CAA REACHES ATOL AGREEMENT WITH TTA

The Civil Aviation Authority (CAA) has agreed with the Travel Trust Association (TTA) the principles of a framework for TTA members to obtain Air Travel Organisers’ Licences (ATOL) on the basis of TTA arrangements instead of normal bonding requirements. 

The ATOL Regulations were amended in October 2003 so that firms selling flight inclusive packages on a split contract basis now need to hold ATOLs.  The CAA said before the change in the law that it would be willing to adopt existing arrangements as a basis for granting ATOLs where these could provide the comprehensive protection required.

Following discussions with TTA, the CAA concluded that the TTA’s financial protection arrangements, which consist of a combination of a trust fund and insurance, could be accepted instead of a bond.  It is expected that final arrangements with the TTA will be put in place over the next few weeks.

Simon Froome, Manager of ATOL, said: “We are pleased to have reached a satisfactory conclusion to our discussions with TTA, which will allow their 400 or so members to obtain ATOLs and comply with the new Regulations.  We expect most of the TTA applicants to fall into the Small Business ATOL category.

“We emphasised when the Regulations changed that we wanted to work with trade bodies and others to build on existing consumer protection arrangements.  This is the first scheme that has been adopted.”

Notes to Editors

ATOL (short for Air Travel Organiser’ Licensing) is managed by the CAA and gives comprehensive protection from losing money or being stranded abroad to people in the UK who buy air holidays and flights from tour operators each year. It is by far the largest travel protection scheme in the UK, and the only one for flights and air holidays sold by tour operators.

“Split contract” packages are arrangements under which a holiday company sells a flight (which may be ATOL protected) and accommodation, or other travel products such as car hire, under separate contracts, which may be protected by other means, or even not at all. This can cause financial loss if, for example, the provider of the flight fails and the customer can then either not find a replacement flight, or has to pay a higher price to secure a flight to enable him to use the accommodation.

All tour operators selling flights and air holidays must hold a licence from the CAA and from October 2003 this also applied to travel firms selling packages under a “split contract” arrangement. Before it gets a standard ATOL, each operator is examined to ensure it is properly managed and financially sound, and it must lodge a bond – a financial guarantee provided by a bank or insurance company. If it fails, the CAA then uses the money to pay for people abroad to continue their holidays and to travel home as planned and to make refunds to those that have paid and not travelled. If the bond is insufficient, any shortfall is met by the Air Travel Trust Fund, which is managed by the CAA and backs up individual bonds.

A Small Business ATOL is granted to operators that carry fewer than 500 passengers a year. Applicants are subject to the usual fitness test, provision of a bond and personal overtrading guarantee from directors. They do not have to meet the financial tests, which apply to standard ATOLs.

The financial protection scheme operated by the Travel Trust Association requires all its members to place all customers’ money into a trust account on receipt.  The money in that account has to remain there until the customer returns from their holiday, at which point the trustees release the money to the company’s general account.  The only exception is money due to the flight providing ATOL holder in advance of travel.  However, in the event that the TTA member fails, the ATOL holder takes responsibility for the flight arrangements. 

TTA members who are granted ATOLs will have a T designator on their licence.  This will enable firms trading with them to identify them as a TTA member; this is important, as TTA licences will be restricted to sell packages only where they obtain air seats direct from ATOL holders. They will not be able to source seats from airlines directly.  The reason for this restriction is that under the TTA protection arrangements the ATOL holder providing the air seat takes responsibility under its licence for the flight protection in the event that the TTA member fails; the remainder of the package is protected by the trust arrangements. TTA licences will also be restricted so that sales can only be made direct to customers and not through agents.

In addition to the trust and agency arrangements, the TTA also has a back-up insurance arrangement called the “safe seat” policy, which all customers are required to take out when booking. In the event of the failure of a TTA member and the funds in the trust account proving to be insufficient to meet liabilities to customers, the TTA can call on the “safe seat” insurance to cover the shortfall.

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