June 10, 2019

UPDATE: Is Thomas Cook cooked?

Lisbon-based wet lessor and charter carrier Hi Fly has placed a bid for Thomas Cook’s airline business, as the struggling tour operator seeks to raise cash following a third profit warning in less than a year.

Thomas Cook is being advised by investment banks Credit Suisse, Morgan Stanley and Bank of America Merrill Lynch.

The company’s airline business unit generated turnover of about £3.5 billion ($4.4 billion) in 2018.

The UK’s oldest package holiday company has reported selling just 57% of its summer 2019 holidays, with tour operator bookings down 12%.

Thomas Cook, along with other holiday operators, has seen financial performance hit by uncertainty over the UK’s departure from the European Union (EU), unstable consumer confidence and a low pound-to-euro value.

Battered by fading demand for package holidays, a hot 2018 summer which deterred bookings and high levels of debt, Thomas Cook has been battling for its future in recent months and is now edging nearer to a full break up.

Thomas Cook has slashed the number of holidays on offer in response to weaker demand, and is offering big discounts to entice UK customers.

Hi Fly becomes the latest on a shortlist of would-be acquirers.

The two companies have a previous relationship.

Thomas Cook Airlines Scandinavia was the first carrier to wet lease an A380 aircraft.

The aircraft represents the first A380 to have been acquired in a secondary-market transaction.

Hi Fly supplied the aircraft that initially was used on two round trips, on 1 August 2018 from Copenhagen to Larnaca, returning on 2 August, and on 2 August from Oslo to Palma de Mallorca and back.

… potential bidders queue up

Thomas Cook put its airline unit up for sale in February, and Lufthansa, Virgin Atlantic and Indigo Partners are among parties that have bid for part or all of the airline business.

Lufthansa reportedly made a non-binding offer in May to purchase German airline Condor from Thomas Cook.

Condor had been part of Lufthansa Group from 1959 but the German flag carrier sold its remaining 25% stake to Thomas Cook in 2009.

Takeover of Condor, at a cash price of €77.19 million ($87 million), gave Thomas Cook sole ownership of the airline, ending 48 years of Lufthansa involvement in Germany’s biggest charter carrier.

Like Lufthansa, Condor’s main base is Frankfurt.

Private equity group Triton Partners has bid for Thomas Cook’s Nordic operations.

Triton in early June agreed a deal to purchase Netherlands-based Corendon Holiday Group through pure online package holiday player Sunweb Group.

The deal includes Corendon’s tour operating activities in Holland and Belgium, back-office operations in Turkey and Corendon Dutch Airlines.

Neither Turkey-based leisure carrier Corendon Airlines nor Malta-based Corendon Airlines Europe is part of the deal; the Corendon Hotels & Resorts business unit also is not part of the transaction.

Sunweb Group was acquired by Triton Fund V in February for an undisclosed amount.

… Fosun to bid for tourism unit

Thomas Cook is being circled by potential bidders for other parts of the business.

Chinese company Fosun International, the largest shareholder in Thomas Cook with an 18% stake, is among those companies eyeing up high street stores and the package holiday business.

Hong Kong-listed Fosun has a stock market value of HK$85 billion ($11 billion) and owns businesses spanning property, healthcare and insurance as well as Wolverhampton Wanderers Football Club in the UK.

The Thomas Cook tour business, which includes 566 stores, posted turnover of about £7.4 billion in 2018, serving about 11 million customers in the UK, Scandinavia and the rest of Europe.

Fosun, which also owns Club Med, has drafted in bankers from JP Morgan to advise and potentially lead a takeover deal.

In February 2015, Fosun special purpose vehicle Gaillon Invest II — now known as Club Med Invest — and New York-based private equity firm Silverfern Group, finalised a takeover of Club Med in a €939 million deal.

Discussions between Thomas Cook and Fosun concerning acquisition of the tourism unit are at an early stage and a formal bid may not emerge.

Fosun would be barred from buying Thomas Cook’s airline unit as the company is not based in the EU, and consequently subject to ownership rules.