[Travel] Thomas Cook

[brianwade]

No, the Government were unable to bail them out (unlike the banks) due to EU Government assistance laws.

Raab is preparing his statement ......

that is simply not true - why were they able to bail out the banks then ? are these new laws . The Spanish government wanted to put money in though and Westminster refused . Didnt need to throw this business away - utter ideological madness . It'll cost more to pay these staff while they look for new work / and the repatriation than any bailout would have done , w**kers

 

[Cheshire Cat]

Even if the government had agreed to pay for Cooks massive current debts and mismanagement, TC would probably have been back for more cash later once it had burned through this bailout. It wasn't sustainable any more.

Banks are essential to the economy (however much you may loathe them). Travel agents are not.

 

[Weststander]

that is simply not true - why were they able to bail out the banks then ? are these new laws . The Spanish government wanted to put money in though and Westminster refused . Didnt need to throw this business away - utter ideological madness . It'll cost more to pay these staff while they look for new work / and the repatriation than any bailout would have done , w**kers

Repatriation and settling overseas hotel debts will cost a grand total of £100m. Which equates to 7 weeks of regular TC winter season losses. The level of TC trading losses are mind blowing.

TC was losing £100m's per year and debt stood at £1.6b.

The BBC's analyst stated:

"Fast forward six years and Thomas Cook is back where it was. All the rescue money is gone and the debt pile is back to £1.6bn. Again it has been thumped by poor trading and a series of one-offs, notably weak sterling and a summer heatwave that led to a downturn in demand.

But there is evidence of deeper problems, as well as a lack of management control. The company stopped paying dividends to shareholders in 2011 as the previous crisis hit, but resumed them in 2017 and again last year - an odd thing to do if trading, and solvency, was tight.

The company's results were marked by exceptional, one-off items, always a red flag for analysts, while the negotiations over the restructuring plan have been chaotic".

 

[Beach Hut]

that is simply not true - why were they able to bail out the banks then ? are these new laws . The Spanish government wanted to put money in though and Westminster refused . Didnt need to throw this business away - utter ideological madness . It'll cost more to pay these staff while they look for new work / and the repatriation than any bailout would have done , w**kers

Lack of a viable banking system would lead to economic catastrophe, lack of cash circulating, mortgage default, unable to get cash, inflation hikes and probable civil riot.

One travel agent going bust does not have the same effect.

 

[nicko31]

I’ve just read on the bbc that Thomas Cook have laid some of the blame on Brexit, saying people have delayed booking their holidays because of it. Really Does anybody know anyone who hasn’t gone on holiday over the last few years because of Brexit ??

The consumer has been cushioned from the reality of a lower exchange rate for some time, the company the travel companies having been taking the hit, just like high street retailers. This is of course pouring oil on already troubled waters.

Sooner or later it all unwinds...

 

[Beach Hut]

The consumer has been cushioned from the reality of a lower exchange rate for some time, the company the travel companies having been taking the hit, just like high street retailers. This is of course pouring oil on already troubled waters.

Sooner or later it all unwinds...

And just wait till Chinese unsecured debt unravels......

 

[Dave the OAP]

Which also beggars the question, if they are so worried about their son starving to death, why isn’t he in school rather than on holiday? Unless it is baby then that would be problematic, but my Mrs who works ina school remarked last night how many kids were shown in the airports!

But even if it was a baby...why would it want a hamburger or KFC?

Having been there a few weeks ago, I can confirm there is a Burger King, a McDonalds AND an Upper Crust.



You can also get Pizzas and Bratwurst.

My major problem with Palma Airport is you can't get anything Spanish to eat.

 

[Hastings gull]

Sad day but the company has struggled for quite a while and never really moved with the times in my view.

Still have rather a lot of holiday shops, although less than previous but I really do not know anyone who goes into a shop and books a holiday these days when you can do it all from a PC very efficiently.

Yes, that is what I heard on the radio. The many shops have to be paid for, and as you say, I suspect that the majority of folk now book online, or at least don't go into their shops.

 

[Cheshire Cat]

Yes, that is what I heard on the radio. The many shops have to be paid for, and as you say, I suspect that the majority of folk now book online, or at least don't go into their shops.

Although not everyone likes or does shopping online

 

[Dave the OAP]

Although not everyone likes or does shopping online

i can’t remember the last time we booked in a travel agent. Probably one of the first cruises we did about 15 years ago!

 

[schmunk]

i can’t remember the last time we booked in a travel agent. Probably one of the first cruises we did about 15 years ago!

The last time I went into a travel agent shop (and I booked a holiday there) was in the year 2000.

 

[dolphins]

Yes, that is what I heard on the radio. The many shops have to be paid for, and as you say, I suspect that the majority of folk now book online, or at least don't go into their shops.

Whilst it is true that some people do prefer to book in a shop, including maybe the elderly or less tech savvy/enabled, I saw something in The Times this morning which gave an indication of where some of TCs monetary issues were... They operated 556 stores across Britain, which included no less than 11 stores in each of Manchester and Glasgow, Nottingham had 9, and Leeds 7. Birmingham and London both had 6 each. In a time when many people browse the travel company websites, and often book through them, it doesn't seem to make any sense to me to have so many stores in each city, all offering the same thing.

 

[schmunk]

Whilst it is true that some people do prefer to book in a shop, including maybe the elderly or less tech savvy/enabled, I saw something in The Times this morning which gave an indication of where some of TCs monetary issues were... They operated 556 stores across Britain, which included no less than 11 stores in each of Manchester and Glasgow, Nottingham had 9, and Leeds 7. Birmingham and London both had 6 each. In a time when many people browse the travel company websites, and often book through them, it doesn't seem to make any sense to me to have so many stores in each city, all offering the same thing.

