What happened to Thomas Cook?

Thomas Cook Group was a British travel company formed from the merger of Thomas Cook AG and MyTravel Group. Originally the company was founded in 1841 by businessman Thomas Cook and was widely considered to be the world’s oldest travel firm. Thomas Cook was a British travel agency founded in 1841 by Thomas Cook. After 178 years in operation, the company ceased operations in 2020 with approximately 600,000 customers traveling abroad. Shifting consumer preferences and the rise of online competitors like Airbnb, also speeded up its decline.

Background

Thomas Cook Group was a British travel company formed from the merger of Thomas Cook AG and MyTravel Group.

The original company was founded in 1841 by businessman Thomas Cook and was widely considered to be the world’s oldest travel firm. Thomas Cook began by selling railway voyages and slowly expanded to travel-related businesses such as hotels, resorts, and airlines. 

After 178 years in operation, the company entered compulsory liquidation in 2019 after it failed to secure funding. The demise of Thomas Cook had significant ramifications for customers and staff around the world. Approximately 21,000 employees became jobless almost overnight and some 600,000 travelers became stranded overseas. A quarter of these was from the United Kingdom, prompting the British Government to instigate the largest peacetime repatriation in history.

The story of Thomas Cook’s demise is told below. How did such a large and successful company operating in the golden age of travel collapse?

Changing travel preferences

No article about the demise of a travel company would be complete without mentioning Airbnb. As more travelers began organizing their own vacations, they had little need for a third-party service like Thomas Cook. 

Low-cost airlines such as EasyJet also took market share from the company in the extremely competitive European airline market.

Tim Jeans, former managing director of budget European carrier Monarch Airlines, would later remark that Thomas Cook was running “an analogue business model in a digital world”.

Political and meteorological factors

In 2016, political unrest in Turkey led to an attempted presidential coup. As one of the top destinations for Thomas Cook customers, the effect of the unrest on revenue was significant.

Two years later, a heatwave across much of Europe combined with the uncertainty around Brexit encouraged many travelers to stay at home. As if that wasn’t enough, the value of the English pound dropped which weakened customers’ purchasing power overseas.

In isolation, it is likely the company could have overcome these relatively transient events. But Thomas Cook was already in a weakened and vulnerable state.

Debt

High debt was a chronic problem for Thomas Cook and probably what sealed its demise.

Shortly before it ceased operations, the company had $2.1 billion in debt accrued via several questionable deals. The 2007 merger with MyTravel Group drew the most criticism as it had only made a profit once in the past six years. 

Such was the level of debt that the company had to sell around three million holidays annually just to cover the interest repayments. Between 2011 and 2002 Thomas Cook paid £1.2 billion in interest alone.

Liquidation

In August 2019, a last-minute rescue deal worth £900 million was drafted by Fosun International – a Chinese conglomerate and major Thomas Cook shareholder. In a complex deal, Fosun would inject £450 million into Thomas Cook while taking a stake in its airline and tour operator divisions.

The remaining money would be given to Thomas Cook’s creditors and banks. However, the deal fell through after the company requested another £200 million to see it through the quiet winter season. 

Key takeaways:

  • Thomas Cook was a British travel agency founded in 1841 by Thomas Cook. After 178 years in operation, the company ceased operations in 2020 with approximately 600,000 customers traveling abroad.
  • As a third-party travel agency, Thomas Cook employed an outdated business model. As more consumers started planning their own vacations, there was little need for the company’s services.
  • Thomas Cook was subject to various meteorological and political disasters in the final years of operation. A high level of debt meant the company was extremely vulnerable to these damaging though largely short-lived events.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"