British travel giant Thomas Cook declares bankruptcy
Thomas Cook, the world’s oldest travel agency with hundreds of businesses under its umbrella of operations including flights, hotels, and cruises has officially ceased trading and deemed financially insolvent.
Apparently, the tour giant has been witnessing a stagnating interest for its destinations in Europe due to economic uncertainty and Brexit woes. Coupled with online competitors as well as easier access to flights and hotels by individuals who could now plan their vacation themselves, the profit margins had to be trimmed excessively in order to be competitive. The latest records show the group had accrued a considerable debt of more than $2 billion dollars which ultimately proved overwhelming.
Vacationers stranded abroad
With the company terminating all operations, all bookings have been cancelled and the planes of its airlines have been deserted. As if the thousands of employees finding themselves today without employment wasn’t bad enough, there’s also the issue of the approximately 600.000 Thomas Cook customers who are currently on holiday and have no way to get back home.
Some travelers have also been held hostage at their hotels since the payment for their accommodation was to be settled by the company which has now gone bust. Government and regulators are now on the move to handle the repatriation of more than 150.000 stranded Britons while those who have booked their future holidays with the group are growing increasingly nervous while waiting for an update regarding their reimbursement.
The company’s insolvency, however, is going to have devastating effects for the UK economy as well as for other hotels and resorts around the world. The travel firm had partners and suppliers in 16 countries serving more than 19 million customers annually.
With Thomas Cook going under, popular destinations in Greece, Spain and Turkey will probably see a dramatic decrease in the inflow of British tourists and their economies will likely feel the brunt as well.
Some politicians have called for the provision of financial aid to save the historic firm and secure the jobs of its thousands of employees in the same fashion the taxpayer’s money was used to bail out the banks during the 2008 financial crisis – an initial bailout of more than £500 billion.
Reportedly, the company also requested a £150 million rescue package from the government which was promptly rejected. Commenting on the group’s request, PM Boris Johnson said that bailing out Thomas Cook would create a dangerous precedent where, in future, other companies might expect the same treatment.
In fact, other prominent British airlines such as Ryanair and Easyjet have also reported deteriorating demand due to Brexit uncertainty and the future doesn’t seem quite promising.
A cheaper pound
Since the Brexit referendum in 2016, the pound sterling has been gradually losing its footing against the euro with more than 11% drop – currently trading at €1.130. The weakened currency is of course very appealing to holidaymakers who will find that booking a vacation in one of UK’s top destinations is now much cheaper overall.
Therefore, while Britons are foregoing their vacations, tourists eyeing the UK will be more than glad to take advantage of the sinking pound and the cheaper shopping, eating and transportation costs that come with it.