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Why Thomas Cook Collapsed
- xioxox 7y agoIt was mostly their £1.7bn debt: https://www.theguardian.com/business/2019/sep/23/thomas-cook-debt-brexit https://www.theguardian.com/business/2019/sep/23/thomas-cook... Without that they could have shrunk or restructured.
- NeedMoreTea 7y agoTwo days later their CEO had near doubled that to £3.1bn. https://www.theguardian.com/business/2019/sep/25/thomas-cook-balance-sheet-deficit-3bn-before-collapse https://www.theguardian.com/business/2019/sep/25/thomas-cook...
- chrisseaton 7y ago> The number of Britons taking a yearly two-week vacation (a travel-agency staple, long standard because of the country’s generous vacation days) Does the UK have a reputation for generous vacation days? I never knew that - I thought it was pretty standard 28 days here.
- diggan 7y ago28 days compared to nothing (CityLab seems to be US based) is infinitive percent more :)
- oh_sigh 7y agoMinimums aren't averages.
- Majromax 7y agoEven still, the median US worker is unlikely to earn 4-5 weeks of paid time off during a year. The lowest quarter of wage-earners are as likely as not to have no vacation leave entitlement at all (https://www.bls.gov/news.release/ebs2.t06.htm https://www.bls.gov/news.release/ebs2.t06.htm) [56% with paid vacation, 44% without]. The median number of vacation days for most categories of workers is about 15 (https://www.bls.gov/ncs/ebs/benefits/2017/ownership/private/table38a.htm https://www.bls.gov/ncs/ebs/benefits/2017/ownership/private/...).
- nostromo 7y agoBut most of the bottom quarter of earners are part-time workers. I'm actually surprised that many part time employees are given paid time off at all.
- Spare_account 7y ago>I'm actually surprised that many part time employees are given paid time off at all. And there's the rub: it's expected over here.
- Gwypaas 7y agoOr as in Sweden, if you work hourly you usually don't get PTO. Instead you get it as cash, about 12% extra on the salary a normal worker would get.
- Symbiote 7y agoIt's not just expected, it's the law! 28 days, though 8 of them can be the standard public holidays, leaving 20. It's pro rata for part time employees, and often given as cash to people on temporary contracts.
- sorokod 7y ago28 isn't zero
- TimMurnaghan 7y agoYep. Reads like an american (got the exchange rates the wrong way up), so should have said get reasonable amounts of holiday.
- sorokod 7y agoSee here [1] - it is 20 or 28 depends on how you count [1] https://en.wikipedia.org/wiki/List_of_minimum_annual_leave_by_country#Countries https://en.wikipedia.org/wiki/List_of_minimum_annual_leave_b...
- lol768 7y agoI don't think it's generous compared to the rest of the EU?
- toyg 7y agoIndeed, most EU countries guarantee the same or better. But in the US (and most of the world, to be brutally honest) it's a different league. The reason? That most vilified of ideas: socialism.
- LudwigNagasena 7y agoThe reason is labour movements. All European countries are deeply capitalist.
- benj111 7y agoYou can be socialist (in the European sense) and Capitalist at the same time. Just like capitalism doesn't have to be Laissez-faire, business knows best, let them do what they want. So Socialism doesn't have to equal Communism. The labour movements of which you speak, often formed political parties, in the UK that was the Labour party. Industries were nationalised, employment rights were given, the NHS was founded. Nevertheless the economy was fundamentally capitalist.
- toyg 7y agoI suggest you go read the history of labour movements across Europe, where they came from, what political parties they begat, what figures brought them support and so on. European countries are fundamentally social-democratic. Have a look at the etymology of that term.
- boudewijnrempt 7y agoWhen I was a kid, my parents had a three-week vacation every summer, and one week in autumn and one in spring. I never managed that, but that's partly because I get too antsy when I'm away from home for more than two weeks, and partly because I'm my own boss. But it's still completely normal in the Netherlands.
