Thomas Cook Ceases Operations, UK Launches Huge Rescue Effort

Filed Under: Other Airlines

It’s a sad day for aviation (again). Today Thomas Cook has officially gone out of business, marking the end of an era for one of the world’s oldest travel companies.

While we’ve seen a lot of European low cost carriers go out of business the past couple of years, this development is arguably much more significant, as Thomas Cook was more than just an airline.

Thomas Cook Ceases Operations

Overnight Thomas Cook ceased operations, leaving 21,000 employees without jobs, and also leaving hundreds of thousands of passengers stranded.

Thomas Cook was known for their package holidays, so while they also had an airline division, that wasn’t even a majority of their business.

The company was in a bad financial situation since 2018, and had been looking for more investors, and was even looking to sell off some assets. Unfortunately that wasn’t successful.

What Went Wrong With Thomas Cook?

Thomas Cook as an airline was doing quite well, actually, while it’s the overall travel business that was struggling. For example, in 2018 Thomas Cook airlines reported operating profits of 129 million GBP, while the overall company reported an operating loss of 60 million GBP during the first quarter of their fiscal year.

The struggles were largely due to increased competition in Europe, uncertainty over Brexit, heat waves in Southern Europe, and more.

What Happens To Germany’s Condor?

While Thomas Cook UK has ceased operations, as of now Germany’s Condor continues to operate as normal, even though they’re owned by Thomas Cook.

Condor’s history is interesting. They were founded in 1955 and for a long time were owned by Lufthansa. Then between 2000 and 2007, Lufthansa sold all of their shares in Condor to Thomas Cook.

Condor, which is profitable, has vowed to continue operations. What’s interesting is that Lufthansa expressed interest in taking over Condor earlier this year, so it sure seems to me like this is a case where the airline won’t have to cease operations.

Germany’s government has promised a bridging loan to Condor, so it sure seems like it will be business as usual for them, especially given the interest in the airline, and also that it’s profitable.

The UK’s Massive Thomas Cook Rescue Effort

The UK is undertaking a massive “rescue effort” to get stranded people back home, which is the largest peacetime rescue effort ever in the UK. CNN quotes the Civil Aviation Authority as indicating that this rescue effort could cost a staggering $750 million.

With that kind of money, you’d think they could have kept the company in business. Wow. There are planes coming from all over to rescue passengers. For example, a couple of Malaysia Airlines A380 are enroute to Europe to fly passengers from Mallorca to the UK.

No wonder it’s so expensive, given the positioning costs.

Bottom Line

It’s sad to see so many people lose their jobs, and also unfortunate that a lot of people are stranded. Thomas Cook is one of the oldest travel companies in the world, and it’s unfortunate that they didn’t keep up with the times and stay competitive.

It’s especially sad that the airline was actually doing reasonably well, but this is a case of the parent company not doing well. Fortunately it looks like Condor will continue operations, and I suspect they won’t have a hard time finding investors… maybe even Lufthansa.

The rescue effort that the UK is launching is also pretty incredible, as it’s the largest peacetime rescue effort ever. The fact that they’re spending up to $750 million on this is rather shocking, in my opinion.

(Featured image courtesy of Ole Simon)

Comments
  1. I would not say the operate as normal as of now the flight I was planning to book from KUL to FRA is not bookable anymore directly on Condor.com or through Expedia.de even though expertflyer shows availability

  2. Does the UK even have $750 million to spare considering the Brexit debacle is soon going to be upon us???

    I would imagine that travel insurance would cover a lot of these Holiday makers loses.

  3. I was wondering what would happen with Condor. This is the only article I’ve seen which addressed that. Thank you for being thorough, as always.

  4. And British taxpayers are funding this rescue operation for what reason? Privatize profits and socialize costs. Absurd.

  5. very bad time for European aviation, competition is dying as quickly as my hopes for a good AA redemption. Now even in leisure markets you have no choice but either listening to lottery sale pitches 30000ft above ground or paying 10 times the regular price on a legacy carrier with the only difference being the lack of mile-high lottery.
    (what? TUI? that New Zealand bird?)
    Luftansa is getting closer and closer to their central European domination scheme.

