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Headlines indicate the Airline Thomas Cook has failed leaving passengers stranded abroad.

  • Were there any indicators that signaled the imminent demise?
  • What (if any indicators) should passengers look for to avoid the next Thomas Cook?

The goal of this question is to understand how a traveler can maintain situational awareness and avoid being surprised.

  • 10
    @Willeke It may very well be a travel question with an answer rooted in economics. – gatorback Sep 23 at 14:38
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    I'm voting to close this question as off-topic because it is routed in economics, it is a company that just happens to do travel related things – Uciebila Sep 23 at 16:04
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    @Uciebila the people who are stranded abroad would probably disagree that this is not a travel question. People should be aware of the risk with other companies, whether tour operators or airlines, and, if there are any, of the signs they should heed to mitigate the risk. – phoog Sep 23 at 17:31
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    Edited the title to be more focused on travel and reopened – JonathanReez Sep 23 at 19:56
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    Thomas Cook was not really an airline, more a tour operator that happened to operate some of its own flights. The economics of tour operators are hugely more cyclical (take in $$ in the spring/summer, pay out $$ in the autumn/winter). And the sector had been consolidating and under attack by the internet for three decades. – smci Sep 24 at 0:53
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Yes, there were many, many indicators that Thomas Cook was in financial trouble, from analyst downgrades to their share price and their bond rate. But the company had been in financial trouble for years, being slow to address its competition as its bread-and-butter businesses were stagnating. They hadn't paid a dividend since 2011. In terms of operational trouble, I doubt travelers could have predicted that the collapse would come on 22 September, certainly when their suppliers and employees did not.

This is true of most major corporate collapses. There is no such thing as announcing a liquidation even a day in advance—your landlord would change the locks, your employees wouldn't bother to show up, the banks would withhold credit card payments, and so on. You're effectively shut down the moment you make the announcement, and that always comes as a "surprise," even when long suspected. So it was with Ansett, Swissair, Varig, Mexicana, and more recently Monarch and WOW air, not to mention companies like Toys R' Us or Northern Rock.


If a company can convince investors, creditors, and regulators that it is improving its operations and balance sheet, it may be able to operate for years and years until it records a profit again, or until the day one or more of the stakeholders is no longer convinced the project is viable. Pan Am made losses for 22 years before closing down, and even in its shabby reduced state might have survived for longer without the Lockerbie bombing. U.S. department store Sears, Roebuck & Co. has been in serious trouble for a decade, and in decline for at least three decades. Many analysts, in fact, have called for its liquidation. But in the meantime it has still sold billions upon billions of dollars of merchandise and employed tens of thousands of people. You can order merchandise from them today and expect it be delivered tomorrow—until the tomorrow finally comes when it is not.

Thomas Cook is a storied name and the company collected a billion pounds of revenue last year. It could roll over its debt and attract new capital until the day arrived that it couldn't. Even their much-publicized £1.5bn loss earlier in the year is a matter of accounting. United Airlines said it lost a staggering $16.7 billion in the fourth quarter of 2005 right before they exited bankruptcy protection.

Protecting yourself

If a small local carrier goes out of business, you are stranded unless you have specifically purchased insurance against that scenario. For major airlines, however, there are usually provisions negotiated whereby another airline will honor at least your return ticket, at its convenience. Based on cursory reading about the high-profile collapses I listed earlier, I cannot discern any pattern of who will accept those bookings. You will need to wait for the news to come out when it happens and contact the relevant airlines for arrangements after the fact.

As far as unused tickets on a carrier that has ceased operations are concerned, some discussion of protection has been covered in Insurance against airline bankruptcy, WOW air has ceased operation, can I get my tickets refunded?, and What happens to plane tickets in case of airline bankruptcy? Travel insurance may or may not include a provision; you will need to read the fine print to see if you qualify. If you purchased from the airline with a payment card, you may be able to contact the issuer of the card to request a refund, since the carrier has failed to hold up its end of the contract. Additional protections may also apply depending on national laws based on how the trip was packaged and sold.

