Thomas Cook Group can arguably trace its collapse back more than a decade, to a round of leisure industry consolidation which resulted in its creation through a 2007 merger between German-owned Thomas Cook and UK holiday carrier Airtours’ parent MyTravel Group.

Goodwill of more than £1.1 billion relating to MyTravel’s UK business, recognised during the merger, was written off over the first half of this year, catapulting Thomas Cook Group into a heavy interim loss, as it sought to cope with a high debt burden and a difficult trading environment.

Thomas Cook Group’s half-year accounts illustrated the precarious position of the company.

Intangibles had made up half its assets at the end of its last financial year, and the write-down meant that, by 31 March 2019, its liabilities exceeded its assets – assets which still contained considerable goodwill – by some £1.34 billion.

Among the liabilities were trade payables of £1.3 billion and long-term borrowings of £1.6 billion, as well as more than £2 billion in revenues received in advance.

While Thomas Cook Group cited various familiar pressures – including fuel prices, overcapacity, and uncertainty over the UK’s withdrawal from the European Union – as reasons for its poor half-year results, the company has hardly been immune to difficulties since the MyTravel merger.

MyTravel had been struggling with losses at the time of the tie-up, and its UK operations were still loss-making even though the company had crept back into overall profit.

Thomas Cook Group had been optimistic, expecting long-term merger synergies of €200 million and projected an operating profit of €620 million for 2009-10.

But the figure for 2009-10 instead slipped to £167 million – only partly attributable to the Icelandic volcanic disruption that year – and it spurred an overhaul of the poorly-performing UK division including optimization of its airline.The air transport industry was emerging from a global economic downturn, while regional issues, such as the detrimental travel effects of the ‘Arab Spring’ movement in 2011, exacerbated the difficulties of Thomas Cook’s “overly-complex” UK business.

Encouraged by the fact that half its UK package holiday business was drawn from retail outlets, the company entered a retail joint venture in 2011 with two Co-operative travel groups, CGL and Midlands, adding some 460 stores to its portfolio of 780 – putting faith in the customer appeal of retail stores despite the prevalence of online booking.

Thomas Cook Group sank into losses in 2010-11, losses which persisted for five years until the company returned to the black in 2014-15, having implemented a transformation programme and witnessing improvement in its UK business.

It unveiled an extension to this transformation in 2015, a new operating model containing initiatives intended to enhance quality and improve margins, through better yields and cost efficiencies, achieving higher earnings and cutting debt. Chinese firm Fosun Tourism Group lent support to the company, through a minority investment.

The return to profitability allowed Thomas Cook Group to start recommending a dividend in 2016, for the first time in five years.

But while the new model – which included an emphasis on own-brand hotels and growing the seat-only flight business – aimed to reshape Thomas Cook Group over a three-year period, operating profit margins stayed low and continued to be hammered by a combination of finance costs, restructuring costs, and the costs of implementing the model.

The extent of the folly of its Co-operative investment became apparent in 2017 when it revealed it had closed 45% of its stores since the expansion, cutting the total number to fewer than 700.

Although the company was technically turning in full-year net profits, these were barely in double-figure millions despite revenues in the region of £8-9 billion.

While its board maintained that it was pursuing the right strategy for profitable growth, the company has remained vulnerable to external disruption, such as geopolitical events and even the weather – last year’s summer heatwave left a backlog of unsold holidays in an already heavily-discounted market, helping to tip the company into losses of £163 million.

Thomas Cook Group had, at points in time over the previous decade, engaged in renegotiation of funding facilities to shore up its finances.

But as losses continued over the first quarter of this year, the weak winter season, the company started looking at a fundamental change to its entire business, embarking on a strategic review to examine a sale of its airline operations, and even a possible break-up of the tour operator business into component parts.

It was forced to retreat from this plan, however, and resort to seeking a recapitalisation after a deteriorating operating environment in Europe meant the divestment of the airline operations was unlikely to provide sufficient value to the company or its shareholders.

Fosun Tourism Group, the minority shareholder, led the effort to rescue the leisure giant, but the approaching winter season and the continuing pressures on the business gradually undermined the case for investment and, as the price for saving the company increased, Thomas Cook Group was unable to convince lenders to provide the funding necessary to keep the 178-year old firm afloat.