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Travel Company Thomas Cook Goes Bankrupt; Tourists Stranded

STEVE INSKEEP, HOST:

The British travel company Thomas Cook has collapsed. The company coordinates packaged tours, or rather they did coordinate packaged tours. They're going out of business immediately, leaving hundreds of thousands of travelers stranded overseas. The British government says getting a total of 150,000 British nationals home will require the biggest peacetime repatriation operation that Britain has ever conducted.

Daniel Thomas is the executive news editor of The Financial Times. He's covering this story from London. Welcome to the program.

DANIEL THOMAS: Good morning.

INSKEEP: How does a 178-year-old company close overnight?

THOMAS: Well, there are two big problems that Thomas Cook had, and you can break them down into financial and strategic. This is a company which has been going on, as you say, for almost 180 years, but the last 10 of those years have been pretty terrible. They've - you know, they've faced, you know, a really difficult market where people are stopping - this is a high street chain in the U.K. You want to get a picture of the scene here, you go to the local high streets in the towns and the cities, and you'll see a Thomas Cook.

And you go - and typically, what you have is you'll go in there, you'll book your holiday, they'll do everything for you, a package will be set up, you just turn up at the airport, fly off to your hotel, get your food and drink all paid for, you know, under the original cost, and you fly back again. So this is, like, a all - you know, like a 360 package they offer.

So for the company, what they've seen is, like, increasingly, people don't do this. They want to go to Airbnb. They book flights through low-cost airlines. They do their own thing. And there's also this shift away from this slightly out-of-date, gaudy idea of a package holiday. You know, people want different experiences. They want to go through adventures. They don't know want to sit for two weeks on a beach in Spain and be fed, you know, average food and all you can eat and drink.

INSKEEP: Right. So...

THOMAS: So it's changed. I mean, the market's changed...

INSKEEP: OK, so the market has changed over time, but I'm just thinking - so you said this has happened over a decade. But then, suddenly, this abrupt end. I'm reminded of the saying by Ernest Hemingway, that the way you go bankrupt is gradually then suddenly. How did it happen so suddenly?

THOMAS: (Laughter) Well, it's been laboring under some heavy debts. They've got about $1.7 billion in debt, and that's been weighing on its balance sheet for some time now. It's coming to a head. The cash - you know, it's paying out quite a lot of interest. Its cash flow is - you know, cyclical. It's the nature of the business.

The problem is, though, that the owners of the business, the equity holders - and particularly one called Fosun, which is a Chinese travel group - they've, you know, sought a solution. And Fosun went to the debt holders and said, look - let's do a debt for equity restructuring. So they put together a deal which would have put, basically, a little more equity into the structure. Some of the - like, a lot of the bondholders would have converted their debt into equity, and Fosun would have taken a stake as well. And that was on the table and had more or less been agreed.

Then at the 11th hour, a group at the bank said, actually, we're a bit more worried than we were at the beginning, and we want a bit more headway - headroom, and we want a couple of hundred more million pounds in the structure. And that was the problem - they couldn't find the money.

INSKEEP: And bang - the company is out of business.

THOMAS: They're - yeah. Right.

INSKEEP: In just a few seconds, is it going - is the government going to have to help to pay to bring people home?

THOMAS: Well, yeah. As you said, there's 150,000 British travelers, some 350,000 European and international travelers - all need to get home now. This is a huge job for the government. They're chartering planes. Right now there are planes landing, which they've had to charter. Big logistical nightmare, really expensive - cost of 100 million pounds-plus for the government here.

INSKEEP: Wow.

THOMAS: So yeah, it's going to be one of those really interesting (laughter) but really complicated things to work out.

INSKEEP: Daniel Thomas of the Financial Times. Thanks so much.

THOMAS: Thank you. Transcript provided by NPR, Copyright NPR.


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