Travel agent Thomas Cook saw its share prices plummet last week, as the company announced it needed more money from its lenders to stay afloat.
The travel agent, a staple of the British travel industry for over a hundred years, reportedly has debts of over £900 million. Shares in the company fell by 75% last week, after it announced that it was holding talks with banks.
Thomas Cook was able to secure extra funding, and received a £200 million cash injection on Friday. This boosted shares by 23% this week, although they are still down by 88% since January.
So why is Thomas Cook in such trouble? Many businesses are feeling the financial pinch at the moment, with less money being spent by consumers in general.
But Thomas Cook has been further hampered by the political uprisings in the Middle East and Northern Africa, as well as extreme flooding in Thailand.
There is also the fact that many people are now shying away from travel agents. Using a travel agent to book all aspects of a holiday can be a good way to save money. But many people are opting for a do-yourself holiday, arranging each aspect of their trip individually in a bid to save cash.
This, coupled with the seasonal low point for Thomas Cook in terms of cash levels, make this an uncertain time for the firm.
These financial difficulties have led to a lot of people losing confidence in Thomas Cook. An advertising campaign was launched this week to try and counteract this lack of confidence and boost sales.
But this is unlikely to be enough to reassure a cash-strapped public. Thomas Cook has promised that all existing holiday bookings are protected, but those who have only booked flights will not be protected by the ATOL scheme.
The news of Thomas Cookís financial woes highlights an important point for holidaymakers ñ what happens if the holiday company you are using goes bustIt is an issue that many people will not have considered. As consumers, we rarely think about the financial stability of the businesses we use. We just think that if we are spending money with them, surely everyone is.
But in this financial climate it is not just individuals who are struggling ñ businesses are too. But there are several steps you can take to ensure you are protected if your holiday company fails.
This is a scheme that was set up by the Civil Aviation Authority (CAA) that is designed to help customers if a travel organiser or tour operator goes out of business.
This is a great scheme as you do not have to pay extra for the protection, but you are covered if anything goes wrong.
So if your tour operator goes out of business before you are due to fly, you will receive a refund for your holiday. Also, if your holiday company goes bust while you are abroad, the ATOL scheme will ensure you can finish your holiday and get an alternative flight home.
Most travel companies are ATOL protected, but double check that you will be covered before you book. It is also worth noting that the ATOL scheme does not cover do-yourself holidays.
So while this may be the cheaper option, you could be left to make your own arrangements should something like your airline go out of business.
If you are arranging a DIY holiday, or even if you are using a tour operator, ensure that you have travel insurance in place.
It is not just a company going bust that can put a stop to your holiday. Anything from natural disasters to terror attacks or unannounced strikes can lead to (potentially expensive) delays.
Most travel insurance plans will offer some form of cancellation or trip delay cover. Many holiday companies may offer a refund for the delay or cancellation of your holiday, but not the full amount you paid for the holiday.
Cancellation and trip delay cover mean your insurer will pay the difference, so you will get a full refund.
To make sure you will be covered in the event of an airline or holiday company going out of business, read the policy carefully before you buy. You can compare travel insurance with Money Expert.
Each policy will cover different eventualities, so double check you are covered for your needs. Most cancellation clauses will also cover you if you yourself need to cancel the holiday for any reason.
But it is worth remembering to think about when you want your travel insurance policy to start. If you opt to start it from the very beginning of your holiday, you will not be covered if anything happens prior to that date.
It may be more expensive, but consider starting your policy from the day you book your holiday. This way you will be covered if anything happens to you or the holiday provider before the start of your trip.