A report by the National Audit Office, published on Thursday (19 March), set out for the first time the full cost of Cook’s failure, warning there were limited resources to deal with any further failures of airlines or Atol holders.

It revealed the Department for Transport (DfT) paid out £83 million towards the repatriation of around 140,000 Britons stranded owing to the collapse of Britain’s oldest travel firm.

The government, meanwhile, is estimated to have picked up a further £73 million in costs arising from Cook’s liquidation in September last year, including “at least” £58 million in redundancy payments and £15 million to £23 million in costs to the official receiver.

The CAA’s repatriation effort, Operation Matterhorn, eventually brought home more than 140,000 Cook passengers via 746 repatriation flights to 18 countries.

However, the report revealed the total cost of the repatriation to the DfT came in £22 million higher than expected after initial estimates that around 60% of the 150,000 Cook passengers stranded overseas had Atol protection proved wide of the mark.

Full booking data passed to the CAA in January 2020 showed 55% of Cook customers overseas at the time of failure were non-Atol protected.

The total cost to the Air Travel Trust Fund (ATTF) is estimated to be £481 million – the largest in its history. The CAA confirmed in January it has so far paid out in the region of £310 million.

However, while the CAA currently expects the ATTF to remain in surplus, “there will be relatively little resources left in the ATTF” the report revealed. The average call on the ATTF’s resources over the five years from 2013/14 to 2017/18 was £10 million.

Govt ‘to stand behind ATTF’

The ATTF is yet to publish its latest accounts for 2018/19, but at the end of its 2017/18 financial year, it has £642 million to call on – £167 in cash and liquid resources; a £400 million insurance facility and £75 million in borrowing facilities.

By comparison, the draw on the ATTF’s resources for the previous major failure of an airline and travel company, Monarch, was £16 million.

The trustees of the ATTF, according to the report, sought assurances from the DfT that should its resources become insufficient, the government would act to rectify the situation – and the government “has agreed to stand behind the ATTF in the event of a shortfall”.

Taken in conjunction, the cost of Cook’s failure to taxpayers and the ATTF is estimated to run to £637 million.

The report further warns the government could face further costs “if another travel company collapses in the near future”, a prospect heightened by the ongoing coronavirus crisis.

“The scale of the collapse of Thomas Cook represents a substantially larger draw on the ATTF than has been previously experienced,” said the report. “In the case of Monarch in 2017, the call on the ATTF’s resources had been £16 million.

“The CAA told us that it is likely that after all valid claims and expenses arising from the collapse of Thomas Cook have been met, there will be relatively limited resources left in the ATTF, although the CAA currently expects the ATTF to remain in surplus.”

Labour MP Meg Hillier, chair of the Commons’ Public Accounts Committee, said new regulations were “urgently required” to mitigate the effect of airline failure and/or Atol holder failure. “Government looks set to foot the bill, with the industry off the hook,” she said. “The resources to cover other airlines going bust is now very limited.”

TTG understands the DfT is pursuing a new form of financial protection to cover repatriation, arising from the recommendations of the Airline Insolvency Review, which was convened after the collapse of Monarch. New legislation could also allow insolvent airlines to continue flying to allow them to repatriate their own passengers.