Indeed, given the elderly are apparently prepared to take a 3 hour return bus journey from Haywards Heath to Hangleton for cheap meat.

 

[Lower West Stander]

It's been mentioned loads, e.g. on 5live just then. It was in the main shareholders insuring/hedging against the collapse of their share values.

It did not bring the company down.

The banks (who had absolutely no interest in the fate of shareholders, after all the proposed new debt would've severely diluted share prices), were not prepared to lend ever larger sums to a business generating incredible losses year after year. Why should they?

I totally agree with your point on banks not throwing good money after bad - its pointless on a busted flush with a flawed business model. It would've gone at some point anyway.

But CDS in this case was not used to insure or hedge. It was taken as an outright position with a view to moving the value of the swap contract. The equity was needed to move the CDS price and this is what brought things to a head. The hedgies knew if they brought the company down they could crystallise their short.

 

[Weststander]

I totally agree with your point on banks not throwing good money after bad - its pointless on a busted flush with a flawed business model. It would've gone at some point anyway.

But CDS in this case was not used to insure or hedge. It was taken as an outright position with a view to moving the value of the swap contract. The equity was needed to move the CDS price and this is what brought things to a head. The hedgies knew if they brought the company down they could crystallise their short.

I understand your middle point. Well explained.

But it is a subjective point to extend that to hedging brought TC down.

In my opinion the banks, Chinese parent and to a lesser extent the government when asked to helped, looked purely at the business case and real cashflows. TC was in a never ending spiral of losses, leaching cash at astonishing rates, year after year.

 

[Lower West Stander]

I understand your middle point. Well explained.

But it is a subjective point to extend that to hedging brought TC down.

In my opinion the banks, Chinese parent and to a lesser extent the government when asked to helped, looked purely at the business case and real cashflows. TC was in a never ending spiral of losses, leaching cash at astonishing rates, year after year.

All true, and arguably TC should’ve gone bust a lot earlier. Bonds have been pricing in a low recovery for a long time which implies equity is worthless.

I suppose my real point is that the hedge funds involved had a vested interest in bringing the company down. They effectively forced the company into liquidation to enhance their own profitability. Any save would’ve involved a complete recapitalisation of the business which was arguably feasible (sales were still decent, but cash flow was rubbish due to weak liquidity, rubbish margins, high fixed costs and excessive debt). A rump, debt free business would’ve had small chance of making it, but the fact that TC went from going concern to liquidation overnight is more reflection of the real interests of those driving the process.


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[Weststander]

All true, and arguably TC should’ve gone bust a lot earlier. Bonds have been pricing in a low recovery for a long time which implies equity is worthless.

I suppose my real point is that the hedge funds involved had a vested interest in bringing the company down. They effectively forced the company into liquidation to enhance their own profitability. Any save would’ve involved a complete recapitalisation of the business which was arguably feasible (sales were still decent, but cash flow was rubbish due to weak liquidity, rubbish margins, high fixed costs and excessive debt). A rump, debt free business would’ve had small chance of making it, but the fact that TC went from going concern to liquidation overnight is more reflection of the real interests of those driving the process.

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I did truly understand your point the first time. In the end, the people/entities hedging gained from the collapse.

But imho, and we may have to agree to disagree, the business was failing and had been for many years. Only existing until now because of a huge private sector rescue in 2011 which dealt with £5.5b of debt. An incredible sum.

The non-tabloids all cover this brilliantly today. The true causes of this financial basket case - the rise of nimble competitors without shops and huge overheads, airbnb, 47% of us now travel independently, and the TC business model generates narrow gross margins, TC couldn’t make its mind up whether it wanted to be a techie platform or to stick with its core audience. Making TC especially vulnerable to the 2018 heatwave, Brexit and any other ad hoc hits on consumer confidence.

I think the hedging is a side issue, of a far smaller scale, which is worth discussing morally. But it didn’t hasten the banks saying enough is enough.

 

[CheeseRolls]

German subsidiary of Thomas Cook , Condor Airlines to be rescued by the German government, saving 4900 jobs, according to Faisal Ahmed at the BBC. 6 month loan deal acceptable under EU regs.

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[Weststander]

German subsidiary of Thomas Cook , Condor Airlines to be rescued by the German government, saving 4900 jobs, according to Faisal Ahmed at the BBC. 6 month loan deal acceptable under EU regs.

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That’s right. The German parts of the business, in stark contrast, to the UK business, have always been profitable. Germans still book entire packages through physical travel agencies.

Per Deutsche Welle:

“Although Thomas Cook group didn't release financial results for individual countries, it is widely known that its German operations are in a much healthier state than those in Britain, where the travel agent had huge debts and struggled to adapt to changing consumer tastes.

"It's easy to complain that it is old-fashioned but Thomas Cook has a good reputation in the German market," travel analyst Dirk Rogl told DW. "Yes, they've been under pressure but they're rather stable and have remained profitable over the long term."

Thomas Cook Germany achieved 2017/18 revenues of €3.8 billion ($4.2 billion) in Europe's largest economy, more than 40% of the group's total revenues.

The travel firm including one of its main German subsidiaries, Neckermann Reisen, have maintained a near 5% share of the ultra-competitive German travel market, according to Euromonitor, partly because a large chunk of German consumers still prefers to book holidays through a traditional agency.

"We still see a lot of consumer loyalty to these brick and mortar travel agency brands — this model still works in Germany," Stephen Dutton, senior analyst in travel at Euromonitor told DW.

 

[Surf's Up]

No surprise there....last year we flew Thos Cock to Cancun. The outgoing flight was delayed by 4 hours for reasons unspecified and we waited in the departure lounge at Cancun airport for a further 5 hours on the return leg watching Condor planes swoop in and out of the airport, all on time, sweeping the hun back home in good time for their frühstück!!!.