Travel companies Thomas Cook and TUI are under serious stress

THE WORLD’S oldest tour operator is looking for a place in the shade. Since September, when it announced the first of two consecutive profit warnings, Thomas Cook’s share price has fallen by nearly two-thirds. The British company, which sells flights, hotel rooms and tours to 20m holiday-makers, is saddled with £1.4bn ($1.8bn) in debt, three times its market value. IHS Markit, a data provider, estimates that 8% of its stock has been borrowed—typically a signal that short-sellers are circling.

Easter brought some solace, if only because Thomas Cook’s low valuation has made it an increasingly tempting takeover target. Its shares rose by 18% on April 23rd, after Sky News reported that Fosun, a Chinese conglomerate that is its largest shareholder, and two buy-out firms were interested in parts or the whole of the company.

Thomas Cook’s woes reflect broader malaise in the industry. On March 29th TUI, its Anglo-German arch-rival and the world’s biggest tourism group, issued a profit warning. Combined, the two companies account for two-thirds of the European package-holiday market.

Some of the problems are cyclical. Last year’s torrid summer convinced many Europeans to seek sunshine at home. The weak pound has dampened traditionally peripatetic Britons’ enthusiasm for travel. The grounding by authorities around the...

via Business Feeds

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