Thomas Cook - liquidation law
Discussion
Not really sure where to ask this, asked it in a TC thread but went unanswered.
Why was TC forced to shut down immediately? When I worked for a leisure company that went bust, most of it kept trading and got sold on. Trafalgar House kept tradi g for a while, so did BHS and many others.
It would have made sense to at least keep the company going until the people on holiday were brought back.
Yesterday on the news the staff who flew back said they would not be paid, who paid for the fuel, landing fees, insurance and so on?
A cousin who works at Faro Airport told me that there were still Thomas Cook aircraft flying and some outlets that belong to the group are still operating, in Poland for example, how?
Why was TC forced to shut down immediately? When I worked for a leisure company that went bust, most of it kept trading and got sold on. Trafalgar House kept tradi g for a while, so did BHS and many others.
It would have made sense to at least keep the company going until the people on holiday were brought back.
Yesterday on the news the staff who flew back said they would not be paid, who paid for the fuel, landing fees, insurance and so on?
A cousin who works at Faro Airport told me that there were still Thomas Cook aircraft flying and some outlets that belong to the group are still operating, in Poland for example, how?
'Keeping the Fleet Flying' long enough to repatriate passengers seems like a good idea and is considered in the Airline Insolvency Review published earlier this year ( https://assets.publishing.service.gov.uk/governmen... ). It was alluded to by the Transport Secretary today in parliament. The document is fairly lengthy but looks worth a read 
ConwyC said:
Not really sure where to ask this, asked it in a TC thread but went unanswered.
Why was TC forced to shut down immediately? When I worked for a leisure company that went bust, most of it kept trading and got sold on. Trafalgar House kept tradi g for a while, so did BHS and many others.
It would have made sense to at least keep the company going until the people on holiday were brought back.
Yesterday on the news the staff who flew back said they would not be paid, who paid for the fuel, landing fees, insurance and so on?
A cousin who works at Faro Airport told me that there were still Thomas Cook aircraft flying and some outlets that belong to the group are still operating, in Poland for example, how?
An Administrator funds and runs a business whilst finding a buyer or closing down the company and trying to make a return on its money. In the case of TC the the complexity of the group (airline company, travel agent, hotel operator) and size of its debt was simply too big an ask/too unattractive for an Administrator to take on.Why was TC forced to shut down immediately? When I worked for a leisure company that went bust, most of it kept trading and got sold on. Trafalgar House kept tradi g for a while, so did BHS and many others.
It would have made sense to at least keep the company going until the people on holiday were brought back.
Yesterday on the news the staff who flew back said they would not be paid, who paid for the fuel, landing fees, insurance and so on?
A cousin who works at Faro Airport told me that there were still Thomas Cook aircraft flying and some outlets that belong to the group are still operating, in Poland for example, how?
Fuel, landing fees etc will be debts which the creditors will attempt to settle with the liquidators. It's not unheard of for airports to issue lien's over aircraft and impound them until fees are settled but as you can imagine that gets very complicated eg. if the airline is leasing the aircraft.
Hmm 6 posts in and you're already asking questions that rank 11 on the Richter Scale 
There are a number of reasons why it's challenging for them to continue trading - the main ones being (and I will forget something):
1. The airline doesn't own (all) of the airplane assets - therefore it would have to use the lease companies assets in order to effect the repatriation. In the UK you cannot currently enforce a 'right of use' so to speak. There will be a number of lease & finance companies (in the broadest sense so incl banks) involved so getting them all to agree is a fruitless exercise.
2. There's currently a whole heap of legislation re licence to fly and who can fly what. Currently that cannot easily be flexed, although the CAA have indicated some movement but in essence the licence is terminated in the event of an insolvency so there's no longer a 1 stop shop allowing them to fly.
3. Insurance - nightmare.
4. You try landing a plane at an airport to whom you owe money - you may not be getting it back in a hurry and can't take the risk, particularly given point 1.
