
Thomas Cook collapses, stranding 150k UK holidaymakers - daanavitch
https://www.theguardian.com/business/2019/sep/22/thomas-cook-in-last-ditch-talks-to-avoid-collapse
======
rwmj
I guess as they've gone bust I can tell this story now ... I used to consult
for Thomas Cook about 15 years ago, and they were a basketcase of a company
even back them, so this doesn't surprise me. I feel sorry for all the reps and
workers out in the field and on the planes who will lose their jobs because of
the profligacy of the Peterborough head office.

Two examples of stupidity stick with me. One was that at the time they
outsourced their website to their main competitor. Which as you can imagine
worked well because their competitor had no desire at all to fix the many
problems with the website. TC didn't understand that the website was
everything because they were at heart a high street travel agency.

The other was when I worked on managing their AdWords account, which was
enormous (like 100K different keywords in thousands of groups). Some keywords
would be bid at £10s of pounds. It is very easy to lose a lot of money on
these keywords because there's a fine balance between the profit you make on
each holiday (usually £100-ish), versus paying a large amount of money on each
keyword and the number of sales you make at the end of the "sales tunnel".
There was also a weekly industry survey which came out ranking the position of
all the travel websites according to number of visitors (I forget the name of
it). Senior managers at TC were fascinated by "being number one" on this
survey every week, and so would instruct us to dial up the keyword bids on
Friday night and run like this over the weekend. Google AdWords with high bids
is very effective at bringing large numbers of low quality visitors to the
website.

Each week they would indeed come number one on this survey (read only by other
senior managers in the travel industry), while at the same time losing tens of
thousands of pounds selling holidays for negative profit.

~~~
sprafa
Most British companies I’ve seen operating appear to be an absolute mess from
the inside. It’s funny that the British have the Northern European credibility
in business but I don’t think they’re anywhere close as efficient or organised
as the Germans or the Dutch. This is just personal experience but I’ve come to
realise it seems to be the norm that British management is overall terrible.

~~~
edf13
Incorrect (Or have you sources?).... the issue is old legacy based companies.
No matter where they are based.

Legacy as in business systems, business thought process, legacy IT, etc.

TC is a very old company

~~~
vesinisa
Company being old certainly does not mean it needs to be full of legacy
systems and business processes. It only means that the company's management is
not competent at evolving the company's processes and systems, which means it
will eventually fail regardless of being a fresh startup or centuries old
going concern.

Bosch, Siemens, Bayer, BASF and Carl-Zeiss are all examples of over hundred
year-old German companies that continue to innovate at the cutting edge of
their industries and are massively profitable.

~~~
usrusr
Minor nitpick: Volkswagen isn't over a hundred years old at all.

It might not be _entirely_ inaccurate to say that they have survived a
thousand years, but those were the shortest thousand years in history.

~~~
vesinisa
Hah! Thanks, edited.

It might be also said that their innovation most recently has focused on some
less-than legal technologies. But innovation it is, nonetheless.

------
FartyMcFarter
> Customers at a hotel in Tunisia reported being locked in by security guards
> as the hotel demanded extra money, fearing it would not be paid by Thomas
> Cook.

This is quite bad behaviour from the hotel. Presumably their business
relationship is with Thomas Cook, not the people on holidays?

They went as far as grabbing people who jumped a wall in an attempt to get
out!

More details here:
[https://www.bbc.co.uk/news/uk-49787563](https://www.bbc.co.uk/news/uk-49787563)

The hotel is this one, maybe one to avoid: "Les Orangers resort in Hammamet,
near Tunis."

~~~
arthurfm
The Guardian article mentions that hotels have to wait up to 3 months to be
paid by the holiday company. I can see why the Tunisian hotel did what they
did, but you are correct that their business relationship is with Thomas Cook,
not the holidaymakers.

 __ _Meanwhile, Thomas Cook holidaymakers were anxious that they might be
evicted from their hotels or charged again for their holidays. Holiday
companies do not normally pay hotels until up to 90 days after guests have
left._ __

Do hotels typically have insurance that covers situations like this?

~~~
tialaramex
> The Guardian article mentions that hotels have to wait up to 3 months to be
> paid by the holiday company.

Ninety day terms are very common in most B2B industries. Large companies
quickly learn that their suppliers are dependant on them to stay in business
and can be abused almost at will. So nominally "90 day" terms claiming you
have 90 days to pay become "We definitely won't pay until 90 days after you
bill us" and then "We typically pay in the working week after 90 days is due"
and then "We only run routine bill payments on the third Wednesday of a month,
so it can be up to 120 days I guess you got unlucky" and next thing you know
the work you did in April is only paid for in October by a company that you
know is already on the verge of bankruptcy but if you don't do that work
they'll cut you off completely. It's crazy but that's how it is.

The EU says if in practice you don't pay on or before 90 days you owe interest
at a calculated rate on the due amount. But most small suppliers are so in
thrall to the huge company they supply that they won't even ask for that
money.

