Protect against travel firm collapse

Lewis Stickley/PA

Millions of holidaymakers are on tenterhooks as shares in Thomas Cook recovered slightly today after nosediving amid fears the debt-laden tour operator was on the brink of collapse.

Despite reassuring words from the company's interim chief executive, travelers are still concerned whether their trips will take place. More than 15 travel companies have collapsed this year, so what is the outcome for consumers when a firm goes bust?

Thomas Cook shocked holidaymakers and investors when it admitted turning to its lenders for an extra £100 million in funding - just four weeks after it agreed a similar top-up. The company, which sells more than 22 million holidays a year in the UK, said it needed further financial help due a drop in trade driven by weak consumer confidence and unrest in North Africa.

The announcement saw shares in Thomas Cook dive 75% and raised fears that millions could face holiday misery if the company collapses. Thomas Cook's shares have partially recovered, rising 20%, but the price is still 93% lower than it was at the start of the year, valuing the company at around £107 million.

According to the Press Association, Sam Weihagen, Thomas Cook's interim chief executive, insisted the company was a "robust business that has a great future". He said: "We're operating business as usual. Flights are leaving on schedule, shops are open and we're taking bookings."

At least 15 travel companies have collapsed during 2011, including Africa Safari Club, Silverbird Travel, Gills Cruise Centre and Holidays4U, Real Traveller and Pinnacle Travel. So what happens to travelers whose money is tied up with these firms?

Pinnacle Travel
Thousands of school children faced missing out on school trips, when Sussex-based firm Pinnacle Travel went into administration in September. The tour operator, which specialised in tailor-made school trips, had 100 booked trips at the time of administration, but none of its clients were abroad as it was the start of school term.

Pinnacle managing director Nigel Parker blamed "exceptional circumstances" for his company's collapse, citing disruption caused by the volcanic ash cloud last year, which grounded hundreds of flights, and escalating air fares.

Fortunately for the kids, neighbouring firm Visions Holiday Group stepped in to buy bookings from the collapsed travel operator, which allowed the trips to go ahead.

At the time, Pinnacle's administrator Antony Batty & Co said schools would be offered the choice of a refund or continue with their bookings through Visions Holiday Group. Those travelling by air had to pay again and claim back the original payment through Atol. The coach were covered by the Abta protection.

Holidays 4 U
Another Sussex-based company, which also traded as Aegean Flights, went into administration in August, due to "difficulties faced by the travel industry during 2010 and 2011, as a result of the economic downturn."

Holidays 4 U, which specialised in charter flights and package holidays to Turkey, had 13,000 holidaymakers abroad at the time of collapse, causing mass panic in resorts in Bodrum and Dalaman. David Clover, a spokesperson for ATOL, said: "There is never a good time for a travel firm to fail; unfortunately the height of summer is the worst possible time. "

Yet travelers were not stranded – the Civil Aviation Authority (CAA) organised "rescue" flights to largely follow the original schedule. The CCA assured that passengers would not have to pay extra for flights or accommodation – but if they were asked to pay for extended stay in accommodation due to rescheduled flights they should send a claim to the CAA on their return home for refund.

The further 50,000 customers with existing bookings for future travel had their flights cancelled. They were advised not turn up at the airport and instead contact the CAA to start the process of claiming a refund – which could take several months to complete.

Unfortunately not all customers are eligible for a refund. Those that booked their trip independently – buying flights through Aegean Flights and sourcing accommodation separately - are likely to find that the hotelier or villa owner will not issue a refund.

Protect against travel firm collapses
Unfortunately, when tour operators collapse, most holidaymakers face the same blight as Holidays 4 U customers rather than being able to continue travel on like the lucky school kids with trips through Pinnacle Travel.

This means disappointment, last minute rearranging and an frustrating indefinite wait to get your money back - so how can you avoid booking with company that may hit difficulty in the first place?

1. Ask for ATOL
Always check the company you are booking with is registered with Atol. It is part of the CAA and a legal requirement that travel companies and tour operators have to comply with if they sell air holidays.

It ensures you are financially protected and protects you from being stranded abroad by carrying out checks on the tour operators and travel organisers it licenses. If a tour operator goes out of business, the CAA will ensure you do not lose the money you paid over, or if you're abroad, arrange for you to finish your holiday and fly home.

2. Beware the dangers of DIY
More and more travelers are opting for DIY trips and booking each component separately – yet this does not offer the same protection through ATOL as a package holiday. For example, if an airline goes bust during your trip, you may have to make your own arrangements to get home at extra cost. Equally, if an airline fails before you are due to travel, you may struggle to reach your booked accommodation and likely lose the money you have paid.

3. Insure against disaster
Travel insurance is always vital, but a comprehensive policy is even more important if you take the DIY route. Choose cover that includes airline insolvency and any possible indirect loss as a consequence. Be careful because many policies don't give this cover, while others limit the amount you can claim or have exclusions, so read the small print.

4. Pay on credit card
Paying for your trip by credit card gives you extra protection under Section 75 of the Consumer Credit Act. This ensures that when you pay more than £100, the credit card provider is jointly liable with the company if it fails to deliver the service you have paid for.

5. Research, research, reseach
Skymasters Travel Ltd, which went into administration earlier this month, has a whole forum of scathing reviews about missing tickets and lost monies on Tripadvisor.com – so it pays to do your research before handing over your hard earned cash to a tour operator.

When you do book, always get a confirmation email or letter, and reference number. If have reason to be concerned, contact the airline directly to confirm your booking.
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