The prime minister’s office was aware of a financial rescue plan that could have saved Thomas Cook but “didn’t want to set a precedent” by lending the company money, its former boss told MPs, as an inquiry into the tour operator’s collapse got under way.

In a sometimes bruising encounter with the business, energy and industrial strategy (BEIS) committee, Thomas Cook bosses drew stinging criticism for their role in the demise of the 178-year-old travel company.

The committee chair, Rachel Reeves, said its directors were guilty of a “series of misjudgments” that “guided” the company “into the rocks”.

She called on them to resign from any other boardroom jobs they held and reflect on whether to hand back bonuses that “you have not earned but you have received”.

The company’s chief executive before it collapsed, Peter Fankhauser, declared himself “deeply sorry” over the company’s descent into liquidation but refused to commit to returning his bonuses, saying he had worked “tirelessly” in his efforts to save the company.

Fankhauser was paid £8.4m during his tenure, including £4.6m in bonuses, but the majority was paid in shares that he did not sell and are now worthless.

The cash element of his bonuses was worth £1.1m but under the terms of his contract only £558,000 can be forcibly reclaimed.

Fankhauser insisted the company could have had a “bright future” under his leadership if the government had not refused to support a £1.1bn financial rescue package.

He said the proposal was “on the table of ministers and it was in No 10”. “We made an estimate of how much a collapse could cost and that was far higher than what we requested.”

Fankhauser told the committee: “I was awfully sad when I had the high official on the phone about five o’clock in the evening [on the day before the collapse], because I knew, now I have to throw in the towel.”

He said he wouldn’t “dare criticise the government … [but] we knew that we needed something that was strong because without it we knew we couldn’t take off again on Monday because the business was on its knees”.

Speaking to the Guardian outside the hearing, Fankhauser said Thomas Cook would have been one of Europe’s best-funded leisure businesses if the rescue had gone ahead.

The restructuring involved a £900m injection from the Chinese tourism business Fosun, banks and bondholders. Spanish hoteliers, backed by their government, were understood to be ready to contribute half of a further £200m demanded by the banks in the weeks before the company’s collapse.

The deal would have cut Thomas Cook’s £1.2bn debt by “at least” half, Fankhauser said, reducing annual debt interest payments from £150m to £50m.

Thomas Cook’s chairman, Frank Meysman, told the committee the funding package was in place at 4pm the day before the company collapsed but the government’s refusal to provide £200m in loans to underpin the deal led to other investors pulling out. “Some other governments have made a different choice,” he said.

Fankhauser also revealed that while he had spoken to the tourism ministers of Germany, Spain, Greece, Turkey and Bulgaria in the week leading up to Thomas Cook’s collapse, no British government minister contacted him during the period.

In a separate BEIS committee hearing, the business minister, Andrea Leadsom, defended her department’s role after the Guardian revealed she and her officials did not meet with company chiefs in the weeks leading up to the collapse.

“There has been a clear dereliction of duty by the government,” said the shadow business minister, Rebecca Long-Bailey.

“It is shameful that ministers failed to make contact with Thomas Cook at such a vital time when other international governments were stepping in, and failed to examine the excessive bonus culture when it was very publicly facing difficulties.

“There must be a full public inquiry into the government’s handling of this scandal.”

Manuel Cortes, the general secretary of transport workers union TSSA, said Leadsom’s position was “untenable”.

During an evidence session that lasted more than two hours, MPs repeatedly criticised Thomas Cook’s directors for their part in the company’s downfall.

Fankhauser admitted he was “not fast enough” to revive the company’s fortunes, partly due to the constraints of debt racked up under his predecessors.

But MPs said he and his directors could have done more to rescue the company.

Committee member, the Tory MP Antoinette Sandbach criticised the board for valuing the company’s “goodwill” – an accounting measure of a company’s future trading prospects – at £2.5bn.

Customers deserted the company after it reported a £1.5bn loss earlier this year, partly due to a £1.1bn goodwill writedown on the value of the UK package holiday unit MyTravel.

MPs said the company could have raised cash by accepting offers for divisions such as its airline.

Directors did not respond to a demand from Reeves that they hand back the cash element of bonuses they received from the company.

The maximum that can be forcibly recouped under the terms of their contracts is £1m, due to a two-year time limit on so-called “clawback” provisions.