Flying on the right side of the law
Check Points appears in every issue of Group Travel Organiser magazine looking at the more serious side of being a group organiser. If you have any comments or questions on this, or any other subject, please contact us.
If you include flights as part of a holiday, you may need to obtain an Air Travel Organisers’ Licence (ATOL).
In the September 2004 issue, we touched on the question of financial protection and the need for bonding or licencing to comply with the Package Travel Regulations. As part of this, we advised that to arrange packages that include an element by air, it is often necessary to hold an Air Travel Organisers’ Licence more commonly known as an ATOL.
The ATOL system is arranged and handled by the Civil Aviation Authority (CAA) which undertakes the role on behalf of the Government. It aims to protect passengers in the case of financial failure of airlines when a flight has been bought as part of a package.
With the emergence of the low cost airlines has come an increase in the interest shown in air based packages. This provides group travel organisers with a chance to offer new and exciting destinations to their members, and like land-based tours. With full scale ATOL licencing not being feasible for smaller organisations, one option open to GTOs is to take advantage of the new small business (or ‘mini’) ATOL. This licence is much easier to obtain than the full standard licence and is ideal for those organisations who can predict a limited number of air based holidays being sold.
When you might not need your own ATOL
There are certain circumstances in which you may not need an ATOL of your own, but you should always discuss your individual arrangements with the CAA, who have a pragmatic approach to regulation in this area.
You may be able to book air tickets with an airline or ATOL holder and include them in a package if you are a ‘closed group’ and you do not advertise the trip outside the group. Suppose, for example, you are a village cricket club and you want to organise a three-week tour to Australia. You may be able to book flight tickets for members of the club, and their spouse, and add these to pre-booked accommodation to form a package. You would need to ensure that each individual member was properly contracted with the airline or ATOL holder and receives either airline tickets/confirmations or an ATOL holder’s booking confirmation at the earliest possible opportunity.
You cannot allow any non-members to come on the trip other than spouses, and in some circumstances, dependant relatives. Likewise, if you were to post notices around the village advertising the trip, you would have advertised it ‘outside the group’ you would certainly need an ATOL. Once again, the advice is to telephone the CAA.
The mini-ATOL
If you find that you need an ATOL, the mini-ATOL may be what you need. It provides a legal way of organising air travel whilst giving your members full protection if the airline fails. As an organisation, you will be able to take up to 500 passengers by air per year. The application process is straightforward and the usual requirements on the financial background of the business and minimum capitalisation are not required.
Although much of the language of the ATOL is in terms of business, the CAA operate a good telephone advice service that fields enquiries from organisations whose primary intent is not to run a holiday business. As the formation and structure of each club or association is different, GTOs should contact the CAA to get advice on how the following requirements may be met by, for example, a town twinning association.
To protect the integrity of the scheme, the usual CAA requirements for a mini-ATOL are that the CAA will want to see
The business plan of the organisation Details of the personnel directly involved in the running of the business (to ensure none of them have been involved with a failed or over-traded ATOL in the past) A projection or schedule of the programme of holidays to be offered (to check it’s likely to be under 500 air passengers). This essentially is to ensure the applicants fitness to hold a licence. The CAA will also want to initially and periodically thereafter, any brochures, promotional materials, websites etc.
The officers of the business will also need to sign guarantees that they will not exceed the 500 passenger, and agreed revenue, limits. They must also guarantee that if the business over-trades and fails, and if the resulting claims exceed the level expected, then they will be liable to pay the shortfall between the bond level and the level of claim to the Air Travel Trust Fund.
The organisation will then have to provide a bond, typically the minimum amount being 10,000 pounds, which will be used to reimburse customers in the case of failure. This does not necessarily mean that you need to lodge that amount in a bank account, but that you’ll need to find an organisation, such as a bank, that provide a guarantee that the money can and will be made available if necessary. A specialist insurance company may also be able to offer this cover with an annual premium of typically 5-10% of the bond required.
The CAA has the authority to allow third party licencing by bodies that have satisfactory financial protection arrangements and controls in place to monitor financial compliance. The CAA continues to licence individual firms based on their membership, and so far, the Travel Trust Association is participating. Applying for an ATOL is not something to be taken lightly, but it can be a great way of extending trips to new destinations. Importantly, it gives your members protection in case of insolvency that they would not otherwise have, or if they booked directly with an airline.
The CAA is considering new guidelines for travel firms that offer split-contract packages and where an ATOL is required. It is hoped these will be available early in the New Year. We will bring you more news of this next year.