Thomas Cook: The essential questions and answers

On 22 November, the Thomas Cook Group – which happens to include Britain’s second-largest tour operator and biggest chain of High Street travel agents – announced it was asking its bankers for a further £100m of funding, pushing its total borrowing to close to £1bn. The share price collapsed on the news, reducing Thomas Cook’s “market capitalisation” – the total value of all the shares – to around £100m. That might strike you as equivalent to having a billion-pound mortgage on a house worth only one-10th as much. In fact. Thomas Cook has a wide range of assets from property to currency, as well as its gold-plated brand name – though that is looking a little tarnished right now.

The company assured customers that it is conducting business as usual: “Our stores and websites continue to assist our customers with their bookings, and all our holidays are operating as normal”.

But given the travel industry’s dismal record of tour-operator failures, many people who have booked holidays or other travel products with Thomas Cook are understandably concerned. This briefing is designed to answer many of the questions that have come in. If you have others, please email travel@independent.co.uk. And if you think I have got anything wrong, let me know at the same address.

I have paid in full for a package holiday with Thomas Cook. What should I do?

Nothing. Were you to cancel at this stage, you would lose most or all of your money. Turn up at the airport and enjoy your holiday.

What happens if Thomas Cook goes bust before the trip?

You would, in due course, receive a full refund under the ATOL scheme that protects package holidays. In the meantime, if you wanted a replacement holiday, you would probably need to pay out again and wait for your money back from the CAA, which administers the scheme. The only exception would be if you have a generous and enlightened travel agent who is prepared to book a new trip for you against the value of the old one.

What happens if Thomas Cook goes bust while I am away?

Keep calm and carry on. The holiday would continue as normal. Your flight home might be slightly amended, but you would be told of any changes.

My holiday is with Neilson/Airtours/Direct Holidays/Club 18-30

These brands are subsidiaries of Thomas Cook, and the same rules apply as with “mainstream” packages.

Through my local branch of Thomas Cook, I have booked a package holiday with a different company. What should I do?

Relax. Pay the balance when due, then go off and enjoy the holiday. The tour operator should honour the booking regardless of the state of health of Thomas Cook.

Should I pay the balance on my Thomas Cook holiday?

Yes. If you don’t, you lose your holiday and your deposit.

The downside of paying: you have to stump up a lot of money – and, as with any holiday, you are paying upfront for the promise of a trip with no absolute guarantee that it will happen. If the company should fail, you lose your holiday, but you keep your money – though you will have to wait weeks or months for a refund from the CAA.

Will I be able to find a replacement holiday?

Yes. The regrettable number of significant failures in the past few years have followed a common pattern. As soon as a tour operator fails, there is an immediate surge in demand for alternative holidays. In travel, prices depend on aggregate demand. So any such spike in people seeking holidays means other tour operators, airlines and accommodation providers will increase prices. Also, if a large slab of capacity, such as Thomas Cook’s charter airline, is taken out of the market, then there may be no suitable alternative flights at any price.

I have bought a flight-only deal on Thomas Cook Airlines. Is my money safe?

That depends. According to the company, “95 per cent of what Thomas Cook sells is protected under the ATOL scheme” This includes “seat-only” arrangements on Thomas Cook Airlines flight – but only when booked through Thomas Cook stores. Were the company to fail, you would get a refund eventually – though, as mentioned above, fares on other airlines are likely to increase. If you booked a Thomas Cook Airlines flight online at flythomascook.com, it is not covered by an ATOL. If you paid with a credit card or Visa debit card you can seek a “chargeback” from the card provider. If not, your travel-insurance policy may protect you against the failure of a holiday company.

I have bought a scheduled flight through my local Thomas Cook branch

There is no ATOL protection. The company says “ABTA protection ensures that the money that customers pay to us is protected prior to it being paid on to the airline”.

I have bought a cruise through my local Thomas Cook branch.

A fly-cruise bought as a single item is ATOL-protected. Cruises departing the UK, or for which the flights are bought separately, are not covered. The company says “ABTA protection ensures that the money that customers pay to us is protected prior to it being paid on to the cruise providers”.

I have bought a London 2012 package from Thomas Cook

Many sports fans who were unlucky in the ballots for tickets for next year’s Olympic Games have opted to buy one of the packages where event tickets are guaranteed. Thomas Cook is one of a very few official partners of LOCOG, the organising committee, able to provide these.

First, the money. “Anyone who has booked and paid in the UK is covered by the bond Thomas Cook holds with ABTA,” says the company.

Naturally, though, you are likely to be more concerned with getting to see the event rather than getting your money back. I understand that LOCOG has guaranteed that anyone buying event tickets as part of a Thomas Cook package will still go to the Games.

I have an accommodation-only booking with Hotels4U/MedHotels, part of Thomas Cook

You are not covered under the ATOL scheme. If you have paid by credit card or Visa debit card you can try to claim from the card provider. If not, you may be covered by your travel-insurance policy. People in this position are the most vulnerable in the event of a collapse, apart from those in the following situation …

As wedding presents, we were given £2,000 of Thomas Cook vouchers. Could these prove worthless?

This is the one case in which I recommend reasonably urgent action. Were Thomas Cook to fail, at present you would be only an unsecured creditor. You need to convert the vouchers into something that is protected –most obviously a package holiday. It may be that Thomas Cook, or one of its subsidiaries, has the right holiday at the right price for you. If not, exchange them at a Thomas Cook travel agency for a holiday with another provider such as Thomson, Cosmos, Virgin Holidays, etc.

What about my Thomas Cook pre-paid currency card?

One concerned traveller said he had heard a rumour that Thomas Cook prepaid currency cards had been frozen, which came as a surprise to me. In fact, Thomas Cook currency cards constitute “white-label” products provided by a separate financial institution regulated by the FSA. So any collapse would not affect your entitlement.

Were Thomas Cook to collapse, would there be a “domino effect” on other holiday companies?

No. Experience shows that there is, in fact, the opposite of a domino effect – if one company fails, it strengthens the survivors. The one problem area could be for other tour operators who buy seats on Thomas Cook Airlines flights.

What’s the future for Thomas Cook?

Too early to say: it depends how travellers respond. Travel, like banking, relies on confidence. You pay cash to take ownership of an intangible dream, and trust it will not turn into a nightmare. The travel equivalent of a run on the bank is for no-one to book holidays, or to forfeit their deposits rather than pay the balance when it falls due. But unless earnings dry up and the banks pull the plug, Thomas Cook remains a going concern. It’s the old joke: if you owe the bank £1,000, it’s your problem. If you own the bank £1bn, it’s their problem.

Since the banks are so deeply committed, they will demand a fast and probably brutal restructuring, in order to focus on the core business and increase profitability. While this spells bad news for a number of the company’s excellent staff, the effect on holidaymakers is likely to be minimal.

Would you book a Thomas Cook holiday?

Yes, if the price were right. As with many purchases, the best time to buy is when no-one else is. There are some cracking bargains around at the moment.