(This article first appeared in TTG on 7 January 2015)
Normally, I find its much easier to spout prophesies about things after they’ve already happened, but when my Christmas TV viewing was hijacked by my 4 year old and we had run out of Quality Streets, there was little else to do but turn my attention to the months ahead. Here are 3 predictions for 2015. Happy New Year one and all.
In their latest piece of ATOL tinkering, the CAA issued a consultation back in June 2014 proposing further changes to the consumer protection scheme, principally aimed at tightening up the rules for small businesses who cost the Air Travel Trust £8m more than they contributed over the 5 years to 2013.
Grabbing the headlines was their proposal to scrap the Small Business ATOL (SBA) scheme, much to the consternation of the 950 SBAs would have to meet new financial tests and inject additional capital or find a home among the managed services such as the ATOL Accredited Bodies.
Interestingly, since the consultation closed in October there has been a perceptible softening in the CAA’s rhetoric over scrapping the SBA, which may suggest they have listened to the dissenters and are considering alternatives.
We’ll know more when we see a summary of response letters sometime in February though judging by the apparent change of heart, we can probably guess which “4-letter words” were the most common.
Prediction: Flushed with new year cheer, the CAA to retain a scheme for small businesses, albeit with some new financial tests to meet.
Deals or no deals?
2014 was definitely the year the investors returned to travel, with many prominent companies changing hands or receiving sizeable investment, including Monarch, Travel Counsellors, Saga, Stella Travel Services (Global, Travelbag, Travel 2), Shearings, JacTravel, Iglu and Elegant Resorts to name but a few. Appropriately, Phoenix and Inflexion “wrapped up” their respective investments Riviera and Scott Dunn in the final business hours before Christmas
Private Equity (PE) investors in particular went crackers for travel in 2014 as we head into 2015, all the necessary elements are still there for more PE deals to flow: The rumour mill suggests a healthy pipeline of owners ready to sell and provided the bookings materialise in Q1, PE firms have funds to invest and lenders are ready to back them.
Prediction: There should be enough appetite from Private Equity to keep the deal activity flowing at least until June.
In a move worthy of Ebineezer Scrooge himself, IATA announced shortly before Christmas that agents will need to start paying for tickets at least every 2 weeks in an attempt to limit the airlines exposure to a repeat of the Air Fast Tickets debacle which cost them £45m. The changes will be effective from 2015 for new agents and from 2016 for existing agents, many of whom pay monthly at present.
The change will have a crippling effect on cash flow, particularly for those TMCs who issue tickets to their corporate clients on 30 day credit terms. This makes it all the more frustrating therefore, that a decision with such profound consequences was taken by the unanswerable, unelected Agency Programme Joint Council (APJC); an unanswerable, opaque decision making body that functions rather like a cross between FIFA and Fight Club.
This is the latest in a long line of IATA rule changes to have hit ticketing agents in the pocket and I expect it will cause many to give up their IATA accreditation and source tickets through consolidators instead.
Prediction: There could be a drop in new IATA applications, further consolidation in the TMC sector, and a good year for the flight consolidators.