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Thomas Cook use of agency cash ‘triggered key Atol reform’

The use of customer money to keep Thomas Cook afloat in the final year of the company’s life placed the business models of multiple travel firms at risk.

That is the view of Alan Bowen, legal adviser to the Association of Atol companies, who argues a key aspect of current CAA proposals for Atol reform “comes directly from the failure of Thomas Cook”, when it was found customers had been enticed to spend “in some cases, tens of thousands of pounds more than a year in advance”.

The CAA Atol Reform consultation, due to close on August 15, proposes that all customer money collected in advance of travel by an Atol holder, or by an agent on behalf of an Atol holder, must go into a segregated account.

Speaking on a Travel Weekly webcast, in a personal capacity not on behalf of the AAC, Bowen noted that when Thomas Cook failed in September 2019: “We discovered the retail side had been collecting payments a year in advance and not passing on anything at all.


More: Aito members urged to give their view on proposed Atol reform

CAA’s Atol reform timing ‘could not be worse’

Webcast: Atol Reform consultation


“They were using money which wasn’t theirs – it was either the customer’s or the Atol holder’s. That was keeping the business going.

“Atol holders ended up having either to give away a holiday for nothing or, because Covid arrived, having to refund money they never had in the first place.

“We’re in a difficult position now [with the reform proposals] because of Thomas Cook and how it operated.”

Bowen said Thomas Cook “insisted every tour operator give them credit”, adding: “I suspect it was going on for well more than a year. The tour operators had no idea.

“Tour operators were giving them [Thomas Cook] credit. They weren’t expecting the deposits to be paid until a certain date and the final balances to be paid later.

“They had no idea at all that a lot of final balances were being collected at the time of booking. Thomas Cook [retail] managers were invited to give a discount to get the cash in.

“They were using travel agency cash which wasn’t theirs. These weren’t Thomas Cook holidays. They were other Atol holders’ [holidays]. About 70 of them discovered when the company failed that all the money had disappeared.

“They were expecting at worst to have lost deposits and discovered that, in some cases, customers had paid tens of thousands of pounds more than a year in advance. That is why we’re in the situation we are now.”

Bowen argued: “The auditors should perhaps have been more careful.”

He noted: “The auditors were changed a year before the failure because the previous auditors resigned.

“I’m hopeful the liquidators will consider carefully the way the business was run because it may have been insolvent for some considerable time before it failed.”

Thomas Cook’s auditor at the time the company failed was big-four accountancy firm EY, which took over from PwC in 2017. PwC had audited Thomas Cook since 2008.

The UK accountancy watchdog, the Financial Reporting Council, subsequently launched an investigation of the auditing and accountancy practices at Thomas Cook extending back to the year to September 2017.

More: Aito members urged to give their view on proposed Atol reform

CAA’s Atol reform timing ‘could not be worse’

Webcast: Atol Reform consultation

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