Home / UK / Thomas Cook: plans made for biggest UK peacetime repatriation – The Guardian

Thomas Cook: plans made for biggest UK peacetime repatriation – The Guardian

The government and the aviation watchdog are drawing up plans for the biggest ever UK peacetime repatriation if Thomas Cook collapses, with 150,000 British customers currently on holidays overseas with the travel company.

Thomas Cook is holding last-minute talks to stave off a bankruptcy that could happen as soon as this weekend unless it secures £200m in extra funding.

The Department for Transport and the Civil Aviation Authority (CAA) have made initial preparations to bring stranded passengers back to the UK, under a plan known as Operation Matterhorn.

Britain’s oldest package holiday company has held emergency talks to sell its Nordic airline and tour operating divisions in an attempt to raise money.

Trade unions called on the government to step in, whether directly or by putting pressure on lenders that include state-owned Royal Bank of Scotland.

The collapse of Thomas Cook would put 20,000 jobs at risk, including about 9,000 in the UK. The CAA could be forced to pick up some of the cost of covering the flights home of 150,000 UK customers abroad. Thomas Cook destinations range from mainland Europe to the Caribbean, the US and the Middle East.

In a stock exchange announcement on Friday, the company said it was in talks with its banks, bondholders and biggest shareholder. The £200m would be designed to see it through the winter on top of a £900m rescue deal close to being finalised.

“Discussions include a recent request for a seasonal standby facility of £200m, on top of the previously announced £900m injection of new capital,” Thomas Cook said.

“The recapitalisation is expected to result in existing shareholders’ interests being significantly diluted, with significant risk of no recovery. The company will provide further updates in due course.”

The company’s shares fell 21% to a new low of 3.5p. A year ago, the shares were worth 75p.

Thomas Cook’s banks, led by RBS, Barclays and Lloyds, have made a last-minute demand for it to raise new funds. The company is in talks with China’s Fosun International, its biggest shareholder, which had already agreed to supply £450m in return for a majority stake in Thomas Cook’s tour-operating business and a stake in its airline.

The TSSA union, which has members in the branches and offices of Thomas Cook, called on the government to intervene to save “jobs and an iconic brand”. Thomas Cook was founded 178 years ago in 1841.

The UK’s pilots’ union called on the government to push RBS and Lloyds, both bailed out by taxpayers during the financial crisis, to support the company.

“It is appalling that banks that owe their very existence to handouts from the British taxpayer show no allegiance to a great British company,” said Brian Strutton, the general secretary of the British Airline Pilots’ Association.

“The government has a say in this, owning one of the key banks and still with huge influence over the other. RBS and Lloyds should be told by the prime minister to support Thomas Cook.”

Quick guide

The history of Thomas Cook

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Thomas Cook owes its name to a humble and deeply religious 32-year-old cabinet-maker who, one June morning in 1841, hiked the 15 miles from his home in Market Harborough to Leicester, to attend a temperance meeting.

The former Baptist preacher believed that the ills of Victorian society stemmed largely from alcohol and, presumably fatigued from his walk, realised he could deploy the power of Britain’s flourishing rail network to help spread the word.

Addressing the temperance meeting, he suggested that a train be hired to carry the movement’s supporters to the next meeting in Loughborough.

Thus, on 5 July 1841, some 500 passengers travelled by a special train for the 24-mile round trip, paying a shilling apiece.

Over the next few years, Cook laid on ever more trains, introducing thousands of Britons to train travel for the first time. The first such outing to be run for commercial purposes was a trip to Liverpool in 1845.

Over the next decade or so, the business expanded to offer overseas trips, to France, Switzerland, Italy and beyond, to the US, Egypt and India.

His more business-minded son John expanded the tour operator and its reach was such that the government enlisted its expertise in an effort, ultimately in vain, to relieve General Gordon at the siege of Khartoum in 1885.

John’s three sons inherited the business, which incorporated as Thos Cook & Son Ltd in 1924 and benefited from the increasing ease of international travel.

Its first flirtation with collapse came during the second world war, when the government requisitioned some of its assets and it was sold to Britain’s railway companies, effectively a nationalisation.

But it boomed in the postwar years as growing prosperity fuelled the appetite for holidays and it returned to private ownership in 1972.

Since then, it has changed hands and changed shape via a series of mergers and takeovers. It nearly collapsed in 2011 but averted its demise with a bailout deal funded by banks.

Now, after 178 years of operation, it is relying on its largest shareholder – the Chinese conglomerate Fosun – to survive. 

Thomas Cook has been brought low by a debt burden of £1.7bn, competition from online rivals and one-off factors such as Brexit uncertainty, all of which have weighed on Thomas Cook’s recovery after a near-collapse in 2011. High prices of jet fuel and hotels have also pushed up costs, while the heatwave in summer last year convinced potential customers to stay at home, with a further effect on earnings.

The previous biggest UK peacetime repatriation was in 2017 when Monarch Airlines collapsed. The CAA had to organise flights home for 110,000 customers on specially chartered planes.

Following the demise of Monarch, the government promised to act on airline insolvency rules to ensure taxpayers would not in future pick up the bill to get home.

A review was published earlier this year recommending an additional 50p levy per airline passenger. The government promised to “swiftly introduce the reforms needed to secure the right balance between strong consumer protection and the interests of taxpayers”, but as yet no action has been taken.

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Thomas Cook package holidaymakers would be protected by the Atol (Air Travel Organiser’s Licence) scheme, meaning their holiday accommodation as well as return flights are effectively guaranteed if they are abroad at the time of a collapse. Future bookings are also protected. The total cost of holidaymakers guarantees to be paid by the Atol scheme underwritten by the CAA is an estimated £600m.

The CAA’s Air Travel Trust fund, the primary source for meeting Atol obligations for failed companies, is currently worth £170m, with insurance worth another £400m.

About half of Thomas Cook customers have only booked flights only and may not come under Atol protection, but the Monarch precedent suggests the government would assume responsibility for bringing them home.

That bill could far exceed the £60m spent on the Monarch rescue operation, with many passengers currently on holiday in the Caribbean and the US.

The CAA said: “We are in regular contact with all large Atol holders and constantly monitor company performance. We do not comment on the financial situation of the individual businesses we regulate.”

Around 600,000 customers in total are abroad with Thomas Cook – which has significant operations in mainland Europe – including around 300,000 Germans and tens of thousands of Scandinavians.

Thomas Cook: plans made for biggest UK peacetime repatriation – The Guardian

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