What happens after 31 December 2020?

With the UK having left the European Economic Area (EEA) 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 will 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.

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Businesses established in EEA countries other than the UK

The UK will no longer be obliged to recognise the protection arrangements made by EEA businesses.

Bookings made after the implementation of a new legal framework will need to be covered under ATOL protection, so these EEA-based businesses will need to apply for ATOLs.

The CAA will consider transitional measures, as set out below.

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UK travel agents selling packages organised by EEA-established package organisers

It will 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 will need either to ensure that the organiser held its own ATOL, or the agent itself will need to obtain an ATOL to cover those sales.

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Transitional measures after 31 December 2020

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 is no longer a member of the EEA, so no longer benefits from mutual recognition, and the authorities in those countries are no longer obliged to accept ATOL protection.  Sales by UK-established businesses will need to be protected by means that were acceptable under the legal framework of the country into which they are selling, as is the case for businesses established in all other non-EEA countries.  The CAA will continue to extend protection to bookings that were made under ATOL prior to 1 January 2021.

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Implementation

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 will be enacted by means of the proposed Air Passenger Rights and Air Travel Organisers’ Licensing (Amendment) (EU Exit) Regulations 2018. A copy of the draft EU Exit Regulations can be found here and a copy of the Government’s explanatory note is here.