  6. @ Ben — BA cancelled lots of flights today (including ours) due to “operational constraints” presumably in exchange for a government handout for using their aircraft to resuce TC passengers. Can you imagine the USA doing such a ridiculous thing? The TC customers should be responsible for finding their own way home.

  7. Thomas Cook needed to be bailed out. The bailing out costs had already been worked out as £900 million but the company needed an additional £200 million to keep going. Straight out the gate the UK government are not going to spend over a billion pounds to keep a holiday company running. Add to that a package holiday company will not be nationalised by any UK government (or any government for that matter) so that left Thomas Cook with nowhere to go apart from down. It’s simple politics. You can’t bail out one company without having to bail out many more. The costs would have been far larger if they’d bailed out Thomas Cook. For example a similar British package holiday company, TUI, is also struggling so if and when they do go down the government would have to bail them out. Bailing out companies is a slippery slope that the UK government have chosen to avoid.

    It really annoys me seeing people complaining and b****ing at Palma airport with no consideration for the 20000 people who have just lost their jobs. One woman who was interviewed by Sky News complained because she was being flown home into Birmingham rather than Glasgow where she lived and would have to suffer the awful and painful experience of 5 hour coach journey. Oh the humanity!!!! Cancel everything, forget all the people who’ve lost their jobs and the thousands of people stranded all over the world. All that matters is if this one woman is flown home directly. Let’s get her one of those A380’s for herself so she can get to Glasgow.

    Selfishness to this level deserves to be punished. She should walk back to Glasgow.

  8. Did the profits for the airline operations you mentioned include Condor? If so it’s Condor that gave them that. They have always been the profit mechanism for Cook.

  9. @ gene

    It’s the law. When the government needs additional planes it can draft them from anywhere in the country.

  10. Though it is a sad time for commercial air travel in Europe, it was definitely on the fault of Thomas Cook’s management for lack of leadership and inability to adapt with the times. I sympathise with their employees. Silver lining maybe more people will take high speed trains and reduce the collective carbon emissions

  11. @Alex Fortune same government whose leader said “£350 million is an underestimate”? At least there’s some sort of insurance scheme available

  12. “…uncertainty over Brexit…”
    Come on, you can do better than this. Let’s stop absolving poor management on something that hasn’t even happened.

  13. @Ray…How’s that again? Let’s take the train to the Mallorca, or the Canary islands or Dominican Republic? Just dumb…

  14. @Lucky
    “ The rescue effort that the UK is launching is also pretty incredible, as it’s the largest peacetime rescue effort ever. The fact that they’re spending up to $750 million on this is rather shocking, in my opinion.”

    After a number of high-profile collapses in the travel industry back in the 1970s, the UK Civil Aviation Authority runs a scheme (“ATOL”) where every package holiday company has to collect a fee for every holiday sold as a condition of being licenced. The money is kept in a fund.

    Customers buy “ATOL protected” holiday packages so that if the operator then goes bust, the CAA’s fund pays to get them home.

    I’m mystified why you find this perfectly sensible arrangement to be “shocking”. Think of it as a form of compulsory insurance.

  15. USD750M / 150,000 would be USD5,000 per head.
    For that price they could just buy Business Class long-haul for everyone.
    (And more than half these people are in Europe, say 3 hours flying from the UK, not Egypt (6 hours), let alone the Caribbean)
    So that number looks either about five times too high, or inflated by some profit-gouging.

    There is one aspect which seems just as illogical in this rescue as in others – why not use the Thomas Cook ‘planes?
    I can understand that they are arrested by the liquidators, but they would like income from them.
    In other UK bankruptcies, existing employees are hired short-term by the administrators/liquidators to help.
    Why does the CAA not charter the ‘planes from “Thomas Cook Flying Ltd” – it would even help the creditors recover a few more percent.
    Even if the actual operating company loses its licence because it is insolvent (and it is often different from the parent company with the debt), the CAA is in charge of licencing, so it could so what was sensible.
    Is the concern that distressed employees might be a safety risk?

  16. Ben, you should really note that the repatriation cost is covered by an existing insurance fund (ATOL) that people pay into every time they buy a holiday package. I’m not sure if the fund has enough to fully cover this, but it’s not like the British government is spending $750 million of taxpayer funds.

