The cost of insurance to back up financial protection for package holidaymakers cost £9.45 million in the first year of the ATOL Protection Contribution (APC).
The insurance is required in case a travel company failure costs in excess of £50 million. The bill must be met from the Air Travel Trust Fund, which collects the APC payments and finances repatriation and compensation for passengers in the event of a failure.
The fund also paid out £1.4 million in interest and bank charges on its soaring £46.5 million debt – up from £21 million in the year to the end of March.
The deficit will mean a rise from £1 to £2.50 in the APC on holidays from October 1. However, Air Travel Trust chairman Roger Mountford insisted there should be no return to the former system of bonding for operators. “Despite the strain on the Air Travel Trust caused by the failure of XL Leisure Group, the trustees see no advantages of a move back to an industry-wide bonding system,” he said.
The cost of insurance and bank charges were revealed in the Air Travel Trust’s annual report, which also explained the delays in meeting some of the claims by XL customers. The report said: “XL traded in a variety of ways and the position was made more complex by some agents selling other holiday components with XL flights. Establishing the legal position and responsibility for claims delayed the settlement process.”
Close to £21.5 million in levy contributions was paid into the fund over the first year as a result of the sale of 21.5 million ATOL-protected holidays. But the fund paid out £36 million in compensation claims – the lion’s share following the collapse of XL in September 2008.
The bill to the fund for XL’s failure is estimated at £28.6 million. However, four other company failures cost the fund significant amounts. The collapse of Seguro Travel – also last September – cost £2.29 million, and those of Pure Flights, Whitehall Leisure, and Sportability cost in excess of £500,000 each.
A total of 46 ATOL-holding travel companies failed during the year to March, with more failures expected over the coming months.