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Thomas Cook collapses, stranding 150k UK holidaymakers

309 points| daanavitch | 6 years ago |theguardian.com

278 comments

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rwmj|6 years ago

I guess as they've gone bust I can tell this story now ... I used to consult for Thomas Cook about 15 years ago, and they were a basketcase of a company even back them, so this doesn't surprise me. I feel sorry for all the reps and workers out in the field and on the planes who will lose their jobs because of the profligacy of the Peterborough head office.

Two examples of stupidity stick with me. One was that at the time they outsourced their website to their main competitor. Which as you can imagine worked well because their competitor had no desire at all to fix the many problems with the website. TC didn't understand that the website was everything because they were at heart a high street travel agency.

The other was when I worked on managing their AdWords account, which was enormous (like 100K different keywords in thousands of groups). Some keywords would be bid at £10s of pounds. It is very easy to lose a lot of money on these keywords because there's a fine balance between the profit you make on each holiday (usually £100-ish), versus paying a large amount of money on each keyword and the number of sales you make at the end of the "sales tunnel". There was also a weekly industry survey which came out ranking the position of all the travel websites according to number of visitors (I forget the name of it). Senior managers at TC were fascinated by "being number one" on this survey every week, and so would instruct us to dial up the keyword bids on Friday night and run like this over the weekend. Google AdWords with high bids is very effective at bringing large numbers of low quality visitors to the website.

Each week they would indeed come number one on this survey (read only by other senior managers in the travel industry), while at the same time losing tens of thousands of pounds selling holidays for negative profit.

markh|6 years ago

This brings back memories... I was the technical half of a two person team who built the very first Thomas Cook website in 1995. Of course, e-commerce was a step too far at the time, but there was much excitement when the spec for HTML frames came out mid-project (don’t judge).

C1sc0cat|6 years ago

As one who specialises in enterprise SEO.

That is still an issue with many businesses, websites are still seen as just an electronic version of a poster on a bill board, its gradually changing.

And Eu companies are even worse, a few years back I suggested a link from a German parents website to the uk subsidiary and was told the Head office lawyers where checking to see if they "where allowed" to add a link.

sprafa|6 years ago

Most British companies I’ve seen operating appear to be an absolute mess from the inside. It’s funny that the British have the Northern European credibility in business but I don’t think they’re anywhere close as efficient or organised as the Germans or the Dutch. This is just personal experience but I’ve come to realise it seems to be the norm that British management is overall terrible.

tpmx|6 years ago

Suddenly Google's ad profits make a lot more sense.

nevf1|6 years ago

Sounds eerily similar to the early days of Ryanair[1] which was a poorly managed basket case in an industry ripe for innovation of its time - managers caring about their looks more than their books, cost overruns and non ownership of key bases... It sounds like Thomas Cook didn't have their Michael O'Leary to swoop in and fix their problems.

Even Ryanair didn't value their website or online offerings at first but they valued something which TC obviously missed time and time again - their bottom line.

[1] https://www.theguardian.com/books/2007/aug/12/biography.feat...

Jefff8|6 years ago

I guess, I can say that I worked on a project for introducing interactive advertising displays into their branches. It was killed because they didn't like the power cabling.

FartyMcFarter|6 years ago

> Customers at a hotel in Tunisia reported being locked in by security guards as the hotel demanded extra money, fearing it would not be paid by Thomas Cook.

This is quite bad behaviour from the hotel. Presumably their business relationship is with Thomas Cook, not the people on holidays?

They went as far as grabbing people who jumped a wall in an attempt to get out!

More details here: https://www.bbc.co.uk/news/uk-49787563

The hotel is this one, maybe one to avoid: "Les Orangers resort in Hammamet, near Tunis."

mhandley|6 years ago

Don't hotels realise this is a reputation business? In the age of the Internet, no-one with access to TripAdvisor or Google will ever stay there again. Wouldn't be at all surprised to see the hotel change name in the next year, if they survive. But perhaps worse that that, a hotel behaving like this, and not being slapped down hard by the Tunisian authorities, will damage the entire Tunisian tourism industry, just as they were recovering from the 2015 hotel attack there.

arthurfm|6 years ago

The Guardian article mentions that hotels have to wait up to 3 months to be paid by the holiday company. I can see why the Tunisian hotel did what they did, but you are correct that their business relationship is with Thomas Cook, not the holidaymakers.

