Thomas Cook: Is the Holiday Operator a Relic of the Past?

Thomas Cook has been soaring through the headlines recently. This article is a quick and simple breakdown of what is going on.

If you wish to find out more information about the matter, I have provided links to useful articles throughout.

What is Thomas Cook?

The tour operator company was first founded in 1841 by yes, you’ve guessed it…Thomas Cook.

The former Baptist preacher founded the company in an attempt to help the working class escape from alcoholism – a widespread problem amongst British society during the 19th century. Cook utilised the new British railway system by offering passengers train journeys for a shilling a head, providing the working class with a revolutionary and affordable opportunity to travel. Over time, the business expanded into the 94-plane-fleet that we know it to be now.

This is only a brief history, if you wish to find out more then click here.

Image courtesy of BBC News.

Where did it all go wrong?

While a multitude of factors led to the company’s troubles, here are some of them:

  • Outdated business plan: Unsurprisingly, consumer trends have changed since 1841. With the 21st century being the age of the internet, the world wide web is now the go-to source for holiday bookings. Thomas Cook however, failed to adapt their business plan to this change and instead continued to invest in their position on the crumbling High Street. Meanwhile, the company’s low-budget competitors such as Rynair focussed on investing in their digital presence.
  • Debt: according to a witness statement by chief executive Peter Fankhauser, the company’s debt amounted to £3.1 billion!
  • Brexit: this factor is perhaps slightly more ambiguous than the others. Arguments have been made that the uncertainty of Brexit led to a lack of confidence amongst the British public to spend money on holidays abroad. Added to the fact that the pound sterling is nearly 1:1 with the euro right now, it is possible that Brexit also had some input on the collapse of the travel giant.
  • ‘Staycations’: Let’s be honest, ‘sunny’ is definitely not a word that we would use to describe the UK. It never has been, and probably never will be. Unsurprisingly, the British summer heatwave resulted in many consumers choosing to stay at home and basking in the (albeit rare) British sunshine rather than dishing out thousands of pounds for a holiday abroad. Understandable to the consumer, but catastrophic to the travel industry. It could be argued that the British heatwave was the final nail in Thomas Cook’s coffin.

In a desperate bid to save the company, Thomas Cook directors had asked the Government to loan them £200 million*. The Government refused.

*Some reports say that Thomas Cook had asked for £250 million. The exact amount has not been confirmed.

If you wish to find out more, then please take a look at this article.

What is the socioeconomic impact of Thomas Cook’s liquidation?

Let’s do a quick bit of maths.

Thomas Cook has over 21,000 staff worldwide – 9000 of which are from the UK. So:

9000 jobs = 9000 people paying tax and National Insurance.

Therefore, if 9000 people are made redundant, then the UK Government will be losing out on a quite a lot of taxes. Simple, right?

No. The problem is two-fold.

Two words: unemployment benefits.

If 9000 people are made redundant, then that is an 9000 more people added to the already crippling amount of citizens that the Government has to pay unemployment benefits to. That is a lot of money…

There is also another socioeconomic problem. As the travel company has ceased trading with immediate effect, 150,000 Britons have been left stranded abroad. According to an article on the BBC, the UK Government has commenced Operation Matterhorn in which they have chartered 45 jets to bring customers home. The jets will fly 64 different routes. Once again, that is a lot of money.

Are you starting to see a trend here?

Why did the Government refuse to help?

Quite frankly, it seems that the cost of the aftermath of Thomas Cook’s liquidation outweighs the amount that the Government would have had to pay to bail out the travel agent. Therefore, why did the Government refuse to help?

Transport Secretary Grant Shapps justified the Government’s decision, arguing that the money “would have kept them [Thomas Cook] afloat for a very short period of time and then we would have been back in the position of needing to repatriate people in any case.” Whether this assumption is accurate or not is entirely a can of worms alone, but the public has made their opinion extremely clear.

A petition has already commenced as an attempt to save the company, amassing over 145,000 signatures. The petition is flooded with comments from nostalgic Thomas Cook fans, outraged by the Government cherry-picking who and who they do not wish to bail out. Many members of the public are in particular speaking out against the Government’s loan to RBS during the financial crisis of 2008.

Some of the comments from the petition comment section.
Names have not been shown for privacy reasons.

What happens now?

In short, we don’t know…but when do we?

According to an article on Legal Week, a group of firms including Ashurst, Reed Smith and Latham & Watkins will be assisting on the restructuring of Thomas Cook.

Furthermore, Virgin Atlantic has made an announcement that they will be offering jobs to Thomas Cook employees. Whether this is a marketing strategy or a genuine attempt to alleviate the situation is debatable. In fact, it is probably both. Nevertheless, it is great to see that efforts are being made to reduce the impact of the largest peacetime repatriation in the UK.

Only time will tell the rest…

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