Thomas Cook: how it collapsed and what customers need to do next

CAA launches biggest ever peacetime repatriation to bring home stranded holidaymakers

(Image credit: Matt Cardy/Getty Images)

Thomas Cook has ceased trading after last-ditch negotiations failed to rescue the beleaguered 178-year-old tour operator.

With 150,000 of its British customers currently abroad, the company’s collapse has prompted the biggest ever peacetime repatriation by the UK Civil Aviation Authority (CAA).

Peter Fankhauser, Thomas Cook’s chief executive, has apologised to its millions of customers and thousands of employees, saying the failure was a “matter of profound regret”.

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So how has it come to this and what can holidaymakers do?

What happened to Thomas Cook?

The travel company - which employs 21,000 staff worldwide and operates more than 560 stores in the UK alone - “suffered as customers shifted from the high street to the internet, threatening its ability to service a £1.6bn debt pile”, says the Financial Times. Thomas Cook came close to collapse eight years ago and took on large loans to survive.

“Tough trading conditions have been exacerbated by Brexit uncertainty,” adds the FT.

The Guardian notes that the firm has also been hit by “the high prices of jet fuel and hotels pushing up costs, while last summer’s heatwave convinced European customers to stay at home, hitting earnings”.

What was the Fosun deal?

In August, Thomas Cook confirmed the details of a £900m rescue deal that would hand control of its package tour business to Fosun, which owns holiday resort chain Club Med. The Chinese investor was to receive a 75% stake in the package tour division and a 25% holding in its airline business in exchange for £450m.

Another £450m would come from the company’s banks and bondholders, who would then own 25% of the package tour division and 75% of the airline.

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However, the amount required was later upped by £200m to £1.1bn “to ensure the business has sufficient headroom to continue operating”, reported The Telegraph.

The company spent all of yesterday negotiating with lenders to secure that additional funding, but early this morning the board announced the talks had failed despite “considerable efforts”. It said it had “no choice but to take steps to enter into compulsory liquidation with immediate effect”. This means all holidays and flights provided by Thomas Cook have been cancelled.

What can holidaymakers do?

Package holidays booked through Thomas Cook are protected under the CAA’s Atol (Air Travel Organiser’s Licence) scheme. This means each customer will be given a replacement holiday of the same value or refund if an operator collapses before they embark, or can finish their holiday and fly home at no extra cost to them if they are already away.

Flights booked separately, however, are not always Atol-protected so customers will need to seek a refund through their travel insurance company or credit or debit card provider.

The Department for Transport has said customers who are currently on holiday will be flown home as close to their booked return date as possible, on an existing flight with another airline or on replacement planes being chartered by the CAA from around the world. The size of the latter fleet “will make it temporarily the UK’s fifth-largest airline”, says the BBC.

But Transport Secretary Grant Shapps has admitted that there are “bound to be problems and delays” - and a “small number” of passengers may need to book their own flight home and reclaim the costs.

The repatriation programme lasts only until Sunday 6 October and is available only for Thomas Cook customers whose journey originated in the UK. Passengers due to fly out of the UK have been told not to go to the airport.

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