The timing of the CAA’s Atol Reform consultation “could not be worse” and the proposals to ring-fence customer payments are “a major issue” for travel agents whose cashflow could be “gone completely”.
That is the view of Alan Bowen, legal advisor to the Association of Atol Companies (AAC), who stressed these are his personal views.
But he told Travel Weekly: “You couldn’t think of a worse time to be looking at radical changes to the way the industry works.
“This is saying to people they’re going to have to completely change the way they do business, in a market that is virtually non-existent.”
Speaking on a Travel Weekly webcast, Bowen said: “Although this is an Atol consultation, it affects every travel agent because it proposes that any money collected on behalf of an Atol-holder goes into a segregated account. That is a major issue for every agent because that is their cashflow gone completely. It’s important agents don’t dismiss this as something that doesn’t affect them.”
Bowen warned: “I don’t think a lot of people are thinking about this.
“That is one of the issues. If we don’t get this right, the CAA could do a lot of damage to a lot of businesses.
“That is not a statement on behalf of the AAC, because we have a consultation and there will be varied views. Some members already have trust accounts. Others are terrified of the thought and a lot of small businesses don’t understand how trust accounts work.”
He argued the proposed reform is too narrow in only focusing on Atol, saying: “The big problem in the last 15 months has been extracting refunds from suppliers. The law says airlines should make refunds within seven days, but the law has been ignored. At the same time, we’re obliged to make repayments in 14 days. There has to be a quid pro quo.”
Bowen insisted: “I’m all for consumer protection. [But] look at the four big failures – the first a year after the Atol scheme was set up [in 1973] when Clarkson’s went bust, ILG in 1991, Monarch a few years ago and Thomas Cook. The thing they had in common was they all had their own airline. A huge repatriation was required. That isn’t the case for 99.9% of seats.
“There is a real danger of throwing the baby out with the bathwater. I’m not against trust accounts, but they are not a cheap version of financial protection.”
However, Daniel Landen, managing director of Protected Trust Services, said: “It seems inherently unfair that good travel businesses are perpetually paying out to fund the failures of poorly run travel businesses and that is being looked at now in a serious way.
“It’s inevitable the industry is going to move towards separating client funds. A separation of client funds from working capital makes a lot of sense.”
Landen argued: “Thomas Cook and Covid have highlighted the need to separate working capital from consumer funds. Small travel businesses may be petrified of this. They don’t need to be. There are a lot of options. You can find the right model to allow you to trade, lower card charges and work on margin rather than consumer funds.”
He insisted: “It’s going to happen. It’s a challenging time. [But] there is never going to be a great time for this conversation.”