REVIEW - Collapse Of UK Travel Giant Thomas Cook Serves Devastating Blow To Tour Operator Business

(@FahadShabbir)

REVIEW - Collapse of UK Travel Giant Thomas Cook Serves Devastating Blow to Tour Operator Business

MOSCOW (UrduPoint News / Sputnik - 24th September, 2019) The announcement that UK travel giant Thomas Cook has ceased operations was a rude awakening for hundreds of thousands of holidaymakers from Europe alone but came as no surprise to the industry insiders who knew the tour operator business had long been in decline.

On Monday, the Thomas Cook Group, which includes the tour operator and airline by the same name, announced its compulsory liquidation following unsuccessful talks between the company's stakeholders and potential new donors on terms of the firm's recapitalization and reorganization. All of the company's bookings, including flights, were immediately canceled.

OVER HALF A MILLION HOLIDAYMAKERS STRANDED

The UK Civil Aviation Authority (CAA) said on Monday that it had launched an operation to repatriate the around 150,000 UK citizens stranded abroad because of Thomas Cook's liquidation, with the process expected to be completed within two weeks.

Thomas Cook Group was one of the world's oldest travel companies and one of the industry leaders in Europe. In total, some 600,000 people are believed to currently be on Thomas Cook tours and are facing a risk of disruptions and irregularities over their holiday. Among them are around 140,000 tourists from Germany, 10,000 from the Netherlands, the same number from France, as well as 3,000 from Finland, among others, according to media reports.

Governments have been quick to step in with pledges to help their citizens. France's Foreign Ministry has vowed to monitor the situation with French clients of Thomas Cook to ensure that their citizens' rights are protected. The Italian Foreign Ministry has, meanwhile, launched a hotline for those affected.

However, some customers were luckier. Neckermann Polska, Thomas Cook's subsidiary in Poland, has vowed that Polish tourists will be unaffected by the unfolding crisis.

The UK travel giant had been heading towards a collapse for some time over a number of internal and external reasons. It had fallen victim to mismanagement and mergers, which led to the accumulation of an astounding debt of 1.7 billion Pounds (over $2.1 billion). The company ended up being burdened by the interests it paid for servicing the debt.

There had been clear-cut indications that the company may announce bankruptcy by September, when the money from the summer high season would stop pouring in. In May, the company's chief executive, Peter Fankhauser, announced losses of 1.4 billion pounds in the six months to March 31 due to customers' uncertainty over Brexit. The firm had also closed 21 UK retail stores and faced a 12 percent decline in bookings for tours and plane tickets.

Thomas Cook lost 303 million pounds during the same October-March period a year ago, according to statistics published by the company.

The losses were also directly linked to MyTravel, a UK package holiday business that Thomas Cook acquired in 2007, having its value slashed by 1.

1 billion pounds.

In its financial results report from May 2019, Thomas Cook identified many risks that could affect business after September 2019, such as "ability to deliver a high-quality, on-time and cost-efficient service for our customers in our Group Airlines. Our ability to operate the fleet of aircraft effectively may lead to customer dissatisfaction, cost increases and reduced profitability."

Moreover, Thomas Cook had been greatly impacted by the rise of online accommodation booking and airline ticket services such as Airbnb, Vrbo and Sparefare, which allow customers to plan their vacations by themselves without relying on big travel agencies. The company's failure to adapt its business model to overcome the challenges of the digital era spells potential troubles for other players on the market.

Thomas Cook, which also has significant operations in mainland Europe, employs 21,000 people, many of them in the United Kingdom. It also operates about 560 shops on UK high streets, making its collapse particularly jarring for the country's tourism industry.

However, the impact of the bankruptcy reaches far beyond the national level as the company has been heavily involved in tourism markets of many countries throughout the world, which now brings additional problems for everyone involved.

According to Tunisian Tourism Minister Rene Trabelsi, cited by Reuters news agency, the company owes 60 million Euros ($66 million) to various hotels in the country. The minister intends to bring this issue to the attention of the UK Embassy in Tunisia.

In Greece, Thomas Cook was one of the main players on the market, so the bankruptcy has put the put the future of the country's tourism industry on edge. In an interview with a local radio station, Michalis Vlatakis, head of the Greek island of Crete's tourist agencies' association, compared the situation to a 7.0 magnitude earthquake that was followed by a tsunami, given that about 70 percent of the island's tourism enterprises were in business with Thomas Cook. What makes the situation even more regrettable is that just this spring the company promised to invest 150 million euros in Greece's tourism industry.

As the company departs from the market, what concerns everyone is who will rush into the temporary vacuum. At the moment UK-German travel agency TUI seems to be the Primary beneficiary. According to Barron's financial newspaper, TUI's shares have jumped 7.5 percent, followed by Dart Group (7.1 percent), which owns Jet2.com low-coster airline, EasyJet (3.4 percent) and Ryanair (1.1 percent).

Some hope that Thomas Cook's exit will create breathing room for an already overcrowded industry, helping to adjust to recent technological advancement that have changed the way people go on vacations.

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