THOMAS COOK ON THE BRINK

Travel giant could go bust in 48 hours ++ 180,000 face being stranded abroad ++ Ministers plan biggest peacetime rescue operation

THOMAS Cook was on the brink of collapse last night, plunging the holiday plans of hundreds of thousands of customers into turmoil.

Despite battling to secure a rescue deal, the 178-year-old travel firm could go bust as early as Sunday, according to company insiders.

That would leave 180,000 customers stranded abroad – and dash the plans of hundreds of thousands of families who have booked Thomas Cook flights or holidays.

The demise of one of the world’s oldest travel companies would also lead to huge job losses and leave the taxpayer facing a hefty bill to bring stranded customers home.

The Mail can reveal that Whitehall officials have already drawn up plans for what would be Britain’s biggest peacetime repatriation. Known as Operation Matterhorn, it has been put together by the Department for Transport and the Civil Aviation Authority.

Senior sources suggested it could take up to two weeks to bring all Thomas Cook customers home if the company goes under.

Thomas Cook has been struggling under the

weight of £1.6 billion of debt and tumbling profits. Debt-fuelled expansion and a series of poor bets on where Britons would want to travel and how many people would book flights has left its finances in crisis.

The company is locked in desperate negotiations with its lenders, Royal Bank of Scotland and Lloyds Bank, over a salvage deal.

In July, bosses announced they were hammering out a rescue deal with Chinese company Fosun, Thomas Cook’s largest shareholder, and a group of hedge funds which owned its bonds. But a group of banks who lend to Thomas Cook, including RBS, are apparently threatening to scupper the rescue deal. They are demanding an extra £200 million be pumped into the rescue package, sources close to Thomas Cook said.

Unless RBS backs down, Thomas Cook’s board will have to call in administrators within days.

‘They’re running out of options’

This could happen as early as Sunday, the Mail understands, and the company has lined up administrators from Alix Partners to step in.

Last night, reports of the company’s troubles saw Thomas Cook bombarded by messages on social media from customers worried about their holiday plans.

Gavin Wilson wrote on Twitter: ‘What are the chances of my return flights to Vegas next month going ahead? Are Thomas Cook gonna be saved or are they about to go under?’ On its Twitter site, Thomas Cook assured holidaymakers that it would be around ‘for many years’.

But an industry source said last night: ‘ Unless the management team can point to a viable transaction soon, they have a clear legal duty to cease trading.

‘To put it bluntly, they’re running out of options.’

If Thomas Cook does fail, the taxpayer will be left with a huge bill. It would cost about £600 million to bring home the 180,000 Thomas Cook customers who would be abroad if the company collapsed early next week, industry experts estimate.

Thomas Cook package holidays are protected by the Atol scheme, which means customers are supposed to be brought home free of personal cost and refunded for any holidays which don’t go ahead.

However, customers who bought only flights through Thomas Cook would not be protected under the scheme.

And at the moment, the scheme – which is funded by the travel companies via a levy on travellers – contains only £ 18 million and is not big enough to cover the costs of a Thomas Cook collapse.

The Mail understands this would leave the Department for Transport having to scratch around for the remainder.

Last night, RBS denied that it was responsible for putting pressure on the deal. A spokesman said: ‘We don’t recognise this characterisation of events. As one of a number of lenders, RBS has provided considerable support to Thomas Cook over many years and continues to work with all parties in order to try and find a resolution to the funding and liquidity shortfall at Thomas Cook.’

The failure of Thomas Cook would be a huge blow to Britain’s travel industry. It served 22 million customers last year, operates more than 550 high street stores and employs 22,000 staff. If the rescue deal does go ahead, Thomas Cook will split into two parts – an airline business and a tour operator.

Most of it will fall into the hands of the Chinese, as Fosun – which already owns Wolves FC – will invest £450 million.

Guy Anker, of the Moneysavingexpert consumer website, said: ‘This is extremely worrying news for hundreds of thousands of people who have booked holidays with Thomas Cook, particularly those who are abroad already.’

Thomas Cook declined to comment last night. A Department for Transport spokesman said: ‘We do not speculate on the financial situation of individual businesses.’

There will be no winners if Thomas Cook goes into administration. having managed to keep trading through this year’s peak summer season without letting holidaymakers down (any more than usual), this venerable travel brand is facing an existential crisis.

Biggest shareholder Fosun has stepped up to the plate, along with assorted bond holders, hedge funds and banks, to put in place a debt for equity swap.

This would allow the travel operator to make arrangements with suppliers, hotels, airlines and the rest, for the 2020 season, by October 1. hold-outs include royal Bank of Scotland and Lloyds, which argue that the safety margin under the agreed recapitalisation is insufficient and there needs to be another £150m-£200m in the kitty.

The dissident banks are the very same lenders which came within hours of shutting down cash machines before the Government stepped in with a £500bn rescue in 2008.

If Thomas Cook were to fail, it is not just a great brand which would be obliterated. There would be further destruction of the high Street, with 550 travel shops in danger. Some 9,000 British jobs potentially could be lost, and 21,000 worldwide. hundreds of hotels would be placed in jeopardy and the shockwaves would spread to Germany and the Nordic countries, delivering UK capitalism and reputation a huge blow at a time when Brexit deadlock has done enough harm.

holiday firms are not dissimilar to banks, in that they depend on confidence. In the travel industry, uncertainty leads to falling bookings, cash flow grinds to a halt and suppliers, such as hotels, demand everlarger up-front payments.

Government cannot look at this with equanimity. If Thomas Cook goes under, the cost of repatriation for the UK alone could be as high as £500m to £600m.

That is three or four times more than the extra float the banks want to see as part of the rescue and equity wipe-out.

Bonkers.

Helping hand

The Bank of england is valiantly defying the rate- cutting zeitgeist at the Federal reserve and the european Central Bank.

This could be taken as a vote of confidence in the UK economy, which continues to surprise on the upside. But circumstances are very different.

The Fed has been through a tightening cycle since the financial crisis of a decade ago, and is seeking to prolong expansion with the cut in its key Federal Funds rate to between 1.75pc and 2pc.

In contrast, the eurozone has never fully recovered from the crisis in the single currency area, and Germany is staring at recession. The eCB is still in an easing phase with a new round of money printing and a cut in its key interest rate to minus 0.4pc.

The Old Lady is keeping her powder dry. Inflation is not a threat, with the consumer prices index at 1.7pc in August. The pound is bouncing around close to $1.20, but there are few signs of panic.

The Bank has chosen a holding pattern and is resisting flight refuelling, recognising the crunch comes on October 31.

If there were a Brexit deal, there may be no need to do anything. A No Deal, and months more of uncertainty with the economy disrupted, will pose different problems.

The traditional response to disorderly foreign exchange markets is to raise rates. More likely the Bank would seek to calm matters with a decisive rate cut, more quantitative easing and extra assistance for the banking system. This has been made possible by Chancellor Sajid Javid, who is addressing the supply side of the economy by opening the spending taps, including more resources for No Deal.

As Britain wrestles with Brexit, across the Atlantic the Fed is doing some emergency work. It has pumped an extra $75bn into the banking system for three days in a row, because of cash shortages.

It may simply be a short-term technical need. Pessimists might note this is how the great financial crisis began.

On the run

The Competition and Markets Authority has struck again, by putting the brakes on the sporty £90m takeover by JD Sports of Footasylum, fearing a bad impact on consumers. The regulator is demanding remedies, or threatens that it will move to an in-depth investigation.

Nothing is routine about the CMA these days. Is Advent, the conqueror of Cobham, listening?