5. Staff - OK this is worst case scenario - but imagine all your pilots knowing they will be out of a job very soon. One of them takes that very badly. Hate to sound cold, but put simply the consequences could be far worse than a sales manager going off the rails if you're using those pilots to fly people back.
6. This wasn't an administration - it was a Compulsory Liquidation appointment of the Official Receiver (essentially as it's such a risky insolvency no single firm would take it on as it could put their entire business at risk). The OR has appointed Special Managers to help them. To be fair, from the accounts I have heard, the OR is actually doing a half decent job. Therefore Administration solutions are not available (although Monarch was an Administration and followed a similar path).
As I said in the other thread - in order for a repatriation to be successful you need to get 1-5 all working well for you (as well as the other issues I've forgotten about
). If they don't it all goes to pot and you get the blame. Or you could subcontract the whole lot out to a solution that's relatively tried and tested (and gives you someone else to blame). If you're the CAA (who I think are doing a sterling job overall in this by the way, much as they did with Monarch) which route would you go down.
It's great in theory to allow an orderly wind down - at the moment it's almost impossible, if legislation changes it will reduce to simply extraordinarily challenging.
Why can some of the businesses keep going... The appointment wasn't over every company in the Group - you don't have to put the whole lot down. It's common in a large complex group insolvency to put the holding company into insolvency but allow one/more subsidiary to trade normally if you can sell it solvently. I presume, but don't know, that could be the case here.
There are a number of reasons why it's challenging for them to continue trading - the main ones being (and I will forget something):
1. The airline doesn't own (all) of the airplane assets - therefore it would have to use the lease companies assets in order to effect the repatriation. In the UK you cannot currently enforce a 'right of use' so to speak. There will be a number of lease & finance companies (in the broadest sense so incl banks) involved so getting them all to agree is a fruitless exercise.
2. There's currently a whole heap of legislation re licence to fly and who can fly what. Currently that cannot easily be flexed, although the CAA have indicated some movement but in essence the licence is terminated in the event of an insolvency so there's no longer a 1 stop shop allowing them to fly.
3. Insurance - nightmare.
4. You try landing a plane at an airport to whom you owe money - you may not be getting it back in a hurry and can't take the risk, particularly given point 1.
5. Staff - OK this is worst case scenario - but imagine all your pilots knowing they will be out of a job very soon. One of them takes that very badly. Hate to sound cold, but put simply the consequences could be far worse than a sales manager going off the rails if you're using those pilots to fly people back.
6. This wasn't an administration - it was a Compulsory Liquidation appointment of the Official Receiver (essentially as it's such a risky insolvency no single firm would take it on as it could put their entire business at risk). The OR has appointed Special Managers to help them. To be fair, from the accounts I have heard, the OR is actually doing a half decent job. Therefore Administration solutions are not available (although Monarch was an Administration and followed a similar path).
As I said in the other thread - in order for a repatriation to be successful you need to get 1-5 all working well for you (as well as the other issues I've forgotten about
). If they don't it all goes to pot and you get the blame. Or you could subcontract the whole lot out to a solution that's relatively tried and tested (and gives you someone else to blame). If you're the CAA (who I think are doing a sterling job overall in this by the way, much as they did with Monarch) which route would you go down. It's great in theory to allow an orderly wind down - at the moment it's almost impossible, if legislation changes it will reduce to simply extraordinarily challenging.
Why can some of the businesses keep going... The appointment wasn't over every company in the Group - you don't have to put the whole lot down. It's common in a large complex group insolvency to put the holding company into insolvency but allow one/more subsidiary to trade normally if you can sell it solvently. I presume, but don't know, that could be the case here.
It’s a pretty simple concept. At the time of liquidation/administration, the liquidator/administrator has to look after the interests of the creditors. In some of the examples given, the administrators will have looked to sell businesses, without damaging the brand/goodwill. And would therefore be willing for those companies to carry on trading and continuing to fund expenses. For an airline, unless a particular business is to be sold which relies on its value involving passengers getting back, the creditors are very rarely going to pay for repatriation. A), because of the direct cost, and b), the indirect costs (having to pay the arrears for aircraft leasing, airports, ground staff etc etc). Commercially, it’s also highly likely that any aircraft that are leased, terminate those leases on insolvency and the aircraft return to the lessor.