- ineedasername 7y agoI think it's not just the UK, but Europe and a lot of the developed world. In the US I get 21 days and it's considered extremely generous.
- johnrgrace 7y agoI'm in the US and I get 47 days (vacation, public holidays, company holidays, election day), 47 days is generous.
- ineedasername 7y agoSure, a very good point. But the people in the UK probably get the same type of non-arbitrary days off. For comparison, I'm more interested in the ones employees can use at their discretion.
- cco 7y agoSurely you're just trolling the majority users of this site? UK's vacation minimums dwarf the grand total of zero in America. Granted 10 days per year is fairly standard amongst most careers in the US.
- rb808 7y agoThe website is American and in America 10-15 days is pretty typical for regular people. In my apartment building the staff have to work public holidays and get 10 days vacation. So yes 28 (+ public holidays!) is very generous.
- Wildgoose 7y agoIt's 28 including public holidays. 20 days minimum + 8 days public holidays.
- ekianjo 7y ago28 days is very long compared to the regular 10 days/year in Japan.
- golemiprague 7y agoIt's 28 days including holidays so if you take into account golden week and the week around the new year and all the emperor "birthdays" et. it is not that bad. Also in Japan 10 days is the minimum, many workers get more days as they get older.
- thrower123 7y agoTwo weeks or less is standard in the US. By the time you deal with Thanksgiving and Christmas, that's one week, maybe, to actually have a vacation.
- dboreham 7y agoThe US has a reputation for ungenerous vacation days.
- magashna 7y agoHow can a company in this industry just strand 600 thousand people!?
- vorpalhex 7y agoAbout as easily as they can not pay their bills and operate without actually generating profit.
- jandrese 7y agoMismanagement. They must have been fairly confident about getting that emergency loan, and when the deal fell through they had no plan B. Just lock the doors and walk away. If I hear that they were bought out by some vulture investment fund like Bain Capital/KKR a couple of years ago I won't be surprised at all.
- notahacker 7y agoBecause you can't fly aircraft when you're bankrupt, and the funds to repatriate people are pooled by the industry, not retained by the individual failing travel company.
- sib 7y agoThe challenge with a statement such as this is that it's stated like it's a natural law ("you can't fly aircraft when you're bankrupt"), rather than the result of a particular set of legal structures in a particular country. In the US, for example, you can certainly fly aircraft if you are undergoing a so-called "Chapter 11" bankruptcy (designed for reorganization.)
- chrisseaton 7y agoThe company is done - how can it do anything when it's defunct?
- PenguinCoder 7y agoI didn't reach that point overnight, unlike the stranded passengers.
- switch007 7y ago> Meanwhile the U.K. is, like the rest of the world, getting warmer. I'm yet to speak to someone who doesn't look at me like I've got 3 heads when I mention this as a possible reason not to go abroad. I even mention our recent heat waves. Nope, doesn't register. Hot = abroad. I mean, if there's data to say otherwise, I won't deny it. Just find it funny.
- benj111 7y agoI've made an increasingly conscious decision to give up flying. I never really liked the flying itself (well waiting in airports) but every year my family go to some random bit of the UK, and all have been nice holidays, it helps that I'm not one for sitting on the beach, and I don't like it too hot to do anything. I won't rule out doing a trip of a lifetime, but compared to a package holiday to Spain, Greece, Ibiza. Britain can hold its own. I've found an inverse correlation between supposed touristyness and what I actually enjoy, so I don't rule out those countries, but it's getting to the non touristy parts of those countries, when all the flights are to tourist destinations.
- epanchin 7y agoQuite attractive not having to buy other currencies at the moment too.
- tonyedgecombe 7y agoWe’ve been doing this for years, a days walking followed by fish and chips keeps me happy.
