Thomas Cook: an Overview of the Situation

Imprimir

4/10/2019

After 178 years of existence, the first tour operator's adventure is coming to an end. A look back at the reasons that led to this situation as well as the hotels that will soon be put into liquidation.

While the era of mass tourism is in decline and a more urban and individual form of tourism is emerging, the tour operator was unable to adapt its business model to the new needs of tourists. Complicated political and economic circumstances (Brexit) that led to the fall of the pound combined with a business model based on the use of a single type of multi-purpose aircraft (for business and leisure segments in major and also secondary airports) to cut costs to bring about the bankruptcy of Thomas Cook. Finally, the surge in oil prices dealt the final blow to the company, which mainly owned particularly energy-intensive, ageing aircraft.

Overwhelming operating costs and bad choices

From a micro perspective, the first factor in the decline is the high operating costs due to the maintenance of a large network of brick and mortar shops to date. These stores incur a significant cost through payroll and costs for renting commercial premises. The company has incurred significant debt, particularly following a merger and acquisition transaction at high cost before the crisis (write-off of £1 billion out of £1.5 billion last semester from the acquisition of MyTravel in 2007, a digital player that had almost never been profitable).

A critical situation on the one hand, and a good hotel portfolio on the other

The cessation of activity took effect on Monday, September 23 as a result of negotiations during the weekend of September 21-22 that failed to provide an additional £200 million for the recapitalisation of the company. As a result, 600,000 tourists are grounded in their destination, including 10,000 French and 150,000 British. As for French nationals, "5,000 are covered by travel agencies and 2,000 have tickets on regular airlines, allowing them to return home without any problems," according to René-Marc Chikli, president of the trade union of tour-operating companies in France (SETO). Tourists from the United Kingdom will be cared for by their government through the British Civil Aviation Authority (CAA) as part of Operation Matterhorn, the largest civilian repatriation operation since the Second World War.

As for the hotel business, it will also enter into liquidation. As this division generates profits with well-known brands such as Casa Cook or Cook's Club, it is likely that the group's hotels will find buyers in the coming months.