In a rather embarrassing turn of events for Boris Johnson’s government, the European Union has approved the German government’s decision to grant airline Condor, a subsidiary of collapsed tour operator Thomas Cook, a 380 million-euro (£334 million) bridging loan to keep it in the air.
Germany’s economy ministry said the EU’s executive Commission gave its blessing on Monday. Condor applied for the loan last month to tide it through the winter after British-based Thomas Cook ceased operations.
The airline, which has been profitable, has nearly 60 planes and 4,900 employees. Condor’s management is looking for new investors.
Thomas Cook former staff resort to food banks
Wielding banners that say “Europe flies, UK crashes” and “bankers bailed out, Thomas Cook kicked out” they protested outside the Conservative Party conference.
Labour’s shadow business secretary Rebecca Long Bailey joined them and said: “it surfaced that the Beis (Business, Energy and Industrial Strategy) department didn’t meet with Thomas Cook hardly at all over the last 12 months and we wonder why that was allowed to happen when it was quite clear that there were alarm bells ringing about Thomas Cook for quite some time.
“It’s staggering how the German government seemed to be on top of the situation and intervened, yet ours just sat back and sat on its hands essentially. And there must be reasons for that.
“We want to know, is it incompetence or was there a real strategic reason as to why they didn’t want to provide the support?”
Thomas Cook had initially approached the UK Government prior to the collapse, asking for a £200 million loan to make up a shortfall in funding to avoid going bust, but ministers declined – concerned that it would set an unhealthy precedent.
The collapse of Thomas Cook could cost taxpayers up to £160 million, according to early estimates.
Some £60 million is expected to come out of the government’s coffers to fund unpaid wages, holiday pay and redundancy costs for the company’s 9,500 staff following the travel firm’s collapse.
The cost is in addition to the Government’s own £100 million estimates for the biggest repatriation in living memory of 150,000 holidaymakers when the business went bust last month.
Boris Johnson complained of ‘moral hazard’
Boris Johnson defended accusations he had failed to step in to save the 178-year-old tour operator, admitting: “It is perfectly true that a request was made to the Government for a subvention of about £150 million,” the Prime Minister admitted.
“Clearly that’s a lot of taxpayers’ money and sets up, as people will appreciate, a moral hazard in the case of future such commercial difficulties that companies face.”
Moral hazard is the concept that firms will take increased risks if they believe that they will be protected from the consequences, for example through a state bailout.
Whether there was a moral hazard in the taxpayer grants and foreign trade jaunts given to Johnson’s former model friend Jennifer Arcuri, will no doubt emerge in London Assembly and police inquiries.