Air Travel Trust will require new credit facility from March

The banking facility of £75 million in credit which backs up the Air Travel Trust fund is due to expire in March and must be renegotiated.

Trustees of the fund describe negotiations with the Trust’s bank, Lloyds, as “advanced and positive” in their annual report published last week, saying they “fully expect to extend the facility on similar terms in early 2024 [and] do not consider that this impacts the Trust’s ability to continue operating as a going concern”.

The Air Travel Trust’s continuation as a ‘going concern’ is key to confidence in the industry and had been queried in some parts of the sector following the collapse of Thomas Cook in September 2019 and the pandemic which followed.

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The trust held assets worth almost £131 million at the end of March 2023, with more than £116 million in the fund and additional amounts owed in outstanding Atol Protection Contribution (APC) funds and debts as well as cash held by bond ‘obligors’ – meaning funds available for consumer refunds – and administrators of failed Atol holders.

However, the trustees have not replaced the insurance against the costly failure of one or more of the biggest Atol holders which it held at the time of Thomas Cook’s failure and which paid out £192 million.

The report notes the trust “has the implicit support of HM Government” should its funds and borrowing prove “insufficient to meet the costs of a large or multiple failures” and the trustees expect the government to “provide additional financial support as necessary . . . based on the support provided over many years and written assurance provided by the Secretary of State for Transport”.

The trust’s continuation required a change or ‘variation’ in the ‘Trust Deed’ which established it in 2004 as this was due to expire in January 2025.

Transport secretary Mark Harper amended the deed on January 11 to extend the original 21-year deed to 125 years, confirming the government’s support for the fund and the Atol scheme.

The costs of administering the trust rose year on year by more than £1 million to £3.1 million due to an increase in charges paid to Atol Accredited Bodies and Franchises from £1.6 million to £2.7 million in the period.

Contingency planning and repatriation

The Civil Aviation Authority (CAA) and Air Travel Trust (ATT) continue to plan the largescale repatriation of Atol-protected travellers in the event of a major failure.

The CAA and ATT mounted the last two major of repatriations of customers of Thomas Cook in 2019 and Monarch in 2017, having outsourced the repatriation of XL Leisure Group customers in 2008.

The trust spent almost £52,000 on contingency planning work for the repatriation of UK consumers in the 12 months to March 2023, although this was less than half its contingency spending the previous year.

This planning included negotiating “improved contracts with various airlines that could be used as replacement flying, contracting with additional airlines, and entering into similar arrangements with suppliers of ground handling and support services”.

The ATT report also notes climate change “will lead to more frequent and more extreme weather events which will undoubtedly impact the travel industry and consumers” and “could give rise to a potential risk that the Trust may see an impact on APC revenues and the number of Atol holder insolvencies”.

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