~~~
gertrunde
I suspect that this might be a varies-by-country thing, certainly in the UK 30
days is the norm, 90 days would be a bit odd.

But I think Italy are mostly 90 days (apparently due to that being Fiat's
terms, and everyone else followed suit).

~~~
toyg
No, it depends on the sector. Big supermarkets, for example, pay later, as do
a lot of businesses where actual turnaround of goods is involved; but service
companies typically have a more flexible cashflow and can easily do 30 days.

In Italy the situation was so bad that it was not uncommon to get 180 days
from big accounts. The State set an awful example by allowing 12 months on its
own bills, and often wouldn't pay for years if at all (what are you going to
do, sue them? The average lawsuit takes more than 2 years...). In the last
decade, several acts of Parliament were passed to actually force national and
local administrations to settle their bills - and a lot of them were still
outstanding a year after that. About two years ago, the government passed a
law forcing all businesses and administrations to pay in 30 days by default
(with some exceptions, of course). Whether this is actually being enforced, I
don't know (I don't live there) but in theory it should allow smaller
businesses to be a bit more confident when signing contracts and asking to get
paid.

~~~
Someone
Thank the EU. [https://ec.europa.eu/growth/smes/support/late-
payment_en](https://ec.europa.eu/growth/smes/support/late-payment_en):

 _”Main provisions of the Directive

Public authorities have to pay for the goods and services that they procure
within 30 days or, in very exceptional circumstances, within 60 days.

Enterprises have to pay their invoices within 60 days, unless they expressly
agree otherwise and provided it is not grossly unfair.

Automatic entitlement to interest for late payment and €40 minimum as
compensation for recovery costs.

Statutory interest of at least 8% above the European Central Bank’s reference
rate.

EU countries may continue maintaining or bringing into force laws and
regulations which are more favourable to the creditor than the provisions of
the Directive.”_

~~~
toyg
Yeah, but apart from this, removing roaming charges, funding infrastructure,
safeguarding working rights, cleaning up our rivers and beaches, and building
the richest market on the planet, what did the EU ever do for us...?

------
CaliforniaKarl
I don't think "stranding" is the right word.

For some time now, UK companies selling "package holidays" (with hotel, air,
etc. all from one vendor and with one bill) are required to put up funds that
the government uses to repatriate those who are already traveling when a
company goes under:

[https://www.caa.co.uk/atol-protection/](https://www.caa.co.uk/atol-
protection/)

Note that it does not cover trips that people put together themselves; in that
case, I expect they'd only have to arrange for a flight home (as they paid for
the other parts themselves).

The CAA (the UK's Civil Aviation Authority) already has a site up for Thomas
Cook customers:

[https://thomascook.caa.co.uk](https://thomascook.caa.co.uk)

~~~
parsimo2010
“Temporarily stuck until they can get a flight scheduled” is better, but
wordy.

These vacationers are in safe countries with good infrastructure. They
definitely aren’t stranded like Tom Hanks in _Cast Away._ However, the other
airlines can’t magic up 150,000 seats, so it might mean that some people will
take a while to get home.

~~~
CaliforniaKarl
Thomas Cook was more than just a travel agent. They were also an airline…

[https://en.wikipedia.org/wiki/Thomas_Cook_Airlines](https://en.wikipedia.org/wiki/Thomas_Cook_Airlines)

… and a hotel chain …

[https://en.wikipedia.org/wiki/Thomas_Cook_Hotels_&_Resorts](https://en.wikipedia.org/wiki/Thomas_Cook_Hotels_&_Resorts)

I would not be surprised if the UK has laws in place, and/or are using ATOL
funds, so that the existing Thomas Cook aircraft can be pressed into service
for the return journeys.

For example, return arrangements have already been confirmed for those
traveling from Croatia on the 23rd:

[https://thomascook.caa.co.uk/customers/if-you-are-
currently-...](https://thomascook.caa.co.uk/customers/if-you-are-currently-
abroad/guidance-by-destination/croatia/split-spu/23-september/)

The return flight details are identical to the original Thomas Cook flights
(other than the flight numbers, which are similar).

