A former senior manager at the travel giant spoke to Travel Weekly to reveal ‘a catalogue of errors’ over 10 years which led to Thomas Cook’s final demise.
1 – The merger with MyTravel was strategically wrong, buying a company that wasn’t in the best of health, an error proven 10 years later with a £1 billion write-down. The deal meant Cook inherited some toxic hotel leases.
2 – The waste of £200 million-plus on trying to build a pan-European reservation system – an impossible task with each country wanting different things. It ended with no new system.
3 – A £290 million share buy-back programme in 2008, using company cash to shore up the share price.
4 – The purchase of companies such as Hotels4U with no clear strategy.
5 – Entrance into the Russian and Indian markets – a complete disaster.
6 – Trying to create a pan-European e-commerce platform in 2010 and spending vast amounts on a London office, taking autonomy from the operating companies where the trading expertise was. Result – hundreds of millions wasted.
7 – Senior management refusing to accept the retail footprint was too large, and purchasing The Co-operative Travel, duplicating stores in many towns. It cost the business at least £200 million.
8 – After rightly ousting the CEO in 2011, the replacement embarked on a personal brand-building exercise.
9 – Doing too little too late on differentiating product, with input costs outpacing selling prices, driving down profit margins.
10 – The downward spiral started in 2007. The latest management have been fighting historical debt and mismanagement, doomed from the day they started.
Twelve years of turmoil at Thomas Cook
Thomas Cook, which is jointly owned by German retail group Karstadt-Quelle and Lufthansa, to merge with MyTravel (Airtours). Lufthansa sells its stake. Merged Thomas Cook Group lists on London Stock Exchange.
Global financial meltdown. In Sept, XL Leisure Group fails, triggering major repatriation.
Recession sees UK outbound travel market decline 20% in 2008-10.
Cook announces merger with The Co-operative Travel.
July: Regulatory approval for Cook/Co-op merger expands group retail estate to 1,204 shops. Cook issues third profit warning in 12 months (previous warnings in Aug and Sept 2010).
Aug: Chief executive Manny Fontenla-Novoa resigns.
Oct: Cook agrees £100 million credit deal; completes merger with Co-op.
Nov: Suspends results announcement pending fresh £200 million deal with banks.
April: Cook confirms fresh talks on refinancing.
May: Secures £1.4 billion refinancing.
July: Harriet Green appointed chief executive.
Oct: Cook adopts ‘Sunny Heart’ logo.
Dec: First full-year operating profit in three years.
Oct: Cook UK head Peter Fankhauser admits: “The whole Airtours integration went completely wrong.”
Nov: Harriet Green departs. Fankhauser appointed group chief executive.
March: Fosun acquires a 5% stake in Thomas Cook.
May: Inquest into deaths of two children from carbon monoxide poisoning on Cook holiday in Corfu in 2006 ends with a verdict of “unlawful killing”.
June: Cook/Fosun announce joint venture. Beach massacre of UK tourists in Tunisia.
Dec: Cook reports £19 million profit after tax after five barren years, following losses of £158 million (2014), £283 million (2013) and £378 million (2012).
Jan: Cook switches 1.2 million seats from Turkey to the Western Med following security concerns.
Aug: Fankhauser reports: “Despite the trading environment, Thomas Cook is a much stronger business. We’re well positioned to capitalise on opportunities when markets improve.”
Dec: Cook reports operating profit of £205 million and pays first dividend to shareholders in five years. Fankhauser says: “The actions we took to shift our holiday programme into the Western Mediterranean helped us maintain revenue.” Travel Weekly reports: “Thomas Cook UK’s operating profit has gone from zero in 2012 to 4.9% a year ago and 6.4% in the 12 months to September.”
Sept: Cook profit warning. Blames hot summer for decline in lates market.
Nov: Second profit warning, including a reclassification of charges, issued two days before full-year results.
Feb: Cook announces review (sale) of its airline.