Saturday, 21 September 2019

Thomas Cook asks for government bailout as it struggles to survive after banks demand an extra £200 million

One of Europe's the longest-running holiday firms, Thomas Cook, is on the brink of administration asking the government for a bailout, following a shortfall in funding from its backers. The Department for Transport said in a statement, "We do not speculate on the financial situation of individual businesses.".

The 178-year old travel firm has been struggling a lot recently with its finances, it has tried a restructuring process a number of times in recent years, in May this year, one of the most recognised UK travel brands reported a £1.5 billion loss for the first half of the year. In July it said it needed £900 million to survive the winter and trade into the next year.  It believed it had everything sorted a few days ago, at least for the rest of this year with a rescue deal by Chinese firm Fosum, who also own ClubMed and football club Wolverhampton Wanderers and a number of other backers.

However, Royal Bank of Scotland and Lloyd and one or two other bankers are demanding the travel firm stumps up an extra £200 million for contingency funds for the winter months, this is in addition to the £900m brought in by the Fosun rescue deal. RBS, itself bailed out by the UK government defended its bullish stance, saying  "As one of a number of lenders, RBS has provided considerable support to Thomas Cook over many years and continues to work with all parties in order to try and find a resolution to the funding and liquidity shortfall at Thomas Cook."

“It is appalling that banks that owe their very existence to handouts from the British taxpayer show no allegiance to a great British company, Thomas Cook, when it needs help,” Brian Strutton, general secretary of pilots’ union Balpa said.  “This puts 9,000 good quality UK jobs needlessly at risk and puts an iconic British brand in jeopardy. The government has a say in this, owning one of the key banks and still with huge influence over the other. RBS and Lloyds should be told by the prime minister to support Thomas Cook." he claimed. 

It is estimated that there are 600,000 customers of Thomas Cook overseas on holidays, around 170,000 of those come from the UK, with hundreds of thousands about to embark on trips from various European countries. 

Negotiations and discussions are still ongoing, with a number of deadline dates on the very near horizon, the bankers want a final decision by this Friday and Thomas Cook's ATOL licence comes up for renewal at midnight on 30th September and until the rescue deal is signed, it doesn't have the money to renew it.

The UK's Civil Aviation Authority has started to draw up contingency plans to repatriate UK holidaymakers that are currently overseas, this would be the largest of its kind, if it were to take place.  With the collapse of Monarch recently, the Government decided it would repatriate all travellers, regardless of whether their travel bookings were covered by the ATOL scheme.  If it did the same with Thomas Cook, it would cost an estimated £600 million, far greater than the amount the firm needs to find to continue trading. According to sources, a number of aircraft have been chartered from this Sunday by the CAA should the Thomas Cook go down this weekend.  

The 178-year-old company employs around 21,000 people around the world including some 9000 in the UK who would lose their jobs if the firm collapses. Hundreds of others would also face an uncertain future working in support industries and suppliers.

As of 8am this morning all Thomas Cook's flights were operating as normal from UK airports and holidays were continuing and future bookings being taken, it was the very picture of 'business as usual'. 

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