The travel sector is bracing itself for the collapse of yet more holiday companies as businesses continue to struggle to meet the challenges of the Covid-19 crisis.
Several longstanding travel companies have failed during the pandemic, among them touring company Shearings in May and round-the-world ticket specialist STA in August. On Monday, Cities Direct ceased trading. It had been operating for 20 years.
Industry bosses have voiced concerns about the closure of the government’s furlough scheme at the end of October, as well as the ongoing slump in overseas bookings, a double whammy that may be the death knell of more businesses. In a statement issued by the Association of Independent Tour Operators (Aito) – of which Cities Direct was a member – executive director Martyn Sumners said many formerly vibrant companies are now in desperate straits because of the pandemic. The situation has been made worse by the government’s “many U-turns” and its failure to consult with the industry. Discussing quarantine measures with the travel industry, for example, would have led to less confusion and disruption for consumers.
Adding to the anxiety for some companies is the prospect of having to renew their Air Travel Organiser’s Licence (Atol, the UK’s package holiday protection scheme) this month (licenses are either renewed in March or September). Renewal is dependent on a company being in good financial shape. Companies that don’t have savings – or don’t want to take out a loan – to see them through the winter may choose not to renew their licenses. Others may try but not meet the Civil Aviation Authority’s (CAA) criteria.
“For a travel company to have survived [the crisis] this far is a major coup but if the CAA then says you’ve got to put £2m into the company when you have no income … how are you going to do that? I can imagine that being the death knell of good companies,” said an Aito spokesperson.
The travel companies the Guardian spoke to are confident that they can get through the winter – if travel returns to normal levels in spring.
Fiona Charrington, chief executive of Martin Randall Travel, which specialises in cultural tours, said that despite having to cancel several English tours and events in the coming months because of the new “rule of six”, they are in a position to get through these lean months, but there is a sense of fear in the sector.
“It’s hard to imagine how a lot of companies will get through it if they don’t have healthy reserves. I think everyone is assuming there will be more [company] failures. If not now, then next year if things don’t improve,” she said.
Kirker Holidays said it also has enough funds in place but the company will be forced to make staff redundancies when the furlough scheme ends.
“The quietest time of year for travel companies is between 1 November and 1 April, and the idea that we will be able to survive without government support is fantasy. You can’t continue to take out loans if there is no light at the end of the tunnel,” said director of sales and marketing, Ted Wake.
He said the ongoing quarantine debacle had shattered consumer confidence.
“The government seems to feel that as long as it gives permission from time to time for people to travel from A to B, the travel industry has nothing to worry about, but the truth is if you have offered such contradictory advice it’s hardly surprising that consumers lose heart.”
In his statement on the Cities Direct collapse, Aito’s Martyn Sumners reiterated the need for more state support: “The alternative is too depressing for words and involves heavy demands for government assistance via claims for social security and housing assistance from the industry’s hundreds of thousands of employees.”
