It has been well documented that public trust in the travel industry is at an all-time low following the demise of Thomas Cook in September 2019, and more recently because of the global pandemic that has disrupted travel so severely.

By Sue Wakefield

Insurers who were previously willing to underwrite ABTA and ATOL bonds no longer wish to do this given the uncertainty and risks.

This has accelerated the use of Trusts and Escrow Accounts by travel companies wanting to protect holidaymakers’ funds.

Protecting Holiday Funds

Put very simply, when a travel company has a Trust or Escrow Account in place and a holidaymaker pays for their holiday, instead of the money sitting in the travel company’s bank account, it is diverted to a ringfenced Trust or Escrow Account managed by independent Trustees which is designed to protect the funds. Those funds are only released to the travel company under the terms of the trust deed.

This means that if the Travel Company goes into liquidation, the funds are not available to the creditors but rather dealt with in accordance with the terms of the trust deed.

In the case of the specific ATOL trusts, the funds would pass directly to the Air Travel Trust in the event of failure and used to meet refund and repatriation costs. The Air Travel Trust was established in the 1970s and is principally funded by ATOL Protection Contributions (APC). These APCs are collected from the ATOL holders for each person who books air travel covered by an ATOL licence.

It seems travel companies are responding to the criticism they have received during the pandemic, which is a welcome move for travellers.

Financial Advantages for Travel Companies

Although travel trusts are not new, the Civil Aviation Authority has been requiring that some travel companies set up such structures as part of the ATOL licence renewal process. The Civil Aviation Authority is currently in consultation with the travel industry generally around changes to the ATOL process and proposing the adoption of Trusts and Escrow Accounts, amongst other possible measures, with potential financial advantages such as possible lower ATOL Protection Contributions for those companies that set them up.

Consumer protection trusts have long been providing comfort and security to the consumer in many other industries and increasing their use in the travel industry seems a very sensible way of bringing back confidence.

The Importance of a Professional Trustee

The role of the Professional Trustee is of great importance in ensuring these Trusts and Escrow Accounts are managed efficiently, compliantly and independently. Trustees that provide assurance and have wider experience in protecting consumers in other sectors will support in bringing back confidence to the travel industry.

As the largest independent Trustee services provider in the UK, with decades of experience acting as a professional Trustee, ZEDRA offers unrivalled expertise in respect of Trustee services. As we are regulated by the FCA as an Authorised Payment Institution, we also provide Escrow services to protect holidaymakers’ funds.

We are one of the Civil Aviation Authority’s approved Trustees and already act as Trustee for a number of household names in the travel industry.

For more information on all aspects of Escrow and Trustee services, please contact Sue Wakefield.

For more information, please contact