Small travel businesses have been warned to waste no time preparing for ‘brutal’ regulatory changes due to be announced by the Civil Aviation Authority.
The regulator revealed last month that plans to abolish Small Business Atols (SBAs) had been scrapped, but firms will face strict financial tests to assess their solvency from April.
Details are being finalised and an announcement expected imminently, but an investor in travel firms warned he expects the new financial hurdles to be “horrific”.
Stewart Baird, chief executive of private equity firm Stone Ventures, which set up Pebble Travel to target small travel firms, said: “Some businesses are going to require a lot of cash to go on to their balance sheets and are going to need to find a solution.
“It’s going to be no good ringing investors two weeks before the deadline once details of what the CAA is proposing come through.
“Companies need to work with an investor so that they understand they are going to enjoy working together. Also, there are lots of things as an investor you have to know.
“My message is to engage now, because it’s going to be brutal at the smaller end of the market.”
The CAA said it had unprecedented trade feedback to its consultation on the proposal to scrap SBAs and that this resulted in their reprieve.
The SBA licenses companies to carry up to 500 Atol-protected passengers a year. There are 950 SBA holders, about half of all Atol licences.
CAA figures have shown the cost of failures among SBA holders outweigh payments to consumer protection fund the Air Travel Trust that backs Atol.