Large business travel agents have been warned they will be hit hardest by new Iata rules that could force them to take out bonds for the first time.
Speaking at the latest Grant Thornton travel industry seminar, Chris Photi (pictured), senior partner at accountancy firm White Hart Associates said this was a “massive issue” for agents.
He said the whole process, although promoted as way of simplifying procedures, was just about Iata generating more bonding cover from agents.
Photi said in 2011 airlines lost $300 million through the failure of Iata accredited agents and that this was the key driver for the changes that were agreed on June 22.
Before they can be fully implemented, they have to be finally ratified in September at the Iata convention.
“What it will mean is a large proportion of agents who do not currently give bonds to Iata will now have to, and those who will be most effected are the extremely large agents.”
The proposed new Iata financial criteria requires agents to have positive EBITDA, and sets out liquidity tests that larger agencies are likely to be unable to meet, said Photi.
“Large organisations have a lot of intangibles on their balance sheets because they have acquired goodwill,” he said.
“There is an Iata bombshell coming because organisations will require more bonds but there is no insurance market any more for any bonds of any size.”
Photi said the bonding market had been decimated by the CAA’s decision scrap bonding for Atol and replace it with the £2.50 Atol Protection Contribution.
UK agents, along with airlines, have drawn up an alternative set of proposals they hope will be adopted by Iata that could relieve them of the need to provide bonds.