The Thomas Cook Affair III

The collapse of Thomas Cook is not just sad but catastrophic on so many levels

This blog post is tagged with:

Thomas Cook Consumer Financial Protection ATOL

Employees, Holidaymakers, Hoteliers, Resorts and support suppliers will be greatly affected

For several days, I was caught up in the mayhem of the collapse of Thomas Cook.

In that time I sought to offer reassurance to Consumers about what would happen if they were affected. 

I spoke up for the Civil Aviation Authority (the CAA), because government Ministers were running around giving the impression that they were organising and controlling the so-called repatriation operation.

Let’s just remind ourselves of some of the key issues surrounding the failure of Thomas Cook:

Firstly, Thomas Cook had been in some difficulty for some time. Whatever about the prevailing winds of Consumer or political change, debt lay at the heart of its operations.

In order to continue with operations, they sought outside financial support and indeed secured that support from Fosun, a Chinese Company. 

However, at virtually 5 minutes to midnight, the banks sought another £200m, to act apparently, as a cushion for the company, through the lean winter months. 

I have read that offers of support came from Germany and Spain, but whatever happened, that offer of crucial support was withdrawn and this sounded the final bell for Thomas Cook.

What was interesting in this mix was the fact that Thomas Cook asked for Government assistance to keep the operation going; unsurprisingly, this was not given; unsurprising because the view generally from Westminster is that we live in a market economy and it really is about the survival of the fittest.

Within hours of the collapse, headlines in the newspapers screamed fat cats, oh the irony! 

One Secretary of State, Andrea Leadsom, called for an inquiry into the behaviour of the Directors, in the lead up to the collapse of the company. 

Others were demanding that the bonuses paid to the Directors were repaid to the company and politicians are now talking about calling the Directors to Parliament to explain their actions.

On so many levels, they are missing the point.

To understand that point you have to look at what is happening right now!

During the course of my radio interviews, we discussed the situation in Tunisia where holidaymakers were in effect, held hostage. I spoke about the illegality of that action, about how the ATOL Consumer Financial Protection scheme would pay their bills.

I also spoke about how it was necessary for the UK government, specifically the Foreign Office and the Secretary of State, Dominic Raab, to step up to the plate and provide direct assistance to holidaymakers in difficulty. In an earlier Podcast, I asked Dominic Raab to accept that this was his responsibility.

In one report, UK holidaymakers in Florida tried in vain to get some help and even sought financial assistance from the UK Consulate but were told flatly that this was not a service that they provided!

I’ve seen this morning that there are a number of holidaymakers and Thomas Cook crew who are stranded in Cuba, because the hotelier or hoteliers are concerned that they won’t get paid, but in this instance, thankfully, the UK Ambassador apparently stepped in and provided the necessary reassurances.

What I’ve seen and read since my earlier podcast strongly suggests that the message of the ATOL Financial Protection scheme is not getting through, with holidaymakers reporting in several destinations that they have either been kicked out of their hotels or they are barred from leaving, unless they pay the monies, again!

So I ask again Dominic Raab, are you taking the action to help holidaymakers in need? Are you speaking to the European Commission, because we are still a Member State of the European Union, to get them to enforce the rules of Financial Protection in Member States and to cause Member State governments to reinforce the message. How about using the EU External Service to supplement your own department’s efforts in non-EU Member States to reinforce the message, like in Cuba, that bills will be paid; are you really doing everything you can, Secretary of State?

In all the years that I have been covering Travel and Consumer Rights, I have never witnessed the scale of these difficulties for holidaymakers in resorts, which tends to suggest that whatever about the apparent information being given out to hoteliers by ATOL and the government, it is simply not cutting through; is this because there is too much political interference within the tried and relatively trusted scheme?

Which brings me to another point.

For several days I have watched and read the comments of Ministers talking about how the taxpayer is picking up the bill for the so-called repatriation. I’ve been asking myself why is the taxpayer paying anything and why is it costing overall £600m?

I couldn’t find the answers to that, but I did examine the accounts and found that in 2018, there was some £160m+ in the account of the Air Travel Trust (this is where ATOL scheme monies are held). 

I then read that, 60% of those affected by the Thomas Cook collapse will be covered by the fund. 

That leaves some 40% who are apparently non-ATOL holidaymakers and not covered by ATOL, but a proportion will have cover through their Travel Company bonding arrangements or indeed Travel Insurance; the exact number of those not covered is as yet unknown.

So again I ask, given these factors, why are UK taxpayers contributing anything at all? 

Could it be that there is not enough money being paid into the fund? Perhaps the answer to that may be found in the CAA’s own words, found on their website, which you can track through the link on this podcast. 

Consumer Financial Protection has been a major talking point, over many years, when we’ve all met to discuss how to enhance the Package Travel Directive. 

The general consensus from Member State governments was that they did not want a pan-European protection scheme. 

I disagreed, because to not have a properly defined and funded scheme leads to all kind of variations in cover; we saw this during the 2016 LowCostHolidays collapse, who operated their Financial Protection scheme in Majorca, which in turn offered a lower protection than the ATOL scheme!

So if government or parliament wants to inquire into anything, then they should perhaps start with the operation of the ATOL scheme. 

They should determine if it is indeed fit for purpose; they could also contribute to transparency of the issue by setting out the full accounts of who is paying what and why, following the collapse of Thomas Cook.

Determining whether something is ‘Fit for Purpose’ should be one benchmark test for any government.

I would suggest that they apply that simple principle when it comes to the monitoring of Travel Companies. 

To begin with, it is quite clear that in any parliamentary inquiry, there is no doubt that the Directors will not only point to unanimity within the Board but that they also had shareholder approval to take the actions they did; in many respects, these potential inquiries are like fiddling at the edges. 

So apart from providing accountability as to the cost of the refunds and repatriation and whether ATOL is indeed fit for purpose, the government should immediately create the conditions, whereby a Travel Company, through an independent audit, both before trading and during each year’s operations, be officially and openly declared to be “Fit for Purpose”. 

This confidence building device would provide immediate benefit to Consumers and provide a clear message to the Industry; wouldn’t you agree Secretary of State Leadsom? 

My final point concerns the request made to government to help provide £200m.

Now as I said at the start of this podcast, that was always going to be unlikely due to our current parliamentary devotion to market-forces, but let’s just take a step back.

A precedent was set, albeit a German precedent, when the government there provided a bail-out for Air Berlin. The bail-out allowed the airline to wind down its operations in an orderly fashion and upon sale of its assets, it repaid the £150m it owed to the German government.

We now hear that Condor, another airline within the Thomas Cook Group, has secured similar support from the German government, until such time as they can determine a future for the airline or the sale of its assets.

The point being that in both cases, the airlines have continued operating.

Imagine if the British government had done the same with Thomas Cook Airlines, whatever about the Travel Company itself.

Would there have been such a call on the ATOL fund?

Would it have cost so much to create a ‘State Airline’?

Would taxpayers have had to pay out less than they currently have to do?

Would there have been a more orderly flow of repatriations?

Would it have calmed Consumer concerns and angst?

Would the government have received bail-out-assistance taxpayer money back? 

Well if it followed the German model, very likely yes.

So Secretaries of State, Schapps & Leadsom, perhaps you too should be called to Parliament to explain why you did not take all reasonable steps to bring order to chaos?

(Note: Reference is made to this being the 'III' Thomas Cook article & podcast. The Thomas Cook Affair II was a recording of Frank's interview with LBC. The link to the podcast commentary the 'III' article can be found here)