Becoming the latest European travel company to fail and leave its customers stranded (who can forget about the collapse of Iceland’s Wow Air back in March?), 178-year-old Thomas Cook collapsed after failing to secure a deal with its creditors, leaving the British government to step in and rescue the as many as 600,000 customers who are reportedly now looking for a ride home.
Thomas Cook CEO Peter Fankhauser apologized to customers “following a decision of the board late last night, a British government receiver has been appointed early this morning…we have not been able to secure a deal to save our business...I know that this outcome will cause a lot of anxiety, stress and disruption.”
Fankhauser explained that while a “deal had been largely agreed, an additional facility requested in the last few days of negotiations presented a challenge that ultimately proved insurmountable.” The company, weighed down by debt, said Friday that it was looking for $369 million in financing over the weekend to avoid going under on Monday.
At the time, the company had a debt burden of £1.25 billion and warned that Brexit-related uncertainties had hurt bookings for summer holiday travel. The firm has also struggled with increased competition from online travel-booking websites like Expedia.
Chinese conglomerate Fosun, Thomas Cook’s biggest shareholder, had considered contributing $560 million to bail out the company earlier this year, but ultimately demurred for reasons that aren’t clear.
All bookings made through the company have been invalidated, the company said. It typically runs hotels, resorts, airlines and cruises for 19 million customers a year in 16 countries.
BREAKING: “We have not been able to secure a deal to save our business” – Chief executive of Thomas Cook Group, Peter Fankhauser apologises to the company’s ‘heartbroken’ staff and customers.
— Sky News (@SkyNews) September 23, 2019
Shares in European airlines and tourism-related companies climbed on the news, with the Stoxx 600 Travel & Leisure Index becoming one of 3 sectors gaining as the broader European share gauge declined.
The UK government is now scrambling to get all of its citizens home safely in what some have called “the largest peacetime repatriation effort in British history,” according to the Sydney Morning Herald. The UK Civil Aviation Authority said Monday that it would be working with the government to bring more than 150,000 British customers home over the next couple of weeks. The UK government runs an insurance program that ensures travelers can return home if a British tour operator goes under while they’re traveling, which is exactly what’s happening with Thomas Cook.
CAA Chief Richard Moriarty told the FT that it had launched “what is effectively one of the UK’s largest airlines, involving a fleet of aircraft secured from around the world.”
“The nature and scale of the operation means that unfortunately some disruption will be inevitable.”
Though the company was reportedly still selling vacation packages late last night and assuring its customers that all flights would continue as normal, passengers waiting at the airport were the first to learn that all operations would be cancelled.
Set to depart from Gatwick Airport, Thomas Cook flight 508 to Dalaman, Turkey was abruptly cancelled early Monday, the first in a string of cancellations at UK and global airports that will ultimately impact one million vacationers, according to the Independent.
Thomas Cook’s collapse resembles that of UK carrier Monarch two years ago. but Thomas Cook is a much bigger firm, and cleaning up this mess will be a much bigger headache for the CAA. Meanwhile, analysts at Bernstein suspect other tour operators could collapse, which would put the market into a bind.
The modern Thomas Cook Group formed in 2007 when the UK’s MyTravel merged with the privately-held Germany-based Thomas Cook to create a tour-company behemoth and promising to hasten consolidation in the tour operating industry.