A leading accountant has warned proposed reforms of the Atol system should be phased in gradually to avoid failures of otherwise healthy tour operators.
Jonathan Wall, chief executive of Elman Wall, warned the Civil Aviation Authority should be “cautious” in the implementation of its proposed changes.
Wall said there is “merit” in proposals to mandate the segregation of customer monies to provide greater consumer protection but advises the authority to allow an “appropriate time period” for travel businesses to recover and build a cash buffer following Covid.
The CAA’s Atol Reform consultation drew more than 300 responses, and the CAA says it will be looking at those before making further recommendations – which can then be responded to in the spring of 2022.
Wall, whose firm acts as accountants to more than 100 Atol holders, said: “Between 2014 and 2019, 93% of customers affected by failures of travel businesses were due to Monarch and Thomas Cook – both companies that arguably should not have had Atol licences renewed for some years prior to their failure.
“I would urge the CAA to be cautious about making too many substantive changes to a system that largely functions effectively, as a result of the mismanagement of two giants who bear no resemblance to most licence holders.
“If not handled very carefully it could have a hugely negative impact on many principled and well-run businesses.”
In a submission to the CAA’s consultation, Wall said Atol holders should have a choice as to continue to protect consumers by way of bonding or insurance-based models, rather than having to segregate funds.
He called for an extended transition period towards segregation of customers’ monies “to avoid the potential mass failure of otherwise perfectly good tour operators due to the inability to cope with the cash flow requirements of a new model” in the wake of Covid.
“This scenario would result in calls on the Air Travel Trust (ATT) and erode consumer confidence in the packaged industry,” he said, adding: “To be viable, the trust model must align with supplier payment requirements, a significant challenge.”
“If consumer funds are held in escrow or trust until a holiday has completed, but suppliers, who would typically be due 70-85% of the funds held, require payment in advance of commencement of travel, the numbers won’t stack up and tour operators will face an ever-increasing cash requirement to fund this gap as their businesses grow.”
Wall also stressed his opinion that airlines and tour operators must be aligned on financial protection, noting that under current regulations many tour operators have been unable to refund consumers within 14 days – as they are required to under the Package Travel Regulations – because monies paid to airlines by Atol holders in advance of travel were not refunded by the airlines in the same timeframe.
Wall, a director at Xeinadin, which owns Elman Wall, said: “It is difficult to comprehend that there is consumer protection in place for the sale of holidays, but not for the direct sale of airline seats.”
He also said it is “far too easy” for an accountancy firm to become an Atol reporting accountant (ARA), and said “standards must be raised… the existing training model is wholly inadequate, and there is no ongoing training or quality control”.