Is it safe to book with Thomas Cook?

Is it safe to book with Thomas Cook, or is there a danger the company will collapse before or during your holiday?

You might well be wondering as Thomas Cook’s financial crisis has been all over the news in the past few days.

The problem for Thomas Cook is that it needs to borrow at least a further £1.1 billion (yep, billion, that’s not a typo) to keep it afloat over the winter.

While it has a rescue deal in place for £900 million, some of its bondholders are threatening to vote against the proposal at a meeting on September 27 because it could mean they’ll end up with nothing due to the way the deal is being structured.

And time is running out for Thomas Cook because it must renew its Air Travel Operators Licence on September 30, for which it needs to satisfy the CAA that it has sufficient funds to see it through the next 6 months.

If the CAA isn’t satisfied Thomas Cook ‘s finances are in order, it won’t renew its licence to sell holidays and the company will be dead in the water, although the CAA has the power to give it a couple of extra weeks beyond the end of September to sort something out.

But there are reports in the papers today that suggest Thomas Cook could run out of money as early as this Sunday, meaning it will be legally obligated to declare itself insolvent and call in the administrators.

Things aren’t looking good.

However, Thomas Cook has a strong management team in place and it has the backing of a major Chinese investor Fosun, which already owns 18% of the business and has agreed to stump up a further £450 million of the £1.1 billion Thomas Cook needs. Fosun, which also owns Club Med, wants to expand its European business even further, so it’s likely to do whatever it takes to keep Thomas Cook afloat. If the rescue deal goes ahead, Fosun will own 75% of the tour operator and 25% of Thomas Cook Airlines. Thomas Cook’s banks have agreed to lend it a further £450 million in return for control of the airline and a quarter share in the tour operator – but it still needs a further £200 million loan or its bankers are threatening to pull the proverbial plug.

However, Thomas Cook has been here before and come back from the brink, so it could still manage to clear this latest hurdle in the way of a brighter future.

And although Thomas Cook is admittedly running out of time to secure a deal, the CAA has the power to give it a couple more weeks, say until October 14, to come up with a rescue plan before pulling the rug from under it. However, there are still those concerns that Thomas Cook might not have enough cash to see it through till then…….


So is it safe to book a Thomas Cook holiday or not?

The answer depends on what you are booking.

If you book a package holiday with Thomas Cook, it will be covered by the company’s ATOL, which means that if the company did go bust before your holiday, you’d get a full refund from the CAA. Of course you’d lose your holiday and you might find it harder to rebook with another company at the same price for the same destination if the company were to fail just before your departure date, but at least you’d get your cash back – eventually (it could take a month or so).

So, I guess you need to decide whether to risk it in the knowledge that, in a worst case scenario, you could lose your holiday but get a full refund.

If Thomas Cook went bust while you were away, you would be able to continue your holiday and the CAA would get you home. Ignore those headlines in the press screaming that holidaymakers will be stranded, if you’ve booked a package (ie flights AND accommodation), the CAA WILL get you home.

Make sure you get an ATOL certificate when you book your holiday and hang on to this – just in case.


What about flights?

If you just book a Thomas Cook flight, this might not be covered by the company’s ATOL so you wouldn’t get a refund from the CAA if the airline went bust.

However, if you book with a credit card, you would be able to claim a refund from your card issuer under the Credit Card Act. Visa debit card issuers might also offer refunds.

Alternatively, you might be able to claim against your travel insurance, if it covers airline failure – check the policy before you buy because not all of them do.

Of course, if you book a flight and Thomas Cook were to go under while you were away, you could be one of those 150,000 or so the newspapers suggest could be left stranded. You might have to find another flight to get yourself home – or maybe not. When Monarch (remember them?) went bust, the CAA and the Department for Transport led by Chris Grayling (remember him?) decided to put on British Airways’ rescue flights to bring home everyone who wasn’t protected by the company’s ATOL, including those who’d just bought flights without accommodation.

It is being suggested in the papers that the government is already planning to do the same should Thomas Cook Airlines go under. The DfT – say the papers – already has a contingency plan in place, called Operation Matterhorn. Neither the DfT nor the CAA would confirm this when I asked them today.

So, yes, you are more at risk if you book a flight-only deal with Thomas Cook, but pay with a credit (not debit) card and you should at least get your money back for your original booking in the event of a worst-case scenario – but be aware that you might have to pay an inflated air fare to get back home if it goes bust while you’re away, and that might not be covered.

In the meantime, I should point out that Thomas Cook is still trading normally.








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