9 min Read
20 May 2019

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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Thomas Cook’s money problems – should holidaymakers be concerned?

Thomas Cook going bust What has happened?

Thomas Cook recently announced half-year losses of £1.5 billion and has seen its share price fall 40 percent as a result. Thomas Cook shares are now 11.8p compared to 129p at this time last year.

A big part of the loss is down to a £1.1 billion goodwill write-down relating to a 2007 merger with travel firm 'My Travel', but the losses have led to a lack of confidence in the travel firm and there are rumours that Thomas Cook could collapse. Thomas Cook responded citing a drop in UK holiday bookings due to uncertainty due to Brexit and a growing environmental movement against air travel in northern Europe.

Thomas Cook has been put under further pressure as intermediaries (firms that process payments and act as intermediaries between Thomas Cook and the customer) seek to extend the time that it holds onto holidaymakers' money. An intermediary would usually process payments and pass the money onto Thomas Cook within a couple of days, however a Nordic intermediary has taken steps to extend the timeframe from a couple of days to a few weeks. It is an unusual move and demonstrates the unease that exists.

Thomas Cook has responded by saying  “In the last few days we have had a number of discussions with our suppliers to explain the ample resources we have to continue to do business as well as our strengthening liquidity position. We remain in discussions with our Nordic card supplier and we are confident that we will reach an acceptable solution in the coming days.”

So is Thomas Cook about to go bust?

Thomas Cook has said that suggestions that the 178 year old business is about to go bust are irresponsible. The group has confirmed that it has secured a further £300 million financing deal with its lenders in order to boost its current financial position.

Thomas Cook said in a recent statement: “We have taken a number of proactive steps in recent months to strengthen our financial position. We have the support of our lending banks and major shareholders, and just this week we agreed additional funding for our coming winter cash low period. We have ample resources to operate our business and at the same time, as usual, our liquidity position continues to strengthen into the summer period. As an ATOL-protected business, all of our holidays are protected under the package travel directive, so our customers can have complete confidence in booking their holiday with us.”

Thomas Cook is doing all they can to reassure customers and have secured additional funding to cover any cashflow shortfall in the coming months. Now is an incredibly busy time for travel firms and so the recent uncertainty is likely to have an impact on sales. We will have to wait and see how things develop in the coming weeks and will continue to update this article as we hear more.

Should Thomas Cook customers be worried?

Customers that have already booked holidays through Thomas Cook are understandably worried. Thomas Cook is doing their best to reassure customers and the group has been responding to concerned customers through social media.

One worried customer contacted them asking "I have a holiday to Florida booked for April 2020, will this be affected by the problems"?

A spokesman called Jamie responded by saying "Hi, please try not to worry, the recent media speculation has no impact on our operations, it's business as usual and you'll still be going away. To give you extra peace of mind, if you have a package holiday, it is fully ATOL protected, so your money and holiday are safe".

Thomas Cook say: 'As an ATOL-protected business, all of our holidays are protected under the package travel directive, so our customers can have complete confidence in booking their holiday with us'

What happens to my holiday if Thomas Cook goes bust?

All flight-inclusive holidays offered by Thomas Cook are financially protected by the ATOL scheme. ATOL stands for Air Travel Organiser's Licence and the protection is designed to reassure consumers that their money is safe and should provide assistance in the event of a travel company going bust. When you pay for your holiday you should be supplied with an ATOL Certificate. You should check your certificate to ensure that everything you booked (flights, cruises, hotels and other services) is listed on it.

Not all flights sold by Thomas Cook are protected by the ATOL scheme. It is likely that if you have booked a flight only and have not received an ATOL certificate then your flight booking will not be ATOL protected.

Getting your money back is one thing but what if you still want to go on holiday, will you be offered a replacement holiday package?

Thomas Cook is one of the largest operators and so it is impossible to say what will happen to existing bookings should they go bust. ATOL protection should ensure that you do not suffer financially but you would need to contact the company directly to find out how it may affect you.

What happens if Thomas Cook goes bust while I'm on holiday?

If you are on holiday when a travel company goes bust you should be protected if the holiday you booked is a package holiday. According to Which? the Package Travel and Linked Travel Arrangements Regulations require organisers of package holidays to provide protection for your money and to bring you home if necessary.

Make sure that you keep all of your documentation safe, including your booking information, ATOL certificate and any relevant information such as travel insurance documents.

What about people who have booked flights only - are they covered by ATOL?

No, as explained above, it is unlikely that flights will be ATOL protected unless they were bought in Thomas Cook's own stores (although if you paid by credit card you may be protected under the Consumer Credit Act - see below). Travellers should make sure they get suitable travel insurance cover ASAP.

See our guide on 'How to save money on your travel insurance'.

What this unfortunate episode does highlight is the importance of booking travel insurance as soon as you book any flights or travel arrangements in order to ensure you get your money back in the event of your travel operator going bust.

What if you paid by credit card or debit card?

If you pay on credit cards (over £100 per person) then you should be covered under Section 75 of the Consumer Credit Act. Read our article 'When it's best to pay by credit card'

Similarly with Visa or Mastercard debit card payments. The card issuers operate a voluntary (not legally binding) chargeback scheme, where they get your cash back from the retailer's bank if something goes wrong, regardless of the amount spent (minimum £10 on Mastercard).

What is the best way to take money abroad?

If all this talk about Thomas Cook going bust is making you nervous about your upcoming holiday, then you may want to read our article on the 'Best way to take money on holiday'.

We outline the best and cheapest way to withdraw cash abroad, as well as the best and cheapest way to pay by card without being charged.

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