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    A couple of reasons why the collapse may have happened now: they are due to pay hotels and other suppliers (usually paid 60-90 days in arrears) for their summer business, but don't have a lot of autumn business bringing in cash or making creditors confident they could repay further credit; and the end of September is traditionally a 'quarter day' when commercial rents are due, and they have a lot of High Street premises. At least in the UK, the ATOL bonding backed by UK government is repatriating people and most package holiday customers shouldn't lose their money. – Owain Sep 23 at 18:56
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    Another critical reason is that their ATOL licence was due for renewal in a few days. Clearly that renewal wouldn’t/couldn’t happen without sufficient assurance as to the company’s financial situation. The banks’ sudden demand for another £150m of capital meant the deal with Fosun wasn’t enough; I imagine once the serious bad publicity started customers cancelled, didn’t book, and a rapid death spiral began. – Traveller Sep 23 at 19:19
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    @Owain it would be interesting to run an analysis to see which month is most likely for an airline bankruptcy – JonathanReez Sep 23 at 21:01
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    Isn't it a Self-fulfilling prophecy if people notice the signs: Company is in bad financial shape -> People notice and don't buy from company in case things go bad -> company is in worse financial shape -> company is gone – Иво Недев Sep 24 at 8:08
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    @ИвоНедев: There's nothing special about the travel industry in this regard. It is an economic truism that most companies rely on goodwill to stay in business. If all your creditors decide to press for payment at once, there will be a "run on the bank" and the business goes under no matter how large. – TimLymington Sep 24 at 10:47
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Economic reason

At least in the Netherlands, in a news article was written that Thomas Cook was already searching for another party to be taken over or to buy them, because of (financial) problems. That alone is a reason to worry for the fall of this company.

To see if a next Cook has the same problem, you could read the financial status of the company, check the stocks (if they have them), and any economic news/forecasts.

No added value (thanks to comments of jwenting and MSalters below** Companies who do not add value (just 'sell' package deals), have low margins and due to the fact that people can very easily make their own vacations by buying tickets online, and use sites for hotels/resorts etc, travel companies who give not much extra service than helping with these two items can not earn much added value.

World gets smaller

Nowadays there are so many airline companies and websites offering tickets, it is easy to get almost anywhere in the world without the need of a specific travel organization. Local hotels offer tours for example, and otherwise there are telephone apps to find restaurants, tours, highlights, tourist spots etc.

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    tbh, Thomas Cook mostly did cheap package holidays, where competition is fierce, margins are slim, and customers can't be relied upon to be back next time if a competitor is just a few Euros cheaper. – jwenting Sep 24 at 4:35
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    My impression is the opposite of the second paragraph; it's the added-value companies that are still growing. Simple resellers are struggling because they don't add value over internet searches. – MSalters Sep 24 at 7:23
  • @jwenting I will remove/change the paragraph... I always thought Thomas Cook did more 'special' / far destination travels with more organization involved. – Michel Keijzers Sep 24 at 8:06
  • @MSaltsers see comment above. – Michel Keijzers Sep 24 at 8:08
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Other answers mention indicators. Still, it is important to say that the indicators don't necessarily imply a demise. As an example, Air Canada filed for bankruptcy in 2003; it never stopped flying, and it has been in the black for several years now.

