Lowcostholidays Collapse: Is Your Holiday Protected?

The demise of Lowcostholidays last week, which is expected to affect almost 140,000 holidaymakers, has put the financial protection of holidays in sharp focus. We talked to the Civil Aviation Authority (CAA), the organisation behind the Air Travel Organisers' Licence (ATOL) scheme, about the importance of financial protection and what to look for when booking a holiday.

Why do I need financial protection when I book an air holiday?

Financial protection for your holiday gives you the peace of mind that you won't be left out of pocket or stranded abroad if your travel company, or one of its suppliers, ceases trading.

What financial protection should I look for when I book a holiday?

All holidays consisting of flights and accommodation, and booked with a UK company, are ATOL protected. If anything happens, the ATOL scheme will make sure you do not lose your money.

Non-air packages (such as those with rail, ferry or coach transport) are required to be financially protected under the Package Travel Regulations. Schemes run by Association of British Travel Agents (ABTA) and the Travel Trust Association (TTA) provide cover. ABTA may also cover accommodation-only bookings and runs a service that resolves disputes between ABTA members and consumers.

What is ATOL protection?

ATOL is a licence granted to holiday companies that sell air holidays. The CAA checks out these companies before they grant an ATOL. Once the licence is issued, the holiday company must contribute to a financial protection fund used to protect customers if the company ceases trading. If one of the company's suppliers ceases trading, it must make alternative arrangements for you.

How do I check if a travel company has ATOL protection?

Each ATOL holiday company is issued with a unique licence number which you can check on the ATOL website; the holiday company must display its ATOL number along with the ATOL logo in all advertising, on websites and in brochures. You should also receive an ATOL certificate as soon as you pay any money. This is what an ATOL certificate looks like.

If my travel company fails, how do I make a claim?

The CAA website will provide all the information you need to claim your money back. You'll need your ATOL certificate and other holiday documents you received, including your holiday confirmation, any payment receipts and payment statements.

If you're abroad, the CAA will make arrangements to ensue you can complete your holiday and travel home as planned. If you incur any cost against any rebooked and paid holiday arrangements as a result of the failure, you should be able to claim this back from ATOL.

Am I covered by ATOL if I book a hotel and flight with different suppliers?

Certain elements of your trip may have some protection, but booking flights and hotels with separate companies means your holiday will not be ATOL protected. You should therefore consider whether you should take out some other financial protection, such as comprehensive travel insurance that covers all of your holiday components, including scheduled airline failure cover.

Am I covered by ATOL if I book a hotel and flight with the same holiday company?

If you book a hotel and flight at the same time, or within 24 hours of each other, with the same UK holiday company, you should be covered by the ATOL scheme. If you book a holiday in this way, you should receive an ATOL certificate once you pay any money to the company.

If I book with a European Union supplier, what cover should I look for?

If you book a holiday package that includes flights with an EU holiday company based outside the UK, it must provide financial protection. You need to check whether the level of financial protection covers repatriation and full refund of deposits. If in doubt, book with a UK-based company, pay by credit card or take out insolvency insurance cover. 

If I book with a non-EU supplier what cover should I look for?

All non-EU suppliers selling holidays that involve flights, even if the flights are not from the UK, must have an ATOL licence from the CAA to protect your money.

If I only buy a flight, do I have any cover?

If you book a flight directly with an airline, it's unlikely to be ATOL protected. However, you have certain passenger rights. Under EU rules, airlines have to look after you if you experience long delays or cancellations at short notice. This means providing refreshments and accommodation if the disruption is overnight. If the disruption was the airline's fault, you may be entitled to compensation too. This applies for cancellations or delays of over three hours on arrival.

What cover do I have if I book on my credit card?

If you're not covered by ATOL and book travel arrangements with separate suppliers, a credit card may provide some cover under the Consumer Credit Act. But, you will only be able to claim for the component that failed, not consequential and additional costs. So, if the hotel you booked goes out of business, you will be able to claim for the cost of the hotel, but not for the flights you booked to travel to the hotel. And, if you decide to still travel and book another hotel, you will not be able to claim more than the original hotel cost.

Should I take out additional insurance in the case of failure?

Travel insurance is really important to cover you for medical costs and other potential expenses, such as damage or loss of any possessions. You can also take out supplier insolvency insurance, and this may cover consequential or additional costs incurred. But it is important to remember that travel insurance providers may well not make arrangements for you to get home in the event of a travel company failure. Check your travel insurance policies and conditions for details.