Thomas Cook: Why It Collapsed and What Happens Now

The British tour and airline operator Thomas Cook has collapsed in spectacular fashion, leaving an estimated 600,000 customers stranded on their holidays around the globe.

On Monday morning, the U.K. launched its largest-ever peacetime repatriation effort in order to manage the fallout. If you thought the Monarch airline collapse a couple years back was a big deal, well, this is much bigger.

Here’s what you need to know about the situation.

How did it come to this?

Thomas Cook lasted a good 178 years, in one form or another. But it has been in trouble in recent times. Its latest incarnation, Thomas Cook Group, which coalesced in 2007 through the merger of Thomas Cook AG and MyTravel Group, nearly went under in 2011—it lost 85% in value and survived only through a loan extension deal that left it deeper in debt.

In May, the group reported a £1.5 billion ($1.9 billion) loss for the first half of the year, £1.1 billion of which was a write-down for what was in hindsight a disastrous MyTravel merger. Thomas Cook at the time also blamed “an uncertain consumer environment across all our markets,” with factors including Brexit, which it said was causing customers to delay their holiday plans, and 2018’s European heatwave, which also reduced demand for getting away from the usually tepid British isles.

But the debt was the big problem, and Thomas Cook was by this point insolvent.

A few weeks ago, the group looked set to get a $1.1 billion rescue package from banks, hedge funds and China’s Fosun, that would have made its interest payments more bearable. But then the banks suddenly said the firm needed to find an extra $250 million in underwritten funds, if the recapitalization deal was to go ahead.

Thomas Cook’s management failed to find the cash. And so the company collapsed.

So what happens now? In short, chaos and misery—for most of the people involved.

What customers need to know

In terms of numbers affected, the largest group of those hit comprises Thomas Cook’s customers, around 600,000 of whom are now stranded away from home.

The U.K.’s Civil Aviation Authority (CAA) is now carrying out “Operation Matterhorn,” which aims to repatriate more than 150,000 people whose end destination was in the country. Those looking for details of their emergency flights home can find them here.

“The first repatriation flight left from JFK to Manchester this morning,” a CAA spokesperson told Fortune. “The repatriation effort will happen across 18 countries.”

But these repatriation flights will only take place over the coming two weeks. After that, passengers have to make their own arrangements.

The CAA has a financial protection scheme called Air Travel Organisers’ Licensing, or ATOL, which covers package holidays. This should mean stranded Thomas Cook customers will not need to pay any extra to the hotels where they are staying, due to the hotels’ concerns over payment (as tour operators usually only pay them after the visit) or if they need to spend additional nights due to the firm’s collapse.

The African Tourism Board issued an appeal to tourism companies, hotels and safari lodges on the continent to assist Thomas Cook’s customers in any way possible. “Companies going an extra step to make Thomas Cook guests feel welcome and appreciated during this uncertain time will pay off in the medium and long term,” it said.

The affected customers include around 140,000 people who were traveling with Thomas Cook’s German subsidiaries. The German government said compulsory insurance should cover the costs of their return home.

It should go without saying that those who were about to embark on a Thomas Cook vacation should not go to the airport, as it isn’t going to happen.

And the workers?

Thomas Cook and its subsidiaries employed around 21,000 people around the world, from flight crews and hotel staff to those who worked in its hundreds of main street branches. Almost all are suddenly without a job, and unions are furious.

“Despite continuing to keep Thomas Cook going in recent weeks with dignity and integrity while their own futures were being secretly decided we don’t even know if staff will get a pay check this month,” said the British Airline Pilots’ Association (BALPA) in a statement. “It is despicable. Thomas Cook pilots and all staff deserve better than this.”

The U.K.’s opposition Labour Party has also seized on the issue, with shadow finance minister John McDonnell saying Thomas Cook’s executives should have to pay back any bonuses they had received.

“They need to really examine their own consciences about how they’ve brought this about and how they themselves have exploited the situation,” McDonnell said.

Despite the company’s ongoing precarious situation, its executives have indeed paid themselves around $25 million in the last five years, with over $10 million going to Swiss CEO Peter Fankhauser.

One part of the businesses might continue, and that’s the German budget airline Condor—a Thomas Cook subsidiary, but one that maintains it is still profitable.

“Condor is continuing flight operations as usual, meaning there is no need for a repatriation mission,” Condor said Monday, as it asked the German government for cash to “prevent liquidity bottlenecks.”

Any winners in this mess?

Thomas Cook’s collapse has provided an immediate boost to the share prices of its rivals.

The Germany-based tour operator TUI, which was Thomas Cook’s biggest rival, saw its price pop by over 8% at one point. EasyJet’s share price was up almost 4% at the time of writing, while Ryanair’s price rose 2.6% before settling down somewhat.

Meanwhile, the low-cost British airline Jet2 told a prospective customer on Twitter that the price of his Jet2 trip booking suddenly rising could be a result of demand-based fluctuations resulting from Thomas Cook’s demise.

And then there’s the hedge funds. As Bloomberg reports, speculators such as Sona Asset Management and Xaia Investment had bought credit-default swaps that could net them a payout of as much as $250 million thanks to the collapse.