What is happening with Thomas Cook?

Thomas Cook: How will your holiday be affected if the travel firm collapses?

The holiday giant needs to raise an extra £200m

Simon Calder
Travel Correspondent
@SimonCalder
Friday 20 September 2019 23:44
comments

The giant travel company Thomas Cook is in a race against time to make a deal with its creditors over a refinancing package. Last month the holiday firm appeared to have secured its future. But now the rescue deal appears to be in danger.

These are the key issues for holidaymakers with a booking involving Thomas Cook.

I am abroad on a Thomas Cook holiday. What happens if the company collapses?

Your package holiday will continue as normal, with hotel bills paid and new flights provided by the CAA under the terms of the Air Transport Organiser’s Licence (Atol). All you need to do is to wait to be told when your replacement flight will be departing.

The airlift, codenamed Operation Matterhorn, involves setting up a “shadow” airline that mirrors the pattern of flying of Thomas Cook Airlines. The aim is to replicate as closely as possible the original schedule, though with larger-than-usual aircraft being deployed it may be that – for example – flights to Birmingham and Manchester are combined. In such cases, coaches will be laid on to complete the journey.

If the airlift is needed, the total cost could be as much as £600m – including paying hoteliers to allow holidaymakers continue with their trips.

I am abroad with a flight-only Thomas Cook ticket and no Atol protection. What happens to me?

If you are booked on a short-haul flight to the Mediterranean, Portugal or Atlantic islands, it is likely that you would be offered a seat in the airlift operation. If you are in the US, then it may be you will need to book one of the “rescue” fares that will be provided by other airlines, in particular British Airways, Virgin Atlantic, Norwegian, United, American Airlines and Delta.

Each airline normally announces its policy within 24 hours of any collapse. Fares are typically £150-£200 one-way, on production of proof of a Thomas Cook booking.

You can then claim back the cost of the original flight from the credit-card provider or travel insurance.

I am abroad on a package holiday from another tour operator, but which uses Thomas Cook Airlines flights. What happens?

Thomas Cook Airlines does “third-party flying” for a wide range of other companies.

Your tour operator has primary responsibility to find an alternative flight for you. If an airlift takes place, it is very likely you would be booked on one of the flights. Otherwise you can work with the tour operator to find an alternative. This should theoretically be at no cost to yourself.

I have a Thomas Cook trip booked. Will it go ahead? If not, will I get my money back?

Were the worst to happen and Thomas Cook closes, it is likely that your holiday will be cancelled. The Civil Aviation Authority says: “In some cases we will appoint a fulfilment partner to provide the holiday.” But that would be a rare event, and it is much more usual for the entire holiday programme to be cancelled.

Current customers who paid for some or all of the trip by credit card will be told to apply to their card issuer for a full refund, whether for a package holiday (flights and accommodation bought in the same transaction) or a flight-only ticket.

People who paid for a package holiday with a debit card should make a claim under the Atol scheme, which is administered by the CAA. Flight-only customers who paid with a debit card can ask for reimbursement under the “chargeback” scheme. Although there is no legal requirement for debit card issuers to pay out if the supplier collapses, this voluntary scheme should help you out.

My trip is a package holiday from a different firm, but with Thomas Cook flights. Will it go ahead if Thomas Cook fails?

Probably. The tour operator who put the trip together will need to try to find alternative flights. It may be that these will cost substantially more, and you may be asked to contribute. Were this to happen, you could alternatively ask for a full refund.

My trip has Thomas Cook flights and accommodation/rental car I booked separately. Who do I claim from if the firm folds?

You do not have the protection a package holiday confers, and the accommodation/rental car provider may not offer a refund. You then have the option to go ahead with the trip using replacement flights (which could well be more expensive) or abandon the holiday and try to claim for “consequential losses” from your insurer.

I can’t take the risk of losing my holiday. Can I cancel and re-book with someone else for my peace of mind?

Not without losing some or all of your money. Thomas Cook says: “If customers choose to cancel their holiday/flight for this reason, normal booking conditions/cancellation charges would apply.”

