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."

Chris Photi, of White Hart Associates, said the current Atol renewals were proving "very tough" for many firms.

"Sadly, travel companies are beleaguered from all sides by the self-interest of key stakeholders – regulators, trade associations, merchant acquirers, insurance companies, financial failure insurers and bond providers, who all have their own jobs and protection agendas.

"The CAA has an ailing group of licence holders who have effectively had no income for more than 12 months, and have had to support themselves using government-supported debt and the job retention scheme. It’s all against the backdrop of a post-Thomas Cook exhausted Air Travel Trust Fund.

"The CAA has approached the renewals reasonably flexibly, but are certainly seeking to obtain greater security from licence holders generally using trust arrangements or a new-style escrow arrangement. These are unsurprisingly not popular with licence holders."

Photi added the authority was taking a pragmatic, case-by-case approach.

"There is no desire on the part of CAA to precipitate failures," he said. "But they are seeking to find ways to protect the Air Travel Trust Fund, particularly for when the ‘bounceback’ occurs and travel companies start taking large volumes of client cash supported by greatly weakened balance sheets."

‘People want to carry on’

Alan Bowen, legal advisor to the Association of Atol Companies, told TTG: "The CAA are clearly very worried about the value of bookings held over from last year. Unless there is a major change of view, I am concerned their demands for substantial additional capital will push some businesses over the edge.

"They are between the devil and the deep blue sea; if they don’t follow their own rules and businesses subsequently fail, they will be blamed for making allowances. But if they hit everyone with demands for extra liquidity when money is tight, they may precipitate the failure anyway."

Gadhoke added Aito was encouraging members to enter into dialogue with the CAA wherever possible to establish the basis on which any request for security or additional capital has been made.

"A few weeks ago, if I was renewing my Atol for April, I’d be projecting good sales for July and August, and from September onwards," he said. "Now the restart looks less certain, I would have to go back and revisit those projections. It feels like applying a set of moving criteria to something fixed.

"It’s been a full year. People have lost money. If they are allowed to trade and travel opens up, they can start clawing it back. But they need that regulatory authorisation, Atol, to be able to do that.

"These are people and businesses who want to follow the regulations, they’re putting their cards on the table and want their licences. They want to carry on, despite everything."