Bumpy road to recovery predicted as stakeholders demand security

Bumpy road to recovery predicted as stakeholders demand security

Travelzoo webinar told COVID-19 crisis is at the end of the beginning

Atol holders could be prevented from taking advantage of any summer bounce back as regulators, banks and insurance firms demand greater security and evidence firms are financially secure.

Martin Alcock, director of the Travel Trade Consultancy, told a Travelzoo webinar that the road to recovery will be bumpy, but that the sector is at the end of the beginning of the Covid-19 crash.

However, he said firms that reviewed Atols in April had restrictions placed on their licences pending a review this summer by the CAA while others will be preparing for a September renewal.

If company finances are not in a good shape, the CAA could demand greater security from firms, which would tie up capital and this could prevent them from benefitting from any late summer booking market.

Looking ahead to the next few months, Alcock said there are other potential hurdles that lie for Atol holders, which he said could be challenging.

The UK furlough scheme will start unwinding in August and in September Abta bonding renewals are due and firms that issue air tickets with March year ends must submit accounts to Iata.

Next year, firms will have to start repaying their Covid business interruption loans, and Alcock said the “elephant on the room” is Brexit and the impact that could have on foreign exchange and border issues.

“Conceivably you could, as soon as the middle of July a return of customer appetite. You could have a queue of customers out of the door, airlines open and countries open,” said Alcock.

“But you could have one of these other stakeholders that comes from left field and prevent you from taking advantage of that. I think that’s what everybody has to be really careful of.

“That includes the regulators, it includes acquiring lenders and insurers. All of those stakeholders have a vested interest in the health of businesses and that have weathered this storm.”

Alcock said the issue comes down to how exposed each of the stakeholders feel they are and that this could by the refunds issue and firms looking to sell more domestic holidays outside of summer.

Both these trends are flattening the exposure profile across the year as companies retain deferred forward bookings on their books and increase their bookings in the low season.

Alcock said refund credit notes means “the exposure of the regulator or the exposure of the credit card company is now at a high level for the entire period until those holidays are taken.

He added: “Similarly, we’re seeing lots of operators who are turning their attention to domestic product that will upset the normal patterns of booking flows.

“Operators who wouldn’t normally sell much in the way of winter holidays are now looking at winter family holidays to try to get some extra cash in and bolster that recovery.

“Again that’s going to completely upset that normal exposure curve. That’s what we’re seeing at the moment is a nervousness around those stakeholders.

“We’re seeing credit card companies asking for security, the regulator or insurer is looking for additional comfort and additional information to really try to get to grips with what the potential exposure is.

“So, I think great there are some early signs of recovery, but there really is a bumpy road ahead.”

Alcock said by September and October regulators will see for the first time the impact of the Covid-19 pandemic and it remains to be seen whether they will offer any concessions.

He said: “It’s still a bit early, I think, to say everything is amazing and improving but I think what it does feel like is that we’ve at least reached the end of the beginning, we’re maybe not quite at the beginning of the end yet.

“We’re certainly nowhere near normal, but reaching the end of the beginning is a really important milestone. We always knew we had to at least reach that point when things would stop getting worse before it started to get better. That’s as positive as we can get at the moment.

“We have to keep putting pressure on politicians on quarantine and FCO advice, and we have to keep doing what we do in terms of getting customers comfortable, and gradually we’ll start to see those early signs of improvement become a greater flow of bookings.”