Thomas Cook Aftermath: When Liquidation Delays Take Off

As you’ve probably heard, Thomas Cook has ceased trading after 178 years.

The company officially went under after failing to secure a £900m plus bailout on Saturday. Thousands of British holidaymakers found themselves stranded abroad without a replacement flights and others were left seeking assurance that their money would be refunded.

Customers have been left in disarray in the biggest repatriation effort since The Second World War. Similar situations have happened in the past, such as the BMI Insolvency case and the liquidation and collapse of WOW Air, but the chaos of the Thomas Cook collapse is on a different level. Throughout the chaos, customers have been looking to their insurance policies to provide assurance that they will get their money back.

However, two travel policies – SAFI and ATOL – are often overlooked and can be instrumental in protecting your money and trip in such a scenario.

What do SAFI and ATOL cover and why do you need them?

Scheduled Airline Failure Insurance (SAFI) and the Air Travel Organiser’s License scheme (ATOL) are mentioned in a lot of articles recently as Thomas Cook customers seek answers.

By having SAFI cover, you’re guaranteed peace of mind should your provider go into liquidation prior to booking with them. R3, the trade body for the insolvency and business restructuring industries has amplified the message to passengers to take a closer look at their insurance policy. They’re emphasising the value of having SAFI cover.

Often, insurance policies are taken out but not checked by customers, which can lead to missing some important details of their cover. It’s become more important than ever to consult your insurance policies and research the more comprehensive options when it comes to European travel especially. Studies from Defaqto have shown that almost half of UK policies tailored for holidaymakers do not include SAFI cover as standard.

Also, the method of payment that you use for your holiday could also affect the protection available. If you booked your holiday with a credit card then you’ll have more guaranteed protection and right to redress than if you paid via other methods for example.

The other comprehensively recognised travel policy is the Air Travel Organiser’s License scheme — popularly referred to as ATOL.

This cover safeguards customers who are flying from the UK if their provider collapses. It prevents people from paying any extra costs or being left stranded abroad.  Typically, ATOL certification will be included in your booking documentation, so it’s advised that holidaymakers keep reference of these important pieces of paperwork. ATOL purchases are automatically covered, and your travel provider has a duty to declare that their deal fits the outlined regulations.

One important thing to be aware of is that the ATOL scheme doesn’t apply to flights which are booked separately. This is where SAFI cover would come to cover any travellers.

It can be taken out as a separate policy if your insurance doesn’t include it already, and it could also cover any situations of company liquidation in advance.

Liquidation and holiday blues

The holiday blues being experienced by many UK travellers at the moment are not the kind many of us usually associate with the end of a holiday.

Dealing with the aftermath of a large-scale company liquidation can be a long and difficult process often having to go through systemic and other internal issues to find the cause.

We asked Chris Horner, Insolvency Director from Business Rescue Expert for some insight into what is still a sensitive topic: “Normally large companies would be expected to enter a rescue process such as administration and continue trading whilst a buyer is found. This is essentially impossible for an airline, so much so that the costs and complexity of the matter require the company to enter compulsory liquidation, with the Official Receiver as principal liquidator, before KPMG and Alix Partners were appointed. This also had the effect of automatically and immediately terminating all staff contracts of employment.”

“There is some criticism that the government again failed to intervene, however this would set a terrible precedent for large companies that the government will bail out highly paid executives and managers where they fail to manage the company properly. There have been multiple opportunities to avoid liquidation over the past 3 years – by proposing a CVA, or a sale to Lufthanser, however these opportunities were avoided by the board, who will now have to answer to a formal investigation into their conduct.”

While the demise of such an iconic firm is another sad sign of the times, tackling liquidation in the most responsible, considerate way should be a priority for businesses, especially when it involves a large customer base, many of whom are tired, confused and annoyed.

Sources:

https://www.caa.co.uk/ATOL-protection/Consumers/ATOL-certificate/

https://www.manchestereveningnews.co.uk/news/uk-news/how-old-thomas-cook-founded-16968382

https://www.ft.com/content/18c6356f-d806-3fef-9ff7-29fb80a343c7

https://www.theguardian.com/business/live/2019/sep/23/thomas-cook-travel-chaos-insolvency-leaves-150000-stranded-on-holidays-live-updates

https://www.scotsman.com/news/atol-claim-how-to-get-a-caa-refund-for-your-thomas-cook-holiday-1-5009998

https://www.independent.co.uk/travel/news-and-advice/wow-air-collapse-flight-cancelled-airport-passengers-flybe-rescue-a8845401.html

https://www.ft.com/content/ee2d6c72-2afe-11e9-a5ab-ff8ef2b976c7

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