The Adrian Loveridge Column – Thomas Cook Goes Belly up

It would be extremely disingenuous while still in the UK not to comment on the demise of the world’s first and iconic tour operator who was established 178 years ago, Thomas Cook.

Right up until midnight on the 22nd September their website gave every indication to hundreds of thousands of holidaymakers that it was ‘business as usual’. Then, as I followed events, in the dead of night at 2.03am (local time) the following alarming message met those visiting their website.

Thomas Cook UK plc and associated UK entities have entered Compulsory Liquidation and are now under the control of the Official Receiver. The UK business has ceased trading with immediate effect and all future flights and holidays are cancelled. www.thomascook.com

While repatriation continues, the British Government has ordered an enquiry to see exactly what went wrong, but perhaps that’s little comfort to the 9,000 staff directly affected in the United Kingdom. The irony is that many of these were former employees of Monarch, which went bust during 2017, at that time the biggest airline collapse in UK history.

Several news sources including the Telegraph have reported that in the last five years prior to the company’s failure, Thomas Cook bosses received in excess of a staggering GB Pounds 20 million in bonuses. This included GB Pounds 8.3 million to the Swiss Chief Executive, Peter Fankhauser, GB Pounds 7 million to Chief Financial Officers Michael Healy and Bill Scott, GB Pounds 4 million to non-executive directors including GB Pounds 1.6 million to Belgium Chairman, Frank Meysman.

The Telegraph was at pains to point out ‘while the figures will likely anger staff, who now face losing their jobs and the thousands of passengers forced to abandon their holidays, insiders say that Mr Fankhauser has performed well in very difficult circumstances. When he took over the company it was in dire financial straits following a string of profit warnings.’

All sorts of reasons for the failure have been proffered including the prolonged heatwave in 2018 resulting in England’s hottest summer on record, prompting ‘huge swatches of potential customers to holiday at home rather than abroad’. Brexit fears, the fall in the value of Sterling, increased fuel prices plus the struggle of attempting to compete with a massive increase in online operators whilst maintaining 550 ‘High Street’ retail travel agency branches.

Apart from the significant human cost, as I understand the company had very few tangible assets with most of the agency locations rented and aircraft leased, so the ‘High Street’ branches will be returned to a retail rental pool and aircraft made available to other airline companies who can afford the monthly payments.

Based on the experience with Monarch, any valuable airport slots will be ‘sold’ to growing airlines and the proceeds used by the liquidators to pay off some of the massive debts including outstanding debts to hotels after preferential creditors, if anything remains.

Hopefully, foreign owned subsidiaries and associated entities like Condor will not be severely damaged by the UK consequence and effect, with the possibility that they may take up some of the slack and routes left abandoned, but with the ongoing Brexit drama, even that may be in doubt.

Even, just hours later, market supply and demand is kicking in and it seems almost inevitable that higher package tour and airfare prices are a direct result which will further reduce the availability of value-for-money holidays.

45 comments

  • All of Loveridge’s and indistry belly bawling while ignoring the harsh environmental limitations of this socalled industry which will never be recognized by their ilk as more and more pressures are exerted on captive populations to, like in the case of Thomas Cook, cotinue to expend good public money into a dead-ended sector.

    It must now be clear to these corporate pimps that the underlying structures of the tourism industry (pride) will never be sustainable, far less profitable, without the continuance of an overt reliance on this perverse corporate welfarism.

    There goes the real corporate communism of our times.

    Liked by 1 person

  • Industry

    Liked by 1 person

  • Thomas Cook represents 6% of our total business.

    Like

  • The moment you see Board Directors, that are not employees, getting bonuses; sell,sell,sell. You know the corporation is doomed.

    Liked by 1 person

  • Vincent Codrington

    @ Northern Observer at 8 :57 AM

    Even then it is too late. Monitor the market of the product/service and do a fundamental analysis of the accounts.One can always see when a company is over-leveraged.
    Another good example of a Ponzi scheme.

    So dpD it is not the mathematics,:but what the mathematics is trying to say.

    Like

  • Vincent Codrington

    Another good research project for the academics: What are the signals for the need to reassess and replace business and economic models?

