British Travel Firm Collapses leaving hundreds of thousands stranded

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**Frazzled**

https://www.reuters.com/article/us-thomas-cook-grp-investment/british-travel-firm-thomas-cook-collapses-idUSKBN1W801E?il=0

LONDON (Reuters) - Hundreds of thousands of holidaymakers were stranded on Monday by the collapse of the world’s oldest travel firm Thomas Cook (TCG.L), sparking the largest peacetime repatriation effort in British history.

The liquidation marks the end of a British company that started in 1841 running local rail excursions and grew to pioneer the family package holiday.

Running hotels, resorts and airlines for 19 million people a year, it has around 600,000 people abroad and will need the help of governments and insurance firms to bring them home from places as far afield as Cancun, Cuba and Cyprus.

Thomas Cook’s demise, announced in the early hours of Monday after it failed to secure a deal with creditors or a government bailout, sparked alarm at hotels where some customers have been asked to pay their bills anew by out-of-pocket resort owners.
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“I’m not going to pay for my holiday again,” Englishman David Midson told Reuters, trying to find information at the front desk of a hotel in Roda, Corfu. “I wish I had brought a driving license, because I can’t get a taxi (to the airport).”

As well as its 21,000 employees, the company’s fall hit global booking websites, credit card companies, travel firms using its airlines and British high streets where its travel agents were forced to shut. Major holiday destinations including Turkey and Greece also warned their hoteliers would suffer.

Tour operators selling customers transport, accommodation and excursions in a single package have been struggling for years due to the rise of budget airlines and cheap online competition from the likes of Airbnb.

Some have carved out a niche in specialist trips such as safaris. But Thomas Cook struggled to adapt due in part to a $2.1 billion debt pile built up over a series of ill-fated deals. It had to sell three million holidays a year just to cover interest payments.

The company had agreed a 900 million pound rescue package with its banks and largest shareholder, China’s Fosun (1992.HK), but lenders asked for an additional 200 million pounds to keep it operating through the winter.

In desperate meetings over the weekend, it failed to secure more funds, with the British government also refusing a bailout, judging it was not a good long-term bet.

Second largest shareholder Neset Kockar, a Turkish businessman, said the company would now be sold as a whole or in parts.
EMERGENCY FLIGHTS

Prime Minister Boris Johnson pledged to get stranded British travelers home, another headache for his government as it tries to negotiate a fiendishly complicated withdrawal from the European Union.

**Overread**

Ouch - however with over 2 billion in debt that was always going to be a hard company to bailout; esp if its infrastructure was dated and the internet companies were heavily undercutting them and taking away business. However again we see that their main reason for failing is being left with huge debts to repay - another reason for GW fans to rejoice that GW tends to avoid taking on big loans to fund its operations and expansions.

The 21 thousand jobs is going to be a major blow to the employment though, that's another 20K swelling the seeking job market!

Though when it comes to getting people home you'd think it would be easier/cheaper to just have the government pay for the original flights and such rather than charter a whole fresh slew of flights. Then again I guess other issues such as hotels and such are other concerns and that the long term costs of keeping people "on their holidays" is another great consideration.

**beast_gts**

A shame. There are reports of people being held 'hostage' in their hotels as their bills have not been payed. The government repatriation is called Operation Matterhorn, and "will cost the taxpayer around £100m".

**Overread**

beast_gts wrote:
A shame. There are reports of people being held 'hostage' in their hotels as their bills have not been payed. The government repatriation is called Operation Matterhorn, and "will cost the taxpayer around £100m".

Which probably rounds up to more than £100million, but is less than the £200 that TC needed to stay afloat - plus being important to note that that was only to tide them over the Christmas period and that after the company would still be bleeding money and with £2billion in debt.

**Not Online!!!**

beast_gts wrote:
A shame. There are reports of people being held 'hostage' in their hotels as their bills have not been payed. The government repatriation is called Operation Matterhorn, and "will cost the taxpayer around £100m".

ohh boi, i just had a flashback to my RS:

**Easy E**

I read the title as...

"British Time Travel Film Collapses and strands ...."

That had much more interesting implications..... but this is pretty bad too.

