What is the Thomas Cook rescue deal and what does it mean for holidaymakers?

Thomas Cook is in advanced talks with China’s Fosun over a £750m rescue package

Thomas Cook has announced a dramatic financial restructuring, which it hopes to complete by September.

These are the key questions and answers about the oldest brand in travel.

I have a forward booking with Thomas Cook. Should I be worried?

No. This deal provides reassurance. It includes £750m in fresh funding designed to see the travel firm through what is expected to be a tough winter, and to “provide the financial flexibility to invest in the business for the future”.

Speaking exclusively to The Independent, chief executive Peter Fankhauser said: “For our customers, for our employees, for our suppliers, this is really good news, because it’s a plan which is securing, going forward, the future of the business.”

While holidays and flights are financially protected, primarily by credit-card cover, the key concern of travellers is that their trip goes ahead as planned.

Mr Fankhauser said: “Our holidays are safe.”

What does the deal involve?

There are two elements. The deal addresses Thomas Cook’s crippling debts of £1.6bn. The key lending banks will take a share in the business in a debt-for-equity swap.

But the Chinese firm Fosun will become the majority shareholder of Thomas Cook with a cash injection of £750m.

Fosun is already Thomas Cook’s largest shareholder, with an 18 per cent holding. Under the deal it will take “a significant controlling stake” in the firm’s tour operations – mainly comprising the package holiday and high street travel agency business – but not the travel firm’s airline.

Is the airline in trouble?

No. European Union airline ownership rules mean Fosun cannot take over Thomas Cook’s in-house carrier; it must be majority controlled by EU shareholders.

But the Chinese firm will take a “significant minority interest” in Thomas Cook Airlines.

Relative to the rest of the business, the airline is in reasonable shape; in a bid to raise cash, the travel firm had earlier this year sought a buyer for Thomas Cook Airlines. But no suitable offer was made, which is why the current deal was devised.

What if I have shares in Thomas Cook?

You are having a very bad day. When the stock market opened, the value of a Thomas Cook share halved.

Someone with 200 shares a year ago could have bought a week’s package holiday; today they would barely have enough for a cup of coffee at Gatwick airport.

Longer term, shareholders will retain only a tiny proportion of the company.

Does this mean the death of the package holiday?

No. Indeed, there is plenty of evidence that travellers continue to appreciate the consumer protection that comes with buying flights and accommodation in the same transaction from a single company.

Without wishing to sound mercenary, will there be bargains around this summer?

Yes. Thomas Cook has updated its current trading outlook, reporting weak margins “due to continued intense competition”.

Holidays from Luton to Corfu in July and August are selling for as little as £240, including flights, self-catering accommodation, transfers and luggage.

The Thomas Cook statement said: “It is clear that the trends experienced in the first half of the year have continued into the second half, reflecting an uncertain consumer environment particularly in the UK.”

Mr Fankhauser said: “Everybody in the travel business faces the same challenges.”

After the summer peak, a package from Bristol to Crete is selling for £120 travelling in the first week in October.

So what went wrong for Thomas Cook?

The oldest brand in travel – established 1841 – has endured decades of uncertainty with repeated changes of ownership and some corporate misadventures.

Thomas Cook failed fully to recognise the threat posed by budget airlines, the opportunities provided by the online age and the changing tastes of holidaymakers.

Tui, its giant rival, has proved more nimble and remains profitable while retaining its position as Europe’s biggest holiday company.

Recently, Thomas Cook has ceded second place for package holidays from the UK to Jet2 Holidays.

But part of the funding will be used to invest in new products which, the company hopes, will secure its future as Thomas Cook heads towards its 200th anniversary.