Industry sources have accused the Competition and Markets Authority (CMA) of “torpedoing” Teletext Holidays and parent Truly Travel which were wound up in December.
The CMA won a High Court ruling at the end of February that Truly broke the law by failing to refund package holiday customers for Covid-era cancellations. The ruling was the culmination of a CMA prosecution launched in October.
But according to a senior industry source, it was the CMA’s action which finished the company. The source told Travel Weekly: “Truly could have traded out of it. But the criminal prosecution had a huge knock-on effect. It torpedoed the company.”
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Teletext Holidays ‘disappointed’ by CMA legal action
A second source pointed out the CAA renewed the company’s Atol in September 2021 and said: “The CMA wanted to make an example. It was shocked when the business failed.”
Truly Travel owner Kumar Edara has declined to comment on the failure. But the sources point out the company could not pay the outstanding refunds “because the money released to airlines, to Ryanair and others, was not refunded”. The first source said: “The business hadn’t earned any money for 18 months. Its argument with the CMA was ‘We can’t raise the money, we can only wait for the money to come back’.
“As soon as there was a criminal prosecution, it was shot trying to raise money. The prosecution was going to cost £2 million to defend.”
The second source noted: “The CAA renewed the Atol on the basis there were no new bookings. That let the business run its course. [But] when the CMA decided to prosecute, it wasn’t possible to continue.”
Truly operated profitably pre-Covid, reporting a £1.35 million profit for the 12 months to October 2019 and £2 million the year before. But it borrowed what a source described as “a sizeable sum” not long before Covid which meant “it could not raise further funding”. It was not able to raise a government Coronavirus Business Interruption (CBIL) Loan. It also could not benefit fully from the UK furlough scheme as it operated from India.
“It was disadvantaged, and it came to the top of the CMA list,” said the source.
The CMA began investigating Truly in February 2021 and threatened legal action in April. Truly signed formal undertakings to refund customers in May and managed to pay most of the refunds, helped by a £4 million VAT payout stemming from its purchase of Alpharooms in 2016. But that left £1.2 million in refunds outstanding, according to the CMA, which took legal action on October 18.
Within days the Travel Trust Association (TAA) announced Truly had left the group and the TTA would fulfil its Atol bookings. Truly went into liquidation on December 2.
That same October, the CMA closed a probe into whether airlines “broke the law by failing to offer refunds for flights during periods of lockdown” saying “the law does not provide a sufficiently clear right to a refund . . . to justify continuing”.
More: Liquidators appointed to close down Teletext Holidays parent