What the Thomas Cook collapse means for customers and investors | FT


The collapse of Thomas Cook
has ruined the livelihoods of 21,000 staff working for the
troubled travel company who now stand to lose their
jobs and disrupted the holidays of hundreds
of thousands of customers. The British government has
launched Operation Matterhorn, the biggest peacetime
repatriation of UK citizens, which will fly 150,000 British
holidaymakers back home. But for hundreds of
thousands of customers who have booked package
holidays and flights with Thomas Cook, what are your rights now
that the company has entered administration? Let’s start with those
currently overseas. Over the next two weeks, the
UK’s Civil Aviation Authority has committed to fly
home all Thomas Cook customers with return flights
who are currently overseas. It says it will endeavour
to get people home as close as possible to their planned
travel dates and has set up a dedicated website –
ThomasCook.caa.co.uk – where affected customers can
find details and information on repatriation flights as well
as advice on accommodation. The regulator has also set up
a 24-hour helpline for Thomas Cook customers, which can be
reached on 0300-303-2800 from the UK and Ireland and
+44-1753-330-330 from overseas. All UK customers who have
booked a package holiday – that’s hotel and
accommodation – will be covered by ATOL,
the consumer protection scheme which is funded
by industry levies. This guarantees to
fly customers home in the event of
a company failure and refund the cost of
replacing ATOL-protected parts of their trip as
well as covering out-of-pocket expenses as a
result of delayed flights home. Now normally,
customers who had only booked a flight
through Thomas Cook would not be covered
by ATOL protection. But the CAA has
confirmed that it will fly home both ATOL
and non-ATOL customers. It stresses that customers
who are currently overseas should not travel to the
airport until their flight back to the UK has been confirmed
on the dedicated website. So what about those
who have yet to travel? Thomas Cook customers in Britain
have already been told not to go to the airport, as all
flights leaving the UK have been cancelled. ATOL-protected passengers with
future package holiday bookings will be entitled to a full
refund for their cancelled holiday. But this will take
some time to process. The CAA says it will
not be in a position to start accepting claims
until next Monday, the 30th of September, and has
warned that from then it could take as long as 60
days after that for the money to be refunded, which takes
us to the end of November. This will unfortunately
leave many passengers with a rebooking dilemma. As they wait to get
their money back, the price of flights and
holidays with rival tour operators is going up. Travel experts are
already warning it could take even longer, due
to the huge scale of Thomas Cook’s operations. When Monarch collapsed
in 2017, the CAA had to process 30,000
claims under ATOL and managed to
refund 80 per cent of those within three months. But it is estimated it will
receive hundreds of thousands for Thomas Cook. When its claims website
goes live next Monday, those making a claim
will need to provide their ATOL certificate issued
at the time of their package holiday booking and
proof of payment in the form of bank or
credit card statements. Those who only booked a flight
through Thomas Cook’s airline will need to make a claim
through their travel insurer or attempt to get their money
back through their credit or debit card provider. Finally, while all
the upheaval is distressing for
holidaymakers, you will get your money
back eventually. Sadly, the same cannot be said
for the thousands of staff who stand to lose their
jobs at Thomas Cook. So for investors, this
means a number of things, depending on what kind
of investors they are. Equity investors will
be wiped out by this. But they would have been, in
most circumstances, anyway. And equity investors
have been pulling out of this stock for a long time. Its troubles are
maybe 15 years old. This business has been
badly-run for many years. It’s had three really quite
underwhelming chief executives. We’ve seen a slow
decline in its market. It’s been very badly positioned. I think if you’re looking around
the travel industry space, it also shows that there
are some opportunities. There are some other
businesses that have been doing very well
by being a little more agile than Thomas Cook has been. There’s a company called
Dart, for example, which is a UK-listed
holidays and airlines group. They’ve been going
up this morning. TUI, a big German group, which
has a large UK side as well, has also seen a bounce
in the shares today. But I think you also
have to think deeply about how legacy businesses
with lots and lots of balance sheet invested in things
like hotels and cruise ships are going to do. This is now quite an
asset-light sort of industry. And there are a lot
of online startups who have been
disrupting what had been a very stable and
comfortable space for people like Thomas Cook. Other investors, if you look
at people who have bonds, for example, or loans
extended to Thomas Cook, they will probably get
back less than expected as a result of this being
an insolvency process rather than an administration. When Monarch Airlines went
under, parts of it were bought. And that meant that more
went back to debt investors than would have
otherwise been the case. The interesting question is what
credit default swap investors get because there
is a theory which is abroad at the
city this morning that what happened here was
that investors in credit default swaps, which pay out when a
business can no longer meet its loan or bonds obligations,
may have encouraged this collapse and also
nudged it in the direction of an insolvency rather
than an administration. That could be a very politically
explosive conclusion, if it’s correct.

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