The almost baffling detail of Thomas Cook’s financial woes over the last few weeks masked much deeper factors that led to its demise.
As any airline boss will tell you, a legacy business model presents major hurdles and is ultimately one that’s not sustainable without significant changes and cost cutting.
Cook ploughed on with its own legacy model for too long. A 178-year history sadly counts for nothing if you don’t prepare for the future.
The old formula of mass market tour operation, airline and retail network no longer works if it’s just offering a product that’s easily self-booked elsewhere and too similar to competitors’ products with much higher overheads.
Yes, Tui manages it, but Tui moved more quickly into exclusive own-brand hotels than Cook and offers a broader range of higher-yielding long-haul holidays than its once former rival. Tui has also got into cruise, a key growth area.
Over the last decade, Cook got left behind until the inevitable happened. The roots of this approach go back beyond the era of Peter Fankhauser, who was at the helm from late 2014 until its demise.
The approach only a decade ago – when the threat of the internet to commoditised travel sales was surely evident to anyone with some business nous – was to make Cook a cheap and cheerful bucket and spade brand with a key high street presence.
Adding 400 shops in 2010 following a merger with Co-operative Travel – only to close most of them down in the following years – was a bizarre move.
Thomas Cook in its most recent form was created from the 2007 merger with MyTravel Group, the most mainstream of brands, which almost collapsed itself in 2003.
A £237 million acquisition spree and £290 million paid to shareholders in 2008-2010 led to a 2011 cash crisis, and the resignation of then chief executive Manny Fontenla–Novoa.
Unlike now, the government then secretly got involved to avoid a collapse.