07 Jun

Travel companies at risk in the absence of Government support and a stable restart for international travel

Mark Tanzer Chief Executive of ABTA – The Travel Association gave evidence this afternoon to the Treasury Select Committee (Monday 7 June) on the economic impact of coronavirus.

In his comments to the committee Mark highlighted:

  • The situation for travel is a lot bleaker compared to other sectors, the ONS own data says travel is the sector that was earliest and hardest by the pandemic (revenues down between 86-90% monthly versus February 2020.). While the domestic economy is starting to reopen, international travel has not been allowed to recover meaningfully. As it stands, only 0.5% of the sector is fully open (based on the proportion of international travel in 2019 that was accounted for by Iceland and Gibraltar, which are on the green list).
  • The financial support measures, while welcome, have not been adequate for the scale of the challenge faced by the sector. HMRC’s data shows that take up of furlough was only 49% of travel companies, this is because staff have to be at work to deal with rebookings and refunds for holidays that can no longer go ahead due to government restrictions and requirements. This figure is much lower than for other sectors, for example 70% for hospitality. 
  • ABTA Members are looking for a complete step change in the Government’s approach to supporting the industry both on restarting travel and recognising the need for tailored financial support.
  • The summer season is two thirds of travel companies’ income. The industry is looking towards the strategic review on 28 June and wants Government to recognise the progress of the UK’s vaccination programme by removing the need for people returning to the UK who have been vaccinated to test, and those who haven’t been vaccinated, allowing them to take a lateral flow test in the first instance. There is also a need to ensure the borders are working properly (see full details at end of release). 
  • 44% of Members anticipate more redundancies when the furlough scheme tapers off. The longer the summer season is delayed the number will be considerably higher. 37% of jobs are at risk or have gone already, that’s likely to rise if the summer season is delayed. 

Specifically Mark said: 

On the impact of the pandemic on the sector

“People aren’t just losing their businesses they are losing their homes, there is absolute hardship and desperation out there. We need a dedicated system of grant support for the travel sector, other countries like France and the Netherlands have done this. Travel is in a class of its own in terms of the pain it has suffered. If we don’t have support I fear of losing a generation of travel companies.”

On restart grants

“The grants are very tightly defined around physical presences and social distancing, as opposed to the regulatory constraints on why people can’t travel. Government has made selling the travel product illegal, that hasn’t really been reflected in the grant structure.

“Our Members have been particularly exasperated and upset, that they have only been entitled to the maximum £6K when shops next door, personal care, were up and running and entitled to £18K in grant support.”

On redundancies

“We’re in a very different stage of the recovery cycle to hospitality and retail. For travel we’re still shedding workers than actively recruiting them. Two weeks loss of income can mean the difference between profit and loss.” 

On insolvencies

“We have lost some very well established and notable companies, within ABTA we’ve lost 25-30 Members. I have anecdotal evidence of people who have been living on thin air, they are right at the end of the tether, they are not crying wolf. They are down to their last redundancy, their last member of staff, the loan is due, they’re being chased by lenders, threats of bankruptcy, this is the here and now story of what it is like for travel.”

On consumer confidence 

“There is a demand but there are obstacles from the government that are blocking the expansion of international travel. Communication hasn’t helped. There was a dip in booking when Government said people should not to travel to amber list countries.  We really need people to be able to travel this summer so that companies get the full balances in.” 

On use of vaccination passport and opening up travel

“We think people who have been fully vaccinated returning from a green country shouldn’t need to do a PCR test, as other countries are doing. Government is being ultra, ultra cautious on this and we hope this will change in the strategic review. We’d like to see that where infection rates and vaccinate rates are similar to ours then you wouldn’t need to do test to travel.”

“It’s almost a right for people, if they have been vaccinated and the country says you therefore don’t need to provide a test, to be able to demonstrate that and avoid the cost of a test. And this has been in existence before COVID, vaccination certificates have existed for a number of diseases, yellow fever and so forth, so it’s not new in principle, it’s the scale of it that’s different.”

On fiscal changes needed

“There are a couple of areas where the Government could make some fiscal changes and send a strong signal. One is VAT on testing costs; this was a revenue stream that didn’t exist before testing and when we’re trying to get people travelling and we know there are costs involved, that would help. And of course Air Passenger Duty… which seems to me a pretty useless tax. It’s never been used for environmental purposes; it’s part of general taxation and I think the case now for at least a holiday from Air Passenger Duty is very strong to get people confident and for the Government to send a signal that it does want people to travel.”

On travel businesses’ ability to survive

“If we stay where we are now, I don’t think that a lot of businesses will be around in the medium term. They need this summer, they’ve missed last summer there’s been nothing happening at the beginning of the year and they can’t go another summer without any trade…I think we’re talking weeks here not months.”