I’m devastated and deeply sorry. But what would I have done differently? Absolutely nothing: Thomas Cook boss breaks silence on momentous crash
At precisely 5.10pm last Sunday, Thomas Cook chief executive Peter Fankhauser received the phone call that would collapse his world.
After days, weeks and months of fighting to haul his beloved travel firm from the brink, the message came from the highest levels of Government that Ministers were not willing to offer the financial support Thomas Cook needed to survive.
‘Until that moment I was totally, totally convinced I could pull it off,’ says the 58-year-old boss of the failed travel behemoth.
Thomas Cook boss Peter Fankhauser says seeing colleagues last week was heartbreaking
Minutes later he was forced to accept his fate – that he would go down in history as the last ever chief executive of Thomas Cook, the man who could not rescue a 178-year-old British institution.
‘I tried my absolute best to save the company,’ says Fankhauser, the Swiss travel industry veteran, in his first interview since Thomas Cook entered liquidation at 2am last Monday.
‘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.’
We meet Fankhauser in Thomas Cook’s corporate headquarters, a plain, one-floor office in the City of London. Despite being well turned out – tieless in a smart white shirt, dark suit trousers and a pair of upmarket, brown RM Williams boots – Fankhauser appears emotionally drained and sleep deprived.
After liquidators took control in the early hours of Monday morning, Fankhauser says he tried unsuccessfully to get a few hours’ sleep and was back in the office at 5.30am to break the news to his 150-strong management team.
On Tuesday, he travelled up to Thomas Cook’s Peterborough office to assist with the Government’s complex operation to repatriate hundreds of thousands of customers stranded abroad. He also needed to say goodbye to his colleagues – many of whom, understandably, struggled to accept the situation.
‘It would not have been right not to go there,’ he says. ‘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 admits that he ‘tried hard not to cry’, adding: ‘But it was heartbreaking. It was heartbreaking.’
The atmosphere within the office is understandably downbeat, with a smattering of employees still working away among rows of mostly empty desks – although Fankhauser’s corner room offers a window into happier times.
Gone bust: Thomas Cook has been battling a £1.7billion debt mountain, built up through takeover deals and restructurings
A large display cabinet is crammed full of memorabilia including photographs of his family and a framed handwritten note from one of his children titled ‘all about my family’.
He also has a picture of Thomas Cook himself – a cabinet-maker who set up the company in 1841 – and a 2015 letter from former Prime Minister David Cameron thanking Fankhauser for helping with a repatriation of customers of rival airlines who were stranded in Egypt’s Sharm el-Sheikh amid terrorism fears.
In the corner of the cabinet sits a £5 mug, featuring the words, ‘Peter: Beneath the steely exterior beats the heart of a dashing hero.’
Unfortunately, Fankhauser failed to swoop to the rescue on this occasion. In fact, among the British public and tens of thousands of holidaymakers whose plans have been ruined, his current status is more villain than hero.
Peter Fankhauser, 58: Lover of sport
Born: Switzerland in 1960.
Family: Wife, Raffaella, and three children.
Hobbies: Skiing, snowboarding, running.
Career: A former national gymnast, Fankhauser started his career as an aerobics teacher before moving into the travel sector.
He also has a PhD in political science and – despite overseeing the collapse of Thomas Cook – is an honorary professor of business administration at the University of St Gallen in Switzerland.
For his part, Fankhauser says he is ‘devastated’. ‘You ask me how I feel? Desperate. And deeply sorry,’ he explains. He reveals the collapse of Thomas Cook is also taking its toll on his family. Fankhauser has three children, the younger two with his second wife, Raffaella.
‘They love me,’ says Fankhauser when asked about their support for him. ‘Every half a day I get a text from my son with a heart. For him it’s also difficult…it is difficult for all of us. But it’s not as difficult as for many, many other colleagues who are suffering probably even more.’
He adds: ‘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.’
In exchange for his best efforts, Fankhauser has been paid £8.3million for leading Thomas Cook since November 2014. But he says he has not received this amount in full, as much of it was share awards that he has never cashed in.
And he dismisses 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 says. ‘I shouldn’t say that. But it is just not right.’
Fankhauser argues his pay is not ‘outrageous’ when compared with other bosses within the FTSE 250 index, which Thomas Cook fell out of last December. He adds that his pay was decided by the company’s board rather than himself. He agreed to work last week unpaid, and did not collect his last monthly pay cheque before Thomas Cook’s liquidation.
Rather than any major corporate issues, Fankhauser’s early years in charge of Thomas Cook were blighted by the company’s treatment of the family of two children who died of carbon monoxide poisoning in 2006.
