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Thomas Cook on brink of collapse as 180,000 risk being stranded

Edmund Heaphy
·Finance and news reporter
FARO, ALGARVE, PORTUGAL - 2019/08/31: A Thomas Cook Airlines Airbus 321 on the move at Faro airport. (Photo by Fabrizio Gandolfo/SOPA Images/LightRocket via Getty Images)
A Thomas Cook Airlines Airbus 321 on the move at Faro airport. Photo: Getty Images

Thomas Cook (TCG.L) on Friday confirmed that it was seeking an extra £200m in funding in order to stave off a collapse of the travel operator — something that could leave up to 180,000 stranded abroad and put 20,000 jobs at risk.

In a statement, the 178-year-old travel company said that discussions on the final terms of its rescue deal were continuing, including with Fosun Tourism Group, its largest shareholder.

Fosun agreed in August to inject £450m into the company as part of a £900m rescue package, though Thomas Cook must still agree on the deal with its lenders.

Thomas Cook's creditors, which include banks such as Royal Bank of Scotland (RBS.L) and Lloyds Bank (LLOY.L), have now demanded Thomas Cook secure an additional £200m in standby funding.

Sky News reported that the travel operator is holding emergency talks about a deal to sell its Nordic airline and tour operating units in an attempt to raise the cash.

READ MORE: 55,000 customers affected in collapse of UK holiday firms

Shares in Thomas Cook plunged by as much as 55% on Friday before quickly recovering. They are now down by around 17%.

If it cannot raise the funding ahead of next week’s vote on the company’s rescue package, Thomas Cook is likely to collapse — which could leave around 180,000 people stranded overseas.

Meanwhile, Thomas Cook employs around 22,000 staff globally, including 9,000 in the UK.

The repatriation efforts could dwarf that of the Monarch Airlines collapse, when 110,000 holidaymakers were flown home as part of an operation that cost the government £60m.

RHODES ISLAND - AUGUST 10:  Passengers wait for boarding on a Thomas Cook Passenger jet at the Airport on August 10, 2008 in Rhodes, Greece. Rhodes is the largest of the greek Dodecanes Islands.  (Photo by EyesWideOpen/Getty Images)
Passengers wait for boarding on a Thomas Cook Passenger jet at the Airport on August 10, 2008 in Rhodes, Greece. Photo: Getty Images

The Civil Aviation Authority would be expected to launch a major operation to fly stranded holidaymakers back to the UK, hiring aircraft at the taxpayer’s expense.

Most customers who purchased package holidays with Thomas Cook are protected through the Civil Aviation Authority’s Atol scheme, which sees operators contribute money to a back-up fund.

That means those already abroad will be able to continue with their holiday and that an alternative flight will be arranged for them, while those with bookings will be offered a full refund.

Those who booked flight-only holidays with Thomas Cook will likely have to contact their credit or debit card provider, however.

The authority was last week reported to be making contingency plans for a possible Thomas Cook collapse, and is thought to have put insolvency experts from advisory firm AlixPartners on standby.

Thomas Cook has been weakened by a pile of mounting debts in recent years. In the first half of its financial year, it reported £1.2bn in net debt, and lost £1.5bn.

At the same time, it has been forced to cut prices due to the rise of online competitors.

READ MORE: Savvy Brits could save up to 50% on their UK holidays