This does not answer why they held the £35m.
Recession killed Flyglobespan, not me – tycoon
Published Date: 10 January 2010
By David Leask
THE tycoon accused of causing the collapse of Flyglobespan last night came out fighting in a bid to clear his name.
Embattled Elias Elia told Scotland on Sunday that the Scottish airline was the victim of the recession – and not his credit card clearance company E-Clear.
In his first interview since Flyglobespan went into administration before Christmas, leaving 4,500 holidaymakers stranded abroad, the Greek Cypriot businessman admitted his reputation had taken a hammering but insisted his hands were clean.
He has been accused of precipitating the airline's collapse by withholding some £35 million paid by credit card holders for flights and holidays. He said he had to keep the money to protect himself and his firm from future claims by unhappy customers.
Elia said: "Flyglobespan are a victim of the current recession. They were forced to discount the cost of tickets to compete in a market that has been badly hit by the financial meltdown.
"We have suffered because we have lost an important client in Flyglobespan and people are painting us as a reason for the airline's collapse. That creates bad publicity, when our view is we are just doing our job. We feel that is unfair, but it still damages our reputation."
The entrepreneur has kept a low profile since Flyglobespan – and its parent company, respected and long-standing Edinburgh travel group Globespan – went under on 16 December.
The airline and its parent company filed for administration on the day when its civil aviation licence was suspended after a financial rescue deal – in which Elia was involved – fell through.
Former Globespan insiders yesterday insisted that airline executives had been convinced by Elia and others that a rescue was on the cards until the very last minute.
Elia said yesterday: "Flyglobespan was a great airline, loved by the Scottish people, and that's why for more than two years we tried our best to help them in every way we could and recently attempted to bring investors to the table to try to secure its long-term future.
"Right up to its closure we were still trying, but once the Civil Aviation Authority withdrew its licence, it was impossible to continue."
Scotland on Sunday, meanwhile, has seen a due diligence report that appears to have been drawn up on Globespan by accountants advising investors lined up by Elia. It cautions against acquiring the airline and says that the business would need a cash injection of £70m, including the £35m the report confirms was held by E-Clear, to survive until June.
Elia's own holiday company, the Allbury Travel Group, including the famous brand Libra, also went bust at the end of last year. His credit card clearing firm also handled Allbury's payments, as well as those of now defunct airlines XL, Zoom and SkyEurope. Elia is facing at least two sets of litigation as a result of these collapses.
The entrepreneur last night stressed that his firm specialised in handling the payments of struggling companies and it should therefore be no surprise that some of them went out of business.
He said: "We are working in the distressed market. We hold on to the funds until all the charge-back claims are exhausted. The major credit card companies use us as a sort of insurance policy to make sure their customers do not lose money on poor services or those that are not provided.
"In Flyglobespan's case 100,000 people paid for flights they have not taken, according to the records we have."
Globespan itself, however, was far from convinced by that argument in its closing weeks. At the time, it questioned whether E-clear needed to keep all credit card takings for up to six months to cover potential losses.
While waiting for the rescue investment arranged by Elia, Globespan also looked at petitioning a court to wind up E-Clear. The accountants currently acting as administrators for the airline – PricewaterhouseCoopers – are understood to have threatened to continue that action.
E-Clear, meanwhile, is late filing its annual accounts. Elia said yesterday this was not unusual for companies and added: "E-Clear is financially healthy and our stakeholders are behind us."
Flyglobespan directors are unable to comment under the rules governing administration.
Bruce Cartwright, of PricewaterhouseCoopers, said: "If E-Clear are really serious about co-operating with us then they should confirm exactly how much money they are holding from Globespan customers."
A spokesman for Elia yesterday confirmed that the entrepreneur accepted his firm had held £35m of Globespan funds when the airline folded.