Worries Over Thomas Cook Unfounded, Agents Say

Despite alarming media reports early last week that U.K. operator Thomas Cook was on the brink of bankruptcy, travel agents on both sides of the Atlantic said they never doubted the company’s viability.

“There is very little wrong with Tommy Cook, apart from the hype that has been created by the media here,” said Ken McNab, managing director, The Travel Company Edinburgh, and president of the U.K. chapter of the American Society of Travel Agents.

“I would be fairly relaxed about booking somebody with Cook. They’ve got the experience, they’ve got the product, they’ve got the infrastructure all in place,” McNab told Travel Market Report.

David McCaig

Reaction was similar on this side of the Atlantic. David McCaig, president and COO of the Association of Canadian Travel Agents, said worries about Cook were overblown.

“There was never any major concern about Cook,” he said.

Triggering alarm
But press coverage in the U.K. trumpeted a different story. When Thomas Cook announced it was seeking a £100 million bridge loan (about $156 million) early last week, local media started talking bankruptcy and aborted holidays.

Cook’s short-term bookings in its home market plummeted 30% almost overnight, McNab said, although there was no change in reservations out of Germany, France, or other major European markets.

Longer-term bookings for 2012 were largely unaffected, but company stock prices crashed by more than 95%. At one point, independent analysts estimated that Cook’s total capitalization was only about one-sixth of the cash value of its global airline, hotel, resort, and travel agency units.

Short-term cash needs
Cook did face a cash flow issue, said McNab. “They have been short of funding because of the takeover of The Co-Operative that is happening.” (See story, “Thomas Cook Merger Yields U.K.’s Largest Agency,” Sept. 26, 2011.)

“They had to find more short-term money for cash flow over the holiday season, when bookings are normally down. It looked a bit shaky in the media, but it isn’t really shaky, if you look underneath the hype.”

Late last week, Cook announced that it had obtained a £200 million ($312 million) bank loan to ease short-term cash flow worries.

Travel agent reaction
Even before the loan announcement put fears to rest, travel agents weren’t buying predictions of Cook’s imminent demise.

“We have absolutely no concerns as to what we’re selling and are still recommending selling Thomas Cook products,” said Julia Lobue-Said, leisure director for Advantage Travel Centres, the U.K.’s largest group of independent agencies. Advantage Travel Centres has about 800 agency members.

“In the consumer press, they always want a horror story,” she continued. “It’s a great shame this has made the headlines.”

Saw no negative indicators
In Canada, McCaig said he had been aware Thomas Cook needed to refinance. He added that “none of the indicators that we look to indicated that there was a serious problem.”

Steve Gillick, president and COO of the Canadian Institute of Travel Counselors, said consumer concerns had more to do with media coverage than Cook’s financial health.

“The British press is famous for their eagerness to obtain controversial sound/video bytes that invite consumer concern,” he said via email. “The same holds true in the U.S. as far as some media channels are concerned.

“Despite the 700-plus emails that were awaiting for me when I returned to the office this morning, after 10 days in Japan, none were voicing concern over booking Thomas Cook or asking for advice on the subject.”

Agency closures coming
Thomas Cook is expected to announce the closure of about 200 agencies, which was planned as part of the acquisition of The Co-Operative Travel, Britain’s number three wholesaler. The merger was approved in September.

The agency closures will trim about 1,000 employees. The company is also expected to cut at least six non-executive directors. The news prompted a 41% jump in stock prices of parent company Thomas Cook PLC on the London Stock Exchange.

Over-reaction?
At the height of recent concern about Thomas Cook, one of the firm’s insurance underwriters, Northern & Western Insurance Company, temporarily suspended supplier-only coverage on Cook’s flight-only and accommodation-only sales.

Cook’s primary insurer, IPP Insurance Company Ltd., made no changes to its coverage. “Other insurers may have overreacted to the recent press reports, due to their lack of experience in the travel industry,” an IPP spokesman said.

Even the British Prime Minister got involved. David Cameron told Parliament during his weekly Question Time that he had asked for a briefing on Cook.

The collapse of a tour wholesaler/operator that carries 22 million passengers annually could have bankrupted the Air Travel Trust Fund, which insures consumer air travel. Press reports say the ATTF, which is guaranteed by the British government, is already more than $68 million in the red.