UK trade association for tour operators and travel agents ABTA has “significantly departed” from its long-established published bonding scheme to a new unpublished maximum protection bond structure in order to protect its captive, which Chris Photi, head of travel and leisure at White Hart Associates (WHA), said is “causing difficulties” for many of its members.
Photi explained that ABTA has faced some material failures over the last year, including STA Travel and Cruise and Maritime Voyages, and the impact to its captive is currently unknown.
He said that such failures have led ABTA to “significantly depart” from its long-established published bonding scheme to a new unpublished maximum protection bond structure which he said is “causing difficulties” for many of its members.
ABTA’s members “have had no prior notice or any clarity of this new approach”, according to Photi.
The only guidance notes for members are the ones available on the ABTA website which was published in February 2015, he explained.
The new bonding approach has not been published to members in revised guidance notes and is being implemented on a case-by-case approach without prior rounded consultation or discussion with members.
Photi suggested ABTA’s new approach is evidently to “protect” its captive.
Commenting on the suggested new bonding approach, John de Vial, director of membership and financial services at ABTA, explained: “Chris Photi is stating that in some cases ABTA has increased bond requirements, which is true in a relatively small number of cases.”
de Vial suggested that Photi has made “a jump of logic” because a bond for a particular trader has increased when a trader is doing less new business during the COVID-19 pandemic, and ABTA must therefore have changed its scheme/approach.
He said: “The reality is that in those cases the increased bond reflects an increased value of customer money held over from cancelled bookings in 2020, which the law requires traders to protect.”
The travel industry has been hit hard especially recently with the COVID-19 pandemic and the travel bans implemented across the world. It has also been hit in the UK by several travel groups collapsing including Thomas Cook Group in 2019.
However, as de Vial pointed out ABTA and ABTA Insurance PCC have been completely unaffected (financially) by the impact of the Thomas Cook Group failure.
ABTA revealed that its captive was not affected by that collapse, which Photi accepted after the UK travel association recently confirmed this publicly.
de Vial dismissed explained that ABTA’s approach has not changed, it is the exposure represented by the trader.
He noted: “This is because, for some traders, despite a reduction in new business, there are very large values of pre-payments made for 2020 holidays that are being carried forward to 2021.”
“These values can exceed that which would normally be held through the winter and into the pre-summer booking period, hence a level of bond required to reflect that,” he added.
de Vial highlighted the ABTA scheme of financial protection, as a Department for Business, Energy and Industrial Strategy (BEIS) approved body scheme, it is required to implement a regime that brings all participants into compliance with the 2018 regulations.
He explained that this is a question of compliance with the law and providing effective security to achieve that. It is not a change of policy by ABTA, it is a change of risk and exposure pattern as a result of this crisis.
“Photi says that this is difficult for traders, and we completely agree,” de Vial stated.
He commented: “The bond market, both with banks and insurance surety providers is difficult. Additional security and costs are common, at a time when traders can least afford it. But, ultimately, it is a business decision for a trader to rebook customers to a future season and to retain their funds. With that business decision comes the legal obligation to protect consumer prepayments in relation to package travel.”
“Consumer confidence rests, in part, on the assurance of financial protection and it is our role to ensure that ABTA bonded packages are properly protected,” de Vial added.