It was announced today 23 September that Thomas Cook has gone into administration. Please see
Operation Matterhorn gears up to rescue stranded passengers
The travel company Thomas Cook is in serious financial trouble. Unless it can find £200 million in extra funds to secure its future, it could fall into administration this weekend. This morning Thomas Cook shares, which have dropped 92% in value over the past year, hit a record low.
News broke on Thomas Cook was in financial troubles and the company has been in talks with Fosun, the largest shareholder in the company. It looked likely that the Chinese investor would buy the tour business. However, now banks (including RBS and Lloyds) have insisted that Thomas Cook come up with extra contingency funds in case they are needed over the Winter period.
On Twitter, the Thomas Cook social media team is trying to alleviate fears:
Hello, I understand you might be unsettled by all the media speculation surrounding Thomas Cook, The plans we have announced, and the process we continue to work through, will, when executed, provide even greater certainty for Thomas Cook’s future. 1/2 ^Perry
— Thomas Cook Cares (@ThomasCookCares) September 20, 2019
But we have seen this before when companies say that all is well and often even the employees don’t know they are about to lose their jobs. For example, in August 2019 when the Malvern group went into administration the social media team were tweeting that all was well 24 hours before announcing the administration.
But of course it needs to put out these messages. Uncertainty in this situation means that fewer people book holidays, unsure whether their holiday will go ahead and so that in turn brings less money into the company.
Thomas Cook holidays are protected by ATOL so if it does fail then 150,000 stranded holiday makers will be flown home at no extra cost to themselves. They will have accommodation paid for (although they may have to move). If the company does go under the process to repatriate holiday makers would be huge. So big, in fact, that the Civil Aviation Authority (CAA) is already on standby with a contingency plan called Operation Matterhorn, which would be the largest ever peacetime repatriation effort. The anticipated cost of this would be £600 million, borne by the tax payer.
RBS, one of Thomas Cook’s creditors, is still majority owned by the British government. Which begs the question…. If Thomas Cook needs £200 million from the banks to keep going but it would cost £600 million for a rescue effort to get people home… then why doesn’t the Government step in to force the banks to help?