We helped 71 business of different sizes to go through the ATOL renewal process. In preparation for the March renewals we have put together some observations to be aware of.
2. The September ATOL renewal round presented many
Covid-19 related challenges for those companies
seeking to renew their ATOL licences.
We helped 71 companies go through the renewals
process. Here are a few things we noticed.
3. The CAA took a risk focussed approach to their assessments.
Large ATOL holders (ATOL turnover greater than £20m) were subjected
to rigorous reviews, in-depth financial analysis, and requests for
multiple reforecasts.
Those applying for less than £5m ATOL turnover were generally waved
through if their most recent (and therefore pre-Covid) accounts passed
the CAA’s financial tests.
ATOL holders in the £5-£20m turnover range were subjected to a
variety of unpredictable approaches.
01 Risk
4. Liquidity remained the CAA’s key focus.
Larger ATOL holders who were unable to demonstrate adequate cash
to client money ratios were required to inject additional cash or put
security in place in the form of bonding or trust accounts.
Few concessions were offered on the required ratios, though in some
cases, companies were permitted extra time to arrange additional
funding.
02 Liquidity
5. Some large ATOL holders were penalised for providing security to
lenders when borrowing under one of the government-backed Business
Interruption Loan Schemes (CBILS or CLBILS).
Typically the CAA insists on a ringfence structure which prevents
lenders from taking security.
However, in the challenging circumstances, it has not always been
possible to negotiate bespoke terms, particularly when borrowing
comparatively small amounts, and within challenging timescales.
03 Loans
6. Despite the dramatic cuts to planned programmes, compared to last
year, many businesses were forced to maintain or even increase their
bonds and other security mechanisms.
However, renewing bonds was hard and finding new bonds was
virtually impossible after all major travel insurers cut their appetite
significantly.
Many companies were left frantically searching for security to support
their bonding, such as letters of credit, cash and other collateral.
04 Bonding
7. As a result of the dearth in bonding, trust accounts again grew in
prominence.
Some of our clients are now required to implement a trust account
before the end of the year as a condition of their licence.
05 Trust accounts
8. The largest ATOL holders were given restricted licences.
They must apply to remove the restrictions during the first quarter of
2021 and will need to demonstrate they have adequate financial
resources to be able to continue taking new bookings after that date.
Similar restrictions were imposed on large ATOL holders at the March
2020 renewal.
06 Restrictions
9. The market turner even more bearish, with planned 2020/21 capacity
around 48% lower than 2019/20.
The top 20 ATOL holders, which now account for 77% of all ATOL
authorisations (up from 74% last year) reduced their collective capacity
by 5.8m passengers.
07 Outlook
