Travel boss: Stop fatcats raiding cash for holidays
Trailfinders founder warns rash spending is putting firms and families in peril
HOLIDAYMAKERS will face more Thomas Cook- style collapses unless travel firms are banned from spending income from customer bookings on fatcat pay and debt-fuelled deals, a travel mogul has warned.
Mike Gooley, the founder and chairman of Trailfinders, has hit out at ‘impotent and flawed’ rules that let travel agents ‘embezzle’ customers’ money to meet everyday running costs.
Gooley, who is worth more than £400 million, attacked regulations that allow firms such as Thomas Cook to spend their income from bookings on paying staff, bankrolling executives and funding ill-fated expansion plans.
In a letter to the boss of the aviation regulator, Gooley called for firms to be forced to ‘ringfence’ money owed to airlines, hotels and the other firms.
Gooley, 82, whose company already sets this cash aside, believes such practices would mean fewer companies run into trouble. They would also safeguard the travel plans of holidaymakers as their trips would still be paid for – even if their booking firm collapses. This would save taxpayers having to cover repatriation and refunds.
Any running costs faced by a booking agent would have to be covered using the margin added by the agent as a fee on top of the cost of a holiday package.
Gooley’s intervention will pile pressure on the Government and the Civil Aviation Authority, which is due today to complete its programme to bring home 150,000 Thomas Cook customers who were stranded abroad.
The Mail on Sunday understands regulators are due to enter talks with the Government in the coming days as they seek to prevent another crash. Gooley’s proposals could form part of the talks.
Gooley, who set up Trailfinders almost half a century ago, claims Civil Aviation Authority boss Richard Moriarty avoided introducing these changes before Thomas Cook collapsed because the firm was already dependent on using booking money to ‘stay afloat’.
Thomas Cook customers and many of its 9,000 staff have been angered by revelations that bosses – who built up £ 1.7 billion of debt in recent years through doomed takeover deals and financial restructurings – were paid millions of pounds.
When the firm went bust late last month it barely had enough cash to last through to October.
Hundreds of thousands of customers were stranded abroad and the company was unable to pay compensation for cancelled future holidays. The CAA had to step in to launch the UK’s largest ever peacetime repatriation programme.
The costs of the return flights and customer refunds are being covered by the Air Travel Organisers’ Licensing (Atol) protection scheme – which is funded by a levy on travel agents – and the taxpayer. The Government could be left sharing a bill of £500 million.
Atol ensures that travellers are not stranded in foreign countries or left out of pocket if t heir travel company closes. Firms with Atol licences pay £2.50 per passenger booking into the CAA’s Air Travel Trust Fund. In a letter to Moriarty, Gooley described the Atol scheme as ‘misguided since its inception’. He wrote: ‘The pipeline funds generated by innocent travellers are not in any way ringfenced.
‘ All other similar transactions in society are rigidly controlled and regulated while travel has always been allowed to misappropriate these future funds and use them to meet general and current running costs.
‘ Embezzlement is not too harsh a description of this common practice which without regulation fuels both the frequency and extent of the misery caused by undercapitalised operators when their business plan fails.’
Gooley, whose company has annual revenues of more than £700 million, added: ‘The CAA is surely now obliged to implement the silver bullet urgently.’