Strategic review: Thomas Cook considers airline sell-off

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

Thomas Cook off to flyer while Tui struggles

Thomas Cook has said it is conducting a "strategic review" of its airline as it seeks to find funds to invest more in its hotels business.

The company said it was launching a strategic review as it needed more resources and financial flexibility after two profit warnings in quick succession late a year ago.

Debt to the end of last rose to £1,588 million.

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.

Over the past year, the holiday specialist has encountered several issues, including consumer demand for sunshine package holidays being stifled by a scorching summer.

The airline was insulated because the tour operator guarantees to fill many of its seats and makes up the difference if prices have to be slashed to fill them. In all, it operates 103 aircraft and posted a 37 per cent rise in operating profit previous year to £129 million (S$225.8 million). Thomas Cook carries more than...

If it wants to upgrade its hotels, it "explains the rationale" of potentially selling the airline business, he said. Citi valued the airline at 630 million pounds.

One possible route might be some form of airline merger.

For summer this year, the firm has sold 30% of its programme, which is slightly ahead of last year.

Holiday airline Germania collapsed this week.

'As a result, we are today announcing a strategic review of our Group Airline.

Tui, whose brands include First Choice, had been expected to update the market on trading next Tuesday.

A good run of warm weather over the summer period meant fewer people booked overseas holidays while high hotel prices in the Canary Islands hit demand in this area.

"We carried over 20 million passengers and generated £3.5 billion in revenue, with underlying operating profits growing 37% year-on-year to £129 million". It said it had met its bank covenant tests. 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.

'This review, which could result in a sale of the division, is an acknowledgement that the company needs to take radical action to steady its performance and fix a fragile looking balance sheet, ' says AJ Bell's Russ Mould.

"I wouldn't say it solves the problem or anything like that, but it reduces the immediacy of the problem", the trader said. He said investors were now pricing the probability of default at 60 percent, down from 70 percent on Wednesday.

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