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Full extent of XL failure detailed
Monday, 19 Aug, 2009
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The back-up Air Travel Trust air passenger financial protection scheme dropped deeper into the red in the last financial year.
The deficit had increased by more than £25 million to £46.5 million by the end of March, the trust’s annual report shows.
The collapse of the XL Leisure Group last September was the major contributor.
The ATT fund has been in deficit in 1996 following a number of large calls during the early 1990s.
The latest report shows that 32 out of 46 ATOL-holding company failures in the 12 months led to calls on the trust.
Outlay on failures increased significantly from £0.4 million to £36 million after the use of bond monies totalling £45 million.
The majority of this expenditure was incurred as a result of the failure of XL.
Without the failure of XL, the call on the trust would have amounted to £7.4 million.
After taking into account administrative expenses, insurance premium, interest payments and bank charges, totalling just over £11 million, the trust’s overall deficit increased by £25.5 million to £46.5 million during the period.
The collapse of XL and the impact of the recession on booking levels “adversely impacted the liquidity” available to the ATT and has resulted in the increase in the ATOL Protection Contribution levy from £1 to £2.50 per passenger from October 1.
Delays in meeting some XL customer claims were down to the large number received and the group’s complex trading model, according to the report.
“XL traded in a variety of ways and the Civil Aviation Authority (CAA) had to determine which claims were eligible for an ATOL refund,” the report said.
“The position was made more complex by some travel agents selling other holiday components with XL flights (commonly known as split contracts).
“Establishing the legal position, particularly in respect of the split contract sales and responsibility for claims from customers who booked with a credit card, delayed the claims settlement process.”
Around 80% of claims had been paid or closed by July 31.
ATT chairman, Roger Mountford said: “While it is regrettable that a need to increase the rate of APC has become necessary so soon after the introduction of the APC, the secretary of state’s decision has enabled the trust to be placed on a more solid financial basis during a period of trading uncertainty for the travel industry.
“Despite the strain on the ATT caused by the failure of XL, the trustees remain committed to the concept of APC as the main source of funding and see no advantages of a move back to an industry-wide bonding system.”
The trustees welcomed government plans to consult on options for ATOL reform later this year.
“This will be an ideal opportunity for the trade to work with the DfT, the CAA and other government departments to explore ways in which the scope of financial protection can be clarified for all passengers travelling on an air holiday,” said Mountford.
by Phil Davies
Phil Davies
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