178-Year Thomas Cook Collapses: Here's Why
Zacks Investment Research | Sep 24, 2019 08:48AM ET
Thomas Cook, a giant in the travel business collapsed on Sep 23, leaving thousands of tourists stranded on foreign soil and staff jobless. The huge debt burden and the changing dynamics of travel and tourism are the reasons behind the company’s falls. The United Kingdom’s administration has authorized airlift to bring back holidaymakers while the company waits to be liquidated.
178-Year Old Company Falls
On Sep 23, the 178-year old pioneer in the tours and travel industry, Thomas Cook Group plc (OTC:TCKGY) collapsed, leaving nearly 150,000 United Kingdom holidaymakers stranded overseas and 21,000 staff from across Europe jobless.
Thomas Cook was dealing with a 1.7 billion pound debt burden and was in talks with the strategic partner Fosun International Limited and other banks and lenders. But things took a different direction at the 11th hour as the company appealed for an additional 200 million pounds to fund its winter deficits and pay hotels in advance for summer packages.
But the lenders backed out from the deal. The company then approached the ministers for a bailout, where foreign secretary, Dominic Raab made it clear that the government will not “systemically step in” unless funding Thomas Cook would benefit the nation. Hence, all doors for the giant closed and it had no other option but to enter into compulsory liquidation.
The stranded tourist whose flights were canceled and hotels were asking to pay immediately got some relief from the Atol scheme of Thomas Cook as it guaranteed their bookings. This scheme ensures that package holders get their accommodation and return flights in case the company collapses.
The government and U.K.’s Civil Aviation Authority (CAA) has initiated an airlift, codenamed Operation Matterhorn to bring back holidaymakers home.
Competitors Reap Profit
As soon as the news of Thomas Cook’s liquidation flashed, its competitors rose on the stock market and earned huge profit from high demand of flight tickets.
The Anglo-German airlines TUI AG (OTC:TUIFY) shares soared 8.4%, while easy Jetplc’s Original post
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