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LONDON (Reuters) – The British government has plans in place to bring home stranded holidaymakers if Thomas Cook (TCG.L) goes out of business, an event that would likely spark chaotic scenes at resorts and airports around the world.
FILE PHOTO: The Thomas Cook logo is seen in this illustration photo January 22, 2018. REUTERS/Thomas White/Illustration/File Photo
The bosses of the world’s oldest travel company were meeting lenders and creditors in London on Sunday in a last-ditch attempt to raise the 200 million pounds ($250 million) they need to keep the company afloat.
Running hotels, resorts, airlines and cruises, Thomas Cook has 600,000 customers on holiday, meaning governments and insurance companies could be forced to step in and bring them home if the company goes into administration.
Unions and the opposition Labour party have urged the government to stump up the cash, but the foreign secretary appeared to dismiss that idea on Sunday.
“We don’t systematically step in with the taxpayers’ money when businesses are going under unless there’s a good strategic national interest,” Dominic Raab told the BBC, adding that plans were in place to prevent anyone from being stranded.
The company, founded in 1841, has been fighting for its survival after its lenders threatened to pull the plug on a rescue deal that has been months in the making.
Hurt by high levels of debt, online competition and geopolitical uncertainty, Thomas Cook needs to find another 200 million pounds on top of a 900 million pound package it had already agreed, to see it through the winter months when it needs to pay hotels for their summer services.
The company’s largest shareholder, China’s Fosun (1992.HK), was due to take a central role in the restructuring.
A person familiar with the situation told Reuters the company was spending the weekend in talks with the government and a number of potential investors about bridging the funding gap. “We have not given up,” the person said on Saturday, declining to be named due to the sensitivity of the situation.
The management team, led by Peter Fankhauser, met banks and bondholders at a London law firm on Sunday morning before a board meeting in the early evening to determine whether it can continue.
Were Thomas Cook to fail, it would spark the biggest peacetime repatriation effort in British history.
The government and the aviation regulator have drawn up a plan to step in and use other airlines to bring Britons home if needed. The person familiar with the situation put the cost of that move at around 600 million pounds.
On top of the British holidaymakers, some 460,000 customers are also abroad, with many coming from Germany or Scandinavia.
An official from Germany said under that country’s rules, it would fall to insurance companies to help get customers home.
Condor, a German airline owned by Thomas Cook, said in a statement that its parent company was doing everything it could to secure fresh funds. “Negotiations with all key stakeholders are complex and ongoing. The Condor flights are currently being operated on a regular basis.”
News of Thomas Cook’s potential demise has sparked alarm not just across the holiday resorts and poolside bars where customers are using social media to get updates, but among its suppliers and future customers who are losing faith.
That is draining the company of the liquidity it needs to keep operating and ramping up the pressure on one of Britain’s oldest and much-loved companies.
The BBC reported that a hotel in Tunisia had asked Thomas Cook customers to pay additional sums in order to leave, for fear that the company would not be able to pay.
“Hi Annie, I understand your father might be unsettled by all the news surrounding Thomas Cook and our business recently but our flight operations continue to operate as normal,” the company said in response to one worried customer.
British foreign minister Raab sought to reassure holidaymakers that they would not end up stuck overseas.
“We …. hope that it (Thomas Cook) can continue but in any event, as you would expect, we’ve got the contingency planning in place to make sure that in any worst-case scenario we can support all those who might otherwise be stranded,” he said.
At the board meeting, the company will have to decide whether in the short term it has enough cash to pay its debts, and whether it has a reasonable prospect of paying its liabilities in six to 12 months’ time, which is predicated on it securing a deal.
At the earlier meeting the lenders will have to decide whether they want to continue supporting a company that has 19 million customers a year, spread across 16 countries.
While it once pioneered package holidays and mass tourism, in recent years it has struggled to pay the interest on its 1.7 billion pound debt, while navigating events such as a coup in Turkey, a heatwave in Europe and the aggressive summer pricing of low-cost airlines like Ryanair.
Reporting by Kate Holton; Additional reporting by William James and Thomas Escritt; Editing by Dale Hudson
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