Image Credit: Adrian Pingstone
Thomas Cook, the world’s oldest travel company, has closed following a failure to secure a rescue deal. The 178-year-old business had needed to find £200 million after its creditor banks suddenly demanded it as part of the rescue. Unable to find the money Thomas Cook ceased trading on 24 September, leaving the UK facing its biggest ever peacetime repatriation effort. Over 600 000 holidaymakers were left stranded, 150 000 of whom were British holidaymakers. Media outlets reported tourists’ alarm at seeing Thomas Cook planes being clamped at airports for failure to pay their airport fees. Some tourists also reported being kicked out of their hotels or being made to pay the difference in charges that had not yet been paid.
The travel company was founded in 1841 in Market Harborough, originally as a train related business,
offering regional day trips out. Before going bust, the company had grown to operate over 94 aircrafts, employed 22 000 staff and had a turnover of £9 billion. It operated in over 19 countries, but often under different subsidiaries, for example the subsidiary company in Germany was known as Condor. While the speed with which the company went under was a surprise, it was well known that Thomas Cook was facing financial difficulties. Earlier this year Citigroup described the company’s shares as “worthless”, while they had been valued at £1.50 just a year earlier.
The company had issued a series of profit warning announcements and reported a loss of £1.5 billion in the first half of the financial year. Although it has to be mentioned that this was largely due to the writing down of value of MyTravel, a part of the Thomas Cook group. The company also had over £1.5 billion worth of debt.
The liquidation of Thomas Cook comes a few months after a similar situation with budget airline Monarch.
Increased competition in the aviation industry with budget airlines like Ryanair and EasyJet has not only squeezed Thomas Cook but also threatened its package holiday market, damaging its revenue. The sudden collapse of the travel firm not only left passengers stranded but staff as well. Viral videos of staff trying to get home spread quickly, with companies such as British Airways facing a backlash as they tried to charge ex-staff $10 000 per ticket. The treatment of staff, including not receiving their last pay check, has raised question marks over Thomas Cook’s executives’ pay. Following the closure national newspapers ran stories calling the former executives “fat cats.”
Protests outside of Parliament were also organised, with one former staff member walking 200 miles to participate. Both Thomas Cook and Monarch had asked the government for financial assistance before going bust. However, this was denied as the government says it cannot step in to save every company that finds itself facing financial hardship.
Transport Minister, Mr Schapps, went on to say on BBC Radio 4’s Today programme: “The company had systemic issues to do with the world of travel which had changed away from high street shops to everyone booking online, and had at one point £1.7 billion of debt.” While Thomas Cook did blame Brexit uncertainty and a weaker pound as reasons why customers delayed booking holidays, it is clear that Thomas Cook had serious debt issues and was a company that was struggling to stay ahead of its costs. But for Thomas Cook’s loyal customer base, staff and hotel partners at its destination this is still devastating news.