Comment: The cost of Thomas Cook’s failure

In a special analysis written for Travel Weekly, Abta’s John de Vial looks at the wider industry impact of the travel giant’s collapse

Thomas Cook was not just large, it was also complex, and its liquidation signalled a momentous event that will be talked about for years to come.

The UK’s second-largest vertically integrated group, which dated back 178 years, employed 22,000 people, traded in 16 countries and turned over some £9 billion a year. There was a sense it was too big to fail.

Thomas Cook Tour Operations was one of five companies with Atol licences and Abta accreditation. The UK airline sold outside of Atol, and the group had a large retail presence. Its Freedom Travel Group division was the first Atol Accredited Body to fail.

It could take years to calculate the true costs of Thomas Cook’s failure, but here are the main components to date.


Overwhelmingly, customers were protected. They were accommodated and repatriated if still on holiday, or refunded if yet to travel, by the Air Travel Trust Fund (ATTF) or Abta bonds. Freedom Travel Group customers may, in some cases, have had holidays fulfilled with funds from the CAA Atol Accredited Body trust or the Abta bond. Credit card companies will carry some cost.

Airline customers were repatriated by the Department for Transport and forward bookings will, in many cases, be covered by credit card or debit card chargebacks.


CAA chair Deirdre Hutton has said Atol will cover about 60% of the £100 million repatriation cost, with the balance falling to the government, which chose to fly non-Atol passengers home.

Operation Matterhorn was a success, and underlined to consumers the value of protection. No operation that size has no hitches, but 160,000 passengers got home, mostly on the right day they were supposed to.

It is reported that refunds for 350,000 forward bookings for 800,000 customers will cost about £420 million. This will be funded by the ATTF and its insurance, credit cards and debit card acquirers. Abta’s claims costs will be fully covered by the bonds held, without recourse to Abta’s insurance policy.

Customer costs have been touted as up to £600 million across Thomas Cook’s six companies, but it is too soon to be precise. I doubt the £2.50 per passenger fee which funds Atol’s ATTF will increase to £10, as has been speculated. The previous £1 charge was never sustainable and changed immediately after XL Leisure Group failed. Thomas Cook will not wipe out the ATTF.

My instinct is that there will be no short-term change and the trustees will not panic but find out the total cost and insurance renewal before deciding how to rebuild the fund.


Employees were initially not paid in September, but the Department for Business, Energy and Industrial Strategy (BEIS) stepped in to fund the Official Receiver’s work.

Abta LifeLine has also helped the most-urgent cases and committed more than £100,000 of the more than £200,000 donated. We should all be proud of what has been achieved.


Reports of hundreds of hotels closing were heartbreaking. Third-party tour operators and suppliers have suffered. Thomas Cook’s retail arms acted as agent for many and had negotiated credit terms. Some of these tour operators report unexpected losses as a result of the early collection of balances by Thomas Cook retail, often in return for discounts. Some third parties insisted on moving the retailer to weekly payments and will benefit from protection afforded by the Abta retail bond. In addition, some retained credit insurance protection.


We do not yet know the cost to third-party tour operators and travel agents in relation to forward airline bookings. Scheduled airline failure insurance (Safi) and credit insurers will also have been hit. Many airline seat purchasers have used chargeback procedures on corporate cards, sometimes in combination with Safi and credit insurance. Others have taken a hit.

Financial institutions

It is too early to assess the total exposure of all financial institutions, from insurers to bond obligors, merchant acquirers, credit and surety markets, among many. A number in excess of £1 billion has been suggested by insurance sources. That may be speculation but, at a European level, does not appear unreasonable. But who pays?

Ultimately, the cost will be carried by the industry and consumers. If gross refund costs end up at circa £500 million, that would represent 200 million APC contributions at the current rate. The net cost will be lower, but it means the APC contributions of Atol-holders over many years will have funded the fallout from Thomas Cook’s failure.

The insurance market, over time, will recover its costs and there are concerns about the consequential effect on market capacity and premiums. In the short term, we have a difficult market that is naturally reviewing risks and risk appetite, although most participants see Thomas Cook as an individual corporate failure – not a travel sector market issue.

Evidence supports this. GfK statistics show great resilience and post-Thomas Cook opportunities taken by Hays Travel, the Midcounties Co-operative, Barrhead Travel, Jet2holidays, easyJet Holidays and others demonstrate a reassuring level of confidence and investment.

The industry responds, reshapes and reinvents itself. Innovation continues and consumers will always travel as long as we stay relevant and serve them well.

Lessons and next steps

There are lessons to learn, but we should be proud the UK’s systems of consumer protection have worked.

There will be much focus on credit terms and agency agreements in the coming months, which is to be welcomed. There will be renewed interest in credit and Safi policies. They are markets to buy good-quality cover in the good times. Now may not be the best of times. The industry will be managing cash through the winter and watching consumer confidence going into 2020.

The Airline Insolvency Review was a good piece of work, which reported following the Monarch failure in 2017. Some of the recommendations that were in the Queen’s Speech have just fallen away, and we must lobby hard to ensure this is back on the government’s agenda in 2020.

The industry and market remains strong. This is not 1991-92 when the International Leisure Group/Air Europe Group failed along with many ski and school travel operators in the aftermath of the first Gulf war. That year, we saw more than 100 failures. This year there have been eight.

Abta will, as ever, be there to help our members navigate through these uncertain times.

MoreComment: Thomas Cook collapse poses price war threat

Comment: Should public liability insurance be compulsory for travel companies?

Comment: Is the failure of an airline always unavoidable and extraordinary?

Comment: Thomas Cook’s collapse shows Atol scheme’s flaw

Podcast: Heroes of the high street – John and Irene Hays

Share article

View Comments

Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

The highest official awards for UK businesses since being established by royal warrant in 1965. Read more.