LONDON – It has emerged over the weekend that Thomas Cook may sell the airline division of the group in order to raise cash following significant losses last year.
This has ultimately sent the group’s shares 12% higher as a result, which could suggest that a significant buyer is on the cards.
The group said that the heatwaves across Northern Europe removed a portion of booking, especially on last minute deals, meaning that up to two profit warnings had to be sent out as a result.
The Thomas Cook Group is valued at around £540 million but holds net debts of £1.6 billion.
This has meant the group stating that it will consider any options for the entirety of its airline division.
Peter Fankhauser, who is the Group CEO of Thomas Cook Group spoke to Reuters about the airline division itself.
“Thomas Cook doesn’t need to own an airline outright to be a successful holiday company,”
He added that a review into the sale of the airline division is happening at this moment in time and that the group will retain links to the carrier if a sale was to take place or not.
Whoever takes over the airline division will have access to the subsidiaries in the division, such as Condor in Germany and mainline Thomas Cook across Britain, Scandinavia and Spain alike.
The potential buyer will also have access to 103 aircraft from airports including Gatwick, Stansted, Manchester, Frankfurt and Munich alike.
The airline is quite a lucrative part of the airline division, especially as it posted an increase of operating profits in 2018 by 37% alone.
Fankhauser also said that the review was brought up at the Annual General Meeting with the outcome not known for another couple of months at least.
Market analysts are showing concern over this move and some are showing positivity.
It could be suggested that easyJet, Lufthansa, IAG or Ryanair could place an interest in the airline division, with Credit Suisse valuing the airline between £1.8 billion to £3.2 billion.
Other analysts are looking to recent bankruptcies across the European aviation industry.
2019 has already seen carriers such as Germania go under, and the fact that the Thomas Cook Airline Division has 103 aircraft, it could be suggested that carriers may go for the slots instead of the aircraft, putting at risk the lives of the aircraft into storage or returned to lessors etc.
In terms of outlook for the airline itself, it is not looking particularly good.
Tour operator bookings decreased by 12% for the Summer 2019 schedule, with consumer uncertainty such as the likes of BREXIT had hit confidence in the market.
Underlying losses for operations in the fourth quarter of 2018 expanded to £60 million from £3 million, but said that bank covenant tests have been met in order to continue such operations.
It will ultimately be interesting to see what direction the Group takes and who the potential buyers could be.
Although Ryanair has been listed as a potential buyer, they may not focus on this sale as it has been busy dealing with the expansion of LaudaMotion, something it is now taking full stake in.
For IAG, it could be a hot contender, given the dropped interest in Norwegian, with Lufthansa and easyJet alike fighting over other carriers too.