UPDATED: ABTA wins ATOL appeal

ABTA has won a ground breaking court appeal against plans by the Civil Aviation Authority to impose ATOL protection on travel agents putting together DIY holidays.

The Appeal Court ruling follows ABTA successfully challenging the CAA guidance in court in January. The CAA then appealed.

The case has prompted concern about a potential lack of consumer protection and suggestions that major operators will withdraw from the costly ATOL bonding scheme.

The Court of Appeal directed that the CAA withdraw its Guidance Note 26 immediately as “misleading”.

ABTA chief executive Mark Tanzer said: “This is very significant news for our members and justifies the time that has been spent challenging the CAA’s view of what constitutes a package.

“Regulators cannot make good policy without certainty in law and this decision will now make it easier for the CAA to plan for the future.”

Contrary to what is stated in the Package Travel Regulations, in its Guidance Note the CAA had taken the view that all such arrangements of two or more items resulted in the creation of a package. This would have meant travel agents having to obtain an ATOL licence leaving them with an additional cost burden, ABTA said.

In addition, travel agents would have become contractually liable for every element of these arrangements that would have been both “unrealistic and unfair”.

ABTA said it believed that this crucial decision underlined that the ATOL Regulations do not meet the need for consumer protection in today’s travel market.

“The CAA’s own figures show that the proportion of leisure air travellers benefiting from the protection given by the ATOL scheme is at its lowest since 1997 and falling steadily as growing numbers of travellers buy travel services from outside the regulated sector,” the association said.

Tanzer added: “Airlines and non-package tour operators operating outside of the regulated system are not faced with the compliance costs of the ATOL regulations and over 18 million travellers choose to buy from these companies. This creates a significant competitive imbalance and a considerable cost disadvantage for many ATOL holders. This unreasonable situation will be aggravated if the CAA seeks to recoup its current deficit of nearly £16 million from those companies that hold ATOL licences.”

ABTA warned that the future mechanism for collecting payments under the ATOL scheme was uncertain.

Following the failure to convince the government of the need for a protection scheme to cover all air passengers, the CAA is considering the replacement of ATOL bonding with a Consumer Protection Charge. ABTA said it supported this proposal in principle, and was looking forward to further details from the CAA.

Tanzer said: “Travel companies are faced with a bewildering array of requirements depending on the type of business they do.

“They can be required to provide a bond to the CAA in respect of air packages and non-package flight sales while also providing a bond to another Approved Body for non-air packages, or protecting those sales by way of a trust account or insurance.

“The present systems of protection are unsustainable. We are in discussion with the Government to try to establish a system whereby all package holidays can be protected under one scheme. This will ease the regulatory burden on our members and would be the first step in a radical overhaul of the entire system to meet the reality of the market in travel services today.”

The CAA said it was awaiting the Court of Appeal’s final order in respect of this matter, and was in the process of studying the implications of this judgment carefully.

“However on an initial reading of the judgment, the CAA believes that greater clarity has now been given to the circumstances where the travelling public is protected,” a statement said.

“The CAA will make a further statement on this matter once the Court of Appeal has made its final order.”

Report by Phil Davies