CAA looking at ways to ‘improve financial resilience’

The Civil Aviation Authority says it is looking at ways to “improve financial resilience” and has spent more time talking to businesses to understand their challenges.

Michael Budge, head of licencing operations for Atol at the CAA, said the regulator has been evolving its processes as quarantine restrictions have changed the outlook for businesses and their ability to maintain and raise cash.

Speaking on an online autumn update hosted by accountancy firm Elman Wall, Budge said there had been an increase in small licence and franchise holders choosing not to renew.

However, he said this was for a variety of reasons and there were number of late renewals, which was “par for the course”.

Budge said the CAA is being “proportionate and measured” as it assesses cashflow and the Covid-19 impact.

“I appreciate that the regulator coming to travel businesses that have a number of tensions and asking for additional information can be seen as frustrating,” he said.

“But it’s been very clear to us that in order to make decisions with regards to the licencing position we need to understand the outlook and actions being taken by management to resolve the position or to look for additional sources of funding.

“We have tried to engage in as collaborative a manner as possible with licence holders to explain the various conditions that we need to put in place.”

Budge said there is broadly a need for more financial resilience in the sector and that trust accounts my play a part in providing that.

He added this is not just a function of the Covid-19 crisis but lessons that must still be learned from the Thomas Cook collapse which have been overtaken by the pandemic.

“We are looking at the regulatory model and framework to see how we can work with the industry to improve financial resilience.

“It’s accepted this is something that cannot happen immediately or overnight and needs input from industry stakeholders, but in the short term there’s recognition we need to move forward.”

John de Vial, Abta director of financial protection and financial services, described the Abta licence renewal process as being “as good as it gets in the current circumstances”.

He said some members have experienced administrative issues with banks and insurers and have been given extensions to the end of October to complete the process.

“Overall, the vast majority of members are getting through this,” he said. “Our approach has been to put aside the normal criteria as much as we are able to.

“There’s not going to be a business in the industry without a damaged balance sheet.”

De Vial said the most important factor has been to ensure there is enough bonding in place to cover the risk of businesses going bust, despite the increased risk of failure.

“Our obligation is to make sure we are holding that security,” he said.

De Vial said all strands of regulatory reform involving package travel, CAA enforcement powers and airline insolvency must be brought together following the Cook and Monarch failures and Covid-19.

And although he said Brexit is an opportunity to do this outside of the restrictions of the EU Package Travel Directive, he feared it will be put on the backburner.

“I really do worry about how long it will take government to bet back to looking at that with Brexit and all the other Covid issues,” he said. “I can see it very easily slipping down the priority order again.”

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