Thomas Cook Travel Company collapses, stranding thousands

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LONDON – Hundreds of thousands of holidaymakers were stranded when one of the world’s oldest travel agencies, Thomas Cook, abruptly announced on Monday, when some of its flights were still underway, that it was going to shut down .

Amid scenes of confusion at European airports, British authorities rushed to bring 150,000 travelers home, chartering dozens of planes to bring people back from as far away as Malaysia. It has been described as the largest peacetime repatriation effort in the country’s history.

The tour operator said all of its bookings, including flights operated directly by the agency, had been canceled. “We are sorry to announce that Thomas Cook has ceased operations with immediate effect”, It said.

With it, the travel plans of hundreds of thousands of people were scolded and tourism officials at vacation hot spots braced for a potentially devastating blow to their savings.

Thomas Cook was no ordinary travel agent. Founded in 1841, it changed the face of British travel. Its ubiquitous storefronts specialized in low-cost vacation packages that put beach vacations in exotic locations within the budgets of middle-income Britons.

So his demise felt a bit like the end of an era – and it seemed to match the larger mood in Britain as the country draws closer to a withdrawal from the European Union.

Indeed, while the company’s brick-and-mortar business model has been overtaken by time, some also saw its struggles as the first signs of the Brexit damage to come. They said a weakened pound and uncertainty among potential travelers played a role in the collapse.

[“Don’t just book it, Thomas Cook it.” Read about how it all went wrong for a travel giant.]

Many travelers affected on Monday were already abroad and wondering how they would get home. Others found their vacation plans shattered.

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 this Friday.

“I’ve been awake for 28 hours now,” Mr Roche, a 30-year-old civil engineer, said in a message on Monday as he and Ms Wells, 31, traveled to Birmingham to seek an alternative. flight.

Britons stranded on vacation were among the 600,000 vacationers left behind worldwide. British Civil Aviation Authority said in a press release that he had organized 60 flights to get people home on Monday, and that the effort would last until October 6. It was not clear whether citizens of other countries could expect similar help.

“We will do our best to bring them home,” Prime Minister Boris Johnson said. “There will be plans ready to deal with this if necessary. “

If Thomas Cook customers were surprised, British officials had less reason to be. The government had refused to organize a financial rescue of the battered company; this, Mr Johnson said, would create “moral hazard” by encouraging other struggling companies to take undue risks.

However, it was not clear what steps, if any, the government had taken to prepare for the possible hordes of stranded travelers.

The tremors from the collapse radiated around the world, in Malaysia and San Francisco, but were felt most acutely in Europe. In Greece, where 50,000 holidaymakers are due to be repatriated to their countries of origin in the coming days, and in Spain, there were fears of the effects on their critical tourism industries.

In Crete alone, the travel agency has attracted 400,000 visitors this year. Michalis Vlatakis, the head of the Greek island tour operators union, described its collapse as a “magnitude 7 earthquake”.

Things were at least as dire in Spain, especially in the Canary Islands and the Balearic Archipelago. Together, they made up about 3.2 million of the 3.6 million passengers traveling to Spain each year on planes owned or chartered by Thomas Cook, according to the Spanish National Airport Authority.

Beyond the chaos and disappointment of travelers, the collapse of the company put 21,000 jobs at risk.

The 178-year-old travel company had been in poor financial health for some time. It announced its closure after negotiations to secure £ 200million, or $ 250million, in emergency funding collapsed over the weekend.

Analysts said Thomas Cook, struggling with debt approaching £ 2 billion – nearly $ 2.5 billion – had failed to keep up with the changing times. While other travel agencies have gone fully online, for example, Thomas Cook has retained its extensive chain of storefronts.

“What not everyone thinks is that this is a very poorly run company,” financial analyst David Buik said in an interview with LBC radio on Monday. “He’s had too many stores. The focus of the business has gone online.

But the company has also suffered from a number of factors beyond its control, including Brexit, the planned British withdrawal from the European Union, which caused the pound’s value to fall. This discouraged travel and reduced profits.

“If the majority of your business is taking place in Euro destinations and you find yourself in a context where there is a lot of capacity and you cannot increase the prices, then there is a cost reduction,” said Chris Tarry, Independent Airlines Analyst. the BBC.

Thomas Cook Managing Director Peter Fankhauser said: “There is now no doubt that the Brexit process has led many UK customers to postpone their vacation plans for this summer.

Mr Fankhauser also cited a prolonged heat wave in the summer of 2018 that resulted in 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 the operator particularly hard in recent years, analysts said.

Although 600,000 Thomas Cook customers were traveling when he announced it was closing, it was not known how many were actually stranded. Some of the company’s local partners said they were still in business.

Condor, a subsidiary of German airline Thomas Cook, for example, was asking the German government for a bridging loan and insisted it would continue to serve the 240,000 of its customers – not all holidaymakers – currently in the city. ‘foreigner.

Because Thomas Cook customers are covered by a government insurance program, they are guaranteed reimbursement for canceled trips and free repatriation. Those who have only purchased 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 a guest’s stay, even if it is cut short. Some stations, however, do not seem to get the message.

On Saturday, some British tourists described being arrested from departure from their hotel in Tunisia for reasons of not paying the hotel. They said they were basically locked up until the case was resolved. Others have been threatened with deportation, according to press reports.

While the government may cover the cost of canceled vacations, it does not contribute to the cost of making other arrangements.

Mr Roche and Ms Wells, the couple who were planning to tie the knot, had to pay an additional 4,000 pounds, or about $ 5,000, for alternative flights for themselves and some family members. And they expected to spend an additional £ 2,000, or $ 2,500, on their accommodation.

“I’m absolutely gutted,” Mr. Roche said.

Most of the couple’s guests, he said, could no longer attend the wedding due to the additional costs.

Thomas Cook’s failure sparked a debate in Britain over whether the government should have intervened to prevent the collapse.

Speaking to UK broadcaster ITV, Grant Shapps, the transport secretary, said that beyond the fact that “governments usually don’t invest in travel agencies,” a Thomas Cook bailout n ‘probably would have only postponed the inevitable by’ stretching things out for a few weeks’.

“The company was asking for up to £ 250million,” he told “Good Morning Britain”, a news program. “They needed around £ 900million more, and they have £ 1.7bn in debt, so the idea of ​​just spending taxpayers’ money on it just wasn’t really interesting. “

Mr Buik, the financial analyst, agreed the government was right not to intervene, saying the company had been “hung in rags”.

Thomas Cook’s problems could prove to be a boon to other tour operators, especially rival TUI, whose shares jumped more than 8% in Monday’s trading.

Andrea Leadsom, the business secretary, said in a statement that the government intends to assemble a task force to support the thousands of Thomas Cook employees who will lose their jobs.

“This will be a time of tremendous concern for Thomas Cook employees, as well as their customers,” Ms. Leadsom said. “The government will do everything possible to support them. “



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