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Thomas Cook collapses, stranding 150k UK holidaymakers
- andrewstuart 7y agoIs this brexit related?
- asdf333 7y agonot completely...booking.com, tripadvisor, trivago, expedia and all these online hotel booking sites are what really did this company in. i suppose it didn't help that folks were probably less interested in travelling due to financial uncertainties around brexit but it definitely isn't the main reason
- arcticbull 7y agoThat’s a very good point. Travelers have shifted over the years from an all-inclusive package booking process to a DIY piecemeal approach and it’s hard for package sellers to compete against the OTAs.
- switch007 7y agoExcept the 600,000 customers currently abroad
- arcticbull 7y agoIndeed :) those folks have a problem.
- Scoundreller 7y agoBut the pricing power TC had over them had been eroded. When there’s less demand, but the same supply, price has to give.
- Lazare 7y agoNot really. As noted in the article, Thomas Cook merged with MyTravel Group in 2007, which almost collapsed in 2011 and left them with a lot of debt. Brexit came years later. Possible causes would be long term trends in the types of holidays people want, increased competition, mismanagement, etc. But the problems started long before Brexit.
- Waterluvian 7y agoYes. What other people are saying is also true. Many nails in the coffin. Brexit apparently caused Britons to hang on to their money more and vacation abroad less. So if you're a travel company on the ropes, Brexit could seal your fate.
- craz8 7y agoIt probably doesn’t help that their revenue is in pounds and their biggest costs are in Euros and Dollars when your local currency crashes due to Brexit For a business with small margins, just this currency swing is a disaster
- craz8 7y agoIt’s possible to hedge some of this risk, but eventually you’d have to raise your prices in Pounds, which will decrease demand and if you’re already on the edge with debt payments, it all falls apart
- stupendousyappi 7y agoThe exchange rate decline was likely the biggest Brexit-related factor.
- greglindahl 7y ago... they should have hedged it for the packages people had actually purchased. That's what currency hedges are for. Prices going up do decrease sales, of course.
- tomatocracy 7y agoThey may well have hedged, I don’t think it’s clear. But I would point out the limits of hedging here - they’d have needed either collateral or someone to offer them credit terms on hedging to do that, neither of which were easily available to them.
- billpg 7y agoA company with margins cut to the bone in the internet era should have spent money they don't have, just in case the UK government does something stupid that causes the currency to tank?
- M2Ys4U 7y agoWhen you're almost £2 billion in the hole, how feasible is it to hedge currency?
- Scoundreller 7y agoI’ll also add a lot of people’s reluctance to travel around the time period of each hard Brexit date. Nobody wanted to risk getting stranded at any changeover, and a lot of industries are probably reluctant to grant time off during it.
- futhey 7y agoExchange rates and access to credit may be in some part Brexit related, but not enough to have on its own altered the outcome.
- tomatocracy 7y agoExchange rates I don’t disagree with but access to credit in general is as good or better now for UK companies than in 2016.
- billpg 7y agoIt hasn't helped. The fall in the value of the pound caused by Brexit has made their service significantly more expensive. Thomas Cook might have been able to position itself, in the internet era, as a local trustworthy service that takes away the uncertainty of buying from unknown overseas services. The increased costs caused by Brexit only made a difficult market more difficult.
- CaliforniaKarl 7y agoI don't think "stranding" is the right word. For some time now, UK companies selling "package holidays" (with hotel, air, etc. all from one vendor and with one bill) are required to put up funds that the government uses to repatriate those who are already traveling when a company goes under: https://www.caa.co.uk/atol-protection/ https://www.caa.co.uk/atol-protection/ Note that it does not cover trips that people put together themselves; in that case, I expect they'd only have to arrange for a flight home (as they paid for the other parts themselves). The CAA (the UK's Civil Aviation Authority) already has a site up for Thomas Cook customers: https://thomascook.caa.co.uk https://thomascook.caa.co.uk
- parsimo2010 7y ago“Temporarily stuck until they can get a flight scheduled” is better, but wordy. These vacationers are in safe countries with good infrastructure. They definitely aren’t stranded like Tom Hanks in Cast Away. However, the other airlines can’t magic up 150,000 seats, so it might mean that some people will take a while to get home.
