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The Air Travel Organisers’ Licensing (ATOL) scheme, introduced in the 1970s, is managed by the CAA. Currently, it protects those buying flight inclusive package holidays and certain flights against the insolvency of their tour operator. In recent years, the market for holidays has changed significantly with the emergence of low cost carriers and the use of the internet to book holidays. As a result many consumers now book holidays that appear to them to be packages, but are, in fact, sold with either limited, or no financial protection.

On 3 February 2011, Theresa Villiers, Minister for Aviation, announced the Government’s ‘in principle’ decision to reform the ATOL scheme in order to increase clarity and consumer protection. An additional aim is to make the Air Travel Trust Fund (ATTF) financially sustainable, allowing the existing Government guarantee to be withdrawn. A Department for Transport (DfT) consultation document was published in June 2011.

It is proposed by the government to introduce ATOL reform by way of secondary and primary legislation. New regulations to extend the ATOL scheme to ‘Flight-Plus’ sold by travel agents and tour operators are expected to come into force on 30 April 2012. A ‘Flight-Plus’ is a booking for a flight which is sold together with accommodation and/or car hire at the same time or within a day of each other. It is anticipated that a new ATOL certificate will be introduced at the same time.

The Civil Aviation Bill (clause 94) would provide the Secretary of State with the regulation-making powers needed to implement reforms to include holidays sold by airlines and ‘agent for the consumer’ arrangements in the ATOL scheme. The Bill had its Second Reading in the House of Commons on 30 January 2012, has now completed its Committee Stage and is expected to have its Report and Third Reading on 25 April 2012.

This note looks at the ATOL scheme, focusing on the weaknesses of the ATOL model and the deficit funding of the ATTF. It considers in detail the proposed ATOL reforms contained in secondary and primary legislation. Finally, it also considers EU initiatives for reform to travel law.

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