Meanwhile, Thomas Cook holidaymakers were anxious that they might be evicted from their hotels or charged again for their holidays. Holiday companies do not normally pay hotels until up to 90 days after guests have left.

Do hotels typically have insurance that covers situations like this?

ezoe|6 years ago

It's between a hotel and Thomas Cook's problem.

Thomas Cook book the hotel. Hotel promised to allocate a room for Thomas Cook. Thomas Cook will pay the hotel fee. Hotel receive the fee from Thomas Cook.

The customer who actually use the hotel owes nothing from the hotel.

The same goes for Airlines.

It's a textbook example really.

tssva|6 years ago

I had something similar happen in Germany in the mid 90's. I was traveling for business and stayed at a hotel which my employer had an account with. My employer was evidently late paying the account. When I and a co-worker went to checkout they wouldn't let us leave until our employer wired them money to settle the full balance of the account. As in this case the local police sided with the hotel.

buboard|6 years ago

That's completely ridiculous behavior. If anything, they should lock them OUT of the hotel

konschubert|6 years ago

That’s hostage - taking, no?

interdrift|6 years ago

In general just avoid going to such countries lol

CaliforniaKarl|6 years ago

I don't think "stranding" is the right word.

For some time now, UK companies selling "package holidays" (with hotel, air, etc. all from one vendor and with one bill) are required to put up funds that the government uses to repatriate those who are already traveling when a company goes under:

https://www.caa.co.uk/atol-protection/

Note that it does not cover trips that people put together themselves; in that case, I expect they'd only have to arrange for a flight home (as they paid for the other parts themselves).

The CAA (the UK's Civil Aviation Authority) already has a site up for Thomas Cook customers:

https://thomascook.caa.co.uk

parsimo2010|6 years ago

“Temporarily stuck until they can get a flight scheduled” is better, but wordy.

These vacationers are in safe countries with good infrastructure. They definitely aren’t stranded like Tom Hanks in Cast Away. However, the other airlines can’t magic up 150,000 seats, so it might mean that some people will take a while to get home.

shkkmo|6 years ago

Why does only cover "package holidays" and not all round-trip air tickets? That distinction doesn't make sense except as a subsidy of package deal providers...

wp381640|6 years ago

Reminder again to never hold gift cards. I had a family member who was gited a $3,000 travel voucher with an agency - I told them to exchange it in for flights asap as you can book up to a year out, change the tickets later and it's better to be a creditor with a national airline than a likely-going-out-of-business-because-of-online travel agency

hnarn|6 years ago

> Reminder again to never hold gift cards.

$3,000 is no small amount of money, do people really feel so much shame in giving someone plain old money that they have to buy a gift card?

A gift card is almost like buying a stock, except it's much more risky and gives you zero benefits compared to the cash that paid for it. If you want someone to be able to travel for $3,000 just give them $3,000.

dehrmann|6 years ago

The gift card market just confuses me. Especially when it's people giving gifts to people (not corporate gifts), cash is something that has at least as much value as the gift card, is accept everywhere, isn't a liability on a balance sheet, and is easier to give.

nabla9|6 years ago

Additionally, buy flights using credit card.

If you used a credit card, you get your money back in the case of bankruptcy. If you used cash you may not unless you bought bankruptcy insurance.

tomp|6 years ago

Depends on the country and industry... AFAIK in the UK, if you buy a restaurant voucher (e.g. via Groupon), the restaurant doesn't actually get that money, but it's held in a separate account until the customer actually uses the voucher.

tomglynch|6 years ago

This is literally an Airline going out of business, the opposite to the point you're making.

fasicle|6 years ago

Thomas Cook to cost the taxpayer £100m for the repatriation of Thomas Cook customers - known as Operation Matterhorn.

https://www.bbc.co.uk/news/live/business-49770809

Krasnol|6 years ago

In Germany TC is required to insure package tourists for this case. Germany won't pay for their return (or as in this case: the time they'll stay there until the insurance gets them a flight back).

beaker52|6 years ago

It's always blown my mind that companies like this will operate not having enough cash on hand to actually provide the services they've sold.

Maybe that's why they're in business and I'm not.

pjc50|6 years ago

Well, reaching that point is the definition of insolvency.

But having future commitments that you don't currently have the cash for is both normal and expected. The economy is held together by invoice credit.

(Wait until the people who get upset about banks "creating money" realise how commercial credit works and discover "shadow banking"...)

