- Aviation Blog
- September 23, 2023
Why Thomas Cook Collapses Unexpectedly
Thomas Cook Group Plc collapsed under a pile of debt after talks with creditors failed, forcing the British government to hire charter planes to bring thousands of the 178-year-old travel company’s customers back home.
The company filed for administration early Monday after eleventh-hour negotiations to raise additional funding failed to result in a deal. The move saw all bookings, flights and holidays with Thomas Cook canceled, sparking panic online among travelers. In what it called the “largest repatriation in peacetime history,” the government said it would work to return all those booked to come back to the U.K. over the next two weeks free of cost.
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The collapse spells the demise of what is one of the the U.K.’s best-known brands, and caps months of talks with Thomas Cook’s investors, led by Fosun Tourism Group. The Chinese firm, which owns the Club Med resort chain, proposed a $1.1 billion bailout in exchange for control of London-based Thomas Cook’s tour operations and a minority stake in its airline. Last week, the tour operator said it needed 200 million pounds ($250 million) more, leading to the rapid unraveling of its rescue prospects.
“Although a deal had been largely agreed, an additional facility requested in the last few days of negotiations presented a challenge that ultimately proved insurmountable,” said Chief Executive Officer Peter Fankhauser.
The company is one of the most high-profile casualties of the travel business’ decades-long shift online and the malaise affecting the European holiday market. For decades, tour operators such Thomas Cook and Germany’s TUI AG thrived by offering package holidays to sun-starved Europeans. But the rise of discount airlines and web distribution have squeezed profits in an industry that is highly seasonal and prone to shocks from terrorism to political turmoil.
What went wrong?
Thomas Cook had secured a £900m rescue deal led by its largest shareholder Chinese firm Fosun in August, but a recent demand from its banks to raise a further £200m in contingency funding had put the deal in doubt.
Fosun said in a statement: “We extend our deepest sympathy to all those affected by this outcome.”
The holiday company spent all of Sunday in talks with lenders trying to secure the additional funding and salvage the deal, but to no avail.
Thomas Cook has blamed a series of issues for its problems, including political unrest in holiday destinations such as Turkey, last summer’s prolonged heatwave and customers delaying booking holidays because of Brexit.
Speaking to BBC News from Manchester airport, travel expert Simon Calder said Thomas Cook “wasn’t ready for the 21st Century”.
“Now everybody can pretend they are a travel agent. They’ve got access to all the airline seats, hotel beds, car rentals in the world and they can put things together themselves.
Mr Calder, travel editor at The Independent, added that planes at the airport began to be impounded shortly after 00:00 BST.
While the company was closing shops to try and cut costs, closing 21 in March, it still had more than 500 outlets, bringing large costs compared to online competitors.
In another sign of its slow progress in mending its finances, it only stopped dividend payments to investors in November.
Thomas Cook has blamed a series of issues for its problems, including political unrest in holiday destinations such as Turkey, last summer’s prolonged heatwave and customers delaying booking holidays because of Brexit.
While the company was closing shops to try and cut costs, it still had more than 500 outlets, bringing large costs compared to online competitors.
In another sign of its slow progress in mending its finances, it only stopped dividend payments to investors in November.
Thomas Cook UK Plc and associated UK entities have entered Compulsory Liquidation and are now under the control of the Official Receiver.
The UK business has ceased trading with immediate effect and all future flights and holidays are cancelled.
A dedicated support service is being provided by The Civil Aviation Authority to assist customers currently overseas and those in the UK with future bookings.
Please visit: thomascook.caa.co.uk for further information.