Adrian Loveridge
Adrian Loveridge

Hindsight is, of course, a wonderful thing, but I wonder just how many tourism industry observers had any real idea of how extensive the debts owed by the collapsed Thomas Cook Group might finally tally.

According to a recent Travel Trade Gazette article, the United Kingdom Official Receiver has reported that ‘Thomas Cook collapsed owing creditors nearly GB Pounds 9 billion

Of the total liabilities amount, some GB pounds 885 million are owed to trade creditors alone, which included GB Pounds 393 million from their tour operator’s division and GB pounds 448 million from its in-house airline. Holiday customers are owed GB pounds 585 million and employees a further GB Pounds 45 million. That GB Pounds 585 million owed to customers does not include the Civil Aviation Authority’s claim.

The bulk of the liabilities, though, rest in GB Pounds 5.7 billion debts arising from other group companies. An additional GB Pounds 1.775 billion is owed to banks and other lenders’.

The receivers have managed to claw back some of this mind boggling debt through the sale of the Thomas Cook Travel high street retail stores to Hays Travel for around GB Pounds 6 million, the airlines slots at various UK airports is, ‘understood to have raised in the region of GB Pounds 36 million to date; and Cook’s intellectual property rights and brand, sold to Chinese travel giant Fosun, for a reported GB Pounds 11 million’.

Other potential saleable assets include Thomas Cook’s call centre, its Peterborough headquarters and aspects of its operations in Scandinavia and central Europe, which have not already been sold.

The receivers report highlighted the affairs of 26 Thomas Cook Group companies and subsidiaries wound up on 23rd September 2019.

Additional reports on a further 27 Cook subsidiaries will follow in due course’ the official receiver has said.

The article did not itemize exactly what was the total debt to hotels that were not owed and/or operated by the company.

All sorts of reasons have been expounded, as to why the world’s oldest tour operator failed with such severity, including a change in customer holiday patterns, customer uncertainty arising from Brexit including the initial 29th March departure date which led to UK customers delaying booking holidays in Europe, the summer 2018 heat wave which caused potential customers to holiday at home.

But these were challenges faced by the vast majority of other holiday companies, so what went so dramatically wrong for Thomas Cook?

In reality the company was functioning under a mountain of debt following the merger with a rival tour operator back in June 2007.

As one Guardian journalist so accurately described ‘it is astonishing now to remember that, at the end of 2007, soon after the merger with MyTravel, Thomas Cook thought it was so flush with cash that it could spend GB Pounds 290 million on buying back its own shares’.

Yet, less than four years later, it was already fighting administration.

6 responses to “Adrian Loveridge Column – Thomas Cook Learnings”


  1. As one Guardian journalist so accurately described ‘it is astonishing now to remember that, at the end of 2007, soon after the merger with MyTravel, Thomas Cook thought it was so flush with cash that it could spend GB Pounds 290 million on buying back its own shares’.

    Or maybe it not quite so astonishing – when you consider all the factors at play in stock buyback schemes.

    Profits Without Prosperity
    By William Lazonick (in Harvard Business Review)

    ………Consider the 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012. During that period those companies used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37% of their earnings. That left very little for investments in productive capabilities or higher incomes for employees.

    The buyback wave has gotten so big, in fact, that even shareholders—the presumed beneficiaries of all this corporate largesse—are getting worried. “It concerns us that, in the wake of the financial crisis, many companies have shied away from investing in the future growth of their companies,” Laurence Fink, the chairman and CEO of BlackRock, the world’s largest asset manager, wrote in an open letter to corporate America in March. “Too many companies have cut capital expenditure and even increased debt to boost dividends and increase share buybacks.”

    Why are such massive resources being devoted to stock repurchases? Corporate executives give several reasons, which I will discuss later. But none of them has close to the explanatory power of this simple truth: Stock-based instruments make up the majority of their pay, and in the short term buybacks drive up stock prices. In 2012 the 500 highest-paid executives named in proxy statements of U.S. public companies received, on average, $30.3 million each; 42% of their compensation came from stock options and 41% from stock awards. By increasing the demand for a company’s shares, open-market buybacks automatically lift its stock price, even if only temporarily, and can enable the company to hit quarterly earnings per share (EPS) targets.

    As a result, the very people we rely on to make investments in the productive capabilities that will increase our shared prosperity are instead devoting most of their companies’ profits to uses that will increase their own prosperity—with unsurprising results.

    https://hbr.org/2014/09/profits-without-prosperity

  2. Piece the Legend Avatar

    Seasons Greetings Adrian Loveridge in your newly acquired retirement.

    I am going to ask you 2 strange questions about Thomas Cook

    Do you see any similarities between Thomas Cook and the legal fraternity with regard to this fiasco?

    Does it present any opportunities for a wise man or woman?

  3. Vincent Codrington Avatar
    Vincent Codrington

    This is one of those cases when being too big leads to failure. TC strayed too far from its core competence.

  4. peterlawrencethompson Avatar
    peterlawrencethompson

    Thomas Cook was destroyed by the greed of the Board and management team. They all knew perfectly well what they were doing when they paid themselves £20 million in bonuses. The game was just to conceal the fact that the company was bankrupt for as long as possible while they kept lining their own pockets. That’s capitalism at its finest.


  5. Loveridge why everytime i look at this picture of you
    You look like a red lobster


  6. Small minds always have a fixation with attacking people.

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