The Guardian view on Thomas Cook: wiped out by debt
The collapse of Thomas Cook, the world’s oldest holiday company, is most obviously a disaster for its 21,000 European employees – 9,000 of whom work in the UK. It may also prove fatal for some of the hotels and other businesses that relied on it for customers. And while having a holiday ruined is not as bad as losing a job, the inconvenience faced by 150,000 British tourists who are now overseas should be treated seriously. Holidays are important, particularly when planned to mark milestones such as marriages and retirements.
The demise of yet another big high street name is bad news too for all those who rely on town centres for their livelihoods, shopping or recreation. The closure of around 560 shops will create yet more empty windows in places already struggling to retain a sense of commercial life as retail migrates online. Jumps in the share price of easyJet and Tui, Thomas Cook’s main competitor, indicate that shareholders believe reduced competition will increase their profits. As with the collapse of Monarch Airlines in 2017, this week’s events are likely to lead to price rises – making the 178-year-old firm’s disappearance a blow to bargain-seeking travellers too.
It is far from clear that the bailout of up to £250m that the company requested, and ministers refused, would have avoided all this. Thomas Cook almost went bust in 2011 and is colossally in debt due to decisions taken by management teams dating back to its merger with MyTravel in 2007. The 2018 heatwave, which led to reduced bookings, combined with the weakness of sterling and concerns about Brexit, pushed it over the edge. And while a consultation with the workforce, as proposed by Labour’s John McDonnell, would indeed have been preferable to the shock and disruption of the last 24 hours, there was a risk that even the bailout would not have been enough. With the cost of the operation to bring stranded tourists home and pay Thomas Cook’s bills expected to far exceed the initial estimate of £100m, the risk of pouring public money into the company, only to see it fail anyway, was that taxpayers would have been landed with two bills instead of one.
Ministers must explain their decision in light of reports that the Spanish and Turkish governments were considering a rescue before they pulled the plug. But political arguments over the role of the state must not overshadow the fact that this is a private-sector failure. The gulf dividing bosses from workers in a business where bosses have taken home £30m since 2007 appears particularly obscene when it is clear that opportunities to reduce its debt mountain were missed as recently as last year.
Observers, as well as those directly affected, may take some solace in the repatriation operation led by the Civil Aviation Authority. That logistical challenges such as ferrying 150,000 tourists back to the UK can be met is a relief. But the whole miserable episode also serves as a reminder of the perils that await. The weakness of sterling combined with Brexit uncertainty, as well as changing weather patterns and other factors outside ministers’ control, place companies at risk. As political instability looks set to continue, the government must come up with clear criteria against which future bids for state help from collapsing businesses can be judged.