Slide 1

Slide 1 text

Unpacking the ATOL Consultation May 2022 Martin Alcock Travel Trade Consultancy [email protected]

Slide 2

Slide 2 text

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

Slide 3

Slide 3 text

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

Slide 4

Slide 4 text

A menu of options

Slide 5

Slide 5 text

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

Slide 6

Slide 6 text

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

Slide 7

Slide 7 text

i) Maintain a flat priced APC ii) Risk based APC Average holiday price Business model risk Hybrid Option C - ATOL Protection Contribution (APC)

Slide 8

Slide 8 text

Option D – The open market solution

Slide 9

Slide 9 text

Key questions Transition arrangements Link to airline reform Breadth of consultation Complexity of requirements The agent business model

Slide 10

Slide 10 text

Retail Agent Tour Operator X Pipeline money The pipeline money problem

Slide 11

Slide 11 text

Segregating client money ATOL trusts and escrow accounts Bank account A trustee Trust deed Beneficiaries

Slide 12

Slide 12 text

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

Slide 13

Slide 13 text

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%

Slide 14

Slide 14 text

Next steps Summer 2022 May 2022 Summary of responses Second consultation on final options

Slide 15

Slide 15 text

Thanks for listening! Martin Alcock Travel Trade Consultancy [email protected]