18 Aug 2010

Another budget operator, Kiss Flights, has gone into administration leaving thousands of passengers stranded and even more without a holiday which they had paid for. The budget firm sold flights to Greece, Egypt, Turkey and the Canary Islands and had 13,000 customers overseas and 60,000 people have forward bookings with the company. The blow follows the collapse of GoldRail and Sun4U holiday companies earlier this summer.

Last month Goldtrail, which specialised in holidays to Greece and Turkey, collapsed, affecting as many as 50,000 travellers. Following that Birmingham-based travel firm Sun4U folded, leaving about 1,500 people stuck abroad, mostly in Spain. In all, 13 travel firms have gone bust in the UK this year, that compares with 33 last year. "No one expected to see this money running out during the height of the holiday season. In an attempt to preserve the summer holiday consumers have become very savvy at sniffing out value for money deals - one of the reasons why budget travel firms such as Goldtrail, Sun4U and Kiss Flights have failed", said Ian Oakley-Smith, Partner, PricewaterhouseCoopers LLP.

Although the Civil Aviation Authority has said that the "vast majority" of people who had booked future trips with Kiss Flights would receive refunds, "there are no phoenix from the flames stories this year for the travel industry. Unlike other hospitality & leisure sectors, such as pubs, those tour operators who are going out of business cannot be resurrected. Pubs enjoy assets, and therefore bank borrowing and a controlled restructuring, allowing them to emerge from an insolvency as a trading business. Travel firms do not have this luxury and therefore when they run out of money, there are no options left.

"But the postcard picture is more complex. Yes the industry is suffering from a lack of consumer finance as we reign in our credit card lifestyles but it is the budget end that is suffering. Budget businesses work off low margins and emergency reserves have been eroded during the downturn. This year's shock events, such as the lingering ash cloud, have forced them to price low to win business. This discounting has been enough to push some over the edge."