The recent collapse of 178-year-old travel company Thomas Cook has left holidaymakers stranded around the world, with some locked up in hotel rooms amid hotel bill stand-offs and with the majority left empty-pocketed and bitter about their poor fortune. The future of the world’s oldest organised travel company had been of concern for some time in the leadup to the shutdown, but no one was entirely prepared for the sudden statement released by its board on Monday, which read:
“Thomas Group plc continued to engage with a range of key stakeholders over the weekend in order to secure final terms on the recapitalisation and reorganisation of the Company. Despite considerable efforts, those discussions have not resulted in agreement between the Company’s stakeholders and proposed new money providers. The Company’s board has therefore concluded that it had no choice but to take steps to enter into compulsory liquidation with immediate effect.”
The UK Civil Aviation Authority (CAA) is supporting the country’s largest ever peacetime repatriation effort to bring home the 150,000 British travellers currently located abroad, but the next step for the 450,000 non British holidaymakers currently abroad is far less certain. It begs the question: what are consumers’ legal rights, and what should they be in this day and age in a situation like this? Should the financial downfall of a company be suffered by faithful consumers, or should the brunt be felt solely by the company’s administrators, chief executives, and board?
Those hit hardest by the situation right now are not the senior level executives of the company, but the innocent families who have spent years toiling away to earn enough money to embark on their trip of a lifetime. Today, they have been told their trips are not going ahead, and they will receive no reimbursements unless they are insured by ATOL – which is essentially a government-run travel insurance fund.
This protection, run by the CAA, prevents consumers from losing money or being stranded overseas if the company they booked a package through goes out of business. So whether consumers have booked a holiday package or just a flight through the UK tour operator, ATOL protection means they shouldn’t lose money or be stranded abroad. But only a thoughtful few are protected by the ATOL scheme in this instance, and the rest are left questioning – will I be compensated in any way?
If the past is anything to go by, things aren’t looking good. Customers of collapsed British tour operator Lowcostholidays received no more than a measly £8 each in compensation back in 2016, when the company fell into administration. It too left thousands of customers stranded abroad – 27,000 to be precise – and 110,000 with worthless future bookings.
So where do customers stand, legally speaking, and should they be liaising with their family lawyer or will attorney to seek justice and/or compensation?
According to consumer rights expert Dean Dunham, British holidaymakers who have booked into a Thomas Cook tour package will be protected by ATOL and will therefore receive compensation, however if customers only have a flight booking through Thomas Cook they will not be protected through ATOL. If the Thomas Cook flight was booked via a travel agent who is an ATOL holder, and travellers received an ATOL Certificate as soon as they made the payment, their booking is protected and the travel agent is obliged to offer a refund.
For those unfortunate consumers who are not protected by ATOL, a few circumstances will ensure consumer protection. If the booking was paid for by Credit Card, legally consumers are able to make a claim under section 75 of the Consumer Credit Act. For those who paid by Debit Card – they may be able to claim under the ‘chargeback scheme’ – a voluntary scheme that all debit card providers are signed up to. For those who have separate travel insurance, they may be covered however it ultimately comes down to the individual provider and the fine print. Many policies include insurance coverage in the case of “financial default” of a travel company, meaning travellers will be “reimbursed for their prepaid and nonrefundable trip costs if their travel provider ceases operations for financial reasons”, according to Steven Benna, a spokesman for the travel insurance comparison site Squaremouth.
In terms of wider legal ramifications for the company, it appears British regulators and MPs are already considering launching investigations into the travel firm’s auditors and directors. The combined salary of the last three chief executive officers has raised concern among regulators, who cannot fathom why Manny Fontenla-Novoa, Harriet Green and Peter Fankhauser were paid £35m over the past 12 years, despite the company being in clear financial distress.
Chair of Britain’s business select committee, Rachel Reeves MP, said: “There are serious questions to answer, including about the company’s accounting practices, its remuneration policy and practice, and about the stewardship of the company.”
The government has also announced a fast-track inquiry into the collapse by the Insolvency Service, which was ultimately responsible for choosing to close down the 178-year-old holiday business while travellers were still abroad and embarking on holidays across multiple continents.