Thomas Cook in liquidation with 21,000 jobs at risk

Thomas Cook

Alix Partners and KPMG have been called in as special managers to travel firm Thomas Cook, which has collapsed into compulsory liquidation with debts of £1.2bn, prompting the largest repatriation in peacetime history, and placing 21,000 jobs at risk

Alix Partners are handling insolvency proceedings relating to the tour operator and holiday companies within the group, which has ceased trading and been suspended from the London Stock Exchange. KPMG is responsible for insolvency proceedings related to the group’s aircraft maintenance and engineering activities.

The 178-year old company, the first-ever packaged holiday operator, had been experiencing well-documented financial difficulties, including £1bn of debt.  At the time of its collapse, Chinese investor Fosun, which has a stake in the company was offering to support a £900m rescue deal, but Thomas Cook was left seeking an emergency loan of between £150m and £300m. Neither its banks nor the government would offer funding and the firm’s fleet of 40 owned and leased aircraft were all grounded over night. 

The company has 21,000 staff around the world, with 9,000 based in the UK, including staff at around 600 high street travel agencies and air crew. Thomas Cook Airlines UK operated 33 planes including 24 Airbus A321s, seven A330-200s and two Boeing 757-200s. Additional short-term leased aircraft of an equivalent standard were used to support peak season flying programmes.


Raising capital to keep the business going became increasingly difficult over the summer and various potential investors failed to materialise.

In the half year results, released as recently as 16 May, Thomas Cook reported revenue of £3.01bn in line with last year’s H1 performance, but booked a goodwill impairment of £1.1bn against the UK business, relating to the 2007 merger with MyTravel. The company also made a loss before tax of £1.45bn after goodwill impairment and was carrying net debt of £1.24bn, which had risen due to a lower working capital position and higher non-cash items. It had also agreed a £300m bank facility to provide additional liquidity for the winter 2019/20 season, but this failed to stop continuing losses.

In May, the company also confirmed it was diversifying the business, with the opening of 12 own-brand hotels, including four Cook’s Clubs and one Casa Cook, and had expanded its presence outside Europe with a joint venture in Russia and was also planning two new hotels in China with major investor Fosun.

It also owned and leased a fleet of around 40 planes serving short and long-haul destinations, costing £169m a year in aircraft lease costs [2017: £143m]. These were predominantly denominated in US dollars, putting more pressure on the balance sheet due to sterling’s loss in value post referendum.

Commenting on the half year results in May, Peter Fankhauser, chief executive of Thomas Cook, said: ‘We have put a keen focus on cash and cost discipline across the group in the first half. We have also accelerated the transformation of our UK business, including the closure of 21 UK retail stores and a review of Thomas Cook Money. A range of further cost efficiencies are planned for the second half, allowing further investment in our growth strategy.’

However, the additional funding could not counteract the increasingly cumbersome business model, based on a bricks and mortar approach to selling holidays, with over 600 retail shops across UK high streets with the associated high costs of property and business rates, and aircraft leases.

There were also concerns about the impact of Brexit, as well as higher fuel and hotel costs.

In the last annual report and accounts, released in December 2018, Thomas Cook highlighted the restructure as a principal risk, stating that ‘fully implementing our strategy for profitable growth remains our focus, however, there is a risk that we cannot fully achieve the change required due to scale of change to our business and operations, and the complexity of our underlying processes and systems’.

Cash and working capital was also described as a significant risk, particularly in terms of ‘meeting scheduled payments under the terms of our debt facilities as they fall due’.

EY has been Thomas Cook auditor since 2017 when it took over the audit from fellow Big Four firm PwC; it earned £4m in total audit and related fees for year end 2018, £1m of which was for non-audit services for the group.

Operation Matterhorn

Around 150,000 UK travellers who are currently on holiday abroad with Thomas Cook and are booked to return to the UK over the next two weeks will now  be brought home as close as possible to their booked return date in a rescue operation.

Codenamed Operation Matterhorn, this is being led by the Civil Aviation Authority (CAA), but also involves the Department for Transport, the Foreign Office, the Department for Business, Energy and Industrial Strategy (BEIS), the Department for Work and Pensions, and other departments.

