Those requiring ATOL for sales, whether for leisure or airline seats have a new era, starting from 1st April 2008. Also, hot off the press is guidance from the Government on “What is a Package”, following some confusion after the Court of Appeal Judgment in ABTA v CAA (2006).

ATOL Reform

A new day will dawn on 1st April 2008, as explained by the CAA in its latest guide “One April, One passenger, One pound”. Those that need to will still have to hold an ATOL with a set level of licence authorisation, and meet the financial criteria of a minimum of net free assets. The people behind the business will need to be “fit and proper” and the number of licences will stay the same. From the start date, there will only be two categories of ATOL - “public” and “ATOL to ATOL”. Deeds of Undertaking will be returned to the airlines and bonding as the basis for financial protection, either by cash or by insurance bond will largely disappear. Bonding will be replaced by the APC, the “ATOL Protection Contribution”, at a rate of £1.00 per passenger aged 2 or over. Bonding will remain for those who have held licences for less than 4 years, reducing down to zero, and for those seen as high risk.

Licence holders for more than 30,000 authorised seats will submit monthly returns to calculate the APC payable, and those with lower licences will report quarterly. The new returns require completion of the actual number of passengers booked and the revenue received, and are due by 14 days after the end of each reporting period. Licence holders will be expected to control compliance by their agents, and the time for issuing a confirmation invoice is reduced from seven to three working days. Businesses will be required to nominate a “Compliance Manager” to ensure that the ATOL rules are properly administered.

For most established licence holders, the good news will be the release of finance otherwise tied up to ensure a cash or insurance bond is available to the CAA. This will be a blessing for many businesses going through difficult economic times at present.

“What is a package?”

The Government’s Department for Business Enterprise and Regulatory Reform finally published a Guidance Note to “provide guidance to the travel industry in assessing whether part or all of their business constitutes a package for the Package Travel Regulations 1992 and the Civil Aviation (ATOL) Regulations 1995”. It is expressed to be relevant to all businesses selling travel arrangements, including those selling to business customers. The Guidance Note carefully goes through the terms of the Court of Appeal Judgment, repeating the examples given by the Law Lords, including a travel agent offering the customer flights, accommodation and transfers at an inclusive price. This is clearly a package. However, the judgment gave an example of travel components being sold separately - where the travel agent advises the customer of the individually priced components flights, accommodation and transfers, and the customer is advised he can purchase any one or more of those services without the need to purchase the others - the judgment held that this would not be the sale of a pre-arranged combination of these services at an inclusive price, and not a package.

The Guidance Note emphasises “evidential pointers” to help to determine whether sales might be “packages” or not including:-

• Advertising, brochures and commitments relating to hotel beds or airline seats - all useful indicators that sales are packages
• Describing the services as a package or dynamic package
• Customer’s request to buy a holiday - then it is likely to be a package
• Request to buy a flight and accommodation and/or other services - likely to be a package
• Non-availability of travel services as a separate service outside the combination - likely to be a package
• Payment and composite billing. The key point is whether components are sold in combination or separately, rather than the bill itself.
• Customer perception - if he thinks he is buying separate services, rather than a combination, this will be persuasive in deciding against a “package”.

The Guidance Note is entirely consistent with the Judgment in the Court of Appeal, but still leaves some grey areas. It clearly is possible to sell separate components at separate prices and avoid the package! Most business travel agents/TMC’s do exactly this all the time. However, if the customer thinks he is getting a package, holiday or a combination of services at an inclusive price, then this is likely to be a package and all of the Package Travel and ATOL Regulations will apply to that sale.

The law is far from crystal clear, particularly for those wishing to avoid the concept of ATOL and packaging.