Thomas Cook puts airline business up for sale to raise cash

TUI and Thomas Cook seems to be losing ground to smaller rivals

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.

"We are at an early stage in this review process which will consider all options to enhance value to shareholders and intensify our strategic focus".

Airlines across Europe are struggling amid fierce competition.

Tui has shocked investors with a profit downgrade and Thomas Cook has put its airline up for sale, underlining the pressures being felt by travel operators this year.

Last year's hot weather seems to still be hurting sales.

'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.

"Where Summer 2018 bookings started very strongly, bookings for Summer 2019 reflect some consumer uncertainty, particularly in the United Kingdom, and our decision to reduce capacity which will both mitigate risk in our tour operator business and help our airline to consolidate the strong growth achieved past year", said Peter Fankhauser, Chief Executive.

The company, which offers package holidays to northern Europeans looking for summer sunshine, has made a decision to focus more on hotels.

The embattled travel agent saw its operating loss increase by £14m year on year to hit £60m for the three months to the end of December as holiday bookings dropped, it revealed.

Net debt jumped to £1.59bn.

Credit Suisse said easyJet, Lufthansa, IAG and Ryanair could be interested in different parts of the airline business, which it said could be worth 1.8 billion to 3.2 billion pounds.

Thomas Cook operates planes in the UK, Germany and Scandinavia.

"We have been clear that Thomas Cook doesn't need to own an airline outright to be a successful tour operator". A quarter of the fleet flies long-haul.

In the first-quarter trading update, it said it would not change its outlook for the full-year. The firm earned "Neutral" rating on Wednesday, September 26 by Citigroup. In all, it operates 103 aircraft and posted a 37 per cent rise in operating profit a year ago to £129 million (S$225.8 million).

While the company blamed too many airlines chasing too few passengers, costs may be the real problem, industry experts said.

The oldest travel company in the world stumbled badly previous year when a heatwave in northern Europe deterred holiday makers from booking lucrative last minute deals, leading to two major profit warnings and talk of a need to raise funds.

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