    The whole reason ATOL exists is that charter/tour operators are a very volatile business and go bankrupt all the time, so this is a wise way to provide some protection for stranded passengers.

  17. Lucky – Interesting article but it is misleading. It suggests the tax payer is paying $750 million. They are not. Also – you make the incorrect conclusion that it would have been cheaper to keep the company in business for the government. This is also incorrect.

    The money for the flights & accommodation is coming from ATOL – the mandatory insurance applied to bookings in the UK.

    As the BBC article states it would have cost £250 million to keep TC afloat but the taxpayer is ‘only’ spending £100 million.
    https://www.bbc.co.uk/news/business-49796827

  18. @Bagoly — the ATOL covers not only plane fare but the cost of hotels and other items sold with the package.

    The British travelers are only 25% of the total stranded. The British media are reporting only on their own people, and the American media are repeating what the British report. It’s not news, apparently, when a British company screws nearly half a million citizens of other countries. I have seen a couple of vague references to German insurance companies managing the effort to help German travelers, but where are they getting their airplanes?

  19. You do know, right, that Thomas Cook is a healthy business? Just not in formerly great Britain. The German broadcaster Deutsche Welle’s website reports:

    Although Thomas Cook group didn’t release financial results for individual countries, it is widely known that its German operations are in a much healthier state than Britain, where the travel agent had huge debts and struggled to adapt to changing consumer tastes. Thomas Cook Germany achieved 2017/18 revenues of €3.8 billion ($4.2 billion) in Europe’s largest economy, more than 40% of the group’s total revenues. The travel firm including one of its main German subsidiaries, Neckermann Reisen, have maintained a near 5% share of the ultra-competitive German travel market, according to Euromonitor, partly because a large chunk of German consumers still prefers to book holidays through a traditional agency.

  20. @Segun
    Would the additional income that could be generated by leasing out the ‘planes not easily cover the parking fees?

  21. german goverment was asked for a credit… this credit has not aproved yet. And Lufthansa has is not interested in taking them over at the moment. So it think you in america have a slightly different view on the case than we in gemany have.

  22. HiFly A380 9H-MIP has left Beja for Dalaman, Turkey. Rescue of Thomas cook customers back to Uk probably Gatwick. Also Malaysian A380 doing twice a day pick ups from Mallorca to Manchester. This be paid for by ATol. Rescue fund.

  23. Wow, sounds like a huge mess! I have no idea Thomas Cook is also in Germany. I’m sure they are in other European countries as well. I wonder how these people will get home? It’s a shame that they couldn’t get everyone home before declaring bankruptcy. There’s gotta be a better way to close down a company of this size than just have them go kaput overnight and stranding their former customers all over the world!

  24. @kevin its all over europe. A little taste of brexit before end of october. And all because the british goverment didnt want to help out with with 200 million euros. Thats nothing. Now they have to pay much more and 20000 employees loose their jobs in GB

  25. Condor was profitable as long as its major customer (also its owner) Thomas Cook was buying half the tickets. 40 of its 58 planes are flown on European routes, presumably also served by Lufthansa, so a merger would require a spin-off to other carriers to prevent monopoly. Lufthansa may be saying it is not interested now, but that sounds like a bargaining position. They were very interested recently until Cook’s Chinese investors shut down negotiations.

    The British are blaming bad weather last year for the bankruptcy. The Germans are blaming Brexit and the declining value of the pound, which is a result of Brexit. Maybe they can all just blame the Swiss. Cook’s CEO comes from Switzerland, and the government named the rescue operation “Operation Matterhorn.”

  26. @Jan – the UK government would have either had to loan Thomas Cook £200 million, just adding to the pile of debt they couldn’t support, or just flat-out give them £200 million, unfairly subsidizing their company relative to its competitors, and most likely just delaying the inevitable. The CAA/ATOS program will cost around £100 million according to Sky News, significantly less than any putative bailout.

    Overall travel demand remains relatively stable (although this last summer’s heat and weakness in the pound from Brexit uncertainty has dampened it slightly), so hopefully the staff will be able to find new positions fairly quickly. It’ll be harder for the high street retail staff, since that part of the business is probably gone – Thomas Cook’s dependency on retail stores in the age of the Internet was one of the flaws in their business model.