    Like

  • ‘Several news sources including the Telegraph have reported that in the last five years prior to the company’s failure, Thomas Cook bosses received in excess of a staggering GB Pounds 20 million in bonuses. This included GB Pounds 8.3 million to the Swiss Chief Executive, Peter Fankhauser, GB Pounds 7 million to Chief Financial Officers Michael Healy and Bill Scott, GB Pounds 4 million to non-executive directors including GB Pounds 1.6 million to Belgium Chairman, Frank Meysam”

    Corporate crooks these investors all are; no concern for passengers and crew as they fly from golf course to golf course knocking glasses and grinning from ear to ear.

    Like

  • @ Charles Skeete

    The economic system is viewed as a game by some heartless persons who have as their motivation financial profit. It is immaterial to them who foot the bill of the win/ lose games. We have to accept the situation and navigate around the negative fall outs.
    This is what our leaders of state and businesses should concentrate on instead of petty politics and propaganda.

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  • @ Vincent

    Game theory

    Like

  • @ Hal Austin at 10 :29 AM

    Yes. Game Theory. I am glad I invested some time and money trying to understand it. I would have been at a lost in my career and on BU if I did not make that investment.
    There are some issues one does not pursue if one discerns the game. I tried to warn you.

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  • 500 Spain hotels ‘to close immediately’ after Thomas Cook fall: industry

    Madrid (AFP) – Hundreds of hotels in Spain are facing imminent closure over the collapse of British travel giant Thomas Cook, the head of the Spanish hotel federation warned on Monday.

    “There are 500 hotels which are going to close immediately due to the collapse of Thomas Cook and the situation could get worse if the government doesn’t take immediate action,” Juan Molas, head of Spain’s Confederation of Hotels and Tourist Accommodation, told business daily Cinco Dias.

    And the sum in unpaid bills left by the demise of the tour operator would be much higher than the initial estimate of 200 million euros ($220 million), said Molas, whose organisation represents 15,000 businesses.

    “It will be much more. The amount for only eight chains is close to 100 million.”

    Of those hotels facing immediate closure, 100 were exclusively dependent on Thomas Cook, he said, while the rest counted on the firm for between 30 and 70 percent of their clients.

    One hotel in Fuerteventura, the second largest of the Canary Islands, had recently undergone a 20-million-euro upgrade and was now faced with 700 rooms “which are going to be empty from October 7” and 200 employees it would be forced to dismiss.

    Worst hit are those in the Canaries and the Balearic Islands, where 40 percent of hotels are affected.

    The industry has put together an emergency plan to be presented to Tourism Minister Reyes Maroto at the next Spanish tourism board meeting on October 7 which will also address the urgent question of air links with the Canary Islands.

    Industry experts fear the impact there could be even more devastating than elsewhere as the resort is very popular as a winter destination among tourists from northern Europe.

    “The busy season is starting and Thomas Cook had 30 percent of air capacity,” Molas said, indicating the disappearance of the package holidaymaker could affect some 1.3 million airline seats, with Tenerife and Lanzarote particularly badly hit.

    He urged the government to contact RyanAir, one of the few carriers that flies there, to urge the budget airline “to reconsider” plans to close four bases in Spain, three of them in the Canaries, saying it was “critical” that the airline maintain its flights.

    https://www.yahoo.com/news/500-spain-hotels-close-immediately-thomas-cook-fall-115130216.html

    Liked by 1 person

  • Economic vulnerabilities vs Climate change vulnerabilities. Equally devastating n’est pas?

    Like

  • I would advise everyone to regard these wild predictions of disruption in the Spanish tourist market with a healthy dose of skepticism.

    Three months from now, check to see how many hotels in Spain have actually closed. You will find out how wrong today’s forecast is.

    After all, the Brits are not going to suddenly stop holidaying in Spain. There will be a brief period of adjustment before “normal” growth returns to the tourist business.

    Pachamama’s characterization of tourism as a “dead-end” industry is nonsense that will end up in the dustbin of ideas — along with the exaggerations of (most) climate scientists and the crude lies of the climate activists.

    Like

  • ” The airline says a third weekly service from Manchester to Barbados will be introduced for the full Winter 2019 season.

    Virgin Atlantic will also increase flying from London Gatwick, with an eighth and ninth weekly service to Barbados for the Winter 2019 season.

    These additional services will go on sale from Tuesday, October 1, for travel on various dates through the Winter 2019 season.”

    https://barbadostoday.bb/2019/09/29/virgin-atlantic-introduces-more-flights-to-barbados-for-winter-2019-season/

    Liked by 1 person

  • Northern

    What then do you recommend when a government gets a bonus in relation to an oil deal negotiations. We cite the last government of the Cooperative Republic of Guyana and of course the Exxon el al contract.

