Flight prices soar as Thomas Cook goes into liquidation

price soar

Damage control following the collapse of Thomas Cook continues today, with the UK Civil Aviation Authority (CAA) carrying out its £75-million rescue operation, Operation Matterhorn. But just 24 hours after the travel giant ceased trading, travellers have been left reeling from a hefty price surge in flight tickets

The CAA has already made a commendable start to its biggest ever repatriation effort, having brought back just under 150,000 people during its first day of operations. "I'm conscious that we've got a huge job to do still, because that's about eight per cent of the total, but a reasonable start,” said Dame Deirdre Hutton, Chairwoman of the CAA. "We've got 74 flights today and are hoping to bring back 16,500 people, but [have] 13 days to go and 135,000 passengers still to bring back. The cost split is 60 per cent ATOL and 40 per cent non-ATOL."

Amidst all the mayhem, Saga, which owns Saga Holidays, Saga Cruises, Titan and Destinology, has assured customers that cruises or holidays booked through Thomas Cook will continue with Saga as planned. “We will ensure that the repatriation of any guests, who are in resorts and due to return to the UK, runs smoothly … we are already contacting our customers who are due to travel on a Thomas Cook flight … to discuss their alternative options,” Saga said.

The last time compulsory liquidation was used in such a high-profile case was Carillion
Tim Symes, Partner at DMH Stallard

Elsewhere, airlines have been accused of cashing in on the 178-year-old holiday firm’s demise, offering up replacement flights at as much as four times the original price.

But analysts have been quick to rebuff this insinuation, insisting that the increased prices simply reflected a high demand. “People aren't sitting there rubbing their hands with glee,” said John Strickland, an airline analyst at JLS Consulting. “If sales come in rapidly on popular routes then prices go up.”

A spokesperson for Jet2 mirrored this view. “Our pricing, as is common practice in the travel industry, is based on the principle of supply and demand,” they said. “As supply reduces, an inevitable consequence is that prices increase. However, we are looking at adding more supply (flights and seats) to help customers at this time.”

But Strickland went on to infer that airlines that didn’t take advantage of the high demand ran the risk of facing the same fate as Thomas Cook. "Thomas Cook has failed because it had massive debts and it was making a loss. It's a fragile industry. More than a dozen airlines have gone bust,” he said. "If the airlines don't make profits where they can on a minority of flights then they don't stand a chance of surviving."

Customers that have yet to take their holidays and are not protected by either ATOL or ABTA are advised to contact their travel insurance providers or credit card companies. Advice on the specially-set-up Thomas Cook page on the CAA website reads: “If your Thomas Cook flights are not ATOL protected, your flights are now cancelled and you are not entitled to make a claim via the ATOL scheme, but you may be able to claim from your travel insurer or your credit card issuer or bank.”

A legal view

Tim Symes, a partner at London law firm DMH Stallard and an expert on insolvency, has commented on the demise of Thomas Cook.

Airlines have been accused of cashing in on the 178-year-old holiday firm’s demise, offering up replacement flights at as much as four times the original price

“[This] marks the end of a very long road for Thomas Cook – the world’s oldest travel agency – with the news of the appointment of a liquidator presiding over a compulsory (namely court-made) liquidation,” he said. “The last time compulsory liquidation was used in such a high-profile case was Carillion. As with Carillion, the official receiver has been appointed as the liquidator, and the official receiver will then make an application to the High Court to appoint special managers (in this case AlixPartners).

“It has been suggested, in the case of Carillion, that compulsory liquidation was chosen over administration due to the dearth of real assets, and the complexity of the contracts. In addition it was key for the government to retain a central role to ensure continuity of affected public services. It remains to be seen precisely why compulsory liquidation was chosen over administration for Thomas Cook, other than the perhaps obvious need for government (CAA especially) to have a direct ‘report’ in the form of the official receiver to co-ordinate matters in the immediate term.

“No doubt, with the benefit of intense media coverage and scrutiny in the coming weeks and months, together with the substantial investigations to be carried out by the official receiver assisted by special managers, the full story on the sad demise of this well-loved travel company will become even clearer.”