Out of business, out of luck
Hundreds of thousands of vacationers left stuck worldwide by tour company’s collapse
LONDON — Hundreds of thousands of vacationers were left stranded when Thomas Cook, one of the world’s oldest tour companies, abruptly announced Monday, with some of its flights still in the air, that it was going out of business.
Amid scenes of confusion at airports in European vacation spots, British aviation officials scrambled to stitch together a plan to bring home 150,000 travelers — the largest peacetime repatriation in the country’s history.
Thomas Cook, which opened for business in 1841, said all its bookings, including flights operated directly by the company, had been canceled.
“We are sorry to announce that Thomas Cook has ceased trading with immediate effect,” the company said.
The news snarled travel plans for hundreds of thousands as tourism officials braced for a potentially devastating hit to their economies.
Many of the travelers were abroad and wondering how they would get home. Others found their vacation plans dashed. Among them were Layton Roche and Natalie Wells, who booked flights more than a year ago from Manchester, England, to Kos, a Greek island, for their wedding Friday.
“I have been awake for 28 hours now,” Roche, a 30-year-old civil engineer, said in a message Monday as he and Wells, 31, were
on their way to Birmingham to seek an alternate flight.
The stranded Britons were among as many as 600,000 vacationers left high and dry worldwide. Britain’s Civil Aviation Authority said in a statement on its website that it had arranged 60 flights to get people home Monday and that the effort would extend until Oct. 6.
“We will try our level best to get them home,” Prime Minister Boris Johnson said.
If Thomas Cook’s customers were surprised, British officials had less reason to be. The government had refused to mount a financial rescue of the battered company; doing so, Johnson said, would create a “moral hazard” by encouraging other troubled companies to take undue risks.
It was unclear, however, what steps, if any, the government took to prepare for the possibility of hordes of stranded travelers.
Tremors from the collapse radiated across the world, to Malaysia and San Francisco, but were felt most acutely in Europe. In Greece, where 50,000 vacationers were expected to be repatriated to their home countries in the coming days, and in Spain, there were fears about the effects on their critical tourist industries.
In Crete alone, Thomas Cook brought 400,000 visitors this year. Michalis Vlatakis, head of the Greek island’s union of tour operators, described its collapse as a “7 magnitude earthquake.”
Things were at least as dire in Spain, particularly in the Canary Islands and the Balearic archipelago. Together, they accounted for about 3.2 million of the 3.6 million passengers flying each year to Spain on planes owned or chartered by Thomas Cook, according to the Spanish National Airport Authority.
Beyond the chaos and disappointment for travelers, the company’s collapse put 21,000 jobs at risk.
In a sense, the collapse signaled the end of an era, in which Thomas Cook’s low-cost package vacations put beaches in exotic locales within the budgets of middle-income Britons. The company had been in poor financial health for some time. It announced its closing after negotiations to obtain $250 million in emergency financing fell apart over the weekend.
Analysts said Thomas Cook, struggling with debt approaching nearly $2.5 billion, had failed to adjust to the changing times. While other travel companies went totally online, for instance, Thomas Cook held on to its extensive chain of storefronts.
“What everybody is not lending their thoughts to is that this has been a thoroughly badly run company,” David Buik, a financial analyst, said in an interview with LBC radio Monday. “It has had far too many shops. The emphasis of the business has gone online.”
But the company also suffered from a number of factors beyond its control, particularly Brexit, the planned British withdrawal from the European Union, which has cut the value of the pound. That has discouraged travel and squeezed profits.
“If the majority of your business is in destinations which are in euros and you are against the backdrop where there is a lot of capacity and you cannot raise prices, then there is a cost squeeze,” Chris Tarry, an independent airline analyst, told the BBC.
Thomas Cook CEO Peter Fankhauser said, “There is now little doubt that the Brexit process has led many U.K. customers to delay their holiday plans for this summer.”
Fankhauser also cited a prolonged heat wave in the summer of 2018 that brought high prices in the Canary Islands, a popular destination for the tour operator.
Terrorism and political unrest in North Africa, Turkey and Egypt have also hit Thomas Cook particularly hard in recent years, analysts said.
Because Thomas Cook customers are covered under a government insurance program, they are assured of refunds for canceled trips and repatriation free of charge. Those who bought only flights from Thomas Cook do not have the same protections and may need to rely more on personal travel insurance, if they have it.
The government insurance program also reimburses hotels for the cost of the customers’ stay, even if cut short. Some resorts, however, appear not to have gotten the message.
On Saturday, some British tourists described being stopped from checking out of their hotel in Tunisia over concerns that the hotel might not be paid. They said they were essentially locked in until the matter was sorted out.
While the government may be covering the cost of canceled vacations, it is not helping out with the cost of making alternative arrangements.
Roche and Wells, the couple planning to marry, had to pay nearly $5,000 extra for alternative flights for themselves and some family members. And they were expecting to spend an additional $2,500 for their accommodations.
“I’m absolutely gutted,” Roche said.
Most of the couple’s guests, he said, could no longer attend the wedding because of the extra costs.
The failure of Thomas Cook touched off a debate in Britain over whether the government should have intervened to prevent the collapse.
Speaking to British television network ITV, Transport Secretary Grant Shapps said that beyond the fact that “governments don’t usually go around investing in travel companies,” a bailout of Thomas Cook would most likely have only put off the inevitable by “stretching things out for a couple of weeks.”
“The company was asking for up to 250 million pounds,” he said on “Good Morning Britain,” the BBC’s morning news show. “They needed about 900 million pounds on top of that, and they’ve got debts of 1.7 billion pounds, so the idea of just spending taxpayers’ money on that just wasn’t really a goer.”