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  • What we have to accept is the demands of the tourist have changed and will continue to do so. For example many will today chose a hotel with wireless connectivity throughout the property as opposed to one say with sunbeds on the beach.

    The industry needs therefore to open their eyes to these needs and realise we are not in the 1970s anymore. Once the demand for seats is there carriers will respond by increasing flights, so the Thomas Cook issue is more of a disruption than a long term problem for us. To me the biggest problem remains is the product we are offering still relevant in 2019 as it was say in 1980? In other words has our product evolved with the times? For example how many of our properties have Wi-Fi connectivity throughout their property as opposed to just in the guest’s rooms?

    Product offering vs relevance is the question for us now.

    Liked by 2 people

  • @Pacha
    that is out of my league. I recall reading reading the Profit Sharing Agreement in Guyana contained several “anomalies’ relative to similar contracts. I am unaware of the bonus, or under what terms the bonus is to be paid.
    A Guyanese friend told me the contract is either a case of grand larceny & corruption, or unimaginable incompetence.

    Liked by 1 person

  • I am not defending bonuses paid for a second, but keep it in perspective. They were paid either in shares which are now worthless or taxed at 40 per cent plus which is a direct benefit to the British Government.

    Liked by 1 person

  • “insiders say that Mr Fankhauser has performed well in very difficult circumstances”

    It’s true the company was saddled with debt when he took over but in the end he performed just as well as the janitor would have done if he’d have been promoted to CEO.

    Liked by 1 person

  • Wily was talking with a local hotel owner over the weekend and he said 25% of their up coming winter season bookings were to THOMAS COOK. He expressed a little relief that it happened now and not at the start or middle of the season as there maybe some opportunity to backfill a portion of this lost business. He also expressed a concern about who may provide the necessary replacement uplift from UK to Barbados.

    Spain is in a more serious position with THOMAS COOK failure as a large portion of their local hotel business was exclusive to THOMAS COOK. The fallout of this agency failure is going to ripple throughout the industry for the next several years.

    Liked by 1 person

  • Has any one heard if they are any govt plans in helping the stranded visitors off the island because of Thomas Cook demise

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  • “Has any one heard if they are any govt plans in helping the stranded visitors off the island because of Thomas Cook demise (?)”

    Could you please explain what is meant by “stranded visitors off the island?” “Off the island” where?

    If you actually meant “stranded ON the island,” then, according to reports from the BTMI, an estimated 44 Thomas Cook guest were in Barbados……booked through scheduled airlines and it is likely that they will not be considered as stranded passengers.

    UK Transport Secretary Grant Shapps said dozens of charter planes, from as far afield as Malaysia, had been hired to fly customers home free of charge and hundreds of people were working in call centres and at airports.

    150,000 tourists were to be brought home to the UK over the next two weeks in a Civil Aviation Authority (CAA) flight programme costing £100 million.

    Forty-five aircraft from as far away as Malaysia were chartered to operate approximately 1,000 flights from 53 airports in 18 countries over the next two weeks.

    Liked by 1 person

  • We have some people who see the negative in every situation.

    Liked by 1 person

  • It may be more of fulfilling their paymasters’ desire of pushing a specific agenda.

    Liked by 1 person

  • Seems the BTMI have pursuaded Virgin Atlantic to put on more flights from the UK to Barbados .

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  • @ David.

    As I said before once the demand is there Virgin will respond and they wouldn’t need no encouragement. The additional market share is all Branson needs to see. The Thomas Cook issue is equivalent here to Kentucky closing and Chefette smiling.

    On another issue can anyone tell me the logic behind this nonesence at the licensing authority?

    Liked by 1 person

  • “This is what our leaders of state and businesses should concentrate on instead of petty politics and propaganda.”

    Like pulling teet with a scredriver- Methinks our leaders in positions of authority and prestige become too full of themselves and know it alls and pour scorn on suggestions from those who are now their minions until the election bell rings.
    We need to first take care of our basics at home before we strut off on the world stage to lecture others on their sins of omission.

    Liked by 1 person

  • Vincent Codrington

    @ David Bu

    I think you overestimate the influence of BTMI. For Virgin ,it is a good business prospect. Businesses are driven by the profit motive.

    Like

  • NorthernObserver

    @VC
    at times we have to ignore reality. If no carrier filled the gap, somebody would take the hit for not doing their job (BTMI?). So when carriers increase, the flip side is they take the credit. The political balance act?