Sporty: Fankhauser is a keen skier and runner
Despite coming close to collapse in 2011, Fankhauser turned a profit in 2015, 2016 and 2017. And the dire financial state of the company has only become fully apparent in recent months.
So how did it come to this for one of Britain’s best known brands– a company with millions of customers across Europe and annual revenues of £9.6billion at the last count?
Thomas Cook, like all European travel firms, has been hit by a series of unavoidable blows in the past couple of years. Terrorist attacks, uncertainty over Brexit and the fall in the value of the pound and a sweltering British summer last year have all been factors in discouraging people from spending their money on Thomas Cook’s package holidays.
On top of that, Thomas Cook has been battling a £1.7billion debt mountain, built up through takeover deals and restructurings. Fankhauser, a German speaker whose English is less than perfect and heavily peppered with corporate phraseology, says he doesn’t want to play the blame game.
But when asked where the fault lies, he continually points towards this debt and the £1.2billion of attached interest costs he has 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 ally Harriet Green.
Former boss Manny Fontenla-Novoa oversaw a debt-fuelled 2007 merger with MyTravel
Fontenla-Novoa oversaw a debt-fuelled 2007 merger with MyTravel – and the firm this year had to write off £1.1billion of value relating to the deal. Fankhauser suggests that a merging of 400 Co-op Travel outlets with its own in 2010 when travellers were increasingly booking online now looks like a mistake.
But Fankhauser stops short of pointing the finger at Fontenla-Novoa personally.
Since taking control, Fankhauser halved the number of travel outlets from 1,200, and claims 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 he says 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, he knew recovery was going to take more than selling a few more holidays.
Further profit warnings were to follow, driving a 95 per cent fall in its share price. By May, Thomas Cook was on the verge of collapse, reporting a £1.5billion winter loss including the £1.1billion 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 says 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 says Thomas Cook was performing ‘in line with our main competitors’ at this time, but that it was sinking faster because of its debts. A rescue deal was now critical.
In August, Fankhauser struck a £900million deal 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 coterie of banks and bondholders, and he was convinced right up to the final hours that they would support him – despite rumours 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 says.
Two weeks before the collapse Fankhauser met with Transport Secretary Grant Shapps
But the deal was ultimately doomed on Monday, September 9 when lenders insisted that Thomas Cook would need to find a back-up £200million in case it underperformed next winter. On the same day – two weeks before the collapse – Fankhauser met with Transport Secretary Grant Shapps.
The following Tuesday, September 17, Thomas Cook submitted a formal proposal for the Government to provide the £200million guarantee.
‘They came to the conclusion that they can’t support us,’ says Fankhauser, reflecting on that fatal 5.10pm call last Sunday. ‘That is a decision from the Government that I’d never, ever dare criticise. We knew the Government was the last resort.’ He says lenders made clear that they could not go on with a deal without the Government being behind it.
‘It is what it is,’ says Fankhauser. ‘The reason why [Ministers chose not to support us] is that they didn’t want to create a precedent. And that is understandable.’
Yet despite the many issues Thomas Cook was facing, Fankhauser fervently believes a Government-backed deal would have secured the long-term future of the company. ‘The whole recapitalisation was a plan that would have put Thomas Cook on a totally different footing in terms of finance. The whole debt burden that I had since taking over would have been wiped out…put into equity.’
He reflects for a moment when pressed about anything he could have done differently: ‘Where did it go wrong? We didn’t change fast enough. That’s definitely the point.’
But he then seems to conclude that the charges on those vast debts prevented the firm moving faster. He pauses again: ‘What would I have done differently? Completely differently? Nothing.’
Fat cat? I’ve not taken a penny this month
The boss of Thomas Cook has said he welcomes a Parliamentary inquiry into his pay – and insisted he is not a ‘fat cat’ despite making millions while running the fallen travel giant.
The Mail on Sunday last week revealed how the board had been paid more than £20million over the past five years as they led the company to collapse. The massive sum attracted condemnation, including from Prime Minister Boris Johnson, who said: ‘I have questions about whether it’s right that the directors, or whoever, the board, should pay themselves large sums when businesses can go down the tubes like that.’
In his interview with The Mail on Sunday, Peter Fankhauser – who was not paid for his work at Thomas Cook this month – defended the £8.3million he received between 2014 and 2018.
He pointed out that around half of this came in share payments, which are now worthless because he did not sell any of his stock before the firm went into liquidation. ‘I don’t think that I’m the fat cat that I’m being described as,’ he said. Parliament’s Business Select Committee last week launched an inquiry into the collapse of the company.
Rachel Reeves, the committee’s chairwoman, said the firm’s demise appeared to have laid bare ‘a sorry tale of corporate greed, raising serious questions about the actions of Thomas Cook’s bosses and their stewardship of the business’.