The world’s oldest travel firm Thomas Cook (TCG.L) collapsed on Monday, stranding more than half a million holidaymakers around the globe and sparking the largest peacetime repatriation effort in British history.
The liquidation marks the end of a British company that started in 1841 running local rail excursions before pioneering the package holiday and growing into one of the world’s largest tour operators.
It ran hotels, resorts and airlines for 19 million people a year in 16 countries. Employing 21,000, it currently has 600,000 people abroad, forcing governments and insurance companies to coordinate a huge rescue operation.
Prime Minister Boris Johnson pledged to get stranded British travellers home, increasing pressure on the government just as it tries to negotiate an incredibly complicated withdrawal from the European Union.
He said the government had rejected a bailout request of about 150 million pounds ($187 million) from Thomas Cook because doing so would have set up a “moral hazard”.
“It is a very difficult situation and obviously our thoughts are very much with the customers of Thomas Cook,” Johnson told reporters on a plane as he headed to the U.N. General Assembly in New York. “We will do our level best to get them home.”
Thomas Cook has been brought low by a $2.1 billion debt pile that prevented it from responding to nimbler online competition. With debts built up around 10 years ago due to several ill-timed deals, it had to sell three million holidays a year just to cover its interest payments.
As it struggled to pitch itself to a new generation of tourists, the company was hit by the 2016 coup attempt in Turkey, one of its top destinations, and the 2018 Europe-wide heatwave which deterred customers from going abroad.
Chief Executive Peter Fankhauser said it was a matter of profound regret that the company had gone out of business after it failed to secure a rescue package from its lenders in frantic, knife-edge talks over the weekend.
The UK’s Civil Aviation Authority (CAA) said Thomas Cook had ceased trading and the regulator and government had a fleet of planes ready to bring home the more than 150,000 British customers over the next two weeks.
The impact could already be felt further afield, with Australian travel group Webjet Ltd (WEB.AX) saying it was 27 million euros out of pocket and British online travel group On The Beach (OTB.L) saying it would suffer from helping its customers in resorts who had flown with Thomas Cook.
The collapse could provide a boost, however, to major rival TUI (TUIGn.DE), whose shares surged more than 8% in early Monday trading, and to Europe’s overcrowded airline sector, which could benefit from the closure of Thomas Cook’s airline business.
“I would like to apologise to our millions of customers, and thousands of employees, suppliers and partners who have supported us for many years,” Fankhauser said in a statement.
Pictures posted on social media showed Thomas Cook planes being diverted away from the normal airport stands.
“Love my job so much, don’t want it to end,” Kia Dawn Hayward, a member of the company’s cabin crew, said on Twitter.
Customers were told not to travel to airports until they have been informed via a special website - thomascook.caa.co.uk - that they were due on a return flight being organised by the government.
The website showed some flights were returning to different British airports, but many were only running a few hours behind the original Thomas Cook scheduled flight and the system appeared to be working well in the early hours.
The British regulator is also contacting hotels hosting Thomas Cook customers to tell them that they will be paid by the government, through an insurance scheme. That was after some customers were briefly held in a hotel in Tunisia when staff asked for additional payments to be made.
Gary Seale, a guest at the Orangers Hotel in Hammamet, Tunisia, posted on Facebook on Saturday that “security have refused to let us out of the hotel and barricaded us in”. He later posted that he had reached the airport and flew home on Sunday.
In Germany, a major customer market for Thomas Cook, insurance companies will coordinate the response.
The company’s German holiday airline Condor said it had asked its government for a bridging loan, and said it would continue flying.
The collapse has the potential to spark chaotic scenes around the world, with holidaymakers stuck in hotels that have not been paid as far afield as Goa, Gambia and Greece.
In the longer term, it could also hit the tourism sectors in the company’s biggest destinations, such as Spain and Turkey, leave fuel suppliers out of pocket and further damage British shopping streets with the closure of hundreds of travel agents.
The group had seemed set for a rescue when it agreed the key terms of a 900 million pound recapitalisation plan with its biggest shareholder, China’s Fosun (1992.HK), and the travel firm’s banks in August.
But in finalising the terms of the deal, the company was hit with a demand for another facility of 200 million pounds in underwritten funds by its banks. Fosun said it was disappointed by the company’s failure to strike a deal with its banks and bondholders, and noted it had remained supportive throughout.
Prime Minister Johnson said Thomas Cook’s collapse raised questions about whether directors of travel companies were “properly incentivised” to avoid bankruptcy.
“We need to look at ways in which tour operators one way or another can protect themselves from such bankruptcies in future and clearly the systems that we have in place to make sure (they) don’t in the end come to the taxpayer for help,” he said.
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