Brexit, significant risks, airline, travel industry

Thomas Cook Group plc – Annual report – 30 September 2018

Industry: travel and leisure

OUR OPERATING ENVIRONMENT (extract)

OVERVIEW (extracts)

ECONOMIC (extract)

CHALLENGES

In the Eurozone, the WTTC forecasts a slowdown in growth, mainly related to the exceptional growth in 2017. 2018 has seen a new Italian government challenge EU fiscal rules, which has resulted in an underlying tension in the Eurozone. In the UK, the IMF forecasts an economic slowdown related to Brexit, owing to continued uncertainty. A commitment by OPEC members to cut production of oil, and renewed sanctions on Iranian productions is likely to see the price of crude rise, though our hedging policy will mitigate short-term impact.

POLITICAL & REGULATORY (extract)

Brexit has continued to dominate the political and regulatory discourse in the UK in 2018, and while it has also featured prominently in discussions in Brussels and Europe’s other capitals, so too has the implementation of important regulatory initiatives from Brussels that impact our industry. For example, the Package Travel Directive 2015 (PTD) came into full force, as did the General Data Protection Package (GDPR), and the Payment Services Directive (PSD2). Following a concerted campaign by Thomas Cook and other industry players, 2018 also saw the UK government take quick and clear action to implement a change in the law so that unscrupulous claims management companies were no longer able to exploit customers and put forward fraudulent sickness claims.

CHALLENGES (extract)

As a pan-European business with a major UK operation, lack of clarity on Brexit has been a major source of uncertainty for the European travel industry, and the business. However, we remain confident that there will be no disruption to travel as a result of Brexit, regardless of the outcome of the negotiations, as both the European Commission and the UK government have formally outlined their respective commitments to continued aviation connectivity even in a no deal outcome. Challenges remain, and the business continues to prepare for all potential outcomes.

OUTLOOK

We anticipate the political outlook on Brexit to remain fluid into 2019. However, we expect greater certainty with respect to potential impacts on our operations, having received commitments from both the EU and UK government, which gives our customers greater certainty in the knowledge that Brexit will not disrupt their travel plans. 2019 in Brussels will see the election of a new European Parliament, and a mandate change that will result in a new Commission, which will then identify their policy priorities Work Plan for the next five years. We are taking measures to inform the development of the Work Plan to ensure that travel’s policy priorities are addressed.

RISK MANAGEMENT (extract 1)

OUR PRINCIPAL RISKS AND UNCERTAINTIES

The table below lists the principal risks and uncertainties as determined by the Board that may affect the Group and highlights the mitigating actions that are being taken. The content of the table, however, is not intended to be an exhaustive list of all the risks and uncertainties that may arise.

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RISK MANAGEMENT (extract 2)

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