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Thomas Cook collapses after rescue talks fail
23rd Sep 2019 07:34
(Sharecast News) - Travel operator Thomas Cook finally collapsed on Monday as last-minute talks to save the industry giant failed, leaving 600,000 holidaymakers stranded around the world and putting 22,000 global jobs at risk.
The UK's Civil Aviation Authority (CAA) said the world's oldest travel company had "ceased trading with immediate effect". More than 150,000 Britons will be repatriated by the UK government in the biggest operation of its kind since World War 2 at an estimated cost of £100m.
Planes from other companies have been brought in to ferry holidaymakers home as part of "Operation Matterhorn", which will run a shadow airline following the travel operator's flight schedules.
Chief executive Peter Fankhauser said the collapse was a "matter of profound regret" after an all-day meeting with shareholders at a London law firm ended on Sunday afternoon without a resolution on a deal to find a £200m bridging loan to keep the company afloat.
Thomas Cook was struggling under a £1.7bn debt burden. Despite returning to profit in 2015 under Fankhauser's turnaround plan, the company suffered again in 2018 as the unusually hot UK summer saw many Britons stay at home. It also failed to keep pace with the internet as more travellers chose to book their holidays online and move away from the "all-in-one" expertise offered by specialist operators.
Brexit worries as consumers held off booking big ticket holidays and rising fuel prices also squeezed already thin margins, analysts said on Monday.
MASSIVE AIRLIFT UNDERWAY
The CAA announcement at 0200 BST on Monday was timed to make sure all Thomas Cook aircraft were on the ground.
A dedicated website for Thomas Cook customers -- https://thomascook.caa.co.uk/ -- has been set up by the CAA to provide information.
"If you are currently abroad and your flight was with Thomas Cook we are providing new flights to return you to the UK. These repatriation flights will only be operating for the next two weeks (until 6 October 2019). After this date you will have to make your own travel arrangements. From a small number of locations, passengers will have to book their own return flights," it states.
Markets.com analyst Neil Wilson called the collapse "a great, great pity".
"One wonders how culpable the banks who at the last gap tried to squeeze Thomas Cook for another £200m are in this collapse. Could the refinancing have worked? We'll never know for sure. But ultimately the debt was the symptom of the ailment - Thomas Cook failed because it didn't move with the times," he said.
"The effects will be felt across the sector, not all bad. On The Beach sees a one off hit from helping customers make alternative arrangements and from list margin on cancelled bookings. Meanwhile airlines are firmer today as they should feel the benefit from the abrupt loss of short haul capacity. IAG, Ryanair and EasyJet shares were all trading higher to different degrees. TUI, TC's main competitor, is up over 6% on the open."
AJ Bell investment director Russ Mould said the company failed "because it didn't have the cash flow to reinvent itself to fight off growing competition as so much money was going on debt repayments" as thin margins and higher fuel costs also squeezed the firm.
"Despite having 22m customers, the business only made £250m (in) underlying earnings before interest and tax which equates to about £11 a customer. That's barely anything given the amount of effort involved to run its business and market its holidays."
"Removing Thomas Cook from the holiday equation will see increased demand for other holiday companies and sadly that could result in higher prices for consumers.
The UK's Civil Aviation Authority (CAA) said the world's oldest travel company had "ceased trading with immediate effect". More than 150,000 Britons will be repatriated by the UK government in the biggest operation of its kind since World War 2 at an estimated cost of £100m.
Planes from other companies have been brought in to ferry holidaymakers home as part of "Operation Matterhorn", which will run a shadow airline following the travel operator's flight schedules.
Chief executive Peter Fankhauser said the collapse was a "matter of profound regret" after an all-day meeting with shareholders at a London law firm ended on Sunday afternoon without a resolution on a deal to find a £200m bridging loan to keep the company afloat.
Thomas Cook was struggling under a £1.7bn debt burden. Despite returning to profit in 2015 under Fankhauser's turnaround plan, the company suffered again in 2018 as the unusually hot UK summer saw many Britons stay at home. It also failed to keep pace with the internet as more travellers chose to book their holidays online and move away from the "all-in-one" expertise offered by specialist operators.
Brexit worries as consumers held off booking big ticket holidays and rising fuel prices also squeezed already thin margins, analysts said on Monday.
MASSIVE AIRLIFT UNDERWAY
The CAA announcement at 0200 BST on Monday was timed to make sure all Thomas Cook aircraft were on the ground.
A dedicated website for Thomas Cook customers -- https://thomascook.caa.co.uk/ -- has been set up by the CAA to provide information.
"If you are currently abroad and your flight was with Thomas Cook we are providing new flights to return you to the UK. These repatriation flights will only be operating for the next two weeks (until 6 October 2019). After this date you will have to make your own travel arrangements. From a small number of locations, passengers will have to book their own return flights," it states.
Markets.com analyst Neil Wilson called the collapse "a great, great pity".
"One wonders how culpable the banks who at the last gap tried to squeeze Thomas Cook for another £200m are in this collapse. Could the refinancing have worked? We'll never know for sure. But ultimately the debt was the symptom of the ailment - Thomas Cook failed because it didn't move with the times," he said.
"The effects will be felt across the sector, not all bad. On The Beach sees a one off hit from helping customers make alternative arrangements and from list margin on cancelled bookings. Meanwhile airlines are firmer today as they should feel the benefit from the abrupt loss of short haul capacity. IAG, Ryanair and EasyJet shares were all trading higher to different degrees. TUI, TC's main competitor, is up over 6% on the open."
AJ Bell investment director Russ Mould said the company failed "because it didn't have the cash flow to reinvent itself to fight off growing competition as so much money was going on debt repayments" as thin margins and higher fuel costs also squeezed the firm.
"Despite having 22m customers, the business only made £250m (in) underlying earnings before interest and tax which equates to about £11 a customer. That's barely anything given the amount of effort involved to run its business and market its holidays."
"Removing Thomas Cook from the holiday equation will see increased demand for other holiday companies and sadly that could result in higher prices for consumers.