Correspondence

Letter from Minister for Aviation, Maritime and Security on the ATOL scheme enforcement powers

Published 25 September 2023

This was published under the 2022 to 2024 Sunak Conservative government

Dear Paul Smith and Robert Bishton (Interim joint CEOs of the Civil Aviation Authority),

In light of the ongoing progress being made towards reform of the Air Travel Organisers Licencing (ATOL) scheme, I write to recognise the vital role of the Civil Aviation Authority (CAA) in regulating businesses that sell package holidays including a flight to ensure that consumers are protected. I would like to take the opportunity to thank you and your team for your continued strong collaboration with the Department for Transport (DfT) in this area.

A holiday can be one of the most important and costly purchases a consumer makes each year. One of the objectives of the ATOL reform programme currently underway is to increase the likelihood of a consumer being able to take the holiday they have booked. This will be achieved, in part, through improved industry resilience, and many of the potential options for reform are focused on meeting this aim.

To ensure the CAA is best placed to adapt to the range of possible reform outcomes, I am writing to confirm DfT’s intention to consider the potential introduction of a wider toolkit of enforcement powers for the CAA in relation to the ATOL scheme. I believe these powers would further protect consumers, both within the current ATOL framework, and as the scheme is reformed.

Importance of the ATOL scheme

Since 1973, the ATOL scheme has played an important role in maintaining consumer confidence in the package travel sector. The Government recognises that the long-term confidence of consumers, the ability of the CAA to reduce the risk of ATOL holders failing, and the ability of the CAA to effectively manage the process for providing refunds and repatriations, all rely on an effectively enforced regulatory regime. Whilst the CAA’s licensing framework remains the primary tool for managing ATOL-holder company risk, the CAA does also hold powers to suspend or revoke an ATOL-holder company’s licence, as well as the option to proceed with criminal prosecution. On that basis, I would continue to encourage the CAA to utilise these powers if it is deemed appropriate.

ATOL reform opportunities

I know that the CAA is continuing to make progress in considering ATOL reforms and is working closely with the team at DfT. I understand that some of the potential reform options may require changes to be made to the ATOL regulations. As new regulatory requirements are introduced and understood, it will be important to ensure that the CAA has the right toolkit to enforce them. It is therefore an opportune moment for DfT to also review the legal powers available to the CAA in relation to the ATOL scheme. I can therefore confirm DfT’s commitment to work together with the CAA to consider broadening the enforcement toolkit for the ATOL Scheme, including the introduction of civil sanction powers.

Civil sanction powers for the ATOL scheme may provide useful incentives to encourage all businesses to comply with the new rules and, ultimately, contribute towards deterring any bad practice. I am also aware of some existing non-compliance issues that the CAA currently works with businesses to resolve and recognise that a broadened enforcement toolkit may add useful flexibility to your approach. For example, this could include the ability to impose financial penalties and to seek undertakings from businesses to comply with a requirement. I want to minimise any disruption or harm to consumers and businesses and will ensure DfT carefully considers the impact of any proposed changes.

Next steps

If you agree, I suggest that this letter should be published. This will allow us to demonstrate transparently that DfT has confirmed to the CAA that it is fully committed to considering changes to its enforcement powers for the ATOL scheme.

Please let me know if you would like to discuss any aspect of this letter further. I look forward to continuing to progress this important area of work with you and your team at the CAA.

[Signed]

Baroness Vere of Norbiton