ATOL Consultation on PTD – Government publishes its response


Currently one of the hottest topics in the travel industry, in relation to regulation is the implementation of the new Package Travel Directive.  This has been bubbling for a few years now and has generated differing opinions as to practically how it will work in the UK.  However, on 28 October 2016, the Department for Transport (“DfT”) launched the first government consultation on implementation of the new Package Travel Directive (“New PTD”), which is due for EEC member states implementation in January 2018. It was focused on how the ATOL scheme should be changed to implement the new PTD.  On 9 February 2017, the DFT circulated its summary of the various responses and the Government’s position on the issues.  Some key points were as follows :

  • Changes to ATOL scheme. The Government is going to make the barest of changes to the ATOL scheme, only those absolutely necessary to implement the new PTD. The wider structural changes to the ATOL, in line with its long stated desire to move responsibility for financial protection from the Government to the industry, will therefore be deferred to another time.
  • Mutual recognition of insolvency protection. In line with the rules of the new PTD, the Government is intending to include within the ATOL scheme all flight-inclusive package sales made by travel companies established in the UK, whether those sales are made to customers in the UK or other Member States of the EU. This will therefore allow travel companies established in the UK to use their ATOL to cover all EU-wide sales, without needing to comply with the financial protection rules of any other Member State. This change will go hand in hand with greater powers for the Civil Aviation Authority (“CAA”) to require information from travel companies about the nature of their sales. No comment has been made in the response to the suggestion that the ATOL scheme may discriminate between the level of protection offered to consumers resident in the UK and those resident in other member states of the EU.
  • Linked Travel Arrangements (“LTAs”). The travel industry response was a preference for LTAs to be included in the ATOL scheme. However, to ensure that the Air Travel Trust is not exposed to the financial risk of failed LTAs, the Government is going to pass legislation to allow it to create a new Air Travel Trust (and associated levy) which will cater for just these LTAs.
  • Definition of a package. The Government is intending to copy and paste the New PTD definition of a “package” into the ATOL Regulations. The definition is broad and will include practically all scenarios when a consumer buys multiple travel components from a travel company at the same time. It catches packages, flight-plus and even some click through sales. The DfT will close the gap in the current ATOL scheme whereby travel agents selling flights as an “agent for the consumer” fall outside the ATOL Regulations, but they agree to abide by the ATOL Regulations in return for a 50% rebate on their APC payments.

What next :

The New PTD was necessary, revising the PTR 1992, due to the diverse changes in the way people buy holidays and dynamically package their own. Sadly, the Government appears unconvinced at the suggestion that there should be an end to the current split system of regulation between flight packages and non-flight packages.  The next state in implementation of the New PTD will be the broader consultation on revising the Package Travel Regulations 1992.  This is due to be launched very soon and will provide clearer guidance on the implementation of the New PTD.

As this New PTD is EEC led perhaps the ramifications of Article 50 being actioned will lead to a whole new consultation and some uncertainty as to how the UK Government will develop the financial protection of the travel industry. This is a key issue for the UK outbound travel industry and will certainly change the landscape as we now know it.