In 2011, Thomas Cook’s share price went from £2.00 to £0.13 in the last twelve months.
The key problems in Thomas Cook’s market is that:
- Their is low price competition.
- People are moving away from travel agents and booking their holidays direct.
- People are not having big holidays any more because of the high fuel price.
- Stability of holiday destinations such as Greece and Egypt are low.
In 2011, sales were £9.8 billion with a profit of £400 million. Thomas Cook now have a debt of £891 million which has resulted in them cutting down stores. They are cutting their airline from 41 planes to 35 to increase capacity saving to £10 million. They are also cutting down 599 hotels from their brochure to cut costs which will save £15 million.
There is the argument that Thomas Cook should make a cut on their assets still. Many people in their market such as Easy Jet outsource planes for their use reducing fixed costs dramatically. To keep costs to a minimum, Thomas Cook could do the same.
This is called retrenchment:
- Rebuilding a business by taking a step back.
- Downsizing a business to make it smaller, leaner and fitter.
- Retrenchment is common answer in a depression.