Low-flying company—Thomas Cook insolvency

Low-flying company—Thomas Cook insolvency

The insolvency at travel agent and operator Travel Cook has caused major worries for holidaymakers, the UK government and insurance companies. Duncan Swift, President of insolvency and restructuring trade body R3, explains what the company’s receivership entails, and the core issues and ramifications for the wider industry.

Original news

Plans for exceptional Thomas Cook compensation scheme

Following the collapse of Thomas Cook, the government has now announced that it intends to set up an exceptional compensation scheme for holiday makers with outstanding personal injury claims against Thomas Cook companies. The scheme aims to protect those who have suffered life changing injuries, illness or loss of life while on a Thomas Cook holiday.

Thomas Cook is ATOL protected, but how does ATOL operate and what happens to losses that do not fall in the scheme?

ATOL is effectively a levy, run by the Civil Aviation Authority (CAA), which takes a proportion of value from all package holidays sold in the UK that include air travel, and operates like an insurance fund. Should the package operator fail, it provides:

  • the cost of repatriation of the travellers stranded aboard at the point the operator fails

  • compensation for costs and losses travellers may incur coming back

  • refunds or replacement holidays for customers who have booked for holidays but are unable to take them because of the operator’s failure

Losses not covered by the scheme, such as the individuals who don’t have ATOL protection, have to be borne by the customer (unless the CAA carries out a mass repatriation scheme). If the customer had to bear the costs of going home, they then become an unsecured creditor in the operator’s insolvency and have little likelihood of recovering a substantial amount of their costs. That said, any consumers who find themselves in these circumstances could explore the option of seeking to recover some of their costs through debit and credit card providers if they’ve used those cards as means of payment—although that does depend on the providers’ terms and conditions.

The only things that sit outside the scheme would be holidays that don’t include flights. ABTA covers non-flight package holidays.

Both ATOL and ABTA schemes rely upon the funding and bond provided by the operator. If the costs exceed the funds available for this bond and the levy, then there are mechanisms for ATOL (and the CAA) and ABTA to cla

Subscription Form

Already a subscriber? Login
RELX (UK) Limited, trading as LexisNexis, and our LexisNexis Legal & Professional group companies will contact you to confirm your email address. You can manage your communication preferences via our Preference Centre. You can learn more about how we handle your personal data and your rights by reviewing our  Privacy Policy.

Related Articles:
Latest Articles:

Access this article and thousands of others like it free by subscribing to our blog.

Read full article

Already a subscriber? Login

About the author:

Zahra started working as a paralegal at Lexis Nexis in Banking and Insolvency teams in April 2019. Zahra graduated with a 2.1 honours in a BA French and Spanish, completed the GDL at BPP University and is seeking some experience before commencing the LPC. She has undertaken voluntary work for law firms in London, Argentina and Colombia.