The September 2020 ATOL renewal process presented many challenges due to the Covid-19 pandemic. The Civil Aviation Authority (CAA) took a risk-focused approach, closely scrutinizing large ATOL holders with over £20 million in turnover through financial analysis and reforecasts. Companies with under £5 million turnover generally received swift renewals if their pre-Covid accounts passed financial tests. Liquidity and the ability to demonstrate adequate cash to client money ratios remained the CAA's primary concern, with few concessions given on required ratios. As a result of reduced travel insurance capacity, many companies struggled to obtain new bonds or other security mechanisms required for ATOL licensing.

1. observations from the
September 2020 ATOL
renewals
7

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. 01
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 £5m-£20m turnover range were subject to a variety of
unpredictable approaches.
Risk

4. 02
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 a trust account.
Few concessions were offered on the required ratios, though in some cases,
companies were permitted extra time to arrange additional funding.
Liquidity

5. 03
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.
Loans

6. 04
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.
Bonding

7. 05
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.
Trust accounts

8. 06
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.
Restrictions

9. 07
The market turned even more bearish, with planned 2020/21 capacity
around 48% lower than in 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.
Outlook

10. info@thettc.co.uk
www.traveltradeconsultancy.co.uk
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