Thomas Cook collapse leaves hundreds of thousands stranded and 22,000 workers facing the axe

Richard Tyler

Britain’s largest package holiday operator Thomas Cook was placed in compulsory liquidation in the early hours of Monday morning after failing to secure funding to keep the firm going. The consequences have been immediate and massive.

The Financial Times described the collapse as spreading “chaos through the international travel industry.”

The overnight collapse has left hundreds of thousands of holidaymakers, and those who had purchased flights, stranded overseas. The UK government has been forced to implement an emergency repatriation operation, the largest in peacetime, to bring back the 150,000 UK-based individuals from 55 airports. The 800,000 future bookings with Thomas Cook have all been cancelled.

TV news reports have shown angry tourists all around the globe who were left in the dark till the very last minute, not knowing if they would have a flight home, and tearful members of staff who have lost their jobs.

The company’s demise will see the loss of all 21,000 jobs of those directly employed, with tens of thousands more in overseas resorts put at risk as many local businesses are unlikely to see the bills incurred by Thomas Cook being paid.

The knock-on effect of the company failure will be enormous, as it is very doubtful that “minor” creditors, such as 1,000 smaller foreign hotel companies in Europe said to be “largely dependent” on Thomas Cook, will get any money back. In Tunisia alone, the company owes hotels £53 million for stays in July and August—with staff employed on considerably lower wages compared to their European counterparts—facing the prospect of no pay cheque for months to come, or jobs going altogether if hotels close.

There are 150,000 UK-based tourists whose return flights with Thomas Cook have been cancelled and some 350,000 non-UK nationals stranded on its holiday packages abroad. Some 50,000 holidaymakers are stranded in Greece alone, with the head of Crete’s union of tour operators Michalis Vlatakis likening the collapse of Thomas Cook to a “7-magnitude earthquake,” saying the local tourism sector was now “waiting for the tsunami.” Some 140,000 German travelers are affected, and local subsidiaries have stopped selling holidays. The Turkish Hoteliers Federation warned that the impact could be devastating for those hotels contracting solely with Thomas Cook. In Spain, thousands of jobs are at stake in popular holiday destinations such as the Canary Islands and Balearics.

The fact that the Thomas Cook Group—which includes some 26 associated companies—has been placed into liquidation means that there will be no rescue—as the liquidators seek to sell off the company’s assets to meet its debts. As well as unpaid bills for those currently on holiday, and fuel and airport charges, the company was servicing £1.7 billion in unsustainable debt it took on through a series of mergers and acquisitions in previous years.

The UK government refused a last-minute appeal to provide just £150 million to enable the company, which had revenues of £9.5 billion in 2018 and assets of £2.1 billion, to continue operating. The funding asked for is far less than the cost of repatriation, with the UK operation alone estimated at £600 million in public funds, even before the human cost of such massive job losses is taken into account.

Conservative Prime Minister Boris Johnson opposed using state funds to enable the company to continue trading, saying this would create a “moral hazard” for other companies who might also seek funding. Such a “moral hazard” was never posed when it came to a Labour government, backed by the Tories, bailing out the banks to the tune of around a trillion pounds in public funds following the 2008 crisis.

The crisis at Thomas Cook was exacerbated when its lenders, including Royal Bank of Scotland—which was taken into public ownership at vast public expense after the 2008 crash—suddenly demanded the company increase its cash holdings to keep it going through the quieter winter period.

Thomas Cook employed 21,000 worldwide, with 9,000 jobs now gone in the UK, including 1,000 at its Peterborough headquarters. Nearly one third of the UK workforce were based at Manchester Airport—home to the Thomas Cook Airlines fleet of 34 aircraft. The company also owned Thomas Cook Airlines Balearics, Thomas Cook Airlines Scandinavia and Condor, based in Germany. In total, it operated a fleet of 105 aircraft this summer.