Travel firm Thomas Cook has announced it is to close 200 stores in the UK over the next two years as it seeks to avoid the possibility of corporate insolvency.
It is the latest move by the firm after it announced losses of £398 million in the year to September, a situation it blamed on the unrest of the Arab Spring in Tunisia and Egypt as much of its overseas package holiday business depends on tourism in north Africa.
The “alarming slump” in bookings in this area had already been recognised as a major issue for the company as it recently carried out urgent refinancing with its creditors, following a 75 per cent loss of share value in a single day.
With doubts about the future viability of the company circulating, the firm has acted by announcing 125 more closures than the 75 that were originally planned, out of a total of 1,300 high street outlets.
The company has also said it will sell five hotels in Spain at a total value of £81 million.
While the recent refinancing may have ensured the company is not at any immediate risk of bankruptcy and the sale of assets may help, the operator may need to secure significant business from consumers amid a potential deterioration in the economy to further reduce its debts and get back on track.
Group chief executive Sam Wiehagen said a full strategic review is taking place in addition to the cost-cutting measures and added: “I am confident that these changes will improve profitability and build a stable foundation from which to rebuild shareholder value.”
Smaller firms connected with tourism may find it harder to refinance than Thomas Cook, or have fewer assets to offload. In such cases, insolvency advice may be required.
Meanwhile, Thomas Cook may also face problems with consumer perceptions as a survey by Which? has listed it as the worst airline for trips to the Canaries.
Rival Jet2.com was rated best for both the islands and mainland Spain and the Balearics.