At the time of the collapse, the Civil Aviation Authority (CAA), the UK’s aviation regulator, was instructed by the DfT to repatriate all 150,000 Thomas Cook passengers, including those who were not covered by the ATOL scheme. As it transpires, 55 per cent of Thomas Cook passengers did not have ATOL protection, increasing the reimbursement costs for the government.
NAO detailed that between 23 September and 7 October 2019, 746 repatriation flights from 54 airports were completed – the DfT and the CAA estimate that 94 per cent of passengers were bought back to the UK on their original scheduled date.
The DfT has agreed to pay an estimated £83 million towards the total cost of repatriation. And other parts of the government are expected to face costs of at least £73 million, which includes at least £58 million of redundancy and related payments to some 9,000 former Thomas Cook employees who lost their jobs as a result of the company’s liquidation (which will cost the government a further £15 million at least).
Further to these costs, the government is also setting up a scheme that will provide Thomas Cook personal injury claimants with ex-gratia payments. Because Thomas Cook had not insured itself for these personal injury claims, of which it was managing many, the estimated cost of this is still uncertain, and NAO asserts that the sale of Thomas Cook’s assets likely won’t raise enough to cover the costs of these claims.
All in all, NAO notes that the government could face further costs if another travel company collapses in the near future. “The CAA estimates that the total exposure of the Thomas Cook repatriation and refunds to the fund that covers ATOL-protected passengers (the ATTF) will be £481 million,” NAO wrote. “The CAA told us that it is likely that after all costs arising from the collapse of Thomas Cook have been met, there will be relatively limited resources left in the ATTF. Should another ATOL-licensed company collapse and costs cannot be met from the fund, the government has agreed to stand behind the ATTF.”
However, NAO does also point out that in December 2019, the government announced plans for new legislation to address airline insolvency, which amongst other things, aims to introduce a special administration regime for airlines to support passengers’ needs post-insolvency and to keep their aircraft fleet flying long enough for passengers to be repatriated. The legislation also aims to improve protection for consumers and protect the interests of the taxpayer.
Hopefully this legislation will come into effect sooner rather than later, especially with the rate at which travel restrictions are affecting the aviation industry, and companies like Ryanair, Virgin and easyJet talking of the mass grounding of flights.