More travel companies expected to collapse this autumn

Kiss Flights will not be the last travel company to collapse this year, analysts warned today.

‘We have not seen the last of the casualties’, said Douglas McNeil, travel analyst for Charles Stanley. 

Low consumer confidence due to impending job losses in the public sector and the extra costs imposed on tour operators and airlines as a result of the volcanic ash cloud, had resulted in a ‘weak summer’ across the industry, McNeil explained.

Andrew Burnham, head of travel and leisure at accountancy firm MacIntyre Hudson’s, said the recent rush of travel firm failures is a ‘worrying trend’ and that there is a big risk of more failures in the autumn

‘Travel firms are under-capitalised and over-reliant on interest earned by clients' deposits,’ Burnham said.

With the Bank of England base rate at a record low, customer deposits are earning less interest, which means firms have lost much of the income they rely on, Burnham explained.

This combined with two years of attrition in the economy in which a lot of travel businesses have discounted too heavily and run slim trading profits, means cash has run out, he added.

Peter Smith, travel expert at Travelsupermarket, meanwhile said: ‘I wouldn’t expect any big businesses to go bust this summer. It is unusual for companies to go this way in the summer when cash flow is at its highest.’

‘However, as we move into autumn we may still see some smaller firms follow the likes of Kiss Flights.’

Budget travel firm Kiss Flights yesterday became the latest in a long line of the travel operator casualties after its parent company Flight Options Limited ceased trading last night.

Around 13,000 people who booked with Flight Options, which sold flights to Mediterranean destinations, are currently overseas, with a further 60,000 expecting to fly out at a later date, according to the Civil Aviation Authority (CAA).