- CaliforniaKarl 7y agoThomas Cook was more than just a travel agent. They were also an airline… https://en.wikipedia.org/wiki/Thomas_Cook_Airlines https://en.wikipedia.org/wiki/Thomas_Cook_Airlines … and a hotel chain … https://en.wikipedia.org/wiki/Thomas_Cook_Hotels_&_Resorts https://en.wikipedia.org/wiki/Thomas_Cook_Hotels_&_Resorts I would not be surprised if the UK has laws in place, and/or are using ATOL funds, so that the existing Thomas Cook aircraft can be pressed into service for the return journeys. For example, return arrangements have already been confirmed for those traveling from Croatia on the 23rd: https://thomascook.caa.co.uk/customers/if-you-are-currently-abroad/guidance-by-destination/croatia/split-spu/23-september/ https://thomascook.caa.co.uk/customers/if-you-are-currently-... The return flight details are identical to the original Thomas Cook flights (other than the flight numbers, which are similar).
- stordoff 7y ago
- HenryBemis 7y agoI was always wondering about the profit margins of these companies. From their prices I always felt that I am paying a portion of the previous guy's vacations. I'd call it a pyramid scheme, only everybody loses.
- Scoundreller 7y agoTaking less money now for higher expenses in the future isn’t that unusual. It’s basically the cornerstone of insurance companies (especially life insurance).
- nly 7y agoThat industry isn't a scam though. Life insurance companies have at least some capacity to balance their books by selling annuities or lifetime mortgages. The number and magnitude of life insurance claims is dwarfed by the hundreds of thousands of pensioners every year that are converting their accumulated wealth to income at paltry rates.
- xioxox 7y agoThe big problem was its £1.4bn in debt, which really brought it down. Id be careful holding shares in companies with big debt if there's a coming downturn.
- dehrmann 7y agoHow's AT&T looking these days?
- Mindwipe 7y agoNetflix and WeWork are more pertinent examples tbh.
- mrguyorama 7y agoI was not aware Netflix had significant debt.
- wp381640 7y agoReminder again to never hold gift cards. I had a family member who was gited a $3,000 travel voucher with an agency - I told them to exchange it in for flights asap as you can book up to a year out, change the tickets later and it's better to be a creditor with a national airline than a likely-going-out-of-business-because-of-online travel agency
- nabla9 7y agoAdditionally, buy flights using credit card. If you used a credit card, you get your money back in the case of bankruptcy. If you used cash you may not unless you bought bankruptcy insurance.
- tomatocracy 7y agoWhat’s more, many credit cards provide at least limited travel insurance which may cover the cost of alternative flights and accommodation.
- tomglynch 7y agoThis is literally an Airline going out of business, the opposite to the point you're making.
- barsonme 7y agoThey do much more than just airlines. For example: https://en.wikipedia.org/wiki/Thomas_Cook_Hotels_%26_Resorts https://en.wikipedia.org/wiki/Thomas_Cook_Hotels_%26_Resorts
- dehrmann 7y agoThe gift card market just confuses me. Especially when it's people giving gifts to people (not corporate gifts), cash is something that has at least as much value as the gift card, is accept everywhere, isn't a liability on a balance sheet, and is easier to give.
- 7y ago
- barsonme 7y agoDoes this mean Condor Airlines is shutting down as well? Their website[1] says they're continuing to fly, but I'm wondering if there any sort of precedent for what happens to child companies when the parent becomes insolvent. Having just returned just last week from Europe via Condor Airlines, I'm glad I don't have to worry about this mess. [1]: https://www.condor.com/us https://www.condor.com/us
- deanclatworthy 7y agoSame issue here in the Nordics with Tjärebörg. At least the Finnish version is claiming this won’t affect them, and has been saying this for weeks. I’d call this bullshit, as far as being irresponsible. It sounds to me like a CEO trying not to spook potential customers rather than being honest with existing ones. My partner has a holiday with them booked for November. I don’t have high hopes for that.
