XL auditor warned of 'financial irregularities in 2006'

The former auditor of collapsed tour operator XL warned of “financial irregularities” at the firm almost two years ago, it has emerged.

In a strongly-worded resignation letter, accountancy firm KPMG claimed in October 2006 that it was blocked from investigating alleged misrepresentations by company directors that could have resulted in “material errors” in financial statements.

XL Leisure Group went into administration in the early hours of Friday morning leaving tens of thousands of holidaymakers stranded abroad, among them 1,000 Irish people.

Since then almost 12,000 Irish and British people have been brought home as part of an airlift mission conducted by aviation regulators.

The warning of potential financial irregularities at XL was made in a UK Companies House filed document dated October 16, 2006. In it KPMG explained why it had resigned as XL’s auditor.

It stated: “We are no longer able to conclude that the financial statements give a true and fair view of the profit of the company and its subsidiaries.”

An investigation into arrangements between XL and a supplier concluded that information had been “misrepresented” to KPMG from “certain directors”.

As a result “financial statements were likely to contain material errors”, auditors concluded, but they were blocked from investigating the matter further, leading to the resignation.

XL, the UK’s third largest tour operator, was forced to call in administrators, it was announced on Friday.

The move grounded the firm’s fleet of planes, necessitating the ongoing airlift mission to repatriate those left stranded

As of this afternoon, the UK's Civil Aviation Authority (CAA) said it had brought back 11,900 people on 52 flights.

The vast majority of those still overseas will fly back on the date they originally intended to, the aviation regulator added.

The procedures in place to deal with the chaos caused by failed airlines and tour operators was nonetheless criticised today by Virgin boss Richard Branson.

Branson called for an urgent review of the rules with a view to allowing the air fleet of stricken firms to continue to fly under the watch of the regulator.

He said: “It does not make sense for aircraft to be lying idle at UK airports when they should be used to bring back stranded passengers of that airline.

“There is enormous pressure at the moment within the aviation industry to help with the rescue mission, which we are happy to do, but it should not be like this in the future.”

The airlift currently underway was yesterday described as the “the most challenging ever undertaken” by XL’s chief executive Peter Wyatt and is expected to cost some £20m (25m).

Thousands of outbound XL customers will have to make alternative plans on their own.

Some 200,000 people in total have seen future holiday plans go up in smoke as a result of the tour operator’s collapse, although most will be compensated.

The high-profile collapse prompted a prediction by British Airways chief executive Willie Walsh that another 30 airlines would go out of business within the next four months.

XL’s administrators said most people who booked holidays with the troubled tour operator should be eligible for a refund.

In some cases travel insurance and payment by Visa debit card also offers protection.

But people who booked a flight directly with XL Airways and paid with another kind of debit card will not be protected – and will have to pay again to get a flight home.