Thomas Cook collapses: What next and why?

Collapse of world’s oldest travel firm has stranded hundreds of thousands of holidaymakers around the globe

Passengers stranded in Spain's Palma airport faced uncertainty over how they would return from holiday after the collapse of British travel firm Thomas Cook. Video: Reuters

 

Thomas Cook, the world’s oldest travel firm, collapsed on Monday, stranding hundreds of thousands of holidaymakers around the globe and sparking the largest peacetime repatriation effort in British history. The operator closed its office in Dublin back in 2014, and hasn’t provided or sold charter holidays departing from Ireland since then, although it’s likely that some Irish people will be impacted nonetheless, having opted to fly out of the UK with the tour operator.

While the Irish Travel Agents Association say this number is likely to be small, it’s understood that some 4,500 Irish travellers have been impacted by the collapse. Thomas Cook has remained active in Northern Ireland however, with flights operating out of Belfast.

So what happens now and why did it collapse?

Who is affected?

The firm ran hotels, resorts and airlines for 19 million travellers a year in 16 countries, generating revenue in 2018 of 9.6 billion pounds ($12 billion). It currently has 600,000 people abroad, including more than 150,000 British citizens.

Thomas Cook employs 21,000 people and is the world’s oldest travel company, founded in 1841. The company has £1.7 billion of debt.

What happens to tourists?

The British government has asked the UK Civil Aviation Authority to launch a repatriation programme over the next two weeks, from Monday to Oct. 6, to bring Thomas Cook customers back to the UK.

“Due to the significant scale of the situation, some disruption is inevitable, but the Civil Aviation Authority will endeavour to get people home as close as possible to their planned dates,” it said.

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A fleet of aircraft will be used to repatriate British citizens. In a small number of destinations, alternative commercial flights will be used. The Civil Aviation Authority has launched a special website, thomascook.caa.co.uk, where affected customers can find details and information on repatriation flights. For those customers not flying from Britain, alternative arrangements will have to be found. In Germany, a popular customer market for Thomas Cook, insurance companies will coordinate the response.

What is the advice to passengers?

“Customers currently overseas should not travel to the airport until their flight back to the UK has been confirmed on the dedicated website,” the Civil Aviation Authority said.

“Thomas Cook customers in the UK yet to travel should not go to the airport as all flights leaving the UK have been cancelled.”

What did the CEO say?

“I would like to apologise to our millions of customers, and thousands of employees, suppliers and partners who have supported us for many years,” Thomas Cook CEO Peter Fankhauser said. “This marks a deeply sad day for the company which pioneered package holidays and made travel possible for millions of people around the world.”

The liquidation

Thomas Cook said it had entered compulsory liquidation and an order had been granted to appoint an official receiver to liquidate the company. AlixPartners UK LLP or KPMG will be appointed as special managers for the different parts of the business.

Why did it collapse?

Hurt by high debt levels, online rivals and geopolitical uncertainty, Thomas Cook needed another £200 million on top of a £900 million package it had already agreed, to see it through the winter months when it receives less cash and must pay hotels for summer services. The request for an additional £200 million torpedoed the rescue deal that had been months in the making.

Thomas Cook bosses met lenders and creditors in London on Sunday to try to thrash out a last-ditch deal to keep the company afloat. They failed. Under the original terms of the plan, Fosun - whose Chinese parent owns all-inclusive holiday firm Club Med - would give £450 million of new money in return for at least 75 per cent of the tour operator business and 25 per cent of its airline.

Thomas Cook’s lending banks and bondholders were to stump up a further £450 million and convert their existing debt to equity, giving them in total about 75 per cent of the airline and up to 25 per cent of the tour operator business. – Reuters