Warning as hotspot for COVID pending…

Travel Trade Consultancy estimates that the unused RCN is equal to the daily value of Atol sales

The expiry of Atol protection for Refund Credit Notes (RCN) at the end of this month is unlikely to cause a cash crunch for Atol holders or substantial losses for consumers, but trade will face a tipping point. late this year or early next.

That’s according to Travel Trade Consultancy director Martin Alcock, who noted that the outstanding RCNs amount to “approximately a day’s worth” of Atol-protected sales.

The CAA is set to issue a new warning to consumers to use outstanding RCN or request a refund before Atol’s protection of the notes expires on September 30 after reporting in late July that RCN worth £54 millions remain unused.

That raised fears that Atol holders could face demands for refunds totaling millions, though the outstanding RCNs can still be used to book holidays beyond the end of September.

However, Alcock told Travel Weekly: “The Atol scheme was protecting 26m passengers a year and something in the region of £20bn in pre-Covid annual sales. The £54m outstanding is a fairly small proportion of that. It represents only one day’s worth of sales protected by Atol.

“As Covid hit in March 2020, a lot of the unspent RCN will relate to the deposit portions of the January 2020 reserves, and we were seeing a lot of ultra-low deposit activity at the time. So a large part of the RCNs will be for individual low values. Many customers may have simply canceled them.”

He added: “The obligation of the Atol holders is to repay the RCNs or convert them into Atol-protected reserves by the end of September. In practice, we are seeing customers able to upsell customers, converting remaining RCNs into new bookings at substantially higher prices, meaning new cash inflow.”

However, Alcock warned: “We still see late 2022, early 2023 as a tipping point when the cost of living crisis hits the sector hard. We could see a slowdown in bookings at the time of the sector’s traditional cash low.”

RCNs played a vital role in protecting many companies from bankruptcy in the early months of the Covid-19 pandemic, although the CAA and Department of Transport only confirmed Atol’s protection of RCNs four months after the crisis.

Trailfinders founder Sir Mike Gooley accused the CAA of creating a “monster” by providing Atol protection to RCNs and failing to “alert consumers to this danger”.

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