Abta has hailed a “remarkable” start to the year, reporting a “robust” performance by members as the sector continues to defy the poor economic outlook for the UK.
However, a report by trustees of the Air Travel Trust (ATT) fund which underpins Atol financial protection presents a far more cautious view, suggesting: “The travel sector remains in a critical condition.”
The ATT report and accounts are for the 12 months to the end of March 2021 so only to the mid-point of the Covid-19 pandemic. But they were signed off last week and note travel bookings “throughout 2022” remained below pre-pandemic levels.
Abta director of legal affairs Simon Bunce told Travel Weekly: “Inflation seems to be peaking, interest rates may not go much higher and we have very good bookings reported. The financial situation seems relatively positive and we see that reflected at Abta. Some members we lost during Covid have come back and we’ve recruited new members.”
He added: “We see an increased availability of bonds, insurance and trust options, and bond renewals have been a lot smoother.”
Rachel Jordan, Abta director of membership and financial protection, agreed, saying: “This year has been pretty remarkable. The performance of Abta members is robust. We’ve only seen one failure, though I’m not so naive as to think there won’t be more.”
She described Abta’s bond‑renewal process as “by far the easiest” of the five peak-renewals she has covered and said: “A couple of new bond providers have come to us.”
Yet the ATT report concludes: “The sector is now significantly more leveraged than before, interest rates have risen significantly. The sector remains under significant stress.”
Alan Bowen, advisor to the Association of Atol Companies (AAC), described the ATT report as “far from positive” and “very cautious”.
He suggested: “January was phenomenal – better than 2019. But there is a change this month. The boom is beginning to run out a little.”
However, he forecast revenues should remain strong even if trading slacks off, arguing: “Most [companies] are operating with far fewer staff. One AAC member used to have an office with 80 staff. Now there are 50 all working from home.
“Balance sheets aren’t strong but costs have been cut. Capital positions are weak but will strengthen. If business is only nearly as good as 2019, we should still see a good level of profits.”
Chris Photi, head of travel and leisure at White Hart Associates, agreed, noting: “2022 outperformed everybody’s expectations and 2023 got off to a good start. But there will be a tail off due to the cost of living and the drop off in government support on energy. The cost-of-living impact is going to come.”
Latest UK economic data showed an improvement, with inflation falling – although still 10.1% in January – and retail sales up 0.5% on December, while gas prices fell to their lowest in 18 months last week.
KPMG chief economist Yael Selfin said: “We’re expecting a relatively mild recession now, but some of the underlying weaknesses are still there.”
Jordan, Bunce and Selfin are due to speak at an Abta Travel Finance Conference in London on March 1-2.