    Liked by 1 person

  • Vincent Codrington

    @ Northern Observer at 1 :45 PM

    The Political Balance Act. I must add that concept to my repertoire of political analytical tools. Thanks very much.
    LoL !!

    Like

  • There is an urgent need to closely scrutinise the auditing of Thomas Cook, which the regulator is doing; but, more importantly, we must separate auditing from conventional accountancy, the way we separated solicitors from barristers. Didn’t the auditors spot the Thomas Cook mess coming?

    Like

  • Didn’t the auditors spot the Thomas Cook mess coming?

    Why risk the chance of missing out on juicy audit fees and perhaps some consulting engagements down the road?

    Liked by 1 person

  • Seems the BTMI have pursuaded Virgin Atlantic to put on more flights from the UK to Barbados

    Lolol. hahaha. The old David is in today?

    Tongue firmly in cheek.

    Liked by 1 person

  • Auditing is an ethical profession

    Like

  • (Quote):
    There is an urgent need to closely scrutinise the auditing of Thomas Cook, which the regulator is doing; but, more importantly, we must separate auditing from conventional accountancy, the way we separated solicitors from barristers. Didn’t the auditors spot the Thomas Cook mess coming? (Unquote).

    Doesn’t the Thomas Cook auditing fiasco remind you somewhat of CLICO?

    Now who is to blame for this Thomas Cook cock-up?

    Executive Management, the Board of Directors, the external auditors or the “Regulator’?

    Britain is a failing state’ not so?

    Go ahead Big Britain, Little Britain is showing you the way.

    Like

  • it is stuck in his throat!

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  • Good press briefing today by minister of tourism reacting to the Thomas Cook fallout.

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  • Recently I read where the operators of Andromeda where experiencing serious problems in attracting visitors to the attraction. I just came across this article from Feb.1991 in the New York Times called “A Rare Garden in Barbados”.

    I’m sure this article would have been in the Travel section of the paper.

    Like

  • Adrian Loveridge

    We have taken literally thousands of people to Andromeda (groups) over the years, but they need to smart-partner with hire car companies, taxi operators, hotels etc., to drive volume. It also comes back to value-for-money, visitors have to feel they are getting something special for entrance price asked.

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  • Thanks Adrian. The business model is outdated , it has not adapted to market.

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  • S/B were experiencing problems……

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  • @Adrian
    Help me understand how this “smart- partner” idea works, should an operator of a business take on multiple partners or should they partner with e.g. Barbados Tourist Board- BTMI (hope I got that right) in order to promote that business? When I arrive at the airport usually there is someone dispensing rum punch/sorrel etc. and when I exit the terminal there is someone providing a bag (BTW not a brochure promoting anything) these individuals are part of a welcoming committee ; should I now have to ask the taxi-driver on places I should visit or should I depend on the hotel to provide some guidance?

    I am not sure what you mean by value for money are you saying that a visit to Andromeda is not worth the price of admission? Could you name the successful businesses that partner with the associated groups and is there a quid pro quo to those partnerships? There are many places of interest in Barbados where visitors don’t have to pay a cent to experience them e.g. St. John’s Church for the view or the history, how about Martins Bay for those interested in a different culinary experience or Codrington College -the latter now charges a nominal fee of $10.00 for anyone wanting to explore the grounds.

    I often see buses decked in tropical colours and filled with people with the name of the tour operator prominently displayed, where are these people going and are these locations/businesses partnered with anyone or is word of mouth the lubricant that facilitate the visits?

    Liked by 1 person

  • Sargeant, Where do I start?

    Going back to airport, Huge new screen welcomes visitors at immigration, there’s a start. A high quality short video highlighting Andromeda.
    Hire car companies automatically hand out reduced price entrance tokens with all rentals and Andromeda offers same on FB and website.
    Taxi drivers given an ‘incentive’ to include stop at Andromeda (I find it difficult to believe this isn’t already done).
    Obviously include cruise passengers and tour companies.
    Give people a reason for visiting Andromeda by highlighting special points of interest to target groups like the millions who buy gardening magazines, horticultural media etc.
    Get BTMI and all tour operators to include video images of Andromeda on all promotional possibilities.

    I could go on, but this should be second nature for all tourism entities.

    Like

  • The case of. Browns the killers could make good money on hugs and forgiveness gambling bets in las Vegas

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  • Oops wrong page

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