Former Thomas Cook Group chief executive Peter Fankhauser has told a UK cross-party parliamentary select committee that interest in the tour operator's UK carrier waned as the European air transport industry came under financial pressure.
Fankhauser faced aggressive questioning from the business, energy and industrial strategy committee on 15 October after an inquiry into Thomas Cook Group's collapse opened.
Challenged by the committee as to why the company did not divest the profitable Thomas Cook Airlines operation sooner, to help relieve its financial burden, Fankhauser said: "In hindsight you're always much wiser. It could have been an opportunity."
He explained that the company had spent several years working to reduce the carrier's dependency on the tour operator, by developing its seat-only business.
But he pointed out that 50% of capacity was still being sold by the tour firm.
Fankhauser said Thomas Cook Group had decided to put the airline "on its own feet" in 2017, legally separating it from an accounting point of view, and giving the company an opportunity to sell the carrier.
"Then we were testing the market, who [might] have interest," he said. "The whole market was talking about consolidation in European airspace."
But hesitation set in over the following months, as companies such as Monarch Airlines and Air Berlin ceased operations.
"Everybody was somehow sitting on the fence and waiting," said Fankhauser. Thomas Cook took advantage of the failures to add capacity, he said, which "seemed to be working very well".
While Thomas Cook Group held talks with major airlines, Fankhauser said that several European airlines had revealed pressures on profits during 2019, and that this unhealthy situation was "really not helpful for the process".
"The competitive tension we were thinking to create by then going public with [a sale], that didn't happen," he said. "On the contrary, the bids – from non-binding bids to final bids – deteriorated."
Thomas Cook Airlines collapsed when the group entered liquidation on 23 September.
Fankhauser told the committee, which was particularly harsh with its line of questioning, that he was "deeply sorry" about the parent company's failure and the distress caused to customers, partners and employees.
He said the effort to turn around the company was hampered by its huge debts, pointing out that the company had paid £1.2 billion in interest and finance costs alone since 2012.
"Imagine if only half of that could have been reinvested in the business," he added.
Fankhauser took over as chief executive in 2014. "I was fully aware of the challenge and I tried to tackle this challenge by really transforming the business – from an old-fashioned tour operator into a modern tour operator – by differentiating our offering and our services, to differentiate us from better-funded companies than we were.
"And obviously the pace we could do that was not fast enough, it was constrained by this huge debt pile."
Fankhauser told the committee that he believed the company was implementing the right strategy, but while it had a target of paying back £300 million in debt from 2015 to 2018, it was only able to pay back £100 million.
He argued that the company's position was looking "extremely good" as late as May 2018, with a particularly positive booking situation, and that it appeared to be "on the right track". But unusually warm weather quickly disrupted the company's outlook.
Thomas Cook Group's decision to write down more than £1 billion of goodwill earlier this year – a decision which catalysed the company's demise – drew scrutiny by the committee, which questioned why the goodwill had not been amortised earlier.
The company's former audit committee chair, Martine Verluyten, defended this decision. "When we took a look at all the forecasts [in 2018] and all the information we had at that point in time, we felt that it was OK to leave the goodwill as it was," she said.
Former chief financial officer Sten Daugaard said the writedown of the goodwill in mid-2019, just a few months later, was a "reflection of how fast the business in the UK deteriorated".
"Deterioration in the UK business in the first half of 2019 was so strong that the arguments used to keep goodwill in the books for 2018 could not be kept – and that's why we had to revisit the goodwill calculation."
Verluyten stressed to the committee that Thomas Cook Group's managers had "never hidden the result of the company", and that all its financial figures were contained in the annual report.
"It's not like we were hiding from the investors and from the general public and everybody that the bottom line of the company was still not healthy," she said.