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Why did Thomas Cook collapse? A perfect storm of calamity and climate

Why did Thomas Cook collapse? A perfect storm of calamity and climate
[Photo: Pedro Aragão/Wikimedia Commons]

Some 600,000 vacationers were stranded when Thomas Cook, a travel company that has been in business for 178 years, collapsed on Sunday.

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Businessman Thomas Cook founded the company back in 1841, named it after himself, and set about organizing railway tours for members of the local temperance movement (definitely not a party bus). Through various iterations, including a stint as a nationalized company and part of the state-owned British Railways, Thomas Cook persisted.

Some 178 years later, it had grown to a huge global travel group, with annual sales of £9 billion ($11 billion), 19 million customers a year, and a staff of 22,000 employees working in 16 countries, per the BBC.

What went wrong?

So what went wrong with what MarketWatch reminds readers was a company that was worth $2.3 billion just 18 months ago? The company had struggled recently after what the Guardian dubbed a “disastrous merger” with MyTravel (if you haven’t heard of it, that’s part of the problem), the looming shadow of Brexit, and growing debt. It was close to bankruptcy eight years ago, but an emergency loan kept it solvent. In May, the group reported a £1.5 billion loss, with more than £1 billion written off from the 2007 merger. It put its airline up for sale in hopes of paying off debt and had been hoping and asking for a £200 million ($248 million) lifeline from its bankers, but it was denied a rescue.

According to the BBC, the company’s “fate was sealed by a number of factors: financial, social and even meteorological.” When this summer’s record heat wave hit the U.K., Brits didn’t need to book vacations to Mallorca or Marrakech to find the sun, and Thomas Cook’s profits suffered. Yes, the weather helped bring down a 178-year-old company, further cementing my belief that business schools should include lessons in meteorology.

In addition to its mounting debt, the travel company had recently struggled as it tried to compete against internet travel booking sites and the rise of low-cost airlines like Ryanair and easyJet, and DIY accommodation booking sites like Airbnb. Customers could simply book their vacations online instead of making a trip to one of Thomas Cook’s 560 storefronts. The Guardian notes that customers who did trek down to one of Thomas Cook’s brick-and-mortar travel shops tended “to be over 65, and in lower socio-economic groups, with less money to spend.”

The company that started by running temperance day trips did try to restructure itself once again, but, as the BBC noted, it was too little, too late. Customers’ preferences had shifted. Now, 600,000 holiday makers have had their stress-relieving vacations ruined by the stress of having their travel agent collapse while they were away—leaving Thomas Cook employees to wonder what will happen next as the ripple effects of the collapse make their way across the travel industry.

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