The March 2021 ATOL renewal process presented many challenges for travel businesses. The number of ATOL holders fell significantly compared to pre-pandemic levels, with the total dropping nearly 15%. Renewals required robust financial assessments by the CAA, with many businesses asked to inject cash or provide additional security. For smaller ATOL holders, the CAA's assessments included examining post-year end cash flows in addition to annual financial statements. Looking ahead, the September 2021 renewals are expected to also be difficult, with continued focus on business liquidity and financial stability.

1. 4 key learnings from the
March ‘21 ATOL renewals

2. The March 2021 ATOL renewal round presented plenty of challenges for travel businesses trying to renew
their licenses.
The late and non-renewing lists were much longer than usual. Unlike last year there was no extension this
time round. Many firms simply ran out of time to complete the process, and fulfill offer criteria before
their licence expired.
The total number of ATOL holders fell to around 1,500, down from more than 1,800 at the last pre-
pandemic renewal in September 2019 - a fall of almost 15%.
Total passenger authorisations remained significantly down compared to pre-pandemic levels.
The quarter by quarter breakdown implies ATOL holders do not anticipate a recovery until the first
calendar quarter of 2022.
Here are four key learnings from the March 2021 renewals we processed for our clients.
31% 41% 55%
94%
Quarter ending June 2021 September 2021 December 2021 March 2022
Authorised ATOL passenger
departures vs September 2019

3. 01 Robust approach
The renewal was generally very challenging.
The CAA were robust in their approach to assessing businesses
and offered very few concessions or flexibility on their offer
conditions.
Requests for additional security (mainly in the form of trust
accounts and escrow accounts) and cash injections were common.

4. 02 Cash injections
Liquidity remained the CAA’s key priority. Many of our clients
were asked to inject cash in the form of new equity or
subordinated shareholder loans to strengthen their balance sheet.
Whilst cash from new bank loans (including those under the
government backed schemes) was taken into account, bank
security and the corresponding increase in creditors often negated
some of the benefit.

5. 03 Small ATOL holders
When assessing smaller ATOL holders (typically those applying for
ATOL turnover less than £20m) the CAA included post year end
cash movements in its financial ratios.
To complete their assessment, the CAA required substantial
amounts of additional financial detail including sales, refunds and
supplier payments since the balance sheet date.
For many, the information was difficult and time consuming to
obtain, and made the financial ratio assessment even more
opaque than normal.

6. 04 ATOL self-assessment test
Historically, companies could check their compliance with CAA
financial ratios by entering their draft financials into the online
ATOL Assessment Test (ASAT).
Now, due to the March 2021 approach of augmenting the balance
sheet with post year end cash movements, the ASAT is about as
reliable as a lateral flow test from Poundland.
In our view, it is useful only if it confirms a negative/ fail result.
Absolutely no comfort should be taken from a ASAT positive/pass
whatsoever.

7. Looking ahead to September 2021
Given the parlous state of the Air Travel Trust Fund, we anticipate
the September 2021 renewal to be similarly challenging.
We understand the CAA will be requesting additional post balance
sheet financial information for all ATOL holders under £20m.
The CAA are due to publish a call for evidence addressing the
future of the ATOL scheme imminently. Though no changes are
likely to be made by September, it will give an indication of the
CAA’s longer term intentions.
We expect the details to include risk based pricing of APC and an
increased focus on segregation of client money.

8. Thanks for reading
info@thettc.co.uk
www.traveltradeconsultancy.co.uk