Friday, July 12, 2024

What Happens When a Travel Provider Like Thomas Cook Shuts Down?

HomeTipsWhat Happens When a Travel Provider Like Thomas Cook Shuts Down?



What happens to customers when a tour operator they paid shuts down; are there any legal guarantees of reimbursement? The short answer: only for some people.By now, you’ve undoubtedly heard that Thomas Cook Group, the British travel operator—which encapsulates retail travel agencies, wholesale tour packagers, and even airlines—has shuttered under bankruptcy. This is the largest tour operator failure in not-so-recent memory; it’s left some 600,000 travelers stranded at their foreign destinations, and many tour buyers who haven’t started their trips yet are unlikely to see the tours they bought or any money they prepaid.

The Thomas Cook Shutdown

As of September 23, all Thomas Cook retail agencies have closed and all tour operations are down. Two affiliated airlines, Condor and Thomas Cook Airlines Scandinavia, are still operating. Condor has told travelers with Condor tickets that it will accommodate them on flights to return home, but will not accommodate travelers who haven’t started Thomas Cook package trips yet.

According to stranded Thomas Cook travelers and multiple media reports, many hotels are owed money—and will probably not be paid—for accommodations they have provided or are now providing. Some hotels reportedly tried to collect replacement payment from travelers, but the general advice from the British government and other authorities has been that travelers shouldn’t be held responsible for the missing payments. The tourism ministry of Turkey ordered hotels not to charge Thomas Cook travelers the missing fees, saying the Turkish government will pay them instead.

About three-quarters of the stranded travelers started their trips from either the U.K. or Germany. The U.K. and German governments have mounted massive efforts to get the hundreds of thousands of travelers home via chartered airplanes, which are being called the “largest peacetime repatriation in U.K. history.”

ATOL: Who’s Likely to Get Reimbursed

British travelers are about the only ones in luck when this sort of situation occurs: Many U.K. travelers booking with a tour company are covered financially by the United Kingdom Civil Aviation Authority’s ATOL (Air Travel Organizer’s License), a trust fund established to cover travelers involved in tour-operator failures. The tour operator has to be covered under the ATOL program by paying fees to it (and Thomas Cook was).

There doesn’t seem to be any such existing effort for travelers from other countries, meaning that only Britons who were customers of an ATOL-licensed operator are likely to receive payout. Said customers can file an ATOL claim through the British government, here.

If You’re Stranded at Your Destination

Absent any formal recovery programs, North American travelers booked on any of Thomas Cook airlines’ now-non-existent return flights should check with other airlines for possible reduced emergency one-way return fares, which are typically offered when a tour operator or airline fails. Travelers with returns booked on other airlines should expect to use those flights as ticketed, but check with the airline to make sure your reservation still stands.

Insurance loophole: If you bought trip-interruption insurance that includes “supplier bankruptcy” or “supplier default” in the fine print as a “covered reason,” that insurance should cover the cost of a new return ticket home. Contact your insurance provider before buying.

If You’ve Paid for (But Not Started) a Thomas Cook Trip

If you booked a package tour that included Thomas Cook Airlines, your reservation is probably now invalid—and you should receive notice saying so. You aren’t likely to get any refund from Thomas Cook, but have two back-up options to recover your payment:

  • If you bought trip-cancellation insurance that includes “supplier bankruptcy” or “supplier default” as a “covered reason,” that insurance should reimburse the cost of your package.
  • If you paid by credit card, ask your bank to reverse the charge, in accordance with federal regulations that state you can get your money back.
  • If you have a Thomas Cook tour package that booked air travel on some other airline, your air trips should still be legitimate—but the vacation package is not.

    If You’re Concerned about Other Travel Companies Shuttering

    In the United States: Airline and tour operator failures were once a serious problem for travelers from the U.S. and Canada, but they’ve not been recently. The North American airline marketplace has pretty much weeded out all the weak players, and at this point financiers do not seem to be worried, at least about any of the large U.S.-based airlines. Then again, those failures can be hard to predict if you’re not in-the-know. Enter insurance provider Travel Guard’s Alert List, a list of companies it won’t cover for default. The list contains no airlines that are currently flying, and no well-known tour operators.

    In Europe, and beyond: Abroad, however, airline failures remain an ongoing threat. Recently a handful of European low-cost airlines have failed, and industry mavens seem to believe that there are still “too many” small lines and too much price competition for all participants to survive even a slight downturn. Any airline with a lot of debt on its balance sheet is a candidate for failure.

    How to Protect Yourself

    There are three basic strategies to minimize risk of airline or operator failure:

  • Limit your up-front risk. Book as many of your arrangements as you can at cancellable rates. Refundable air tickets carry outrageous prices, but even if you have to cancel a nonrefundable ticket, you can usually retain the value minus a change fee (except for on basic-economy fares). Meaning: Book refundable tickets/hotel reservations, and avoid basic economy.
  • Make advance prepayments by credit card only; chargeback provisions do not apply to debit cards or other similar direct forms of payment.
  • If you have a lot at risk, buy trip-cancellation and trip-interruption insurance (TCI/TII) to ensure you’ll be covered.

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