A New Dunkirk? 600,000 European Tourists may Have to be Rescued

Post Reply
fountainhall

A New Dunkirk? 600,000 European Tourists may Have to be Rescued

Post by fountainhall »

Thomas Cook, Britain's oldest package tour company, presently has around 600,000 tourists enjoying package holidays, including 150,000 from Britain and around 300,000 from Germany. Unless it obtains a quick injection of several million pounds sterling, it is likely to go bust as early as this weekend. The company has a debt burden of £1.7 billion (US$2.12 billion)
[Britain's] Department for Transport and the Civil Aviation Authority (CAA) have made initial preparations to bring stranded passengers back to the UK, under a plan known as Operation Matterhorn . . . The Civil Aviation Authority could be forced to pick up some of the cost of covering the flights home of 150,000 UK customers abroad. Thomas Cook destinations range from mainland Europe to the Caribbean, the US and the Middle East.
https://www.theguardian.com/business/20 ... patriation
fountainhall

Re: A New Dunkirk? 600,000 European Tourists may Have to be Rescued

Post by fountainhall »

So Thomas Cook has gone bankrupt. The company had been unable to find the £200 million its bankers had demanded. Thanks to package tours being protected under British government regulations, I assume it will be a special government fund built up from a levy on each tour and the taxpayers who now have to pay to repatriate more than 150,000 already on vacation and reimburse all those who have purchased future tours. 1 million or so future holidays are already paid for. To achieve the repatriation, the government has chartered more than 40 aircraft from airlines as far away as Malaysia.

I still remember my first real holiday when I was a student. It was a Thomas Cook package tour to Malta. 2 weeks in early November with flights on British Airways, transfers, a 3 star hotel and breakfast cost all of £86 from London. A friend who joined me from Edinburgh paid an extra £5 for return flights from Scotland to London. (The massive rise in oil prices was still more than a year away). Over the next few years I took tours with the company to Morocco, Corfu, the Canary Islands, Crete and back twice to Malta. Since then I have only rarely taken package tours.

https://edition.cnn.com/2019/09/22/busi ... index.html
User avatar
Gaybutton
Posts: 21462
Joined: Sat Jul 31, 2010 11:21 am
Location: Thailand
Has thanked: 2 times
Been thanked: 1306 times

Re: A New Dunkirk? 600,000 European Tourists may Have to be Rescued

Post by Gaybutton »

fountainhall wrote: Mon Sep 23, 2019 10:25 am Thomas Cook has gone bankrupt.
I'm surprised. I never thought, of all companies, that one would go bankrupt or even have any business problems. I just read that Thomas Cook founded his company in 1841. 178 years later, down the toilet.
fountainhall

Re: A New Dunkirk? 600,000 European Tourists may Have to be Rescued

Post by fountainhall »

The company seems to have sown the seeds of its own demise with a number of loss making acquisitions that added considerable debt to its balance sheet over the last dozen years. Add to that two consecutive very warm summers in the UK which persuaded some who might have travelled to beaches abroad just to stay home. With its own fleet of 105 aircraft, pricing was highly sensitive to short term oil price rises. With holidays being purchased many months in advance, those price rises could not be recouped. Add to that the advent of low cost carriers and the increasing number of people preferring to make internet booking of individual flights and hotels. Then I heard on the BBC this morning that the profit per employee was minuscule. The company was clearly operating on an out-of-date business model.

Another key problem seems to be that it relied much too heavily on what are termed cheap "bucket and spade" package tours with the emphasis on beach holidays. Other package tour companies have been diversifying to get a greater share of the more premium holiday market.

Airports and hotels in Europe and the Americas will now be left with huge amounts in unpaid bills. Airports are impounding all the Thomas Cook aircraft since airport fees have not been paid for a long time. Hotels arranged by the company were usually paid for the rooms 60 to 90 days after travellers had taken their holidays. Popular hotels will be particularly badly hit. Then there are the 21,000 staff who will lose their jobs, including about 12,000 in the UK.

Ironically Thomas Cook's collapse will no doubt help the other package tour companies. These will see an uptick in business resulting from the Thomas Cook bankruptcy. Another benefit will probably be international airlines desperate for more pilots in view of the worldwide shortage. A less desired advantage, though, is that prices of flights and hotels to Thomas Cook destinations started to rise very considerably only minutes after the bankruptcy was announced.
Jun

Re: A New Dunkirk? 600,000 European Tourists may Have to be Rescued

Post by Jun »

Gaybutton wrote: Mon Sep 23, 2019 11:27 am I'm surprised. I never thought, of all companies, that one would go bankrupt or even have any business problems. I just read that Thomas Cook founded his company in 1841. 178 years later, down the toilet.
I'm not surprised. Travel agencies and airlines seem to be more prone to going bust than most. One of my golden rules has been to never buy shares in airline stocks. Although the likes of Ryan Air have done well for investors & even Warren Buffet now holds airline stocks.

