The crumble of Thomas Cook began in 2007 as a result of a failed merger. Also, the massive adoption of technology for making holiday reservations together with increasing debts resulted in an instant demise of the business. The fall down of the brand is a story of continuous poor debt financing in addition to environmental factors and poor management decisions that supported Thomas Cook going further down the drain.

The Thomas Cook travel company was a famous British tour operator. It was a brand well known for providing customers traveling entities from transport, tours, and meals to accommodation as a package. This one-stop vacation shop was in business for 178 years as it offered convenience to travelers. Incorporating the airline business to its transport saw Thomas Cook taking customers across the world, realizing its boom in ten folds.

The instant fall of Thomas Cook

Irresponsible debt management was a key reason for the fall of the business empire, but also some external factors played a role in its total liquidation.

Disastrous Merger and Debt financing

Similar to most mergers, the company converged with MyTravel with the aim of creating an enormous monopoly that would comfortably compete with new entries to the market. Despite these expectations, Thomas Cook went into a deeper hole of debt as MyTravel had made a profit once in the preceding half of the decade.

The inevitable fall almost happened in 2011 when the Thomas Cook debt had amounted to £1.1bn. A substantial amount of the company's revenue was going back to pay its debt. Some of the travel firm's employees and senior officials believe that lenders of this money made it hard for the firm to pay it back. According to these officials, The Royal Bank of Scotland and the Lloyds Banking Group were never fully committed to the financial rescue of Thomas Cook and would prolong this package hoping that the government would intervene and provide backstop funding which would in return, improve the creditor's position. Well, this did not happen. A Chinese company, Fosun International, instead took chances with Thomas Cook for a couple of years which helped the company stay afloat for a while.

The deal became disastrous as the company counted its eggs by planning for restructuring which was dependent on £450bn from Fosun. The investment would clear the £1.7bn in return, the group owned a huge part of Thomas Cook shares. The eggs did not hatch, and as of September 2019, the Thomas Cook group ceased trading.

Technology

Debt is not entirely to blame since the business did not adapt to the new changes in the market. Despite the announcement that the company would be working with Expedia, a travel technology company, Thomas Cook remained adamant in using physical shops and calls for booking. This meant that it was not meeting the customers' demand since most travelers used online platforms to make travel reservations. The company relied on its 600 "high-street" shops across the United Kingdom. Therefore, the brand was not known for its convenience compared to its rivals who adopted the internet for bookings.

Brexit

There is doubt that Brexit majorly affected Uk travelers from delaying their holiday plans for the summer as Mr. Frankhauser, Thomas Cook's chief executive, claims. He believes that it brought some amount of uncertainty especially in operating an airline. Thomas Cook airline was running in a market flooded with low-cost carriers and purchases made in dollars. This made it especially challenging when the system experiences shock, the pound loses a lot of value making it difficult to finance debt.

Operating an Airline

At the start of the 21st century, Thomas Cook took its chances to run an airline business known as Thomas Cook airline. The company gradually took over a Frankfurt-based airline, Condor and with time, had a fleet of 34 planes flying to a total of 82 destinations.

Experts have pointed out that operating a traveling tour and an airline are both challenging and dissimilar businesses that seemed Thomas Cook was not ready for. John Strickland, an aviation consultant the Thomas Cook airline lacked the flexibility to operate a stand-alone airline. He points out that the cost of running an airline in addition to operating and maintenance costs makes the business exposed especially during the off-peak season.

Well, it is clear that once your borrowing gets out of hand and your lenders commit to having financial wrangles with a business, it is bound to fail. Despite being a leader in the travel industry, Thomas Cook's liquidation due to irresponsible debt management and poor business decisions will ruin any successful business. Prior to debt, be keen on the terms of the debt.