Thomas Cook collapse was ‘a failure of corporate finance, not travel’

The collapse of Thomas Cook was “more a failure of corporate finance than a failure of travel”, according to the chief executive of Abta. 

Speaking at the travel association’s annual convention in Tokyo, Mark Tanzer said: “Thomas Cook paid £1.2bn in finance charges over the past six years, plus goodness knows how much in advisory fees to the City.

“Those were profits from its holiday business, money that in a more balanced financial model would have been available to invest and develop the business.

“It has ended up killing the milk cow they [the lenders] were feeding off.”

When Thomas Cook went out of business on 23 September, it was about £1.7bn in debt to its banks with a further £1.3bn owed to suppliers.

“When you’ve got that much debt it really weakens the immune system. When you have some difficulties, such as your key market going down in Sharm el Sheikh, it leaves you in a very weak position.”

Almost 1 million British holidaymakers were either abroad or holding future bookings with Thomas Cook.

The transport secretary, Grant Shapps, told parliament: “All parties considered options to avoid the company’s being put into administration.

“Ultimately, however, Thomas Cook and its directors themselves took the decision to place the company into insolvency.”

The Department for Transport (DfT) launched an airlift to bring 140,000 Thomas Cook customers home, known as Operation Matterhorn. 

Of the £100m cost, £60m will come from the Atol fund.

Refunds of a further 800,000 forward bookings are now being processed by the Civil Aviation Authority (CAA). Handling holiday money could cost a further £400m – some covered by the Atol fund, the remainder by insurance taken out by the CAA.

There are concerns that the present Atol fee of £2.50 per passenger could increase, But Mr Tanzer said: “We’ll be very disappointed if they increase the Atol levy.

“The pain of the Thomas Cook failure is being felt very widely in our industry, by tour operators, travel agents, hotels and other suppliers.”

Around 9,000 Thomas Cook staff lost their jobs in the collapse: at the headquarters in Peterborough, the airline’s base in Manchester and at more than 500 high street travel agencies.

But Abta’s chairman, Alistair Rowland, said: “There are at least three bids for most of the shops.” Many staff are likely to be employed by the successful bidders.

Other travel firms, including his own organisation, Midcounties Co-op, are competing to take over Thomas Cook travel agencies.

Mr Tanzer also spoke of the “uncertainty and disruption” in the travel industry that would follow a no-deal Brexit.

The Abta chief executive said: “It is also very damaging to consumer confidence.

“In the run up to the March deadline, we saw an industry slowdown, and the same pattern is repeating itself as we approach another cliff edge.”

Another speaker at the Tokyo convention, the writer Marcel Theroux compared Brexit to Japan’s “closed country” policy that lasted from the 17th to 19th century.

He poured scorn on the process of a country “willingly cutting itself off from the world and going into commercial isolation”.

Last week Boris Johnson told parliament: “Let us seize this moment to honour our over-riding promise to the British people, respect Brexit and get Brexit done.”