End of Refund Credit Notes risks ‘serious cash outflow’

The CAA decision not to allow refund credit notes (RCNs) to be issued for cancellations due to Covid-19 beyond the end of the year risks a “serious outflow” of cash from struggling businesses.

That is the view of industry accountant Chris Photi, head of travel and leisure at White Hart Associates, who warned: “There could be a serious liquidity outflow if customers insist upon cashing in refund credit notes for a cash refund.

Photi told a Travel Weekly Insight Report launch event: “Refund credit notes have undoubtedly been a lifeline for the industry, [but] they’re not an infinite resource.

“The CAA says it won’t extend refund credit notes beyond December 31. That could be crucial to some businesses. The longer this goes on, the more bookings will fall due for cancellation and refund.”

Alan Bowen, legal advisor to the Association of Atol Companies, agreed: “It’s a big issue. I’ve talked to the CAA and there will be no extension. The CAA is being forced by the Treasury because, ultimately, if a business fails refund credit notes are going to be paid out of the Air Travel Trust. And we all know the state of the Air Travel Trust.

“The back-up insurance fund of £400 million is no longer there, so it will be money coming out of the government’s pocket.

“If travel doesn’t restart by April, there will be an issue. People who have issued a lot of refund credit notes are going to be in some difficulty.”

Bowen said: “An awful lot of people assumed in March we would be out of this by the summer or at the very latest by early autumn. There are an awful lot of bookings for March-April [2021] where, if they can’t go ahead, customers will ask for refunds.”

He added: “I came across a company which issued credit notes that expire on December 31 and is writing to customers saying they’ve moved the date to September 30 next year. Of course, that isn’t acceptable. It’s an indication some companies are finding life difficult.”

“A refund credit note is an agreement between the customer and operator. Abta has told every operator that if a customer asks for a refund, they should get it. But there are some companies making it difficult to get money out of them.”

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