Thomas Cook Gets Big Stock Market Blow, Might Close Down

The economic reality of British tourists is dire, financial constraints forcing them to give up formerly popular vacation spots such as Egypt, Turkey or Greece. As a result, travel agency Thomas Cook suffered a big stock market blow yesterday, worth 900 million pounds. While some change destinations, other holiday makers are reducing their summer breaks to an average of 10 days, contributing to the huge losses Thomas Cook is faced with.

The forecast for Thomas Cook is so bleak, some even say the British travel agency which has been a leader in the travel market for the past 170 years might close down. The company’s chief executive Manny Fontenia-Novoa told the Daily Mirror that their customer’s amount of money that could be spared for their own private treats has significantly decreased.

‘It means they have less to spend on things they like.’With consumers feeling the pinch we can’t pass on higher prices and it’s hitting our margins. It might not sound like a lot but £10 to £15 less on a holiday we only make £25 on — that’s a big hit.’

Mr Fontenla-Novoa also added the current trading conditions are the worst he has ever been faced with.

“The destinations in North Africa are decimated. In the UK the market is very tough and consumer confidence very low.”

The profits warning released yesterday led to an 8% drop for Thomas Cook shares, which in turn caused the 900 million pounds decrease in the agency’s market value. The limited cash of British customers was not the only cause for the company’s poor performance. The political turmoil affecting Tunisia, Egypt and Morocco also hammered a few nails in Thomas Cook’s coffin. Trips to Egypt’s popular seaside resorts alone have dropped by 50% after the protests of early 2011.

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Regardless of the big blows the travel agency has received in the past months, Thomas Cook’s CEO still rejects the possibility of a closure.

“In terms of whether we’re planning shop closures right now, we’re not,” Mr Fontenla-Novoa said. “What we’re planning to do is wait to see what the CC says about the merger and see what the remedies are if any and then we’ll take it from there.’

Given this year’s difficulties facing travel industry, the drop in profits and the losses were not a surprise for business analysts. But the extent of the loss was indeed a huge surprise, which made them wonder about the flexibility of Thomas Cook’s business strategy and their ability to sail hostile waters. Unless they find a way to recover, 2011 will mark the end of a travel company that has definitely made history.





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