Will your travel company go bust?
Long story made short: it might, but hopefully it won’t.
If you’re one of the many thousands of holidaymakers struggling to get a refund for your cancelled holiday from your tour operator or travel agent, I wouldn’t be surprised if you were worried they’d go bust before you get your money back.
Many tour operators – and their trade association ABTA – are even warning that if they have to refund all their customers for holidays cancelled due to the Covid-19 pandemic they’ll go out of business, which doesn’t exactly inspire much confidence that these companies are on a firm financial footing.
However, at the end of last month, 805 travel companies applied to the Civil Aviation Authority to renew their licences to sell holidays, a process which involves the CAA examining the financial health of a company, and 704 tour operators were approved. That’s a good sign.
Of the remaining 101 companies whose Air Travel Organisers’ Licences (ATOLs) expired, 55 didn’t apply to renew while 46 re-applied but these have not yet been approved by the CAA. It’s possible some of these will cease trading, but it’s equally possible they will receive new licences shortly. It is certainly not unusual for as many as 101 companies to fail to renew their licences on time, but it’s important that if you’re re-booking or booking a new holiday, you check that your holiday company has a current ATOL.
Of course, lots and lots of companies in virtually every sector are in a fight for survival at the moment due to the impact of Covid-19, and travel companies have been particularly badly hit because travel has come to a virtual standstill.
As a result, travel companies are being asked to refund hundreds of thousands of cancelled holidays at a time when they are getting very few – if any – new bookings. TUI alone has now been forced to cancel almost a million holidays.
To make matters worse, in many cases tour operators will have long since spent the money paid for holidays they’ve been forced to cancel. Much of the money will have gone on sales and marketing costs, wages and rents, some might have already been passed on to airlines and hotels.
In normal circumstances, travel companies would be able to use money from new customers to refund you, but while the worldwide lockdown continues, people are understandably reluctant to hand over deposits for new bookings until they know when the lockdown will be lifted.
Fortunately, many travel companies have been able to take advantage of Government-backed loans and also the Job Retention Scheme, which has covered much of their wage bill during the lockdown. These financial lifelines will have enabled some travel companies to survive for longer, but some won’t last much longer unless they’re able to sell holidays this summer.
I have no idea which travel companies are closest to collapse but I would say that size isn’t necessarily an indicator of strength. Remember Thomas Cook and Monarch?
What happens if a travel company goes bust before you get a refund?
Good news. If your holiday is ATOL-protected, and it should be if you booked a package, then you will be refunded by the Air Travel Trust Fund. It might take a while, it could be several months before you get your money back, but you will be refunded.
However, if you accepted a voucher for a cancelled holiday this might not be refunded by the Air Travel Trust Fund. If you accepted a Refund Credit Note, this might be refunded, but it might not. ABTA says these Refund Credit Notes are protected by the Air Travel Trust, but the Civil Aviation Authority, the body that actually governs the Air Travel Trust Fund, has not confirmed this is the case.
For this reason, the best advice is not to accept vouchers or Refund Credit Notes for cancelled holidays until the situation becomes clear.