Package protection levy to increase

The levy that underwrites financial protection on package holidays is poised to rise next April from the current £1 per booking, with the travel industry signalling it will bitterly oppose the move.

The Civil Aviation Authority confirmed this morning it will consult the industry shortly on an unspecified increase in the ATOL Protection Contribution (APC).

The projected rise follows the collapse of the UK’s third-largest travel group, XL Leisure, last September and the resulting cost of repatriating and refunding customers.

CAA consumer protection group deputy director David Moesli told leading industry figures at a briefing in London: “There will be a consultation on the level of the APC sooner rather than later.”

That drew an immediate hostile reaction from travel association ABTA and the Federation of Tour Operators, leading groups TUI Travel and Thomas Cook and others in the trade.

TUI Travel corporate general counsel Mike Bowers and Thomas Cook group director John de Vial quoted CAA assurances on the level of the levy made in 2007, and FTO director general Andy Cooper said: “The levy should not increase.”

The APC was only introduced in April last year, when the CAA assured the travel trade a change in rate was unlikely for three years even in the event of a major company failure and a recession. There has been widespread speculation it could rise to £2.50 or £3 and might need to go as high as £5.

Moesli suggested: “The trade has to be realistic. Just look at the problems on the high street.” But Cooper urged the industry to use the consultation to make its feelings known to the government.

The CAA is legally bound to consult the industry before any change in the levy, but the rate will be decided by secretary of state for transport Geoff Hoon. The consultation will last six weeks.

Moesli said he did not expect the new rate to be in place by October 1, leaving April 1 2010 as the likely date for introduction.

He revealed the administrators of XL estimate the final cost of XL’s failure at £80 million. However, Moesli dismissed press reports that the Air Travel Trust fund which underwrites financial protection will be left bankrupt by the collapse.

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