THOMAS Cook was unlikely to survive changing travel habits, major debt and Brexit, an expert says.
Chief executive Peter Fankhauser apologised yesterday, saying he was “distressed” by the company’s fall after “intense negotiations” aimed at saving the business.
Brexit has been cited as one of the factors that caused the crash.
However, The Telegraph reported that 12 high-flyers at Thomas Cook earned around £20 million over five years from 2014 as the company’s debt grew to £1.7 billion.
Commenting, Professor John Lennon, director of the Moffat Centre for Travel and Tourism at Glasgow Caledonian University, said: “This is a major failure in the travel sector. It will leave the competitive space in package holidays clear for TUI.
“The environment in which Thomas Cook operated radically changed with the advent of budget air travel, online travel services and easy access to private accommodation through online platforms like Airbnb.
“The merger with Airtours and MyTravel Group left Thomas Cook with a major debt burden of £1.7bn that became harder and harder to service.
“Combined with increased competition and consumer uncertainty, weaker sterling as a result of Brexit and increasingly nervous lending organisations, it left limited possibilities for an alternative outcome.”
The 2007 MyTravel merger eventually led to a £1.1bn loss when bosses took the decision to write down its value in May this year.
But they said there was “little doubt” that Brexit had deterred some from making holiday plans.
The company hoped to secure a rescue deal led by Fosun, its largest shareholder, but this failed when creditor banks including the Royal Bank of Scotland (RBS) demanded an additional £200m. It led a group of banks to deliver an emergency loan to Thomas Cook eight years ago.
It is understood that travel bosses approached the UK Government for £250m, but Westminster said bailing out the business would have hit the public purse too hard.
Drew Hendry MP, the SNP’s business spokesperson at Westminster, said the suspension of that house would make it harder to scrutinise that decision and find out what, if anything, could have been done to avoid the company’s end – and what will be done to help those affected. He stated: “The UK Government will need to explain their actions through the course of this painful process – including what they knew about the collapse of Thomas Cook and what they could have done to step in and prevent it.
“Thomas Cook had previously warned that the UK Government’s Brexit obsession was causing them problems and it is clear that it has accelerated the difficulties.
“In any normal period, the government would be expected to come before parliament to set out to MPs what actions it will be taking and the support being offered. However, the UK Government has shamefully shut down parliament.”
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here