The recovery in the Air Travel Trust fund which backs up the Atol scheme marks a remarkable turnaround for outbound travel which has gone from the gravest crisis in its history early in the pandemic to new peaks in demand in the past year.
The Air Travel Trust (ATT) accounts and report for the 12 months to March 2023, published last week, reveal the fund held £169 million at the end of January. It had sunk to £20 million after the failure of Thomas Cook in 2019 wiped out a £260 million surplus and back-up insurance of £192 million.
That surplus had been built only since 2013, with the ATT in deficit from 1996 to 2012 despite introduction of the Atol Protection Contribution (APC) on Atol bookings from 2008.
The fund took time to build owing to the failures of XL Leisure group in 2008 and Goldtrail Travel in 2010 and the APC, initially set at £1 per person per booking, was raised to £2.50 following the XL Leisure collapse.
The record Atol bookings from 2022, combined with a historically low rate of failures – there were just eight in the 12 months to last March and five since – restored the fund to health. Only 15 passengers required repatriation and 17,000 refunds in the reporting period.
Given this robust health, industry figures could be forgiven for questioning the need for Atol reform and the CAA focus on segregation of customer money.
The reform has been delayed, but the CAA reasserted its view on segregation last month, noting it “continues to observe a considerable number of Atol holders using advance customer monies to fund operational expenditures”.
The report of the fund’s trustees, all senior figures at the CAA, makes clear the CAA’s concerns.
It notes: “The performance of travel companies is getting close to full recovery. However, balance sheets broadly continue to show signs of weakness and still need strengthening and repair.
“Cash flows continue to be stretched by the servicing and repayment of higher debt burdens and the increasing cost of holding this debt, higher demands in working capital driven by tightening supplier payment terms, [and] inflationary pressures on costs.
“All of these factors are placing an increased strain on liquidity levels of travel companies.”
The trustees do note Atol-protected bookings were “the highest on record” in January 2023, and in September 2023, “Atol departures surpassed 2019 levels”. They also suggest online agents are “growing faster than ever” and agent networks have gone “from strength to strength”, with Atol-protected bookings “strong for winter 2023-24 and buoyant for summer 2024”.
But they also point out the funds requiring protection are increasing, with “many industry participants now accepting bookings far further in advance than witnessed historically”.
So, there is more customer money requiring financial protection for longer periods.