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Following Thomas Cook’s Bankruptcy, What Is the Potential in its Remaining Assets?

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British based travel group Thomas Cook’s ceased trading on 23rd September 2019. We explore the prospects for its remaining assets.

In the U.K., although the brand will experience immediate suffering, its name still holds a strong sentimental meaning to British consumers. So much so that U.K. newspapers have reported about travellers becoming emotional on Thomas Cook’s final flights and on one flight the passengers even organised a collection for the crew, raising £5,000. With much patriotism for a home brand, an investor could stand a good chance of re-inventing the Thomas Cook brand, but under a completely different business model.

The Nordic region looks most promising. Thomas Cook’s tour operators Ving and Spies are established market leaders in Sweden, Norway and Denmark. For the 2018 financial year, this region achieved the highest profits within the group. Notably, its sales are spread almost evenly over the year, as Nordic residents seek to escape the cold and dark winter months. Indeed during the winter season value sales are higher than for the U.K. and Ireland despite having a much smaller customer base.

A buyer for Thomas Cook Northern Europe is most likely to come from outside of the industry, possibly a private equity investor, as the market is already consolidated. In fact, Swedish based investment firm Triton made an offer in May 2019. Following Thomas Cook’s bankruptcy, Triton can be expected to renew their offer and obtain more favourable terms.

Continental Europe is Thomas Cook’s largest operating region, dominated by Germany. Products such as city breaks, which took sales from Thomas Cook in the U.K., have in Germany expanded the market rather than taken share from its traditional packages. Of its German assets, the strongest potential for a sale lies in its charter airline Condor. According to trade press sources, Tui would be interested in Condor. This would be a good match as there is limited overlap between the German airports served by Tuifly and Condor, furthermore it would also give Tuifly access to aircraft suitable for long-haul flights.

Lufthansa has publicly expressed an interest in Condor, once one of its subsidiaries, however it would face anti-trust issues at its key Frankfurt hub. More likely is that executors will carve up the airline, selling its activities at different airports to different players, likely also to include low-cost carriers such as easyJet.

Following Thomas Cook’s bankruptcy, it is evident that the market is becoming increasing competitive and the industry is slowly making traditional package tour operators redundant. Business who are still in this business model need to develop innovative products to excite consumers.

For now, one question remains for Thomas Cook –  since many of its remaining assets are profitable, who will take opportunity and acquire them?

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