The COVID-19 crisis will see the government demand airlines recapitalise as the banks were made to after the 2008 financial crash, the boss of The Travel Network Group has said.
Speaking in a Travel Weekly webcast, Gary Lewis, chief executive of the Worldchoice and TTA parent, said the pandemic will raise the issue of trust accounts and protecting customer money.
“Trust accounts will be one of the big conversations, and maybe now’s not the time, but certainly it will come in the next three, four, five, six months.
“And if the government has funded the industry through this, specifically funnelling money through the airlines, putting the furlough scheme in place, putting money into Package Travel Regulations amendments, if they come, then in the same way they funded the banks in 2008 and asked them to recapitalise they’re going to look at our industry and ask us the same questions.
“What are we doing with customer money? The trust account model is not the easiest or simplest thing, but there are models out there, and the TTA model is a fantastic example, for enabling new businesses, large businesses, and medium sized businesses to trade in the industry.”
Lewis said the TTA trust account model has been “brutally tested” by the COVID-19 crisis but it has been shown to be able to withstand the challenges.
“We’ve got some of the biggest members like Trailfinders, Teletext Holidays that are TTA members and yet we also have 70% of the new travel businesses into the market come through the TTA trust account model.
“That trust account model has flexibility in it because of the way we blend insurance products, supplier failure insurance, and that whole model’s been brutally tested through this and it’s stacking up and standing up.
“The trust account model works because you are specifically looking after client money and it’s not risked.
“The implication of that comes down to the relationship with your supplier partners. Even in the trust model we release money early to Atol holders because the money is then financially protected by the CAA and the Atol licence.
“Pipeline money is still released by the trust accounts. Therefore, the challenge for the trust account model is still there.”
Lewis said he was hopeful that airline refinancing would get pipeline cash flowing again but believes pubic and government pressure may be needed to ensure agents and operators see the benefit.
“Hopeful airlines refinancing will get the cash flowing. But cash is absolutely bleeding out of them.
“Are they going to worry about the tour operators? Are they going to worry about this pipeline that in some way supports them and some way competes against them?
“I think you will absolutely need pubic pressure and government pressure to get the airlines to support that.
“Iata is an incredibly powerful organisation, they’ve got their lobbying campaign far better than we have.
“I think we are doing very well as this moment in time, but I think we were slow to get to it as an industry.
“We are probably three weeks behind where we should be and if you look at what governments in other countries have done to already amend their PTRs, we are behind the curve as an industry.
“Abta has done some exceptional work to get the stats and the evidence to government but there are conversations to be had in the future about the process and how we are represented because the airlines are brilliant at it.”