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Thomas Cook offers airline to raise £1 billion to pay debts

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Thomas Cook offers airline to raise £1 billion to pay debts

Unread post by bimjim » Thu Feb 07, 2019

https://www.standard.co.uk/business/tho ... 60221.html

Thomas Cook offers airline for sale to raise £1 billion to pay debts
Simon English
7 February, 2019

Ailing Thomas Cook on Thursday put its airline up for sale in a bid to raise more than £1 billion to pay down debt after one of the worst years in its history.

The holiday giant played down suggestions last year it could sell its 103 aircraft, breaking up the company.

Today it said it had begun a “strategic” review of the airline to “increase financial flexibility and accelerate execution of our core strategy”. It could sell all, or just part, of the airline arm.

Investors enjoyed a 13% bounce in the battered shares to 35p. They were nearer 130p back in November 2014 when then chief executive Harriet Green was ousted amid a whispering campaign about her suitability to lead a large company.

Industry experts say Cook’s planes could be picked up by aircraft leasing companies, but note the tough market for sellers. Many airlines are going bust or close to collapse, and thus keen to sell planes at depressed values.

City analysts think Thomas Cook’s present finances are simply unsustainable. Last year it made profits of just £12 million on sales of £9 billion.

Thomas Cook has been around since 1841 and employs 22,000 people. In November it revealed an awful profit warning, its second in three months, that sent the shares down 30% in one day.

It blamed the warning partly on Britain’s hot summer. Today chief executive Peter Fankhauser said: “As expected the knock-on effect from the prolonged summer heatwave and high prices in the Canaries have impacted customer demand for winter sun. Where summer 2018 books started very strongly, bookings for summer 2019 reflect some consumer uncertainty, particularly in the UK.

The tough climate was underlined by a profit warning from Cook’s rival TUI Travel, which triggered a 16% slump in the shares today, making it the FTSE 100’s biggest casualty.

While Thomas Cook may be struggling, the airline itself is seen as profitable. Lee Wild at Interactive Investor said: “Net debt of £1.59 billion is a millstone around Cook’s neck, and it just does not have the money to make crucial and necessary improvements to the business.”

It needs to upgrade the quality of its hotels to better compete with TUI, say City analysts. It had to scrap its dividend last year as part of the attempt to rescue its finances.

Thomas Cook also admitted on Thursday the future is uncertain “due to wider market uncertainty, particularly in the UK”.

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