Thomas Cook directors to be questioned by MPs over collapse

Former directors of Thomas Cook will face questions from MPs next week about their pay and stewardship of the company , as an inquiry into the tour operator’s dramatic implosion gets under way.

Five executives who were at Thomas Cook when it failed, including the chief executive, Peter Fankhauser, will appear in the first evidence session before the business, energy and industrial strategy (BEIS) select committee on Tuesday.

The committee, chaired by the Labour MP Rachel Reeves, is expected to focus on executive pay levels, corporate governance, the firm’s high debts and the role of its auditors.

The head of Thomas Cook’s remuneration committee, Warren Tucker, who is also a non-executive director at the Foreign and Commonwealth Office, is likely to face questions about the company’s pay policies.

The three chief executives who were at the helm of the tour operator in the 12 years leading up to its collapse have attracted criticism for accepting pay packets worth a combined £35m.

Fankhauser’s predecessors, Harriet Green and Manny Fontenla-Novoa, who were paid nearly £28m between them over seven years, will appear at future evidence sessions.

Q&A

Why did Thomas Cook collapse?

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

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EY, Thomas Cook’s auditor at the time of its collapse, and PwC, its auditor until 2017, will give evidence, as will the Financial Reporting Council and the government’s Insolvency Service, which is managing the company’s liquidation. Manuel Cortes, the general secretary of the transport workers’ union TSSA, will also take part in the inquiry.

Thomas Cook collapsed under the weight of its debts last month in one of the most high-profile corporate failures in UK history.

Its demise put 9,000 jobs at risk and left 150,000 British holidaymakers stranded overseas, triggering a repatriation effort expected to cost more than £100m.

MPs are also expected to examine the failed attempts to devise a plan to keep Thomas Cook afloat.

The government has faced criticism for refusing to offer financial support as investors and executives scrambled to put a financial rescue together. Ministers have said a taxpayer-funded bailout would have been throwing good money after bad.

Earlier this week, Hays Travel vowed to save 2,500 jobs after agreeing to buy Thomas Cook’s 555 high street agencies.

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