**Jadenim**

The summary on BBC earlier implied that this was another instance where each time the company changed hands in recent years it was bought by “investors” using loans, the debt from which is saddled onto the company. I don’t understand why this is still allowed.

**beast_gts**

Jadenim wrote:
The summary on BBC earlier implied that this was another instance where each time the company changed hands in recent years it was bought by “investors” using loans, the debt from which is saddled onto the company. I don’t understand why this is still allowed.

Because it allows certain people to line their pockets, and they were expecting a government bail-out (and there are now several on-line petitions calling for a bail-out or nationalisation...)

**Frazzled**

Easy E wrote:
I read the title as...

"British Time Travel Film Collapses and strands ...."

That had much more interesting implications..... but this is pretty bad too.

When Doctor Who and Benny Hill go into business...

**Whirlwind**

Overread wrote:
Ouch - however with over 2 billion in debt that was always going to be a hard company to bailout; esp if its infrastructure was dated and the internet companies were heavily undercutting them and taking away business. However again we see that their main reason for failing is being left with huge debts to repay - another reason for GW fans to rejoice that GW tends to avoid taking on big loans to fund its operations and expansions.

£2bn isn't that much relatively here. It's a different industry where the return is a lot slower. Holidays can be booked months to years in advance and many customers only pay very close to the holiday (or staggered). That means that TC have an allocated debt for hotels/flights/transfers etc for every customer that has purchased a holiday but not yet paid. Hence if you have potentially 2-3 years worth of pre-bookings that counts as a debt to some extent and hence with such a large customer base that level of debt is relatively easily achievable if you are making a modest loss on average per holiday.

They did also has a rescue package of £900m agreed but at some cost in terms of share value etc. It wasn't until the relatively late that a group of banks suddenly decided they wanted another £200m which collapsed the deal.

Now you could be generous and argue that they may have done this because of the uncertainty in the £ because of the UK market uncertainty due to (no politics allowed) "the UK deciding to act like an idiot but which issue shall not be named". As such the current risk is that the £ will drop meaning the cost of the winter holidays will become more expensive but that can't be passed onto customers that already have bought the holidays increasing the loss on each holiday.

Alternatively you might argue that the banks deliberately left it to the last minute to deliver a killing blow because they didn't like the deal and preferred to asset strip the company because they think it is more valuable to them that way. This could be argued because the reason for the winter slow down is well known and forecastable so there is no reason to delay the request until the last minute. For example does this not look slightly suspicious:-

https://www.theguardian.com/business/2019/sep/23/hedge-funds-win-big-from-short-selling-thomas-cook-shares

Of course it does not help because of the July weather compounded by the weak £ meant people took shorter UK holidays (and staycations) rather than splash out on a holiday abroad. This meant the summer income didn't materialise just in the same way that many retailers rely on Xmas to cover the rest of the year.

**OrlandotheTechnicoloured**

Very sad, but a bailout would have been crazy, too much debt to make things work long term, and all that would have done was kicked the bankruptcy along the road a few months,

as Whirlwind says it's telling that the banks who were owed a bunch of money thought it was best to get whatever cash back they could via a bankruptcy (and even if it's secured debt I bet they'll be loosing money) rather than letting the Chinese investor put in 900 million quid

**xKillGorex**

After working for Thomas cook for 16 years, this time last year my wife’s position with them was put in to consultation when they closed one of two stores in our town.
After a few stressful weeks she was told her job was safe but another job offer came along that was too good to miss. Even back then we knew the company was on borrowed time.

Glad to say she took the other job but it’s still hard as had old work mates there.

**Grey Templar**

This is apparently the largest peace time peace time repatriation effort in UK history. Its pretty crazy.

Of course whats crazier is that the airline continued to take on customers when they clearly knew that they might not be able to fly them back. You'd think a company in financial collapse would scale back their business to a more sustainable level. Given that this isn't the first time an airline going out business has stranded customers, it seems like airlines should be prevented from booking flights they know they can't guarantee.

**xKillGorex**

Yeah it should be shocking that they would take a booking until the very last minute be collapsing but it’s not. Along with the fact of the bosses walking away with a nice payout to themselves.

Apart from the trouble it’s causing customers once again the the staff that will have the most heartache. But this wasn’t an overnight thing and a lot of people new this was likely to happen soon enough. Just glad my partner got out a while ago.

