The expiry of Atol-protection for refund credit notes (RCNs) at the end of this month is unlikely to trigger a cash crunch for Atol holders or substantial losses for consumers, but the trade will face a crunch point late this year or early next.
That is according to Travel Trade Consultancy director Martin Alcock who pointed out the outstanding RCNs amount to “about a day’s worth” of Atol-protected sales.
The CAA is poised to issue a fresh warning to consumers to use outstanding RCNs or request a refund before Atol protection of the notes expires on September 30 after reporting in late July that RCNs worth £54 million remain unused.
That triggered fears Atol holders could face demands for refunds totalling millions, although outstanding RCNs can still be used to book holidays beyond the end of September.
However, Alcock told Travel Weekly: “The Atol scheme was protecting 26 million passengers a year and something in the region of £20 billion in annual sales before Covid. The £54 million outstanding is a pretty small proportion of that. It represents only about one day’s worth of Atol-protected sales.
“Given Covid struck in March 2020, a lot of the unspent RCNs will relate to the deposit portions of January 2020 bookings, and we were seeing a lot of ultra-low deposit activity at that time. So a large portion of the RCNs will be for individually low values. Many customers may have simply written them off.”
He added: “The obligation on Atol holders is to refund RCNs or convert them into Atol-protected bookings by the end of September. In practice, we’re seeing clients able to upsell to customers, converting remaining RCNs to new bookings at substantially higher prices, meaning new cash inflow.”
However, Alcock warned: “We still see late 2022, early 2023 being a crunch point when the cost-of-living crisis bites hard on the sector. We could see a slowdown in bookings around the time of the sector’s traditional low point for cash.”
RCNs played a vital role in protecting many firms from bankruptcy in the first months of the Covid-19 pandemic, although the CAA and Department for Transport only confirmed Atol protection of RCNs four months into the crisis.
Trailfinders founder Sir Mike Gooley accused the CAA of creating a “monster” in providing Atol protection of RCNs and failing “to alert consumers to this jeopardy”.