Thomas Cook: Bosses warned of £10billion credit claims and travel havoc ahead of collapse
THOMAS COOK bosses were warned credit claims could top £10billion ahead of its collapse last week, a complex network of off-balance-sheet guarantees revealed.
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A confidential report, prepared just days before the 178-year-old company’s failure, laid bare how insolvency would wreak havoc across the travel sector. The report, seen by The Daily Telegraph, claimed the collapse would leave huge debts owed to hoteliers, intermediaries and other suppliers. Many of the suppliers could expect to recoup 3.4p in every pound owed to them.
Bondholders, whose debts totalled more than £1billion, may only recover 2.3p.
The Thomas Cook brand was worth as little as £1.3million, the AlixPartners report found.
Alongside KPMG, AlixPartners are handling the liquidation of the company.
The predictions come as the bill to European taxpayers of Thomas Cook’s collapse could rise to more than £1billion.
European governments have already spent £900million.
Germany, Spain and Portugal have injected £740million in loans and bailouts to prop up Thomas Cook subsidiaries and protect against contagion.
The cost to Britain for flying customers home and funding redundancy pay is already estimated at £160million.
It took the Civil Aviation Authority and Whitehall officials two weeks to repatriate more than 150,000 UK holidaymakers.
Officials will this week focus on bringing in a new system to avoid a similar fallout from any future travel sector collapse.
Claims in the report differ to debts disclosed upon the collapse of £3.1billion because of the triggering of multiple guarantees.
The analysis lifts the lid on what can be realised from the carcass of Thomas Cook.
Other than cash, its assets were only worth £59m, even though the company had a stock market value of more than £2billon 18 months ago.
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The sale of take-off and landing slots “is likely to be highly contentious in all jurisdictions”, the report found.
Slots outside of Britain were deemed worthless.
There would only be a “short period” during which value can be realised from those at UK airports.
The race to snap up slots is heating up as Thomas Cook had around 200 at London Gatwick and 350 at Manchester.
Air France KLM added its name to the interested parties.
KLM chief executive Pieter Elbers told The Daily Telegraph: “We of course will follow very closely which slots become available.”
British Airways’ parent company, IAG, and easyJet have also said they are interested.
Virgin Atlantic, part-owned by Air France KLM, may also be interested.
Ministers were criticised for rejecting a plea to plug a £200million shortfall in Thomas Cook’s rescue plan late in September.
Manuel Cortes, of UK union TSSA, said: “As the governments of Portugal, Spain and Germany have demonstrated, ministers here sitting on their hands is down to their lack of political will rather than EU state aid rules.”
A Department for Transport spokesperson defended the Government’s decision not to step in, saying: “Unfortunately airlines and tour operators do fail. It is not the Government’s role to prop them up, and any financial assistance risks setting a precedent.
“We believe anyone looking at the details of this collapse will conclude a rescue deal would have been a poor use of taxpayer money, with no guarantee the company would have remained solvent.”