Travel businesses will switch increasingly to trust accounts to protect customers’ money if the CAA has its way, according to leading industry accountant Chris Photi.
But Abta remains unconvinced, insisting other methods including bonding “achieve the same goal”.
Photi, head of leisure and travel at White Hart Associates, told a Travel Weekly Future of Travel Week session: “The trust model is going to become more and more prevalent.
“The CAA’s view is the impacts of Covid-19, in particular refunds, have been more efficiently dealt with by Atol-holders which operate trusts.”
He acknowledged a trust “comes with a cashflow impact” and said bonding would remain “acceptable under law”, but insisted: “Covid-19 has stress-tested models like nothing else. Trusts can’t be mandatory, but the CAA is arm-locking businesses to look at trusts, particularly in the cruise sector.”
Abta director of membership and financial services John de Vial agreed: “The CAA is looking at mechanisms, including trust funds, to see a greater segregation of customer monies.
“We say, ‘That is fine, but give participants a choice’. Different mechanisms achieve the same goal, including bonding.
“It’s said Abta has always been against trusts. What we’re against is the current type of trust where not all the customer’s money is in the trust account. The trust allows prepayments to suppliers. In this crisis, that has been shown to be one of the major issues.”
De Vial said: “Trust accounts are in exactly the same position as every other travel organiser where they’ve not received a refund from the airline or other supplier and are unable to refund the consumer.”
Photi agreed trust arrangements had not facilitated refunds on the flight component of packages cancelled due to Covid, but said: “It enabled operators who use trusts to say ‘Here is your ground money back’. That is better than nothing.”
He also acknowledged: “Operating a ‘gold standard’ trust is extremely expensive. You need massive reserves. Take a £1,000 holiday with a £400 flight. You have to fund 40% [of the booking] even though you may only be making 10%-15% margin.”
De Vial told the summit: “We’re beginning to see trust accounts that give the option of holding all customer money. We’re open to look at those.
“But there aren’t easy answers for 99% of Abta members as to how you pass all customer money into a trust account and are able to deal with suppliers in advance. The notion there is an easy solution is a fantasy.”
He added: “Some companies are being forced down the trust route by merchant acquirers. A small minority of members are in that position.”
Themis Advisory director Jo Kolatsis said: “A gold-standard trust model, where all consumer money is ring-fenced, is really expensive. I’m not aware of many businesses doing that.”
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