The failure of Thomas Cook dominated the travel law specialist’s annual event in London last week. Ian Taylor reports.
‘Operators are aiming to tighten agency contracts’
Tour operators have questioned agents’ handling of clients’ money in the wake of Thomas Cook’s collapse and looked to tighten agency agreements.
Atol-holders sought to act after it emerged Cook encouraged its agents to boost its cashflow by taking full payment for holidays ahead of the date balances were due.
Travlaw senior partner Matt Gatenby said: “One of the questions we’ve been asked [by operators] is ‘Can I tighten my agency agreements to control what agents do with clients’ money?’”
He told the industry audience: “You can change the terms of agency agreements, but there is not an easy answer. A company is not there if it has gone bust.”
Abta head of legal services Simon Bunce confirmed: “The retailer can take the money when they want, subject to agency agreements.
“Agents giving discounts in return for early payment is common across the industry.”
He added: “Operators can’t stop agents giving discounts – there is a law to allow that.”
Bunce insisted: “There wasn’t anything fundamental wrong.”
But he agreed there are “all sorts of issues for the industry” following the collapse. Bunce highlighted the fact that many tour operators had extended credit to Thomas Cook, allowing the group to delay passing on customers’ payments.
Bunce said: “The big issue with our tour operator members was credit.” He noted: “If you’re the weaker party in a commercial relationship, whether you give credit may not be up to you.”
But he said: “[Abta] pipeline bonding does not apply if operators give credit. If it did, we would be underwriting the whole industry.”
Gatenby agreed, saying: “That is the way the system is set up.”
Kelly Cookes, leisure director at The Advantage Travel Partnership, pointed out the failure also raised questions for third-party agents. She said: “I would ask questions as an agent when I pass over money – what protection does my customer get and what protection does my business get?”
Cookes laments loss of business for Freedom agencies
Many people affected by Thomas Cook’s collapse have been forgotten despite the “fantastic” response of the industry, according to Kelly Cookes, former Freedom Travel Group general manager and Thomas Cook head of commercial partnerships.
Cookes, now leisure director at The Advantage Travel Partnership, said: “Lots of people were impacted who we don’t talk about.
“Freedom members lost businesses they had spent years building up. The effects were much wider than generally talked about.
“The industry response was fantastic. But the loss of that iconic brand was devastating on the inside and outside.”
She recalled: “In the week leading up to that Sunday [September 23], there was still a lot of positivity in the business. There was a lot of faith Thomas Cook could pull through.
“I got into the office early that day and the liquidators were already in.” Cookes said she was lucky, adding: “I was unemployed eight or nine days, but there are a lot of people still looking for jobs.”
Bunce: Lessons to be learnt from failure of Cook
Simon Bunce, Abta head of legal services, launched a robust defence of the CAA’s handling of Thomas Cook’s failure.
Bunce told the Travlaw event audience: “We’ve not seen a failure like this before. We’ve seen failures by tour operators, by agents, by airlines. We haven’t seen anything like this. We haven’t seen an Atol-accredited body go bust before.”
The Freedom Travel Group of agents was part of the Thomas Cook Group and a CAA-recognised Accredited Body.
Bunce said: “Certainly, there are lessons to be learnt from the failure, but all this happened overnight.”
Journalist Simon Calder disagreed, saying: “There are so many questions. Thomas Cook was still taking bookings just before midnight on September 22. I booked a fortnight to Zante not expecting to take it. Should I have been able to buy a holiday just before the company went bust?”
Cook went into liquidation on September 23.
Calder added: “I get 27 emails a day from people saying they’re still waiting [for refunds]. The CAA said it would pay refunds in 60 days. I estimate 30,000 holidays have still to be refunded. Customers who booked with Thomas Cook through Expedia or Virgin Holidays were told their holiday was ‘toast’, then told their plane had taken off. The CAA provided an expectation and then didn’t deliver.”
Abta defends CAA’s Atol scheme
Abta rejected criticism of the Atol scheme in the wake of Thomas Cook’s collapse despite saying the association would raise the failure to pay third-party agents commission with the CAA (Travel Weekly, January 23).
Simon Bunce, Abta head of legal services, responded to criticism by journalist Simon Calder saying: “The purpose of Atol is to protect consumers [with bookings of] flights [and] accommodation and to bring them home if overseas, and that is what it did.
“Consumers did continue their holidays. Consumers will get their money back. The Atol Regulations did everything they were supposed to do.”
He insisted: “Consumer protection has served the industry well.”
Calder told the Travlaw event: “Atol didn’t do what it says on the tin. I got my money [a refund on a holiday booked minutes before Cook ceased trading] in 57 days, but some consumers who claimed from credit cards got their money in three days.
“Do we need Atol? Shouldn’t we just rely on credit cards and Section 75 [of the Consumer Credit Act]?”
Bunce dismissed that, saying: “The Consumer Credit Act would not repatriate people.”
Calder also criticised the decision to repatriate all passengers, arguing: “The government sent a message that there is no need to buy an Atol protected holiday because [it] will bring everybody home.”
Bunce hit back, saying: “The alternative would be to have check-in staff at airports asking consumers ‘Where’s your Atol Certificate?’ It would be chaos.”
He asked: “How should repatriation be funded in future? This is a conversation that has been going on for years.”
The government is committed to reviewing airline insolvency procedures after commissioning an Airline Insolvency Review following the collapse of Monarch in 2017. The review’s report was published last May. The government has yet to act on the recommendations but has sought industry views in a broader consultation on aviation strategy.
However, transport secretary Grant Shapps said in a written statement in October: “I am determined to bring in a better system for dealing with airline insolvency.”
Bunce said: “The government appears to want the CAA involved. We need to see what comes out of the process. Hopefully, we’ll get further than after the Monarch collapse.”
Flybe deal highlights emissions challenge
The recent deal by the government to keep Flybe flying because of its importance to the UK regions highlights the difficulties government and industry face tackling carbon emissions.
The government agreed to review Air Passenger Duty on domestic flights despite criticism that reducing APD would encourage flying (Travel Weekly, January 23).
Abta head of legal services Simon Bunce said: “Flybe fits with government policy [because of its UK regional services]. But it raises the challenge the industry is going to have around carbon.
“If the desire to address climate change reduces [the number of] people flying, there will be economic consequences for the destinations airlines fly to. That is the challenge we face as an industry.”
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