Thomas Cook Airlines

The £520 Million ATOL Refund Bill. Can the UK CAA Cover It?

In the UK, travel agents must pay £2.50 into the ATOL scheme for each person they book on a package holiday.

If a travel business with an ATOL ceases trading, the ATOL scheme protects consumers who had booked holidays with the firm. It will support consumers currently abroad and provide financial reimbursement for the cost of replacing parts of an ATOL protected package.

ATOL Website

If you’re in the UK, you will be well aware of the ATOL scheme (operated by the UK CAA) by now after the collapse of Thomas Cook.

The mammoth repatriation effort, dubbed Operation Matterhorn (aka the largest in peacetime history), is to bring an estimated 150,000 people back to the UK.

Government figures show that the cost of reimbursing holidaymakers who lost future bookings stands at £420 million.

This is in addition to an expected £100 million bill to return Thomas Cook passengers to Britain and tens of millions owed to hotels overseas.

Thomas Cook Group Website

Though after years as one of the leading travel agents in Europe, as the Thomas Cook Group sites still boasts (parent company of Thomas Cook UK), surely the passenger ATOL contributions must cover the mounting bills?

Methodology

Using direct and indirect data sources, I was able to obtain numbers to make some “informed estimations”.

I am using figures from Thomas Cook Airlines, as I was unable to find exact package holiday passenger numbers. This is an important distinction, as Thomas Cook Airlines also carry passengers not covered under ATOL protection (e.g. those who booked flights only). As a result, many of the figures quoted will be overestimates.

Similarly, I also use figures from the Office of National Statistics that report total UK holidays by year to work out potential ATOL contributions.

ATOL contributions in this post are assumed to be fixed at £2.50 per passenger.

Results

Thomas Cook ATOL Contributions by Year

Thomas Cook Airlines Passenger Volume and Estimated ATOL contributions (2009 - 2018)

Download chart.

Year Pax (TC airlines) ATOL contribution GBP
2009 8,202,534 20,506,335
2010 8,120,815 20,302,038
2011 7,969,569 19,923,923
2012 6,783,661 16,959,153
2013 6,043,480 15,108,700
2014 6,043,480 15,108,700
2015 6,395,623 15,989,058
2016 6,623,546 16,558,865
2017 7,319,546 18,298,865
2018 8,090,208 20,225,520

Full table.

Since 2013 Thomas Cook Airlines has been carrying an increasing number of passengers. Over 2 million more in 2018 than in 2013 (25% increase).

Assuming all these passengers were covered under ATOL protection (see methodology), Thomas Cook paid over £20.2 million to the scheme in 2018. Using the same logic, over the period between 2009 and 2018 Thomas Cook airlines paid £179 million into the scheme.

Let’s assume now that only 50% of Thomas Cook airline passengers paid in to the scheme. In 2018 they would have contributed just over £10 million, and since 2009, about £90 million.

This number is still way short of the estimated £520 million final bill, as quoted above.

Potential Total Travel Agents ATOL Contributions by Year

UK Holiday Passengers and Potential ATOL contributions GBP (1998 - 2018)

Download chart.

Year UK Holiday Passengers ATOL Potential ATOL contributions GBP @100% paid UK Holiday Passengers ATOL GBP @50% paid
1998 32,306,000 80,765,000 40,382,500
1999 35,023,000 87,557,500 43,778,750
2000 36,685,000 91,712,500 45,856,250
2001 38,670,000 96,675,000 48,337,500
2002 39,902,000 99,755,000 49,877,500
2003 41,197,000 102,992,500 51,496,250
2004 42,912,000 107,280,000 53,640,000
2005 44,175,000 110,437,500 55,218,750
2006 45,287,000 113,217,500 56,608,750
2007 45,437,000 113,592,500 56,796,250
2008 45,531,000 113,827,500 56,913,750
2009 38,492,000 96,230,000 48,115,000
2010 36,422,000 91,055,000 45,527,500
2011 36,819,000 92,047,500 46,023,750
2012 36,173,000 90,432,500 45,216,250
2013 37,149,000 92,872,500 46,436,250
2014 38,519,000 96,297,500 48,148,750
2015 42,150,000 105,375,000 52,687,500
2016 45,020,000 112,550,000 56,275,000
2017 46,636,000 116,590,000 58,295,000
2018 47,042,000 117,605,000 58,802,500

Full table.

Assuming all UK holiday makers contributed towards ATOL, the scheme would have raised £117.6 million in 2018 (47 million pax). If so, since 1998 the scheme has raised £2.13 billion (from 851.5 million passengers). ATOL stated in 1973.

Let’s assume only 50% of holiday makers were required to pay into the scheme, it would still have generated a pot of over £1 billion (ignoring other times passengers have been compensated by ATOL, see below).

We have enough to cover the £520 million now…

Repaying Thomas Cook Passengers

Thomas Cook Impact on ATOL Contributions Pot 1998-2018

Download chart.

Assuming the 50% of holiday makers since 1998 were required to pay into the scheme (£1 billion), the £520 million Thomas Cook bill would require 48.9% of the schemes contributions to refund passengers.

Thomas Cook UK are the largest agency or airline to go into liquidation, by quite some margin.

Though a number of other airlines — FlyBMI, Cobalt, Monarch, etc — are likely to have impacted passengers under ATOL protection. ATOL refunds for the collapse of Monarch added up to £21 million.

Of course, many smaller agencies will have ceased trading, requiring ATOL refunds for passengers too.

The question is, has ATOL paid out more than £520 million since 1998. I’m not so sure…

Improvements

As indicated in the methodology section (and lack of a definitive answer to the question), there are lots of estimations in this post.

To improve the accuracy of the figures estimated, I would need ATOL contribution figures by agency and all payouts over the period the organisation has been operating.

tl;dr

It is very likely that the final Thomas Cook will significantly impact the balance sheet of the ATOL protection scheme. It could easily exceed over 50% of all ATOL contributions for the last 20 years.

Footnotes

  1. Data sources + data used in this post.
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