Thomas Cook have had expensive stores in prime high street locations to sell travel. Clearly some people have used them, but I can't understand why customers would want to use them. Who wants all that overhead lumped on top of their holiday price ? Secondly, if you go in there, the staff will try and sell you what they are incentivised to sell, whereas if booking directly over the internet, it's easy to check offers from multiple sources. The latter has to be more advantageous to the customer.
Selling holidays off the high street has to be more prone to internet disruption than most businesses.

Their forex business is subject to internet comparison & competition (for any customer with intelligence).

Running airlines is competitive and requires good execution.
fountainhall

Re: A New Dunkirk? 600,000 European Tourists may Have to be Rescued

Post by fountainhall »

Jun wrote: Mon Sep 23, 2019 4:45 pm 1. even Warren Buffet now holds airline stocks.

2. Thomas Cook have had expensive stores in prime high street locations to sell travel.
1. I wonder which airlines? Like jun I cannot imagine why anyone would want airline stocks, especially in the USA. With the reduction in capacity in recent years and the big reduction in the price of oil, many flights are mostly full. Increasing capacity will mean more aircraft and lots of extra staff. More importantly, aircraft replacement will cost a lot because the average age of fleets is quite high, apart from American Airlines at 10.8 years - United's is 16.1 and Delta's 15.8 (statistics as of June 2019). Asian Airlines generally have much younger fleets. Vietnam 6 years, Singapore, 6.9, Air China 7.4, Cathay Pacific 8.5, ANA 8.7, JAL 10.6, Asiana 11.5.

2. This also takes me back to my youth. All the high street agencies printed expensive large glossy brochures with information and photos of all their tours. In my late teens and 20s, it was great to pop in, pick up a brochure and spend hours trying to work out where I'd like to go. Often I'd go nowhere and the brochures ended up in the trash.
User avatar
Gaybutton
Posts: 21462
Joined: Sat Jul 31, 2010 11:21 am
Location: Thailand
Has thanked: 2 times
Been thanked: 1306 times

Re: A New Dunkirk? 600,000 European Tourists may Have to be Rescued

Post by Gaybutton »

I suggest reading the following article:

https://us.cnn.com/travel/article/trave ... index.html
Jun

Re: A New Dunkirk? 600,000 European Tourists may Have to be Rescued

Post by Jun »

fountainhall wrote: Mon Sep 23, 2019 7:45 pm Like jun I cannot imagine why anyone would want airline stocks, especially in the USA. With the reduction in capacity in recent years and the big reduction in the price of oil, many flights are mostly full.
As stated, I don't invest in airline stocks, but your second sentence more or less explains why some long time critics of airline investment now hold airline stocks (in the US). As I understand it, the number of airlines in the US has decreased, so competition is reduced and profitability has improved from poor to satisfactory.

Here's a list of what Berkshire Hathaway (run by Warren Buffet) own, although due to people copying them, I understand they only declare what they have to declare on quarterly 13Fs. So it might be slightly out of date & also exclude small holdings which do not have to be declared.

Several US airlines in the minority holdings. Previously, they avoided airline stocks for decades.
https://en.wikipedia.org/wiki/List_of_a ... e_Hathaway
User avatar
Captain Kirk
Posts: 707
Joined: Sun May 22, 2011 2:48 am
Location: Pattaya
Been thanked: 50 times

Re: A New Dunkirk? 600,000 European Tourists may Have to be Rescued

Post by Captain Kirk »

Can't help but wonder what kind of salary the Thomas Cook top brass has been paying itself while probably knowing they'd be going bust soon enough.
Jun

Re: A New Dunkirk? 600,000 European Tourists may Have to be Rescued

Post by Jun »

Captain Kirk wrote: Tue Sep 24, 2019 2:41 am Can't help but wonder what kind of salary the Thomas Cook top brass has been paying itself while probably knowing they'd be going bust soon enough.
No need to wonder. Download their annual report, hit ctrl-f and type in "Remuneration". All will be revealed. Such transparency is one of the wonders of regulated capitalism. Along with the highest living standards and longest life expectancy of all time.

Also, the worst businesses are automatically weeded out as they fail to compete. Other more efficient ones take over, driving productivity and living standards up. In the short term, there will be some disruption as tourists are repatriated & people are fired. In a few months time, most will have found new jobs, people will continue to book their holidays with more efficient operators.

The world will be a better place because one more obsolete company has gone & it's people have moved on to something more productive. Alternatively, we could do it like the Soviet bloc, but such methods are proven to fail.
Post Reply