Thomas Cook

Baroness Vere of Norbiton Excerpts

Wednesday 25th September 2019 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Transport (Baroness Vere of Norbiton) (Con)]

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”.

--- Later in debate ---

[Baroness Scott of Needham Market (LD)]

My Lords, I thank the Minister for repeating that long but very useful Statement, and for the letter that was sent out to Members. I echo the thanks to the staff of airlines, customer services, ground crew and so on, who have done so much to restore some order to what could have been a catastrophic situation. Those thanks must especially go to the employees of Thomas Cook, many of whom are showing a degree of compassion and humanity towards their customers that is sadly lacking in the attitude of the directors.

Given what we know already about the state of Thomas Cook, can the Minister say more about how the Government are going to, and I quote from the Statement,

“seek to understand the failings of stewardship”?

I will not repeat the points made by the noble Lord, Lord Rosser, but these questions of governance and of the failings of governance are key, both to prevent this happening again and in protecting consumers in this sector and others.

I can understand why the Government were reluctant to go in with a classic bailout, but I wonder whether they ought to have thought more about whether it was possible to fund Thomas Cook for a few weeks, specifically to bring back those customers who were already abroad. Might that not have been more efficient than having to scrape around for aircraft wherever we could get them? I would like to know more about that.

I understand that CAA guarantees to hoteliers apply only to those passengers who have ATOL protection. There are 40% who do not have that protection, and we are hearing all sorts of stories about people being locked out of accommodation. Not everyone has the financial resilience to simply pay a bill on demand to a hotel, especially as they have already paid once for a holiday, so I would like to hear more about the 40% who are not covered.

The Minister may be aware that the vultures are already gathering, and there are stories emerging of scams where people purporting to be from Thomas Cook are offering refunds to get people’s bank details. Will she urgently consider a social media campaign to highlight the dangers of this and setting out exactly what people should do if they have been affected?

[Baroness Vere of Norbiton]

I thank both the noble Lord, Lord Rosser, and the noble Baroness, Lady Scott, for their thoughtful questions and comments about this difficult situation.

The noble Lord, Lord Rosser, talked about the various reviews that the Government will make sure are undertaken as a matter of great urgency. He also mentioned the accounting methods and the comments from EY. Thomas Cook of course uses IFRS, the standard accounting rules. Those are used in 125 countries and have been adopted by the EU. Some people will push those to the absolute limit, and maybe Thomas Cook did, but we cannot say for sure. Once we have got to the stage where the repatriation has finished successfully and everyone is home, we certainly will look into all sorts of things, including its application of the various accounting rules. The official receiver will review all payments made to the board and creditors in the lead-up to the date when the board declared the company insolvent. The official receiver is able to recall payments if it feels that they were not made in the right course of business.

The noble Baroness, Lady Scott, mentioned governance, which is really important as well. I hope that when these reviews have been finished, we will take away a number of lessons from them. The travel industry has always operated in the way it does. The issue now is that some of these organisations are very large, and when the worst happens it has a very significant consequence. Therefore, we as a Government need to think about the long-term future for aviation and travel organisations when they become insolvent.

This brings me on to the second major area commented on by the noble Lord, Lord Rosser: the airline insolvency review, which we asked Peter Bucks to undertake after Monarch. He submitted his report to the department in May this year. It is a long report; I am sure the noble Lord has read it. It has many different proposals—it was one of my responsibilities as the former Aviation Minister to go through it and see how we were going to take these various things forward. None of the things in it is easy, simple or without risk. There was a possible levy on passenger tickets but, as noble Lords will know from the repatriation today, simply having the money is only one thing—one has to have the aircraft.

That was the second thing that might be suggested: some sort of special administrative regime for an organisation. Again, that is quite complicated. I think we have one for energy companies and one for universities, but they are very difficult to put in place and require primary legislation. We are looking at that as a matter of urgency. The noble Lord also suggested looking at financial instruments. Again, we have been looking into that, at how they might either help or hinder—they might speed up a company’s demise.

I believe the German Government have been able to provide a bridging loan. I understand that Condor is in a different financial situation from the Thomas Cook Group as a whole, and maybe it is viable in the longer term. I very much hope that it is. However, we received a request from Thomas Cook for government support. I do not recall the date of the letter—it was possibly Friday. I will have to write to the noble Lord with all the details on what we received at what point and the reasons we decided to decline. I suppose one of the most obvious reasons was that Thomas Cook has until very recently been losing about £250 million a month, so it was not entirely clear to us that £250 million would be a good and viable long-term solution for a company which was clearly being weighed down by an incredible amount of debt.

