Sunday, 13 October 2019

Another piece of the Thomas Cook puzzle

As I mentioned a couple of weeks ago, there were/are lots of groups with an interest in seeing Thomas Cook's operations keeping going. What tourists are paying £1,000 for is to  be somewhere nice and hot for a week, the flying there and back - which is what Thomas Cook was in charge of - is a pain in the bum. The marginal/average cost of flying a plane full of UK tourists to their destination in Europe and back is about £100 per passenger, the value/cost to everybody concerned (of the actual holiday, using up limited days' leave from work) is far in excess of that.

The BBC report a good example of such a group, which hadn't occurred to me before:

The sudden collapse last month of one of Europe's biggest travel groups, Thomas Cook, ruined the holidays of 600,000 stranded tourists. Hundreds of thousands more had trips booked when the news was announced.

But for parts of Spain's tourist sector, Thomas Cook's demise is also an existential threat... The Spanish Confederation of Hotels and Tourist Accommodation has said that 1.3 million autumn and winter visitors will be unable to fly into Spanish destinations.

This will result, it says, in the shutting down of at least 500 hotels, generating losses to the tourism sector running into the hundreds of millions of euros.

Spain's government has announced a package of measures worth €300m (£260m; $330m), including emergency credit lines and a reduction in airport fees, particularly for hubs in the Balearic and Canary islands, plus plans to spend €500m in improving tourism infrastructure.


Surely, that €300m (or €800m, or whatever) would have been more than enough to take over Thomas Cook's airline business (plus whatever other bits they need) and keep it going, maybe even turn it round? Stuff like the leases on the planes; staff wages (it's a lot cheaper keeping a team going than assembling a new one); the take-off and landing slots; all the information about who's going where and when.

Thomas Cook's 2018 accounts show that it (they?) had a decent operating profit/positive cash flow from operating activities. What tipped it (them?) into big losses were interest costs and the usual 'cost of intangible assets' nonsense. The new owners of the business don't need to take on the ghastly debts, that's Thomas Cook's old creditors' problem (many of whom will be entirely innocent in the whole mess; some of whom will be complicit and it serves them right).
------------------------------------------
To cut a long story short, the Spanish government could simply run the airline which takes UK tourists to Spain. Everybody wins.


5 comments:

Lola said...

Or, let markets work and do not subsidise the hotels - aka rent seeking landlords - partially.

TC goes bus. Entrepreneur A steps in and buys the going concern - ex the debts - gets on one of his plaes and goes and sees all the hoteliers. Job done and not in any way at taxpayers expense.

Because Mr MW we all know from experience the governments running airlines IS A VERY BAD IDEA.

Unknown said...

Mark:
https://discussion.theguardian.com/comment-permalink/134286000
Guy compares property to fine art

Mark Wadsworth said...

L, the markets will work, but it takes longer rebuilding everything than taking it over.

Agreed, Spanish tourism industry is charging "rent" for people to access the sunshine. But they are still businesses. if they want the money to keep coming in, they should have bought trade and assets of Thomas Cook.

I only suggested "Spanish government" because they have deeper pockets and can act more quickly than it would take all the Spanish tourist businesses to get the money together and agree the terms.

U, I've seen similar KLNs before. The reply is "land value tax is not a wealth tax, it is a user charge"

The Stigler said...

The problem is that less and less people find it a pain in the butt.

Back in the 1980s, booking a hotel in most of France meant knowing French. It meant making an international phone call (back when that was expensive). It meant having hotel books and so forth. Now I go to booking.com and it's done.

Also, there's a lot more people in the packaging game. You used to go to Cooks and they'd get you both flight and accomodation. Now, you onto an airline site and there's accomodation. Go to Eurocamp to book a caravan and they'll get you a ferry or flight.

The coastal accommodation people will be fine because people always want that coastal accommodation. Lots of French stuff is done via sites like HolidayRentals.com.

(there isn't a huge premium on sun. It's coast that really pushes the price up. You can get really cheap houses for a week in the Charente, which has lovely sunshine, but is about 100 miles from the sea).

Mark Wadsworth said...

TS, for sure, that is not the point. Lots of people do 'packaging', but each of them has to laboriously set it all up, the website, the contacts, the endless contracts, the reputation, the employees etc.

TC had a good system in place, so those worst affected from it (UK govt on behalf of stranded tourists, ATOL, Spanish hoteliers, shops at airports, whoever) would have done well to quickly club together and take over TC's bundle of contracts and keep them running (could be done in hours or days), rather than wait for competitors to expand to fill the gap (this will happen with free enterprise, but will take weeks or months or possibly even years).