The looming September Atol licence and Abta bonding renewal period is going to be “bedlam” and the process is likely to extend beyond the deadline at the end of the month.
A panel of experts on industry regulation was brought together at yesterday’s Travel Weekly Future of Travel event in London to discuss the situation after 18 months of the Covid-19 pandemic.
Leading industry accountant Chris Photi, head of travel and leisure at White Hart Associates, said he was particularly concerned for mid-sized firms with £10 million to £15 million annual turnover.
These firms are being dealt with by a team at industry regulator the Civil Aviation Authority (CAA), which Photi said is not equipped to deal with the nuances of each company’s situation and has less scope for discretion.
Photi said both Atol renewals and Abta bonding are “very challenging”. “We are 18 months into a pandemic and these companies are at their lowest ebb when it comes to their finances,” he said.
“They are coming up against difficulties in signing off their accounts, with cash, are they going to get their Abta bond renewed, are they going to get terms out of the CAA?
“It’s a case of chicken and egg. Forty five percent of [Atol] holders have not submitted their applications because of those reasons.”
Photi said one of the problems these firms are facing is resourcing at the CAA which has a separate team that deals with the larger Atol holders that provide monthly data and another for smaller firms.
This latter team requires firms to input data into an Atol liquidity test system that generates a “scorecard” to determine what is required for them to be granted a new licence.
“It’s going to be bedlam for the next two, three, four weeks,” Photi said. “It’s going to go beyond the September deadline.
“I probably have a dozen firms I have problems with. In fairness to the CAA, some have been late in getting their submissions in.”
Asked if the situation will inevitably lead to failures, Photi said there is no rationale for the CAA to put firms out of business when there is no money left in the Air Travel Trust Fund that backs Atol.
And he said there were “various techniques” that firms can deploy to meet CAA requirements like agreeing to segment customer money from working capital.
“There is always the prospect of finding a solution,” he said. “It probably will end up being that it just is not sustainable, the model will not sustain it, and the business will run out of cash.
“That’s generally the reason businesses fail, because they run out of cash. I think there will be a lot of companies that the CAA will let drift beyond October.”
Photi said that if these firms continue to experience liquidity problems, even if the hoped for travel bounce back does happen, they will then have to seek advice about what their options are.
“Indirectly the renewals may cause failures,” he said.