Thomas Cook Could Sell Airline Business To Raise Badly Needed Cash

Thomas Cook Group plc, the world’s oldest travel company, is resorting to all available options -- including selling the four firms that comprise its airline business -- to raise enough cash to cope with the far more difficult year of 2019.

It racked-up huge losses in 2018 when the drought and heat wave in northern Europe during the spring and summer deterred holiday makers from booking last minute deals. The resultant loss in revenue triggered two major profit warnings, and talk of a need to raise more capital.

Thomas Cook’s willingness to do what it takes to get its house into order saw Wall Street send the group’s shares 12 percent higher yesterday. The company had a market valuation of $700 million (£540 million) pounds and net debt of $2.1 billion (£1.6 billion) in 2018.

"Thomas Cook doesn't need to own an airline outright to be a successful holiday company,” said CEO Peter Fankhauser.

The company’s airline business consists of Thomas Cook Airlines, Thomas Cook Airlines Balearics, Thomas Cook Airlines Scandinavia and Condor (in Germany). It posted a 37 percent rise in operating profit in 2018, which was far better than the company’s core tour business.

Analysts said Thomas Cook’s airline business could fetch from $2.3 billion (£1.8 billion) to $4.1 billion (£3.2 billion). Together, the four carriers operate 103 aircraft.

Fankhauser revealed a review is being conducted and said the company will retain strong links to the carrier whatever the outcome. Selling its airlines will enable the parent company to invest more in its own hotels. There will also be funds to improve its digital sales offerings.

Fankhauser said the review is at an early stage and will likely to take several months. Lufthansa, easyJet, IAG and Ryanair might be interested in different parts of Thomas Cook’s airline business, according to Credit Suisse.

Analysts said selling these airlines won’t be easy given turmoil in the European airline industry, which saw the bankruptcy only this Feb. 4 of the 40 year-old, privately-owned airline Germania. They said there won’t be a rush to buy Thomas Cook’s entire airline fleet, or even parts of it.

European tour operator bookings are 12 percent lower for the summer. Thomas Cook said this reflected consumer uncertainty, especially in the United Kingdom where concerns about Brexit are hammering consumer confidence.