Thomas Cook management faces probe over collapse
Thomas Cook’s management will be investigated by a UK government-backed probe into the travel group’s collapse, as holidaymakers flooded international airports on Monday to queue for rescue flights.
The full cost of the demise of the world’s oldest tour operator is still being assessed by restructuring specialists AlixPartners, with investors lining up to cherry-pick the best parts of its pan-European operations after the failure of last-ditch talks to secure a £1.1bn rescue deal.
On Monday, the first few dozen flights chartered by the UK’s Civil Aviation Authority (CAA) began transporting up to 150,000 British tourists, with officials warning that there would be some disruption in a mass repatriation involving as many as 1,000 planes from 18 countries over the next two weeks.
The government has estimated that it could cost up to £100m, although people close to the company warned that the eventual cost could be much higher. Up to 21,000 jobs are at risk — 9,000 in the UK alone.
Andrea Leadsom, Britain’s business secretary, has asked the Insolvency Service to launch an investigation into the company’s demise, including the role of management, who were on Monday criticised for taking large salaries while overseeing the decline of the group.
In a letter to Dean Beale, chief executive of the Insolvency Service, she said: “I ask that the investigation looks, not only at the conduct of directors immediately prior to and at insolvency, but also at whether any action by directors has caused detriment to creditors or to the pension schemes.”
Chief executives at Thomas Cook took home £18.7m worth in pay in the past 10 years, according to FT calculations from annual reports, with the current CEO Peter Fankhauser earning about £8.5m in his near five-year tenure.
Prime minister Boris Johnson said in New York on Monday night: “I have questions for one about whether it’s right that the directors, or whoever, the board, should pay themselves large sums when businesses can go down the tubes like that.”
John McDonnell, the Labour shadow chancellor of the exchequer, said Thomas Cook executives should be forced to hand back bonuses and — if that was legally impossible — they should do so voluntarily.
Mr Fankhauser said in a statement that the company had worked “exhaustively” to salvage the deal. “It is a matter of profound regret to me and the rest of the board that we were not successful.”
The collapse is a huge blow to Chinese conglomerate Fosun, Thomas Cook’s biggest shareholder, which had proposed contributing £450m to a rescue package. The group said in a statement that it was “disappointed” and that “its position remained unchanged throughout the process, but unfortunately other factors have changed”.
As the government declined to save the company, Thomas Cook negotiated for extra cash from a group of Spanish hoteliers, according to people familiar with the situation, but a final deal could not be reached.
Not all have been stung by the company’s demise. Hedge funds including TT International and Whitebox Advisors have successfully bet against the company’s share price, while others have bought credit-default swaps that will now pay out as much as $250m after the travel agent’s liquidation.
A spokesperson for Unison, which represents Thomas Cook’s airline staff, said the collapse was “an act of economic vandalism” by the UK government.
“What the government should have done is intervened and stood behind the business like other European governments have done,” they said.
In Greece alone, 50,000 holidaymakers were stranded, while Spain’s industry ministry said that around 114,000 passengers, mostly foreign tourists, were due to travel on Thomas Cook flights to and from Spain over the next 15 days.
Condor, the German airline owned by Thomas Cook, said all its flights were operating as planned on Monday. Condor confirmed that it had asked the German government for a bridge loan.
Additional reporting by Laura Hughes, Robert Smith, Tabby Kinder and Jim Pickard