We have a holiday booked with Thomas Cook. Will it go ahead?
The honest answer is: I expect so.
I realise this looks unhelpful. But it reflects the truth that there is no absolute guarantee that any holiday will go ahead as booked.
In normal times external events such as drones at airports, atrocious weather and volcanic ash can scupper holiday plans. But very occasionally travel companies go bust. When they close down, forward bookings are cancelled.
There have been increasing fears that Thomas Cook’s financial position is precarious. But the fundamentals of the business look sound to me. Thomas Cook is a giant company with an illustrious history, an outstanding brand and, probably, a successful future. It has 21 million customers each year, revenue of nearly £10bn and 20,000 staff.
So why is Thomas Cook in the headlines for all the wrong reasons?
Thomas Cook’s share price collapsed on Thursday and Friday 16/17 May because of the company’s poor financial performance.
Someone with 200 shares in May 2019 would have enough for a week’s holiday for two on the Greek island of Zante including flights from Gatwick, transfers and accommodation. Today, their shareholding would barely be worth enough for one single ticket on the Gatwick Express.
Thomas Cook has arranged a financial backstop of £300m in case it is needed, and is actively selling its airline – which, with over 100 aircraft, is a sound and profitable part of the business. The aim is for the sale to help Thomas Cook pay down its huge debts and turn the company around.
Alternatively, someone could take advantage of the low share price and buy the firm. The Chinese group Fosun is rumoured to be interested in Thomas Cook.
What could cause Thomas Cook to collapse?
The biggest danger I can see is a self-fulfilling prophecy.
All travel bookings 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. Conversely, so long as enough travellers believe Thomas Cook will stay in business, then it can continue it financial recovery.
Is the money I paid for my holiday safe?
This information is provided in the hypothetical event that the company stops trading. Thomas Cook operations are continuing as normal.
Were the worst to happen and Thomas Cook closes, the vast majority of travellers will be able to reclaim their cash. I believe most current customers paid for some or all of the trip by credit card. In this situation, the card issuer will be expected to provide a full refund, whether for a package holiday (flights and accommodation bought in the same transaction) or any other purchase.
People who paid for a package holiday with a debit card should make a claim under the Atol scheme, which is administered by the Civil Aviation Authority (CAA).
For other trips, such as flight-only purchases, paid for by debit card, the the first place to seek a remedy is the card issuer. Although there is no legal requirement for debit card issuers to pay out if the supplier collapses, the voluntary “chargeback” scheme should help you out.
But what if a replacement trip costs much more than I paid?
That is always the problem when airlines and holiday firms fail – you get your money back, but the actual replacement cost for a similar trip is much higher – not least because other firms can put their prices up to exploit the surge in demand.
A good travel insurance will pay the extra to provide a “like for like” trip.
What if the company fails while I am on holiday?
Package holidays will continue as normal, with hotel bills paid and new flights provided by the CAA. For flight-only passengers, rescue fares should be provided by other airlines. You can then claim back the cost of the original flight from the credit-card provider or travel insurance.
I booked a trip through a Thomas Cook travel agency but with a different tour operator. What are my options?
There is every likelihood that the trip will go ahead as planned. If there is any issue – eg money you paid the travel agent not having been passed on – then Abta, the travel association, will be able to advise.
My package holiday is with Tui but the flights are with Thomas Cook Airlines. What happens if it is sold, or if Thomas Cook fails?
Thomas Cook Airlines is a successful part of the business and is currently up for sale. If it is sold, you can expect all present obligations to be carried out as planned. Were it to close down with the rest of the business, Tui would find someone else to do the flying.
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.
Haven’t we been here before?
Yes. On 22 November 2011, Thomas Cook’s share price collapsed even more spectacularly, losing around three-quarters of the company’s value on some bad financial news. The firm sold off some family silver, cut costs and improved operations. I expect the same will happen now.