Lowcost Group collapses

News broke late on Friday(15th July)that the Lowcost Group had ceased trading and called in administrators.

Though the recent Brexit vote, and resulting financial turmoil was blamed for the collapse, in truth the group had been experiencing financial challenges long before June. Pressures in core holiday markets like Turkey, rising costs of pay per click Google advertising and a notoriously price sensitive customer base meant that the Lowcost Group was operating on very low profit margins with little reserves to cushion the impact of a shock. 
Warren Buffet used to say that when the tide goes out, you can see whose been swimming naked. Well Brexit was the tide.
Lowcost Holidays had a very public falling out with the CAA back in 2013 and took advantage of a controversial loop hole in the ATOL regulations that allows companies established in other EEC member states to sell into the UK without the need for ATOL protection.
Lowcost Holidays relocated its head office to Mallorca and was regulated by the government of the Balearic Islands, who offered a significantly cheaper way of complying with European Package Travel regulations. The CAA warned customers back in 2013 to be cautious about booking with the Lowcost Holidays. Their move was widely condemned by the travel trade at the time and has formed the basis for many a discussion as other businesses considered similar moves.
We understand that there are currently 27,000 customers overseas. Whilst repatriation shouldn’t be an issue (most flights will have been paid in full) many customers will be asked to pay again for their accommodation in resort. 
For the 110,000 poor customers who have not yet departed, their summer holiday plans lie in tatters and the Balearic scheme is unlikely to be able to cope with the volume of refund claims. 
There are wider complications too. Many travel businesses sold flights together with product, sourced from Lowcost Beds as a B2B wholesale supplier. 
Under Flight Plus rules, they are now faced with a stark choices. They must either find their customers an alternative bed with little chance of reclaiming any already paid. This could prove very expensive given well publicised capacity shortages in Spain and other “safe” destinations. Alternatively they will have to offer a full refund of the hotel as well as the flights and car hire making this equally costly an option.
While the CAA will have no involvement in helping consumers of Lowcost Holidays, they will be watching closely with fingers crossed that the failure of Lowcost Beds doesn’t cause a domino effect of other travel business failures.


The 2 things you need to know about the ATOL Reporting Accountant scheme

On 1 April 2016 the CAA’s ATOL Reporting Accountant (ARA) scheme officially went live. Here are the 2 things you need to know and the next steps you need to take to make sure you comply.
1. What is an ARA?

The scheme was first announced back in 2014 as part of the CAA’s Rebalancing ATOL consultation and is part of the CAA’s wider attempt to educate accountants on the details of the ATOL scheme and to improve the quality and reliability of the information they report.

To qualify as an ARA, accountants will have to register with their governing accountancy institute and must pass the online CAA test similar to the ATOL Accountable Person test.

Going forwards, all ATOL reporting must now be signed by an ARA.

You can find more information on the ARA scheme on the CAA’s website.



2. What do you need to do?

First things first, you should immediately check the CAA’s published list to see if your accountant is already registered as an ARA.


At the time of writing, there were over 400 registered ARAs but if your accountant is not one of them, you have 3 options:

A. You can ask your current accountant to register as an ARA with their institute. The requirements and costs for your accountant of doing this will vary depending on which institute they belong to, and how big their firm is. They will need to sit a test, and they are likely to need to pay additional fees to their institute.

B. If your current accountant is unwilling or unable to register as an ARA, you could appoint an ARA solely for the purposes of signing off your CAA forms. We understand some of the ARAs listed on the CAA’s site would be prepared to do this.

C. If neither of these options is suitable, you will need to appoint a new accountant. Bear in mind that the engagement process can take time to set up.
Whatever option you decide, be sure to act quickly. From 1 April 2016, the CAA will reject any ATOL reporting unless they are signed by a suitably qualified ARA and they are unlikely to renew your ATOL at your next renewal date.