- radiowave 7y agoI think part of what's happening there might be that what you describe as "hot = abroad", on closer consideration, would actually expand to "hot and not raining = abroad". Global warming might be delivering "hot", but it hasn't been delivering "not raining". So this might be connected to the discrepancy you've noticed between the language of climate change, and people's opinions about the weather. I've certainly spoken to people who've tried to tell me that increased rainfall is the reason why they don't believe global warming is occurring, presumably because: (a) they conflate warming with "good weather" (for some definition of good weather), and (b) they're not well acquainted with how the water gets up in to the sky in the first place.
- buboard 7y agoThe article abdicates the responsibility of Thomas cook itself. It's clearly not solely an issue of external factors (althemoreso those factors were predictable). TC has financial troubles for a decade now. It known to be in a dire situation the past few years. And yet it was allowed to sell unrealizable packages to hundreds of thousands of people. Now their collapse costs a fortune to the UK taxpayers and probably even more to the thousands of businesses in the european south that are damaged. It's a little rich to pretend it was all inevitable
- ineedasername 7y agoYes, it's costing the UK not much less than if they had bailed out the company and forced some restructuring. (Yes, that way lies the potential for moral hazard)
- buboard 7y agothe costs for other countries are higher. For greece alone the cost is estimated at 200M
- Symbiote 7y agoWhere does this cost Greece money?
- buboard 7y agothey didnt leave just the tourists stranded, they left hotels, car rentals etc. unpaid since july.
- tonyedgecombe 7y agoI expect they have been paying on 90 days for a long time.
- giobox 7y agoTC pays the hotels and its contractors in arrears. TC ships a huge number of Brits to Greece every year. There are reports of hotels demanding payment from the travellers themselves given TC won't now be paying etc. They also employed directly/indirectly a great many people around Europe.
- mrnobody_67 7y agoClearly they had plenty of customers given that 150K people are stranded. So the reason they collapsed is because their cost structure wasn't aligned to serve the volume of business they conducted.
- andyst 7y agoNot specifically. The article indicates changing market preferences for travel, digitisation of agency functions, emergence of low cost carriers and market disruption in airbnb as the underlying causes. Although they may have had 150k stranded customers it seems they were left with a low yielding segment selling products the market didn't need.
- tyingq 7y ago150K UK residents were stranded. 600K if you include people from other countries.
- paulpauper 7y agoI don't get why this is such a big deal. airline bankruptcies are not that uncommon
- tonyedgecombe 7y agoLots of stranded customers, most of whom don’t have the wherewithal to get themselves home.
- maxk42 7y agoI was hoping this article would explain why they suddenly left 600k people stranded instead of winding-down the business, but no such luck!
- NeedMoreTea 7y agoThey were insolvent, at which point they are not allowed to trade. There's a specific offence of trading whilst insolvent. The CAA brings all the UK customers home as near to on schedule as possible under ATOL rules. Not sure how other nations play it out. There was talk after Monarch's collapse a couple of years ago of permitting an exception in the insolvency rules. Specifically to allow the use of the collapsed group's aircraft and pilots. No more was every heard of it. But it was Chris "failing" Grayling as Transport Secretary, so hardly surprising the initiative failed.
- EpicEng 7y agoHow do you continue to fly airplanes around when you're bankrupt? I don't think "winding down" is much of an option for an operation like this.
- joncrane 7y agoSurely even the below average business owners will know at least a week in advance that they're going bankrupt?
- jdsully 7y agoOnce bankruptcy is inevitable it's a mad rush from creditors to secure assets. The net effect is your "bankrupt" as soon as it appears inevitable regardless of whatever timeline you would have planned. Further continuing to trade after your insolvent is a form of creditor preference. In most cases your customers become just another creditor upon bankruptcy. This is of course illegal.
- michaelt 7y agoInsolvency law already allows for some creditors to be higher priority than others. Some would say the people who are in a foreign country and owed a flight home should be the highest priority creditors. And if operating a flight is the most efficient way to pay that debt....
