Full Impact Of Thomas Cook Collapse Unclear: 'Another Sore Spot For The Eurozone'

British holiday operator Thomas Cook collapsed Monday after negotiations aimed at saving the 178-year-old holiday operator failed, and analysts say the impact on the airline industry is unknown.

The closure has also triggered the biggest-ever peacetime repatriation aimed at bringing more than 150,000 British holidaymakers home.

The tour operator's failure put 22,000 jobs at risk globally, including 9,000 in the U.K.

The UK Civil Aviation Authority said the tour operator had "ceased trading with immediate effect." 

Package Holidays Threatened

Thomas Cook is not the first company of its kind to collapse.

Morgan Stanley equity analyst Jamie Rollo said in a note that the collapse of such a well-known holiday brand may damage customer confidence in package holiday operators.

Package holidays are threatened by disintermediation from low-cost carriers and online travel agents, and traditional operators tend to have high legacy retail, technology and overhead costs, the analyst said. 

"The industry has seen many holiday companies collapse in the past including market leaders ILG in 1991, MyTravel in 2003, and nearly Thomas Cook in 2013 and survived. We note that this is a quiet period for holiday bookings, and the industry should have settled down by the new year 'peak' season when summer holiday bookings ramp up. We also note that TUI rebranded from Thomson a few years ago, one reason being the name’s close similarity to Thomas Cook." 

Long-Term Impact Unknown

Thomas Cook's impact on the travel industry remains, with around 150,000 holidaymakers stranded and up to 21,000 jobs at risk, said Jameel Ahmad, global head of currency strategy and market research at FXTM. 

“The potential economic impact of the collapse will not be clear immediately, but it represents another sore spot for the Eurozone and even the economies such as Turkey and Tunisia, which all benefited from being destinations of holidaymakers,” he said. 

The factors behind the demise of Thomas Cook likely include ongoing competition in the airline industry, and more recently, issues such as devaluation in the pound following the EU referendum in June 2016, volatility in oil prices and global uncertainty, Ahmad said. 

When taking a look at the financial information of Thomas Cook over the past 12 years, the U.K.’s oldest travel company has alternated between profits and losses since 2007.

"There have been more losses than profits in the past 12 years, and this suggests that the business model has suffered for more than a decade, and current issues such as Brexit uncertainty and weakness in the British sterling should not be provided as explanations behind why the company went under." 

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Photo courtesy of Thomas Cook.