The shortfall in the failed Lowcost Travel Group’s accounts could reach £65 million, according to a provisional estimate, with the company having “probably” less than £10 million in assets.
Lowcost Travel ceased trading at the end of last week, leaving consumers and creditors owed perhaps £75 million, say the group’s administrators.
About 150,000 UK customers of the group’s Mallorca-based online travel agency Lowcostholidays had forward bookings and have lost holidays as a result of the failure, with almost as many again in other markets in Europe, the US and Australia.
However, these are only the bookings made direct with the group which also operated an accommodation broker with an extensive B2B business, dealing with online travel agents and other bed banks.
The joint administrators of the Lowcost group, UK-based Smith and Williamson and CMB Partners UK, still have no clear picture of the extent of B2B bookings as the Switzerland-based bed bank Lowcost Beds has yet to be formally placed in insolvency.
Lowcost Travel ceased trading on July 15 blaming “significant market headwinds in the run up to the EU referendum . . . and the subsequent fall in the value of the pound”.
However, the group had been operating at a loss for several years.
The company was headquartered in the UK but ran its online travel agency business from Palma, Mallorca, and its bed bank from Switzerland.
Lowcost relocated to Palma from the UK in November 2013 after giving the UK regulator, the CAA, just 24 hours’ notice.
The move placed the company’s holiday bookings outside the Atol consumer financial protection scheme as Lowcost instead registered with the Balearic Islands’ regulator
Chief executive Paul Evans claimed customers’ booking were nonetheless fully protected, but the Balearics regulator this week revealed the group had a financial guarantee of just 1.2 million euros.
Finbarr O’Connell of Smith and Williamson told Travel Weekly: “We wouldn’t be surprised if there could be a £75 million deficiency.”
Asked what had led to the company’s failure at a time when it should have had a large amount of cash from customers’ bookings, O’Connell said: “It’s much too early to each any conclusions.”
The joint administrators are being advised on travel insolvency issues by legal firm Cassowary as well as by international law firm Nabarro LLP.
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