UK ministers accused of sealing Thomas Cook's fate
The government has been accused of sealing Thomas Cook’s fate, as claims emerged that the Spanish and Turkish governments had offered to help save the stricken tour operator, only for the deal to disintegrate due to a lack of support in Westminster.
As recriminations flew, government-chartered aircraft began flying 150,000 stranded Thomas Cook customers back to the UK after the 178-year-old tour operator collapsed into liquidation in the early hours of Monday under the weight of its debts.
Around 9,000 UK staff are facing redundancy, while thousands of holidaymakers were left waiting for the state-backed airlift in airports from the US to mainland Europe and north Africa, after weekend talks about a £1.1bn financial rescue fell apart.
The discussions were abandoned on Sunday after the government turned down the company’s request for financial support to help tide it over the winter.
Details of the government’s refusal to step in came as current and former Thomas Cook executives faced criticism for multimillion-pound pay deals in recent years.
The firm’s last three chief executives took home combined pay packages – including bonuses – worth more than £35m in the past 12 years, triggering calls from the Labour party for the bosses to return their windfalls.
A source familiar with the rescue talks said Thomas Cook had reached an agreement to secure £200m, with help from the Turkish government and a group of Spanish hoteliers backed by ministers in Madrid. They were willing to invest to limit the potential damage to their tourism industries.
The Spanish hoteliers were led by billionaire hotelier Miguel Fluxà Rosselló and offered to invest €107m (£95m), according to reports in the Spanish media.
But the rescue plan fell apart after the British government said it was not prepared to provide any financial guarantees to underpin the funding package.
Once the government’s lack of confidence in Thomas Cook leaked out, the source said, support in Spain and Turkey for the precariously constructed deal “melted away”.
“Two governments were prepared to back a British brand, the UK government wasn’t,” said the source. “Without that, there wasn’t enough confidence around the table to make it work.”
Separately, the German government was reportedly considering providing Thomas Cook subsidiary airline Condor with a bridging loan, allowing the company to keep flying. Condor flights were still taking place on Monday.
Labour and trade unions criticised the government for not doing enough to prevent one of the most high-profile corporate failures in British history. No 10 said it could not justify spending taxpayers’ money to keep a struggling business afloat.
The prime minister, Boris Johnson, said on Monday that government intervention to stave off the company’s collapse would have set a dangerous precedent. “Clearly, that’s a lot of taxpayers’ money and sets up […] a moral hazard in the case of future such commercial difficulties that companies face,” he said.
A No 10 spokeswoman added: “A bailout would not have been a good use of taxpayers’ money. We would have had to repatriate people later down the line and have lost more money in the process,” a No 10 spokeswoman said.
The transport secretary, Grant Shapps, said Thomas Cook would not have been a good investment and suggested putting in government cash would only have delayed its inevitable collapse. “I think if we’d seen a business that clearly had hot prospects and all it needed was something very simple and then it would carry on, that would be very different. I don’t think that there was a route through to pumping in taxpayers’ money and then actually avoiding today.”
But the shadow chancellor, John McDonnell, insisted government intervention could have provided “breathing space”.
“To just stand to one side and watch this number of jobs go, and so many holidaymakers have their holiday ruined, I just don’t think that’s wise government,” he said.
The first signs rescue talks had failed came on Sunday when executives left a crunch meeting with banks
and shareholders without reaching a deal. Within hours the tour operator’s flights disappeared from flight websites such as Skyscanner.
Just after midnight officials from the Civil Aviation Authority (CAA) arrived at the airport to impound one of its planes. The last Thomas Cook flight, from Orlando to Manchester, touched down at 8.52am at Manchester airport on Monday morning. Crew members were said to have been moved to tears after passengers organised a whipround for them.
Passengers on one of the last official Thomas Cook flights, from Lanzarote to London Gatwick, praised the behaviour of cabin crew who knew their jobs were at risk.
Joe Jeness, 34, said: “After we touched down the crew were visibly upset. One of the air hostesses had tears in her eyes when we got off the plane and we saw others hugging each other. The captain came and stood at the exit with the crew and every passenger who got off the plane wished them well. It was heartbreaking.”
The CAA has chartered more than 40 aircraft, including from the US and Malaysia, to bring customers home from 18 countries, after Thomas Cook’s own planes were grounded. The repatriation is expected to incur costs of more than £100m, borne by the Department for Transport.
Former transport minister Chris Grayling had promised to introduce a new levy-funded regime to keep bankrupt airlines flying temporarily, after the collapse of Monarch in 2017 cost the government £60m. No legislation has been introduced so far.
While customers stuck abroad are being flown home, hundreds of thousands of customers’ bookings for holidays and flights have been cancelled, including dream weddings.
Staff at the company’s Peterborough headquarters and in its 560 high street shops were formally notified of the collapse on Monday morning. “It is a matter of profound regret to me and the rest of the board that we were not successful,” said the chief executive, Peter Fankhauser. “This marks a deeply sad day for the company.” Many staff left the building in tears.
The business minister, Andrea Leadsom, has written to the insolvency service asking it to investigate the role of directors in the company’s demise. Leadsom also wants reassurances about the firm’s pension scheme.
Labour called on its last three chief executives – Manny Fontenla-Novoa, Harriet Green and Fankhauser – to hand back some of the £35m they were collectively paid in recent years.
Thomas Cook buckled under the weight of a £1.7bn debt pile racked up during an ill-fated acquisition spree. Deals include the 2010 tie-up with Coop Travel, which gave it a total of 1,200 high street outlets, even as customers were increasingly buying their holidays online.
It narrowly escaped administration in 2011 and had to be rescued by its lenders, leading to even higher debts, that have since racked up £1.3bn in interest payments.