Sudheer Sharma, Advisor and Consultant at Trstpays is an experienced and well-established Travel Trustee and the comments below reflect his experience of operating ATOL Trusts.   

This article was originally published in June 2019 on the website of the Institute of Chartered Accountants in England and Wales.

General principles for Trust ATOLs   

The ATOL Scheme protects customers who have booked their holidays with an ATOL licenced UK travel company (“Travel Company”). ATOL ensures the customers don’t lose the money paid out or become stranded abroad if the Travel Company ceases trading. 

The Civil Aviation Authority (“CAA”) oversees the protection of these ATOL consumer travel funds under a number of mechanisms, one of these being Trust accounts (“Trust Accounts”). The other traditionally recognised model is Insurance or Cash Bonds. 

These Trust accounts are managed by Independent Trustees (“Trustees”) who are generally experienced and understand the business of protection of travel consumer funds. 

Trust accounts ensure consumer funds are ring-fenced and separated from the Travel Company’s own funds so that in the event of a failure, consumer funds are intact.  So, the trust model more readily enables the CAA to fulfil holidays in the event of the Travel Company becoming insolvent.  

Where the CAA is not able to fulfil the holidays, clients are assured of the return of their monies. 

Beyond the Trust accounts there is a guarantee provided by the CAA’s Air Travel Trust (“ATT”). In the event of a shortfall, monies held in the ATT are used to meet refund and repatriation costs arising from a failure. The Fund is administered on behalf of the Air Travel Trust (“ATT”) by the Consumer and Markets Group (“CMG”) of the Civil Aviation Authority. 

The ATT is funded by ATOL Protection Contributions (APC). The Civil Aviation (Contributions to the Air Travel Trust) Regulations 2007 enable the ATT to collect APCs from ATOL Holders for each person who books air travel covered by an ATOL. As of 31 March 2018, the ATT fund had a surplus of £170 million and this fund is growing rapidly.  

Experience of ATOL Trusts 

The intentions of the CAA have been well served by the use of these Trust ATOLs. Furthermore, unlike Bonds there is a greater likelihood of monies being available in the Trust accounts thereby limiting the call on ATT funds. Bonds even in medium-sized failures are rarely sufficient. 

Trustees experience of working with Travel Trusts has been very positive as shown below. Trustees add to the assurance that Travel Companies seek in the practical operation of their Trust ATOLs.  

ATOL Trusts in General 

The Trust model also works well with The Package Travel and Linked Travel Arrangements Regulations 2018, the latest enhancement to protecting Consumer funds, 

The Trust model is unique in its effectiveness and the systematic manner it is defined and operated.  

It provides assurance to all parties involved, not least the CAA that consumer funds are being managed properly. External parties such as Banks, Merchant Acquirers and Suppliers derive great satisfaction from these Trust accounts.  

No other system including bonding provides anywhere the level of comfort the ATOL Trusts provide. 

Objective Criteria and Concepts 

Such assertions are supported by an objective assessment when considering key concepts applied in developing, maintaining and operating these ATOL Trusts. They are: 

The Teams and Sharing of Information 

By the nature of the processes involved, it is possible to develop effective relations with the Management and Trust teams at the Travel Company thereby ensuring that claims from their Trust accounts are processed expeditiously and information is presented in a consistent manner for all claims thereby enhancing confidence in the process. There is clear understanding of the requirements as set out in the Trust Deeds. 

Systems, Efficiency & Effectiveness 

By developing specific systems geared to recording transactions and producing accurate claims on a timely basis. This calibre of systems is enhanced when there is open sharing of information.  

The Trustees and Travel Company interact in a clearly defined manner so that claims are submitted and then substantiated in an efficient and effective manner so that issues are identified and resolved promptly. 


Cashflow considerations are paramount to all businesses operating ATOL Trusts. The Trust Deed format in terms of which elements of a booking may be claimed and when has been carefully drawn up to be fair to the Travel Companies whilst protecting Consumer Funds.  


The author believes that the costs of operating these Trust are reasonable and proportionate. Trustees can pass on cost savings by becoming more efficient in carrying out their role.  

Businesses operating these Trusts are likely to derive significant benefits when commercial and regulatory costs savings are taken into account. So, Merchant Acquirers for one are likely to provide more cost-beneficial solutions. 

The CAA & Confidence in ATOL Trusts 

Those Travel Companies Operating Trust ATOLs are aware these trust arrangements work well as they are efficient and effective. The CAA conduct audits, arrange visits and telephone reviews to examine the work of Trustees on a regular basis. These trusts provide a higher level of assurance. We repeat the point, that no other consumer protection mechanism provides this level of comfort in protecting consumer funds.  

External parties such as Banks, Merchant Acquirers, Suppliers and Interested Third Parties derive great comfort and satisfaction from the existence of these Trust accounts. With Trust accounts, they generally do not ask for security deposits or upfront payments as a form of security. The combination of ATOL Trusts and oversight by the CAA are important considerations for these external parties. 

Consumers would be gratified to learn that their travel funds are controlled and protected in such a precise manner. An ATOL trust is solely focused on protecting their funds. 

Merchant Acquirers generally are exposed to the risk of a travel business’s failure to the fullest extent due to the requirements of Consumer legislation. Consequently, acquirers do take steps to mitigate their liability at short notice by: 

  • withdrawing facilities in times of increased risk 
  • demanding bonds (cash and/or insurance) 
  • operating deferrals so that they end up holding onto funds for a period of time 

This is quite apparent where a major Tour Operator and a major Low-cost airline have had restrictions imposed upon their funds by some of their acquirers. 

Acquirers go further and provide advantageous term to ATOL Trust operators. 

Suppliers (accommodation and flight suppliers) generally ask for payments upfront and in advance of delivery of the service. That creates a further risk to consumer funds should the Supplier fail to deliver the service that has been paid for in advance. 

In the early days of a Trust, it is not uncommon for a business to advise Suppliers and Merchant Acquirers of the existence of these Trusts and seek favourable terms.