Continued from page 72


Breaking the news: Thomas Cook chief executive Peter Fankhauser (on stage) informs staff of the company’s collapse at its Peterborough head office on September 23


He ponders: “What could we have done beter?


We had a strategy, but we could not do it fast enough. We built up Cook’s Club and Casa Cook hotels and our own hotel management company. We set up a hotel investment fund of £150 million. But it took too long. We could not build the brands to get the scale. “If I could do it again, I would be more brutal – we


were not fast enough, not radical enough. It’s difficult to move an elephant, [especially] when you are debt- loaded. Before I could invest, I had to pay the debt.”


‘The debt burden really bites’


Fankhauser suggests Cook also suffered ill fortune, saying: “We had not good luck. In 2016 there were the terror atacks. We made a massive shiſt [from the eastern Med to the West]. In 2017 we were confident – we said we would accelerate the strategy. “In the first half of 2018, we were 12% beter


booked [year on year]. Ten the heatwave came. We could not find a response. We could not change capacity, so we had a bad year and then the debt burden really bites. We had two profit warnings [in September and November 2018]. Our numbers were lower and we had a reallocation [of exceptional items] and that had a negative impact on our [results] guidance.” Te planned Brexit date, at the end of March


2019, also hung over the sector at that point. “Trough October, November, December


we saw it [the market] geting difficult,” he says. “When we came back aſter Christmas [2018] we said, ‘We need structural change’.” In February, the board announced “a review” of


the group’s airline, puting it up for sale. Fankhauser says: “We had prepared the airline [for sale]. It had its own profit and loss [account] and was a separate company for two years.” His initial thinking in separating the airline


had been to “make others think about airline consolidation”. But it did not happen. He says now: “It could be I tested the market too


long, but I wanted to be sure the [tour operator] business was working without an airline.” By the beginning of this year, he says: “We knew it was going to work.” Te airline atracted several offers. “Tere was


really good interest,” says Fankhauser. But amid this interest, the extent of overcapacity among Europe’s carriers also became apparent. Fankhauser says: “Everyone came out with


70 10 OCTOBER 2019


a profit warning, even easyJet. Eurowings [the Luſthansa subsidiary] had a disaster with its results. “We saw none of the alternatives [the offers]


giving us a solution that would work.” To make maters worse, in May: “We had a


goodwill write-down of £1.1 billion.” Tis saw Cook report disastrous half-year results, inflated to £1.45 billion by the “goodwill impairment” on the MyTravel business Tomas Cook had acquired 12 years before. He explains: “Te £1.1 billion in goodwill had


been tested every year [by Cook’s auditors]. But in a deteriorating market, we had to write it off. We discussed, ‘Do we write off one-quarter, a half?’ I said, ‘Write it all off. Get rid of it.’” Te company also announced its banks had


agreed a new £300 million credit facility from October, conditional on selling the airline. But it was the headline losses which dominated media reports – albeit that the £1.1 billion “was a paper loss”. He says: “When you are not in a good position, it becomes difficult.”


Fosun was a ‘good solution’


Unable to sell the airline for the amount Cook needed, Fankhauser says: “We went for a recapitalisation.” Chinese group Fosun, already Tomas Cook’s


leading shareholder and joint-venture partner, agreed to take a majority stake in the business for £450 million, with the airline separated off and majority control of the carrier acquired by the banks and bondholders in return for £300 million and a debt-for-equity swap. Fankhauser recalls: “I went to China to convince


[Fosun chairman] Guo Guangchang that it was a good solution for him, and the banks agreed.” It was an elegant deal in the circumstances,


capable of resolving many of Cook’s problems. Te deal needed completing by September.


We were fighting to the end.


We explored every avenue. I was convinced we could succeed. The failure is devastating for everyone. I feel responsible


But talks dragged on. He says: “It was a huge transaction, a hugely complex process. A hell of a lot of partners needed to agree. We needed not only the banks, we needed the bond providers, the credit card providers, the merchant acquirers, each with financial advisors and consultants, and the CAA. We kept them all informed of our cash position. “It was complicated – that is why it took so long.


We were working round the clock from May.” He insists: “It was really a good plan, but it was


all public. You get pressure in the media, you get pressure from suppliers, tighter payment terms, credit card companies covering their exposure by withholding payments, banks tightening their


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