Thomas Cook latest news: rival airlines cash in as company closes

Following the collapse of Thomas Cook, business is booming for rival airlines. TUI creates extra two million seats. Jet2 shares hit all time high. And Hays trebles its footprint

It’s almost one month since news broke of the collapse of the UK’s largest travel company, leaving 150,000 tourists stranded and thousands of airline employees out of work. However, what is one airline’s loss is another’s gain, as Thomas Cook competitors enjoy increased booking numbers and a rise in share price.

TUI has announced an additional two million seats for its 2020 summer schedule, creating jobs for more than 100 pilots and 200 cabin crew.

Dawn Wilson, managing director at TUI Airways said: “Every year we welcome new cabin crew and pilots and this year is set to be our biggest and best yet. I’m particularly proud to be able to commit to offering over 50 Thomas Cook captains the opportunity to join TUI Airways and continue to fly customers on their holidays.”

As a result of this news, TUI’s share price rose 10 per cent last week – its best price since February – significantly beating the index performance of the FTSE 100.

Jet2 is also seeing a positive impact following Thomas Cook’s news. Its parent company, Dart Group, lifted its profit expectations for the year due to “increased levels of customer demand since Thomas Cook Group entered into compulsory liquidation”. This trading updateon October 11 sent shares to an all-time high, closing 16.5 per cent at £10.90.

easyJet share price

Other airlines have also benefited from the Thomas Cook tragedy. Ryanair is up 4.5 per cent to €11.96 and Wizz Air has advanced 4.1 per cent to £37.52.

Surprisingly, easyJet seems unaffected by Thomas Cook, with shares falling over 6 per cent to £10.98, despite “robust customer demand”. In its trading update on October 8 the company said it predicted profit before tax of between £420m and £430m, which is in the upper end of its previous guidance range.

Johan Lundgren, easyJet chief executive, said this was the result of the company’s “self-help initiatives and the increased demand due to disruption at British Airways and Ryanair”.

It was the BA and Ryanair strikes that saw easyJet’s share price rise by around a third, after falling to a five-year low during the summer. This recent drop in value could be because the trading update wasn’t as positive as investors expected.

While passenger numbers rose by 8.6 per cent to 96 million ­– driven by an increase in capacity of 10.3 per cent – total revenue per seat decreased by around 2.7 per cent. In addition, headline cost has increased by circa 12.0 per cent, due to “increased capacity, higher unit fuel costs and adverse foreign exchange movements”.

Hays Travel buys Thomas Cook

Another business hoping to succeed where Thomas Cook has failed is Hays Travel, run by husband and wife John and Irene Hay. The 40-year-old company has trebled its footprint and doubled its workforce since buying Thomas Cook’s high street shops. However, the company is much more than a “family-run” company, with sales of more than £1bn in 2018.

The couple had to go head-to-head with two US private equity companies before they could take over Thomas Cook for an undisclosed sum. Since the acquisition on October 9 they have already opened 186 stores in England, Scotland, Northern Ireland and Wales, providing 1,982 jobs.

In the current climate with the high street on the demise, investing in a chain of travel stores is a bold move. What’s more, the concept of a package holiday is looking increasingly outmoded with travel-savvy tourists taking their holidays into their own hands.

Ryanair CEO Michael O’Leary declared the package holiday market is “screwed”.

“Firstly I think the tour operator model is dead,” he said. “In much the same way as the travel agency is dead. Nobody under the age of 40 goes out and buys a tour package or goes to a travel agent any more. They do it themselves,” he said.

What is your sentiment on TUI1?

Vote to see community's results!

Ryanair launched a failed attempted into the holiday market in 2016, so this could be a case of sour grapes. Statistics certainly say so; last year Abta noted that half of holidaymakers took a package holiday abroad. It’s these figures that Hays Travel hopes will ensure success with their new venture.

Weak sterling

Other issues they have to contend with, along with the rest of the travel industry, are Brexit and climate change.

While talks continue there is still uncertainty as to the level of disruption Brexit will cause holiday makers, but the travel industry is already suffering. With the weak sterling many people decided to holiday at home in 2019, and Thomas Cook chief executive Peter Fankhauser claimed “political uncertainty related to Brexit over recent months has led to softer demand for summer holidays across the industry”.

Willie Walsh, chief executive of British Airways owner International Airlines Group (IAG), said BA had not been as badly affected as easyJet or Ryanair by Brexit because it mainly operates out of London, where the economy is stronger. However, he admitted a no-deal Brexit would make the economy “slightly weaker”.

Flight shaming

While Brexit is a UK concern, climate change is impacting airlines around the world. According to the Air Transport Action Group aviation produces around 2 per cent of the world's carbon emissions and 12 per cent of all transport emissions.

International Air Transport Association chief economist Brian Pearce stated climate was no longer “just an issue for protestors and scientists”, but was now “top of the agenda for mainstream investors”.

Speaking at the Airlines 2050 conference in London, Pearce also said flight shaming “could be a factor slowing growth in the future”. This is backed up by research from Swiss bank UBS, who surveyed more than 6,000 people in the UK, US, Germany and France about their flying habits. One in five people said they reduced the number of flights they took over the past year, citing flight shame or flygskam.

More than a fifth (21 per cent) of those surveyed said they had intentionally reduced the number of flights they took over the last year.

“TUI is seeing a negative demand impact from flight shame, particularly in Scandinavia and Sweden,” says John Strickland, an airline analyst at JLS Consulting. “This is not evident in other markets, but is a trend which airlines are monitoring with concern.”

British Airways has promised to achieve net-zero emissions by 2050, by offsetting all domestic flight emissions from next year at a cost of $3m (£2.4m) per annum, while Virgin Atlantic and Air New Zealand provide their passengers with carbon offset calculators.

Despite growing climate concern and other economic factors, the IATA reported a growth in passenger numbers of 5 per cent in June 2019, which is a slight increase from 4.7 per cent year-on-year growth recorded in May.

So the airline industry giveth and it taketh away. Investors will have to keep a careful eye on what happens next in these volatile, changing times.

“Thomas Cook leaves a big whole in the market which is natural for TUI and other airlines to fill,” says Strickland. “The market is nevertheless tough with weaker demand in the UK market reflecting consumer uncertainty and higher costs for holidays due to sterling weakness.”

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com Bel LLC or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
iPhone Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image