In the early hours of Monday morning, with most of its fleet of planes on the ground, the rug was pulled from under Thomas Cook, in the biggest failure of a travel firm in British history. Tens of thousands of holidaymakers have been airlifted home, many after exhausting queues in airports, and with a million more are seeking refunds on future bookings. So what does the debacle tell us about protecting ourselves when making bookings in future?
Atol (mostly) works – and is worth having
If you’ve just spent 24 hours at Dalaman airport waiting to board a rescheduled flight home, or you were forced out of your hotel by irate owners, you might disagree. But the Atol (Air Travel Organiser’s Licence) scheme has mostly come to the aid of up to 600,000 holidaymakers who had Thomas Cook bookings for future trips, or were already abroad. Set up in 1973 after several high profile travel firms collapsed leaving people stranded in Spain, a £2.50 Atol levy is applied to each holiday booking.
As the name suggests Atol covers flight-based trips, and also most cruise packages. It has been extended to those booking flights and hotels together with the likes of Expedia and Lastminute.com. So a weekend away in Rome can be covered in the same way as a package holiday to Turkey but only if you book both from the same travel firm.
Brexit
“There is now little doubt that the Brexit process has led many UK customers to delay their holiday plans for this summer,” said the chief executive, Peter Fankhauser, in May. But it cannot be the whole story - arch-rival Tui has coped because its finances are healthier.
Weather
The summer heatwave of 2018 encouraged would-be holidaymakers to stay at home, undermining prices in the “lates” market where operators try to clear unsold holidays. There seems to have been a hangover into 2019, with customers calculating that waiting to book is a productive strategy.
Competition
A pincer movement of Airbnb and budget holidays has changed consumer behaviour, though Thomas Cook still managed to sell 11m package holidays last year.
Banks and debt
The tour operator has been attempting to shoulder a huge pile of debt for the past decade – £1.7bn worth at the last count. Successive managements failed to remove meaningful chunks. The banks argue they have supported an overstretched company for years and the details of why it could not be saved may have to await the report from the Insolvency Service.
Bad management
Thomas Cook’s borrowings were too high. The moral of the tale is that tour operators should fund themselves conservatively. If your balance sheet is fragile, you are at the mercy of events in an industry where most of the cash arrives in the summer and then flows out in the winter.
Nils Pratley, financial editor
You need to make sure your trip will actually be covered
Thomas Cook won’t be the last travel firm to fail, so check your travel agent/website is Atol registered before handing over card details – and be aware Atol is only offered by UK based travel firms.
Beware how many foreign travel websites will give the impression they are based in the UK when they are not. Firms have to publish their Atol number – and if you unsure you can check its validity on the Civil Aviation Authority website. When you make an Atol protected booking you will receive an Atol certificate which lists which parts of the trip that are financially protected. If you don’t get a certificate, you don’t have the protection. For that weekend in Rome, check what you are booking is Atol covered, as the way in which it is booked is crucial as to whether you have cover or not. You have similar but different cover if your package starts with a train or coach trip. It’s the same for UK cruises.
While Atol was designed to cover flight-based trips, the Package Travel regulations apply to all other holiday travel packages booked if they are booked through Abta-registered travel agents/websites. If you book a rail or coach trip, or a cruise that starts in the UK and includes hotel accommodation thrown in, it is the Abta agent scheme that will refund you if the travel firm collapses, or get you home if required. It’s the same story if your cruise starts at a UK port. Some Thomas Cook customers who had used its travel agents to book trips with other tour operators will have had their bookings honoured because they were covered by Abta, Abta told us this week.
It’s different if you book your own flights and hotels separately
If you book a flight using the Ryanair, or rival carrier’s website, and a hotel, or villa on Booking.com or Airbnb – there is no Atol protection. As a result the advice is always to pay using a credit rather than debit card because it allows you to hold the card company liable in the event the airline folds before you travel, provided the ticket cost more than £100.
While it is unlikely Ryanair will collapse, it is only a matter of time before another airline folds. There were plenty of people who booked flight-only deals with Thomas Cook who are now making section 75 claims to their card providers.
For bookings costing less than £100, or if you paid by debit card, you may be able to claim money back from your card provider through the chargeback scheme. The chargeback process isn’t a legal requirement, but has become an industry standard. Some Thomas Cook customers have had flight-only charges refunded via chargebacks.
You may buy a flight from Ryanair and later add a hotel on its much-promoted Ryanair Rooms site, but that does not automatically constitute a package deal. Basically to benefit from EU “linked travel arrangement” protection you must purchase both flight and hotel from the same company within the same 24 hours. Ryanair told us its passengers are protected under the Irish package travel directive, which is equivalent to Atol. On lastminute.com if you buy flight and hotel in one go, paid together, you get Atol protection. In truth, the rules are a mess for consumers to navigate, through.
Buy travel insurance with ‘scheduled airline failure’ cover
It’s known as scheduled airline failure (SAF) in the trade, or in the better travel policies supplier failure. The aim of the cover is to step in if an airline’s collapse leaves you stranded abroad or unable to depart.
Arguably, if you always buy flights with a credit card, you don’t need it as the card provider is liable. But SAF would cover the buying of more expensive replacement flights, which would allow the rest of the trip to carry on. It will also pay out if you bought the flights without a credit card.
The problem is that many travel policies, particularly those at the cheaper end of the spectrumones, don’t provide this cover as standard. According to Defaqto, just over half of the 1,135 annual travel policies listed SAF cover of between £100-£15,000. The average amount of cover offered under a SAF policy is £2,500.
Sally Jaques, a travel expert at GoCompare, says this should serve as a wake-up call. “Our research looking at over half a million transactions found that in 2018 over 30% of single trip travel insurance policies were bought on the actual day of departure. Hopefully the publicity surrounding the end of Thomas Cook will persuade holidaymakers to get themselves properly protected and to do it very soon after booking their trip.”
Economycover.com’s Premier Plus annual family multitrip policy (Europe only) costs £51.20 a year, and includes £8,000 cancellation cover and £5,000 SAF cover. Multitrip.com has a similar policy costing £36 a year with £3,000 cancellation and £1,500 SAF.
Don’t, don’t don’t ever hold on to vouchers for travel firms or retailers
You have to feel for the Cambridgeshire family from Cambridgeshire who spent two years saving up more than £800 for Thomas Cook vouchers to pay for their dream trip to Euro Disney. Lianne Jones had even bought some more vouchers at her local Thomas Cook travel agent a week before its collapse, only to be told they are now worthless. Retail vouchers of any kind are just not worth the risk anymore. Too many consumers have lost out in this way.
If you are about to go on holiday, it’s worth looking at the news
Thomas Cook’s collapse may have been all over the Guardian, and most news broadcasts, but that didn’t stop several passengers turning up at Gatwick on Monday expecting to board a grounded Thomas Cook flight.
