Thomas Cook: Turbulent times
Thomas Cook’s collapse brings the curtain down on 178 years of history for the company – so where did it come from, and what caused it to crumble?
Pure, Christian behaviour in the 19th century played an important role in the creation of what have become major brands in the 21st.
Cadbury, famously, was founded by Quakers to give people a pleasure away from the misery and hardship caused by alcoholism; the same religious movement played a role in the foundation of Clark’s shoes, and corn flakes were developed in the USA by Seventh Day Adventists creating new foods that fitted in with their vegetarian principles.
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Thomas Cook’s origins were along the same lines. A cabinet maker and former Baptist preacher of the same name created the company in 1841, organising trips for members of the temperance movement.
Mr Cook organised his first trip in 1841, taking about 500 supporters of the movement on a day out by train from Leicester to Loughborough, 12 miles away. The day was a success, so he went on to arrange excursions between Leicester, Nottingham, Derby and Birmingham for temperance societies and Sunday schools.
But what began as an attempt to encourage people into healthy lifestyles and eschew alcohol is now an empire that lies in the dust, leaving thousands of people out of work, and hundreds of thousands of Britons stranded around the globe relying on the government to bring them home.
Thomas Cook’s story is one of a multinational business with various interests being caught in a perfect storm.
Huge debts, changing consumer habits, the rise of low-cost internet rivals, and political instability at home and abroad all provided relatively small cuts that collectively added up to a gaping wound in the business from which it simply could not recover.
Mr Cook launched trips to Paris in 1855, before venturing to Italy, Switzerland, Egypt and the US in the 1860s.
His first high street shop was opened in 1865 in London and around the world tours began in 1872.
Pleasure trips by plane were launched in 1919.
The Cook family sold the business to the Belgian owners of the Orient Express in 1928, before it became state-owned as part of the nationalised British Railways in 1948.
By 1950 the number of British tourists travelling abroad each year exceeded one million, with France, Italy, Spain and Switzerland the most popular destinations.
Colossal
Thomas Cook returned to private ownership in 1972 and has since switched hands several more times.
The most recent major change was in 2001 when a German travel group became the sole owner of the firm.
Thomas Cook Group employed around 21,000 people in 16 countries and had about 19 million customers each year.
But despite its colossal size, the company was unable to fend off the variety of challenges which eventually lay before it.
The issue that tipped Thomas Cook over the edge all hinged on raising an extra £200 million.
Bosses had been negotiating with lenders and the firm’s major shareholder for months, securing £900 million in new funding, but more recently it became apparent that it needed another £200 million to meet all its costs.
A separate lender is said to have been lined up, but they pulled out at the last minute. The other banks and lenders said they would only stump up the £900 million if the extra £200 million was secured.
But Thomas Cook’s problems with debt stretch back several years. The company first renegotiated its £1.6 billion debt pile in 2013, kicking the can down the road until 2020.
However, by last summer it became clear that repayments were starting to put immense strain on the business – the company made all its money in the summer and needed enough to see it through the winter months.
At the same time, bosses past and present always claimed they knew Thomas Cook must adapt to an evolving holiday market.
Traditional travel agents were too slow to take advantage of the internet, claiming customers still wanted the face-to-face experience of walking into a shop to book their holidays.
Thomas Cook did reduce the number of stores it had, but by the end hundreds remained. All the while, rivals were eating into their market share, and the emergence of online-only travel agent On The Beach really highlighted the problems further.
All the while, political turmoil at home and abroad was taking its toll.
Key destinations such as Tunisia, Turkey and Egypt all saw booking fall in the wake of 2010’s Arab Spring uprisings, and Thomas Cook was also getting dragged into a criminal case around the deaths of two customers in Corfu from carbon monoxide poisoning.
But Thomas Cook also warned over Brexit, saying Britain’s departure from the EU had caused a delay to bookings. Moreover, the company takes bookings in pounds, pays for fuel in dollars and books hotels in euros. When the pound collapsed in value after the EU referendum, it hit the travel company’s profitability.
Helal Miah, investment research analyst at The Share Centre, sums up the problems: “The group, like its peers, has suffered from a perfect storm of turbulence, from political unrest and terrorism at some of its most popular destinations, to unusual weather patterns seeing travellers taking staycations and the ever present Brexit uncertainty devaluing the pound and putting consumers off from booking holidays.
“The group has also been too slow to adjust to the online world. While other travel groups have suffered from these factors, Thomas Cook’s pile of debt is the differentiating factor.”
Thomas Cook’s first commercial venture was an outing to Liverpool in 1845, for which he charged 15 shillings for first-class passengers and 10 shillings for those in second-class.
His company’s last came 178 years later, as Flight TCX2643 arrived at Manchester Airport after leaving Florida in the wee small hours on Monday morning, its terarful staff hugging one another as they bade an emotional farewell to the company that had provided their jobs.
