Demise of travel brand has cost 9,000 jobs in U.K.
(Bloomberg) -- The British government has ordered a probe into the role of Thomas Cook Group management in the collapse of the 178-year-old tour operator, which cost thousands of jobs and left people stranded across Europe.
Business Secretary Andrea Leadsom asked the state Insolvency Service to investigate the responsibility of the company’s directors and whether any action they took may have “caused detriment” to lenders or pension schemes. The government also has expressed concerns about bonus payments.
Anger around the collapse has been stoked by the continuation of operations at Thomas Cook’s German and Scandinavian arms, where rescue bids are still under discussion. Prime Minister Boris Johnson has defended a decision to refuse a U.K. state bailout, saying it would have set up “a moral hazard.”
The demise of one of the world’s best-known travel brands has cost 9,000 jobs in the U.K. and left 150,000 people stuck overseas, requiring the biggest peacetime airlift in British history. The plans of thousands more have been ruined, leading to scrapped vacations and even the cancellation of weddings.
Thomas Cook’s collapse was months in the making, with a US$1.1-billion refinancing led by top investor Fosun Tourism Group, Chinese owner of the Club Med resort chain, appearing to have secured a rescue.
Then lenders including Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc sought an extra 200 million pounds, prompting Thomas Cook to turn to the government this weekend, only to have its pleas rebuffed.
The opposition Labour Party’s business spokeswoman, Rebecca Long-Bailey, said Tuesday on Sky News that Johnson needed to explain why he didn’t step in to help when parts of Thomas Cook were profitable and there were eleventh-hour offers on the table that were predicated on government support.
Speaking on Talk Radio on Tuesday, Leadsom said that in writing to the Insolvency Service she’d sought to accelerate a process that would have happened as a matter of course “so that we can get some answers here.”
The Financial Reporting Council said separately that it’s working with the Insolvency Service as a matter of urgency to consider “whether there is any case for investigation and enforcement action.” The FRC is a state agency tasked with promoting transparency and integrity in business.
A bid to refinance Thomas Cook led by Miguel Fluxa, chairman of Spain’s Iberostar hotel group, failed to proceed because it lacked the support of the U.K. government, tourism news website preferente.com reported Monday, citing a tourism official from the Balearic Islands government. The economies of Spanish resorts are highly dependent on British visitors.
Condor, Thomas Cook’s German airline and operator of 58 of the group’s 105 aircraft, is continuing to fly. While the German holiday arm has halted all package departures through Thursday, it says it’s still evaluating final options, though may follow its parent in filing for administration.
Thomas Cook Northern Europe, which includes Nordic tour companies Ving, Spies and Tjäreborg, resumed operations Tuesday, according to spokesman Fredrik Henriksson. The Nordic business is profitable and Henriksson said he expects the administrators of Thomas Cook to find a buyer.
Thomas Cook Airlines Scandinavia, which transports about 85 per cent of the unit’s customers, took control of leasing contracts and licenses from the parent company late Monday. Some people hadn’t slept since Sunday after working to get its aircraft off the ground, spokeswoman Lisbeth Nedergaard said.
Britain is meanwhile continuing to repatriate tourists. The Civil Aviation Authority operated 64 flights Monday, bringing back more than 14,700 people or 95% of those due to travel that day. Seventy-four flights are set to operate Tuesday, with the program, dubbed Operation Matterhorn, running until Oct. 6.
TUI AG, the world’s biggest tour operator, reiterated full-year financial guidance Tuesday, saying the summer season is “closing out in line with expectations.” It said its model of owning hotels and cruise ships outright is proving resilient, while acknowledging issues including Brexit, the grounding of its Boeing Co. 737 Max fleet, and Europe-wide airline over-capacity.
Hanover, Germany-based TUI said it’s assessing the short term impact of Thomas Cook’s demise. Its shares traded 4.5 per cent higher as of 12:35 p.m. in London, after gaining 7.2 per cent Monday following the collapse of its rival.
Read more: TUI Shrugs off Thomas Cook’s Demise to Report Better Bookings
(Updates with FRC comment in ninth paragraph, Nordic situation in 13th, TUI share rally in last.)
--With assistance from Siddharth Philip, Tim Ross and Thomas Mulier.