Blackstone4|6 years ago

Working capital is the amount a company is due for services/goods (accounts receivable) minus what it owes for services/goods (accounts payable).

The ideal situation for a company is that if it receives payment for it services in advance (i.e. a consumer paying for a holiday) and has to pay its suppliers (i.e. hotels) much later. This can result in a situation called negative working capital where a company has received more cash from customers than it has paid to-date. This is effectively interest free financing.

Companies getting into financial difficulty will try to accelerate payment of monies they are owned and delay payment to supplies...as we see here.

droithomme|6 years ago

> not having enough cash on hand to actually provide the services they've sold

The article mentions that one of the issues here is that the credit card companies saw that collapse was imminent and certain and thus refused to release the funds charged by their customers to Cook, knowing that Cook would collapse, the customers wouldn't get their full holiday, would do a chargeback, but the bank wouldn't be able to get the funds back from Cook.

> "The tour operator is understood to have made a number of proposals, including ... for credit card companies to release about £50m of cash they are holding as collateral against Thomas Cook bookings."

So maybe they did have enough cash on hand in a way, but the banks weren't releasing it to them.

Another intractable and perhaps the main problem was their massive debt service owed on their previous bailout. Kind of similar to Toys R Us and other companies that have had a bailout of one form or another that leads to massive debt and debt payments taken on and beyond the ability of the company's profits to pay off.

chadcmulligan|6 years ago

I've been told many large companies only have a few months cash flow to keep them operating. I remember many years ago this fact was exploited by the unions when a dispute couldn't be resolved. They stopped collecting payments (pre internet) and the dispute was resolved quickly.

sksksk|6 years ago

Well, they're not in business anymore

HenryBemis|6 years ago

I was always wondering about the profit margins of these companies. From their prices I always felt that I am paying a portion of the previous guy's vacations. I'd call it a pyramid scheme, only everybody loses.

xioxox|6 years ago

The big problem was its £1.4bn in debt, which really brought it down. Id be careful holding shares in companies with big debt if there's a coming downturn.

jl6|6 years ago

I have a future holiday booked with Thomas Cook. I paid a deposit, which I expect to get back through either ATOL or my credit card company. The overall cost was going to be less than I would have paid booking direct. They should probably have charged me more :(

dehrmann|6 years ago

Maybe this is nitpicking, but it might be more that they're always one month behind on all their bills. A pyramid scheme needs to keep getting suckers on the bottom layer; this might operate fine with repeat customers.

dmitriid|6 years ago

> profit margins of these companies

They are really low. They rely on large numbers of tourists to have a meaningful profit YoY.

Source: worked for a tourism company in early-to-mid 2000s.

Scoundreller|6 years ago

Taking less money now for higher expenses in the future isn’t that unusual.

It’s basically the cornerstone of insurance companies (especially life insurance).

dehrmann|6 years ago

I was recently debating booking a flight to Europe on Norwegian. It didn't affect my decision, but I'm very aware that they're struggling financially, so I'd only buy the tickets less than a month out on a credit card so it's the bank's money, and if they declared bankruptcy and cancelled flights, c'est la vie.

Cakez0r|6 years ago

Ah, nuts! I had no idea Norwegian was struggling. I have a long-haul flight booked with them for Christmas :(

barsonme|6 years ago

Does this mean Condor Airlines is shutting down as well?

Their website[1] says they're continuing to fly, but I'm wondering if there any sort of precedent for what happens to child companies when the parent becomes insolvent.

Having just returned just last week from Europe via Condor Airlines, I'm glad I don't have to worry about this mess.

[1]: https://www.condor.com/us

goodcanadian|6 years ago

If Condor operates as an independent company, as long as it is a going concern, it will likely continue to fly. As an asset, it will be sold by any administrator in order to help recoup money to pay Thomas Cook's creditors. It is (most likely) worth more money as an operating airline than if it were to be shut down.

ce4|6 years ago

German Spiegel Online has a bit of information:

Basically Condor answered that they will continue operating but also had to apply for a state backed credit to bridge short term liquidity issues caused by Cook's insolvency. This is being assessed by the German government at the moment.

