Beleaguered travel firms are at risk of being "pushed over the edge" by more stringent financial assurances being sought by the CAA and other stakeholders ahead of the latest round of Atol renewals, experts have warned.
TTG understands the authority is looking for some firms to put up extra capital and cash security owing to the stresses of the Covid crisis, with the Air Travel Trust Fund (ATTF) still depleted following the collapse of Thomas Cook in September 2019. Other pressures on businesses’ cash reserves include advance and/or upfront payments for financial failure insurance and merchant acquirers fees.
Additionally, many travel businesses still have significant amounts of cash tied up in refund credit notes (RCNs) to which the CAA has extended Atol protection, which could yet burden the ATTF if firms are forced out of business due to there being no immediate prospect of travel being able to resume.
The CAA declined to comment when approached by TTG with the Atol renewal process ongoing. The deadline for Atol renewals is midnight on Wednesday (31 March).
"There are cases coming through to me now where members are saying the CAA is seeking a capital injection or security," Aito head of commercial Bharat Gadhoke told TTG.
"Some of the sums relative to the size of the businesses are quite large. Contrary to that, we’ve had a few renewals sail through. But there are more of the former than the latter.
"The CAA has said it will take into account the fact there has been no income for the past 13 months and that the restart of international travel keeps being pushed back – all these things impact turnover and projections.
"They also have each company’s full financials in front of them, so surely they must have an inkling many of these businesses just don’t have the required funds?"
Gadhoke said "everyone" was seeking cash security in the current climate. "Merchant acquirers want it up front, even financial failure insurers. Now we’ve got the CAA asking for it. Cash is king, and it’s throwing the entire industry into turmoil.
"On one side, we’ve got the government not dipping its hand into its pocket for anything so far as travel is concerned. On the other, you have all these stakeholders saying they want some too.
"We’re being treated like a pinata; everyone’s picking up a stick and hitting us, but there’s nothing there – yet they still expect money to fall out. It’s actually quite frightening for people who have build up businesses over many years with their Atol being the sole basis on which they trade."