Economics Current

World-renowned travel company Thomas Cook has gone bankrupt

In News Recently, The World’s oldest travel company Thomas Cook has gone bankrupt and left thousands of travelers stranded across Europe and affecting thousands of jobs around the world. The travel company spanned 178 years in business collapsed on 23rd September 2019 after the last-minute talks to crack a deal with the creditors for bailing out the firm of its debt failed. This resulted in the largest peacetime repatriation effort by the British Government which hired dozens of chartered planes to bring back stranded customers of the company. The British PM Boris Johnson pledged to get all stranded British travelers home and also revealed that his government had rejected Thomas Cook's request for a bailout of about 150 million pounds ($187.1 million) as it would have set up a "moral hazard". Peter Fankhauser, Thomas Cook’s CEO, said the tour operator’s collapse was a “matter of profound regret” as he apologized to the company’s “millions of customers, and thousands of employees”. Thomas Cook- Background Founded by cabinet-maker Thomas Cook in 1841 at Leicestershire, England the company Thomas Cook was among the world’s best and oldest travel companies. The group included an airline company of Thomas Cook which, from its base at Manchester and Gatwick airports served leisure destinations across the world. The company survived through two world wars and ran hotels, resorts, and airlines for 19 million people a year across 16 countries. The liquidation marks the end of one of Britain’s oldest companies and has left almost six lakh people stranded resulting in the coordination of governments and insurance companies for the largest peacetime rescue effort. Impact The Collapse of the travel giant has put 22000 jobs at risk across the globe that includes 9000 jobs in the UK. It triggered the largest peacetime rescue operation in British History as the sudden collapse of the company left 150000 British citizens stranded abroad. The government and the Civil Aviation Authority (CAA) started rescue efforts – codenamed Operation Matterhorn – to bring holidaymakers home. The CAA also launched a website that contained details about the repatriation flights for the smooth functioning of rescue operations. The collapse can majorly impact the tourism sector and force closure of many travel agents. It is also expected to have a ripple effect in Asia. Reason for the collapse of Thomas Cook There are several reasons for the collapse of the travel giant that has been attributed to mainly debt pile, online competition, geopolitical events, and dynamic travel market situation. The heatwave in Europe in 2018 also affected tourism due to many last-minute cancellations. The company also failed to strike a rescue deal from banks and bondholders. Impact on Thomas Cook India In a clarification issued by Thomas Cook India, it stated that it runs independent of Thomas Cook UK and will not be affected by the collapse. The Indian arm of Thomas Cook is owned by Canadian multinational company Fairfax which acquired a 77% stake in it in the year 2012. Thus, bankruptcy and sudden shutdown of Thomas cook UK will have nil impact on Thomas Cook India.

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