Mild insolvencies maybe tip of the iceberg for UK travel

Published at 10:02 AM on 04 February 2009

The steady trickle of failed travel companies has started the climb towards new heights as the threat of airline failure looms in 2009, warns PricewaterhouseCoopers LLP today.

In just under two years the number of tour operators or travel agents becoming insolvent has increased by 50%, as fifteen went bust in England and Wales in the final quarter of 2008.

In fact, there were a third more travel insolvencies last year than in 2007.

The firm’s quarterly insolvency statistics indicate a gradual increase in insolvencies since early 2007 with two prominent quarters. Both Q4 of 2007 and Q3 2008 saw the industry shaken by giant players falling over. The most recent being XL - accounting for 11 of 24 companies becoming insolvent. The Travelscope collapse occurred the previous winter, taking several of its subsidiaries with it. Again this explains the spike in insolvencies during Q3 2007.

Ian Oakley-Smith, partner, PricewaterhouseCoopers LLP, said:

“Discounting the Travelscope and XL administrations, we can see the level of failed travel companies increasing steadily over the last two years. This may, however, be the tip of the iceberg.”

“With around 30 airline failures forecast* over the next year, those travel organisers operating under an ATOL will be expected to find alternative air travel for their customers. This kind of unexpected, financial outgoing could finish off a number of smaller companies.”

However, aside from taking out its own companies, the collapse of XL will actually have helped save some travel organisers from ruin by taking capacity out of a saturated market.

“XL operated three per cent of the market and its demise will have freed up share for other travel companies. As more become insolvent in 2009, this will benefit some of the larger players and the gulf between winner and losers will widen,” Ian added.

Due to the typical lag the travel industry experiences between the start of a downturn and the impact on the number of failures, this is likely to be just the start of a steeper incline in travel and tourism (T&T) insolvencies. As more people experience a reduction in their income over the next year holidays will fall down the household priority list.

“Bookings or rather the lack of them over the next few months for summer holidays 2009 will determine the rate of failure for these businesses.”

“Travel agents and tour operators both operate in a regulated environment, but will continue to feel the pressure during 2009 and those with weaker balance sheets may find it difficult to avoid being taken over or failing.” Ian concluded.

 

 

 

 

 

Q1 07

Q2 07

Q3 07

Q4 07

Q1 08

Q2 08

Q3 08

Q4 08

T&T insolvencies

 

 

 

10

 

 

 

11

 

 

 

8

 

 

 

19

 

 

 

11

 

 

 

12

 

 

 

24

 

 

 

15

 


For more information contact:

Sian. Mannakee
Technology, Telecoms, Entertainment, Media, Hospitality and Leisure, PR Manager, PwC 
Tel:020 7213 2538 
Mobile:07715 484 884 
 

Ian Oakley-Smith
Partner, PricewaterhouseCoopers LLP 

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