Thomas Cook Group plc Collapses

Thomas Cook Group plc Collapses

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The Civil Aviation Authority (CAA) returned 150,000 passengers to the United Kingdom following the collapse of the world’s oldest travel firm1 Thomas Cook Group plc in September of 2019.2 This was part of an initiative called “Operation Matterhorn” through which the CAA undertook what is considered to be the largest peacetime repatriation effort in British history.3 The CAA reported that, during the first 13 days of Operation Matterhorn, 94% of holidaymakers arrived at home on the day of their original departure.4 Remaining passengers needed to make separate arrangements to return home. The British Broadcasting Channel (BBC) reported that people who were covered by the Air Travel Organiser’s License scheme (Atol) would have the cost of their travel packages refunded and that the majority of Thomas Cook holidays were packages that are Atol protected.5 As the turmoil was unfolding, British Airways announced they were among airlines supporting the CAA in its repatriation efforts: “We will help as much as we can in the coming days.”6 Virgin Atlantic, founded by Sir Richard Branson, reportedly helped as well.7 Passengers returning to other parts of the world were not as fortunate.8

Not all branches of Thomas Cook are out of business

The operations of many Thomas Cook branded companies were not affected by the collapse and their customers’ travel plans were not disrupted. For example, Hindu Business Line reported that Thomas Cook (India) Group was a different corporate entity as of August 2012 when it was acquired by a Canada based multinational investment company.9 And there were heart warming stories out of local papers about travel companies intervening by buying former Thomas Cook branches and offering all employees their positions back. Word from the cathedral city of Chichester in West Sussex in England was “[t]he manager of the recently reopened former Thomas Cook shop in Chichester has spoken of her relief when she found out her job had been saved.”10

Thomas Cook in the 19th and 20th centuries

British Newspaper The Daily Telegraph, aka The Telegraph, founded in 1855 by a contemporary of Thomas Cook, published a history that focused on the company’s history prior to acquisition by C&N Touristic, AG, a German travel group in 2001.11 The Telegraph interviewed Paul Smith, the company’s archivist, who had access to rare items such as a Thomas Cook brochure for the marketing of flights, printed around 1919 when Thomas Cook marketed pleasure flights.12

Long before the company was arranging flights, it was organizing travel by train and by boat. According to the Telegraph, Thomas Cook was born in the Derbyshire market town of Melbourne in 1808 and was a man of religious conviction. In 1841 he began organizing trips for his fellow supporters of the temperance movement, which promoted abstaining from drinking alcohol. The first trip Thomas Cook organized was by train, from Leicester to Loughborough. The Telegraph goes on to lament: “The brand has survived two world wars, the regimes of six British monarchs, the rise and fall of the soviet bloc, and numerous changes to how we live…. A reproduction of a Thomas Cook ‘circular note’ – an in-house version of the traveller’s cheque – recalls a move into currency transactions in 1874. A ‘Nile Season: 1896-97’ brochure salutes the rise of river cruising….”13 According to The Telegraph, the company was incorporated as Thos Cook & Son Ltd. in the twentieth century and then was nationalized after the Second World War started, becoming part of state-owned British Railways.14 It went back to being a private company after the war, reportedly becoming owned by Midland Bank in the 1970s before being sold in the 1990s to a German bank and charter airline.15

Thomas Cook in the new millennium

The debt piled onto Thomas Cook’s innovative enterprise by its management in the new millennium was of a magnitude sufficient to cause Thomas Cook to roll over in his grave. The Guardian reported on September 21, 2019, days before the company collapsed and went into compulsory liquidation proceedings:

Just three weeks ago, the tour operator looked to have secured a £900m rescue package – half provided by Chinese tourism business Fosum, the rest by a mixture of banks and hedge funds. The debt-for-equity swap would wipe out £1.7b of loans, allowing the company to make its interest payments during the barren winter, when less cash comes in because bookings are low.

Then, in what one person familiar with the talks described as a bolt from the blue, came a shock demand from its banks, state-owned RBS [the Royal Bank of Scotland] among them. Thomas Cook must find an extra £200m, they said, or the restructuring could not go ahead. The company sometimes credited with inventing modern tourism must, by this weekend, somehow cobble the money together if it is to survive.16

Unfortunately negotiations did not work out and, on September 23, 2019, Thomas Cook Group plc ceased trading with immediate effect and entered compulsory liquidation proceedings in the United Kingdom.17

Conclusion

In addition to stranding people who were traveling when the company went into compulsory liquidation, the collapse of Thomas Cook has reportedly led to 9,000 employees in the United Kingdom being put out of work.18 The public outcry precipitated an investigation of the audit of the company in 2018 by the Financial Reporting Council19 and Members of Parliament questioning management.20

1 British travel firm Thomas Cook collapses, stranding 600,000 people abroad, Reuters, September 22, 2019.

2 Thomas Cook: Final repatriation flights touch down, BBC News, October 7, 2019.

3 Id.

4 Id.

5 Id.

6 Francesca Street, Air crews ‘stranded’ after Thomas Cook collapse, CNN Travel, September 25, 2019.

7 Id.

8 Stacey Leasca, Tour Operator Thomas Cook Ceases Operations, Leaving 600,000 People Stranded, Travel and Leisure, September 23, 2019.

9 Why Thomas Cook (India) is not affected by Thomas Cook’s collapse, Hindu Business Line, September 23, 2019.

10 Sam Morton, Thomas Cook; Delight for staff after jobs at former Chichester branch are saved, Chichester Observer, October 29, 2019.

11 Chris Leadbeater, The history of Thomas Cook, from tours for teetotalers to boozy packages to Spain, The Telegraph, September 23, 2019.

12 Id. Cover art from the brochures is included in the article, adding a great visual component to the history it presents.

13 Id.

14 Id.

15 Id.

16 Bob Davies, Holiday nightmare: big debts and bad luck push Thomas Cook to the brink, The Guardian, September 21, 2019.

17 BBC News, Thomas Cook collapses as last-ditch rescue talks fail, September 23, 2019.

18 Bill Wilson, BBC News, Thomas Cook’s auditor EY to be investigated, October 1, 2019.

19 Id.

20 BBC News, Thomas Cook: Former bosses deny responsibility for collapse, October 23, 2019.