Thomas Cook

30th September 2019

A missed opportunity at Thomas Cook?

Back in May, we reported that there may be a hidden opportunity lost in the noise of the ongoing troubles at Thomas Cook PLC.

Since then we have seen the company search desperately for a £200million bailout, before its tragic collapse earlier this week, leaving tens of thousands of people jobless, and disrupting hundreds of thousands of people’s holidays.

We reported that there was an opportunity for a potential suitor to take on Thomas Cook Airline Ltd. The airline arm of the business was ironically performing at a level comparable to the better performing competitors in the airlines industry, having both healthy sales growth and profit margins.

Plimsoll had even valued Thomas Cook Airlines Ltd at £500million, taking into account goodwill, assets and cash on the balance sheet.

Thomas Cook’s German airline Condor, who also benefit from high and rising profitability and competitive overall financial health in Plimsoll’s analysis of German Airlines, managed to source a bridging loan from the German government to allow it to continue operating while it seeks a new owner.

Could there be hope for a suitor or the UK Government to offer a bridging loan to the UK airline? Any acquirer would benefit immediately from the following:

  • Hundreds of landing slots at key hubs including Manchester, London Gatwick, and Frankfurt
  • A focused fleet of over 100 Airbus only aircraft
  • Established long and short-haul routes and landing slots at major tourist destinations
  • A recognised brand name

There are some going concerns around the airline industry after some volatility in the markets in recent months and years, which could dissuade any potential suitors from acquiring in that industry, backed up by today’s profit warning from British Airways. Earlier in June, we published an article that outlined the following issues in the airlines market:

  • Average margins in the market have been falling for 3 years
  • The number of Airlines Plimsoll has rated as Danger has risen to 129
  • 90 of the 350 companies are losing money
  • Budget airlines are making twice the profit of “Legacy Carriers”
  • Budget airlines are averaging a sales per employee figure much higher than the industry average 
  • 62 of the 350 carriers have seen sales decline in the latest year

Changing consumer trends may mean that although 30% of the companies ranked in Plimsoll’s Airline industry analysis are rated as 'highly attractive’, this may not be the case in the medium term.

To purchase or find out more about our analysis of the Airlines industry, click here.