Thomas Cook Report

Da Mota Ferreira William
Mandvikar Snehil
Nguyen Dinh Khanh
Caumont-Marseilles Camille
Financial Report
Financial Statement Analysis, Group 5, Cohort E2, 2017/2018

Section 1 : Introduction : brief presentation of the company
Thomas Cook Group plc is a British global travel public agency founded in 2007. They are the
result of a merger between Thomas Cook AG and MyTravel Group plc. The firm is listed on the
London Stock Exchange and belongs to the FTSE 250 Index.
The group, whose CEO is Peter Fankhauser, is competing in the hospitality and the tourism
industries. It offers charter and scheduled passenger airlines, package holidays, cruise lines, hotel
and resorts services.
Thomas Cook Group owns several tour operators, the booking website Hotels4u. They conduct
their operations in 5 main areas, namely: UK, Germany, West Europe and Northern Europe. The
group also owns a fleet of 94 aircraft, almost 3,000 stores, 22,000 employees and over 19 million
annual customers. It became the second largest travel company in Europe and the UK behind TUI
Travel.
It’s revenue reached £7,8 million in 2016.
Thomas Cook wants “to be the best loved holiday company, delighting our customers, our people
and our shareholders”, which is the vision of the group.
Section 2 : Business Environment and Strategy Analysis
I. Industry analysis
Thomas Cook Group is competing on the hospitality and tourism industry.
The hospitality and tourism industry is a multibillion-dollar industry, which is dominated by a few
large companies. These firms get the biggest market shares, they influence the structure and
shaping of the industry. Among the top earning 2016 travel companies : Expedia Inc, Priceline
Group, American Express Global Business Travel and Carlson Wagonlit Travel.
The companies in this industry are fragmented.
Assess of Thomas Cook profit potential : Porter’s framework : the five forces competitive analysis
These forces drive competition and the profitability within the industry.
* barriers to entry : it’s a difficult task to enter this market industry, to get a place, but due to the
internet, some barriers to entering the tourism market are weakened. Efficient communication
channels decrease the initial marketing costs, make easy the access to the existing suppliers,
some firms differentiate from their competitors by having a high service differentiation, the new
entrant has to get the expertise which is easy to obtain in the context of a mobile society in which
employees can leave one firm to another and take their expertise with them.
* buyer power : there are many customers who choose a firm to organise their business or leisure
travel. There are more and more customers who go online to compare the best provider, they
don’t need the assistance from travel agents anymore. They find internet websites which
negotiate for them. The cost of switch is reduced , the loyalty to a single firm drops, so the buyer
power is increasing. Customers can down prices by playing on rivals against one another.
* supplier power : is low, is not a big threat in this industry. The suppliers are the employees to
these firms, their bargaining power is high when there are few people to fill service section of the
industry, which is not the case in the hospitality and tourism industry.
* threat of substitutes : is enough high : in the tourism and hospitality industry, it is easy to start
a new business and progress successfully. Firms exist with all price ranges, with different
levels of service and amenities. Internet creates new substitution threats.
* competitive rivalry among existing competitors : in the tourism and hospitality industry,
competition is fierce. Some travel agencies deal with ordinary tourists, others are specialized in
commercial and business travel only, others serve as general sales agents for foreign travel
companies. With the development of the general public access to the Internet, many online travel
agencies were born since the mid-1990s.
People surf on the net to find the best prices for the best experience, so there is a price war
between competitors to get and keep the more customers as possible.
II. Competitive strategy analysis and competitor’s choice
Thomas Cook targets frequent travelers from 18 to the late sixties looking for travel places. It
positions itself to the all inclusive holidays market.
The company can rely on its various strengths :
- It is the second largest travel company in the UK and even in Europe

- Thomas Cook is one of the best-known names in the travel industry with more years’ experience
of travel than any other organisation
- It provides affordable holidays to people
- It has made progress to reduce delays
- It is a responsible business which manages its environmental impact (Thomas Cook Airlines
among the most efficient in Europe)
- It offers a very high quality service to customers : they are available around the world 24/7 (direct
contact whenever and wherever they want), to build a long customer relationship
- Reliability and trust
- It has strengthened the quality of their offerings, they have added travel-related services (seat
sales, meal on board, excursions in resort…)
- It benefits from a strong global presence thanks to its several services, its powerful marketing
communication and its sponsorship activities
- Its New Operating Model will deliver sustainable growth
- The business culture change with the renewed focus on the customer : the latter is now at the
heart of their strategy, employees do their best to give customers the best experience : this
progress will (increase customer loyalty and recommendation and ) generate a great value in the
future
The group can also rely on the opportunities of the sector : the travel and tourism sector keeps
growing ahead of the global economy, customers’ wish for overseas travel is returning to pre-
recession levels, the current oil prices are low, package travel is becoming more and more popular
Benchmarking
TUI Travel plc, which is the largest tourism group in Europe, is Thomas Cook’s number one
competitor in EU.
TUI Travel targets middle-class society and above as of 20y.o, and positions itself on the premium
offerings market.
The company offers unique and customizable holidays available at TUI and directly sold to
individuals, maintains a strong leadership position in long haul travel, benefits from more than 30
million customers worldwide and over 30,000 employees.
The UK and France are its biggest market whereas the UK and Germany are the biggest one for
Thomas Cook. TUI Travel starts implementing in emerging markets to benefit from their potential.
III. Corporate strategy analysis
According to their 2016 annual report, the group revenue increased by £86 million (1%)
compared to the previous year. This reflects a £263 million increase in sales of holidays to own
brand hotels. These good results for their own brand hotels is due to increasing differentiation
which translated into higher margins, improved customer retention and better ancillary sales. So by
being in multiple businesses they were able to create synergies between their businesses and
eventually differentiate their overall customer experience. But this increase was offset by politic
disruptions in Tunisia, a key destination for European market, highlighting how the industry can be
affected by political or security-related events.
IV. How the industry’s features and the company’s strategic choices may affect the firm’s
financial statements
Just like their competitors in the industry (TUI Travel, Virgin Holidays) Thomas Cook chose to have
a fully implemented system with no third parties. From the website to their stores they chose to
own everything, while they lease the aircrafts. These fixed assets are held on the balance sheet
and can affect the current cash flow, the financial return and the need for financing. And this is
particularly true for the maintenance prevision costs.
For example, according to their financial reports, in 2015 they had fixed assets for aircraft of
£605m and provisions of £241m for maintenance.
Thomas Cook’s assets are not very liquid which can be problematic when they need to meet short
term obligations or to be able to compete in price wars in sectors with intense competition like
airlines and hotels.
Section 3 : Accounting policies vs accounting principles
Section 4 : Details links between the 4 company’s financial statements :

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Da Mota Ferreira William

Financial Statement Analysis, Group 5, Cohort E2, 2017/2018

Section 2 : Business Environment and Strategy Analysis

Thomas Cook Group is competing on the hospitality and tourism industry.

II. Competitive strategy analysis and competitor’s choice

The company can rely on its various strengths :

- It is the second largest travel company in the UK and even in Europe

III. Corporate strategy analysis

Section 3 : Accounting policies vs accounting principles

Section 4 : Details links between the 4 company’s financial statements :

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