The ATOL scheme provides travellers with financial protection when they book a package trip that includes some airline travel.
In this post we will explain what ATOL is, and how it works. We will also look at who needs a license, and outline the steps required to get registered. Finally, we will explain some of the penalties and other consequences you could face if you fail to get an ATOL licence when required.
What is ATOL?
ATOL stands for Air Travel Organisers’ Licensing. First introduced in 1973, the ATOL scheme provides travellers with financial protection when they book a package holiday that includes a flight. This protection is separate from their travel insurance cover.
What Does ATOL Do?
ATOL providers must provide their customers with an ATOL certificate whenever they book an ATOL protected trip. Among other things, this document will outline exactly who and what is covered by the ATOL scheme.
If an ATOL registered travel provider ceases trading while their customers are overseas, the ATOL scheme can help the customers to continue their trip through providing some financial support. This can include reimbursement for accommodation, car hire, and transfers, along with support with flights home where necessary.
Exemptions to ATOL Cover
The ATOL scheme does not cover all flights. There are also numerous exceptions to the ATOL coverage, including issues with accommodation, and missing or damaged luggage.
For more information, you can read a full guide to what ATOL does not cover.
When Do You Need To Be ATOL Registered?
The ATOL Scheme is run by the Civil Aviation Authority (CAA), and there is extensive guidance on their website concerning who needs an ATOL, and who is exempt.
Businesses that offer flight packages or flight-only sales to UK passengers are legally required to get an ATOL. This includes businesses based outside of the UK that advertise and sell to customers within the UK.
Travel agencies, tour operators, and online travel retailers may be required to get a licence as part of the Package Travel Regulations. Some travel agents may not be required to hold their own ATOL, such as those who only sell accommodation packages, or those who exclusively sell premade packages that include flights. However, even if a travel agency is exempt from the scheme, they must:
- Exclusively work with providers who do own an ATOL.
- Advise their customers on whether or not any flights they book through them are covered by the ATOL scheme.
- Make it clear just what the ATOL scheme covers, and what it does not cover.
- Ensure that their customers receive a valid ATOL certificate.
As part of the regulations, all ATOL holders must appoint an accountable person (AP) to ensure that their company complies with the CAA’s terms and conditions.
How To Become ATOL Registered
To get ATOL registered, you will first need to pay an application fee. This can be in the form of a fixed charge, and the amount you pay will depend on the size and nature of your business. At the time of writing, the fees range from £981 to £2,601.
You will also need to take a fitness and a finance test, so that the CAA can confirm that your business has the competence and the capacity to hold a licence. And ultimately, you will need to introduce a mechanism for protecting your customers’ money – with a bond, for example.
You will have to renew your licence once a year, and you will have to go through a similar assessment process every time you renew.
Though it is possible to get an ATOL licence from a franchise or an accredited body, many businesses choose to apply directly to the CAA. You can read the full CAA guidance to applying.
Penalties for Not Being ATOL Registered?
If you are legally required to get an ATOL, either as part of the CAA regulations or under the Package Travel Regulations, then you will face some severe penalties for non-compliance.
The CAA has numerous enforcement powers, and they can pursue criminal prosecution for businesses and individuals. They have also pledged to publicise some of their enforcement actions, in order to provide transparency for consumers, and to create a strong deterrent for non-compliance.
This essentially means that they are prepared to “name and shame” any travel providers that do not comply, which would likely lead to considerable reputational damage. So, even if they do not face prosecution, any business or individual that falls foul of the CAA regulations may struggle to ever trade again.
There may also be some insurance implications for non-compliance. Travel agents and tour providers often rely on scheduled airline failure insurance and supplier failure insurance to cover their own losses should a provider cease trading. But if your insurer finds that you failed to get an ATOL where necessary, or that you neglected to check that your providers were ATOL registered, then they may reject your claim.
How to Ensure You Are Fully Covered as a Travel Agent or Tour Operator
At James Hallam, we have provided dedicated insurance services for travel agents and tour operators for over 20 years.
We can advise you on whether you have a legal obligation to get an ATOL based on the packages you sell. We can also help you access the specialist insurance you need to ensure that, in the event of a supplier failure, you can cover your losses as well as your customers’ losses.
Find out more about our specialist insurance services for travel agents and tour operators.