Continued from page 56
instruments to be used in conjunction with each other”, an approach the Department for Business is considering as part of its review of the PTRs launched this summer. Crucially, Abta reports
“considerable opposition to enforced segregation of customer monies”. It warns the CAA: “Any move
to segregation of monies would require the rebuilding of company balance sheets which would need time and might not be possible in all cases.” Abta also warns segregating
customer payments could hurt smaller businesses and the UK sector as a whole, noting “enforced segregation would distort competition as some companies would be better able to accommodate or negotiate supplier terms because of their business model or market strength, potentially disadvantaging or excluding SMEs”. In addition, “any restrictions
on supplier prepayments could disadvantage UK companies against overseas competitors”. The association acknowledges
members are divided on proposals to segregate ‘pipeline monies’ – customer payments to agents, held on behalf of Atol holders. It notes: “There is fuller support from principals . . . [but] many agents view these proposals as a fundamental challenge to the travel agent business model, undermining their ability to negotiate business-to-business commercial arrangements.” Yet Abta’s members support a
proposed move to variable rates of Atol Protection Contribution “provided it is transparent and reflects the specific company risk to the ATT Fund”.
Trailfinders calls for rapid transition to trust protection
Trailfinders is bucking the demands of most of the sector by urging a rapid Atol reform process and variable Atol Protection Contribution (APC) payments by April next year. In its response to the CAA’s Atol
reform proposals, Trailfinders even criticises the two-week extension of the consultation deadline in August, suggesting it “delayed further” the process. Abta, the Advantage Travel
Trailfinders chairman
Mike Gooley
Partnership and other groups have called for a lengthy transition process. But Trailfinders argues: “Transition periods invite a lack of action and urgency.” The company supports full
segregation of customer money,
describing its use “for any other purposes than intended” as “embezzlement” and suggests partial segregation, one of the CAA proposals, “condones embezzlement”. However, it acknowledges “partial segregation with payments to suppliers will have an important role in transition”. Trailfinders proposes pipeline
funds held by agents be protected by trust arrangements and calls for Atol Certificates to show liability for payments. It also calls for zero APCs “as soon as providers are compliant with the ultimate protection model”, noting Trailfinders “pays APC fees under duress”.
Ian Taylor
The September Atol renewal process is expected to be difficult with a senior industry figure confirming the CAA “has concerns” about the finances of many tour operators. Alan Bowen, legal advisor to the
Bowen expects ‘difficult’ September Atol renewals 10%
Percentage payment required for a bond for new travel businesses
Alan
Association of Atol Companies, noted the CAA’s financial requirements can be a shock to companies. He told Travel Weekly: “At the
last renewal [in April], someone was asked to put in £900,000.” That amount could be provided by a bond, but Bowen said: “They had no idea they could put up a bond.” The costs of bonding have risen
significantly, but Bowen explained: “If you’ve been trading for 25 years, it would cost 5%-6% [of the amount], so about £45,000.” He argued: “The CAA has
concerns about capitalisation. If your business is solid and costs under
54 2 SEPTEMBER 2021
control, the renewals should be as normal. But a lot of businesses are not in that situation [and] some just won’t get a bond now because the bond market has shrunk. “The CAA is telling some people
to set up trust arrangements, it is so concerned about their finances. For new Atol applicants, the CAA wants trust arrangements from day one.” Bonds are still available. The
problem is “the only companies that need bonds are higher-risk.” In the past, all Atol holders required bonds and bond providers could hedge their provision by having a mix of clients – the more high-risk balanced
Bowen
against those presenting lower risk. That changed in 2008 when the Atol Protection Contribution on bookings replaced bonds for most Atol holders. Bowen said: “Historically, you got a bond for 1%-2% [of the amount] so £10,000-£20,000 for a £1 million bond. But the costs have gone up and up. For new travel businesses now bond providers want 10%.” He added: “The CAA is wary of making allowances after Thomas Cook and this year businesses will have a year of refunds and refund credit notes in accounts.”
travelweekly.co.uk
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