Thomas Cook bosses face scrutiny over collapse

September 23, 2019 by No Comments


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Media captionThomas Cook employees such as Ella Waine, pictured in her uniform, react to the company’s collapse

Thomas Cook bosses’ actions will face scrutiny as part of an investigation into the tour operator’s collapse.

Business secretary Andrea Leadsom asked the official receiver, which oversees liquidations, to look at whether bosses’ actions “caused detriment to creditors or to the pension schemes”.

The request came amid criticism over executive salaries at the firm.

The government has said it will run a “shadow airline” for two weeks to repatriate 155,000 UK tourists.

Transport secretary Grant Shapps said its response to the crisis was “on track so far” and “running smoothly”.

But some people have complained of long queues and disruption at airports.

Ricky Houston said his flight to Newcastle from Corfu was delayed by nine hours on Monday.

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Media captionThomas Cook passengers face a long journey home

“I feel sorry for the reps because I don’t think they knew anything either. It was the hotel which kept us up to date,” he said.

Mr Shapps, who earlier attended an emergency Cobra government meeting on the government’s response, said: “People will experience delays, we’re not running the original airline, but we intend to get this done all in the next two weeks and then end this phase of the rescue.”

He also stressed people should not come home early from their holidays but should “carry on and leave on the date they were supposed to leave, having first checked the Thomas Cook website before leaving for the airport”.

The government has said that customers will be brought home “as close as possible” to their booked return date.

It has estimated the efforts to get people back home, the UK’s biggest peacetime repatriation exercise ever, could cost up to £100m.

The firm’s collapse has also put 22,000 jobs at risk worldwide, 9,000 of them in the UK.

Why are the directors under scrutiny?

Top directors at the holiday company have been paid a combined £20m in salaries and bonuses since 2014.

Prime Minister Boris Johnson questioned whether directors should pay themselves “large sums of money” as their businesses go “down the tubes”.

“I think the questions we’ve got to ask ourselves now [are]: How can this thing be stopped from happening in the future?

“How can we make sure that tour operators take proper precautions with their business models where you don’t end up with a situation where the taxpayer, the state, is having to step in and bring people home?,” he said.

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Passengers are facing queues and disruption, from destinations such as Majorca

Ms Leadsom said the official receiver’s inquiry would look into the conduct of the firm’s top directors.

“I ask that the investigation by the Official Receiver 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,” Ms Leadsom wrote in her letter to the Insolvency Service.

The service has the power to disqualify people from serving as company directors for up to 15 years if it finds them guilty of misconduct and can pass information to criminal enforcement bodies in the most serious cases.

Labour’s shadow chancellor John McDonnell has said Thomas Cook bosses should pay back any bonuses they had received.

“I think they need to really examine their own consciences about how they’ve brought this about and how they themselves have exploited the situation,” he told the BBC.

Thomas Cook chief executive Peter Fankhauser said he was “deeply sorry” about the firm’s collapse and said the company had worked “exhaustively” to salvage the deal.

How will holidaymakers get home?

All Thomas Cook holidays are now cancelled.

Customer can seek compensation via the government’s Atol scheme, or from their credit card or insurance companies.

Customers seeking information can visit the CAA’s special Thomas Cook website.

Those scheduled to return to the UK within the next 48 hours or who are having problems with their accommodation or need special assistance can ring 0300 303 2800 in the UK or +44 1753 330 330 from abroad.

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Thomas Cook planes have been impounded at Manchester Airport

Customers will be on special free flights or booked on to another scheduled airline at no extra cost, with details of each flight to be posted on a dedicated website as soon as they are available.

The DfT added that a “small number” of passengers might need to book their own flight home and reclaim the costs.

The CAA is also contacting hotels accommodating Thomas Cook customers, who have booked as part of a package, to tell them that the cost of their accommodation will be covered by the government’s Air Travel Trust Fund and Air Travel Organiser’s Licence scheme (Atol).

What about Thomas Cook’s international operations?

For now, Thomas Cook’s Indian, Chinese, German and Nordic subsidiaries will continue to trade as normal.

This is because, from a legal standpoint, they are considered separate to the UK parent company and are not under the jurisdiction of the UK’s Official Receiver.

They do, however, share services – such as aircraft and IT – with their parent company and will need to strike rescue deals in the coming weeks to keep trading.

What went wrong?

Thomas Cook had secured a £900m rescue deal led by its largest shareholder Chinese firm Fosun in August, but a recent demand from its banks to raise a further £200m in contingency funding had put the deal in doubt.

The holiday company spent all of Sunday in talks with lenders trying to secure the additional funding and salvage the deal, but to no avail.

Thomas Cook has blamed a series of issues for its problems, including political unrest in holiday destinations such as Turkey, last summer’s prolonged heatwave and customers delaying booking holidays because of Brexit.

While the company was closing shops to try and cut costs, it still had more than 500 outlets, bringing large costs compared to online competitors.

In another sign of its slow progress in mending its finances, it only stopped dividend payments to investors in November.