Going bankrupt in the United Kingdom is a whole lot different than in the US. Had Thomas Cook been based here, it would have most likely filed for Chapter 11 bankruptcy protection and tried to reorganize while still flying. But Thomas Cook is a UK company, and that means that when the 178-year old business ran out of financing options Sunday night, it effectively just disappeared as far as the public is concerned. The UK government is solely focused on picking up the pieces in the near term while it prepares for a massive liquidation in the long run.
Usually when I write about failing companies, I’m talking about airlines, but Thomas Cook is unique in that its airlines actually did alright. It’s the tour operator/packaging business that was weighing the company down and causing red ink. As its fortunes turned worse this year, Thomas Cook looked at selling off its airlines to keep the rest of the business afloat. No deals were made at the time, and instead the company focused on recapitalization. It had a deal in place, but at the last minute, the banks required an additional GBP 200 million. The company thought it had a deal for that too, but it fell through. Yesterday, the company gave up and shut down.
The Great Repatriation
While the UK may not protect companies, it does protect consumers. Those whose bookings were under the umbrella of the ATOL scheme and hadn’t started their trips will simply get their money back. They’ll have to start planning new trips from scratch if they still want to go. (Some lucky people will have their air tickets intact if they weren’t booked on a Thomas Cook flight, but the rest of the trip will be wiped out.)
The bigger issue is that there are 150,000 Britons on their trips who need to get back home. The UK promises to bring all of them back over the next two weeks. How the heck can it do that? Well, sadly, it has experience in this area.
When Monarch failed a couple years ago, the UK had to bring 100,000 people back. This is a bigger effort, but the building blocks are in place, and the government can learn from past issues.
This page on the UK’s website shows what people can expect depending upon their destination. Firm plans seem to be made only a day or two at a time, so we can’t see the entire outline, but rescue efforts are underway.
The impact in the US is limited since Thomas Cook’s subsidiary Condor is still flying, and it has a large presence. But Thomas Cook did fly to Las Vegas, Los Angeles, New York/JFK, Orlando, and San Francisco. Except for Orlando travelers, all Britons stuck in the US can call British Airways or Virgin Atlantic to make new arrangements home at no extra cost. For Orlando, charters are being arranged. That’s also the case for most other destinations. In fact, yesterday alone the government arranged for 60 flights back to the UK. Check this out.
I partnered with Karl at Great Circle Mapper to put this complex map together. If you want to see more details, head on over to the Great Circle Mapper where there’s a dedicated page. I know that’s a lot of lines and colors, so here’s a list as well.
- Antalya, Turkey – Titan Airways to Belfast, London/Gatwick, and Manchester
- Bourgas, Bulgaria – Titan Airways to Birmingham and Manchester
- Cancun – Wamos Air to Manchester (people going to London/Gatwick are on this flight too and being sent via ground upon arrival)
- Corfu, Greece – Titan Airways to Bristol, East Midlands, London/Gatwick, London/Stansted, Manchester, and Newcastle
- Dalaman, Turkey – Hi Fly Malta to Glasgow, Titan Airways to Cardiff and London/Gatwick, London/Stansted, and Manchester, Freebird to London/Gatwick, Evelop to Birmingham (people going on one Glasgow flight are on this flight too and being sent via ground upon arrival)
- Enfidha, Tunisia – Titan Airways to Manchester
- Fuerteventura, Canary Islands – Titan Airways to Manchester
- Gran Canaria, Canary Islands – Eastern to London/Gatwick, Titan Airways to Bristol and Manchester (people going to Birmingham are on this flight too and being sent via ground upon arrival)
- Hurghada, Egypt – Titan Airways to London/Gatwick, EuroAtlantic to Manchester and Newcastle
- Kos, Greece – EuroAtlantic to Manchester (people going to Bristol are on this flight too and being sent via ground upon arrival), Hi Fly to London/Gatwick
- Lanzarote, Canary Islands – easyJet to London/Gatwick, Air Europa to London/Stansted, Titan Airways to Birmingham and Manchester, Miami Air to Glasgow
- Las Vegas – Fly on scheduled British Airways or Virgin Atlantic flight
- Los Angeles – Fly on scheduled British Airways or Virgin Atlantic flight
