The Fall of Thomas Cook

In May 2019, analysts shared concerns of the impending downfall of Thomas Cook,the 178-year old European precursor to all travel companies in the world. Citigroup concluded that Thomas Cook’s shares implied  “zero equity value”, due to the company’s massive amounts of debt in excess of $1 billion. Essentially, Thomas Cook’s liabilities exceeded its equity by such a huge margin that the value of a company available to its shareholders and owners is 0. Four months later, Thomas Cook announced its liquidation after its $1.1 billion rescue plan fell through (led by Fosun Tourism Group) as it was unable to find backers for an additional £200 million credit line requested by its largest banks. UK Prime Minister Boris Johnson defended the decision to refuse a requested bailout of £150 million. ”That’s a lot of taxpayers’ money,” he told reporters. ”It sets a moral hazard”, and the business was shut overnight. 

As the trades closed on Friday, the share values had fallen by 89% from €30.76 to 3.45 in 2019. It is the worst-performing stock in the FTSE All-Share in the year to date. The company’s euro bonds lost more than two-thirds of their value on Monday to trade, upon which creditors will try to recoup during liquidation.Thousands of travellers were left stranded overseas, and the British government footed the bill to get them home. 

As a Malaysian, the news of Thomas Cook’s liquidation was insignificant to me. Why would I care about a travel conglomerate’s downfall that happened 8 time zones away? I barely knew about the company, much less how its past operations led to its downfall. However, a quick Google search of the company has the idea lodged firmly in my mind for days on end. Even though I’m on the wrong side of the globe to be impacted by this incident, Thomas Cook was not as far away as I initially thought. In fact, I was sure that I have come across the infamous golden heart somewhere in my travels before.

Now, do accompany me in my journey to understand what exactly happened to Thomas Cook, one of the biggest tour operators in the West. 

A Brief History 

The travel conglomerate’s humble origin story started 178 years ago. Thomas Cook, the founder of the company, had made logistic arrangements for 500 people from Leicester to Loughborough to promote the temperance movement. For only 1 shilling, the people could enjoy a round trip train travel, band entertainment, food and beverages. Unbeknownst to him, this would revolutionize the travel industry for decades to come. Even to this day, we are still familiar with similar travel packages that provide transportation, lodging and food. 

From then onwards, Thomas Cook has built a travel empire on his stellar management skills. From tours around the United Kingdom to Egypt, the eponymous company has enabled many of the working class to participate in travelling, which was once a pastime exclusive to the upper classes of society. Without Thomas Cook’s monumental contribution to this industry over a century ago, travelling might remain unattainable by many of us today.  

Thomas Cook & Son ceased its operations as a family business in 1928, when Frank and Ernest Cook sold the entity to the Compagnie Internationale des Wagons-Lits et des Grands Express Européens, the historical operator of the Orient Express. From then on, Thomas Cook has changed multiple hands from American Express to Condor & Neckermann, and was once state-owned under the British Transport Holding Company before becoming privatised once again. In 2015, it formed a cross-continental partnership with Fosun International Limited, China. 

After reading up on the company, I became more intrigued by the backstory of the company. What was the true reason behind the dramatic downfall of the once multi-million dollar company in 2019? Were there any signs signalling the danger? What had contributed to the giants’ liquidation? 

The Downfall

Many would argue that Thomas Cook’s decline started in 2007, when the company merged with MyTravel. The merger between the previously German-owned Thomas Cook and MyTravel had stirred many criticisms back in the day. Even though the merger had consolidated the high-street travel brands into a much more manageable group of three, in hindsight the merger was proven to be a strategic mistake. When Thomas Cook should have started digitizing its business, the company had instead increased its brick-and-mortar footprint to over 1,200. Not only did this saddle the company with more shops than they needed, which it then had to incur extra costs close down in future years, it had also made the company more resistant to online innovations in the future. 

MyTravel has consistently found themselves at a loss since 2001, and this merger has effectively bloated the cost centres of Thomas Cook, further plunging the company into debt. By the end of the financial year, Thomas Cook was carrying more liabilities than assets on its back – of which a considerable amount of assets contained goodwill. In the end, the merger had cost the company £1.1 billion in impairment to goodwill, a figure too heavy for the company to handle amidst the climbing pressure from other competitors. Thomas Cook’s management had gone on to acquire many other niche brands throughout the year, further sabotaging its economics with unsustainable acquisitions. In the space of a year, the company went from a positive position of £394 million to a net debt of £293 million in 2008. 

Thomas Cook’s financial decline continued to 2011, where the company first stepped onto the brink of liquidation. Thomas Cook’s shares plummeted from 200p to merely 10pin 2010, and the company’s debt had totalled to over £1 billion. The company’s value had also suffered a whopping 75% fall during that time. Thomas Cook’s struggles were attributed to the towering threats to the tourism industry, mainly from low-cost providers that offer highly competitive prices and tech-savvy travellers that would rather plan their own trips. Thomas Cook’s travel insurance business was also negatively affected by heightened online competition. The company was also operating in an economic downturn during that time, where consumers radically reduced their leisure spending in compensation of rising pressure in essential spendings. 