I am owed hundreds of pounds by Thomas Cook following a heavily delayed flight. If it fails, what are my rights?

You will be an unsecured creditor and are unlikely to see a significant proportion of the cash.

I have a Thomas Cook Cash Passport prepaid card. Is the money on it safe?

Yes. The cards are issued by Wirecard Card Solutions Ltd and operated separately from Thomas Cook. Wirecard is regulated by the Financial Conduct Authority.

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A worrying time for staff and shareholders?

Alarming for more than 20,000 staff, nearly half of them in the UK, with the looming prospect of more job cuts if and when the rescue deal goes through.

Thomas Cook shareholders have already been wiped out. Going back 16 months to May 2018, a holding of 200 shares would have been worth £270, enough for a week’s package holiday to Greece: worth £270. Today, those same 200 shares are worth just £7, which might just buy you lunch in a beachside taverna.

When did things go wrong for Thomas Cook?

The company can point to everything from the continued ban on flights to Sharm el Sheikh in Egypt to uncertainty over Brexit for damaging its business, but there are longer-term and deep-rooted problems.

The low-cost aviation revolution and a series of corporate misadventures left Thomas Cook badly wounded in 2011, and though it made a recovery it has been struggling compared with its huge rival Tui and the relative youngster Jet2. Thomas Cook has been slow in adapting to the changing market, and creating premium products rather than commoditised cheap and cheerful holidays.

Thomas Cook still has hundreds of high street travel agencies, a successful airline and nearly £10bn of revenue every year – but running the business profitably has been elusive.

Surely Thomas Cook is too iconic to fail?

​Thomas Cook was the pioneer of organised travel – beginning with a Temperance outing from Leicester to Loughborough in 1841.

The travel firm prospered through the second half of the 19th century and, with allowances for world wars, thrived through much of the 20th century. In 2007 it merged with Mytravel, and is one of the biggest holiday companies in Europe – with operations in Germany, Scandinavia, Russia and elsewhere. But scale and being the strongest brand in travel are no guarantee of enduring success.

Wasn’t Thomas Cook’s future supposed to be assured by a rescue deal from China?

A complex deal was arranged in which the travel company was to receive an injection of £900m – half from the Chinese conglomerate Fosun and half from its lenders, who were also going to write off around £1.6bn in debt in return for a share of the company. The plan was to shore up Thomas Cook’s finances and see it through the winter – as well as protecting more than 20,000 jobs and millions of holidays.

But those lenders – led by RBS, Lloyds and Barclays – are demanding that it bolster its finances by having an extra £200m on standby to protect against shocks during the winter ahead. The last thing they want is to have to write off loans.

Might the government step in to rescue Thomas Cook?

The usual stance is that businesses must fend for themselves. But in the present political climate (and the party conference season) it may be that the government finds itself able to provide financial backing for Thomas Cook.

The business secretary, Andrea Leadsom, could say: “This is the lesser of two evils – the taxpayer would otherwise be hit for a lot more than £200m. If we support Thomas Cook now, the Chinese will come up with lots of fresh money to help the company flourish.”

How long has Thomas Cook got to sort itself out?

September is traditionally cruel to struggling holiday companies, because the bills for the summer become due but revenue is drying up – particularly if people are wary of booking holidays. Fridays are especially tricky, historically speaking, with many failures afflicting travel firms on Fridays in September. They spend the week trying to find a financial rescue, and finally throw in the towel.

A big problem is customer confidence. Travel plans are built on faith. You hand over cash well in advance in the expectation that you will take delivery, ie enjoy the holiday, as planned. If many people stop booking because they believe the company could fail, then the fall in revenue could precipitate its failure – a self-fulfilling prophecy.

Is this actually a good time to book a Thomas Cook holiday?

Yes, if you are prepared to accept that it may not happen and you would need to settle for a full refund.

At present holidays are on sale for the autumn and winter around the £200 for a week to destinations such as Tunisia and Turkey.

On Friday morning, the price of a week in Icmeler, Turkey, including flights from Gatwick (with luggage), transfers and accommodation – departing on 8 October 2019 – fell from £191 to £166.

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