The multi-million pound costs of the collapse of Thomas Cook left the back-up Air Travel Trust Fund almost exhausted and with “very little resources” to support another travel company failure.
The stark warning came today in an official report into the government’s response to the collapse of the travel giant.
The total exposure to the fund that covers Atol-protected passengers with repatriation and refunds will be £481 million, according to Civil Aviation Authority estimates.
This was the largest call on the ATTF and is in addition to a bill of at least £156 million taxpayers face for the government’s reaction to the failure of Thomas Cook last September, the results of the National Audit Office probe reveal.
The investigation findings confirm that he government could face further costs if another travel company collapses “in the near future”.
The report says: “The CAA estimates the total exposure of the Thomas Cook repatriation and refunds to the fund that covers Atol-protected passengers (the ATTF) will be £481 million.
“The scale of the collapse of Thomas Cook represents a substantially larger draw on the ATTF’s resources than any previous case.
“The CAA told us that it is likely that after all costs arising from the collapse of Thomas Cook have been met, there will be relatively limited resources left in the ATTF.
“Should another Atol-licensed company collapse and costs cannot be met from the fund, the government has agreed to stand behind the ATTF.”
Ministers confirmed plans in December for new airline insolvency legislation which could allow airlines to keep aircraft flying long enough to repatriate passengers.
The legislation also aims to improve protection for consumers and protect the interests of the taxpayer.
Labour MP Meg Hillier, who chairs the Commons’ Public Accounts Committee said that “lessons need to be learnt and future risks understood”.
“Government looks set to foot the bill, with industry off the hook,” she added.
“The resources to cover other airlines going bust is now very limited. New regulations are urgently required.”
The Thomas Cook collapse left 150,000 customers stranded in 18 countries overseas and saw 9,000 UK staff lose their jobs.
The Department for Transport instructed the CAA to repatriate all 150,000 Thomas Cook passengers and is reimbursing the aviation regulator for the cost of repatriating those passengers not covered by the Atol scheme.
“At that time an estimated 40% of Thomas Cook passengers were thought not to have Atol protection, although in February 2020 this proportion was revised upwards to 55%, increasing the costs to government by £22 million,” according to the report.
The DfT’s decision to intervene following the failure was based on its assessment that Thomas Cook customers were at risk of “significant disruption and cost” in returning to the UK.
A total of 746 repatriation flights from 54 airports were completed between September 23 and October 7, which brought an estimated 94% of passengers back to the UK on their original scheduled date.
“The remaining customers may have chosen not to return to the UK at that time or organised their own travel back,” the report found.
“As well as repatriating Thomas Cook passengers, the government agreed to repatriate some Thomas Cook staff, if there were spare seats on flights.
The DfT has agreed to pay an estimated £83 million towards the total cost of repatriation.
This included the cost of keeping some parts of Thomas Cook running to assist with the rescue efforts.
“But the final cost to government of the repatriation may not be known for some time as, for example, the CAA will continue to receive for some months invoices for leasing planes, ground handling charges, and other services, with a proportion of these costs falling to government,” today’s report adds.
“In addition to the costs associated with repatriating passengers, other parts of government are expected to face costs of at least £73 million as a consequence of the insolvency of Thomas Cook.
“These costs include at least £58 million of redundancy and related payments to Thomas Cook’s former employees and at least £15 million for the costs of liquidating Thomas Cook, although the total costs of liquidation will not be known until the Official Receiver finishes his work.”
The cost of a government scheme set up in November to make ex-gratia payments to Thomas Cook personal injury claimants facing the most serious hardship as a result of injuries or illness while on their holiday is still uncertain.
The NAO says: “At the time of its collapse, Thomas Cook was managing many personal injury claims from customers.
“Thomas Cook had not insured itself for these claims and it is unlikely that the sale of Thomas Cook assets will raise enough to cover the cost of these claims.”
Diana Holland, assistant general secretary of the Unite union, said in response: “The government’s failure to support the highly profitable Thomas Cook airline to continue to fly has once again been shown to be a particular error.
“If the airline had been supported, even for a short time, there would have been no need for a highly costly repatriation exercise, a new permanent buyer found and these costs avoided.
“The government for years has been promising to introduce the Airline Insolvency Review and the Insolvency and Corporate Governance Review which would have prevented Thomas Cook’s airline being forced into liquidation, but still no action has been taken.
“It is essential that the government demonstrates it has learnt the lessons from this sorry saga and ensures workers can access benefits and receive the money they are owed quickly when companies collapse.
“Particularly in the light of the current coronavirus crisis which has already resulted in many workers being made redundant or temporarily laid off.”
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