ATOL Protection Contribution

Statement by:
Paul Clark MP, Parliamentary Under Secretary of State for Transport
Date delivered:
16 July 2009
Statement type:

Parliamentary Under Secretary of State for Transport (Mr Paul Clark): The Air Travel Organisers License (ATOL) system provides financial protection to those taking flight-inclusive package holidays overseas.   It ensures that in the event of a tour operator  becoming insolvent, consumers already abroad can complete  their holidays and be returned to the UK and those who have paid for their holidays but have not yet departed will receive a full refund.  It is operated by the Civil Aviation Authority (CAA).

The failure of XL leisure group in September 2008 and the effects of the recession have caused serious financial difficulties for the Air Travel Trust Fund (ATTF), which meets the insolvency protection costs of the ATOL scheme.  To help address this, between April and June this year, the CAA consulted on possible increases to the ATOL Protection Contribution (APC) paid by travel companies to the ATTF.  The consultation looked at a range of possible increases to the current charge of £1 per passenger to between £2.50 and £3.50 per passenger.

Following the consultation, the CAA provided advice to the Secretary of State recommending the APC be increased from £1 to £2.50 per passenger with effect from 1st October 2009.  After careful consideration, I have decided to approve the recommended increase.  I am aware of the extra burden this will place on travel companies and consumers at difficult times, which is why I have agreed to an increase at the bottom of the range consulted on by the CAA.  I believe this strikes the right balance between ensuring the future financial stability of the ATTF while keeping additional burdens on travel companies and consumers as low as practicable.   I believe that £2.50 for the protection that ATOL provides represents a good deal for consumers – it is cheaper than stand-alone airline failure insurance and represents less than 0.5% of the average ATOL holiday price.  The CAA intend to review the rate of the APC before the ATTF moves into surplus, projected to be by the Spring of 2012.  

The increased APC will allow the ATTF access to additional commercial credit facilities which will benefit from an increased and extended Government Guarantee that the Government has agreed to in principle.  The Government also intends to consult on reforms to the ATOL system in the autumn to make it fairer and more understandable for consumers. A copy of CAA's advice to the Secretary of State and a summary of consultation responses will be placed in the House library.