Airline Protection (ATOL) levy to rise to £2.50

The raising of the £1 levy from October 1 follows industry consultation when Association of British Travel Agents (ABTA) called for a “fundamental reform” of the Air Travel Organisers Licence (ATOL) system.

The announcement was made by transport minister Paul Clark, who said he approved the increase as recommended by the Civil Aviation Authority (CAA) after “careful consideration”:

“I am aware of the extra burden this will place on travel companies and consumers in difficult times, which is why I have agreed to an increase at the bottom end of the range consulted on by the CAA.

“I believe it strikes the right balance between ensuring the financial stability of the Air Travel Trust Fund (ATTF) while keeping additional burdens on travel companies and consumers as low as practicable.”

Clark added that the £2.50 for the protection that ATOL offers represented a “good deal” for consumers, being cheaper than stand-alone airline failure insurance and representing less than 0.5% of the average ATOL holiday price.

A higher rate of £3.50 per passenger had been considered.

Clark revealed that the CAA would review the rate of ATOL Protection Contribution (APC) before the ATTF moves out of the red, but this is not projected to be until the spring of 2012.

He also said the government intended to consult on reforms to the ATOL system in the autumn “to make it fairer and more understandable” for consumers.

ABTA chief executive Mark Tanzer responded by saying:

“Although ABTA members were disappointed that the APC should rise so soon after its introduction at £1, we accept that market conditions and recent failures have meant that measures are required to stabilise the Air Travel Trust Fund.

“We are glad that the proposed increase is at the lower end of the options considered, as APC places a direct burden on ATOL holders in what is a difficult trading environment.

“We look forward to the APC returning to the level of £1 as soon as the finances of the ATTF permit.

“Not only is the existing scheme of financial protection fragile, it has also created great uncertainty and inequalities for the industry and the travelling public.

“We look forward to working now with the CAA and government to develop a more effective and fairer system of consumer protection in travel.”

Francesca Ecsery, general manager of flight comparison website Cheapflights.co.uk, said:

“The introduction of APC in April 2008 didn’t forecast for the recession and the increase from £1 to £2.50 as of 1 October 2009 will hit consumers’ pockets at a time when every penny counts.

“A recent survey by Cheapflights.co.uk found 82% of people are more likely to consider booking with well established airlines, operators and agents, a sign the public want the stability and protection of a known partner.

“Even though the rise was the lower end of the CAA’s recommendation, the travel industry may find the increase serves more harm than good in the long run.

“Given the current economic climate, any additional charges to consumers will only weaken the famous British determination to travel and if bookings are negatively affected, it may put pressure on the industry to make savings elsewhere.”