The final cost of the repatriation is not known at this moment. I mentioned that it was £50 million for Monarch; this is at least twice the size and much more complicated. It is a fast-moving situation, but of course we are striving to keep costs to a minimum and are in open discussions with a number of third parties with which we will look to reach an agreement over future financial support.

With regard to the industry taking advantage, I agree with the noble Lord that this is very disappointing indeed. We do not expect anybody to take advantage in a difficult situation. On the flip side, I am very pleased by the support that we are being given by certain airlines—for example, BA and Virgin, which have both been offering rescue fares to people in places where we do not have repatriation flights.

Obviously, we have done a significant amount of contingency planning. We knew what our plan was for the hotels, but until the event actually happened we could not put that plan into place. The letters went out to 3,000 hotels; imagine you are a hotel far away and you get a strange letter from the British Government saying, “It’s okay, we’ll pay the hotel bill”. It just took a while for the message to get through. We used our diplomats and consular staff to get out there and talk to the hotels. We also went straight in at ministerial level, saying to Tourism Ministers, “Please can you speak to the hotels to make sure that people are not thrown out of them?”

The noble Baroness, Lady Scott of Needham Market, also talked about what we called when doing contingency planning “keep the fleet flying”, which would of course seem obvious to anyone—they are planes, why can we not get them up in the sky? We really tried to look into that, but we need the legislation for that to continue, because operating an airline is not as simple as having a pilot and putting a plane in the sky. Unfortunately, one needs many indemnities and certificates, but we hope to be able to put something in place which would allow the fleet to continue to fly so that, should this ever happen again, that would be the most obvious way of sorting it out.

Those passengers not guaranteed by ATOL may well have other routes that they can use if they pay by credit or debit card or through travel insurance. If there is one other thing that has come out of this, it is that many people go on holiday nowadays and do not think about travel insurance or what might happen if the travel company goes into liquidation. People might want to think differently how they protect themselves when they go abroad.

I was appalled to see the scams too, people saying on social media that they are getting telephone calls from people saying that they can get their money back. We are working on it and the CAA will be putting out some stuff—it might already have gone out—making sure people are aware that there are scams out there. The good thing is that social media is doing its own thing. People who are not connected are already saying, “Beware, there are some very dodgy people out there”.

[Lord King of Bridgwater (Con)]

Is my noble friend saying that, at a time when the Government are making every effort to get home people who are stranded and scrabbling around to find any airlines that will help, and while we see pictures of all the Thomas Cook planes sitting idle on airfields, whose crews presumably are unemployed, there is no way in which some extra arrangement could be made on a temporary basis to give some employment to the crews and use the planes that are there to bring those people home?

[Baroness Vere of Norbiton]

I assure my noble friend that those very same questions went through my mind as I was going through the contingency planning for all the options that we had for this eventuality. Insolvency law in this country does not allow that; the number of indemnities that would be required is enormous. We will be looking as a matter of urgency at whether we can put something in place.

One point that is a slight mitigation here is that most of the Thomas Cook aircraft are leased, and therefore they automatically go back to the leasing company. One would not be dealing with Thomas Cook at that point but with however many tens of leasing companies in order to operate the planes owned by those companies.

[Lord Browne of Ladyton (Lab)]

My Lords, in response to the part of my noble friend Lord Rosser’s question about the cost to the UK taxpayer of this business going into administration, the Minister answered with reference only to the repatriation costs. I might say, and I will support this in a moment, that she grossly underestimates them by just doubling the Monarch costs.

What is the cost to the UK taxpayer of all the implications of the administration of this business, including the cost to public funds? ATOL is a public fund put together by the accumulation of levies on holidaymakers and travellers, as are the CAA’s funds that are being used here. Only yesterday there was an estimate in the Financial Times of the cost to the ATOL fund alone of £600 million. It is there in detail, explaining that because of the EU directive the fund will have to pay back to the people who have booked holidays in advance the cost of those holidays that they are not now going to get, and it will take it months to do it.

How much tax does Thomas Cook owe the Government in air passenger duty, VAT and other taxation that it has collected? How much will all these thousands of people who are going to be made redundant cost the Government in benefits, retraining and support? What are the implications for the pension funds? Surely the Ministers who made this decision not to give £250 million to Thomas Cook in the short term had an estimate of these figures before them. What was that estimate? How much was this going to cost the Government if they went down the road that they went down, with the inevitable result that this business went into administration?

