The ATOL Story – 50 years of abject failure 1973 – 2023

Not just the £10 billion in payouts (see table attached), but the untold misery inflicted upon many millions of innocent travellers.

This financial regulation should never have been entrusted to the CAA but to the existing Authorities well versed in such controls.

All that was ever needed was mandatory Escrow Accounting outlawing the misappropriation of pipeline funds. In summary, embezzlement and inappropriate capitalisation.

TIMELINE

1960’s – Consumer Protection provided by voluntary trade associations, primarily the Association of British Travel Agents (ABTA) and the Tour Operators Study Group (TOSG)

1967 – Sir Ronald Edwards charged by the government to set up a committee to enquire into Britain’s civil air transport.

1969 – Committee’s findings published in the report “British Air Transport in the Seventies”. Suggests creation of the Civil Aviation Authority (CAA).

1971 – December - Civil Aviation Act passed.

1973 – Civil Aviation Act takes effect creating the basis of the ATOL scheme. As such, it is the 50th Anniversary of the ATOL scheme this year.

The 1971-73 legislation is not comprehensive consumer protection. It has two aims:
To prevent fraudulent operators engaged in the growing charter market from taking money for non-existent flights.
To introduce a compulsory bonding scheme to ensure people were not stranded abroad after the failure of a travel organiser as without bonding this responsibility had fallen to the Foreign Office.

Summer 1973 – 274 ATOL Licenses granted on the basis of bonding. Given the pitiful failures of this system it is incredible that bonding rather than Escrow Accounting was ever contemplated.

August 1974 – Court Line Group (Clarksons Holidays) collapses. Clarksons Holidays are 2nd largest tour operator. Clarksons Holidays were only bonded for 35,000 pax but had some 100,000 people abroad. Government gave prompt commitment to protect all customer payments at taxpayers cost.

1975 – Air Travel Reserve Fund Act introduced as a back-up fund for individual travel organiser bonds. Air Travel Reserve Fund (ATRF) created by £15 million Government loan and subsequently by a levy on holidays. ATOL holders required to contribute first 1% and then 2% of their turnover to the fund regardless of the level of risk they posed.

November 1977 – Contributions to the ATRF cease when the Fund stood at what was deemed an adequate sum. Income after this comes from the Fund’s invested capital.

February 1982 – Laker Airways fails. Claims of almost £12 million involving 139,000 holidaymakers. £5.3 million was paid out of bond and £6.5 million was met by the back-up Fund. The bond was totally inadequate yet again.

1983 – Government commission a fundamental review of the ATOL system. Conducted by Sir Peter Lane, he was asked to consider whether licensing system could be replaced by less interventionist insurance arrangements. Concluded an insurance scheme could not replace licensing. The Lane report recommended the Air Travel Trust Committee was set up to watch over protection arrangements.

1986 – Government concluded the back-up fund was an integral part of the ATOL system and should be brought into the CAA’s control. The Air Travel Trust was set up with CAA Board Members and Officials being appointed Trustees.

1990-1991 - Two failures, Capital Airlines (1990) and the International Leisure Group (March 1991) (including Air Europe), highlight the inadequacies of the system whereby customers booking direct with airlines are not protected (still an issue). International Leisure Group had 23,000 people abroad at the time of failure and 600,000 advance bookings. The cost of the rescue operation was £11 million.

1991-92 – Change in management of bonds. All bonds now held by the CAA.
ABTA and FTO (previously TOSG) relinquish management to the CAA.

1992 – European Directive on Package Travel (EDPT) extends scope of responsibility for those selling travel.

1992 – Airbreak Group, Sungate and Euro Express fail. Cost to the Fund £5.1 million.

1994 – Sunseeker Leisure fails. Cost to the Fund £2.3 million.

1995 – Villmar Travel fails. Cost to the Fund £3.2 million.

10 May 1995 – New European Directive on Package Travel legislation (EDPT) agreed and became effective.

The scope of the ATOL scheme was widened.

Licensing system became more complex and sophisticated with different categories of license and bond levels.
A new license category was introduced for tickets sold by agents of scheduled airlines protected by guarantees from airlines rather than bonds.

1996 – The Flight Company and Go Air fail. Cost to the Fund £6.2 million.

1996 - The Air Travel Trust Fund’s investment income was no longer sufficient to meet the claims on it and its assets were exhausted.

2000 – ATIPAC replaces the Air Travel Trust Committee. Theoretically encourages more diverse views. Actually puts the foxes in charge of the chickens….

2008 – The deficit in the ATTF stood at circa £20 million (£5 million more than the initial loan in 1975).

2008 - The APC, was introduced to modify the failed bonding model, other than for businesses whose riskiness justified additional measures. This new levy scheme was "sold" to the travel industry as a full bond replacement scheme replacing any previous form of bonding with an across the board £1 ATOL Protection Charge ("APC"). The Scheme was purported to have been structured so as to withstand a £250million failure (Only TUI and Thomas Cook could have caused a failure of this size).

2009 - XL Airways failed. This was an £70 to £80 million failure (£41.5 million bond and £28.5 to £38.5 million from the Fund). On the back of this the CAA introduced an increase in the APC charge by 150% from £1 to £2.50. The AIM OF THE SCHEME was to withstand a £250million failure and yet within a year the APC charge was being increased by 150% on the back of a mere £40million failure. The natural conclusion is that the scheme was seriously flawed from inception.

2 October 2017 - Following the collapse of Monarch airlines, the CAA had to bring nearly 84,000 passengers back to the UK. Between 600,000 and 750,000 future bookings were cancelled. CAA brought back passengers who had booked to travel on the Monarch Airlines Group even if they did not have ATOL protection for fear of “riots”.

1 July 2018 – ATOL Regulations changed so that flight plus bookings no longer came under ATOL protection.

23 September 2019 - Thomas Cook went into compulsory liquidation, sparking the largest peacetime repatriation in the UK's history. With Thomas Cook being ATOL-protected, the CAA had to repatriate more than 150,000 British holidaymakers. 22,000 jobs were lost and 450,000 people were affected worldwide by Thomas Cook’s failure. Thomas Cook’s bond with the CAA was a mere £1 million. At what point did Thomas Cook realise that their continued trading was amplifying the cost of the collapse?

29 April 2021 – ATOL Reform Consultation launched.

31 July 2021 – ATOL Reform Consultation due to close. However, typically this was then delayed.

May 2022 – Next steps to ATOL Reform published. Promised next consultation in 2022. Is not tabled until January 2023.

17 February 2023 – Air Travel Trust Fund has £108 million cash reserves and £75 million commercial borrowing facilities as shown in 2021 accounts.

24 March 2023 – Second ATOL Reform Consultation No tangible outcome from the first one 2 years previously.

The CAA have said that there will be no new measures before 01 April 2024.
Table of costs to Air Travel Fund.pdf