Thomas Cook Crisis
Background to the Thomas Cook Crisis
Tourism contributes 11.7% of GDP and represents 13.6% of all members in Spain. Tourism is, by its nature, a horizontal sector, having an impact on practically every sector of the economy, and it is capable of generating induced income in sectors such as commerce, leisure and the services in general which our visitors use, whether they come through a tour operator or independently.
Tourism is also a fundamental sector in the economy of the island regions. In the Balearic Islands it represents more than 45% of gross domestic product (GDP) and provides work for more than 30% of all wage earners and in the Canary Islands it contributes more than 35% of GDP. Furthermore, the sector generates more than 40% of all jobs in those regions. Notable, in both cases, is the significant number of European tourists they receive, especially British tourists.
The British group Thomas Cook, the second largest in the world and the oldest, went into administration on Monday 23 September, after the failure of emergency negotiations with its principal shareholder, the Chinese investment group Fosun, and its creditors with the aim of securing a capital injection to allow it continue operating.
The company, with a history stretching back 178 years and 22,000 employees, announced in a communiqué the “compulsory liquidation of Thomas Cook” in spite of the efforts made. The firms AlixPartners and KPMG have been chosen to help the Official Receiver with the process of winding up the group.
The Thomas Cook group comprises an extensive tour-operating network, various airlines and hotels. Given that composition, the failure has also had a direct effect on air connectivity. In 2018, Thomas Cook airlines brought a total of 7.1 million passengers to Spain according to statistics from the airport operator AENA. The group Thomas Cook United Kingdom alone sent around 1.3 million tourists to Spain in 2018. It operated flights from the United Kingdom to 11 Spanish airports (essentially the Canary Islands, the Balearic Islands, Girona/Costa Brava, Reus/Costa Dorada, Alicante/Costa Blanca and Costa de Almería), although most of its operations were focused on the two archipelagos, which will therefore be the worst affected regions. So the effects of Thomas Cook’s failure will be felt not only by the tourism industry, but also in terms of connectivity, jobs and, in short, the social well-being of the affected autonomous regions, in particular the Canary and Balearic Islands, and the country as a whole.
Given this situation, the amount owed by Thomas Cook UK to the more than 600 Spanish hotels affected stands at more than €260 million. The amounts owed by other Thomas Cook subsidiaries which have become insolvent (such as those in Germany and the Netherlands) or those whose operations remain frozen (as in the case of Hungary, for example) has yet to be calculated.
Furthermore, the fact that Thomas Cook UK has ceased trading means that all of those people who had booked (and in many cases paid for) tourism-related services to travel to Spain in the coming months will now not come. According to estimates using data from AENA, the impact is reckoned at more than 400,000 tourists affected in the Canary Islands and 300,000 in the Balearic Islands between October 2019 and March 2020.
Finally, it is worth pointing out the significant loss of direct employment, with more than 3,400 jobs including workers at the company’s head office in Spain (800 at the head office and the handling company at the airport), located in Palma de Mallorca, and positions at hotels. In addition to the loss of direct employment, there is a much broader social aspect, as there is a risk that the hotels affected will have to close, which could spread to other sectors, such as transport and product distribution, but also to complementary sectors such as commerce and restaurants, among others.
Thomas Cook worldwide
The situation in the European countries where Thomas Cook had a presence is detailed below.
Consequences and impact of the failure of Thomas Cook
The problems arising from the failure of Thomas Cook can be summarised in four main áreas:
- First, the loss of air connectivity, particularly important in the Canary and Balearic Islands, which requires measures to be implemented aimed at attracting airlines and routes.
- Second, the lack of liquidity of many of the affected companies and self-employed individuals and the drastic worsening of their balance sheets, as the failure means that the turnover for the summer months has not been received and the winter season, which is high season in the Canary Islands, is at risk. This means a lack of short-term liquidity for many companies and self-employed individuals. It should be borne in mind that the effect of non-payment is not limited to the hotel sector, but also extends to the transport and distribution sectors, as well as suppliers of the hotels. Soft credit channels should be set up as a matter urgency to overcome liquidity problems and to be able to deal with the new tourism season. Furthermore, employment costs should be reduced by subsidising social security contributions or deferring payment of social security contributions and taxes.