- consp 7y agoBankruptcy laws in most countries forbid you from not trying to operate in a normal way (e.g. by comforting possible customers to buy with you). Otherwise you would be committing to a more speedy insolvency which would in the end be some form of bankruptcy fraud. I agree with you this is strange and very non beneficial to the customers who book late in the process but it would be even worse for those who already had booked and would then be left hanging since no money was coming in anymore. Though quite obviously the only people benefiting from this are lawyers and the executor.
- goodcanadian 7y agoIf Condor operates as an independent company, as long as it is a going concern, it will likely continue to fly. As an asset, it will be sold by any administrator in order to help recoup money to pay Thomas Cook's creditors. It is (most likely) worth more money as an operating airline than if it were to be shut down.
- greglindahl 7y ago
- Scoundreller 7y agoGuardian reports: > Dozens of charter planes have been brought in from as far afield as Malaysia to assist with the mass airlift. Getting a charter plane has been quite difficult since the 737MAX grounding. Any excess capacity has been soaked up. There have been lots of unusual chartering by airlines that don’t usually charter. Air Canada had been using some, and it’s exceptionally rare for them to not use AC-branded planes. At least it’s not the high season.
- Symbiote 7y agoOn the other hand, there are presumably now about 50 fairly new Airbus aircraft for sale, mostly A320 or similar, plus some Boeing ones. (Various sources give different numbers for the fleet size.)
- mhandley 7y agoAlmost all of their aircraft are leased, not actually owned by them. In the short term, they'll probably be impounded by the airports they're currently at, pending payment of landing fees. https://www.planespotters.net/airline/Thomas-Cook-Airlines https://www.planespotters.net/airline/Thomas-Cook-Airlines
- Scoundreller 7y agoAnd there’s no shortage of airlines willing to pay top-dollar to charter a fleet ready-to-go yesterday. No way the lessors will say “sure, keep using them for a while, just us pay in advance”. The 737MAX grounding had big knock-on effects. I just paid 30% more than I usually do for TATL tickets, for bloody November.
- toyg 7y agoYeah, this would have been absolute carnage just last month. At least there should be very few kids involved now.
- mcv 7y agoWhy are extra planes even necessary? There were already return flights planned, right? Why not have those fly anyway? Maybe they're owned by Thomas Cook and the crew won't get paid anymore, but it'd be nice if the government could step in and let those parts of the company continue operating until every is home again. That's much less disruptive than keeping the original planes grounded, and chartering different planes to step in. That's disruptive to two plane crews and the passengers. Continuing as normal would be far less disruptive. But I'm probably missing some vital piece of red tape. It's usually an insurance issue.
- greglindahl 7y agoOne interesting part of the news coverage is that there are 600k customers involved, and only 150k of them are UK holidaymakers. Notice the lack of coverage of the other 450k?
- msclrhd 7y agoFrom the 05:37 summary: ----- * There are 600,000 Thomas Cook travellers who have been left stuck overseas. * More than 150,000 of those are Britons. -----
- mikejb 7y agoThe guardian is a British newspaper, so there's an understandable focus. An additional factor may be the insurance situation: Some countries require travel organizers to set up insurance for these cases, ensuring that customers can still get back. I'm not 100% sure on this, but I think the UK doesn't have such requirements, which would worsen the situation for them in particular.
- greglindahl 7y agoThis isn't the only article; many US newspapers have also had the same focus.
- dagw 7y agoNotice the lack of coverage of the other 450k? if you read a Swedish newspapers they'll talk about the Swedish customers, read a German newspaper and they'll talk about the German customers and so on.
- buboard 7y agoits quite possible they don't know the origin of the other customers, so nothing to report there
- consp 7y agoThe 10-20k Dutch customers of Neckermann and TC are covered by an equivalent fund for safe voyage home (and possible payout). I guess more countries have some kind of arrangement.
- PhilWright 7y agoWhy do these travel companies always go bust in a way that leaves people stranded? Surely the management must have known a week or two ago that the company was about to go under. In that case, stop anyone flying out but still bring people back. By the time they actually cease trading there should be few people left abroad. Some managers in Thomas Cook must have known that people flying out were going to end up stranded and they just let them go.
