Thomas Cook - Statement

Part of the debate – in the House of Lords at 3:24 pm on 25th September 2019.

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Photo of Baroness Vere of Norbiton Baroness Vere of Norbiton Parliamentary Under-Secretary (Department for Transport) 3:24 pm, 25th September 2019

My Lords, with the leave of the House, I shall now repeat a Statement made by my right honourable friend the Secretary of State for Transport in the other place. The Statement is as follows:

“Mr Speaker, I would like to make a Statement about the steps the Government have been taking to support those affected by the collapse of Thomas Cook, in particular the 150,000 passengers left abroad without a flight back and also the 9,000 people here who have lost their jobs in the UK.

This is a very sad situation. All parties considered options as to how this company could avoid being put into administration. Ultimately, however, Thomas Cook and its directors took the decision themselves to place it into insolvency proceedings, and it ceased trading at 2 am on Monday 23 September. I recognise that this is a very distressing situation for all involved, and I would like to assure Members that the Government are committed to supporting those affected, including by providing repatriation flights free of charge for all those people.

We have been contingency planning for some time to prepare for this scenario, under Operation Matterhorn. The Government and the Civil Aviation Authority have run similar operations in the past and have been working hard to minimise disruption for passengers and to try to assist Thomas Cook’s staff. Even with our preparations and previous experience with Monarch, the task before us represents the largest peacetime repatriation ever undertaken in the UK. Some disruption and delay are inevitable, and we ask for understanding, particularly for Thomas Cook’s staff, many of whom are still working alongside the Government to help ensure the safe return of customers.

For example, the situation in Cuba has been reported in the media. The aircraft left this morning, and all passengers from Cuba scheduled to come home today are on that flight.

Normally, the CAA’s responsibility for bringing back passengers would extend only to customers who are covered by the ATOL scheme. However, there would have been insufficient capacity worldwide in the aviation market for non-ATOL customers to book tickets independently and bring themselves home. Some passengers would have had to wait for a week or more and others would have suffered financial hardship while they waited for an available flight. This would have created further economic problems, with people unable to return to work or be reunited with their families. With tens of thousands of passengers abroad with no easy means of returning to the UK, I instructed the CAA to ensure all those currently abroad were able to return, ATOL or non-ATOL.

Due to the size, complexity and geographical scope of the Thomas Cook business, it has not been possible to replicate its exact airline and schedule. In the case of Monarch’s collapse in 2017, the CAA was able to source enough aircraft of the right size and type to closely match the airline’s own operation. Thomas Cook was a much bigger airline, however, and also provided a global network of package holidays. As a result, this operation is much more challenging. Some passengers will be travelling home on commercial flights where other airlines have available seats. I am sure that the whole House would like to thank all the airlines and ground staff who have offered assistance to Thomas Cook passengers in this difficult situation.

I would like to update the House with the latest information and give honourable and right honourable Members a sense of the scale of the operation that has been going on. We have put in place arrangements to bring back more than 150,000 people to the UK across 50 different locations. This requires more than 1,000 flights by CAA-chartered aircraft over a two-week period. Passengers will be able to complete their full holidays, so they should not be leaving early and should be able to return on the day they were intending to.

So far, in the first two days of the operation, nearly 30,000 passengers were returned to the UK on more than 130 dedicated CAA flights, with a further 16,500 passengers whom we hope to repatriate today on something like 70 flights—I checked before I came into the House. So far, 95% of people have been repatriated on their original date of departure. We have not been able to bring everyone back from the airport they went to because of the different sizes and shapes of the aircraft available. In the first two days, we provided onward coach travel to over 2,300 passengers and arranged an additional flight from Gatwick to Glasgow to relocate passengers who had flown back to the wrong airport. The CAA has reached out to over 3,000 hotels to issue letters of guarantee to ensure that British holidaymakers can remain in their hotels. That has been followed up with calls and contact from FCO officials.

There are over 50 overseas airports involved— around the Mediterranean, in north Africa and in North America—and 11 UK airports engaged in this programme. There have been over 100,000 calls to our customer service centres and over 2 million unique visitors to the CAA’s dedicated website. There were close to 7 million page views on the first day alone. In total, 10 government departments and agencies have been involved, including the DfT, FCO, BEIS and DWP in London, and our extensive diplomatic and consular network in the affected countries worldwide.

I have been hugely impressed as the programme has rolled out in the last few days. The response from Thomas Cook passengers has generally been positive, with many praising the CAA, local staff and government officials, even though there has been considerable disruption. For example, people have not been able to use advance check-in, as they are used to doing, instead having to queue—therefore causing the queues as seen on television screens. Despite these robust plans and their success so far, this is a distressing situation for all concerned. One of my top priorities remains helping those passengers abroad to get back to the UK and to do so safely.

