Thomas Cook – problems and consequences

Thomas Cook Airlines

Thomas Cook Airlines

Last week, the biggest UK travel group, Thomas Cook, delayed publishing its 2011 results as it was renegotiating the terms of its credit agreements. Following this announcement, the group saw its shares drop by 75% (from 41,62£ to 10,20£) in one single day. After a long week-end the Thomas Cook managers reached an agreement with the banks and received a new £100m loan for the business. After the good news came out the group’s shares jumped by 50%, but the share value is still much lower than it was one week ago.

As an affiliate of Thomas Cook, I received regular payments from them over time. This morning, I received an email from them in which I was informed that they will close the affiliate program on 31/12/2011. In the last couple of years I witnessed many bankruptcies in the travel industry, but this is the first time I see a company taking such measures in order to reduce costs and restructure its business. And they are giving their business partners a generous one-month notice.

By closing the affiliate program Thomas Cook is reducing its commission costs. This decision may, of course, lead to a decrease in ticket sales but on a smaller scale. I believe that many affiliates (myself included) will continue to promote the business because they like and trust it. So, all in all I think this was a good decision and I hope that the tour operator will soon recover from its current financial condition.

Sources:

http://www.travelobserve.com/Press-Zone/thomas-cook-facing-financial-problems.html

http://www.guardian.co.uk/business/marketforceslive/2011/nov/28/thomas-cook-soars-bank-rescue

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