To get through the rut in 2011, Thomas Cook had reduced both its offered holiday plans and fleet, and also made many of its senior executives redundant. In the end, the company had managed to survive the crisis after cost-cutting measures were applied and an additional emergency loan was obtained from its banks. Interestingly, the Royal Bank of Scotland, the bank who had led the rescue efforts for Thomas Cook in 2011, was the one who had pulled the last straw for the company this time around when it requested for an additional £200 million. Furthermore, a digital advisory board was formed in 2013 as the firm’s attempt to prepare Thomas Cook against the rapidly changing landscape of the travel industry. However, its failure had become one of the major tellings of Thomas Cook’s upcoming downfall in 2019. 

Evidently, Thomas Cook was not the only one that was facing problems in the travel industry. XL Leisure collapsed in 2008. Many other players including Aigle Azur, XL Airways, Norwegian, Superbreak, LateRooms and Monarch Airlines have all liquidated leading up to 2019. It is now evident that the travel industry is heavily disrupted by technology, and the wave of change cannot be withstood by major corporations either.  

The Analysis

Many might ask, why did Thomas Cook face problems with the recession in 2011 when it  survived the 1970s economic downturn? In fact, the company had thrived amidst the fall of many of its competitors. Thomas Cook had catapulted its reputation to the top of the industry with its Money-Back Guarantee scheme. This can be attributed to many bad decisions and external factors, of which we will analyse using the PESTEL analysis below. 

Political Factors

The travel industry is heavily dependent on the environment of its destination. Thomas Cook’s decline in sales can be partially attributed to the political unrest experienced in its popular destination countries, such as Thailand, Turkey and Egypt. In 2013, Thailand’s political divide between the military elites and politicians had worsened. A coup d’état was attempted in Turkey back in 2016, and the nation is still in political turmoil especially near the Syrian border until today. Egypt’s political unrest was particularly prominent in big cities such as Cairo and Alexandria. These political crises have caused subsequent human rights violations allegations, which had ultimately discouraged Thomas Cook’s potential customers to travel to these regions.  

Economical Factors

The main economic problem with Thomas Cook was its unsustainable debt levels. On top of that, the management’s strategic direction to develop its physical presence had also caused them to make several fatal errors that had further worsened the company’s cost base. Even though the company was tight with its trading, it had resumed paying dividends to its shareholders in 2017 after a stop in 2011. This was certainly a peculiar decision to make when the financials were tight. Aside from its shareholders’ overwhelming votes for it, the company also made the decision as a way to reflect the organisation’s confidence in their strategies. Furthermore, Thomas Cook’s airline operates as a scheduled airline instead of a fully chartered airline, causing internal competition as customers could book to fly on a Thomas Cook flight without actually subscribing to the company’s tour services. Aside from the company’s financial situation, the UK, in general, was also under the influence of macroeconomy. The British Pound was facing escalating pressure in recent years due to Brexit, causing the currency to weaken in terms of the exchange rate. Goods became more expensive to the masses, causing consumers to cut down on leisure spending in an attempt to stay afloat.   

Social Factors

The social circumstances surrounding the travel industry has drastically changed as well. Experienced travellers now look for immersive travel experiences, causing higher adoption of the integrated tourism concept. Enclave tourism, which is seen as the traditional approach to tourism where travellers enjoy an ‘all-inclusive’ travel experience, are slowly fading out of the mainstream. To adapt to this social change, many travel agents have transformed themselves to become travel advisors who specialize in a knowledge niche to provide to a certain demographic. On top of that, the travel trends highlight a book-it-yourself culture, and  many travellers were becoming more comfortable with booking their own itinerary, accommodation and flights through online platforms. This had suppressed demand for Thomas Cook, who reaps profit through travel package arrangements. The rise of the sharing economy such as Airbnb and Uber also meant that Thomas Cook’s assets were quickly becoming redundant. Instead of staying in hotels, travellers might have preferred staying in Airbnbs for a more localized experience. The company had thus retained too many assets that could not provide much profit to cover its operational costs. To young travellers, the cookie-cutter approach to travel no longer sufficed, and Thomas Cook’s products no longer appealed to them.   

Technological Factors

Technological development in the past century had also contributed to Thomas Cook’s downfall. In this age where the internet is highly accessible, people can now book their trips easily online through online travel agencies like Expedia, search engines like, Google Flights, and Skyscanner. The rising number of online travel services also meant that Thomas Cook was no longer competing with domestic travel agencies only but also international competitors. Thomas Cook had seen technology as a threat that had reduced sales from its retail stores. What the company could have done was develop innovative solutions to integrate with its retail stores. Not having cutting edge IT systems and sticking with legacy IT that had no customer relationship management software had accelerated the company’s collapse.

