Blame the Weather: Thomas Cook Mulls Airline Sale Amid £14m Operating Losses

Cornelia Mascio
Febbraio 10, 2019

Its underlying operating loss rose by £14m to £60m for the three months ending 31 December 2018. For this summer, tour operator bookings are down 12 per cent although pricing was slightly higher. Demand for Spanish holidays was also weaker amid tough competition. This was led by demand for Turkish and North African destinations, offsetting less demand for Spain.

But gross margins fell, reflecting a continuation of the "highly competitive" market conditions in the United Kingdom at the end of the summer, and weaker demand for winter holidays in the Nordics.

Fankhauser added, "As expected, the knock-on effect from the prolonged summer heatwave and high prices in the Canaries have impacted customer demand for winter sun".

The oldest travel company in the world, Thomas Cook was hurt by a heatwave that gripped northern Europe previous year and deterred holiday makers from booking lucrative last minute deals. The Company owns, operates and manages travel agencies, tour operators and vehicle hire agencies, as well as owning their own aircraft fleet, cruise ships and resort properties.

Airline bookings for summer are also below a year ago after cutting the number of flights to short and medium-haul destinations by taking in less wet-lease capacity. Thomas Cook Group now has an average rating of "Hold" and an average target price of GBX 75.78 ($0.99).

Thomas Cook said it had made progress in managing its cost base but that bookings for this summer reflected consumer uncertainty, especially in Britain.

The company's willingness to sell its airline business reflects its commitment to its core growth strategy, with Thomas Cook eager to learn recoup losses it sustained previous year in what was a challenging 12 months trading.

The company will explore options for its airline branch "to enhance value to shareholders and intensify our strategic focus", a press release on Thursday said.

'We recognise that we need greater financial flexibility and increased resources to accelerate the execution of our strategy of differentiation: to invest in strengthening our own-brand hotel portfolio; further digitising our sales channels; and driving greater efficiencies across the business, ' Thomas Cook CEO Peter Fankhauser said.

Airline business up for sale?

"We will provide an update on this process in due course".

"As such, we would be surprised if their strategic review announced they got the entire business away". UBS Group reissued a "neutral" rating and issued a GBX 60 ($0.78) price target on shares of Thomas Cook Group in a report on Friday, November 23rd.

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