News

Trailfinders chief hopes Covid-19 crisis is ‘catalyst for reform’

Protecting money in trusts could support a three-tiered approach to regulation based on an assessment of the extent firms risk customer money, according to Trailfinders.

Speaking on a special two-part Travel Weekly Roadmap to Recovery webcast, chief executive Toby Kelly said the agency hopes the Covid-19 crisis will be the catalyst for the sort of regulatory reform it has been “crusading on” for decades.

He said regulations needed to be less fragmented; should consider risk to mitigate the impact of failures; and should focus on protecting customer money rather than building up funds to pay for collapses.

“Travel is the only significant industry where consumer pipeline money isn’t protected by regulation. Whether it’s solicitors or estate agents or bookies, those are all protected,” he said.

“For some reason it’s been woeful in travel. And it’s almost been voluntary, to the extent that you decide [whether or not] to protect consumers’ funds.”

Kelly said the CAA had told Trailfinders that parts  of the travel industry could not afford trusts and he said he accepted any transition would take time.

Trailfinders has suggested a system under which firms contribute towards a central pot for financial protection based on the risk they pose to customer money.

Firms that keep all money in trust until the client returns home would pay nothing, while firms that protect a portion of the money in trust would pay less than those that do not or cannot operate a trust.

Kelly likened the current system to a 19-year-old who has been banned for drink driving paying the same for insurance to drive a Ferrari as a 50-year-old with a clean licence driving a Nissan Qashqai.

He said this was evident in last year’s collapse of Thomas Cook.

“Those in charge of regulation would agree, looking back, that Cook was undercapitalised and probably insolvent for some years before it went pop,” he said.

“If you operate from cashflow rather than being properly capitalised, it is only a question of time, unless something drastically improves within your business.

“You’re just buying time until you fail, and you’re making the scale of that failure dramatically bigger because that money isn’t there.”

The UK’s departure from the EU also raises the prospect of regulatory reform to better manage future company failures than was the case with the “obvious catastrophes” of the collapses of Cook and Monarch, panellists noted.

Gary Lewis, chief executive of Travel Trust Association parent The Travel Network Group, said the EU gives member states a range of options as they interpret its directives into domestic law. He said this would have made it illegal for UK regulators to be prescriptive about how firms protect customer money to tackle inconsistencies in how regulations were applied across the sector.

“There is real movement in the CAA and a feeling in government that there is a chance to sort this out once and for all – that the airlines’ argument they are too big to fail doesn’t stack up,” said Lewis.

Share article

View Comments

Jacobs Media is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.