The business secretary, Andrea Leadsom, has come under fire after it emerged she did not speak to Thomas Cook executives during increasingly frantic talks between the company and the government leading up to its collapse last week.
Records of telephone calls and meetings, seen by the Guardian, indicate government ministers were aware the 178-year-old tour operator’s finances had been deteriorating for months.
But the documents show Leadsom and ministers and officials from the Department for Business, Energy and Industrial Strategy had little to no discussion with the company about its ailing balance sheet until after it had entered liquidation.
One source familiar with the relationship between the government and the company said BEIS, which oversees the response to business collapses such as those of Carillion and British Steel, “didn’t want a meeting and didn’t ask for one”.
Brexit
“There is now little doubt that the Brexit process has led many UK customers to delay their holiday plans for this summer,” said the chief executive, Peter Fankhauser, in May. But it cannot be the whole story - arch-rival Tui has coped because its finances are healthier.
Weather
The summer heatwave of 2018 encouraged would-be holidaymakers to stay at home, undermining prices in the “lates” market where operators try to clear unsold holidays. There seems to have been a hangover into 2019, with customers calculating that waiting to book is a productive strategy.
Competition
A pincer movement of Airbnb and budget holidays has changed consumer behaviour, though Thomas Cook still managed to sell 11m package holidays last year.
Banks and debt
The tour operator has been attempting to shoulder a huge pile of debt for the past decade – £1.7bn worth at the last count. Successive managements failed to remove meaningful chunks. The banks argue they have supported an overstretched company for years and the details of why it could not be saved may have to await the report from the Insolvency Service.
Bad management
Thomas Cook’s borrowings were too high. The moral of the tale is that tour operators should fund themselves conservatively. If your balance sheet is fragile, you are at the mercy of events in an industry where most of the cash arrives in the summer and then flows out in the winter.
Nils Pratley, financial editor
Thomas Cook executives were instead told to speak to the Department for Transport (DfT), which orchestrated the repatriation of 150,000 UK citizens stranded overseas when the travel company went bust, but has limited experience of planning for corporate insolvencies.
Asked how many times BEIS ministers or officials had met Thomas Cook over the past 12 months, a government spokesperson said: “UK government officials meet with a range of businesses on a regular basis.”
The shadow business secretary, Rebecca Long-Bailey, said: “It is appalling that the government has seemingly shirked its responsibility to Thomas Cook’s workers and supply chain businesses.
“The message this sends out is that it doesn’t care about them, their families and the communities who will be hardest hit by the company’s demise.”
Manuel Cortes, the general secretary of the transport workers’ union TSSA, said: “Johnson said his government couldn’t intervene to save Thomas Cook because this would create a ‘moral hazard’. It now appears that not only is he a zombie prime minister, but that he leads a cohort of ministers who’re united only by their ineptitude and immorality.”
The union argued the government could have done more to keep parts of Thomas Cook alive or provide backing to encourage a private-sector rescue deal. The government has said investing in Thomas Cook would have been throwing good money after bad.
Thomas Cook was placed in “enhanced monitoring” by the Civil Aviation Authority (CAA) in November 2018 after its second profit warning in two months, triggering regular calls and meetings with the regulator as well as the DfT, the Department for Digital, Culture, Media and Sport (DCMS) and aviation ministers.
Since the company’s collapse, BEIS has assumed a leading position in managing its insolvency, the fallout from one the UK’s largest corporate failures, and the impact on staff and suppliers.
Leadsom released details last week about her role in setting up a taskforce to assist those affected.
The Insolvency Service, part of BEIS, is also managing the liquidation of Thomas Cook’s assets, a delicate task after a collapse that cost 9,000 British employees their jobs.
Leadsom wrote to the Insolvency Service in the immediate aftermath of Thomas Cook’s failure, urging it to fast-track an investigation that would include the role of directors.
But sources familiar with Thomas Cook’s liquidation said the minister did not appear to be well briefed on the company or its finances.
The records of talks between the regulator and ministers offer some insight into the increasingly frantic pace of discussions with the transport secretary, Grant Shapps, officials from DCMS, successive aviation ministers and the CAA.
Thomas Cook’s directors, including Sten Daugaard, the chief financial officer, met or spoke to the CAA on 16 occasions after the regulator enhanced its monitoring of the company due to the parlous state of its finances.
The company’s chief executive, Peter Fankhauser, also met Shapps on 9 September, during a fortnight in which directors spoke to the DfT or the CAA on an almost daily basis.
MPs are expected to question the company, regulators and ministers during an inquiry by the BEIS select committee next month.
Fankhauser has blamed Thomas Cook’s banks for pushing it over the edge.
“The longer the talks dragged on, the more uncertainty grew, increasing the likelihood of a liquidity squeeze,” he told the Sunday Times. “Had we been quicker, we might not be in the situation we are now in.”
Thomas Cook had a balance sheet deficit of £3.1bn when it collapsed and had rejected several offers for parts of the business, including its airline operation.
The CAA expects to bring back another 15,00 Thomas Cook holidaymakers on Sunday. That would bring the total repatriated to 108,000, out of more than 150,000 who were abroad when the firm collapsed a week ago.