This is why the government carried out a review of airline insolvency, which recommended a formal repatriation scheme, paid for by passengers.
In a nutshell it’s all about whether creditors of the company are willing to stump up (in the hope that the costs will pay for themselves in any sale of the business).
This is why the government carried out a review of airline insolvency, which recommended a formal repatriation scheme, paid for by passengers.
In a nutshell it’s all about whether creditors of the company are willing to stump up (in the hope that the costs will pay for themselves in any sale of the business).
Alpinestars said:
It’s a pretty simple concept. At the time of liquidation/administration, the liquidator/administrator has to look after the interests of the creditors. In some of the examples given, the administrators will have looked to sell businesses, without damaging the brand/goodwill. And would therefore be willing for those companies to carry on trading and continuing to fund expenses. For an airline, unless a particular business is to be sold which relies on its value involving passengers getting back, the creditors are very rarely going to pay for repatriation. A), because of the direct cost, and b), the indirect costs (having to pay the arrears for aircraft leasing, airports, ground staff etc etc). Commercially, it’s also highly likely that any aircraft that are leased, terminate those leases on insolvency and the aircraft return to the lessor.
This is why the government carried out a review of airline insolvency, which recommended a formal repatriation scheme, paid for by passengers.
In a nutshell it’s all about whether creditors of the company are willing to stump up (in the hope that the costs will pay for themselves in any sale of the business).
It's one of those simple concepts that isn't so simple in reality. For example, TC is a group it isn't just an airline its an airline, a retailer and a hotel operator. Aircraft leases might well get terminated on insolvency but if the aircraft has been impounded at an airport and/or a lien executed against fees owing then it gets sticky between the creditor, the leassor and the leassee, and so on...This is why the government carried out a review of airline insolvency, which recommended a formal repatriation scheme, paid for by passengers.
In a nutshell it’s all about whether creditors of the company are willing to stump up (in the hope that the costs will pay for themselves in any sale of the business).
48k said:
It's one of those simple concepts that isn't so simple in reality. For example, TC is a group it isn't just an airline its an airline, a retailer and a hotel operator. Aircraft leases might well get terminated on insolvency but if the aircraft has been impounded at an airport and/or a lien executed against fees owing then it gets sticky between the creditor, the leassor and the leassee, and so on...
Absolutely. But it is simple. If the creditors want to pay all the costs, including arrears or whatever is negotiated with suppliers, repatriation would happen. But in this case, it’s not in their (commercial) interests to do so. As an aside the three borrowers and the main airline trader and main tour operator have been put into liquidation. So it’s not just the borrowers/holding company. The debt was of course cross guaranteed. I understand the German and Scandi sub groups were ring fenced, and aren’t in liquidation.
48k said:
It's not unheard of for airports to issue lien's over aircraft and impound them until fees are settled but as you can imagine that gets very complicated eg. if the airline is leasing the aircraft.
Back in the day a Ryanair pilot (I think it may have been Cathal Ryan, the owner's son) had to pay for a plane's fuel on his personal credit card because Ryanai's credit was on stop.So said:
48k said:
It's not unheard of for airports to issue lien's over aircraft and impound them until fees are settled but as you can imagine that gets very complicated eg. if the airline is leasing the aircraft.
Back in the day a Ryanair pilot (I think it may have been Cathal Ryan, the owner's son) had to pay for a plane's fuel on his personal credit card because Ryanai's credit was on stop.eliot said:
Out of interest how much does it cost to fill up say a 737 or a 380?
Ballpark 70p a litre plus vat, 26,000 litres to fill a 737. Bear in mind you don't brim the tanks, you'll land with fuel on board and you uplift what you need to get you to the next destination plus reserves (or the one after that if you're stopping en route without an uplift).
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