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The 600 per cent holiday protection price hike – and what you need to know

Holiday tourist - Shutterstock
Holiday tourist - Shutterstock

If you have trouble sleeping, try downloading a copy of the Civil Aviation Authority’s latest holiday protection review. I began to drift off halfway down the contents page of what is an incredibly complex review of the Atol system that protects the money we pay for our holidays.

If you do manage to get to page 30, however, you might be jolted out of your soporific state. Here, the review suggests that there could be a 600 per cent increase in the charge currently levied on all package holidays. Known as the APC (Atol protection charge), it is currently set at £2.50 – but the CAA is pondering the possibility of it rising as high as £15 on some holidays.

The levy is a sort of tax, raised on the operator rather than directly on the consumer, but inevitably passed on to us. It goes into a fund used to refund and repatriate those who are victims of a collapsing holiday firm.

In fairness, the CAA suggests that some holidays could see a lower charge – down to only 50p per person. But, frankly, the review is so heavily hedged, it is hard to be sure what the likely result will be.

Here are some of the key questions at stake:

How do things work now?

Consumers pay for holidays in advance, so if an operator goes out of business, you risk losing both your money and your holiday. The current Atol scheme guarantees that if this happens before you travel, you will get a refund of the money paid in advance. If it happens while you are on holiday, you will be able to continue as normal and have new return flights organised for you.

Why do we need reform?

CAA – which sets the financial rules and charges imposed on operators under the Atol scheme – said some travel firms were spending the money paid in advance by customers on the day-to-day running of their businesses, not keeping it in hand to pay the necessary outgoings for that customer’s holiday, or to make refunds. This put the company, consumers’ money and the holidays at risk. This seems to be the CAA’s main concern.

Can I simply protect myself?

Yes. Plenty of travel insurance policies offer protection against insolvency and you also have backup if you pay by credit card. But they won’t help you organise repatriation if you are stranded. Doing so yourself is likely to cost more than you originally paid.

What about the way collapses are dealt with?

The fundamental problem with the way major collapses happen and are dealt with is the way the insolvency rules work. The moment a company collapses, the airline (if it has one) has to stop flying and staff are no longer paid, so stop working.

This means that Atol civil servants have to organise the rescue from scratch – booking systems must be taken over, customers and hotels contacted, new aircraft chartered. When Thomas Cook failed in 2019, some 140,000 stranded hol­i­day­makers had to be brought back to the UK, at a cost of £100 million.

An alternative solution allows the company to be wound down in an orderly way, so an airline can keep flying, passengers can return home and experienced staff can be kept on to manage the situation. That would be much cheaper, but it does not seem to be on the CAA’s radar in this review.

What will happen next?

The CAA won’t decide until at least 2024, although it seems to be leaning towards a system that stops travel companies using so much of their customers’ money as cash flow.

For further information, see caa.co.uk/atol-protection and telegraph.co.uk/tt-holiday-protection

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