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Thomas Cook considering sale of its airline business with fears for the future; Thomas Cook has short haul flights from Cardiff Airport to resorts in Menorca, Cyprus and Turkey as well as weekly flights to Orlando.

Byline: Emma Munbodh

Thomas Cook is conducting a strategic review of its flight business, with one option being the potential sale of its entire airline arm amid concerns over the company's future.

The travel giant said has said it will consider "all options to enhance value to shareholders".

Thomas Cook reported a 1% rise in first quarter revenue to [pounds sterling]1.65 billion while underlying operating losses increased by [pounds sterling]14 million to [pounds sterling]60 million.

It said this was led by strong customer demand for Turkey and North African destinations, offsetting weaker demand for Spain. However sales fell over weaker demand for winter holidays in the Nordics.

Thomas Cook has short haul flights from Cardiff Airport to resorts in Menorca, Cyprus and Turkey as well as weekly flights to Orlando. At the start of the year the company announced it would be adding 29,000 extra seats on flights from Cardiff for summer 2019.

This is a 22% increase in capacityand the airline is introducing a larger Airbus A321 to its services from Cardiff.

New Ryanair flight from Cardiff to Malaga

The seasonal loss was led by the Group Tour Operator where a weaker performance in the UK and Northern Europe was partially offset by a good performance in Continental Europe.

Boss 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 bookings started very strongly, bookings for summer 2019 reflect some consumer uncertainty, particularly in the UK, and our decision to reduce capacity, which will both mitigate risk in our tour operator business and help our airline to consolidate the strong growth achieved last year.

"We are today announcing a strategic review of our group airline. We are at an early stage in this review process which will consider all options to enhance value to shareholders and intensify our strategic focus. We will provide an update on this process in due course."

The company said it has undergone significant transformation over the past five years to enable a clearer strategy in both its Airline and Tour Operator businesses.

However, it said the firm needs greater financial flexibility and increased resources to strengthen its hotel portfolio and digitise sales channels.

Thomas Cook increases flights from Cardiff Airport

Thomas Cook currently operates a fleet of 103 aircrafts, of which a quarter serve long-haul destinations.

It carried over 20 million passengers and generated [pounds sterling]3.5 billion in revenue last year, with underlying operating profits growing 37% year-on-year to [pounds sterling]129 million.

"The past year has been a holiday nightmare for Thomas Cook" explained Ed Monk, at Fidelity Personal Investing.

"It plunged from profit to loss and saw its debts piled up to [pounds sterling]389m at the time of its last update in November. Today's first quarter results show losses grew again but at least showed no worsening of full-year earnings expectations, with winter breaks to the Nordics and Continental Europe down on last year but trips to Turkey and North Africa higher.

"Net debt remains the huge problem, however, and jumped to [pounds sterling]1.588bn. That coincides with the company announcing a 'strategic review' of the profitable and growing Group Airline business, which has seen profits rise 37% in the past 12 months. The company is now considering 'all options', which could mean a sale."

Thomas Cook's announcement comes just weeks after regional airline Flybe announced it was being taken over by a consortium led by Richard Branson's Virgin Atlantic and Stobart Group.

Cardiff Airport entered into a 10 year agreement in 2015 with Flybe to increase its capacity and routes at the airport.

The Exeter-based airline put itself up for sale in mid-November weeks after issuing a profit warning, having been hit by rising oil prices and a weaker pound.

Elsewhere, Ryanair also announced a troubled start to the year after blaming [pounds sterling]17 million losses on compensation payouts last year.

On Thursday, online travel agent On the Beach said it grew 20% in the first four months of the financial year.

It said sales were driven by its hotel partnerships, the expansion of long haul operations and more recently, its integration with Emirates airline.

Following the acquisition of Classic Collection Holidays in August 2018, the company said it will continue to focus on package holidays, with a planned launch in March 2019 and a phased rollout across the remainder of the calendar year.

Simon Cooper, On the Beach chief executive, said: "The first four months of the new financial year has delivered another solid period of growth for the Group.

"Our strategy of investing in our brands, talent and technology to drive growth has delivered performance in line with the Board's expectations, with both new and repeat customers attracted to our wide range of value for money beach holidays.

"Whilst we remain cautious of the consumer environment in the period immediately prior to the 29 March, the Board remains confident in the Group's outlook and will continue to evaluate opportunities to enhance its market share position."

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Title Annotation:Business
Publication:Wales Online (Cardiff, Wales)
Geographic Code:4EUUK
Date:Feb 7, 2019
Words:859
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