Thomas Cooked - the collapse of the oldest company in travel and their continued communication failures
SUMMARY: In the early morning hours of Monday, September 23, Thomas Cook Group PLC, formally announced bankruptcy and their entering into compulsory liquidation under U.K. law after failing to secure a £200 million loan from its bankers and the partially government-owned/taxpayer-controlled Royal Bank of Scotland (RBS). The world’s oldest travel company, which began in 1841, was closing its doors after 178 years. Sadly, the company known as one of Europe’s top no-hassle travel companies left 600,000 stranded passengers across the globe.
The United Kingdom, the largest Thomas Cook market, had 155,000 passengers stranded, triggering the largest peacetime repatriation effort in U.K. history. The Civil Aviation Authority (CAA), the United Kingdom’s equivalent to the Federal Aviation Administration (FAA), launched Operation Matterhorn to return all stranded passengers carrying a British passport. In total, the U.K. government paid for 150 aircraft from 50 partners which flew 746 individual flights at the cost of £600 million. The collapse also left 21,000 employees without work, many finding out of their job loss while still operating aircraft and flying 35,000 feet in the air. This horrendous situation must cause us to ask, what happened, and how did Thomas Cook’s failure to communicate successfully impact this disaster?
To understand the true scope of the Thomas Cook fiasco, it’s important to first understand who they were as a company and the massive scale at which they operated. At their collapse, Thomas Cook was known throughout Europe as one of the top low-cost, leisure-specific travel companies operating tours in Africa, Asia, Europe, North America, South America, the Middle East. Along with operating tours, Thomas Cook owned 550 brick-and-mortar travel agencies, 380 hotels and resorts, 17 ocean liners and cruise ships, and 151 aircraft flying to 82 destinations on almost every continent. They truly were a behemoth in the travel sector with their airline and travel stores being the crown jewels.
Despite their massive brand awareness, popularized in Europe by the advertising slogan, “Don’t just book it, Thomas Cook it,” as synonymous with their brand as their name, Thomas Cook failed to make the jump into the digital age throughout the 2000s.
In direct competition with Thomas Cook was a flooded air market comprised of easyJet, RyanAir, Norwegian, Vueling, WIZZ, Eurowings, Thomas Cook sister-company, Condor, and German leisure-specific airline and travel group, TUI. All carried lower overhead, focusing on one or two travel and hospitality segments, compared to Thomas Cook who had high fixed costs. The increasing usage of the internet offered more targeted travel experiences and companies including Kayak, Expedia, Priceline, Travelocity, Orbitz, TripAdivsor, Hostelworld, and Airbnb began to chip away at Thomas Cook’s travel store business, many times offering cheaper deals through multiple airline carriers and hospitality groups and undercutting Thomas Cook by not needing in-store travel agents. Partnerships between online travel booking companies and low-cost carriers also increased, many times leaving all of the Thomas Cook ventures out of the equation.
As travelers gained a plethora of options when it came to booking inexpensive flights, guided tours, and accommodations, the demand for a traditional all-inclusive, package style, physical travel agency, and tour company had changed. Furthermore, changes in travel attitudes and apprehension surrounding Brexit led to the gaining of popularity of staycations and less-expensive regional, European-based travel. For many Europeans, particularly Britons, travel has become cheaper, more frequent, less extravagant, and shorter in duration. Younger travelers are able to book inexpensive last-minute flights and hostel accommodations in a matter of minutes and older travelers can book a condo and private tours inexpensively halfway around the world. All these factors lead to less interest in an all-inclusive, long-duration, tour-based travel company like Thomas Cook.
Throughout the days and hours leading up to the collapse, all seemed normal. Thomas Cook flights were taking off and landing, tours were commencing, flights could still be booked on their website, and customer service employees were responding to passengers on Twitter. Thomas Cook sent their final tweet on September 22 at 9:40 p.m., reassuring a passenger that their travel plans would not be affected.
