The group had seemed to be close to securing a £900mln rescue deal for its tour operator and airline businesses, propped up by a £450mln cash injection from its largest shareholder, Chinese giant Fosun, and a consortium of banks and other lenders.
However, the agreement was thrown into doubt on Friday after a number of banks, led by Royal Bank of Scotland PLC (LON:RBS) and Lloyds Banking Group PLC (LON:LLOY), demanded Thomas Cook find an extra £200mln to keep itself afloat over the traditionally quieter winter period.
This proved to be too much for the company, which on Monday announced to the market that it would enter liquidation proceedings, putting 22,000 jobs at risk worldwide and leaving around 150,000 customers stranded abroad.
Peter Fankhauser, Thomas Cook’s chief executive, said it was a matter of “profound regret” that the company had been unsuccessful in securing a rescue deal, adding that the additional funding demanded last week had proved an “insurmountable” challenge for the 178-year old business.
“I would like to apologise to our millions of customers, and thousands of employees, suppliers and partners who have supported us for many years”, he added.
The company's shares were suspended from the main market with immediate effect.
Among the airlines, easyJet PLC (LON:EZJ) was up 2.9% to 1,088p, Ryanair Holdings PLC (LON:RYA) was up 1.1% to €10.10, British Airways owner International Consolidated Airlines Grp SA (LON:IAG) was down 1% to 473p and Jet2 owner Dart Group PLC (LON:DTG) was 7% higher at 906p.
Chris Beauchamp, chief market analyst at IG, said that while Thomas Cook’s demise would help rivals such as TUI and On The Beach expand their market share, structural problems facing the industry would “continue to weigh on profitability”.
Not enough cash
Meanwhile, AJ Bell’s investment director Russ Mould said the travel group’s failure was ultimately attributable to the fact that it “didn’t have the cash flow to reinvent itself” amid growing competition, with most funds being diverted toward repaying its debts.
“[Thomas Cook] struggled with very thin profit margins, high levels of competition, rising fuel prices and large borrowings. It also had expensive stores on the high street to maintain and leasing fees on aircraft to keep paying” Mould said.
The analyst added that the company’s disappearance could result in higher prices for customers as rivals took advantage of less competition in the market.
--Adds analyst comments and updates share prices--