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ATOL Reform Consultation – Future of Financial Protection

Author: Nicola Spoor FCCA ACA, White Hart Associates Limited

Published: 18 May 2021

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The impact of the Covid-19 pandemic on tour operators and travel agency businesses is unprecedented, brutal in fact.

This sector was affected first and will be the last economic sector on the road to recovery. The pandemic has been like a wrecking ball to the travel industry and the road to recovery is littered with heavy debt, damaged brands, decimated workforce and will inevitably lead to changes in the travel regulatory regime.

At the outset of the pandemic a large amount of other countries governments issued emergency temporary legislative changes to the travel regulatory regime. A lot of other industries had interim emergency changes and the lack of intervention in the UK lead to a very difficult period of travel businesses. These businesses have had prolonged levels of ambiguity, lack of refunds from airlines, choosing between paying staff and keeping them working instead of furlough, three years of trade being wiped out in one year of Covid-19, hoping they have a supportive bank, HMRC delays on expediting tax refunds, merchant providers removing their facility, a deluge of consumer needs that needed addressing, refund credit notes, insurance companies doing their best not to pay out on policies and then last but not least the renewal of their ATOL, ABTA and IATA regulatory licences.

In response to the financial issues caused by the initial failure of Thomas Cook and then three months later the start of the Covid-19 pandemic it is not a surprise that the CAA has intention to introduce changes to ATOL. This isn’t unexpected for me as my firm has an in-house Travel Regulatory Advisory Department that has been at the coalface of dealing and assisting with renewals. During this process the use of consumer cash to support operations, by some companies, and the length of time taken to make consumer repayments has highlighted the necessity for better financial resilience. The CAA is in our overall experience not unsympathetic to the plight of travel businesses and has is keen to ensure they do not precipitate failures, by rigid actions. They have for example allowed CBILS finance to be acceptable to fill liquidity and profitability gap and not score as debt would usually be. It is however a Government regulator first and foremost, so the priority is the protection of the consumer. The CAA have therefore issued an initial consultation to invite comments of stakeholders.

Whilst inevitably there will be a change to the financial regulation of travel companies, I hope that this is looked at for the whole chain of supply and also careful thought is given to the impact on the price consumers will pay for holidays. It would be a shame to return to the situation when only certain sections of society can access a travel arrangement that they can afford. That isn’t protecting consumers. Therefore you should aim to respond to this call for consultation if you are a travel company – you are stakeholders. The airline industry has a very strong, cohesive lobbying body and the travel industry as a whole doesn’t. It is important that when asked to voice issues that the travel industry and their finance professionals respond and do.

*The views expressed are the author’s and not ICAEW