Environmental Factors

Notably, global warming had also contributed to the drop in Thomas Cook’s business. Thomas Cook’s peak season mirrored that of most tourism companies, reaching a high during summer and relatively quiet at any other time. It was found that even a rise of 2 °C would greatly affect tourism demand, as warmer areas might become too uncomfortable for many.  Thus, when a heatwave washes across the West, many UK travellers would rather stay at home instead of travelling in 40 degree heat. The increasing awareness of carbon footprint had also made young travellers wary of unnecessary air travel, causing Thomas Cook’s airline to be undermined in favour of local, more sustainable ways of tourism. 

Legal Factors 

Thomas Cook’s situation was further complicated by Brexit. Following Lowcostholidays, Monarch Airlines, and Flybmi who attributed their collapse to Brexit uncertainties, Thomas Cook also blamed their declines on the same reason. In 2018, the UK’s overseas tourist arrivals have dropped by 5.3%. VisitBritain have also found a 7% decrease in interest to visit the UK since the occurrence of the Brexit referendum. The company’s target customers seemed to be wary of the potential instability curtailing the nation’s exit from the EU, and thus caused them to delay many of their summer holiday plans. The potential legal problems with customs checks had also increased uncertainty around tourism, which had led to many travellers refraining themselves from travelling into the EU, which was regarded as one of the most popular regions for Thomas Cook customers. 

The Fatal Crash

In 2019, Thomas Cook was valued at approximately £738 million. However, the firm’s towering debt was almost equal to its value. It had issued three profit warnings within a financial year while reporting a whopping £1.5 billion loss in half a year. After the series of profit warnings, the company’s share price had plummeted from 140p to 18p just in 2018. At that point, Thomas Cook’s shares were worth similar to those traded during its 2012 financial crisis. EY has also concluded that Thomas Cook’s airline sale was plagued with “material uncertainties”.

In an effort to mitigate its loss, Thomas Cook had adopted many methods to increase its cost-efficiency. It attempted to sell its 105 jets to the highest bidders. On top of that, the company had also closed many of its stores to cut down operational costs. Thomas Cook had attempted to appeal to the UK government by requesting for a loan on the basis that its collapse would be more economically costly than if the government were to intervene to ensure the continued existence of the company. It is estimated to cost the government £600m to facilitate the largest repatriation effort since World War II if the company were to liquidate. However, many were worried that the government cash injection would merely delay the company’s collapse instead of reversing it.  

In the end, all of its efforts proved to be in vain. Thomas Cook, Britain’s oldest travel company, went out of business in the early hours of Sept. 23 following the breakdown of emergency talks between its banks, bondholders and its biggest shareholder, Chinese conglomerate Fosun International Ltd. The 178-years old company had entered into compulsory liquidation. 

The Industry Crisis? 

Initially, I had assumed that the package holiday industry was on its brink of collapse. After all, if a well-established brand like Thomas Cook had to cease its trading, surely smaller companies will be struggling to stay afloat, no? To my surprise, that was not the case. The industry as a whole was projected to grow instead of independently booked holidays. Instead of negatively impacting the industry, Brexit had instead given consumers the incentive to book their holidays via package holiday companies to take advantage of their financial protection policies and the Air Travel Organiser’s Licence (ATOL) protection scheme. While Thomas Cook was experiencing a decline in business, its close competitors, TUI and Jet2holidays, had both experienced increases in their business of 22.3% and 216.7% respectively. It could be explained that TUI’s growth was a result of the company’s shift in business focus. After TUI AG and TUI Travel merged in 2014, the newly merged company sold off a significant amount of non-core businesses in favour of cash inflow. Then, the money was channelled to develop more differentiated content such as new resorts and ships so that TUI could maintain its positioning within the market. TUI also had a smaller retail footprint than Thomas Cook.


To conclude from the observation, the package holiday industry has yet to become obsolete. Instead, it was Thomas Cook’s poor adaptability and innovation to surf the changes in market trends that was the cause behind its downfall. After Thomas Cook’s liquidation, the company’s market competitors will now scramble to grab its market share. However, the package holiday industry must innovate to truly achieve sustainability. To capture the market share from independent travellers, companies must increase their flexibility to adapt to the individual preferences of its customers. Established companies must ensure that they can stay at the forefront of innovation so they would not be eliminated by the up-and-coming startups in the industry. Thomas Cook’s downfall was an event that saddened many British people, but it had also served as a wake-up call to many businesses in different industries: the turbulent sea of change is coming, and no one, not even high-street brands, can afford to be complacent.

Researcher: Teh Jia Qi

Edited by: Tay Hui Zhen

Reviewed by: Vikky Beh

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