- Third, the negative impact which it has on workers affected both directly, due to the closure of Thomas Cook’s head office in Spain, located in Palma de Mallorca, and indirectly, due to the closure of affected companies. Given this situation, the State Public Employment Service (Servicio Público de Empleo Estatal: SEPE), in coordination with the autonomous regions, will implement various active and passive employment policies in order to facilitate and speed up the process of finding new jobs for those affected.
- Fourth and finally, the significant reduction in tourism demand flows, which requires campaigns to attract tourists and the search for new market niches, for which it is necessary to adapt the tourism products offered to the new preferences of tourists. Furthermore, new tour operators and/or channels for attracting demand must be sought as a matter of urgency.
The Civil Aviation Authority of the United Kingdom operates under a financial protection scheme known as the Air Travel Trust (ATT), for consumers who purchase package holidays including flight and accommodation through ATOL-protected tour operators and travel agencies.
The government and the Civil Aviation Authority took the measures necessary to ensure that affected travellers were returned to the United Kingdom in the days immediately after Thomas Cook ceased trading.
On 11 October, the Spanish cabinet approved Royal Decree-Law 12/2019[PDF] [249KB], introducing measures for all companies affected, including: the establishment of a credit line for companies which have not been paid by TC, the establishment of a national fund for tourism competitiveness (Fondo Financiero del Estado para la Competitividad Turística: FOCIT), coordination of active employment policies between SEPE and the autonomous regions, support and information measures for those affected and reinforcing the intelligent tourist destinations strategy. These government measures were addressed at the interministerial tourism meeting held on 3 October 2019[PDF] [175KB].
During her meeting with the European employment commissioner, Marianne Thyssen, the acting minister of industry, trade and tourism requested that the EU allocate resources from the European Globalisation Fund to alleviate the consequences which the failure of Thomas Cook may have in terms of employment. Other countries affected by the failure, such as Greece or Portugal, could also be included in this request. (Press release regarding European funds[PDF] [326KB])
Separately, on 24 September, the acting minister of industry, trade and tourism met with representatives of the most affected autonomous regions - the Canary Islands, the Balearic Islands, the Valencian Community, Andalusia and Catalonia - and with business owners from the tourism sector, to draw up and coordinate a joint action plan and to tackle this crisis.(Press release regarding autonomous regions[PDF] [340KB])
The Spanish national aviation safety agency (Agencia Estatal de Seguridad Aérea: AESA) is carrying out on-site inspections at the Spanish airports from which Thomas Cook operated, to check that the rights of passengers laid down in Regulation (EC) 261/2004, regarding delays, cancellations and denial of boarding, are being respected. (Press release regarding AESA inspections[PDF] [131KB])
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Information and links leading
Measures taken before the crisis
- Right Decreto-ley 12/2019, 11 October, which urgent measures are taken to alleviate the effects of the opening of insolvency proceedings of the business group Thomas Cook [PDF] [248.16 KB]
- Shock Plan Thomas Cook. 13 support measures and modernization the tourist industry [PDF] [325.11 KB]
- Measures taken by the government of Spain to face the crisis caused by the cessation of activity of Thomas Cook [PDF] [185.64 KB]
- he Balearic Isles. Decreto-ley 2/2019, 4 October [PDF] [169.76 KB]
- The Balearic Isles. Note, 3 October 2019 [PDF] [190.31 KB]
- The Balearic Isles. Order indefinite hiring subsidies encourage [PDF] [3.11 MB]
- The Balearic Isles. Order occasional aid mitigate impacts singles [PDF] [1.76 MB]
- Canary Islands. Press release, 7 October 2019 [PDF] [139.23 KB]
- Available Line ICO Tourism Sector Thomas Cook. Keep reading
- Disponible Línea ICO Sector Turístico Thomas Cook. Keep reading
- The Balearic Isles. Instructions timely aid contest indefinite hiring and creditors. Keep reading
- Meeting of the minister in the Balearic Islands. Keep reading
- The minister meeting in Arona. Keep reading