Travel firm Thomas Cook, a leading global travel group has come a long way from it’s humble beginnings in 1841. with operations in 16 countries and 22,000 staff they look like a stable company with a stable platform. Over the years though they have not always shown this and today they are in arguably their toughest position yet.
The Thomas Cook group share price has been hit hard. On the 21st May 2018 a share was worth over 129p and today it is down as low as under 12p. Why does that matter to a freight forwarder?
Thomas Cook Airlines
The airline owned by Thomas Cook was put up for sale earlier this year along with it’s subsidiary Condor. The view being that the sale of Thomas Cook Airlines and Condor would help the group pay down debt for re-structuring.
Operating 44 aircraft under the Thomas Cook Airline brand with another 52 aircraft under Condor they are major players in the charter market. Supporting their travel brand but they also carry wide-bodied cargo into airports scheduled carriers serve with narrow bodied flights. Condor are Germany’s second largest commercial airline based on fleet size and passengers flown.
It is Thomas Cook’s slots though which are the main interest to freight forwarders. Offering direct flights from UK airports into airports difficult to reach by scheduled carriers. With the demise of Monarch Airlines, Thomas Cook and Leisure cargo became the focal point for some countries.
Why the nervousness
Thomas Cook have been in the news a lot over the last few years. Closing the Club 18-30 brand as they couldn’t find a buyer. In December the BBC website ran an article showing that the shares in November lost 60% of their value. Neither of these press releases were flattering to the Thomas Cook group.
Then Thomas Cook in February confirmed it was conducting a “Strategic review” of it’s airline business. Seeking funds to invest in it’s core travel and hotel business. All looked normal and Thomas Cook Airlines seemed a profitable airline. A sensible move saw the groups share price rise.
The company has said that the airline is subject to “Multiple bids” with speculation rife that Lufthansa could be an option. Lufthansa already work closely with Condor and so would seem a good fit. Virgin airlines are also rumoured to be interested and a sale to either airline would mean that cargo capacity will not be hit in the short term.
Will they sell the airlines in time
Supplier nervousness and consumer confidence is being hit with Citigroup downgrading their shares. Investors appear to have lost confidence and the auditors also had concerns. When they stated that there was material uncertainty around the proposed sale of the airline division this has cast doubt over the group as a whole.
On the back of this uncertainty payment intermediaries and card acquirers have looked to protect themselves. If card acquirers hold onto cash for extended periods rather than pass this money through to Thomas Cook then this could have an impact on cash flow.
The sale of Thomas Cook Airlines is beginning to look like a way of stemming this consumer dip in confidence. The management team say they have a plan and they have the backing of the banks. The reports are that the bank funding is reliant on the airline sale. With the airline sale comes stability again in the charter market. What freight forwarders cannot afford is for the airline to cease trading whilst cargo is in transit. Cheap freight rates into the USA with onward trucking on their network could catch some out.
Are other airlines in trouble
It isn’t just Thomas Cook airlines who have had to re-structure this year. Norwegian’s sale to IAG fell through and FlyBe have also had pressures. In fact in 2019 the following have ceased operation : .
- Germania ( Germany )
- California Pacific ( US )
- Flybmi ( UK)
- Insel Air ( Curacao )
- Tajik Air ( Tajikistan
- Asian Express Airline ( Tajikistan )
- WOW ( Iceland )
- Aerolineas de Antioquia ( Columbia )
- Fly Jamaica Airways ( Jamaica )
- Air Philip ( South Korea)
- Jet Airways ( India )
Let’s hope Thomas Cook Airlines and Condor do not go the same way.