The majority of UK tour operators are required to hold an ATOL licence, without which they may not legally sell air travel. ATOL-licensed firms will have had their business practices inspected by the CAA. An ATOL licensed tour operator must also obtain insurance bonds from the CAA. The aim of this is to provide refunds to travellers affected by any event which causes the airline to be unable to provide travel for its customers, and to arrange for flights to return home those already abroad at the time.
History
In the 1960s, voluntary organisations such as the Association of British Travel Agents provided a degree of financial protection for air travellers. In 1970, the Federation of Tour Operators introduced a bonding scheme whereby their members had to obtain bonds to the value of 5% of their annual turnover. In 1972, ABTA followed suit.
Legal requirement
The Civil Aviation Act 1971 established the CAA. Covered under this act was the creation of the original ATOL Regulations. These mandated that all tour operators whose primary mode of transport was by air, must hold an ATOL licence. These regulations came into effect in 1973.
Early practice
On 15 August 1974, the Court Line group collapsed. It was the second largest tour operator at the time and its subsidiaries included Clarksons Holidays, Horizon, and Medvillas. Clarksons Holidays held an ATOL licence and was therefore theoretically covered by its insurance bond. Although the 35,000 customers stranded abroad were successfully repatriated under the scheme, there were insufficient funds for the 100,000 people whose holidays had been paid for in advance. This was a blow to consumer confidence and led to considerable media attention. A government fund called the Air Travel Trust has since been introduced to pay for any excess which is not covered by ATOL.
On 23 September 2019 Thomas Cook went into compulsory liquidation, sparking the largest peacetime repatriation in the UK's history. With Thomas Cook being ATOL-protected, the Civil Aviation Authority set about repatriating more than 150,000 British holidaymakers.
