After a bruising past couple of years, a number of regulated travel companies were rightfully hoping that the pent up consumer demand from the last lockdown might finally mean that they could start long road towards a recovery in this sector as the economy started to reopen.

With the latest news regarding the Omicron variant, consumer confidence can't fail to be hit again and this is clearly playing out in the stock market where stocks across the sector have tumbled over recent days.

Companies with cash reserves and / or supportive shareholders have most likely exhausted these avenues of funding during the last lockdown and another year of missed revenues during the busy Christmas period and ski season could be the final straw for a number of travel companies and their investors.  Lenders are unlikely to want to further expose themselves given the fragility of this sector at present and so it really does make you wonder what this will mean for a number of the ATOL regulated companies when their next licensing deadline comes up on 31 March 2022.  

If I were a CEO or CFO in a travel company now I would be closely assessing working capital requirements over the coming months and understanding the potential impact of needing to ringfence consumer monies or even put them into trust accounts.  Issues such as the level of outstanding credit notes issued to consumers will also come into play when dealing with the CAA on licensing conditions as they will still count as a liability to consumers which will need to be accounted for.  The need to maintain minimal liquidity levels over and above consumer monies mean a clearly presented rolling 13 week cash flow model could make discussions with the regulator and with key financial stakeholders a lot more manageable.  It sounds obvious, but don't forget, the CAA will have multiple renewals to deal with and a number of issues relating to Covid-19 and so you won't want to be towards the back of a long queue!

It is clear that a number of these companies are going to need early engagement and a solid restructuring plan agreed with all stakeholders over the coming months to be able to climb the significant hurdles they are likely to face this winter.