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Thomas Cook Travel Company Collapses, Stranding Thousands

LONDON — Hundreds of thousands of vacationers were left stranded when one of the world’s oldest tour companies, Thomas Cook, abruptly announced Monday, with some of its flights still in the air, that it was going out of business.

Amid scenes of confusion at European airports, British officials scrambled to bring home 150,000 travelers, chartering dozens of jets to bring people home from as far away as Malaysia. It was described as the largest peacetime repatriation effort in the country’s history.

The tour company, said that all its bookings, including flights operated directly by the agency, had been canceled. “We are sorry to announce that Thomas Cook has ceased trading with immediate effect,” it said.

With that, travel plans for hundreds of thousands were snarled, and tourism officials in vacation hot spots braced for a potentially devastating hit to their economies.

Thomas Cook was no ordinary travel company. Founded in 1841, it changed the face of British travel. Its ubiquitous storefronts specialized in low-cost package holidays that put beach vacations in exotic locales within the budgets of middle-income Britons.

So its demise felt a bit like the end of an era — and it seemed in keeping with the larger mood in Britain as the country moves closer to a withdrawal from the European Union.

Indeed, though the company’s brick-and-mortar business model was overtaken by time, some also saw in its travails early signs of Brexit damage to come. They said a weakened pound and uncertainty among would-be travelers had played a role in the collapse.

[“Don’t just book it, Thomas Cook it.” Read about how it all went wrong for a travel giant.]

Many of the travelers affected on Monday were already abroad, and wondering how they would get home. Others found their vacation plans dashed.

Among them were Layton Roche and Natalie Wells, who booked flights more than a year ago from Manchester, England, to Kos, a Greek island, for their wedding this Friday.

“I have been awake for 28 hours now,” Mr. Roche, a 30-year-old civil engineer, said in a message on Monday, as he and Ms. Wells, 31, were on their way to Birmingham to seek an alternative flight.

The Britons stranded on holidays were among as many as 600,000 vacationers left high and dry worldwide. Britain’s Civil Aviation Authority said in a statement that it had arranged 60 flights to get people home on Monday, and that the effort would extend until Oct. 6. It was unclear whether citizens of other countries could expect similar help.

“We will try our level best to get them home,” said Prime Minister Boris Johnson. “There will be plans ready to deal with that if it is necessary.”

If Thomas Cook’s customers were surprised, British officials had less reason to be. The government had refused to mount a financial rescue of the battered company; doing so, Mr. Johnson said, would create a “moral hazard” by encouraging other troubled companies to take undue risks.

It was unclear, however, what steps, if any, the government took to prepare for the possibility of hordes of stranded travelers.

Tremors from the collapse radiated across the world, to Malaysia and San Francisco, but were felt most acutely in Europe. In Greece, where 50,000 vacationers were expected to be repatriated to their home countries in the coming days, and in Spain, there were fears about the effects on their critical tourist industries.

In Crete, alone, the tour company brought 400,000 visitors this year. Michalis Vlatakis, the head of the Greek island’s union of tour operators, described its collapse as a “7-magnitude earthquake.”

Things were at least as dire in Spain, particularly in the Canary Islands and the Balearic archipelago. Together, they accounted for about 3.2 million of the 3.6 million passengers flying each year to Spain on planes owned or chartered by Thomas Cook, according to the Spanish National Airport Authority.

Beyond the chaos and disappointment for travelers, the company’s collapse put 21,000 jobs at risk.

The 178-year-old travel company had been in poor financial health for some time. It announced its closing after negotiations to obtain £200 million pounds, or $ 250 million, in emergency financing fell apart over the weekend.

Analysts said Thomas Cook, struggling with a debt pile approaching 2 billion pounds — nearly $ 2.5 billion — had failed to adjust to the changing times. While other travel companies went totally online, for instance, Thomas Cook held onto its extensive chain of storefronts.

“What everybody is not lending their thoughts to is that this has been a thoroughly badly run company,” David Buik, a financial analyst, said in an interview with LBC radio on Monday. “It has had far too many shops. The emphasis of the business has gone online.”

But the company also suffered from a number of factors beyond its control, particularly Brexit, the planned British withdrawal from the European Union, which has cut the value of the pound. That has discouraged travel and squeezed profits.

“If the majority of your business is in destinations which are in euros and you are against the backdrop where there is a lot of capacity and you cannot raise prices, then there is a cost squeeze,” Chris Tarry, an independent airline analyst, told the BBC.

Peter Fankhauser, the chief executive of Thomas Cook, said, “There is now little doubt that the Brexit process has led many U.K. customers to delay their holiday plans for this summer.

Mr. Fankhauser also cited a prolonged heat wave in the summer of 2018 that brought high prices in the Canary Islands, a popular destination for the tour operator.

Terrorism and political unrest in North Africa, Turkey and Egypt have also hit the operator particularly hard in recent years, analysts said.

Although as many as 600,000 Thomas Cook customers were traveling when it announced that it was closing its doors, it was unclear how many were actually stranded. Some of the company’s local partners said they were still operating.

Condor, a German subsidiary airline of Thomas Cook, for example, was requesting a bridge loan from the German government and insisted that it would continue to serve the 240,000 of its customers — not all of them vacationers — currently out of the country.

Because Thomas Cook customers are covered under a government insurance program, they are assured of refunds for canceled trips and repatriation free of charge. Those who bought only flights from Thomas Cook do not have the same protections and may need to rely more on personal travel insurance, if they have it.

The government insurance program also reimburses hotels for the cost of the customers’ stay, even if cut short. Some resorts, however, appear not to have gotten the message.

On Saturday, some British tourists described being stopped from checking out of their hotel in Tunisia over concerns the hotel might not be paid. They said they were essentially locked in until the matter was sorted out. Others were threatened with being kicked out, according to news reports.

While the government may be covering the cost of canceled vacations, it is not helping out with the cost of making alternative arrangements.

Mr. Roche and Ms. Wells, the couple planning to marry, had to pay an extra 4,000 pounds, or about $ 5,000, for alternative flights for themselves and some family members. And they were expecting to spend another £2,000, or $ 2,500, for their accommodations.

“I’m absolutely gutted,” Mr. Roche said.

Most of the couple’s guests, he said, could no longer attend the wedding because of the extra costs.

The failure of Thomas Cook touched off a debate in Britain over whether the government should have intervened to prevent the collapse.

Speaking to the British television network ITV, Grant Shapps, the transport secretary, said that beyond the fact that “governments don’t usually go around investing in travel companies,” a bailout of Thomas Cook would most likely have only put off the inevitable by “stretching things out for a couple of weeks.”

“The company were asking for up to £250 million,” he said on “Good Morning Britain,” a news program. “They needed about £900 million on top of that, and they’ve got debts of £1.7 billion, so the idea of just spending taxpayers’ money on that just wasn’t really a goer.”

Mr. Buik, the financial analyst, agreed that the government was right not to step in, saying that the company had been “hanging on rags.”

Thomas Cook’s problems may prove a boon to other tour operators, particularly rival TUI, whose shares surged more than 8 percent in Monday trading.

Andrea Leadsom, the business secretary, said in a statement that the government intended to convene a task force to support the thousands of Thomas Cook employees who will lose their jobs.

“This will be a hugely worrying time for employees of Thomas Cook, as well as their customers,” Ms. Leadsom said. “Government will do all it can to support them.”

Source: NYT > World News

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