- choeger 7y agoThe moment they stop flying out, they collapse. In that case they leave people behind and sink the company actively. Not a situation any manager wants to end up in.
- greglindahl 7y agoI'm sure you read the article, which mentions that there were negotiations up to the last minute to raise the last 200mm pounds on top of the 900mm pounds existing rescue package.
- human20190310 7y agoIn general I think companies have a duty to their shareholders to fight to stay in business until it's literally impossible to do so. As long as there are resources left, those would have to be allocated to preserving the business, rather than to smoothing the process for their customers.
- visarga 7y agoIn that case the shareholders should be held responsible for leaving people stranded.
- em500 7y agoThe whole point of a limited liability company is to shield shareholders from responsibility. https://en.wikipedia.org/wiki/Limited_liability#Justification https://en.wikipedia.org/wiki/Limited_liability#Justificatio...
- lettergram 7y agoStrange... must be down from the 600k reported by Business Insider: https://www.businessinsider.com/thomas-cook-bankrupt-airline-stranded-rescue-2019-9?utm_source=reddit.com https://www.businessinsider.com/thomas-cook-bankrupt-airline...
- mikejb 7y agoThe detail is in the title: 150k UK holiday makers vs. 600k total
- futhey 7y agoI was trying to figure this out too, other reputable sources cite 600k as well. There is some number of passengers who have not yet left on their trip, who are part of that number.
- mikejb 7y agoI'm wondering how one gets stranded before leaving on a trip (and that group makes up 75% of stranded people) It's 150k UK vs. 600k total holidaymakers.
- meraku 7y agoMight not necessarily mean they are _physically_ stranded. Booking holidays often means scheduling time off work, around children's school holidays, when prices are reasonable, etc. Not always a trivial task. Having those plans abruptly cancelled in this manner where they need to not only get a refund for any money paid, but to also try and make alternative arrangements on their own and cover any difference in cost out of their own pocket is effectively leaving them stranded in a sense.
- FartyMcFarter 7y ago> Customers at a hotel in Tunisia reported being locked in by security guards as the hotel demanded extra money, fearing it would not be paid by Thomas Cook. This is quite bad behaviour from the hotel. Presumably their business relationship is with Thomas Cook, not the people on holidays? They went as far as grabbing people who jumped a wall in an attempt to get out! More details here: https://www.bbc.co.uk/news/uk-49787563 https://www.bbc.co.uk/news/uk-49787563 The hotel is this one, maybe one to avoid: "Les Orangers resort in Hammamet, near Tunis."
- mhandley 7y agoDon't hotels realise this is a reputation business? In the age of the Internet, no-one with access to TripAdvisor or Google will ever stay there again. Wouldn't be at all surprised to see the hotel change name in the next year, if they survive. But perhaps worse that that, a hotel behaving like this, and not being slapped down hard by the Tunisian authorities, will damage the entire Tunisian tourism industry, just as they were recovering from the 2015 hotel attack there.
- hnarn 7y ago> Don't hotels realise this is a reputation business? I would say that the facts presented above answer that question for you.
- TeMPOraL 7y agoIndeed. What reputation? A lot of tourists are shopping for price, the only reputation that matters is that of the booking site they use - the visitors want to trust that the site doesn't peddle total low-end garbage. Hotels are a commodity.
- pbhjpbhj 7y agoI took some package tours back in the day: you could get a good deal by not knowing where you would end up. Thomas Cook, or whoever, booked you in to a resort for a given price and put you in one of "their" hotels. Reputation of the individual hotels was not an issue, only of the travel company. Which is kinda how it should be -- why use a travel company and do all the legwork yourself, that would be like going to a restaurant and then checking the suppliers when choosing a dish off the menu.
- dehrmann 7y agoI was recently debating booking a flight to Europe on Norwegian. It didn't affect my decision, but I'm very aware that they're struggling financially, so I'd only buy the tickets less than a month out on a credit card so it's the bank's money, and if they declared bankruptcy and cancelled flights, c'est la vie.
