On 28 October 2016, the Department for Transport (DfT) launched its consultation on proposed changes to the Air Travel Organisers’ Licencing (ATOL) scheme. This is the first of two Government consultations, the second of which is due to be launched by the Department for Business, Innovation and Skills (BIS) at a later date (as yet undetermined) and will cover changes to the UK Package Travel Regulations. The ATOL consultation focuses on three aspects, namely: 1) proposals for strengthening the ATOL scheme and ensuring enhanced customer protection in line with Directive (EU) 2015/2302 on Package Travel and Linked Travel Arrangements (PTD2); 2) reforming ATOL regulatory framework for the longer term; and 3) evaluation of the 2012 ATOL regulations.

Breaking it down into a series of 14 specific questions, the DfT has indicated that strengthening ATOL to align with PTD2 is the preferred option as opposed to doing nothing and keeping the regulations in their present form or leaving it to the market to generate solutions for compliance. The Government is nevertheless open to market based solutions as part of the ATOL reform, for example in assessing the treatment of the new Linked Travel Arrangements and its current approach to “Flight-Only” sales. As part of the longer term vision, it also wishes to look at alternatives to the current flat rate levy and consider possibilities like risk-based, turnover-based or holiday-cost-based measurements, especially to encourage EU businesses to establish themselves in the UK and use the ATOL scheme to trade across the EEA as a single vehicle of compliance under PTD2.

The DfT naturally recognises that the future relationship with the EU will have a big impact on driving these changes. It acknowledged that PTD2 was designed to ‘harmonise rights and obligations across Europe, in order to ensure a consistent level of protection and support cross-border sales in the travel market’ as well as to ‘prevent insolvency protection obligations from acting as an obstacle to the free movement of services’ (paragraph 43, page 13). However, with some of the bellicose rhetoric emanating from certain parts of the Government, it will undoubtedly serve as an example of how Brexit will dominate legislative, political and legal discourse in the travel industry for years to come.

Industry is encouraged to participate actively in the consultation, the deadline for which is 23:45 on 24 November 2016. Further details of the consultation can be found here and we look forward to assisting you through these interesting times of change.