Continued from page 48 The reform has been


delayed, but the CAA reasserted its view on segregation last month, noting it “continues to observe a considerable number of Atol holders using advance customer monies to fund operational expenditures”. The report of the fund’s


trustees, all senior figures at the CAA, makes clear the CAA’s concerns. It notes: “The performance of travel companies is getting close to full recovery. However, balance sheets broadly continue to show signs of weakness and still need strengthening and repair. “Cashflows continue to


be stretched by the servicing and repayment of higher debt burdens and the increasing cost of holding this debt, higher demands in working capital driven by tightening supplier payment terms [and] inflationary pressures on costs. All of these factors are placing an increased strain on liquidity levels of travel companies.” The trustees do note Atol-


protected bookings were “the highest on record” in January 2023, and in September 2023, “Atol departures surpassed 2019 levels”. They also suggest online agents are “growing faster than ever” and agent networks have gone “from strength to strength”, with Atol-protected bookings “strong for winter 2023-24 and buoyant for summer 2024”. But they also point out the


funds requiring protection are increasing, with “many industry participants now accepting bookings far further in advance than witnessed historically”. So, there is more customer money requiring financial protection for longer periods.


ATT ‘expects to extend’ £75m banking facility


Ian Taylor


The banking facility of £75 million in credit which backs up the Air Travel Trust fund is due to expire in March and must be renegotiated. Trustees of the fund describe


negotiations with the Trust’s bank, Lloyds, as “advanced and positive” in their annual report published last week, saying they “fully expect to extend the facility on similar terms in early 2024 [and] do not consider that this impacts the Trust’s ability to continue operating as a going concern”. The Air Travel Trust’s


continuation as a “going concern” is key to confidence in the industry and had been queried in some parts of the sector following the collapse of Thomas Cook in September 2019 and the pandemic which followed. The trust held assets worth almost


£131 million at the end of March 2023, with more than £116 million


CAA and ATT keep planning for a major repatriation


The Civil Aviation Authority and Air Travel Trust (ATT) continue to plan the large-scale repatriation of Atol-protected travellers in the event of a major failure. The CAA and ATT mounted


the last two major repatriations – of customers of Thomas Cook in 2019 and Monarch in 2017 – having outsourced the repatriation of XL Leisure Group customers in 2008.


46 8 FEBRUARY 2024


Insurance cover for a major failure has not been renewed


in the fund and additional amounts owed in outstanding Atol Protection Contribution (APC) funds and debts as well as cash held by bond ‘obligors’ – meaning funds available for consumer refunds – and administrators of failed Atol holders. However, the trustees have not


replaced the insurance against the costly failure of one or more of the biggest Atol holders which it held at the time of Thomas Cook’s failure and which paid out £192 million. The report notes the trust “has the implicit support of HM Government”


The trust spent almost £52,000 on contingency planning work for the repatriation of UK consumers in the 12 months to March 2023, although this was less than half its contingency spending the previous year. This planning included


negotiating “improved contracts with various airlines that could be used as replacement flying, contracting with additional airlines, and entering into similar arrangements with suppliers of ground handling and support services”. The ATT report also notes


climate change “will lead to more frequent and more extreme weather


Monarch failed in 2017


events which will undoubtedly impact the travel industry and consumers” and “could give rise to a potential risk that the Trust may see an impact on APC revenues and the number of Atol holder insolvencies”.


travelweekly.co.uk


should its funds and borrowing prove “insufficient to meet the costs of a large or multiple failures” and the trustees expect the government to “provide additional financial support as necessary . . . based on the support provided over many years and written assurance provided by the secretary of state for transport”. The trust’s continuation required


a change or ‘variation’ in the ‘Trust Deed’ which established it in 2004 as this was due to expire in January 2025. Transport secretary Mark Harper amended the deed on January 11 to extend the original 21-year deed to 125 years, confirming the government’s support for the fund and the Atol scheme. The costs of administering the


trust rose year on year by more than £1 million to £3.1 million due to an increase in charges paid to Atol Accredited Bodies and Franchises from £1.6 million to £2.7 million in the period.


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