- 2rsf 7y agoBut what happens if they declare bankruptcy on you way back ? and what about hotel reservations or the more expensive flight you'll have to take ? BTW Norwegian are fine for a while https://simpleflying.com/norwegian-bond-payments-deferrednorwegian-airlines-defers-two-bond-payments/ https://simpleflying.com/norwegian-bond-payments-deferrednor...
- hnarn 7y ago> But what happens if they declare bankruptcy on you way back ? Buy your plane tickets with a credit card, ask your credit company for the money back, buy another ticket. This is one of the main advantages of using a credit card: the credit company will absorb the debts of the third party (the airline, in this example).
- Broken_Hippo 7y agoSure, and hope that you aren't on a strict budget and the return flight doesn't cost a lot more. Oh, and that the credit comes in a timely manner and you aren't waiting until monday/tuesday because friday evening isn't a business day.
- hnarn 7y ago> and hope that you aren't on a strict budget If you have a credit card and you're still on a tight budget, you're using credit cards the wrong way: i.e. the way most people use them. Use them like a debit card and you'll be fine, and in emergencies you have credit to dip into.
- 7y ago
- benj111 7y agoFrankly I think its amazing that all these people can expect to be repatriated, relatively problem free, it's like a bank collapse, but you have to herd people. And the scale. Operation Market Garden only dropped 40,000 troops. D day only managed to land 150,000 on the first day.
- matwood 7y agoThe scale is larger, but figuring out how to move people around when an airline stops flying either through a strike or bankruptcy is not uncommon. As long as they can get people out of the vacation town and into a larger EU city, flights back to the UK become relatively easy. Years ago I showed up a Croatian airport to head home after a few weeks vacation and during that time the Croatian airline (pilots I guess) had gone on strike. It was a bit hectic, but eventually we were put on an unbranded private jet to Frankfurt. From there getting back to the US was no big deal.
- pjc50 7y agoOn the other hand, the tourists aren't being paradropped over hostile territory. Unless Thomas Cook had really gone downhill..
- benj111 7y agoI don't think they limited the amount of people they dropped on the Netherlands, or the people they threw at the Normandy beaches on the basis that they might be shot at. Logistics was the limiting factor.
- mcv 7y agoAnd jumping them out of a plane saves on landing and return flights, so in that sense, Normandy and Market Garden would be logistically simpler than Operation Matterhorn. Although I hope that Matterhorn doesn't require any bridgeheads to be conquered. It's also worth remembering that Market Garden failed in its final objective.
- rwmj 7y agoI guess as they've gone bust I can tell this story now ... I used to consult for Thomas Cook about 15 years ago, and they were a basketcase of a company even back them, so this doesn't surprise me. I feel sorry for all the reps and workers out in the field and on the planes who will lose their jobs because of the profligacy of the Peterborough head office. Two examples of stupidity stick with me. One was that at the time they outsourced their website to their main competitor. Which as you can imagine worked well because their competitor had no desire at all to fix the many problems with the website. TC didn't understand that the website was everything because they were at heart a high street travel agency. The other was when I worked on managing their AdWords account, which was enormous (like 100K different keywords in thousands of groups). Some keywords would be bid at £10s of pounds. It is very easy to lose a lot of money on these keywords because there's a fine balance between the profit you make on each holiday (usually £100-ish), versus paying a large amount of money on each keyword and the number of sales you make at the end of the "sales tunnel". There was also a weekly industry survey which came out ranking the position of all the travel websites according to number of visitors (I forget the name of it). Senior managers at TC were fascinated by "being number one" on this survey every week, and so would instruct us to dial up the keyword bids on Friday night and run like this over the weekend. Google AdWords with high bids is very effective at bringing large numbers of low quality visitors to the website. Each week they would indeed come number one on this survey (read only by other senior managers in the travel industry), while at the same time losing tens of thousands of pounds selling holidays for negative profit.
- tpmx 7y agoSuddenly Google's ad profits make a lot more sense.
