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Ditching Atol contributed to Lowcosts’s downfall

Lowcost Holidays’ move to Palma in 2013 contributed to the group’s collapse, say administrators, with the agency’s withdrawal from Atol leading to a reduction in UK customers.

The shortfall in the accounts of Lowcost Travel Group, which ceased trading on July 15, could reach £65 million, with administrators saying the company has less than £10 million and owes creditors £75 million.

Lowcost failed with 27,000 customers abroad and 112,000 forward bookings comprising another 255,000-270,000 clients. About 150,000 of the total were UK customers of Lowcost Holidays, which withdrew from the Atol scheme when it moved from the UK to Majorca in November 2013.

Joint administrator Finbarr O’Connell of Smith & Williamson, who is acting with Lane Bednash of CMB Partners, said: “The directors told us the move to Spain reduced their customers because a lot of UK holidaymakers look for Atol. They moved to Spain for cost savings, but it had a negative effect.”

Lowcost gave the CAA 24 hours’ notice of the relocation, leading the CAA to query whether it had “validly transferred its obligations to consumers”.

O’Connell said: “The assets have largely disappeared. All the money has been spent. There are a few million pounds, probably under £10 million. If customer claims amount to £50 million, we wouldn’t be surprised if there is a £75 million deficiency.

“The Spanish travel agency had a guarantee of €1.3 million. Customers’ claims will be limited to that and be pooled. You’re talking [payment] of 1p [in £1].

He acknowledged: “It’s not good news for consumers. Travel insurance tends to be invalid in insolvency. If a customer paid on a credit card that is probably the best position. If they paid on a debit card there is a question as to whether banks support [claims].”

Asked what caused the failure when Lowcost should have had large sums of cash, O’Connell said: “It’s much too early to reach any conclusions.” But he said trading through to September was not an option: “They were running out of cash. They would not have been able to continue to September.”

He dismissed a report that Lowcost failed to hedge on currency, saying: “The group had a substantially hedged position.” But he said: “The currency squeeze affected it. It reported bookings to the eurozone down 60% on 2015.”

That seems extraordinary when latest ONS figures show UK departures to the eurozone up 9% in the five months to May and analyst GfK reports summer bookings 5% up on 2015 to June.

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