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    Similar story with Swissair, which was then taken over by Lufthansa and now operates as Swiss. As others have noted, Cook also had investors pumping in money, but not enough. – JJJ Sep 24 at 16:16
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    Same for nearly all of the major U.S. airlines. Almost all of them filed for bankruptcy protection in the 2000s at one point or another. The combination of 9/11 and the recession (and not-so-flexible union contracts) hit the airline industry hard. However, they filed for bankruptcy reorganization, not for liquidation. – reirab Sep 24 at 16:50
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    @reirab: that comment is quite right but could exacerbate a major transatlantic misunderstanding. In Europe (including the UK) neither 'bankruptcy protection' nor 'bankruptcy reorganization' exist; some of Swissair was sold as a going concern, but the company ceased to exist. – TimLymington Sep 25 at 9:13
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    @TimLymington They do exist in at least parts of Europe. Alitalia is in it right now (and has been since 2017.) Perhaps a different name is used for it, but it's essentially the same thing. – reirab Sep 25 at 15:34
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    @TimLymington For that matter Condor entered it yesterday. – reirab Sep 25 at 15:49
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Passengers would be hard pressed to do better than financial analysts at predicting the collapse of a company. If you can do that generally you stand to make an enormous amount of money. One reasonable indicator would be the stock price :

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Clearly there have been signs of trouble for over six months. Just as with investors, though, it's a question of more than just finances. Cook did ask the government for a bailout, and depending on who's in charge at the time, sometimes that works and sometimes companies can bounce back after restructuring. If you were booking a holiday in March, though, there certainly were signs that Cook was getting into trouble - and serious signs by July. I'm not sure the expected outcome would have been a total collapse of the company, however. In many cases the business interests continue while the company restructures, even if investors lose everything when the company is put into administration, so it's probably not the case here that anyone expected Cook to simply close its doors and leave half a million people stranded.

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    Somewhat anecdotal but - a friend of mine was booking a holiday with Thomas Cook back in May. It happened to be the same day that I read this in the newspaper: theguardian.com/business/2019/may/17/… – richardb Sep 25 at 9:44
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    Those graphs are very obvious in retrospect, not so much at the time you need to make a decision. E.g. by looking at the data until mid-2016, there's no way to tell whether it's a temporary stock price drop or a downfall. – Dmitry Grigoryev Sep 26 at 12:01
  • @DmitryGrigoryev I think that's the point - if it was that easy to tell then there wouldn't be so much money to be made in the market. – J... Sep 26 at 12:11
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In terms of aviation, an airline going totally out of business like this is exceptionally rare. Most airline failures tend to be takeovers or bankruptcy restructuring. For instance American Airlines bought out the troubled TWA and kept it flying, eventually folding its operations into American

Financial problems soon resurfaced and Trans World Airlines Inc. assets were acquired in April 2001 by AMR Corp., the parent company of American Airlines, which quickly formed a new company called TWA Airlines LLC. As part of the deal, TWA declared Chapter 11 bankruptcy (for the third time) the day after it agreed to the purchase. The terms of the deal included a $745 million payment.

Total "stop flying now" bankruptcies are usually the result of last-minute failures to restructure. Some notable examples are Eastern Air Lines, Pan American Airlines and Midway Airlines. All three happened in 1991, after the Gulf War caused a spike in fuel prices. From the Midway article

Citing the high price of jet fuel during the 1991 Gulf War and a drop in passengers in the recession that followed, the airline filed Chapter 11 in March 1991. In reorganization, Midway attempted to sell itself to Northwest Airlines. Northwest pulled out of negotiations on November 12, 1991, however, and Midway ceased operations the next day. Its bankruptcy was re-filed as a liquidation under Chapter 7 bankruptcy laws.

In US law, Chapter 11 is a restructuring bankruptcy. Courts and creditors tend to prefer it, since it keeps the company operating. Chapter 7 is a total liquidation. Europe has similar laws, as Thomas Cook's own website attests

Further to the announcement made on 20 September 2019, Thomas Cook Group plc (“the Company”) continued to engage with a range of key stakeholders over the weekend in order to secure final terms on the recapitalisation and reorganisation of the Company.

Despite considerable efforts, those discussions have not resulted in agreement between the Company’s stakeholders and proposed new money providers. The Company’s board has therefore concluded that it had no choice but to take steps to enter into compulsory liquidation with immediate effect.

Most people don't buy travel insurance anymore because serious disruptions like this are so rare. The only time I've ever bothered with it is when I've booked a cruise during hurricane season (where your costs can explode if your ship has to make port elsewhere and/or infrastructure is damaged). A good insurance plan is the only way to insulate against these kinds of things, but it's like buying a plan that pays you a lot of money if you get struck by lightning.

