The Air Travel Trust fund can continue to cover Atol failures despite being depleted by the failure of Thomas Cook in 2019 but will have to be refinanced, the Civil Aviation Authority has confirmed.

Speaking at the Travel Weekly Future of Travel Spring Forum, CAA group director of consumers and markets Paul Smith said: “With the support of the government, we are in a position to fulfil claims around Atol failures.”

Smith pointed out the Air Travel Trust (ATT) accounts for 2018-19, published last November, provided “a snapshot of the financial position” and said: “The fund, albeit significantly depleted, did have a positive cash balance.”

The fund had a balance of £35 million in November, with the government committed to underwrite any pay-outs for Atol failures above the amount in the trust, which accumulates funds from the £2.50 Atol Protection Contribution on every Atol booking.

Smith argued: “We have some liquidity facilities. Also, we have the letter of support from government in relation to the fund.

“We still have a cash balance and we were able to draw significantly on the insurance we had in place. Having said all that there is a longer-term issue around refinancing the ATT. Right now, we don’t have insurance markets [operating] in the way we did previously. That is very much on our mind and on the government’s mind.”

The accounts revealed the ATT insurance policy expired in March 2020 and “could not be renewed as there was no available capacity in the insurance market”.

Asked if industry contributions to the fund will need to rise, Smith said: “It’s too early to say what the best combination of measures will be to address the issue. Traditionally, the intention is that contributions cover the expected costs of the fund.

“We do need to replenish the fund, but there is a question about the right timescale to do that recognising the challenges the industry has right now. We’re conscious the industry is in a very difficult position.”

The trust’s 2019-20 accounts remain unpublished. Smith said: “We’re working to get the 2019-20 accounts out. Hopefully, that is a matter of weeks away.”
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