The U.K. government deployed the “largest repatriation in peacetime history” to bring home more than 150,000 tourists stranded on overseas beaches and in vacation hotspots by the collapse of tour operator Thomas Cook Group Plc.
The massive airlift, using chartered jetliners, follows the collapse of the 178-year-old company early Monday after eleventh-hour fundraising talks with investors failed. The move saw bookings, flights and package tours canceled, sparking online panic for travelers and prompting a plunge in Thomas Cook bonds.
The government said it would work to return vacationers over the next two weeks in an exercise dubbed Operation Matterhorn. The rescue will cost about 75 million pounds ($93 million), according to a person familiar with the situation — about 50% more than the U.K. spent to bring home travelers affected by the demise of Monarch Airlines two years ago.
Those who have reached their destinations were urged to stay in place and continue their vacations, with the government saying it’ll cover the cost of accommodation and their return home around the scheduled time. Bookings are covered by the Air Travel Organizer’s License program, or ATOL, which provides insurance against travel disruptions.
Thomas Cook is the highest-profile casualty of a decades-long shift in the travel business. The rise of discount airlines and online booking platforms has encouraged sun-starved Europeans to spurn package-tour operators and arrange their own trips, while the highly seasonal industry has suffered shocks ranging from terrorism to political turmoil.
The demise of one of the U.K.’s best-known brands, leaving more than 21,000 jobs at risk, caps months of talks with its investors, led by Fosun Tourism Group. The Chinese company, which owns the Club Med resort chain, proposed a $1.1 billion bailout in exchange for control of Thomas Cook’s tour operations and a minority stake in its airline.
Last week, the London-based company said it needed 200 million pounds more, prompting its rescue prospects to unravel.
“Although a deal had been largely agreed, an additional facility requested in the last few days of negotiations presented a challenge that ultimately proved insurmountable,” said Chief Executive Officer Peter Fankhauser.
Thomas Cook shares were suspended in London and its euro bonds plunged 72%. German rival TUI AG rose as much as 11%, while British Airways parent IAG, Easyjet Plc and Ryanair Holdings Plc got a boost from the prospect of flying home stranded passengers at the U.K. government’s expense, as well as increased bookings down the road.
Condor, Thomas Cook’s German airline, said it will keep operating flights and has applied for a bridge loan from the German government. The company’s German tour operating arm said it’s sounding out “final options” and warned that it might have to file for insolvency, too.
AlixPartners LLP was named an adviser to Thomas Cook and will work with the aviation authority to bring customers back to the U.K.
The collapse deals another blow to the European travel sector, just months after the bankruptcy of Icelandic budget airline, Wow Air. The carrier shut down its operations in March due to lack of financing, leaving 2,700 fliers stranded and hurting the country’s economy. Monarch collapsed in 2017 after unsuccessfully trying to switch from charter to scheduled low-cost operations.
Fosun Tourism Group said in a statement Monday that it was “disappointed” Thomas Cook was unable to find a solution. Its shares dropped as much as 5.5% in Hong Kong.
“Fosun confirms that its position remained unchanged throughout the process, but unfortunately other factors have changed,” the company said. “We extend our deepest sympathy to all those affected.”
The last-ditch rescue bid proposed swapping existing debt into shares, leaving Fosun holding the majority of Thomas Cook’s tour-operating business while creditors would have controlled its airlines. The company had almost 2 billion pounds of debt as of March 31, according to data compiled by Bloomberg.
But the challenges eventually proved insurmountable. A group of hedge funds organized to block the plan because it would stop them from cashing in on holdings of swaps that pay out when a company defaults on its debt. There was also concern that customers would avoid Thomas Cook for fear the company wouldn’t be around to honor their bookings.
Prime Minister Boris Johnson defended the decision to refuse a government bailout that he said had been requested, worth about 150 million pounds.
“That’s a lot of taxpayers’ money,” he told reporters on his way to New York for the United Nations General Assembly. “It sets up a moral hazard.”
Founded in the 1840s by a Victorian entrepreneur of the same name, Thomas Cook started out by running train trips through the English Midlands. The business expanded as Britain’s growing middle class discovered they had more time — and money — to discover the delights of continental Europe.
Briefly absorbed into the state rail company soon after World War II, the company got its biggest boost in the 1970s and 1980s as Britons sought the sun on a cheap budget. The ad slogan “Don’t just book it, Thomas Cook it” entered the national psyche.
But the company labored under its large debt burden and the costs associated with maintaining a high-profile presence in Britain’s provincial towns. Nimbler online rivals ate into its core business and a succession of turnaround plans failed to stick, while the sluggish European vacation market and uncertainty over the economic impact of Brexit crimped demand more recently.
The slowing global economy and signs of a pullback in Chinese tourist travel may have prevented Fosun Tourism from raising its bailout package. The company, which bought into Thomas Cook in 2015, “is probably concerned about spending too much to get too little on their investment,” said Andrew Collier, managing director of Orient Capital Research in Hong Kong.
“This marks a deeply sad day for the company which pioneered package holidays and made travel possible for millions of people around the world,” CEO Fankhauser said Monday.
–With assistance from Shirley Zhao, Siddharth Philip, Tim Ross and Christopher Jasper.
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