Holidays 4U was asked to provide additional security that deprived it of £2 million of cashflow when it renewed its Atol licence before its collapse, a creditor’s report has revealed.
The Turkey specialist failed after rival operators, including the big two Tui Travel and Thomas Cook, shifted capacity to Turkey after the revolution in Egypt. The PricewaterhouseCoopers report on the collapse sates the company “began to encounter a marked downturn in trading” in the spring of 2011.
As a result, on March 31, the company had to provide the CAA with a bond of £542,000 and placed £2.8 million into a trust account as security against the Air Travel Trust fund that backs the Atol scheme.
Of that £2.8 million, £1.3 million was provided by the operator’s charter airline seat provider Onur Air. The demand for additional security by the CAA came as Holidays 4U renewed its Atol licence in March and was unable to meet the CAA’s “pre-requisite financial criteria”.
By August the Brighton-based company was unable to meet the costs of flying to Onur Air which was not prepared to extend further credit and the firm was placed into administration on August 3.
The reports says “it was not reasonably practicable to rescue the company as a going concern”. Following the collapse Holidays 4U’s bank Barclays released £2.7 million to the Air Travel Trust Fund. It adds that there will be funds available to distribute to unsecured creditors. The amount owed is estimated at £12.4 million.
Company creditors listed included Barclaycard Business which was owed £3 million but had retained £1.3 million in deferred payments. The Air Travel Trust Fund was owed £13.4 million in advanced and pipeline monies as well as for repatriation, but this was offset by £7.5 million of funds held as security.