THOMAS COOK’s FAILURE


In a special analysis written for T T


homas Cook was not just large, it was also complex, and its liquidation signalled a momentous


event that will be talked about for years to come. Te UK’s second-largest vertically


integrated group, which dated back 178 years, employed 22,000 people, traded in 16 countries and turned over some £9 billion a year. Tere was a sense it was too big to fail. Thomas Cook Tour Operations


was one of five companies with Atol licences and Abta accreditation. The UK airline sold outside of Atol, and the group had a large retail presence. Its Freedom Travel Group division was the first Atol Accredited Body to fail. It could take years to calculate the


true costs of Cook’s failure, but here are the main components to date.


Customers Overwhelmingly, customers were protected. They were accommodated and repatriated if still on holiday, or refunded if yet to travel, by the


12 12 DECEMBER 2019 ravel Weekly, John de Vial, director of financial protection at Abta, looks at the wider industry impact of the travel giant’s collapse


Air Travel Trust Fund (ATTF) or Abta bonds. Freedom Travel Group customers may, in some cases, have had holidays fulfilled with funds from the CAA Atol Accredited Body trust or the Abta bond. Credit card companies will carry some cost. Airline customers were


repatriated by the Department for Transport and forward bookings will, in many cases, be covered by credit card or debit card chargebacks.


Atol CAA chair Deirdre Hutton has said Atol will cover about 60% of the £100 million repatriation cost, with the balance falling to the government, which chose to fly non-Atol passengers home. Operation Materhorn was a


success, and underlined to consumers the value of protection. No operation that size has no hitches, but 160,000 passengers got home, mostly on the right day they were supposed to. It is reported that refunds for 350,000 forward bookings for


I doubt the £2.50 per passenger fee which funds Atol’s ATTF will rise to £10, as has been speculated


800,000 customers will cost about £420 million. Tis will be funded by the ATTF and its insurance, credit cards and debit card acquirers. Abta’s claims costs will be fully covered by the bonds held, without recourse to Abta’s insurance policy. Customer costs have been touted


as up to £600 million across Cook’s six companies, but it is too soon to be precise. I doubt the £2.50 per passenger fee which funds Atol’s ATTF will increase to £10, as has been speculated. The previous £1 charge was never sustainable and changed immediately after XL Leisure Group failed. Thomas Cook will not wipe out the ATTF. My instinct is that there will be no


short-term change and the trustees will not panic but find out the total cost and insurance renewal before deciding how to rebuild the fund.


Employees Employees were initially not paid in September, but the Department for Business, Energy and Industrial Strategy (BEIS) stepped in to fund the Official Receiver’s work. Abta LifeLine has also helped the most- urgent cases (page 8) and committed more than £100,000 of the more than £200,000 donated. We should all be proud of what has been achieved.


Suppliers Reports of hundreds of hotels closing were heartbreaking. Third-party tour operators and suppliers have suffered. Thomas Cook’s retail arms acted as agent for many and had negotiated credit terms. Some of these tour operators report unexpected losses as a result of the early collection of balances by Thomas Cook retail, often in return for discounts. Some third


travelweekly.co.uk


THE COST OF


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