~~~
stordoff
> The return flight details are identical to the original Thomas Cook flights
> (other than the flight numbers, which are similar).

I suspect it's different operators re-using the same flight numbers and
airport slots.

ZT is Titan (a short notice lease provider, which makes sense):
[https://en.wikipedia.org/wiki/Titan_Airways](https://en.wikipedia.org/wiki/Titan_Airways)

U2 is easyJet:
[https://en.wikipedia.org/wiki/EasyJet](https://en.wikipedia.org/wiki/EasyJet)

Titan Airways are confirmed as providing support:

> Following the collapse of Thomas Cook, Titan Airways are working in co-
> ordination with the Civil Aviation Authority to provide return flights back
> to the UK for those passengers currently overseas.

[http://www.titan-airways.com/](http://www.titan-airways.com/)

------
wp381640
Reminder again to never hold gift cards. I had a family member who was gited a
$3,000 travel voucher with an agency - I told them to exchange it in for
flights asap as you can book up to a year out, change the tickets later and
it's better to be a creditor with a national airline than a likely-going-out-
of-business-because-of-online travel agency

~~~
dehrmann
The gift card market just confuses me. Especially when it's people giving
gifts to people (not corporate gifts), cash is something that has at least as
much value as the gift card, is accept everywhere, isn't a liability on a
balance sheet, and is easier to give.

~~~
Scarblac
Ideally a gift should show that you know the other person well enough to pick
just the right thing for them.

Money is the other extreme, it says "I really have no idea what kind of gift
you'd like", so apparently you hardly know each other.

Gift cards are at least a small step up, you show you think the other likes to
travel.

~~~
onion2k
Cash with a note saying "For you to enjoy in <person's favourite shop>" then.

~~~
why-oh-why
That reminds me of my grandma, she used to hand me money “for you to buy some
X”

I should give her a call.

------
fasicle
Thomas Cook to cost the taxpayer £100m for the repatriation of Thomas Cook
customers - known as Operation Matterhorn.

[https://www.bbc.co.uk/news/live/business-49770809](https://www.bbc.co.uk/news/live/business-49770809)

~~~
Krasnol
In Germany TC is required to insure package tourists for this case. Germany
won't pay for their return (or as in this case: the time they'll stay there
until the insurance gets them a flight back).

------
beaker52
It's always blown my mind that companies like this will operate not having
enough cash on hand to actually provide the services they've sold.

Maybe that's why they're in business and I'm not.

~~~
pjc50
Well, reaching that point is the definition of insolvency.

But having _future_ commitments that you don't _currently_ have the cash for
is both normal and expected. The economy is held together by invoice credit.

(Wait until the people who get upset about banks "creating money" realise how
commercial credit works and discover "shadow banking"...)

~~~
WarDores
Anyone interested in the "creating money" aspect of banks should definitely
read a paper called "The Monetary Basis of Bank Supervision"
([https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3421232](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3421232)).

------
HenryBemis
I was always wondering about the profit margins of these companies. From their
prices I always felt that I am paying a portion of the previous guy's
vacations. I'd call it a pyramid scheme, only everybody loses.

~~~
xioxox
The big problem was its £1.4bn in debt, which really brought it down. Id be
careful holding shares in companies with big debt if there's a coming
downturn.

~~~
dehrmann
How's AT&T looking these days?

~~~
Mindwipe
Netflix and WeWork are more pertinent examples tbh.

~~~
mrguyorama
I was not aware Netflix had significant debt.

~~~
Mindwipe
Netflix is basically sticking $4 billion a year in bonds at this point.

That's not necessarily a problem today. Debt is cheap. But they do have to
slow that down at some point through lower spending or increased revenue, and
if the cost of debt suddenly skyrocketed in the meantime, which is not
impossible, that would be a big problem for them.

