Tui and airlines see shares jump on hopes of boost from Thomas Cook collapse
Thomas Cook’s collapse has sent shares in closest rival Tui and listed airlines soaring as they look set to receive a boost from its demise.
Tui saw shares rise more than 6% in the FTSE 100 Index as it is expected to fill the gap left by Thomas Cook in the short-haul holiday market.
Low-cost carrier easyJet was also enjoying gains, up 5% in the FTSE 250 Index, while shares in Dublin-listed competitor Ryanair lifted 2%.
British Airways owner International Consolidated Airlines (IAG) initially received a shares boost, but later saw shares slip 2%.
Thomas Cook shares had been suspended ahead of the market open after the overnight announcement that it had ceased trading, although shares had closed down at just 4.5p on Friday – their value almost completely wiped out just a year after hitting heights of £1.50 last summer.
Online holiday travel firm On the Beach – which sells Thomas Cook holidays – also revealed it is among those impacted by the failure, warning over a hit from costs to help affected customers.
It expects to book the one-off charge in 2018-19 results for costs of organising alternative travel arrangements for those currently in resorts and lost profits on cancelled bookings.
The group is also assessing the possible impact on the next financial year and will give a further update.
But it hopes to be able to recover the costs of cancelled flights through a so-called chargeback claim, which it said was used after the demise of Monarch in 2017.
Shares in On the Beach shrugged off the alert, rising 3% as investors instead looked to the benefit from increased market share.
On the wider boost to rivals, The Share Centre investment research analyst Helal Miah added: “Being one of the largest travel groups, its disappearance will mean a large player’s future customer base will now move over to its rivals.”
Insurance firms were trading lower, however, as investors were looking ahead to the bill they would have to foot for Thomas Cook’s collapse.
RSA Insurance and Prudential were 3% lower in the FTSE 100.
Experts said the woes at Thomas Cook have highlighted the risks of the tour operator model, with large liabilities taken on in advance and uncertain revenues collected later down the line.
Tui recently reported a 46% plunge in third quarter underlying earnings after a hit from grounded Boeing planes and as trading was knocked by the weak pound and Brexit uncertainty.
But travel analysts at Bernstein said Tui is a “far more resilient business” than Thomas Cook thanks to stable cash flows from its cruise and hotels arm.
They added: “This year it has even decided to be more aggressive on volume and price to try to aid market consolidation: A tactic showing some vindication.”