Mediterranean tourism jolted by Thomas Cook’s collapse
The collapse of British travel firm Thomas Cook has not only stranded some 600,000 tourists across the globe but it is expected to wield a stinging and lingering economic punch to Southern Mediterranean countries that were popular holiday destinations served by the failed company.
Tunisia, Morocco, Turkey, Egypt and Greece are feeling the immediate financial repercussions from the British tour operator filing for receivership and the countries are bracing for a potentially longer-term drag on their tourism sectors.
Thomas Cook, the oldest travel company in the world with a network of airlines, resorts and hotels that accommodated 22 million travellers annually with package tour deals, declared bankruptcy on September 23 and announced it would be liquidating its assets.
The UK Civil Aviation Authority released a statement, saying: “Thomas Cook Group, including the UK tour operator and airline, has ceased trading with immediate effect. All Thomas Cook bookings, including flights and holidays, have now been cancelled.”
The collapse of the global travel institution that was established in 1841 followed a failed 11th-hour effort between Thomas Cook management and shareholders to secure additional funds for a bailout package. The firm was $2.1 billion in debt, struggling to adjust to competition from budget airlines and low-cost online booking sites. A UK and Scandinavian heatwave in 2018 that kept holidaymakers at home and Brexit fears that curtailed travel plans for many this summer only added to the company’s troubles.
Critics pointed to inflated salaries of the company’s leadership, as well as excessive bonuses and perks awarded to the executives that contributed to Thomas Cook’s financial woes.
Thomas Cook accepted a $1.1 billion rescue plan put forward by its largest shareholder, Chinese investment giant Fosun International, which holds an 18% stake in the firm and which also owns the Club Med resort chain and Canadian circus company Cirque du Soleil.
Under that agreement, Fosun was to provide $554.2 million in exchange for at least 75% of the company’s tour operator business and 25% of its airline. Lending banks and bondholders were to give another $554.2 million and convert their existing debt to equity — providing them with 25% of the tour operator business and 75% of the airline.
The deal fell through when creditor banks demanded Thomas Cook management come up with an additional $246.2 million to help the company through the winter months when it receives less cash and must pay hotels for summer services. Turkish businessman Neset Kockar, Thomas Cook’s second-largest shareholder with an 8% stake, said the British travel firm would either be sold in full or in parts.
The collapse of Thomas Cook resulted in the immediate grounding of its planes and shutting the doors of its numerous travel agencies, putting 21,000 employees in 16 countries out of work, including 9,000 in Britain. The British government quickly launched its largest peacetime repatriation effort, arranging flights to return around 150,000 Britain-based Thomas Cook customers from various holiday spots.
The jolt from the travel firm’s bankruptcy was particularly felt throughout the Southern Mediterranean.
Thomas Cook had only recently returned to Tunisia following the 2015 jihadist attacks on a Tunis museum and the Sousse beach resort that resulted in the death of 60 people, including 30 British tourists. The collapse of the UK travel company has resulted in more than $65.2 million in unpaid Tunisian hotel bills for stays in July and August, along with the cancellation of up to 40,000 trips to the country that had been reserved through Thomas Cook for the rest of the year.
For Turkey, the fall of Thomas Cook could mean a drop of 600,000-700,000 tourists annually, Turkey’s Hoteliers Federation Chairman Osman Ayik said. He stated that Thomas Cook owes $123,000-$246,000 to small Turkish hotels in unpaid bills.
The Turkish Tourism Ministry warned Turkish hotels that demand payments from tourists or attempts to evict them because of the collapse of Thomas Cook would be prosecuted. The Tourism and Finance ministries worked to put together a “credit support package” to help affected local businesses.
Egypt’s favoured tourist locales, including Red Sea resort towns Marsa Alam and Hurghada, are expected to experience large financial losses because of the Thomas Cook bankruptcy. Blue Sky, the UK travel firm’s Egyptian tour operator, cancelled 25,000 reservations for Egyptian stays through April 2020. Blue Sky had forecast 100,000 tourists booked through Thomas Cook would holiday in Egypt next year.
Moroccan hotels are facing unpaid bills of around $20.3 million after the British tour company’s collapse. Thomas Cook accounted for around 100,000 of the country’s 12 million annual holiday-makers but the Moroccan tourism promotion office had signed an agreement with the British travel firm in 2017 to boost the number of tourists booked through Thomas Cook to 400,000 by 2020.
Greece’s PanHellenic Federation of Hoteliers said the failure of Thomas Cook could cost the country’s hotel owners as much as $369.5 million, including $98.5 million-$123 million lost from Crete, Greece’s most popular destination for package holidays.
Cretan hotel owners had not received payments from Thomas Cook since mid-July and hotels on Corfu and Zakynthos in the Ionian Islands had also not been remunerated by the British tour operator.