Collapse of second package tour firm

BRITAIN'S troubled package holiday business has claimed a fresh victim. Following the collapse last week of Land Travel, the Civil Aviation Authority has announced the failure of the Bob Warren Travel Service, which traded as Paloma Holidays at Arundel, West Sussex.

Unlike Land Travel, which was unbonded, Paloma Holidays was licensed by the CAA to carry 6,480 passengers. The authority said arrangements have been made to repatriate about 180 passengers at present abroad. Other customers with advance bookings with the company will receive a full refund. Paloma specialised in holidays to Spain and Portugal.

Noel Josephides, chairman of the Association of Independent Tour Operators - of which Paloma Holidays was a member - said that he was surprised at the failure. 'The tour operating side of the company had been doing well. It was the travel agency part of the business which caused the problems,' he said. Paloma's collapse provides further evidence of the precarious state of tour operators' finances. Further bankruptcies are certain over the next four weeks, particularly in the last two weeks of August when tour operators' cash flow is usually stretched to the limit.

The Government is already arranging to make additional funds available for the Air Travel Trust Fund, which exists to refund holidaymakers when a tour operator's bond proves to be insufficient. After last year's collapse of the ILG group and several other tour operator failures, the fund has fallen from pounds 26.7m a year ago to pounds 5.1m.

A levy on all package holidays sold will probably be introduced next year to rebuild the fund - in the meantime, the Government has said that the fund can borrow money if necessary.

There is concern in the trade that the Land Travel collapse will dent the modest recovery in bookings that has been taking place. Holiday companies need a sustained increase in bookings until mid-September in order to break even for the year. Many smaller companies that suffer a loss for the year are likely to find it difficult to have their licences renewed by the CAA next March.