- Malta – Titan Airways to London/Gatwick
- Marsa Alam, Egypt – Nile Air to Birmingham
- Menorca – Evelop to Birmingham (people going to Manchester are on this flight too and being sent via ground upon arrival), Titan Airways to Bristol, East Midlands, Glasgow, and London/Stansted, Eastern to London/Gatwick
- Montego Bay, Jamaica – Virgin Atlantic to Manchester
- New York/JFK – Fly on scheduled British Airways or Virgin Atlantic flight
- Orlando – Atlas Air to Glasgow, Virgin Atlantic to Manchester
- Palma de Mallorca – EuroAtlantic to Birmingham (people going to Glasgow are on this flight too and being sent via ground upon arrival), Titan Airways to East Midlands, Malaysia to Manchester (people going to Newcastle are on this flight too and being sent via ground upon arrival)
- Paphos, Cyprus – Titan Airways to Manchester
- Punta Cana, Dominican Republic – Titan Airways to Manchester
- San Francisco – Fly on scheduled British Airways or Virgin Atlantic flight
- Split, Croatia – easyJet to London/Gatwick, Titan Airways to Manchester
- Tenerife, Canary Islands – Titan Airways to Manchester
- Zakynthos, Greece – Titan Airways to Birmingham, Bristol, Cardiff, East Midlands, London/Gatwick, and Manchester, Miami Air to Glasgow
This is just for one day, so it’s an incredible number of flights to stand up overnight. It was pointed out to me that not all of those Titan flights are operated by Titan. Some are being sub-contracted to other carriers. The end result, however, is that Titan is suddenly having a VERY good month.
Once that’s all done, then the dust begins to settle. What happens now, especially on the airline side of things? That’s where things may get interesting.
The Great Asset Fight
These repatriation flights are only for those who already left the UK and needed to get back home. Everyone else just gets refunds, and that means airlines like easyJet and Jet2 are about to get a windfall of new business. TUI will pick some up as well, and I’m sure all low-cost carriers that touch the UK at all, like Ryanair and Wizz, will see a healthy uptick in bookings. But in the long run, someone is going to step up. This capacity won’t simply disappear.
The tour package model that Thomas Cook previously operated has been fading. Some airlines like Jet2 and Allegiant in the US have found modified ways of making that work, but I wouldn’t expect to see huge new capacity to directly replace what Thomas Cook was doing. Instead, I expect existing airlines will pick up the slack and jockey for position to buy assets in the liquidation.
The biggest prize is Condor. Condor, to be clear, is still operating from its German bases. Those flights are going as scheduled, but the airline has asked for a bridge loan from the German government to help it get through the liquidation process.
Condor has a lot of value. It’s not the old airplanes in the fleet that matter, but rather it’s the slot holdings in Frankfurt that would be quite the prize. Undoubtedly Lufthansa is interested, but there was concern that it would be viewed as anti-competitive. I think that’s probably right, and that opens the door for others.
I’d imagine an airline like IAG-owned LEVEL would be very interested in this, especially since it has both short- and long-haul operations under its brand. Ryanair and easyJet and the like will probably have interest as well, but they wouldn’t want long-haul. Whether there might be an interest in breaking Condor apart of not remains to be seen, but I imagine a bid to keep the whole thing intact would be looked upon more favorably.
Then there is the UK operation. Virgin Atlantic had previously said it was interested in Thomas Cook’s long-haul operations. Most of that long-haul was focused outside of London, but I’m sure Virgin Atlantic would love to pick up those few, precious Gatwick slots if it could. It could also fit that leisure flying from Manchester, Glasgow, etc into its existing operation. So that seems like a possibility.
For short-haul, however, I’m not sure that anyone will care. easyJet, Jet2, and Ryanair will ramp up their operations in the country to fill in and replace lost capacity where needed. But I doubt that there are many assets worth buying from Thomas Cook to serve that purpose. It’s easier to just let Thomas Cook go away and grow organically in most places, I’d think.
There’s no question that many airlines will all be sniffing around every asset to see what’s worth grabbing and what’s not. For now, Condor flies on, but whether it is able to stay independent or not is unclear. Thomas Cook was a big company with a well-known brand. And now, overnight, it’s just gone.
