Reasons Behind The Thomas Cook Bankruptcy Case | Thomas Cook Case Study

Lakshya Singh Lakshya Singh
Dec 10, 2020 7 min read
Reasons Behind The Thomas Cook Bankruptcy Case | Thomas Cook Case Study

Thomas Cook Group was a British travel company which operated as both, an airline company and a tour and travel firm. The Group was founded after the merger of Thomas Cook AG and My Travel group in 2007.

However, the brand "Thomas Cook" is 178 years old and was trusted by travellers globally. Recently, Thomas Cook Group collapsed due to a lack of funds. They have announced their bankruptcy. We tried to find out what were the reasons behind the Thomas cook bankruptcy case. Here's a Thomas cook case study or Thomas cook bankruptcy case study for you!

News About Thomas Cook Bankruptcy Case
Global Travel Industry
History of Thomas Cook Group
Reasons Behind Thomas Cook Bankruptcy Case
Why Thomas Cook India is Safe?

News About Thomas Cook Bankruptcy Case

Thomas Cook Group collapsed on Monday, 23 September 2019. This caused 22,000 losing their jobs which include 9,000 people from the UK.

More than 150,000 travelers who were on holiday, lost their trip home.

On 26 September 2019, the British Civil Aviation Authority (CAA) announced that they have scheduled over 70 flights on Thursdays (26 September) to bring back 16,000 travelers who were on their holiday to different countries. Their program would continue until 6 October. They have more than 1000 flights planned to schedule for 10 days.

The last Tweet from Thomas Cook

Global Travel Industry

The Travel Industry is one of the biggest service industries in the world. Over 1.45 Billion people travel in a year globally. It is expected that the number of travelers in 2019 will be 3% to 4% more than that of 2018. With the increase in the disposable income of people, the travel industry can expect to grow at a higher rate. Some of the few industries which are the pillars for the Travel Industry are:

  • Transportation (Flight, Trains, Car rental, etc.)
  • Accommodation (Hotels, hostels, camps, etc.)
  • Food (Restaurants, Clubs, Bars, etc.)
  • Entertainment (Shopping, Casinos, Concerts, etc)
  • Finance (Insurance, Banking, Loans, etc.)

Without all the above industries, it is not possible to imagine the travel industry in this era.

The following factors have either changed or promoted the travel industry in recent years:

Online Booking

With the help of the Internet, it has become so easy to access all the information and book everything online.

Personalized Experience

Many hotels now provide personalized services based on the choices of the customers.

Automation & Robots

The trend of making hotels automated with the help of machines and robots to serve people has changed the whole industry. Although, many people think that it would be creepy to be in such a hotel many travelers still looking for some new experience.

Influencers

There are a ton of influencers and especially vloggers who keep travelling and showing new places to people which influences people to travel more.

These were just a hand full of the reason but there are a lot of factors which promote traveling and Internet stays at the top.

History of Thomas Cook Group

Thomas Cook Case Study
Thomas Cook, Founder of Thomas Cook & Son

Thomas Cook Group is the oldest travel agency in the world which was founded in 1841. Thomas Cook founded the company by helping people travel by train. He was a part of the Temperance Movement (A movement against Alcohol) and arranged meetings for the movement and carried temperance supporters from one British City to another.

At the same time, he founded the Thomas Cook Travel Agency and worked as the middle man for the travellers. Around 1860, the company was arranging foreign trips and was the first one from the country to take people to the US & Europe. It even arranged many world tours for travellers.

When Thomas Cook was succeeded in arranging many trips, he became sure about this business and bought a shop on Fleet Street, London, and started selling travel accessories along with travel arrangements. In 1872, Thomas formed a partnership with his son and renamed the company to Thomas Cook & Son. Thomas' son, John Mason Cook provided expertise for the commercials of the company.

Thomas Cook & Son old office - Thomas Cook Case Study
Thomas Cook & Son office

Thomas retired in 1878 and John Mason and his son were now responsible for the business. By 1888, the company was able to establish its offices in various countries. By now, the company was developed in terms of its services. They were able to arrange many activities in other countries for their travellers like Opera, Mountain climbing, etc.

The company then ran by the family members only and remain the same until 1924 when it was renamed to "Thomas Cook & Son Ltd." after getting limited liability status.

The third generation of the family was even more successful as travel became more popular. However, the company was sold to Hays Warf Cartage Company in 1942. After few decades, it was then acquired by the British Government and was renamed to "Thomas Cook Group Ltd."

Between 1974 to 2001, Thomas Cook Group Ltd. was acquired by many companies until C&N Tourist AG acquired it and renamed it to "Thomas Cook Group AG". Later in 2007, Thomas Cook Group AG was merged with My Travel Group to form "Thomas Cook Group Plc".

Why Did Thomas Cook Collapsed?

Reasons Behind Thomas Cook Bankruptcy Case

Why Thomas cook failed? Some of the reasons which led to the failure Thomas Cook Group and caused Thomas cook bankruptcy case are:

Funding

The major and the most obvious reason for the collapse of Thomas Cook is that they were not able to secure the funding of Β£200 million or almost $250 million. If the company would have received the amount of funding, it could have easily survived instead of getting bankrupt but due to lack of funding led to the Thomas cook bankruptcy case.

The Debt

Thomas Cook had a debt of over $2.1 Billion. It is the reason the investors backed out of investing in the company. The bosses of Thomas Cook even met many lenders and creditors in London but failed to raise any funds. Again investors backed which led to the Thomas cook bankruptcy case.

The Model

The business model of a travel agency depends on segregating the different aspects of travelling and packing it into one travel package. However, with the easy and direct access to any service through the internet, the travel package, or going through a travel agency has become obsolete.

Airline Expenses

Thomas Cook was a service travel company that even provided flights to travellers. However, operating an airline is not an easy task. An airline company needs a lot of funds to bear its running cost. Costs like fuel, maintenance, crew, etc. need to be fulfilled.

Brexit

The company is calling it the top reason for the collapse. In May 2019, the CEO of Thomas Cook, Peter Frankhauser said: "the Brexit process has led many U.K. customers to delay their holiday plans for this summer."

And of course, one reason for its failure is the common reason for most of the business failure, resisting change. Thomas Cook was unable to adapt the changes according to the new generation and ended up collapsing.


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Why Thomas Cook India is Safe?

Even though the whole world is shocked by seeing the 178 years old company collapsed, Thomas Cook India is still doing business as always.

The reason behind it is that Thomas Cook (India) Ltd. was acquired by Fairbridge Capital Ltd. is a subsidiary of Canada-based company, Fairfax Group.

Hence, Thomas Cook India is totally safe and still operational. However, they have put this warning to let the users know that their company is independent of the brand of Thomas Cook.

Thomas cook bankruptcy case study
When you visit Thomas Cook India website, it shows this message

Even though Thomas Cook India is still operational, they have seen a sudden downfall in their share price. Their share price decreased by 5.23%.

Conclusion

Thomas Cook has been a great business since its birth. The company changed the way people travelled. In the age when it was a luxury to travel to another city, the company made it possible to easily travel to other countries. Along with its travel business, it has also been a great financial company for travellers.

However, everything has an end. So, it is an acceptable truth and not a surprise that the company ceases to operate anymore. Even though the travel industry has grown as a whole, but it has also evolved in the process. So, if any company has to survive in any industry, they need to adapt change according to the generation. I hope you learned something in this case study of Thomas Cook.


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