**Steve steveson**

Grey Templar wrote:
This is apparently the largest peace time peace time repatriation effort in UK history. Its pretty crazy.

Of course whats crazier is that the airline continued to take on customers when they clearly knew that they might not be able to fly them back. You'd think a company in financial collapse would scale back their business to a more sustainable level. Given that this isn't the first time an airline going out business has stranded customers, it seems like airlines should be prevented from booking flights they know they can't guarantee.

Legally companies are not allowed to keep trading if they believe that they are no longer viable, so in theory every company should do this. However the hubris of the directors often gets in the way and leads them to believe that they can turn it around. It’s like asking a gambling addict to stop when they have lost too much.

**Skinnereal**

And now, they're asking why the bosses were still getting multi-million pay and bonuses, while the company folds around them.

**A Town Called Malus**

Skinnereal wrote:
And now, they're asking why the bosses were still getting multi-million pay and bonuses, while the company folds around them.

Because capitalism.

Those questions are always asked when this happens and nothing changes because why would it under our political-economic system? Those at the top always get out okay. In the corporate tradition it is everyone else who goes down with the ship whilst the captain and his friends row away on the only lifeboat with the only life jackets.

**Future War Cultist**

Another one of those companies that’s been around for literally forever biting the dust. It’s terribly sad.

**Skinnereal**

A Town Called Malus wrote:
Skinnereal wrote:
And now, they're asking why the bosses were still getting multi-million pay and bonuses, while the company folds around them.
Because capitalism.

Those questions are always asked when this happens and nothing changes because why would it under our political-economic system? Those at the top always get out okay. In the corporate tradition it is everyone else who goes down with the ship whilst the captain and his friends row away on the only lifeboat with the only life jackets.

With any luck, they'll get the same treatment as BHS's boss got.

"Thomas Cook has "had some difficulties for quite some period of time" says Business Secretary Andrea Leadsom.
...
Should the directors repay their bonuses, she is asked?"
https://www.bbc.co.uk/news/live/business-49770817

**tneva82**

How does the EU packet travel directive apply here btw? That's designed to protect customers among other things company going bust during your holiday so seems applicable for those who have got packet holidays(I would be out of luck as my holidays are never packet holidays...which is why I try to ensure I have at least enough money to book flight home ASAP elsewhere in case the finnish national air company goes bust)

Some subgroups of this one seems to be able to continue to operate independently. At least something.

**Mad Doc Grotsnik**

If anyone has been caught up in this, talk to your bank as well.

They can raise either a Chargeback Claim (something offered by VISA and MasterCard) if you paid using a Debit Card, or a Section 75 Claim (legislation) if you paid using a Credit Card.

Notably, only a partial payment need be made using the credit card - if it's successful, you reclaim the full amount. So if you paid a deposit of say, £100 (minimum required for S75), but the hol cost £5,000 total? A successful S75 claim will recover the full £5,000.00

**Frazzled**

How are people stranded? This is a question, not a criticism. Weren't tickets etc. already paid for? In the travel stuff I have used a service for,m they just arranged things and charged a fee. Whats the dealio?

**Overread**

Frazzled wrote:
How are people stranded? This is a question, not a criticism. Weren't tickets etc. already paid for? In the travel stuff I have used a service for,m they just arranged things and charged a fee. Whats the dealio?

I assume it must be to do with how payments are processed through the system. So whilst the customer paid months ago, the actual plane operators and hotels don't yet have the money. They might have basically a promissory note from the tour firm which gets paid in stages through the year. So it might be that you paid for your holiday months or even a year ago, but the flight and hotel get paid at the end of the month after you leave. When things run smooth this all works out fine, but when the tour company folds then all those connected payments get frozen. So whilst the customer has paid the direct services have not been and likely will not be paid out.

So now the flight isn't paid for, but also the hotel and any other addons are not paid for either. This can panic those owners because now they've got services booked up that won't generate them any revenue so their first instinct is to direct charge and/or dump the customers they do have. Technically many of those on holiday are now (through no fault of their own) freeloading. Hotels and such might not even want to do this, but might be forced to otherwise they'll fold in turn being unable to pay for staff wages and the like.

