Unpacking the ATOL Consultation: ABTA Travel Law Seminar

It’s a little over a year since the launch of the ATOL Consultation on funding arrangements. At the recent ABTA Travel Law Seminar, TTC’s Martin Alcock summarised his views on the progress, timescales and what changes might be on the horizon.

Transcript

1. Unpacking the ATOL Consultation May 2022 Martin Alcock Travel Trade Consultancy martin@thettc.co.uk
2. The CAA is considering moving to a framework that takes a more systematic approach to ATOL holder risk, and that better prices any residual risk an ATOL holder poses to the consumer. The objective would be to encourage and incentivise ATOL holders to reduce their reliance on customers’ money as a source of funding working capital thereby requiring them to pursue a more robust funding structure and financial policy. ATOL Reform 1 1
3. Reduce reliance on customer money Risk based pricing of ATOL Protection Contribution (APC) Minor changes to rules around agency agreements Changes to Small Business ATOL (SBA) payment terms The consultation covered 4 areas
4. A menu of options
5. Option A – Mandatory framework • Total segregation vs partial segregation (eg. a fixed percentage) • Three proposed methods • Client account • Escrow account • Trust account i) Mandatory segregation of client money ii) Mandatory bonds
6. Mandatory portion of client money to be protected Segregated client money Option A Bond Option B Segregated client money Bond Option C Segregated client money Bond Option D 100% 80% Option B – Tailored framework
7. i) Maintain a flat priced APC ii) Risk based APC Average holiday price Business model risk Hybrid Option C - ATOL Protection Contribution (APC)
8. Option D – The open market solution
9. Key questions Transition arrangements Link to airline reform Breadth of consultation Complexity of requirements The agent business model
10. Retail Agent Tour Operator X Pipeline money The pipeline money problem
11. Segregating client money ATOL trusts and escrow accounts Bank account A trustee Trust deed Beneficiaries
12. Trust a/c Typical ATOL trust working Booking Supplier payment Departure Balance due E.g. £250 Credit/debit X Credit/debit X E.g. £750 Return Current a/c E.g. £200 X E.g. £550 X E.g. £800 E.g. £200 *Only if cover against supplier failure is in place
13. Escrow a/c Typical ATOL escrow working Current a/c Credit/debit Weekly calculation of total aggregate of gross ATOL client money held: If escrow a/c balance is more than 70% trustee can release cash down to 70% If escrow a/c balance is less than 70%, company must top up the account to 70%
14. Next steps Summer 2022 May 2022 Summary of responses Second consultation on final options
15. Thanks for listening! Martin Alcock Travel Trade Consultancy martin@thettc.co.uk linkedin.com/in/martin-alcock/