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Last Updated: Thursday, 30 October, 2003, 12:17 GMT
Holiday costs 'could rise'
Sunbathing
Consumers should pay a separate fee, says industry
The cost of buying a package holiday could rise if new consumer protection measures are introduced.

Tour operators want the existing system, whereby package holidays are protected by credit card companies or through a bond, to be scrapped.

Instead, it wants consumers to pay an upfront fee, which would be used to compensate holidaymakers when firms go bust.

Tour operators want it limited to 1 a person, but admit it could rise.

Split contracts

The Association of British Travel Agents (Abta) and the Federation of Tour Operators (FTO) are among those backing the plans.

Far from increasing prices, the industry says the proposals could make companies more competitive.

What is Atol?
Air Travel Organisers' Licensing is managed by the Civil Aviation Authority.
It protects consumers who have bought holidays and flights from tour operators from losing money or being stranded abroad
All tour operators selling flights and air holidays must hold a licence from the CAA, and a taking out a bond is a condition of their licence.

They have written to the Civil Aviation Authority (CAA) to ask if it will consider the idea as part of its review of Atol bonds - the main consumer protection travel scheme in the UK.

The cost of running the Atol scheme varies according to the size of the tour operator - and the industry believes its proposals would be cheaper to run.

Atol rules

The plan is also aimed at ending iniquities in how consumers are protected across the travel industry.

All tour operators selling flights and air holidays must hold a licence from the CAA.

Before it can operate the firm must lodge a bond, which is a financial guarantee provided by a bank or insurance company.

However, more people are now making their own holiday arrangements, because of the internet and the growth of no-frills airlines - and these bookings often have no financial protection.

There is also no Atol scheme covering purchase made directly from airlines.

One particular problem arises through "split contract" holiday deals.

This is where separate accommodation and air deals are sold together as packages.

While a holidaymaker may believe the holiday is protected, individual components of the holiday may not be covered by the scheme.

For example, they may be compensated if the airline folds, but not covered for their accommodation.

Dutch-inspired

The tour operators' proposal is based on a Dutch scheme established in the late 1980s.

Travel companies also want to end the right of individuals to make travel claims against their credit card companies, under Section 75 of the Consumer Credit Act.

Current rules mean that consumers can still approach their credit card issuer - if their tour operator goes bust - as an "insurer of last resort".

There are too many gaps in the existing travel financial protection schemes
Ian Reynolds, Abta chief executive

Tour operators say removing this responsibility would help smaller firms survive by cutting the cost to them of credit card services.

"There are too many gaps in the existing travel financial protection schemes," said Abta chief executive Ian Reynolds.

"The new scheme proposes to be a catch-all that would simplify the current systems and remove costs related to bonding and credit card risk.

"This would then make British traders more competitive in the UK and EU."




SEE ALSO:
How to avoid a holiday nightmare
25 Jun 03  |  Business
New plan for stranded holidaymakers
27 Aug 02  |  Business


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