A big tour operator can be guaranteed to go bust in every downturn. But the fall of Britain's third largest was swift by any standards. On Thursday last week, bookmaker Paddy Power gave 10-1 odds that the XL Leisure Group would be next to fold, says The Times. By early Friday, it had come "to a messy standstill at the end of the runway", robbing 264,000 people of their pre-booked holidays and leaving 85,000 more beached abroad, says The Sunday Times. It also ended an unlikely alliance between "the sharpest traders in the murky world of British charter airlines and a group of Icelandic billionaires". At least XL's head, Phil Wyatt, had the grace to cry while apologising to customers (although his contrition may have seemed more genuine had XL not kept taking money from punters, even as the administrators sharpened their pencils). He blamed the oil spike, which saw the airline's fuel bill jump a whopping $82m, but was reticent on the subject of XL's $280m debt, which ultimately proved the coup de grace, says The Independent. "As ever, the lesson is that debt is a killer."
As the Travel Trade Gazette observed in 1997, Wyatt, 45, had "an unenviable reputation", and was seen by many rivals as "Public Enemy Number One". His father, Harry Wyatt, was an industry legend who had set up Monarch Airlines in the 1960s. Young Phil joined the firm as a junior clerk, before teaming up with his brother to launch Goldcrest Aviation in 1991. It was here his career really took off, says the Daily Mail. He courted controversy by chartering cut-price planes, of questionable safety, from Yugoslavia and Slovenia. Opponents claimed he had "set back the image of the charter industry ten years". But Goldcrest raked it in. Wyatt was part of a group of sharp-dealing entrepreneurs who "plied their trade around Gatwick" and "either created, brokered, and in some cases ditched, a string of charter airlines", says The Sunday Times. When one venture, Excel, floated on Aim in 2002, Wyatt's 10% stake was worth £18.5m. Soon after, the Icelanders moved in.
Excel had caught the attention of tycoon Magnus Thorsteinsson, one of the "Samson trio" of Icelandic heavyweights who had made a killing brewing beer in Russia. In 2005, he folded Excel into his aviation business, Avion. The relationship didn't work, but Wyatt still secured hefty backing from Icelandic retail bank Landsbanki, when he led a management buyout of the rebranded XL in 2006. Plunged into the incestuous world of Icelandic finance (Landsbanki is chaired by Bjorgolfur Gudmundsson whose son, Thor Bjorgolfsson, is Iceland's richest billionaire), the risk of XL debt was passed onto another entity in which the father and son owned shares: shipping group Eimskip. But when XL collapsed, they stepped in personally to take on the debt. The plan, says The Mail on Sunday, was not to shore up XL, but prevent the fall-out from its collapse ripping through Iceland's precariously interwoven and leveraged institutions. Wyatt, meanwhile, has retreated to his Sussex estate to lick his wounds. But he strikes a defiant note. "I have been in this business since I was 16 years old and I can assure you I am not going to let big companies dominate the business," he told The Sunday Times. There's every likelihood he'll be back.
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The Darwinian winnowing underway in aviation
XL is "an extra-large disaster", says The Daily Telegraph, and not just for those who'll struggle to get a refund under the outdated rules governing Britain's travel industry. It is bound to have a knock-on effect on other struggling players, as travellers bypass the weakest airlines and tour companies for the perceived safety of larger groups. Zoom, MaxJet, Silverjet and Oasis have already fallen and BA boss, Willie Walsh, believes 30 more airlines will go by Christmas. "A Darwinian process of survival of the fittest is underway," says The Independent. No wonder shares in holiday giants TUI and Thomas Cook have jumped.
XL, which made a £24m loss last year while continuing to pay its directors handsomely, quite simply ran out of cash, says The Sunday Telegraph. Evidence of longstanding "financial irregularities" is now surfacing. It transpires that the firm's auditors, KPMG, resigned two years ago, claiming the accounts did not "give a true and fair view of the profit and state of affairs of the company". Directors had blocked KPMG's insistence on a "comprehensive, independent investigation". There was another big hush-up this summer when XL's then CEO, Peter Owen, resigned. XL cited "personal reasons", says the Evening Standard. But we now know that Owen, a former head of operations at BA, had been declared bankrupt and was thus barred from holding directorships. Owen had doubled as chairman of Silverjet, the business-only airline, which claims he amassed personal debts against it totalling £240,000. Owen, who lives in some style in Hampton, west London, filed for bankruptcy on 28 May. Two days later, Silverjet went to the wall.
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