So those getting chargebacks from their cards should hopefully turn around and pay the hotels and such direct if they wish to remain - of course all that faff (plus the scale of the operation) might mean there's delays on all fronts with processing such requests.

Basically you pay the tour operator in advance who then hold your money, generate interest off it, and also sort out all the connecting flights and legwork for you and thus simplify the whole process. Them holding your money also makes it easier if you cancel, its why some offer "100% returns on last minute cancellations" as technically the company hasn't actually paid anyone and is just holding your cash; meanwhile fines are used often to reduce the chances of null bookings etc.

**Mad Doc Grotsnik**

Many of the flights were Thomas Cook Airline.

With no money? No fuel, no crew etc. So that's scuppered a lot of return journeys.

**Skinnereal**

Mad Doc Grotsnik wrote:
Many of the flights were Thomas Cook Airline.

With no money? No fuel, no crew etc. So that's scuppered a lot of return journeys.

This.
Thomas Cook did not just sell the holidays from glossy catalogues, or their website.
They ran a lot of the flights going to these holiday destinations.
They employed the reps who handles transfers to airports.

The UK government has leased 40 aeroplanes for 2 weeks, from what I heard. They have made a replacement rescue airline to bring people home.

**Bran Dawri**

So the moral of the story is basically do the legwork and book your hotel yourself, I guess?

**AdmiralHalsey**

Also Thomas Cook paid the places at which you stay something like 30-60 days -after- the end of your holiday.

Now the various things that they would have paid for are thrown into question as if they'll recieve the funds, and in many cases they won't. [A lot of insurence will cover debts incured after the bankcrupcy, but not before, so if you've already been on holiday for two weeks, the hotel isn't getting that money back unless they can claim it from Thomas Cook's corpse.]

This has lead in many cases to a ... Negative treatment of hapless holidaymakers.

That said. Who books a holiday with a on the edge of collapse share price imploding 2 billion pounds in debt company without expecting this to happen?

**Whirlwind**

Bran Dawri wrote:
So the moral of the story is basically do the legwork and book your hotel yourself, I guess?

That's not quite true in the UK. All holiday operators are signed up to a scheme called ATOL protection. If a company goes bust before you go on holiday then you will be refunded through the scheme. If you are abroad then you are guaranteed a flight to return you home. There are some weaknesses but generally you are better protected financially from unexpected huge additional costs.

Buying flights and hotels separately are not covered by this scheme. In this scenario if the airline goes bust then you are much less protected and if you have to cancel the hotel then you may not get a refund and vice versa. Of course this is 20+ year old scheme when people chose holidays of teletext and the internet was not a thing. There's an additional cost to holiday operators for this so it does make it slightly more difficult to compete.

**xKillGorex**

Well luckily for a lot of people on holiday that have payed for a package holiday the caa are reassuring the hotels that they will get the money owed and that people don’t to cough up again.

Saying that though i imagine lines of communication are very sketchy even still. It’s not hard to see why you had the situations over the last couple of days where hotels were locking guests in and demanding they pay again.

**Mad Doc Grotsnik**

AdmiralHalsey wrote:
Also Thomas Cook paid the places at which you stay something like 30-60 days -after- the end of your holiday.

Now the various things that they would have paid for are thrown into question as if they'll recieve the funds, and in many cases they won't. [A lot of insurence will cover debts incured after the bankcrupcy, but not before, so if you've already been on holiday for two weeks, the hotel isn't getting that money back unless they can claim it from Thomas Cook's corpse.]

This has lead in many cases to a ... Negative treatment of hapless holidaymakers.

That said. Who books a holiday with a on the edge of collapse share price imploding 2 billion pounds in debt company without expecting this to happen?

Genuinely, I wasn’t aware they were in such deep schtook.

Granted, I wasn’t planning a holiday or owt, so had little reason for specific research. But I still don’t recall it being mentioned at all until last week. And professionally I’m a clever cookie who deals with consumer complaints at a high level. If I was oblivious, I think it’s harsh to blame The Man In The Street. I mean, this was Thomas Cook. A hint street staple since, well, forever. Not some random, shonky internet startup promising the world but only delivering disappointment.