LONDON (Reuters Breakingviews) - Thomas Cook has folded up his beach umbrella for the last time. Given the venerable British tour operator’s almost antediluvian business model, the UK government’s refusal to provide a last-minute 150 million pound lifeline wasn’t hard. Taxpayers will instead pick up the tab for repatriating 150,000 sunburned Brits. Invoking “moral hazard” won’t be as easy if a chaotic Brexit claims other corporate victims.
Social historians will mourn the demise of the world’s oldest travel company, founded by a Baptist carpenter in northern England in 1841; their corporate counterparts will not. With more than 500 high street outlets, Thomas Cook demonstrated a stunning inability to adapt to changing travel habits. The rise of budget airlines and disruptors like Airbnb combined with the weak pound and the unusually hot summer of 2018 to kill off the company which had suffered a near-death experience in 2011.
Prime Minister Boris Johnson had little choice but to let the firm go under, even though the government is now on the hook for getting holidaymakers home. Repatriating 80,000-odd Brits after the 2017 collapse of charter airline Monarch cost taxpayers 50 million pounds. Thomas Cook has stranded twice as many British customers and Boeing’s grounded 737 MAX has pushed up the cost of leasing aircraft. Insurance won’t let government recoup much of the projected 150 million pound expense.
Thomas Cook’s owners, including China’s Fosun Tourism, its largest shareholder, face total wipeout. Creditors won’t fare much better. The company only owned 16 of its 100-odd fleet of planes. Other assets include landing slots, nine Mediterranean hotels and the Thomas Cook brand, which is presumably worth less than a week ago. It is hard to see these covering much more than a quarter of claims estimated at between 1.5 billion pounds and 1.7 billion pounds.
The UK government’s repatriation bill is roughly the same size as the bailout request Johnson spurned. Refusing to rescue the company in favour of footing the cleanup bill allows the government to maintain the tough line it took with other recent cock-ups such as British Steel and Sirius Minerals. But if Johnson follows through on his threat to take Britain out of the European Union without a deal by the end of October, other corporate victims will come knocking.
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