Thomas Cook, the travel firm that has seen 178 years of operation ended its own journey after the company filed for bankruptcy in the UK High Court. The collapse came on Monday, as negotiations to secure funding that would see to the payment of the company’s $2.1 billion financial obligations. Denial of the request is understandable since it would be unwise for banking institutions to loan out funds under high-risk conditions.
Bankruptcy Declaration Results to Cessation of Hotel, Resort and Plane Operations
As a result, the Thomas Cook company ceased trading operations, which prompted the UK Civil Aviation Authority (CAA) to divert Thomas Cook planes away from the regular stands. Chaos erupted in different airports across the globe, when Thomas Cook customers were met with disrupted travel arrangements. About 150,000 Britons found themselves stranded at destinations, without hotel accommodations or means of transportation to return home.
Actually, the firm has about 600,000 customers currently vacationing abroad, spread across 16 countries, whilst staying at hotels and resorts run by Thomas Cook. However, since the company has ceased operations, hotel and resort guests will have to vacate the premises because employees have been put out of work.
To help stranded British citizens return home, the UK government has asked the CAA to organize a repatriation rescue mission codenamed: “Operation Matterhorn.” Fleets of charter planes were commissioned and dispatched to holiday destinations as far as Malaysia, to provide the stranded Britons free transportation that will fly them home to the UK.
Meanwhile, the governments and insurance companies of other countries are also constrained to launch rescue missions in order to bring their respective citizens back to their homebase.
Rationale Behind Banks’ and Investors’ Reluctance to Grant Thomas Cook Additional Funds
In August, the oldest travel firm had hoped to receive about $1.1 billion as recapitalisation rescue from its foremost shareholder, Fosun Tourism Group. The deal, though, was dependent on the outcome of Thomas Cook’s negotiations with its banks. Fosun, a China-based company, which also owns Club Med resort, said that since the travel firm is now required to submit to compulsory liquidation to pay its creditors, the recapitalisation previously agreed upon is no longer applicable.
Thomas Cook’s failure to secure bank and investor funding can be attributed to the firm’s backward business model, which makes it difficult for the company to realize profits.
According to economist Frances Coppola, Thomas Cook refused to adapt to modern trends such as online bookings for flights and hotel reservations, as well as mixing and matching travel experiences. The company continued to ignore the changing trends in the travel industry, and was oblivious to geopolitical events and effects of climate changes like the heatwave.
As a result, the company did not have anything profitable to offer banks and investors, which makes the recovery of business funds uncertain, even for a minimal profit.