News

Refund credit notes are driving up cost of Abta bonding

Abta has rejected claims that it has piled financial pressure on members by hiking its bonding requirements.

Mark Tanzer, Abta chief executive, said bonds had to increase as a consequence of members issuing so many refund credit notes (RCNS) in lieu of cash refunds to consumers for cancelled bookings.

He argued it was also to be expected that bond providers would “look carefully at their exposure” to create “a very tight funding market”.

Tanzer told Travel Weekly: “Abta’s ability to protect RCNs is linked to the underlying bonds because that is the instrument that provides the protection.

“Under the Package Travel Regulations [PTRs] you have to protect the customer money you have at risk. And as time has gone on with people issuing refund credit nodes, that has increased.

“Even if [a business’s] turnover has gone down or has been zero because of Covid, the customers’ money they are holding has gone up because of all of those deferred refunds.

“So in order to comply with the PTRs, the bond increases because the amount of customers’ money they’re holding has increased.”

Tanzer acknowledged: “People have said, ‘Well, I’m not trading, yet my bond has gone up’. That is because the bubble of money at risk has increased. It’s not just Abta being difficult. It is what is required under the PTRs.”

He added: “The financial markets have already taken some pain. We’ve had 23 failures including Shearings and its parent company Specialist Leisure Group and Cruise and Maritime Voyages.

“So there have been hits to the people who are providing these bonds. You can’t be surprised that they’re looking carefully at what their exposure is and at what kind of appetite they have for risk while we’re still in this very difficult trading situation.

“The two together mean you have a very tight funding market.”

Abta is only now completing the autumn cycle of bonding renewal and is poised to start on the March renewals.

Speaking on a Travel Weekly webcast, Tanzer said: “We are just completing the last bond renewal cycle.

“It’s a very small number outstanding. The vast majority have been done, but there is a small number [left].”

He said: “It has been a very tight bonding market.”

Share article

View Comments

Jacobs Media is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.