------
dehrmann
I was recently debating booking a flight to Europe on Norwegian. It didn't
affect my decision, but I'm very aware that they're struggling financially, so
I'd only buy the tickets less than a month out on a credit card so it's the
bank's money, and if they declared bankruptcy and cancelled flights, c'est la
vie.

~~~
2rsf
But what happens if they declare bankruptcy on you way back ? and what about
hotel reservations or the more expensive flight you'll have to take ?

BTW Norwegian are fine for a while

[https://simpleflying.com/norwegian-bond-payments-
deferrednor...](https://simpleflying.com/norwegian-bond-payments-
deferrednorwegian-airlines-defers-two-bond-payments/)

~~~
freshfey
The hotel reservation problem actually happened to me. I booked the hotel via
a company called AMOMA, which Google recommended me when I entered the hotel
name (it was the cheapest so I took it).

They recently sent me an email saying that they immediately ceased service and
our booking will probably be cancelled. I checked with the hotel the same day
and got a confirmation that the booking is all good (via phone and email). One
day after I get an email from the hotel saying our booking has been canceled.

I did pay via (prepaid) credit card so it'll be interesting to see whether
I'll ever get my money back...

~~~
ValentineC
> _I did pay via (prepaid) credit card so it 'll be interesting to see whether
> I'll ever get my money back..._

Curious: what card is both "prepaid" and a credit card?

------
barsonme
Does this mean Condor Airlines is shutting down as well?

Their website[1] says they're continuing to fly, but I'm wondering if there
any sort of precedent for what happens to child companies when the parent
becomes insolvent.

Having just returned just last week from Europe via Condor Airlines, I'm glad
I don't have to worry about this mess.

[1]: [https://www.condor.com/us](https://www.condor.com/us)

~~~
goodcanadian
If Condor operates as an independent company, as long as it is a going
concern, it will likely continue to fly. As an asset, it will be sold by any
administrator in order to help recoup money to pay Thomas Cook's creditors. It
is (most likely) worth more money as an operating airline than if it were to
be shut down.

~~~
greglindahl
However, bankruptcy laws in many countries are pretty good at destroying value
in these circumstances.

------
Scoundreller
Guardian reports:

> Dozens of charter planes have been brought in from as far afield as Malaysia
> to assist with the mass airlift.

Getting a charter plane has been quite difficult since the 737MAX grounding.

Any excess capacity has been soaked up.

There have been lots of unusual chartering by airlines that don’t usually
charter. Air Canada had been using some, and it’s exceptionally rare for them
to not use AC-branded planes.

At least it’s not the high season.

~~~
mcv
Why are extra planes even necessary? There were already return flights
planned, right? Why not have those fly anyway? Maybe they're owned by Thomas
Cook and the crew won't get paid anymore, but it'd be nice if the government
could step in and let those parts of the company continue operating until
every is home again. That's much less disruptive than keeping the original
planes grounded, and chartering different planes to step in. That's disruptive
to two plane crews and the passengers. Continuing as normal would be far less
disruptive.

But I'm probably missing some vital piece of red tape. It's usually an
insurance issue.

~~~
cjrp
Would you take a plane flown by two pilots who have just been told they've
lost their jobs?

~~~
Scoundreller
What do you call a pilot on their last day? Your pilot ;)

I’m sure it happens more often than you think.

------
sek
[https://finance.yahoo.com/quote/TCG.L/balance-
sheet?p=TCG.L](https://finance.yahoo.com/quote/TCG.L/balance-sheet?p=TCG.L)

This looks really bleak, everybody who had some liabilites to Thomas Cook in
any way should at least consider the chance of insolvency.

The hotels should be able to check this information, but consumers?

Every person who gets a new phone contract has his credit rating checked, but
if hundreds of thousand people buy expensive flights nobody warns them about
the risk.

------
greglindahl
One interesting part of the news coverage is that there are 600k customers
involved, and only 150k of them are UK holidaymakers. Notice the lack of
coverage of the other 450k?

~~~
mikejb
The guardian is a British newspaper, so there's an understandable focus.

An additional factor may be the insurance situation: Some countries require
travel organizers to set up insurance for these cases, ensuring that customers
can still get back. I'm not 100% sure on this, but I think the UK doesn't have
such requirements, which would worsen the situation for them in particular.

~~~
greglindahl
This isn't the only article; many US newspapers have also had the same focus.

------
totaldude87
How come a company that is trusted by half a million travelers (at the end of
a holiday season) can this easily go bankrupt?.. Is this a case of bad
management or cheap travel models or what..

cant see any details on when they started seeing issues, and how did they end
up like this..

edit: here is how -- Thomas Cook returned to private ownership in 1972 and has
seen a series of mergers and takeovers. In 2007, it merged with the UK-listed
owner of Airtours, MyTravel Group, which nearly collapsed in 2011 but was
bailed out by its banks. The rescue left Thomas Cook with a debt burden of
£1.7bn and the company struggled to cope, leaving administration as the only
option.

