The back-up Air Travel Trust financial compensation scheme refunded almost 300,000 bookings following the collapse of Thomas Cook Group two years ago.
The failure in September 2019 led to the largest peacetime repatriation of more than 150,000 holidaymakers.
The ATT annual report for the year to March 2020, published 14 months later than normal, revealed that less than half – 45% – had Atol protection. They were able to continue their holidays at no extra cost.
However, the majority had to be flown home by the government as there was insufficient capacity available at the time to enable “an orderly return to the UK without intervention”.
The report of the ATT trustees revealed expected claims on the Trust of £448 million from eight Atol holder failures in 2019-20 against £3.6 million the previous 12 months.
The overall cost to the ATT was £445 million, largely down to Thomas Cook, against a surplus of almost £440,000 in the previous 12 months.
A bespoke insurance policy it had in place effectively capped its exposure to £250 million, which was within the cash reserves of the Trust at the time of the failure.
But it had to call on a borrowing facility in March 2020 “to provide additional liquidity to support consumer refunds whilst waiting on further funds from the insurance policy”.
The trustees concluded that the ATT had adequate resources available “to continue in operational existence for the foreseeable future”.
The trustees expectation was that government would step in to provide additional funding to the ATT should another large Atol company or multiple smaller licence holders fail.
The ATT had £45 million in cash reserves and a credit facility of £75 million when the annual report was signed off last week.
Thomas Cook was the first failure of an Atol holder where consumers had been able to pay for holidays in instalments by direct debit.
The ATT automatically refunded more than £90 million to over 91,000 customers in liaison with GoCardless, the firm Thomas Cook used to run the direct debit scheme, without them having to make a claim.
It added: “In situations like this there is always disruption, upset and stress for the individuals concerned, but an exceptional 97% of passengers were brought home to the UK on the same day they were originally due to return.”
The report added: “Following on from the process first adopted with Monarch, consumers that had booked through retail travel agents were refunded without having to first wait for their agent to forward any ‘pipeline’ monies they were holding, with the reconciliation taking place behind the scenes.
“Where sufficiently reliable data had been available from Thomas Cook, further streamlined processes were put in place to reduce the amount of paperwork and form-filling that consumers were required to provide, backed up with additional anti-fraud processes to confirm the correct identities of those being refunded.
“There were a minority of cases where the data available from Thomas Cook was unreliable or incomplete, and these consumers were unfortunately required to submit fully evidenced claims. At the time of signing, the Trust has refunded just under 300,000 bookings.”
A “very small number” of consumers submitted fraudulent claims, ranging from claims for previously cancelled holidays or package components, to a variety of forged paperwork.
But due to “very detailed” booking and payment information extracted from Thomas Cook’s systems, the trustees of the ATT said they were confident these claims were all detected and refused.
Almost immediately after the failure a small number of ‘opportunistic’ or fraudulent websites appeared, offering to either manage the claim process on behalf of consumers, or for the purpose of scamming personal information and bank details from distressed and potentially vulnerable consumers.
“To the best of our knowledge, with the assistance of the relevant authorities, the CAA was able to trace and close down these websites in a matter of days,” the ATT said.
The report went on to outline how consumer confidence in booking holidays had continued to improve despite the Thomas Cook collapse, with forward bookings 12% ahead in October 2019.
But the strong level of bookings that continued into early 2020 “materially changed” with the onset of the Covid-19 crisis in March last year following government imposed restrictions, “with a sharp decline in consumer confidence and inability to travel leading to very low bookings”.
The ATT report added: “The impact of travel restrictions and therefore cancellations led to an exceptional demand for customer refunds, which in turn resulted in significant liquidity pressures across the industry.
“The Covid-19 pandemic has brought all previous growth to a halt, with an industry effectively on pause for over a year and a sector under tremendous financial stress.
“It is likely to take time for it to recover to 2019 levels. Whilst the government recently issued the Global Travel Taskforce report on 9 April, uncertainty remains.
“The timing of when bookings can actually restart, likely driven by increased certainty over travel restrictions and reciprocal arrangements with destination countries, coupled with the speed of the general economic recovery, will be key in determining the shape of the sector and the competitive landscape post-crisis.
“This will be critical to the shape of recovery throughout 2021 and beyond.”
It pointed to “significant uncertainty” about how long it will take the sector to recover and how this might impact consumer demand for Atol-protected holidays.
“This in turn creates significant uncertainty over the income and expenditure of the Trust, in terms of reduced APC [Atol Protection Contributions] income and an increase in both the number and aggregate cost of Atol failures.”