Senior industry figures have warned of a heightened risk of failures following the July 31 expiry of many refund credit notes issued in the first weeks of the Covid crisis.
Industry accountant Chris Photi, head of travel and leisure at White Hart Associates, told a Travlaw industry webinar: “We’ve seen mounting closures of long-established businesses like Funway and Fleetway, and they are not likely to be the only ones. The July 31 refund credit note (RCN) deadline could result in failures.”
Association of Atol Companies advisor Alan Bowen agreed, saying: “We had about four weeks when a lot of people thought travel would be up and running by the end of July.”
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It is unclear how many RCNs for cancelled holidays issued in March and early April had a July 31 expiry date, which was linked to a firm’s Atol-renewal date. Abta issued guidance extending all RCN expiry dates beyond July 31 in mid-April following the CAA’s completion of the delayed Atol-renewal process.
Bowen suggested “there may be 100,000 or more” with a July 31 expiry date and said: “A lot of people are saying ‘We haven’t got the money’ and talking to their accountants. One business went to borrow £2 million last week. Customers will be considering what to do on August 1. Some will seek chargebacks.”
A senior leisure industry source downplayed the number of businesses at risk, saying “it’s not a significant number”, but warned: “For those in a critical position, not confident in their financing, it could be the straw that breaks the camel’s back. There is a fine line in the current market between financial engineering and failure.”
Abta chief executive Mark Tanzer said: “When the date expires, the customer is entitled to a cash refund unless they choose to roll it forward. There may be discussions on that, but that is the principle.”
More: Refund Credit Notes praised as ‘lifeline’ for agents
CAA issues guidance on refund credit notes at last
Advice: Abta Refund Credit Notes explained
