Published: Sun, February 10, 2019
Economy | By

Spirit AeroSystems' airline challenges echoed by Thomas Cook launching "strategic review"

Spirit AeroSystems' airline challenges echoed by Thomas Cook launching

A good run of warm weather over the summer period meant fewer people booked overseas holidays while high hotel prices in the Canary Islands hit demand in this area. This was led by demand for Turkish and North African destinations, offsetting less demand for Spain.

Gross margins declined as the company cut prices to draw in United Kingdom customers at the end of the summer season and to address weak demand for winter holidays in the Nordics.

The group also took a £4mln hit related to foreign exchange movements.

The airline was insulated because the tour operator guarantees to fill many of its seats and makes up the difference if prices have to be slashed to fill them.

"As expected, the knock-on effect from the prolonged summer heatwave and high prices in the Canaries have impacted customer demand for winter sun", Fankhauser said.

It has however reduced 2019 capacity in the face of challenging conditions, as holidaymakers eye economic uncertainty arising from Brexit.

For summer this year, the firm has sold 30% of its programme, which is slightly ahead of last year.


Airline bookings for summer are also below previous year after cutting the number of flights to short and medium-haul destinations by taking in less wet-lease capacity. The company presently has an average rating of "Hold" and an average price target of GBX 75.78 ($0.99).

The company said it needed "greater financial flexibility and increased resources" to invest in its own-brand hotels.

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 said it had made progress in managing its cost base but that bookings for this summer reflected consumer uncertainty, especially in Britain.

"Thomas Cook doesn't need to own an airline outright to be a successful holiday company", Chief Executive Peter Fankhauser said, adding a review was being conducted and the company would retain strong links to the carrier whatever the outcome.

Europe's second-largest tourism group today announced a strategic review of its profitable airline, which has some 20 million passengers a year and consists of Germany's Condor and the "Thomas Cook"-branded airlines in the UK, Scandinavia and Balearics". "We will provide an update on this process in due course". UBS Group reaffirmed a "neutral" rating and set a GBX 34 ($0.44) price target (down from GBX 60 ($0.78)) on shares of Thomas Cook Group in a report on Tuesday, December 11th.

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