Thomas Cook collapse

178 years old, drowned in £1.7bn of debt. Its collapse left the state to fly 150,000 travellers home.

Documented, foreseeable risks that were ignored anyway. The failure is attention, not information.

Room: Q1 Predictable
Year: 2019
Impact: 150,000 passengers
Sector: Travel and tourism
Region: Europe
Category: Economic

Why this room

This is q1 because the group's insolvency condition was documented and negotiated in public for months before it happened: the rescue under discussion in 2019 required converting about 1.7 billion pounds of existing debt to equity plus 900 million pounds of new money, and the company failed when lenders demanded a further 200 million pounds it could not raise. The contingent public liability was equally well characterised in advance, because the UK had run the same scenario two years earlier when Monarch failed, and the CAA's repatriation machinery (Operation Matterhorn) existed precisely because the exposure was foreseen. Neither the balance-sheet risk nor the state's downstream cost was novel information; what failed was action on it.

The record

Thomas Cook Group plc entered compulsory liquidation on 23 September 2019, with winding-up orders made against the group companies and the Official Receiver appointed as liquidator.certain
Around 150,000 Thomas Cook customers were abroad at the time of the collapse; between 23 September and 7 October 2019 the CAA's Operation Matterhorn ran 746 flights from 54 overseas airports, and about 94% of holidaymakers were returned on their originally scheduled date.certain
Approximately 9,000 UK employees were made redundant.certain
The National Audit Office put the taxpayer's bill at at least 156 million pounds, including about 83 million pounds paid by the Department for Transport towards repatriating passengers not covered by ATOL, at least 58 million pounds of redundancy and related payments, and at least 15 million pounds of liquidation costs; the CAA separately estimated exposure to the Air Travel Trust Fund at 481 million pounds.certain
The failed recapitalisation would have injected 900 million pounds of new money and converted about 1.7 billion pounds of existing debt to equity; it collapsed when lenders sought an additional 200 million pounds after an independent review found the agreed sum insufficient.high

Sources

The book

This entry is one of 111 in the register. The full story, and what it cost the people who lived it, is in Risky Business by Claudia Zeisberger, David Munro and Joanna Reijgersberg-Siew.

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