Travel operator Thomas Cook (TCG.L) is currently scrambling for an additional £200m in funding to avoid an all-out collapse of the company, which could leave as many as 180,000 holidaymakers stranded abroad.
The situation arose after Thomas Cook’s creditors, which include banks like Royal Bank of Scotland (RBS.L) and Lloyds Bank (LLOY.L), demanded the additional funding as part of a rescue package for the 178-year-old company.
If the travel operator fails to secure the funding — and the government decides not to step in — by a key meeting next week, it could go into administration.
That would almost certainly ground flights and potentially disrupt the travel plans of tens of thousands of people.
Here is where that leaves holidaymakers.
What happens if you’ve booked a package holiday?
Holidaymakers who’ve booked package holidays with the flagging tour operator are protected by ATOL, a financial protection scheme run by the Civil Aviation Authority that is funded by contributions from tour operators.
ATOL protects most consumers who’ve booked package holidays — meaning that, if Thomas Cook collapses, even those who are abroad will be able to continue their holiday, because their accommodation and return flights are effectively guaranteed.
Those with bookings will likewise be offered a full refund.
What happens if you’ve only booked flights and are abroad?
If you’ve booked flights with Thomas Cook, then it is unlikely that you are entitled to ATOL protection from the Civil Aviation Authority, which only covers package holidays.
However, when Monarch Airlines collapsed in October 2017, leaving 110,000 passengers abroad, the UK government stepped in.
As part of the largest peacetime repatriation efforts the UK has ever seen, the government specially chartered around 700 flights over a two-week period, at an estimated cost of £60m to the UK taxpayer.
While many holidaymakers experienced some disruption to their travel plans, pretty much everyone got home at no further cost.
The transport ministry and the Civil Aviation Authority are said to have already initiated a plan to bring stranded passengers back home, known as Operation Matterhorn.
But the authority has thus far declined to comment on the plans.
In a statement, it said: “We are in regular contact with all large ATOL holders and constantly monitor company performance. We do not comment on the financial situation of the individual businesses we regulate.”
What happens if you’ve only booked flights and have yet to travel?
If you booked the flights using a credit card directly with Thomas Cook, and the costs of the flights was more than £100, then it may be possible to get your money back from your credit card company under Section 75 of the Consumer Credit Act.
“Using a credit card responsibly and not spending beyond your means offers you a bit more protection, which can prove invaluable in situations such as this,” said Alastair Douglas, CEO of advisory firm TotallyMoney.
“Lack of knowledge of these situations often leaves consumers out of pocket, thinking there’s nothing to be done, when really that’s not the case.”
Douglas said that customers should contact their credit card company — such as their bank or building society — if there is any doubt about what they are entitled to.
Customers who purchased the flights using a debit card, unfortunately, are not entitled to any protection under Section 75.
What happens to the UK travel industry?
If Thomas Cook collapses, the UK travel industry will be left with only one significant package holiday company, TUI. That means less competition, and it could lead to higher prices.
Manuel Cortes, the general secretary of the Transport Salaried Staffs Association, said that Thomas Cook must be rescued “no matter what”.
“If Thomas Cook goes under, we will be left with just one major travel operator — TUI — controlling the mass market. If need be the government must step in to ensure Thomas Cook’s survival.”
What happens if travel operator Thomas Cook collapses? – Yahoo Sports