Comment: OTAs selling no-frills flights can ‘sidestep’ Atol reforms

Chris Photi, of Whitehart Associates, gives his expert verdict on the Atol reforms announced this week


“One small step for man, one giant leap for mankind”? Yesterday’s Atol reform announcement by the aviation minister was little more than a baby step albeit in the right direction.


She has gone for a quick fix through secondary legislation with the promise of a review of primary legislation next year. What is proposed? All flights sold plus ground arrangements can no longer be structured to fall outside of the Atol protection scheme by split contracting.


However, even though tougher policing is threatened, there is still a massive loophole for Online Travel Agents to continue to act as an agent for the consumer in booking a no frills flight on their behalf direct with an airline and selling the ground arrangement separately.


Broadly the profile mix of an OTA selling flight-plus, due to the paucity of chartered flight availability, is weighted 75% towards no frills. While the proposal seeks travel agents to provide greater clarity to consumers, I believe it to be still very simple for a carefully constructed website to sidestep this reform.


However there are some significant sensible aspects that will come out in the small print of the baby step:


• The CAA is to implement the ATOL Protection Certificate – hopefully an unequivocal kite mark of security – a great progression;


• Travel agents will still be able to sell travel components in an agency capacity and be scored by the CAA for free asset testing at the lower risk profile of agency turnover. The CAA, judging from the high level debate I have had with their senior officers, promise a thoughtful and pragmatic approach while remaining, for the sake of fairness, within their published financial and fitness criteria. However, the potential increased enforcement and compliance powers the minister refers to still concern this old and, some may say, jaundiced licensing professional.


Immediate problems I foresee:


• The lack of transparent and trustworthy Supplier Failure Insurance cover – the CAA will score a business without SFI as a higher licensing risk;


• The smouldering resentment by the Big Two who have not got the level playing field they wanted with airlines. Supposing they play the “well, actually, we are an airline too” card and pull their direct business out of the Atol scheme;


• Where will the CAA’s double bonding come from for new entrants into the Atol scheme;


• Also, watch out for a proliferation of trust-related protection within the Atol scheme to negate bonding requirements.


Finally, a plea. Will all stakeholders actually make sure you respond to the formal consultation and have your informed say.


Am I the only one fed up with big industry names righteously calling the industry to arms and to do something about it when they can’t be bothered to formally respond to the consultation when invited to do so.


Stop plugging product in the name of rousing the industry.


 

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