ATOL and Package Travel Reform: Let the horse-trading commence

Horse Trading

As you might imagine, the life of a travel regulations consultant has its good days and bad days.

Take last Friday for example, when in a rare moment of stage-managed showmanship and coordination, the UK government released not 1 but 2 long awaited texts concerning the future of travel regulations.

First the Department for Business, Innovation and Skills (BIS) released “the UK government’s response to the European Commission’s Call for Evidence on Proposals for a new Directive on Package Travel and Assisted Travel Arrangements”. As the gargantuan title suggests, it is a 140 page dossier laying out the UKs position for negotiating changes with EC Members States to the laws governing the sale of air and non-air holidays in Europe.

Not to be outdone in the bombastic report title stakes, the Department for Transport (DfT) released their “Response to the Call for Evidence On the Future of a the Package Travel Directive and ATOL implementation and Funding Arrangements” – a comparatively gaunt 48 pages, concerned only with the future of regulating air travel.

Was it worth the long wait? Well, given ATOL is the way sellers of UK air travel comply with the European Directive, the main conclusion from the DfT is that no further ATOL changes will be considered until the Europeans have finished deliberating, likely to be sometime in mid 2015 (for introduction into the UK in 2016/17).

Between now and then, there is a lot of horse-trading to be done between Member States to get to a final European Directive. Here are the key interests that UK government say they will be pushing:

  1. Regulating should be determined by the territory “where sale was made/ offered” instead of  “place where the business is established”

In attempting to eliminate barriers to cross border trading, the EU proposed a subtle shift to a make the “place of establishment of a seller” the deciding factor in where that seller should be regulated.

Such a change would open up the unedifying spectacle of companies regulatory shopping for the most lenient member states, not to mention the frankly ludicrous prospect of UK citizens begging, say CAA Latvia for repatriation home from Turkey.

No doubt foreseeing the chaos, our government is wisely pushing for “place where the sale was offered” to remain the key determinant.

  1. Support for the widened definition of a package

The first draft from the EC contained no less than 6 new definitions of a Package that would impose liability more widely than Flight-Plus ever did, presenting a serious challenge to the agency/ OTA business model not least around TOMS VAT. Though many questions still remain around some of the definitions (Assisted Travel Arranger (ATA) seems a particularly strange one), the government have nailed their colours to the mast in support of widening the definitions – a move which is likely to deepen the already yawning schism between agents and tour operators.

  1. End the obligation for companies to provide “open ended” consumer protection

UK government are proposing to replace the current unlimited guarantee so that companies should only need to provide “reasonable financial protection” for an amount of claims that could “normally be expected”, possibly through a maximum cap along the lines of the Financial Services Compensations Scheme.  It is a vague, though well intentioned suggestion that is likely to be welcomed particularly by insurance companies operating in the sector.

  1. Remove Business Travel altogether. 

There is a general consensus that the current proposals do not go far enough in removing Corporate Travel and other Business to Business sales from the regulations. Further suggestions have been made to exempt such sales fully.

  1. Remove Domestic packages where no transport is included.

The vagaries of the current European text mean all sorts of domestic arrangements are classed as packages, even where there is limited potential for consumer detriment (for example, hotel plus golf). The government would like the right to exempt such arrangements from stifling red tape, though it would be a rare and bold political move in European terms so expect strong opposition from other Member States.

So that’s 190 pages distilled down to 5 points.

Ill leave you to decide whether last Friday was a good day or a bad day…