Thomas Cook set to cease operating as rescue talks fail
A weekend of rescue talks has ended in failure. Thomas Cook is set to cease trading after 178 years in business.
In the early hours of Monday morning it will be confirmed that the group is heading into insolvency.
The announcement is being made in the dead of night to enable as many of the group’s aircraft to return to the UK as possible.
The moment that the insolvency process is confirmed the Civil Aviation Authority (CAA) will revoke Thomas Cook’s Air Operator’s Licence, effectively grounding the fleet.
The first wave of flights on Monday morning won’t leave - 23 alone are scheduled to depart from Manchester Airport.
The company has been in distress for some time. Thomas Cook’s debts are unsustainable and in May it reported a record loss.
The company’s chief executive, Peter Fankhauser, tried to save the business by restructuring it.
Shareholders, bondholders and the company’s banks were asked to accept heavy losses and pledge new investment in return for significant stakes in a revived tour operator and airline. Agreement was reached but it went on to unravel.
Faced with collapse, Thomas Cook asked the government to underwrite £250 million of extra borrowing. The government decided the risk was too great, it wasn’t prepared to use taxpayers’ money to support a business whose prospects it viewed as being dim.
The consequences of the company’s failure are extremely grave, so except MPs to demand an inquiry.
From aircraft engineers to cabin crew to travel agents, 9,000 of Thomas Cook’s staff in the UK are at risk of losing their jobs.
The wind down of the airline, the tour-operator business, and the dismantling of the PLC will be managed by Alix Partners who will also support the repatriation effort.
KPMG are expected to be appointed over the businesses retail assets.
Thomas Cook has 540 high street travel agents in the UK, all of them are expected to close permanently with immediate effect.
With the Thomas Cook fleet grounded, the government has already asked the CAA to make arrangements to hire aircraft from other airlines to bring 150,000 British holidaymakers home.
"Operation Matterhorn" is already underway. EasyJet, TUI, Jet 2 and Virgin have agreed to lease spare aircraft. The repatriation mission is likely to last several weeks and I’m told that the CAA expects it to cost the taxpayer around £100m.
Several hundred thousand customers will be left holding tickets for flights and bookings for holidays that they've already paid for.
In many cases, they'll be compensated, in some cases they won't.
Shareholders have more or less been wiped out already but on Monday morning the administrators are likely to apply to have Thomas Cook formally delisted from the the London Stock Exchange.
The administrator’s job will be to sell what assets it can to raise money to repay creditors.
The group is asset light, it owns only a handful of aircraft it operates and only nine of the hotels it sends tourists to.
Thomas Cook’s banks - among them RBS, Lloyds and Barclays - and its bondholders are collectively owed £1.7 billion.
It’s unthinkable they’ll get anything like that sum back.