What if Thomas Cook collapses?
What if Thomas Cook collapses?
See our post from May 2019 Thomas Cook secures extra funding as financial woes worsen
The world’s oldest travel firm, Thomas Cook, has lost 60% of its stock value in a week as its profits slumped and its debt piled up.
Founded in 1841, Thomas Cook is one of the world’s biggest holiday companies, operating in 17 countries and carrying some 20 million holidaymakers. It has 22,000 staff and about 600 British travel agencies.
Having issued two profit warnings in the last two months, the world’s first ever tour operator is blaming its poor performance on the summer heatwave and England’s World Cup success.
With bookings for the winter also down 3% on 2017, the company has announced that profits will be £30m lower than expected. Its bonds also dropped in value and the cost of insuring its debt against defaulting on payments has reached a record high.
The company also gave a less detailed forecast for next year than it has in the past, adding to fears over the impact of Brexit or another crisis in a major package holiday destination such as Turkey.
The company’s market value had fallen to £363 million on the stock exchange, £26 million below its £389m debt mountain, “putting it on course to be demoted from the FTSE 250 mid-cap share index”, reported the BBC.
The Daily Telegraph says “though Thomas Cook may be deemed ‘too big to fail’ when it comes to tour operators”, and is currently battling to reassure investors that its slump is temporary, “its sliding share price has brought into the view the sort of nightmare scenario that would occur should one of Europe’s largest tour operators collapse”.
Should holidaymakers be worried?
All holidays booked through Thomas Cook are ATOL protected, so should the tour operator collapse, customers will be entitled to a full refund or replacement holiday before the scheduled departure time.
The Civil Aviation Authority (CAA) will also protect package holidays and cover arrangements to return customers if the operator collapses while they are on holiday.
Some holidaymakers could be caught out if they have booked on Thomas Cook’s airline, which is separate from the tour operator, and sells flight-only trips, some of which are not Atol protected.
What about longer term?
Six UK tour operators have already collapsed this year as the British switch to building their own bespoke holidays online.
While customers are protected, many small suppliers will be worried. Having traded with confidence with the tour operator, they will now be worried about those unpaid invoices and whether there will be future demand.
How can CPA help?
This is another reminder than just because you sell on credit to large businesses, it doesn’t mean you are trading risk free. We have seen many large companies fold in recent years leaving many small businesses struggling with over exposure. They are not invincible.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
As a third party collector, we can get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
James Salmon, Operations Director, 06/12/18.
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