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In general, it's impossible to predict whether a company is going to cease to operate. That's because they'll hide enough of the details to prevent you from predicting this - they have to. And if you could predict this, that would by itself change when it's happening. Let's use the example of Thomas Cook to show why this is.

Imagine you knew ahead ahead of time that Thomas Cook was going to cease operation, what would you do? Exactly, you'd not book anything through them and go to their competitors instead (or just book things yourself). Now, that means that less money goes to a company that is already in financial trouble. Considering that if you can predict this, others can too, it will be a significant amount of revenue the company is missing out on, hastening its demise.

It's more than just that, though. Imagine for a moment that you are an employee of Thomas Cook. If you know for certain that the company is going to fail, you'll be looking for a new job. And if you know that if you go into work today, the company won't be able to pay you for that work, will you even go? Both are big problems (if enough of your employees know, anyway) so even if you can be sure that your impending demise is not leaked by your employees, you can't allow them to know ahead of time that the company is not going to survive.

At the core, this is what this all winds down to: at the very moment it is known that a company is going to fail, it has already failed. That's why by definition it's impossible to predict this happening with even a reasonable degree of certainty.

  • Re: " if you go into work today, the company won't be able to pay you for that work, will you even go?". For a long-term employee of a UK company, absolutely yes, unless you've already got another job lined up that makes it worth losing out on statutory redundancy pay etc. gov.uk/your-rights-if-your-employer-is-insolvent – Steve Sep 26 at 10:48
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As other answers have said, it is not possible to predict exactly when a business will fail, but there were many factors indicating that it was imminent. However to answer the literal question "Can a passenger predict a travel company is going to go bankrupt tomorrow?" it would seem the answer is yes. If the British newspapers are to be believed, this man, cashed in his Thomas Cook vouchers the evening before the company declared it was folding so that he could get compensation as the vouchers would likely have become worthless just hours later.

  • 1
    "But after hearing that Thomas Cook were on the verge of going bust..." my guess is that the store they used was still open even after the bust had occurred, just for one day or what not...if you had some insider information however... – rogerdpack Sep 24 at 16:45
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    On the other hand, it might just be that someone somewhere does this every few days and the fact that it was just hours away is a coincidence. – Jasper Sep 25 at 8:43
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    There was certainly "thomas cook may be about to collapse" stories in the press the day before before the actual collapse was announced. – Peter Green Sep 25 at 17:30
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A comparatively reliable prediction of imminent demise would trigger imminent demise in a business driven by customer demand. So basically your chances of getting out in time depend on being near the front of a stampede.

Travel agencies have been under quite some pressure in the last decades. Nevertheless, Thomas Cook moved a lot of money and a lot of travellers. Investors get in and out all the time and tend to make money as long as the terms of their investment happen to fall in reasonably operative times.

For an internationally operating company based in the UK, finding new international investors is harder in the context of uncertain Brexit conditions. The Brexit chaos is not responsible for recurring (and acerbating) problems of the international travelling industry, but it may have played a role with a lack of replacement for departing investors.

All this does not really boil down to dependable advice to travellers. Overall, "don't panic" seems to be the advice doing least damage to most people, but minimizing the damage of a single person might work better with "panic early" which seems irresponsible to recommend as a strategy.

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One factor is that they were coming up for their annual licence renewal with the CAA and were going to struggle to get it because of their financial situation. (just as you see a lot of retai bankruptcies after Christmas when the quarterly rent falls sue after the peak sales period pre-Christmas.)

  • They have been through that situation a great many times. So not a clear indication of going bankrupt. – Willeke Sep 25 at 10:14
  • True but I based my comment on what a CAA spokewoman said on the Radio 4 Today program the day it happened. I am not sure what the precise financial requirements are but it looks like they were not going to scrape by this time. – Duke Bouvier Sep 26 at 12:30

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