Business

U.K. tour operator Thomas Cook collapses, cancels all bookings

Veteran U.K. tour operator Thomas Cook collapses after failing to secure rescue funding, and travel bookings for its more than 600,000 global vacationers are cancelled. Analysts say its failure comes from an inability to compete with services like Airbnb and online travel companies.

Government works to repatriate firm's 150,000 U.K. customers still abroad

U.K. tour operator Thomas Cook has ceased trading and all its hundreds of thousands of bookings cancelled after the firm failed to secure rescue funding. (Paul Hanna/Reuters)

Veteran U.K. tour operator Thomas Cook has collapsed after failing to secure rescue funding, and travel bookings for its more than 600,000 global vacationers were cancelled early Monday.

The U.K. government said the return of the firm's 150,000 British customers now abroad would be the largest repatriation in its peacetime history. On Monday, Prime Minister Boris Johnson said they have already begun a "huge effort" to bring home stranded tourists and passengers. He said future steps need to be taken so "you don't end up with a situation where the taxpayer, where the state is having to step in and bring people home."

The Civil Aviation Authority (CAA) said Thomas Cook has ceased trading, its four airlines will be grounded, and its 21,000 employees in 16 countries, including 9,000 in the UK, will lose their jobs. 

Britain's CAA said it had arranged an aircraft fleet for the complex British repatriation effort, which is expected to last two weeks.

"Due to the significant scale of the situation, some disruption is inevitable, but the CAA will endeavour to get people home as close as possible to their planned dates," the aviation authority said in a statement.

The 178-year-old company said Friday it was seeking £200 million ($331 million Cdn) in emergency funds to avoid going bust, and was in weekend talks with shareholders and creditors to stave off failure. The prominent firm, whose airliners were a familiar sight in many parts of the world, also operated around 600 U.K. travel stores.

Thomas Cook's struggle to adapt

Thomas Cook, which began in 1841 with a one-day train excursion in England and now operates in 16 countries, has been struggling over the past few years. It only recently raised £900 million ($1.5 billion), including receiving money from leading Chinese shareholder Fosun.

Analysts said Thomas Cook, which rode a package holiday boom that started in the mid-1980s, was too slow to react as consumers moved away from buying trips at bricks-and-mortar stores. 

It has been overtaken by online services like Airbnb and internet travel companies who may separate or combine hotel, rental car and flight offerings, which puts pressure on prices through comparison shopping. 

"The company has struggled to adapt to a changing travel and retail environment," said Michael Hewson, chief market analyst at CMC Markets UK. 

The company did push into online business, with 48 per cent of its bookings from the internet as of last year. But it wasn't fast enough. Online rivals didn't have to bear the costs of owning 200 hotels, 500 travel agency shops and 105 airline jets, but acted as middlemen.

The company cited Brexit uncertainty as one of the contributing factors to its slowdown in bookings. (Armando Babani/EPA-EFE)

Thomas Cook Group PLC isn't alone in facing such pressures. Competitor TUI Group AG, based in Hannover, Germany, has shifted its focus from tour operators to its own cruises and hotels. 

But other factors laid into the British travel company. 

Company officials have cited uncertainty over Brexit, both from consumers worried about its impact on their finances and from the timing, given that one unfulfilled deadline for Britain to leave the EU fell on March 31, just days before the heavy European Easter holiday travel season this year. Travel agents had to issue guidance on what would happen in case of a no-deal Brexit.

Brexit has meanwhile sent the pound lower, giving British travellers less purchasing power. 

As the company struggled to reshape its business in the new environment and cut costs, it was hit with an unusually warm summer in 2018, which it said led travellers from the U.K. and Scandinavia to put off plans to head for warmer destinations. When they did decide at the last minute, the sector of the market that focuses on late decision makers turned out to be fiercely competitive on price.

"The group, like its peers, has suffered from a perfect storm of turbulence, from political unrest and terrorism at some of its most popular destinations, to unusual weather patterns seeing travellers taking 'staycations' and the ever-present Brexit uncertainty devaluing the pound and putting consumers off from booking holidays," said Helal Miah, investment research analyst at The Share Centre. 

In May, the company reported a debt burden of £1.25 billion ($2.07 billion), which gave the company less breathing room to manoeuvre.

"While other travel groups have suffered from these factors, Thomas Cook's pile of debt is the differentiating factor," said Miah.

Most of Thomas Cook's British customers are protected by the government-run travel insurance program, which makes sure vacationers can get home if a British-based tour operator fails while they are abroad.

Like 'being held hostage'

The company's troubles had already started to affect those travelling under the Thomas Cook banner before the firm announced its collapse.

A British vacationer also told BBC Radio on Sunday that the Les Orangers beach resort in the Tunisian town of Hammamet, near Tunis, demanded that guests who were about to leave pay extra money for fear it wouldn't be paid what it is owed by Thomas Cook.

Ryan Farmer, of Leicestershire, said many tourists refused the demand, since they had already paid Thomas Cook, so security guards shut the hotel's gates and "were not allowing anyone to leave."

It was like "being held hostage," said Farmer, who is due to leave Tuesday. He said he would also refuse to pay if the hotel asked him.

The Associated Press called the hotel, as well as the British Embassy in Tunis, but no officials or managers were available for comment.

Julie Robsson and her seven friends are due to fly out of Spain on a chartered Titan Airways plane to Manchester following the cancellation of their Thomas Cook flight earlier in the day.

The 58-year-old retiree from Yorkshire was ending a weeklong holiday on the Balearic Islands, about 250 kilometres south of Barcelona, and part of a group of some 300 tourists who were waiting on Monday for replacement flights.

Stranded passengers are seen at check-in points at Enfidha-Hammamet International Airport, Tunisia on Monday. (Zoubeir Souissi/Reuters)

Robsson said she was satisfied with the information received on the ground from the CAA and the British Consulate in Palma, the capital of the autonomous Spanish archipelago, but Thomas Cook's representative had not appeared in the group's hotel since the first rumours of the financial difficulties emerged last week.

"I'm quite sad because it's an old company. The prices were all reasonable. The planes were clean," Robsson said, adding that after having used Thomas Cook's services for package holidays in Spain, Greece, Mexico and India, she was considering other alternatives now.

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