The german travel agent subsidiaries however have stopped selling travels for now (brands Neckermann Reisen, Bucher Last Minute,etc)

https://spiegel.de/wirtschaft/unternehmen/thomas-cook-reisek...

deanclatworthy|6 years ago

Same issue here in the Nordics with Tjärebörg. At least the Finnish version is claiming this won’t affect them, and has been saying this for weeks. I’d call this bullshit, as far as being irresponsible. It sounds to me like a CEO trying not to spook potential customers rather than being honest with existing ones.

My partner has a holiday with them booked for November. I don’t have high hopes for that.

tallanvor|6 years ago

Ving Norge cancelled all their flights even though they haven't actually filed for bankruptcy, so don't be surprised if the other subsidiaries end up with similar happenings.

zwieback|6 years ago

I hope not - only direct flight from Portland to Germany and very cheap (but crappy)

Scoundreller|6 years ago

Guardian reports:

> Dozens of charter planes have been brought in from as far afield as Malaysia to assist with the mass airlift.

Getting a charter plane has been quite difficult since the 737MAX grounding.

Any excess capacity has been soaked up.

There have been lots of unusual chartering by airlines that don’t usually charter. Air Canada had been using some, and it’s exceptionally rare for them to not use AC-branded planes.

At least it’s not the high season.

mcv|6 years ago

Why are extra planes even necessary? There were already return flights planned, right? Why not have those fly anyway? Maybe they're owned by Thomas Cook and the crew won't get paid anymore, but it'd be nice if the government could step in and let those parts of the company continue operating until every is home again. That's much less disruptive than keeping the original planes grounded, and chartering different planes to step in. That's disruptive to two plane crews and the passengers. Continuing as normal would be far less disruptive.

But I'm probably missing some vital piece of red tape. It's usually an insurance issue.

toyg|6 years ago

Yeah, this would have been absolute carnage just last month. At least there should be very few kids involved now.

Symbiote|6 years ago

On the other hand, there are presumably now about 50 fairly new Airbus aircraft for sale, mostly A320 or similar, plus some Boeing ones.

(Various sources give different numbers for the fleet size.)

sek|6 years ago

https://finance.yahoo.com/quote/TCG.L/balance-sheet?p=TCG.L

This looks really bleak, everybody who had some liabilites to Thomas Cook in any way should at least consider the chance of insolvency.

The hotels should be able to check this information, but consumers?

Every person who gets a new phone contract has his credit rating checked, but if hundreds of thousand people buy expensive flights nobody warns them about the risk.

greglindahl|6 years ago

One interesting part of the news coverage is that there are 600k customers involved, and only 150k of them are UK holidaymakers. Notice the lack of coverage of the other 450k?

mikejb|6 years ago

The guardian is a British newspaper, so there's an understandable focus.

An additional factor may be the insurance situation: Some countries require travel organizers to set up insurance for these cases, ensuring that customers can still get back. I'm not 100% sure on this, but I think the UK doesn't have such requirements, which would worsen the situation for them in particular.

dagw|6 years ago

Notice the lack of coverage of the other 450k?

if you read a Swedish newspapers they'll talk about the Swedish customers, read a German newspaper and they'll talk about the German customers and so on.

consp|6 years ago

The 10-20k Dutch customers of Neckermann and TC are covered by an equivalent fund for safe voyage home (and possible payout). I guess more countries have some kind of arrangement.

buboard|6 years ago

its quite possible they don't know the origin of the other customers, so nothing to report there

msclrhd|6 years ago

From the 05:37 summary:

-----

* There are 600,000 Thomas Cook travellers who have been left stuck overseas.

* More than 150,000 of those are Britons.

-----

totaldude87|6 years ago

How come a company that is trusted by half a million travelers (at the end of a holiday season) can this easily go bankrupt?.. Is this a case of bad management or cheap travel models or what..

cant see any details on when they started seeing issues, and how did they end up like this..

edit: here is how -- Thomas Cook returned to private ownership in 1972 and has seen a series of mergers and takeovers. In 2007, it merged with the UK-listed owner of Airtours, MyTravel Group, which nearly collapsed in 2011 but was bailed out by its banks. The rescue left Thomas Cook with a debt burden of £1.7bn and the company struggled to cope, leaving administration as the only option.

nkingsy|6 years ago

I was not familiar with the term holidaymaker, and thought it was corporate speak for a Thomas Cook employee. Very confused until halfway through the article.

Exquisites|6 years ago

That's a damn shame. I used to fly with them for next to nothing. Decent airline. Never would consider staying in their crappy hotels though. This will have a major effect on low-cost long-range tourism. Everybody is going to bump their prices up a notch.

