Travel companies have disputed trust accounts can provide a “one size fits all” solution to protect consumer monies.
Responding to the Civil Aviation Authority’s planned Atol reform, Hays Travel co-founder Dame Irene Hays told a Barclays webcast it would be hard for new travel businesses to survive without access to customer funds as working capital.
The CAA wants segregated customer payments, most likely in trust accounts, to become a condition of Atol licensing, not just for Atol holders but for agents selling their holidays.
But Hays suggested a more flexible regulatory solution “proportionate to the risk” would be appropriate, based on financial assessments of individual companies.
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She said: “The whole issue of regulatory framework around segregation of customer monies is not straight forward.
“For large companies such as Hays Travel it’s less of a problem. My argument would be that the application of strict regulation would kill travel business start-ups. Our view is that regulation should proportionate to the risk.”
She said it was important for start-ups to have access to customer funds, particularly if they are starting in the travel sector at a challenging time.
Hays, who has helped around 50 companies to start up over the last 41 years, said: “They [the CAA] are in a position to take a view around the risk. I don’t think there is a one size fits all position. To operate with no access to customer funds would be very challenging financially.”
The Travel Network Group (TTNG) chief executive Gary Lewis said the ‘structure’ around the trust fund was important to allow for some of the monies to be used to pay suppliers, for example by taking out supplier failure insurance.
He said: “Trust funds are as good as the structure around them. At one stage around 80% of new travel businesses came through the Travel Trust Association. It was about the structure, as long as you can use some of that money to pay suppliers.”
Lewis said he believed there was “a place for bonds and insurance” in the market as well as trust funds, adding that 98% of companies operated correctly and there was adequate funds in the Air Travel Trust Fund (ATTF) to cope. The “huge deficits” in the fund have happened when Atol-holders which also own an airline have failed, he said.
“It [the ATTF] didn’t have enough to cope with the Thomas Cook failure and that’s what we are trying to correct,” he added.
Flight Centre Travel Group chief financial officer EMEA Adam Murray said there needed to be a more ‘holistic’ approach towards protecting customer monies.
He blamed the refunds crisis in the pandemic on the fact airlines were not subject to the same rules as package travel companies and were not forced to refund within a set 14 days.
“Not all trust accounts are equal,” he said, adding: “I find it really challenging when we talk about the Package Travel Regulations and it’s airlines dictating a lot of this and the same rules are not applying to them. Refunds broke down because the supply chain failed.”
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