How badly has Coronavirus hit the travel industry and what are the implications for our future holidays? This week we were given an insight. The CAA published its biannual list of tour operators whose licence to operate had not been renewed. It doesn’t give the reasons behind for each individual case, but the length of the list is a telling annual indicator of the overall state of the industry and the latest edition showed a big increase in the number of companies shutting up shop compared with this time last year.
First, some background. Half of all operators had to renew their Atol (Air Travel Organiser’s Licence) by the end of September (the other half are assessed in March). To qualify for a licence a company has to place a bond with the CAA and satisfy other financial requirements.
There are always some which fail to make the grade, or decide to pack it in without making an application. But this year the numbers have taken a sharp turn for the worse. Only 995 of the 1,261 companies whose licences expired at the end of September, have had them renewed – a fall of more than 20 per cent. Some 176 companies did not even apply for renewal – more than three times the number for the same time last year, and a sure sign of the huge financial pressure the industry is under.
It’s true that 90 applications are still in the balance – either because the CAA has yet to reach a decision, or because it is waiting for further documentation. But, while some of those companies may eventually have their licence granted, it won’t be enough to change the overall picture.
What does all this mean? The biggest impact is, of course, on those who may have lost their jobs or businesses. But it also matters to consumers for two reasons. First because fewer companies not only means less choice, less competition and higher prices. And second because it makes an already complex financial protection system that much more confusing.
I’ve tried to demystify the situation by addressing some key questions below. Full details of how Atols work and how to check you are covered are on the official website (packpeaceofmind.co.uk).
Why is an Atol important?
Atols are the single most important guarantee that your money will be safe when you pay in advance for a holiday. Any company that wants to put together package holidays by selling flights and accommodation needs to have an Atol. This is a requirement of the EU Package Travel directive, enshrined in UK law, and it means that if that company goes out of business customers who are owed money will be reimbursed by a central fund. Those who are actually abroad at the time of the failure are able to complete their holiday and replacement flights are arranged.
Can a company continue trading when it no longer has an Atol?
The answer is yes, but it creates complications for consumer protection if it does. Basically, the company can still act as an agent and sell holidays offered by another Atol-bonded operator and it can sell different elements of a holiday – flights, cruises, hotel bookings etc – as separate bookings. But without an Atol, it can’t combine two or more of these elements to create a package holiday. My advice would be to avoid such complications and book with an operator or agent which still holds an Atol.
What if I have already booked a holiday with a company which has now lost its Atol?
The CAA tells me that all holidays booked while the company held an Atol will continue to be covered even if its licence has not been renewed.
What about credit notes?
Official Refund Credit Notes (RCNs) which were issued while a company was still licensed, also continue to be protected by Atol even after the licence has lapsed. However, there is uncertainty as to whether RCNs issued after September 30 will now be backed by Atol – a CAA spokesman was unable to clarify this, despite my asking the question.