ATOL scheme is ‘ineffective bureaucratic feast’

With the imminent release of the Airline Insolvency Review report, Trailfinders chairman Mike Gooley CBE explains why he believes the ATOL scheme is ‘ineffective and impotent’ and why the only solution is to have trust accounts for clients. Trailfinders left ABTA to join the Travel Trust Association at the end of last year, becoming its largest member.

"The travel industry has been more fraught with constant financial failure than any other enterprise and by its nature this has resulted in not just loss of money, but untold misery, when innocent travellers have lost their precious holiday or been left stranded.

The root cause is that the industry is so unusually permitted to use pipeline monies as working capital. People hand over advance funds in the belief and trust that it is for their specific travel arrangements, never realising it may be spent to keep a cash-strapped operation afloat, so massively adding to the magnitude of their shortfall when they do collapse.

The solution is so blindingly simple: the mandatory operation of a Trust Fund to ring-fence pipeline funds and prevent their use for any other purpose than that intended, and supposed by the purchaser. Indeed, any other use is simply misappropriation.

The authority charged with regulating this commerce is the Civil Aviation Authority although the flight component is only the smaller fraction of holiday arrangements. They come under the Ministry of Transport, itself not famed for financial management. There are much more fitting Government agencies charged with the regulation of financial behaviour.

The rudimentary ATOL scheme was introduced in 1973 and has proved ineffective time and time again. Despite the current 152 pages, it is so impotent that only a minority of travellers is actually covered and even then the protection can be limited and certainly not understood by the public. It is nothing much more than a bureaucratic feast majoring in obfuscation. Very worryingly it is also very poorly policed and it seems that in the lead up to the Monarch collapse, the CAA even encouraged a reduction in First Aviation Ltd ATOL fees to safeguard their own ATOL Trust Fund, so contrary to the CAA’s very purpose.

The scheme is so convoluted, because it was clumsy and poorly thought out from the outset, so has had to suffer sticking plaster corrections, and for a long time the plasters being applied over previous plasters."