Thomas Cook China sees little impact from UK closure

When Thomas Cook, the world’s oldest travel agency, enters bankruptcy this week, the future for its joint venture with Shanghai-based conglomerate Fosun International will likely remain positive, the JV said.

Thomas Cook China said it is fiscally stable and healthy at this time. The company is unaffected by the issues faced by Thomas Cook in the UK and is operating normally.

“Thomas Cook China will continue to benefit from the long-term commitment and support of the Fosun Tourism Group,” the announcement stated.

In March 2015, Fosun International, the parent company of Fosun Tourism Group, acquired a 5 percent stake in Thomas Cook.

Seven months later, the two parties formed a joint venture called Thomas Cook China, in which Fosun holds the majority 51 percent stake while the rest is held by the Thomas Cook Group. The brand name Thomas Cook China was officially launched in September 2016.

During a news conference for the half year fiscal report in Hong Kong in mid-August, Qian Jiannong, president of Fosun Tourism Group, admitted the traditional travel agency business is contracting and its outlook is not optimistic due to uncertainties in the global economy.

While not excluding then the possibility of participating in the restructuring of Thomas Cook, Qian said that they will stick to the ground rules to make sure that “there will be a positive influence on Fosun despite what the result will be in the future.”

Thomas Cook UK Plc and associated UK entities said in a statement on its official website they have entered compulsory liquidation on Monday and are now under the control of the Official Receiver in the country, sparking chaos for thousands of its customers around the world.

In an open letter released on Monday, Thomas Cook Chief Executive Officer Peter Fankhauser said that they “have worked exhaustively in the past few days to resolve the outstanding issues on an agreement to secure Thomas Cook’s future for its employees, customers and suppliers.”

“Although a deal had been largely agreed, an additional facility requested in the last few days of negotiations presented a challenge that ultimately proved insurmountable,” he wrote.

The agreement that Fankhauser mentioned refers to the restructuring negotiations initiated by Fosun Tourism Group, which offered 450 million pounds ($559.8 million) in investment to acquire a 75 percent stake in Thomas Cook’s travel business and a 25 percent stake in the UK travel giant’s airline business.

But no consensus was reached regarding Fosun’s latest offer. In an announcement released on Monday, Thomas Cook China, in which Fosun Tourism Group holds a majority stake, said it has been informed that Thomas Cook Group has entered compulsory liquidation and it “feels sorry” for the bankruptcy.

The UK business of Thomas Cook ceased trading with immediate effect and all future flights and holidays were canceled, according to the statement. The 178-year-old travel agency has a fleet of more than 60 planes worldwide. It is estimated that at least 600,000 people around the world will be affected by the suspension of its operations. Thomas Cook has struggled from mounting financial pressure since last year. The company reported a loss of 163 million pounds by the end of 2018 and the flood of red ink further expanded to a loss of 1.5 billion pounds by June.

Zhou Mingqi, chief analyst at marketing consultancy Jingjian Thinktank, said that although Thomas Cook did not manage well over the past few years, the business value of the brand name is huge as it is well established worldwide, and more important, the pioneer of modern tourism.

“Based on its past business performance, there might be some problems with Thomas Cook’s management. If major adjustment can be made regarding business and management, Thomas Cook can seek expansion in China with the help of Fosun Tourism Group and even seek better investment return in the capital market,” he said.