In addition to supporting passengers, we have been working across government to ensure the 9,000 former Thomas Cook employees in the UK and those overseas receive the support that they need. The decision by the Thomas Cook Group’s board has been deeply upsetting for employees, who are losing their jobs. DWP’s Jobcentre Plus rapid response service is in place, helping workers to get back into employment. The Jobcentre Plus rapid response managers across the UK are ready to engage with the liquidators to start that vital work. There are special arrangements for UK employees who are owed redundancy and notice pay by their insolvent employer. The redundancy payment service in the Insolvency Service can pay statutory amounts owed to the former employees from the National Insurance Fund.

My right honourable friend the Secretary of State for Business, Energy and Industrial Strategy is establishing a cross-government task force to address the impact on employees and local communities. This will help to overcome barriers to attending training, securing a job or self-employment, such as providing childcare costs, tools, work clothes and travel costs.

My colleagues and I have also been in contact with those Members whose constituencies will have been hardest hit by those job losses and given assurances that we will work with the industry to offer what support we can. In fact, all honourable Members’ constituencies have been affected in some way, even from working in a shop location.

My colleague the Secretary of State for Business, Energy and Industrial Strategy has also written to the Financial Reporting Council to ensure that it prioritises, as a matter of urgency, an investigation into both the causes of the company’s failure and the conduct of its directors and its auditors.

I am also aware of the duty of this Government to the taxpayer. While affected passengers have been told that they will not have to pay to be flown back to the UK, we have entered into discussion with several third parties with a view to recovering some of the costs of this large operation. Around 60% of passengers have ATOL protection and the CAA’s Air Travel Trust fund will contribute proportionately to the cost of the repatriation as well as refunding future ATOL bookings. We will also look to recoup some of the costs from the relevant credit and debit card providers and travel insurers, and we will look to recover costs from other travel providers through which passengers may have booked their Thomas Cook holiday. We are also in discussion with the official receiver to understand what costs can be recouped through the company’s assets. The final cost of Monarch back in 2017 was about £50 million, including ATOL contributions. The repatriation effort for Thomas Cook is now known to be about twice the size and is more complicated, for the reasons explained.

It has also been suggested in the press that the Government could have avoided the collapse with a bailout of up to £250 million for the company and its shareholders. Given the perilous state of the business—including, as reported, a £1.5 billion half-year loss in May, followed by a further profit warning in November—that was simply not the case, with no guarantee that such an injection would have secured the future of the company. In effect, our concern is that we would have put in £250 million and would have been throwing good money after bad. And then we would have had to pay the repatriation costs anyway. It is clear that in the last few years the company ran into several problems, trying to expand through investing in the high street while the market moved online.

The loss of an iconic British brand, which was 178 years old and one of the world’s oldest travel companies, is an extremely sad moment. However, this should not be seen as a reflection on the general health of the UK aviation industry, which continues to thrive. Passenger numbers are up, and more people are travelling more. The truth is that the way people book their holidays has changed an enormous amount, but it did not change as much within the company. None of that should detract from the distress experienced by those businesses reliant on Thomas Cook passengers and also Thomas Cook employees, who, as I have already said, have worked above and beyond in recent days, during this distressing situation.

We have never had the collapse of an airline or holiday company on this scale before, but we have responded swiftly and decisively. Right now, our efforts are rightly focused on getting passengers home and looking after employees, but we also need to understand whether any individuals have failed in their duties of stewardship within the company. Our efforts will then turn towards working through the reforms necessary to ensure that passengers do not find themselves in this situation again. We need to look at the options, not just ATOL, but also whether it is possible for airlines to be able to wind down in an orderly manner. They need to be able to look after their customers and we need to ensure that their planes can keep flying, so that we do not need to set up a shadow airline for whatever period of time. That is where we will focus our efforts in the weeks and months ahead. In order to do that, we will need primary legislation in a new Session of Parliament.

In what has been a challenging time, I put on record my appreciation for the work of all of those involved in this effort, and in particular Richard Moriarty, CEO of the CAA. His team, and my officials at the Department for Transport, have done an extraordinary job so far. I am also grateful for the support o others, including the Mayor of Manchester, who has acknowledged the Government’s repatriation efforts and their work with other agencies to help get those affected home. This has been an unprecedented response to an unprecedented situation, and I am grateful to all parties who have stepped in to support these efforts. I commend this Statement to the House”.