The former head of Thomas Cook has spoken publicly for the first time, dismissing claims that he oversaw “aggressive accounting” methods ahead of the travel giant’s demise.
Peter Fankhauser hit back at claims that he was a “fat cat” – despite being paid millions of pounds since he became chief executive in November 2014.
He reacted to government criticism by saying he received only half of the £8.3 million total awarded to him in the role as about £4 million was invested in Thomas Cook shares, which are now worthless.
Fankhauser dismissed the suggestion, levelled by some and highlighted by Business Select Committee chairwoman Rachel Reeves, that Thomas Cook bosses used “aggressive accounting methods” to improve their chances of being paid lucrative bonuses by hiding certain costs and driving up profit numbers.
“That is just rubbish,” he told the Mail on Sunday “I shouldn’t say that. But it is just not right.”
Fankhauser argued his pay was not “outrageous” when compared with other bosses within the FTSE 250 index, which Thomas Cook fell out of last December.
His pay was decided by the company’s board rather than himself, he argued. Fankhauser agreed to work last week unpaid following the collapse in the early hours of last Monday, and did not collect his last monthly pay cheque before Thomas Cook’s liquidation.
More than 1,000 staff plan to take legal action after losing their jobs at short notice and missing out on pay. They plan to stage a mass protest today [Monday] at the Conservative party conference in Manchester.
But Fankhauser claimed his ability to save the company was hampered by a debt mountain built up in the years before he took charge.
Describing himself as “devastated”, he said: “You ask me how I feel? Desperate. And deeply sorry.”
He added: “I’m grateful for the loyalty of millions of customers. And I feel deeply, deeply sorry that they suffered this crisis. I can’t say more than that. I can just tell them I tried everything for this company.
“I tried my absolute best to save the company. But the truth is I didn’t pull it over the line. And I understand all the anger, all the disappointment of my colleagues. I understand all that. But I gave everything not to be in this situation.”
Fankhauser, who like many of his former staff was not paid for his work in September, spent much of last week talking to his workforce, including at its Peterborough head office.
He said: “It would not have been right not to go there. But it was tough. I talked to colleagues in small groups. They were crying.
“They were asking very, very difficult questions, ‘How did it come to that? Couldn’t you have made all the decisions better?’ All the questions I ask myself as well, of course.”
Fankhauser and the Thomas Cook board now face a parliamentary inquiry focusing on their pay.
The Business Select Committee – led by Labour MP Rachel Reeves – will examine bosses’ pay. Reeves said the firm’s demise appeared to have laid bare “a sorry tale of corporate greed”.
Fankhauser said he welcomed the inquiry, but said: “I don’t think that I’m the fat cat that I’m being described as.”
He accepted the blame for not securing a £200 million deal with the government that would have rescued Thomas Cook. But he added that, due to the company’s large debt pile, he would have done nothing differently if he had his time again.
Thomas Cook, like all European travel firms, suffered from a series of external blows in recent years, including terrorist attacks, uncertainty over Brexit and the fall in the value of the pound and last summer’s UK heatwave – all factors in discouraging people from booking foreign package holidays.
Thomas Cook was also battling a £1.7 billion debt mountain, built up through takeover deals and restructurings.
But Fankhauser said he didn’t want to play the blame game.
He pointed towards the debt and the £1.2 billion of attached interest costs he had to deal with as chief executive.
Much of the debt was built up during the tenure of Manny Fontenla-Novoa, who was ousted in 2011 and replaced by Fankhauser’s immediate predecessor and Harriet Green.
Fontenla-Novoa oversaw a debt-fuelled 2007 merger with MyTravel – with Thomas Cook this year having to write off £1.1 billion of value relating to the deal.
Fankhauser suggested that a merging of 400 Co-op Travel outlets with its own in 2010 when travellers were increasingly booking online now looked like a mistake.
But he stopped short of pointing the finger at Fontenla-Novoa personally.
Since taking control, Fankhauser halved the number of travel outlets from 1,200, and claimed he was prevented from doing more because of strict lease contracts.
He does take some of the blame for Thomas Cook’s demise, not least his inability to pull off the rescue deal.
But changes that needed to be made at the company were constrained by a shortage of cash, which was eaten up by debt repayments.
By the time he was forced to announce a profit warning last September, Fankhauser knew recovery was going to take more than selling a few more holidays.
Further profit warnings were to follow, driving a 95% fall in its share price. By May, Thomas Cook was on the verge of collapse, reporting a £1.5 billion winter loss including the £1.1 billion MyTravel write-down.
But why did it take so long – 12 years after the deal was completed – to make this write-down? Fankhauser says he discussed the issue with Thomas Cook’s auditors last September, after the profit warning, but that they concluded a write-off was not necessary.
In May this year, when Thomas Cook issued another profit warning as bookings dried up, he said the company “had no other [choice but] to write it off. That wasn’t even a discussion. That, of course, made the situation more difficult”.
Fankhauser contended that Thomas Cook was performing “in line with our main competitors” at this time, but that it was sinking faster because of its debts.
He struck a £900 million deal in August with Chinese firm Fosun, already Thomas Cook’s largest shareholder, its lenders and bondholders to keep the company alive.
He had spent months talking to a range of banks and bondholders, and he was convinced right up to the final hours that they would support him – despite speculation that some had already begun to get cold feet.
“I don’t want to believe that [the banks had turned against him], because then I would feel really betrayed,” he said.
But the deal was ultimately doomed on September 9 when lenders insisted that Thomas Cook would need to find a back-up £200 million in case it underperformed next winter.
On the same day – two weeks before the collapse – Fankhauser met transport secretary Grant Shapps. The following Tuesday, September 17, Thomas Cook submitted a formal proposal for the government to provide the £200 million guarantee.
“They came to the conclusion that they can’t support us,” said Fankhauser.
“That is a decision from the government that I’d never, ever dare criticise. We knew the government was the last resort.”
Lenders made clear that they could not go on with a deal without the government being behind it.
“It is what it is,” Fankhauser said. “The reason why [Ministers chose not to support us] is that they didn’t want to create a precedent. And that is understandable.”
However, Fankhauser believed a government-backed deal would have secured the long-term future of the company, despite the many issues Thomas Cook was facing.
“The whole recapitalisation was a plan that would have put Thomas Cook on a totally different footing in terms of finance,” he explained.
“The whole debt burden that I had since taking over would have been wiped out…put into equity.”
When asked about anything he could have done differently, he said: “Where did it go wrong? We didn’t change fast enough. That’s definitely the point.”
But the charges on the company’s vast debts prevented the firm moving faster.
“What would I have done differently? Completely differently? Nothing,” he added.