------
nkingsy
I was not familiar with the term holidaymaker, and thought it was corporate
speak for a Thomas Cook employee. Very confused until halfway through the
article.

------
Exquisites
That's a damn shame. I used to fly with them for next to nothing. Decent
airline. Never would consider staying in their crappy hotels though. This will
have a major effect on low-cost long-range tourism. Everybody is going to bump
their prices up a notch.

------
PhilWright
Why do these travel companies always go bust in a way that leaves people
stranded?

Surely the management must have known a week or two ago that the company was
about to go under. In that case, stop anyone flying out but still bring people
back. By the time they actually cease trading there should be few people left
abroad. Some managers in Thomas Cook must have known that people flying out
were going to end up stranded and they just let them go.

~~~
greglindahl
I'm sure you read the article, which mentions that there were negotiations up
to the last minute to raise the last 200mm pounds on top of the 900mm pounds
existing rescue package.

~~~
human20190310
In general I think companies have a duty to their shareholders to fight to
stay in business until it's literally impossible to do so. As long as there
are resources left, those would have to be allocated to preserving the
business, rather than to smoothing the process for their customers.

~~~
visarga
In that case the shareholders should be held responsible for leaving people
stranded.

~~~
em500
The whole point of a limited liability company is to shield shareholders from
responsibility.

[https://en.wikipedia.org/wiki/Limited_liability#Justificatio...](https://en.wikipedia.org/wiki/Limited_liability#Justification)

~~~
visarga
That's a catch 22. The company has a duty to its shareholders first, and
shareholders are protected from responsibility.

------
benj111
Frankly I think its amazing that all these people can expect to be
repatriated, relatively problem free, it's like a bank collapse, but you have
to herd people.

And the scale. Operation Market Garden _only_ dropped 40,000 troops. D day
only managed to land 150,000 on the first day.

~~~
pjc50
On the other hand, the tourists aren't being paradropped over hostile
territory. Unless Thomas Cook had _really_ gone downhill..

~~~
benj111
I don't think they limited the amount of people they dropped on the
Netherlands, or the people they threw at the Normandy beaches on the basis
that they might be shot at. Logistics was the limiting factor.

~~~
mcv
And jumping them out of a plane saves on landing and return flights, so in
that sense, Normandy and Market Garden would be logistically simpler than
Operation Matterhorn.

Although I hope that Matterhorn doesn't require any bridgeheads to be
conquered.

It's also worth remembering that Market Garden failed in its final objective.

------
andrewstuart
Is this brexit related?

~~~
asdf333
not completely...booking.com, tripadvisor, trivago, expedia and all these
online hotel booking sites are what really did this company in.

i suppose it didn't help that folks were probably less interested in
travelling due to financial uncertainties around brexit but it definitely
isn't the main reason

~~~
arcticbull
That’s a very good point. Travelers have shifted over the years from an all-
inclusive package booking process to a DIY piecemeal approach and it’s hard
for package sellers to compete against the OTAs.

~~~
switch007
Except the 600,000 customers currently abroad

~~~
Scoundreller
But the pricing power TC had over them had been eroded.

When there’s less demand, but the same supply, price has to give.

------
lettergram
Strange... must be down from the 600k reported by Business Insider:

[https://www.businessinsider.com/thomas-cook-bankrupt-
airline...](https://www.businessinsider.com/thomas-cook-bankrupt-airline-
stranded-rescue-2019-9?utm_source=reddit.com)

~~~
futhey
I was trying to figure this out too, other reputable sources cite 600k as
well.

There is some number of passengers who have not yet left on their trip, who
are part of that number.

~~~
mikejb
I'm wondering how one gets stranded _before_ leaving on a trip (and that group
makes up 75% of stranded people)

It's 150k UK vs. 600k total holidaymakers.

~~~
meraku
Might not necessarily mean they are _physically_ stranded.

Booking holidays often means scheduling time off work, around children's
school holidays, when prices are reasonable, etc. Not always a trivial task.

Having those plans abruptly cancelled in this manner where they need to not
only get a refund for any money paid, but to also try and make alternative
arrangements on their own and cover any difference in cost out of their own
pocket is effectively leaving them stranded in a sense.