- rwmj 7y agoWhen I worked in this field (and I must stress that this is 15 years out of date anecdata), my impression was that Google's profits came from a mix of a large influx of naive new users, and established companies with misaligned incentives. By "misaligned incentives", I mean that we were rewarded with a % of ad spend. This is very common model in the old advertising industry, and AdWords was treated as adverts, not as a technology proposition. Of course this meant that we had very little financial incentive to reduce the ad spend. A more aligned structure would have been to reward percentage of profits, but companies were reluctant to reveal their profit margins to a third party, and third parties couldn't trust their clients to report this data correctly anyway. Hence percentage of ad spend was what everyone used.
- fasicle 7y agoThomas Cook to cost the taxpayer £100m for the repatriation of Thomas Cook customers - known as Operation Matterhorn. https://www.bbc.co.uk/news/live/business-49770809 https://www.bbc.co.uk/news/live/business-49770809
- fluffything 7y agoIt's the EU's fault! /s
- Krasnol 7y agoIn Germany TC is required to insure package tourists for this case. Germany won't pay for their return (or as in this case: the time they'll stay there until the insurance gets them a flight back).
- beaker52 7y agoIt's always blown my mind that companies like this will operate not having enough cash on hand to actually provide the services they've sold. Maybe that's why they're in business and I'm not.
- chadcmulligan 7y agoI've been told many large companies only have a few months cash flow to keep them operating. I remember many years ago this fact was exploited by the unions when a dispute couldn't be resolved. They stopped collecting payments (pre internet) and the dispute was resolved quickly.
- sksksk 7y agoWell, they're not in business anymore
- Blackstone4 7y agoWorking capital is the amount a company is due for services/goods (accounts receivable) minus what it owes for services/goods (accounts payable). The ideal situation for a company is that if it receives payment for it services in advance (i.e. a consumer paying for a holiday) and has to pay its suppliers (i.e. hotels) much later. This can result in a situation called negative working capital where a company has received more cash from customers than it has paid to-date. This is effectively interest free financing. Companies getting into financial difficulty will try to accelerate payment of monies they are owned and delay payment to supplies...as we see here.
- droithomme 7y ago> not having enough cash on hand to actually provide the services they've sold The article mentions that one of the issues here is that the credit card companies saw that collapse was imminent and certain and thus refused to release the funds charged by their customers to Cook, knowing that Cook would collapse, the customers wouldn't get their full holiday, would do a chargeback, but the bank wouldn't be able to get the funds back from Cook. > "The tour operator is understood to have made a number of proposals, including ... for credit card companies to release about £50m of cash they are holding as collateral against Thomas Cook bookings." So maybe they did have enough cash on hand in a way, but the banks weren't releasing it to them. Another intractable and perhaps the main problem was their massive debt service owed on their previous bailout. Kind of similar to Toys R Us and other companies that have had a bailout of one form or another that leads to massive debt and debt payments taken on and beyond the ability of the company's profits to pay off.
- sek 7y agohttps://finance.yahoo.com/quote/TCG.L/balance-sheet?p=TCG.L https://finance.yahoo.com/quote/TCG.L/balance-sheet?p=TCG.L This looks really bleak, everybody who had some liabilites to Thomas Cook in any way should at least consider the chance of insolvency. The hotels should be able to check this information, but consumers? Every person who gets a new phone contract has his credit rating checked, but if hundreds of thousand people buy expensive flights nobody warns them about the risk.
- Exquisites 7y agoThat's a damn shame. I used to fly with them for next to nothing. Decent airline. Never would consider staying in their crappy hotels though. This will have a major effect on low-cost long-range tourism. Everybody is going to bump their prices up a notch.
- nkingsy 7y agoI was not familiar with the term holidaymaker, and thought it was corporate speak for a Thomas Cook employee. Very confused until halfway through the article.
- totaldude87 7y agoHow come a company that is trusted by half a million travelers (at the end of a holiday season) can this easily go bankrupt?.. Is this a case of bad management or cheap travel models or what.. cant see any details on when they started seeing issues, and how did they end up like this.. edit: here is how -- Thomas Cook returned to private ownership in 1972 and has seen a series of mergers and takeovers. In 2007, it merged with the UK-listed owner of Airtours, MyTravel Group, which nearly collapsed in 2011 but was bailed out by its banks. The rescue left Thomas Cook with a debt burden of £1.7bn and the company struggled to cope, leaving administration as the only option.