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Taxpayers to fork out £156m for Thomas Cook collapse

Thomas Cook collapsed in September 2019. (Getty)

Taxpayers will foot a bill of £156m ($185m) for the collapse of travel company Thomas Cook in September last year, a report by the Whitehall spending watchdog has found.

The Department for Transport (DfT) will pay an estimated £83m towards the total cost of bringing stranded customers who were not Atol-protected back to the UK, according to the National Audit Office (NAO).

The taxpayer will also cover £58m in redundancy costs and related payments to Thomas Cook’s former workers, and at least £15m for the liquidation of the business.

The final cost “may not be known for some time”, partly because invoices for repatriation costs are still being received, the NAO said.

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Thomas Cook was the world’s oldest travel company before it collapsed last year after struggling with debts of £1.7bn and a weak bookings market. The company had been struggling for several years and there was anger after the collapse that executives made £20m in pay and bonuses in the five years leading up to the company’s failure.

The collapse left 150,000 customers stranded, leading to the biggest ever peacetime repatriation effort led by the government. The DfT instructed the Civil Aviation Authority (CAA) to fly all stranded customers back to the UK on a total of 746 flights from 54 airports.

This included an estimated 83,000 whose holidays did not have with Atol protection, which meant they were not automatically entitled to be repatriated free of charge.

The DfT said at the time that those passengers were flown back by the government based on its assessment that Thomas Cook customers were at risk of significant disruption and cost to return to the UK.

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The cost of reimbursing those travellers is now being covered by taxpayers.

Labour MP Meg Hillier, who chairs the Commons’ Public Accounts Committee (PAC), said “lessons need to be learnt and future risks understood.

“The repatriation looks set to cost the taxpayer £83m and there are other costs associated with insolvency of at least £73m.

“Government looks set to foot the bill, with industry off the hook. The resources to cover other airlines going bust is now very limited. New regulations are urgently required.”

The PAC report warned taxpayers may face further bills if another large travel company were to go into liquidation in the near future as the government has agreed to support the fund that covers Atol-protected passengers if it runs out of money.

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The Atol (Air Travel Organiser’s Licence) scheme is a UK financial protection scheme run by the CAA which protects most air package holidays sold by travel businesses based in the UK and some flight bookings.

The CAA warned that the cost to the fund that covers Atol-protected passengers for the Thomas Cook repatriation and refunds will be £481m and “there will be relatively limited resources left” once all payments have been made.

The government announced plans for new airline insolvency legislation in December last year. This would allow collapsing companies to keep their planes flying long enough to bring passengers home.

Thomas Cook’s demise led to 9,000 jobs being lost.