Would it have been cheaper to save Thomas Cook as bill for collapse hits £156 million?

The shock collapse of Peterborough's Thomas Cook could cost the taxpayer £156 million, according to a new report.
The former offices of Peterborough based Thomas CookThe former offices of Peterborough based Thomas Cook
The former offices of Peterborough based Thomas Cook

The figures have been revealed by the National Audit Office which says the Department for Transport (DfT) has agreed to pay an estimated £83 million towards the total cost of repatriating the travel giant's customers who were not covered by the Atol scheme.

Other Government costs include £58 million in redundancy and related payments to Thomas Cook's former employees, of which 1,000 plus were based at Westpoint, Lynch Wood, Peterborough, and at least £15 million for liquidating the business.

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The NAO added that "the final cost may not be known for some time", partly due to invoices for repatriation costs still being received.

Thomas Cook.Thomas Cook.
Thomas Cook.

But the sum has been met with anger by travel union leaders who warn the cost could actually be much higher and that it would have been cheaper for the Government to have saved the travel giant.

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

She went on: "The repatriation looks set to cost the taxpayer £83 million and there are other costs associated with insolvency of at least £73 million.

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"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."

When Thomas Cook collapsed on September 23 last year, the DfT instructed the Civil Aviation Authority (CAA) to repatriate all 150,000 holidaymakers who were overseas.

This included the roughly 83,000 who had not booked a trip with Atol protection, which meant they were not automatically entitled to be flown home free of charge.

The DfT is reimbursing the cost of repatriating those passengers.

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A Dft spokeswoman said: "Due to the unprecedented scale of the operation, other airlines did not have enough capacity to repatriate those abroad.

"Without this effort, stranded passengers couldn't be guaranteed a safe journey home, causing stress and disruption to families, which would have had a knock-on effect on the wider economy with so many employees abroad."

A total of 746 flights from 54 airports were involved in what was known as Operation Matterhorn.

The NAO report warned there could be further costs to taxpayers if another large travel company collapses in the near future.

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That is because the Government has agreed to stand behind the fund that covers Atol-protected passengers if it runs out of money.

The CAA told the NAO that the exposure to the fund of the Thomas Cook repatriation and refunds will be £481 million and "there will be relatively limited resources left" once all costs have been met.

In December last year the Government announced plans for new airline insolvency legislation, which would allow carriers to keep their planes flying long enough to repatriate passengers.

The collapse of Thomas Cook led to 9,000 jobs being lost, with many ex-workers still unemployed.

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The Government was accused of not doing enough to help what was the world's oldest travel company.

TSSA General Secretary, Manuel Cortes, said the true costs of the collapse of Thomas Cook to the taxpayer is likely to be “far higher” than £156 million.

Mr Cortes, whose union represented retail staff in Thomas Cook stores around Britain is also warning that Coronavirus “threatens the existence of high-street travel shops.

At the time, TSSA warned that it would have been cheaper to step in the save Thomas Cook, as well as saving thousands of jobs.

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Commenting on the NAO report Cortes said: “Our union argued tooth and nail that rescuing Thomas Cook would have been better value for money, protected jobs and customers who had to be repatriated.

“Sadly, Tory dogma got in the way of common sense. This report from the NAO only tells half the story however, it talks only about the cost of repatriation and the initial costs of the company going under.

“We must bear in mind that taxpayers covered redundancy payments to workers and other staff costs like unpaid wages and some people are sadly still receiving benefits as they remain unemployed and our members have a number outstanding claims in Employment Tribunals.

“The only conclusion to draw therefore is that the bill for failing to keep Thomas Cook afloat when there was ample opportunity to do so is still unfolding and is likely to be far higher than the £158m figure being quoted today.

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“The lessons of Thomas Cook must be learned as we face the Coronavirus crisis which threatens the very existence of the high streets travel shops.

"The Government must act now to stop that from happening and I have already made representation to the Department for Transport (DfT) about this.

“If you are travel trade worker the best protection you can get is to join our TSSA family today.”