Thomas Cook closes the book on 178 years

Monday, 23rd September 2019 13:03 - by Shant

After last-minute attempts to secure contingency funding on Sunday, negotiations between Thomas Cook and lenders broke down, leading to the announcement that as of midnight of the 22nd of September, the company ceased trading.  Naturally, the immediate concerns are with stranded holidaymakers, but the government has initiated a huge repatriation operation, looking to bring home as many as 14,000 of the 16,000 due to fly home on Monday.  The firm has in excess of 150,000 holidaymakers, so this operation will be managed through the cooperation of a range of airline operators, including EasyJet and Virgin who have contributed to the what has now been dubbed Operation Matterhorn.  

The company itself has over 21,000 employees, who were informed through a press conference by its Chief Executive, Peter Frankhauser, that Thomas Cook is now in the hands of government's official receivership.  Indeed, not long into the early hours of Monday morning, aircraft at a number of the UK's airports were already being impounded.  This is a tremendous fall from grace for one of the industry's leading brand names, though tough times were nothing new from the tour operator, having weathered the storms earlier in the decade.  Peter Frankhauser managed to turn the company around and return its finances into the black in 2015, but the current climate has been too much to fight against and the books have finally been closed.  

Thomas Cook has attributed its demise to a number of factors, but some of them will have a familiar ring to it and should serve as a strong reminder that no matter how big the name, heightened competition can claim scalps right across the spectrum.  Having a high street presence was one major cost burden which will have detracted from revenues, and the company has been closing shops consistently in recent years in a bid to try and compete with online-only operators.  Not for the first time are we talking about the impact of a dwindling high street, a history of which has left it with expensive overheads at a time when its rivals have been flourishing in the digital age.

This has been exacerbated by increasing acquisitions - leading to more liabilities (re property) - at a time when the global economy was expanding.  As we now know, times are changing, and with greater indebtedness, these said acquisitions have compounded Thomas Cook's profitability to the point of collapse - again, something which will undoubtedly resonate through the rest of corporate world and conglomerates and multinationals especially.  

Other factors such as a hot summer in 2018, prompting an increased interest to holiday in the UK, as well as the Brexit uncertainty which has hit discretionary spending across a range of sectors,  have added to the downfall of the 178-year-old company.  This is a company with a strong heritage, built from humble beginnings, but in recent times, the management has clearly struggled with not only economic pressures, but with the concept of packaged holidays in a day and age where the consumer can 'package' a holiday through the internet themselves.  Some will say that there was an inevitability to this weekend's outcome, but one can't help but think that a more modest approach going forward and a period of entrenchment would have helped sustain the company a little longer.  A lesson here for many no doubt.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.