PhilWright|6 years ago

Why do these travel companies always go bust in a way that leaves people stranded?

Surely the management must have known a week or two ago that the company was about to go under. In that case, stop anyone flying out but still bring people back. By the time they actually cease trading there should be few people left abroad. Some managers in Thomas Cook must have known that people flying out were going to end up stranded and they just let them go.

rlucas|6 years ago

The moment they stop accepting reservations for new travel outbound is the moment they are commercially dead.

Agreed, if you knew there was 0% hope (say, of flying anyone back a week hence) it would be unethical to keep it going. But if you were trying to keep things afloat and thought you could do, it would be unethical to do otherwise, since stopping new outbounds would 100% doom the firm and strand the overseas travelers.

greglindahl|6 years ago

I'm sure you read the article, which mentions that there were negotiations up to the last minute to raise the last 200mm pounds on top of the 900mm pounds existing rescue package.

buboard|6 years ago

This didn't come out of the blue. Thomas Cook is known to have problems for years and an impending collapse has been rumoured since months ago. Why did all these traveleres choose them is a better question

stordoff|6 years ago

Completely playing devil's advocate - continuing to operate whilst knowing there is a high risk of them going bust gives the CAA more time to put in contingency plans, rather than going bust _now_.

choeger|6 years ago

The moment they stop flying out, they collapse. In that case they leave people behind and sink the company actively. Not a situation any manager wants to end up in.

benj111|6 years ago

Frankly I think its amazing that all these people can expect to be repatriated, relatively problem free, it's like a bank collapse, but you have to herd people.

And the scale. Operation Market Garden only dropped 40,000 troops. D day only managed to land 150,000 on the first day.

pjc50|6 years ago

On the other hand, the tourists aren't being paradropped over hostile territory. Unless Thomas Cook had really gone downhill..

matwood|6 years ago

The scale is larger, but figuring out how to move people around when an airline stops flying either through a strike or bankruptcy is not uncommon. As long as they can get people out of the vacation town and into a larger EU city, flights back to the UK become relatively easy.

Years ago I showed up a Croatian airport to head home after a few weeks vacation and during that time the Croatian airline (pilots I guess) had gone on strike. It was a bit hectic, but eventually we were put on an unbranded private jet to Frankfurt. From there getting back to the US was no big deal.

andrewstuart|6 years ago

Is this brexit related?

Lazare|6 years ago

Not really. As noted in the article, Thomas Cook merged with MyTravel Group in 2007, which almost collapsed in 2011 and left them with a lot of debt. Brexit came years later.

Possible causes would be long term trends in the types of holidays people want, increased competition, mismanagement, etc. But the problems started long before Brexit.

billpg|6 years ago

It hasn't helped. The fall in the value of the pound caused by Brexit has made their service significantly more expensive.

Thomas Cook might have been able to position itself, in the internet era, as a local trustworthy service that takes away the uncertainty of buying from unknown overseas services. The increased costs caused by Brexit only made a difficult market more difficult.

asdf333|6 years ago

not completely...booking.com, tripadvisor, trivago, expedia and all these online hotel booking sites are what really did this company in.

i suppose it didn't help that folks were probably less interested in travelling due to financial uncertainties around brexit but it definitely isn't the main reason

Waterluvian|6 years ago

Yes. What other people are saying is also true. Many nails in the coffin. Brexit apparently caused Britons to hang on to their money more and vacation abroad less. So if you're a travel company on the ropes, Brexit could seal your fate.

stupendousyappi|6 years ago

The exchange rate decline was likely the biggest Brexit-related factor.

futhey|6 years ago

Exchange rates and access to credit may be in some part Brexit related, but not enough to have on its own altered the outcome.

Scoundreller|6 years ago

I’ll also add a lot of people’s reluctance to travel around the time period of each hard Brexit date.

Nobody wanted to risk getting stranded at any changeover, and a lot of industries are probably reluctant to grant time off during it.

lettergram|6 years ago

Strange... must be down from the 600k reported by Business Insider:

https://www.businessinsider.com/thomas-cook-bankrupt-airline...

mikejb|6 years ago

The detail is in the title: 150k UK holiday makers vs. 600k total

futhey|6 years ago

I was trying to figure this out too, other reputable sources cite 600k as well.

There is some number of passengers who have not yet left on their trip, who are part of that number.