Until the last moment, the company, which had long experienced problems with servicing loans, had been discussing the terms of debt restructuring with the main shareholder of the Fosun Tourism Group and lenders in order to close a “hole” amounting to £200 mln ($249.23 mln), but the negotiations failed.
Thomas Cook, the oldest British travel company in the world, has announced its forced liquidation and is awaiting thousands of holidaymakers around the globe eager to return home. Despite all attempts, the company was unable to find funds to prevent bankruptcy.
The booking of tickets for more than 600,000 vacationers around the world was cancelled early in the morning.
Consequences for Holidaymakers and Employees
About 600,000 people are now abroad on Thomas Cook vouchers, of which about 160 thousand are British citizens. Due to the bankruptcy of the company, 22,000 of its employees may lose their jobs, including 9,000 in the United Kingdom.
It may take up to two weeks for Britons to return home despite the fact that government ministers will today launch Britain’s biggest peacetime repatriation effort.
How Did the Government React?
The UK government has already announced that it will create an ad hoc working group to deal with the Thomas Cook situation and will allocate funds to deal with the consequences.
According to UK Prime Minister Boris Johnson, the government was right not to bail out tour company Thomas Cook.
“We need to look at ways in which tour operators one way or another can protect themselves from such bankruptcies in future,” he stressed.
Earlier, British Foreign Minister Dominic Raab said that the government will be ready to lease charter flights in order to return the customers of Thomas Cook back in case it declares bankruptcy.
In turn, UK Labour party’s finance policy chief Mcdonnell said that the government should have been willing to do more to save Thomas Cook.
Why Did the Company Go Bust?
For a long time, Thomas Cook has been experiencing financial difficulties. The company itself named various reasons, in particular the political unrest in places of rest, and the refusal of customers to book vacations due to Brexit. According to the BBC, in addition to this, the travel agency has faced fierce competition from online travel agencies and low-cost airlines.
The company had pegged its hopes on a £900 mln rescue deal with its largest shareholder, the Chinese investment company Fosun International, which owned a stake of 18%. However, Fosun’s creditor banks demanded a further £200 mln in reserve funding, which cast doubt on the deal. Thomas Cook tried unsuccessfully to negotiate with creditors and requested help from the British authorities, but was refused and was forced to stop working.
Thomas Cook expects that management of the liquidation will be entrusted to AlixPartners UK LLP or KPMG, which will also deal with the return of British customers to their homeland.
“I would like to apologise to our millions of customers, and thousands of employees, suppliers and partners who have supported us for many years,” Chief Executive Peter Fankhauser said in a statement in the early hours of Monday morning.
The company was founded in 1841 by Thomas Cook, who is called the inventor of organised tourism. Initially, the company specialised in railway excursions. At the time of closing, it ran hotels, resorts, as well as the airline. The number of its customers was 19 million people a year in 16 countries, according to Reuters.