Bonuses of Thomas Cook executives can be clawed back. Transport Secretary reveals, as government calls for investigation to be ‘priority’

A government minister has said the repatriation efforts following the collapse of Thomas Cook are about twice the size of the £50 million Monarch operation.

Wednesday, 25th September 2019, 4:36 pm
Peter Fankhauser, chief executive of Thomas Cook.
Peter Fankhauser, chief executive of Thomas Cook.

But Transport Secretary Grant Shapps did not give a total for how much the current repatriation operation will cost.

He said: “The final cost of repatriation for the Monarch situation was about £50 million, including Atol contributions.

“The repatriation efforts for Thomas Cook is now known to be about twice the size and more complicated.”

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Peter Fankhauser, chief executive of Thomas Cook.

Mr Shapps said that bailing out the troubled travel firm would have been “throwing good money after bad” and the Government was concerned it would have had to pay for the repatriation of holidaymakers anyway.

He said that the Government will focus its efforts after the repatriation on looking at how airlines can be wound down in a more orderly way.

He added: “They need to be able to look after their customers and we need to be able to ensure their planes can keep flying in order that we don’t have to set up a shadow airline.

“This is where we will focus our efforts in the next couple of weeks.

“We will require primary legislation, and, dare I say it, a new session of Parliament.”

Mr Shapps said the Business Secretary Andrea Leadsom had written to the financial regulator urging it to prioritise its “urgent” investigation into the collapse.

He said: “My right honourable friend has written to the Financial Reporting Council to ensure they prioritise as a matter of urgency an investigation into both the causes of the failure and the conduct of its directors and of its auditors.”

He added: “We also need to understand whether any individuals have failed in their duty of stewardship within the company.”

Mr Shapps said the Government will look at whether bonuses paid to Thomas Cook’s executives can be recovered through the insolvency process.

His opposite number, Labour’s Andy McDonald, asked: “Will the Secretary of State make clear to those executives that they should return their multi-million pound undeserved and unwarranted bonuses?”

Mr Shapps said Ms Leadsom has written to the Insolvency Service about bonuses and he said they “do have powers” to do this.

He added: “The official receiver does have powers to require in certain circumstances the return of bonuses and I absolutely agree with him that this needs to be fully looked into.”

Mr McDonald blamed “government dithering on aviation strategy” for adding to the woes facing Thomas Cook customers and staff.

He said Mr Shapps’ predecessor, Chris Grayling, had said he would reform airline insolvencies “to ensure a strong level of consumer protection and value for money for the taxpayer”.

Mr McDonald added: “This was misleading, the Government has done nothing to protect consumer or taxpayer interests.

“The Government has sat back and let the company fold.”

Responding, Mr Shapps said a new law is needed to keep planes flying when an airline goes bust, as is the case in Germany.

He said: “It is also the case that the German insolvency rules allow for administration to take place, allow for those aircraft to carry on being used and allow for other buyers to come in during that administration process.

“Which is not something that our current airline liquidation insolvency rules allow for. He rightly points out that the previous Secretary of State said he wanted to do something about this and he commissioned a review.

“Just to be clear of the timeline, that review reported on May 9, 2019 and suggested what we should do is have rules which are not dissimilar to the German rules to allow our airlines to trade in administration.

“Which would make repatriation massively easier because we could use those airlines.”

Mr Shapps added: “We need a new session to introduce that primary legislation in order to bring that in.”

SNP MP Alan Brown (Kilmarnock and Loudoun) called on the Government to apologise for allowing Thomas Cook to collapse, saying lessons had not been learned from the collapse of the Monarch airline.

Mr Brown said: “The UK Government should actually be apologising for this collapse happening on their watch.”

He added: “Why were lessons not learned from the collapse of Monarch just two years ago?”

Mr Shapps replied: “No government would want to lose a 178-year-old famous British iconic name.

“And whilst I hear people say ‘why didn’t you just put the money in?’ the answer is because all you’d have to do is open the books and realise that it you’ve got a £1.75 billion debt, if you lost £1.5 billion in six months alone, if you’ve then issued a profit warning, this is entirely different I’m afraid from the Condor situation, which was a fundamentally profitable airline.

“And it just would not be responsible to throw good money after bad.”

The Government says it is working to repatriate Thomas Cook staff and crews, as well as passengers.

Mr Shapps told the Commons passengers need to be brought back first, but said he had asked the Civil Aviation Authority to be “flexible”.

He said: “Actually, we are bringing some of those people back, starting with the crews and the operational people.

“I think I’m right in saying that yesterday, we’ve brought about 150 back so far. It is not the case that we are ignoring them at all.

“We need to bring passengers back first. I’ve asked the CAA to be as flexible as possible in bringing those people back.”

Tory Robert Halfon (Harlow) said: “My constituents have lost their jobs, the directors go back to their million-pound-plus houses. They’ve taken £47 million in bonuses and wages over the past few years.

“My constituents have worries about their jobs and worries about their pensions. Should we not be seizing the assets of the directors who plundered this company and took it to ruin?”

Mr Shapps said it was “very important to allow the correct channels, the official receiver, to do their job”, adding: “I do think we need to leave it to due process to see whether that would be appropriate.”

Tory Huw Merriman (Bexhill and Battle) recalled Monarch’s collapse adding: “Can we please make sure that we absolutely reform this sector so that we do not put jobs at risk, we do not ruin holiday experiences and we do not lose taxpayers’ money - it’s all about actions not words.”

Mr Shapps replied: “The answer is quite simply yes, we’ll get on with it.”

Labour chairwoman of the business, energy and industrial strategy committee (BEIS) Rachel Reeves said her committee believed that Thomas Cook’s directors and their auditors “have serious questions to answer”.

She said: “In the last five years £20 million of bonuses have been paid to those directors and the company has now gone under with more than £3 billion worth of debt.

“So can the Secretary of State confirm that the directors of Thomas Cook will not be able to continue as directors at any other firm until the Insolvency Service has completed their investigation?”

Mr Shapps: “It is for the official receiver to do that part of the work, I can’t pre-empt it.”

Labour’s Clive Betts (Sheffield South East) asked Mr Shapps to “guarantee” there would be a bill reforming the travel industry in a Queen’s Speech.

Mr Shapps replied: “Without wanting to reveal the contents of the Queen’s Speech, and I hope he’ll appreciate that I have hinted very broadly where we want to go and with the reassurance of the opposition front bench, I think he will have his asks answered.”