What does the UK-EU transition period mean for ATOL holders?
Following exit from the EU, the UK is entering a transition period during which EU law will continue to apply while the longer-term UK-EU relationship regarding protection against insolvency in the travel business is determined. ATOL holders should expect no change to existing conditions during the transition period.
What if the UK and EU reach no longer-term agreements by the end of the transition period?
If there are no new agreements and the UK leaves the European Economic Area (EEA) then the following changes are likely, depending on where your business is established. The 'EEA' consists of all European Union countries plus Norway, Iceland and Liechtenstein:
Package organisers established in the UK
Countries in the EEA would no longer be obliged to recognise ATOL protection for package sales made in their territory, and ATOL cannot cover new package bookings made in the EEA. ATOL will continue to protect bookings that have already been made, but any further sales made into EEA countries will need to meet local requirements for insolvency protection. Affected businesses will need to make their own arrangements in this regard.
Businesses established in EEA countries other than the UK
The UK would no longer be obliged to recognise the protection arrangements made by EEA businesses.
Bookings made after the implementation of a new legal framework would need to be covered under ATOL protection, so these EEA-based businesses would need to apply for ATOLs.
The CAA is aware that the time available for such businesses to apply for and obtain an ATOL might be short, so we would consider transitional measures, as set out below.
UK travel agents selling packages organised by EEA-established package organisers
It would no longer be possible to sell (in the UK) packages organised by EEA package organisers solely as an agent of that organiser. UK travel agents selling the packages of EEA-established organisers would need either to ensure that the organiser held its own ATOL, or the agent itself would need to obtain an ATOL to cover those sales.
Transitional measures immediately after the end of the transition period
As regards EEA-established businesses selling into the UK, in the three months immediately after the transition period ends we do not expect actively to pursue enforcement action against those firms which i) apply for an ATOL and make adequate progress towards obtaining it and ii) whose UK sales are covered by insolvency protection that meets the standards applicable to consumers in their own country.
As regards UK-established businesses selling packages into EEA countries, the CAA is NOT contemplating transitional measures. The limitation here arises because the UK would no longer be a member of the EEA, so would no longer benefit from mutual recognition, and the authorities in those countries would no longer be obliged to accept ATOL protection. Sales by UK-established businesses would need to be protected by means that were acceptable under the legal framework of the country into which they were selling, as is the case for businesses established in all other non-EEA countries. The CAA would continue to extend protection to bookings that were made under ATOL prior to the UK’s withdrawal.
The UK aspects of these changes – that is, the changes in the scope of ATOL – will be implemented by new UK legislation. That legal change would be enacted by means of the proposed Air Passenger Rights and Air Travel Organisers’ Licensing (Amendment) (EU Exit) Regulations 2018, which have already been laid before Parliament and would be enacted in the event of no new UK-EU agreements at the end of the transition period. A copy of the draft EU Exit Regulations can be found here and a copy of the Government’s explanatory note is here.