[Baroness Vere of Norbiton]

My Lords, I fear that the noble Lord is making the wrong comparison there. On the £250 million, we made the assessment that, even had we been able to provide the guarantee of funds that was requested, the company did not have a viable future. It was severely in debt and losing a significant amount of money. We would have been in the same situation in the future but £250 million poorer. Also, it is not the Government’s usual position to prop up private companies that have got themselves into trouble.

When it comes to the total costs of the failure—there are many, and we understand that—some are clearer than others at this time. On repatriation, for example, I did not just double the Monarch cost—I said that this repatriation is twice the size of Monarch’s, but it is also more complicated. However, we are mitigating that by having conversations with a third party. We learned from the Monarch case that some people do not behave in the way you would expect: in that case, a significant portion of people chose not to be repatriated using the Government. They found other ways of getting home—we do not know how, but they did not arrive for their flights.

Estimating the costs is extremely difficult. It is up to us to keep the costs as low as possible, but ATOL customers who have future bookings can claim from ATOL—that fund is underwritten by the Government. Again, we cannot be absolutely clear about the cost because it will depend on how many people end up claiming, but every person who applies to ATOL to get a refund for their booking will receive it—and that is right.

[Lord Balfe (Con)]

My Lords, I draw noble Lords’ attention to my entry in the register. The Times today has two very interesting headlines. The first one says that,

“the company had hung its staff ‘out to dry’”,

but the second one, on the same page, says:

“High flying Thomas Cook chiefs will enjoy a soft landing”.


Yet again, boards of directors appear to be completely above the lifestyle of the workers who are making the money that they benefit from. Of more worry to the day-to-day employees is a quote from the Insolvency Service. It said that those,

“who lost their jobs would not be paid by the failed company for their last three weeks of work”.

These are people who have mortgages to pay, food to put on the table for their children and are due their wages next Monday. Can I ask that the Government look seriously at a way of providing some short-term financial support so that this wages bill can be paid? It is absolutely outrageous that millions and millions of pounds are pocketed by directors at a time when people are not being given even the money to pay their mortgage and buy their children’s food.

[Baroness Vere of Norbiton]

I thank my noble friend, who makes an extremely important point. I may be mistaken, but I did understand that BALPA wanted the Government to give Thomas Cook the £250 million, which, in my mind, would just be propping up a failing board, which, clearly, he does not have an awful lot of respect for.

It is top of mind to make sure that the employees are treated as well as possible. The Insolvency Service is preparing to pay statutory redundancy to employees. I will look further into exactly what payments will be made and when, and I will include payments that are due to pensions. I will provide as much information as I possibly can and I will put a copy of my letter in the Library to clarify what the Government and the Insolvency Service can do to support employees in the short term. In the longer term, as I have already said, the Jobcentre Plus rapid response service is there, waiting and able to help employees. I have been really heartened by so many companies, such as British Airways and Heathrow Airport, sharing their jobs’ pages on Twitter and saying, “Look, Thomas Cook staff, we respect you. You are good workers. We’ve got jobs, please apply to us”.

[Lord Lexden (Con)]

Will the Government, in due course, produce a full report which they will lay before Parliament, setting out the causes of this disaster, the tremendous rescue operation that is under way, and the full costs for which the noble Lord, Lord Browne of Ladyton, has asked?

[Baroness Vere of Norbiton]

My noble friend makes a very important point. All this information will be available in due course.

[Lord Faulkner of Worcester (Lab)]

My Lords, the reason why the 150,000 Thomas Cook customers are able to be repatriated at no expense to themselves is largely because of the EU package travel directive that was agreed in 2015. Will she give us an assurance that, if the United Kingdom does leave the European Union, the protection given by that directive will continue?

[Baroness Vere of Norbiton]

I believe that that directive has been brought across and is in our law.

[Baroness Kramer (LD)]

My Lords, obviously our first concern is both for the staff of Thomas Cook and for the holidaymakers who found themselves in this impossible situation. Across the globe, however, there are hoteliers and others who have provided services for which they have not been paid. If the UK has a reputation for allowing this situation, I suspect that other travel firms will find in the future that they are asked for guarantees and other kinds of prepayments that will make holidays far more expensive for everybody else in this country. Does she have an idea of how the people who are owed money for services that they have provided under Thomas Cook arrangements are going to be repaid in these circumstances?

[Baroness Vere of Norbiton]

As the noble Baroness will know, these are, in pretty much all instances, private companies making private arrangements. The travel market is global, so if one is in a hotel in Italy, there will be people there from travel companies from all over the world. It is the case, therefore, that those private arrangements will continue, and as with all private arrangements between two private organisations, an assessment should be made on the long-term financial viability of the person to whom one is providing credit.