- surfsvammel 7y agoPart of the niche they where in have seen margins and bottom lines decline for a long time. Airlines focusing on the budget segment has been going out of business for years. Is Norwegian next in line? If the European airlines keep going out of business we might see airlines from outside of Europe operating intra-Europe flights. Maybe an Emirates flight from Paris to Marseille or Qatar Airways flying Stockholm-Helsinki?
- Symbiote 7y agoThey aren't really an airline, that's just part of the business. Foreign airlines aren't generally allowed to operate intra-EU flights (something Brexit is disrupting, many British planes have been registered elsewhere in the last year or two).
- golover721 7y agoBankruptcy in the UK is significantly different than in the US where companies often continue to operate under Chapter 11 in a way that may not be noticeable to customers. The UK as far as I know doesn’t offer such protections.
- jayflux 7y agoIt’s not just the US where they do this but other countries in Europe also. The U.K. govt are looking into doing this for aviation as the US model was brought up in the commons when discussing Thomas Cook.
- barbegal 7y agoI'm not sure the article truly gets to the key points of why they went out of business. The travel industry in Europe is still growing, Brits are making more foreign trips than ever before. The real problem was that the holidays they were selling weren't making Thomas Cook any profit. The holidays needed to be competitive against online travel agents with much lower wage costs. By booking with Thomas Cook, you could get an experience where there were more staff on hand to help you, but actually people didn't value this and hence weren't prepared to pay more. The real nail in the coffin for Thomas Cook was their huge liabilities and huge concerns about their business viability so of course they were paying huge amounts of interest. Lenders were only lending to them on the hopes that they could collect enough interest rather than repayment. They were hoping that other parties (such as governments) would make cash injections such that they could profit. Everyone knew that eventually the debt would catch up with them, no one would want to be left holding the bag and the company would collapse. The only reason Thomas Cook's balance sheet didn't look horrific was because they had assigned the brand a goodwill value of over £2.5 billion in 2018 which they wrote down to £1.4 billion after the first half of 2019. This was clearly a huge over-estimate as I doubt anyone will be paying much to purchase their brand now!
- treis 7y ago>assigned the brand a goodwill value of over £2.5 billion in 2018 which they wrote down to £1.4 billion after the first half of 2019. This was clearly a huge over-estimate as I doubt anyone will be paying much to purchase their brand now! That's not what Goodwill is. Goodwill goes on the balance sheet when you acquire a company for more than book value.
- usr1106 7y agoI am not familiar with the details of their business. But I assume they got the goodwill into their balance sheet by typical mismanagement: 1. Their markets are shrinking 2. Instead of shrinking company operations to adapt, they buy even less successful competitors for an overprice, so goodwill in the balance sheet 3. Not unsurprisingly integrating the not so successful competitor into the company is not so successful, employees are demotivated abd business suffers even more 4. Now a company with growing costs operating on a shrinking market gets even less profitable I don't claim healthily shrinking a company to adapt to a shrinking market is easy. But I'm sure it must be doable. Looks like business management largely fails in this discipline.
- kerrsclyde 7y agoMore than a quarter of their profits were being used to pay interest on loans taken out after years of decline. The management seem to do a good job of diverting attention from the debts but the company was seriously badly managed, it was only a matter of time before it went bump. That's not to mention the 2006 Carbon Monoxide poisoning incident which meant people like me resolved never to use the company again.
- barbegal 7y agoI think you mean a quarter of their revenue.
- NeedMoreTea 7y agoWell he misses mention of the £3.1bn of debt before its collapse. Nor that while high street travel agents were busy declining fast Thomas Cook, fifteen years after we all discovered lastminute dot bomb[1], they bought Co Op Travel and their 750 shops. They lost their prestige image in the 90s as they were firmly playing in the discount package space. Doubling their high street shop network in 2016 seems to be sheer lunacy. [1] For those who don't remember the reference, their IPO didn't go to plan: http://news.bbc.co.uk/1/hi/in_depth/business/2000/review/1069169.stm http://news.bbc.co.uk/1/hi/in_depth/business/2000/review/106...