    It’s always a difficult call for governments when it comes to bailouts., Usually the call comes down to “can the company be saved?” and “will not bailing the company out depress the economy severely?” For example, during the Great Recession the Obama Administration took the decision to help General Motors and Chrysler because not doing so would have caused a massive surge in unemployment at a time when it was already very high. At the time, a lot of people pointed out that this was unfair to Ford (which was much more financially stable and didn’t need a bailout) and non-US competitors, many of whom could have come into the US and bought up factories, or just offered to buy the assets of GM and Chrysler outright in the foreclosure program. In that case, the decision was that the massive disruption from even a short-term shutdown of production would have pushed the Great Recession into a full-blown depression and made recovery that much more difficult. By comparison, the failure of Thomas Cook will have a far smaller impact, and at a time when unemployment is low…much as I hate to say that considering the impact on the employees.

  27. What utter disgrace! The airline board, shareholders, and CEO need to be held personally accountable, for each and every customer and staff. To allow it all to operate until a complete collapse is a disgrace, callous disregard to people’s lives. CEO and Board should all rot in prison!!

  28. @Bagoly – As has already been stated the aircraft are impounded so they cannot leave the ground, despite how sensible it would appear to use those very aircraft it’s the law.

    @Ben/Lucky – As has already been stated it’s not costing $750M/£600M and the UK taxpayer isn’t paying for it either. The repatriation flights are an insured cost.
    Also – nobody is stranded. Those who departed on a package holiday up & until yesterday will continue to enjoy their holiday as planned, then the repatriation flights will take them home for the next fortnight. The remainder are being repatriated on alternative existing already scheduled flights.

  29. @Bagoly: Several TC aircraft are actually being used right now—although all of these seem to long-term leases from SmartLynx.

    You can actually see the assortment of rescue planes on Flightradar24 – just filter by callsign “AWC”. This won’t show the whole rescue fleet, since regular airlines operate these flights under their own flight numbers (Jet2, easyJet, BA, Malaysia, Hi-Fly), but it’ll still give a nice overview.

  30. @The nice Paul – it’s pointless after that comment from Lucky & other Americans (I’m presuming) like @Gene trying to explain anything like the CAA or the UK’s NHS or Australia’s Medicare. They all run from the room brandishing their semi-automatic assault weapons, screaming “Socialism” like it’s a bedbug infestation.

    Rather than everyone simply putting a little in to help out a large amount of people A LOT.

  31. Calm down @Milton F ! As mentioned by many above, there is a national insurance scheme in place for events such as this. How good is that?? Can’t imagine anything like that taking off in America. Would have too much of a whiff of socialism for selfish Americans.

  32. I wonder if it would have been possible to spin off the airline portion of Thomas Cook, since that was reported as being profitable, thereby at least saving the jobs of those in that branch? Or was the airline branch totally tied into their travel agency branch for captive passenger bookings?

  33. It’s really hard to unpick different bits of a group and say X was profitable while Y was loss-making. All the parts of the group worked together, with transfer pricing rates set taking factors such as tax liability into account (thus further distorting the picture).

    But… we do know for sure that the whole group was staggering under the weight of £1.7billion of debt.

    Just pause for a moment and wonder at the scale of that debt. How on Earth were they going to trade themselves out of that debt trap?

    In cases like this, I fall back on the old accounting saying that “cash is a fact; everything else is an opinion”.

  34. This is an email that I got from Gatwick Airport a few days ago:

    Dear……

    If you’re looking to purchase a luxury watch or update your wardrobe with some design-led clothing, make sure you save your shopping for the airport as we’ve just welcomed two new arrivals to our North Terminal.

    We’ve got a top tip for you if you want to access products at World Duty Free which aren’t available in store and still make savings against high street prices.

    Thomas Cook Airlines will be launching a new route from Gatwick so you can grab some flights and enjoy some winter sun. Plus, we’d like to introduce you to our new chatbot who’s on hand to help you with flight information.

    Our Summer Festival is coming to an end this month but there’s still time to give away a pair of flights to one lucky winner in the last of our Summer Festival competitions!

    We hope to see you soon.

    Weird.

  35. What happens to all the Thomas Cook planes that are scattered around the world? Saw one at JFK yesterday still.

Leave a Reply

Your email address will not be published. Required fields are marked *