3 takeaways from the latest ATOL authorisation data

When companies apply to renew their Air Travel Organiser’s Licence (ATOL), they must project how many passengers they expect to carry over the following 12 months. The resulting set of authorisation data provides a great indication of travel companies’ optimism and intent over the coming year. 

After the March 2023 renewal round, we’ve been busy mining the latest data set, and there are some interesting trends to share.

Below are three takeaways from our deep dive into the ATOL authorisation data.

1 – Total ATOL authorisations hit a 10-year high

Total authorised passengers have hit a 10-year high of 28.7m, surpassing the previous high watermark of 2018, the last year to include Thomas Cook data. 

Overall authorisations are up 9% since the last renewal in September 2022 and 12% up on September 2019, the renewal which preceded the Covid shutdown. 

The rise reflects the surge in demand for overseas flight-inclusive package holidays in recent months. The market is back in growth, and ATOL holders are clearly optimistic the good times will continue. 

Our authorisation bridge shows where the growth has come from. And it really illustrates how the package market rebound has exceeded expectations. Most of the overall authorisation increase came not from March renewers but from ATOL holders who had renewed just six months ago but needed to increase their licence authorisations off the back of better-than-expected trading. 

Jet2holidays (+560k seats, 11%), Booking.com (666k seats, 62%) and easyJet Holidays (210k seats, 16%) have all reported buoyant trading and have applied to the CAA to vary their licence limits for the remainder of their current licence year to September 2023. 

Amongst those ATOL holders that renewed in March, the largest increase was loveholidays, which added 594k seats to its authorisation (a whopping 32% increase), leapfrogging On The Beach to become the third largest ATOL holder overall. Loveholiday’s latest accounts show trading is now well ahead of pre-Covid levels, propelled by successful refinancing and fundraising activities.

There were other notable increases from On the Beach (139k seats, +7%), Travel Counsellors (32k seats, +30%), Statesman Travel Services (32k, 178%) and Walt Disney (29k seats, +88%). However, a smaller number chose to decrease their licence limits, such as Virgin Holidays (-49k seats, -18%).

2 – The ATOL market is consolidating

Whilst the overall market is clearly in growth, it is the larger ATOL holders who are driving the majority.

Outside of those referenced in the bridge chart above, the total authorisations from March renewers is still around 35% below pre-pandemic levels.

We believe the difference in fortunes is primarily down to funding. The larger ATOL holders have generally found it easier to raise new money from various sources – such as rights issues, issuing bonds, increasing loan and revolving credit facilities, selling non-core assets, sale and leasebacks, or accessing government support schemes. 

Conversely, small and mid-sized operators have found it harder. Many only survived the pandemic period through day-to-day firefighting and a strong focus on cost control. They now find themselves with depleted teams and weakened balance sheets. Satisfying regulators’ requirements has eaten up spare capital. As a result, their recoveries are slower and more cautious.

The upshot is that the largest five ATOL holding groups in 2023 (TUI*, Jet2, loveholidays, On The Beach**, and easyJet Holidays***) now account for 62% of the package market, an increase from 53% in 2019.

And the rapid growth of Booking.com, which is now the 6th largest ATOL holder with 1.7m seats) means the top ten ATOL holders now represent 76% of the market. 

*Includes Marella Cruises ATOL **Includes Classic Collection ATOL ***Includes easyJet Airline ATOL

As the chart below illustrates, the market share of the top six has ebbed and flowed over recent years. We note that at 19%, TUI’s current market share is back to its 2013 position. But the group recently announced plans to add a further 1.1 million of additional capacity for summer 2024, so its authorisation could change in the run-up to its next renewal. We’ll be keeping our eyes peeled for any variations before then. 

3 – The number of ATOL holders is starting to increase, primarily with new franchise holders

¹Number of ATOL holders with public sales greater than zero, therefore, excludes Transport Company ATOL holders, many of whom allowed their Transport ATOLs to lapse. 

Another 30 ATOL¹ holders dropped out of the system in March 2023 after failing to renew their licences. Over the past three years, there has been an exodus of smaller operators from the flight-inclusive holiday market. Today, there are almost 230 fewer trading ATOL holders¹ than before the pandemic, a 12% reduction.

The pandemic highlighted the costly obligations that face companies selling ATOL packages. Many came under severe cash flow pressure, stuck between the legal requirement to refund consumers within 14 days of cancellation whilst unable to recover funds from suppliers. On top of this, the CAA began a consultation on ATOL reform which included some fairly onerous proposals to enforce escrow or trust accounts.

As a result, a number of ATOL holders collapsed. Many others made pre-emptive decisions to pivot away from selling ATOL packages towards less risky business models, like acting as agent, selling single travel components, or non-flight packages. 

However, in the last six months, we’ve started to see some green shoots of recovery. 

There were approximately 50 new ATOLs granted in the last six months. More than enough to offset the recent leavers. The result is an overall increase in the ATOL holder population and a reversal of the trend of the past few years. 

Almost two-thirds of these new ATOL holders were licensed through an ATOL franchise scheme, which can be a much quicker and simpler process than applying directly to the CAA.

If you would like to discuss any of the insights above, please get in touch.