The current repatriation effort is estimated to be twice the size of the one mounted in the wake of the collapse of Monarch Airways two years ago, which cost £50m. The government has said, given the extent of the disruption, with an estimated 150,000 passengers affected, it will be bringing back all passengers including those who are not ATOL protected, who would normally be expected to find and pay for their own way home.

Business secretary Andrea Leadsom said: ‘This will be a hugely worrying time for employees of Thomas Cook, as well as their customers. Government will do all it can to support them. I will be setting up a cross-government taskforce to monitor local impacts, will write to insurance companies to ask them to process claims quickly, and stand ready to provide assistance and advice.

‘I will also be writing to the Insolvency Service to ask them to prioritise and fast-track their investigation into the circumstances surrounding Thomas Cook going into liquidation.’

Peter Fankhauser, chief executive of Thomas Cook, said: ‘We have worked exhaustively in the past few days to resolve the outstanding issues on an agreement to secure Thomas Cook's future for its employees, customers and suppliers.  Although a deal had been largely agreed, an additional facility requested in the last few days of negotiations presented a challenge that ultimately proved insurmountable.

‘It is a matter of profound regret to me and the rest of the board that we were not successful. I would like to apologise to our millions of customers, and thousands of employees, suppliers and partners who have supported us for many years.

‘This marks a deeply sad day for the company which pioneered package holidays and made travel possible for millions of people around the world.’

Airline insolvency review

In the wake of the Monarch Airlines collapse, the Department for Transport launched an airline insolvency review, which published its final report in March this year. The review’s stated aim was to address concerns that only a quarter of air passengers are fully covered by the ATOL scheme in the event of a provider ceasing operations.

It recommended the government introduce a ‘flight protection scheme’, which would be a comprehensive scheme to protect all UK-originating air passengers, with the associated costs met largely, if not wholly, by the private sector.

The review suggested that the scheme should be coordinated by the CAA, and underwritten by requiring each airline serving the UK market to provide suitable financial protection based on the estimated cost of repatriating its passengers. It claimed this would create a level playing field for all UK-originating passengers, providing reasonable assurance of repatriation protection, whether or not they hold an ATOL certificate.

It also made recommendations to enhance protection relating to future bookings, and to put the ATOL scheme on a more commercial footing. To date, this policy has not been put into effect, with a number of major airlines objecting to funding the system.

Liquidation proceedings

Simon Appell, Alastair Beveridge, Dan Imison and Ben Browne of AlixPartners have been appointed special managers to assist the Official Receiver with regard to Thomas Cook’s airline and tour operator companies in liquidation.

The affected businesses are Thomas Cook Airlines Ltd, Thomas Cook Group Treasury Ltd, Thomas Cook Tour Operations Ltd, Thomas Cook Airlines Treasury, Thomas Cook In Destination Management Ltd, Thomas Cook Group Tour Operations Ltd, Thomas Cook Group, Thomas Cook Money Ltd, Thomas Cook Services Ltd, My Travel Group Ltd, Thomas Cook Investments (2) Ltd, Thomas Cook Continental Holdings Ltd, Blue Sea Overseas Investments Ltd, Thomas Cook Group UK Ltd, Thomas Cook Finance 2, Thomas Cook Group Airlines Ltd, Thomas Cook West Investments Ltd, Thomas Cook UK Ltd, and Thomas Cook UK Travel Ltd.

Blair Nimmo, Jim Tucker, David Pike, Mike Pink and Ben Leith of KPMG have been appointed special managers to assist the Official Receiver regarding retail and aircraft maintenance companies in liquidation. These are Thomas Cook Aircraft Engineering Ltd, Thomas Cook Retail Ltd, TCCT Retail Ltd, The Freedom Travel Group Ltd, Future Travel Ltd, Travel and Financial Services Ltd, and Retail Travel Ltd.

Customer information

All Thomas Cook bookings, including flights and holidays, have now been cancelled. All of Thomas Cook’s retail shops will close with immediate effect.

The government is working with the UK Civil Aviation Authority (CAA) to help passengers return to the UK. Depending on their holiday location, this will be either on CAA-operated flights or on existing flights with other airlines. This will apply to both ATOL protected passengers and those who are not protected.

The CAA has set up a dedicated website for Thomas Cook customers.

By Pat Sweet, Sara White


Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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