Saturday, 28 September 2019

Don't just book it...

From The Torygraph:

As many as 150,000 Thomas Cook passengers have been left stranded abroad awaiting repatriation after the travel giant ceased trading.

The company was unable to secure the extra £200 million needed to keep the business afloat following a full day of crucial talks with the major shareholder and creditors on Sunday, leaving thousands of travel plans in chaos.

This morning, the last Thomas Cook flights landed in the UK, with staff in tears and passengers coordinating a 'whip round' of donations. Transport Secretary Grant Shapps said dozens of charter planes, from as far afield as Malaysia, had been hired to fly customers home free of charge and hundreds of people were working in call centres and at airports.

I really don't get it.

Thomas Cook (not sure which bits, the corporate structure is unclear to me) went bankrupt and the administrators pulled down the shutters. Sacked their staff, cancelled future flights etc.

This leaves lots of people who have to get home somehow. A lot of them ended up paying extortionate ticket prices to get home. This illustrates my point that a large part of airline ticket prices is pure rent. They could get away with it because of temporary scarcity. Thomas Cook's jets were parked somewhere, their slots left unused with all their pilots and crew out of work - while planes and crews "from as far afield as Malaysia" were being hired at huge cost. Why not use what's nearest to hand?

'Somebody' has to pay for the stranded passengers to get home. For the purposes of this discussion, it does not matter whether that is the passengers themselves, their holiday insurance companies, ATOL, the UK government. And that cost should be kept as low as possible.

My question is, why didn't the UK CAA or ATOL simply chip in for one or two week's operating costs, long enough to get everybody home? That would be a lot less hassle than sorting out a hundred thousand individual insurance/compensation claims (and "hundreds of [extra] people... working in call centres and at airports"). It would work out far cheaper for the 'somebody' who ends up footing the bill, that saving being equal and opposite to the super-profits/rents which surviving airlines have just collected, plus the reduction in admin and hassle for all concerned.


Tim Worstall said...

I asked the CAA about this. Why aren't they using the T Cook planes to do the repatriations?

Just got something about how "the assets belong to the administrators, up to them" stuff.

Mark Wadsworth said...

TW, thanks. So even the CAA doesn't know.

Andrew Carey said...

The aircraft don't belong to Thomas Cook - but to lessors. They might be a handful of exceptions. So the lessor is entitled to have them back.
Your point seems to be whether it would be cheaper to keep the nominal branded airline running with the lessor likely demanding a higher price from their new temporary contract with the CAA as they know the obligations that fall on the CAA, than the current set up where the CAA charter planes.
I might be wrong, and your point instead is to keep Thomas Cook going as an existing business for the short term, albeit one that is not permitted to take on new customers. That involves government financing and temporarily running Thomas Cook as an existing business short term.
This seems to reduce down to comparing
1. Government running things versus
2. Government paying for things
I prefer 1.
Massive simplification of course

Mark Wadsworth said...

AC, sure, the administrators will have to pay another two weeks' worth of leasing instalments. The finance companies would prefer that to getting nothing.

I didn't mean the 'government' should run it. They'd probably be awfully bad at it.

I meant that...

1. There is one group who will have to pay for all this (some combination of passengers, insurance companies, ATOL, government). This group has an interest in keeping costs as low as possible.

2. There is one group ideally placed to continue running things for two weeks - that is Thomas Cook - they have the landing slots, the timetables, the passenger lists, the pilots and flight crew etc. They have paid most of their fixed costs, so only need to be paid the marginal costs, which are about £50 - £100 per passenger.

Therefore it's cheapest and smoothest if group 1 sub-contracts the whole 'getting passengers home' thing to group 2. The government, insurance companies and ATOL can argue how to split the bill afterwards. That's a small number of parties who are under no particular time pressure, unlike some poor couple who both need to be back at work by next Monday.