- eecc 7y agowow, that link loaded in an instant. Was the web that fast two decades ago?
- pieter_mj 7y agowhat the hell just happened? Way, way faster than anything I've seen in quite a while and loads faster than the 64.ms nonsense.
- perl4ever 7y agoThat page appears to be about 100K, so I think it would probably have taken at least 15-20 seconds to load on dial-up? Probably back in the day you would have been swearing at how bloated it was.
- detritus 7y agoI worked for a newspaper around the period this article was published (~2000) and we had a strict 120kb limit per page, aiming more for ~90kb, for the exact reasons you suggest.
- jaclaz 7y agoAnd we can now measure webpages in Doooms (JFYI): https://news.ycombinator.com/item?id=13211120 https://news.ycombinator.com/item?id=13211120 https://twitter.com/xbs/status/626781529054834688 https://twitter.com/xbs/status/626781529054834688
- imgabe 7y agoI can understand going out of business. I don't understand how it happens so suddenly from one day to the next to the point where people had no way to get home. Like, when those people booked their vacations, or even when they departed on their vacations, Thomas Cook just had no idea that they wouldn't have the funds to complete their trips? Do they just not look at their accounting statements and bank balances or something? How does something like that come as a surprise?
- epanchin 7y agoWhat would you suggest? Prevent people from booking? At which point creditors would realise something was up, and the result would be the same.
- michaelt 7y agoLook at things from the perspective of a CEO who knew his only chance to save the company (and his annual bonus) was to gamble all-in on getting a government bailout. From that perspective, wouldn't you want to make a bankruptcy as messy as possible?
- nwallin 7y agoThe UK has different bankruptcy laws than the US. Once you declare bankruptcy, that's it: all your accounts are frozen, all your employees go home, the company's assets belong to the courts. It's similar to, but even worse than a chapter 7 bankruptcy. I don't why their system is the way it is, but that's how it works.
- autokad 7y agoI dont want to go anywhere that involves getting into a plain such that I: - get talked to like I'm a dog by TSA - forced to wait hours in lines to get through security - violated by being forced to remove my belt and shoes
- deleted 7y ago[deleted]
- jaco8 7y ago... and in the future you will look to this experience as having been VIP, because in the future you will check-in naked , shackled to the floor with a hole in it so that you do not do anything untoward to others and the robot crew. The hole is to avoid the constant toilet trips necessitated by the crappy food . If you travel cattle-class you will get your cloth back in a basket , mixed together with the cloth of similar classed passengers. You will be allowed to re-dress once getting thru airport security , which involves getting taken apart and put together again by the intern of the day.
- autokad 7y agodont give them ideas
- dehrmann 7y ago> Today, a flight from the U.K. to a city on the continent can cost the same as or even less than an (overpriced) train ticket from central London out to the airport Looking at you, Gatwick Express.
- ironic_ali 7y agoGatwick express: lol
- usr1106 7y agoThe article is a nice read, but it fails the answer the question in the headline. If a company has a huge business and it's shrinking by a couple of percent a year, does the company unavoidably go bancrupt? I don't think so. There are plenty of successful businesses with a smaller customer base. The problem is mismanagement, corporational slowness, lying about the facts, creative if not illegal bookkeeping etc etc. Best demonstrated by the fact that management has got multi million bonus payments during recent years.
- tonyedgecombe 7y agoYou can’t shrink when you are so indebted.
- tim333 7y ago>In 2000, there were 0.61 Euros to the British pound. The writers don't seem very good at maths. I think they mean 0.61 pounds to the Euro. Also as to why they went bust the top comment on the previous discussion seems more telling to me https://news.ycombinator.com/item?id=21045550 https://news.ycombinator.com/item?id=21045550
- ptah 7y ago>600,000 people stranded abroad >For the 150,000 stranded customers who are British, the U.K. government has just announced so the majority who are not british are just stranded?