Licensed Insolvency Practitioners and the Travel Industry
Trouble in the Travel Industry! The Role of Licensed Insolvency Practitioners.
The much publicised collapse of Monarch Airlines in the autumn lead to some asking the question as to what happens when a travel company fails? Simon Parker, a chartered accountant and licensed insolvency practitioner here at Antony Batty & Company, has dealt with a significant number of travel industry insolvencies over the past 20 years and looks very briefly at the issues that need to be addressed and the work involved in the days leading up to and following an appointment.
Both speed and confidentially are required so the appropriate insolvency procedure will usually be administration allowing the insolvency practitioner appointed to take immediate control. The administrator will in very short order have to speak to a number of affected parties and deal with a whole range of issues, as detailed below.
The rules surrounding regulation and consumer protection are complex and therefore not covered in detail in this article but travel companies that sell packaged holidays have to provide consumer protection.
The CAA’s Consumer Protection Group with the help of the Company’s management and the administrator will focus on those customers who booked a holiday which included a flight and in general ABTA will look at land based excursions.
Depending on the type of holiday sold the CAA and/or Abta will require the names of those who have booked a holiday but have yet to travel (‘forward bookings’) and most importantly those who are abroad. The forward bookings and the repatriation costs are met by the Air Travel Trust Fund which in turn is topped up by the £2.50 charge which is added to the price of every airline ticket sold. Holidays without involving a flight can be protected by bonding.
Credit card providers
They will be keen to assess their exposure and prepare for the section 75 claims from the customers which are known as charge backs.
These can be the accommodation providers and other travel agents but also IT companies which run the systems required to provide the above information. They can and have held the company/administrator to ransom by shutting down the system pending payment of outstanding arrears.
The administrator may have to pay staff to assist in the early days. Those involved in the travel industry are traditionally loyal to their employer and their customers.
Press/reporting to customers
The human interest element means that even relatively small travel failures attract the attention of the press who have to be managed carefully. Anxious customers need to be kept informed and the administrator will arrange for a notice to be placed on the Company’s website and communicate to them by way of email. Similar notices will appear on the websites of ABTA and the CAA
Potential purchasers of the Intellectual Property Rights (‘IPR’)
The details of the forward bookings and the database of those who had hopefully previously enjoyed a holiday organised by the failed Company will be of interest to competitors and can be sold in the very early days following insolvency. The Data Protection Act and pre pack rules (SIP 16) have to, of course, be strictly adhered to.
Cash held by agents
The administrator will need to contact the travel agents who have sold holidays on behalf of the failed company and hold cash in respect of those bookings known as ‘pipeline monies’ This task will need to be addressed quickly as some agents may choose to return the cash to the customer who may have already have been refunded by the CAA, ABTA or the credit card provider.
Contact us for Help and Advice
Insolvencies within the travel industry are a very specialised area of insolvency and require an Insolvency Practitioner with knowledge of, and expertise in, the sector to be able to deal effectively and quickly with the challenges listed above.
Antony Batty and Simon Parker have that experience and expertise, as this testimonial from Diamond Short Break Holidays demonstrates:
“From the moment I contacted Simon Parker and Antony Batty, their professional advice and guidance was invaluable and certainly helped to guide us through an extremely difficult, worrying and stressful time.
They were understood what a difficult time this was for everyone involved and treated all our staff with respect and empathy, during the administration. Their knowledge of the travel industry and the complications that are particular to the industry is excellent, and the importance of this must not be underestimated.
I would highly recommend Simon Parker and Antony Batty to any business faced with the difficulties involved in insolvency.”
(Director, Diamond Short Break Holidays)