Without the public’s knowledge, an emergency overnight meeting between executives and creditors was taking place to look for any possible path forward. The airline had only roughly $200 million in liquid cash assets on hand and without an immediate cash infusion via a new loan, the 178-year-old company would shutter. Nobody outside the meeting knows exactly what was said in the room or what stalled negotiations, but it decided, that Thomas Cook was no longer able to operate and at 3:01 a.m., the Civil Aviation Authority took over Thomas Cook’s twitter and released the official statement of insolvency.
All around the world, at their very moment of insolvency, flights were boarding, planes were fueling, crews were preparing for takeoff, and passengers were ready to leave for vacation or head home. But at that moment, the company was gone. Everything had to stop. Pilots and flight crews were no longer employees, the fuel that just entered the plane would not be paid for, and planes were no longer owned or leased by the airlines. Travelers now faced a harsh reality. Their flight was canceled indefinitely and there wasn’t an airline to call to re-book. The Civil Aviation Authority (CAA) was now tasked with bringing home nearly 155,000 British travelers in the largest peacetime repatriation effort in U.K. history, codenamed Operation Matterhorn.
REACTION & PR Case Analysis: It’s clear on multiple levels where Thomas Cook messed up and directly walked into a major public relations, corporate communications, and brand reputational crisis. First off, Thomas Cook violated multiple Page principles, particularly numbers 3, 4, 5, and 7. As you will see, the cascading effect of violating multiple principles only further deepened the communications crisis.
3) Listen to stakeholders – Thomas Cook did not listen to stakeholders, both inside and outside the organization as they were heading toward an ultimate collapse. Numerous times multiple groups voiced concerns surrounding changing attitudes in travel with Thomas Cook reacting far too slowly to the high maneuverability of the digital age. This culminated in 2011 with a near-collapse in the business as stocks plummeted 75.2 percent as reports details Thomas Cook was seeking a £100m loan to prop up failing aspects of the business.
Following this event, stakeholders inside and outside the organization demanded a split in the company, separating the more profitable airline from portions of the business that were experiencing slowdowns, such as the hospitality and package tour operations. Thomas Cook leadership responded by slashing the number of travel stores from over 3,000 to just 550 and selling off expensive portions of the business. However, further calls from stakeholders to bring the business fully into the digital age were repeatedly rejected by Thomas Cook leadership and instead, a full re-branding campaign was executed in 2013.
4) Manage for tomorrow – Thomas Cook failed to manage for tomorrow by continuously ignoring call after call to reorganize the company from stakeholders. Investors, financiers, members of the pilots union, and non-union staff across the organization called for a response to the changing travel and tourism industry. Furthermore, in the final days and hours of the business, when Thomas Cook leadership knew the business was certainly doomed, no effort was taken to help soon-to-be stranded passengers or provide an easy transition for employees. Twitter handle, @ThomasCookCares was taken down as it became clear the company cease to exist, offering stranded passengers and crew no way to contact the airline.
5) Conduct public relations as if the whole enterprise depends on it – Clearly, this was not Thomas Cook’s objective. During the final days of Thomas Cook’s operation, when it was clear to executives that their company was collapsing, leadership waited and failed to take accountability for the oncoming disaster. Not only did they not notify employees, passengers, or other key stakeholders, they failed to operate their business with a public relations mindset. To them, it was easier to delay the inevitable until the final moment when they could shut their doors and walk away without having to deal with the fallout. Of course, that fallout left 600,000 passengers and 21,000 employees stranded and out of work.
7) Remain calm, patient and good-humored – Thomas Cook failed at this principle by walking away from the disaster and not even attempting to fix their mistakes. Instead, the government and Thomas Cook’s competitors had to step in to fix the mess Thomas Cook created. Multiple airlines, including major competitors such as British Airways, Virgin Atlantic, and easyJet offered reduced fares for passengers needing repatriation, as well as stating they would create a special hiring division to bring Thomas Cook employees jobs. This lack of an effort on Thomas Cook’s part to remain calm, handle the situation as professionally as possible, and focus on.
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