It's always blown my mind that companies like this will operate not having enough cash on hand to actually provide the services they've sold.
Maybe that's why they're in business and I'm not.
Maybe that's why they're in business and I'm not.
But having future commitments that you don't currently have the cash for is both normal and expected. The economy is held together by invoice credit.
(Wait until the people who get upset about banks "creating money" realise how commercial credit works and discover "shadow banking"...)
The ideal situation for a company is that if it receives payment for it services in advance (i.e. a consumer paying for a holiday) and has to pay its suppliers (i.e. hotels) much later. This can result in a situation called negative working capital where a company has received more cash from customers than it has paid to-date. This is effectively interest free financing.
Companies getting into financial difficulty will try to accelerate payment of monies they are owned and delay payment to supplies...as we see here.
The article mentions that one of the issues here is that the credit card companies saw that collapse was imminent and certain and thus refused to release the funds charged by their customers to Cook, knowing that Cook would collapse, the customers wouldn't get their full holiday, would do a chargeback, but the bank wouldn't be able to get the funds back from Cook.
> "The tour operator is understood to have made a number of proposals, including ... for credit card companies to release about £50m of cash they are holding as collateral against Thomas Cook bookings."
So maybe they did have enough cash on hand in a way, but the banks weren't releasing it to them.
Another intractable and perhaps the main problem was their massive debt service owed on their previous bailout. Kind of similar to Toys R Us and other companies that have had a bailout of one form or another that leads to massive debt and debt payments taken on and beyond the ability of the company's profits to pay off.