September 14-18, 2020

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Travel regulation experts discuss APC, chargebacks, Atols and RCNs in the wake Continued from page 40

the customer’s money is in the trust account. The trust allows prepayments to suppliers. In this crisis, that has been shown to be one of the major issues.” De Vial said: “Trust accounts

are in exactly the same position as every other travel organiser where they’ve not received a refund from the airline or other supplier and are unable to refund the consumer.” Photi agreed trust

arrangements had not facilitated refunds on the flight component of packages cancelled due to Covid, but said: “It enabled operators who use trusts to say ‘Here is your ground money back’. That is better than nothing.” He also acknowledged:

“Operating a ‘gold standard’ trust is extremely expensive. You need massive reserves. Take a £1,000 holiday with a £400 flight. You have to fund 40% [of the booking] even though you may only be making 10%-15% margin.” De Vial told the summit:

“We’re beginning to see trust accounts that give the option of holding all customer money. We’re open to look at those. “But there aren’t easy answers for 99% of Abta members as to how you pass all customer money into a trust account and are able to deal with suppliers in advance. The notion there is an easy solution is a fantasy.” He added: “Some companies

are being forced down the trust route by merchant acquirers. A small minority of members are in that position.” Themis Advisory director Jo

Kolatsis said: “A gold-standard trust model, where all consumer money is ring-fenced, is really expensive. I’m not aware of many businesses doing that.”

De Vial and Photi tip hike in APC to replenish ATT

The Atol Protection Contribution (APC) on package holidays is certain to rise once the worst of the Covid crisis is past because of the need to replenish the Air Travel Trust fund. That is the view of senior industry

figures including Abta director of membership and financial services John de Vial and leading industry accountant Chris Photi, head of leisure and travel at White Hart Associates. Photi believes the CAA could

introduce a tiered APC, offering a discounted rate to Atol-holders using trust arrangements to protect

customers’ money. He told the Future of Travel

summit: “I expect the CAA to offer a reduced APC if companies use trust accounts. That won’t be imminent, but it will come.” The Air Travel Trust (ATT) fund

was all but emptied by the collapse of Thomas Cook a year ago. Photi said: “The ATT does have

a government-backed line of credit. But at the end of the day, the only way it can be replenished is for the travel industry to pay for it. So one assumes the APC will go up. “The CAA will consider a tiered

Chris Photi believes APC could become tiered

I expect the CAA

to offer a reduced APC if companies use trust accounts

APC based on whether you operate a trust or put all the responsibility on the ATT.” He suggested the reduced rate “could be £2.50 and the APC £5”. De Vial noted the government’s

belated confirmation this summer that refund credit notes are Atol- protected and said: “The government promise is a sort of bridging finance guarantee that it will stand behind the Air Travel Trust if it’s needed. That is fantastic, although it was frustrating that they took as long as they did. “But it doesn’t address the

mechanisms for refunding the Air Travel Trust or for rebuilding the ATT reinsurance. “Ultimately, the ATT is going to

have to be rebuilt. I don’t think we’ll see a sudden increase in APC, but it can’t be dodged.”

‘CAA’s demands for data puts pressure on finance teams’

The CAA’s demands for financial data from larger Atol-holders risks “paralysis by analysis”, according to Chris Photi, head of travel and leisure at White Hart Associates. Photi told the Future of Travel

summit: “The CAA is asking for updated financial information. Its requirements have moved from monthly cashflows to weekly cashflows, putting real pressure on finance teams.

38 24 SEPTEMBER 2020 “The CAA is in no way relaxing

its liquidity tests, albeit it’s accepting government-supported loan arrangements as a replacement of liquidity for a licence-holder. “Licence-holders with Atols for

more than £20 million are being approached by the CAA on the basis almost of ‘paralysis by analysis’.” Photi acknowledged: “The CAA

wants to do whatever it can to get a licence-holder through, but there is only so much juice you can squeeze from an orange.” He described the CAA at the

time of the March Atol renewals as “rabbits caught in the headlights”. Photi said: “They were saying ‘We’re

Chris Photi

going to plough on’. Then it was ‘Give us a model’, ‘Give us another model’, ‘Sensitise it like this’, ‘Sensitise it like that’. You’re a beleaguered finance director trying to put this together and it’s changing every week.”

PICTURE: Shutterstock

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