Thomas Cook has flown into the great 2019 abyss joining many others before it. What makes this bankruptcy uniquely different is that Thomas Cook had been around for 178 years. As far are airlines are concerned, Thomas Cook joined an ever-growing list of failures in 2019:
- Germania (Germany)
- Flybmi (UK)
- Insel Air (Curacao)
- Tajik Air (Tajikistan) – Resurrected a few months ago.
- Asian Express Airline (Tajikistan)
- WOW (Iceland) – A restart is in progress.
- Aerolineas de Antioquia (Columbia)
- Fly Jamaica Airways (Jamaica)
- Air Philip (South Korea)
- Jet Airways (India)
- Wisdom Airways (Thailand)
- Avianca Brasil (Brazil)
- Avianca Argentina (Argentina)
- Al Naser Wings (Iraq)
- Aigle Azur (France)
- XL Airways (France)
- Aria (Slovenia)
- Thomas Cook Airlines (UK)
Thomas Cook Airlines catered to the charter and leisure market with aircraft configured for the most part with economy seating. When they ceased operations, their fleet consisted of:
- 27 Airbus A320-200 with 220 economy seats
- 7 Airbus A330-200 with 49 premium economy seats and 261 economy seats
A Brief History
In 1841, cabinet maker Thomas Cook started arranging rail transportation for the Temperance movement to points in central England. Based on that success, he arranged transportation to the Great Exhibition of 1851. In growing his business Thomas Cook expanded to:
- Tours to Europe starting in 1855
- His son, John Mason Cook joins the Company full time in 1865
- Tours to the United States began in 1866
- John Mason becomes a partner in 1871 and the Company is renamed, Thomas Cook & Son
- The Company acquires limited-liability status in the UK and becomes Thomas Cook & Son Ltd
- Cook introduces the circular notes in 1874 which was the first form of travelers’ checks.
The Company continued to flourish under John Mason Cook and his sons. The grandsons sold the business in 1928 to the operator of the Orient Express. The Company was sold to a British rail consortium in 1942 and became nationalized. The sale of “all-inclusive” (package holidays) began in the 1950s. The Company became denationalized in 1974, renamed to Thomas Cook Group Ltd under the control of Midland Bank. Ownership in 1999 included the merger of the Carlson Leisure Group and purchase by C and N Touristic AG in 2001.
At the end of 2018, Thomas Cook had:
- 9.5 billion GBP in sales
- Served 19 million customers
- Had 22,000 employees worldwide
What Went Wrong
Here is where the perfect storm of problems all come together.
Balance Sheet Trouble
The first signs of trouble came in 2011 when Thomas Cook first became saddled in debt to include a large pension underfunding. The Company was faced with bankruptcy then and it was rescued with an emergency loan arranged by the Royal Bank of Scotland. The financial situation began to worsen in 2018 which saw the Company lose 1.5 billion GBP from October 2018 through March of 2019.
Seasonal Decrease in Business
The summer holiday season is huge for the leisure travel industry. When summer is over, the leisure market goes into a slack season. These operators count on a healthy summer season to carry them over to the next summer.
The Great UK Heat Wave of 2019
The UK definitely experienced a historically hot year in 2019. Many people in the UK that would fly to a warmer locale decided to stay home.
The Drop in the Value of the British Pound (GBP)
Over the past 10 years, the Pound has traded in the range of $1.50 to $1.65 (USD) to the pound. The Pound has been trading around the $1.25 (USD) level for most of this year. Recently, the Pound was trading at just $1.20 (USD).
The Brick and Mortar Store Fronts
The Cook business model was based too much on storefront travel stores and was late to embrace the world of internet sales. At their peak, Thomas Cook had over 500 storefront travel locations. The internet was only created 64% of their business. These days, people want to point and click their way to vacation in just a few minutes.
My Take on the Demise of Thomas Cook
It is a sad occasion when a long-time travel provider ceased to exist. I can remember when super-stars in the airline world like Pan American World Airways and Trans World Airways (TWA) went under. Then there was airline deregulation in the 1980s, more airline failures and the parade of airline mergers. Thomas Cook pioneered the retail travel business from the beginning, they just didn’t change with the time in the end.