European tour operator Thomas Cook is considering the possible sale of its airline business, after announcing a review of the unit as part of efforts to increase funding to support a wider strategic overhaul.
The airline business was a strong performer in a challenging year for the tour operator, which twice lowered profit expectations for the 12 months ended September 2018 – citing the negative impact of hot weather in Europe on demand for holiday travel.
In a first-quarter trading update today, Thomas Cook said its underlying operating loss had deepened £14 million ($18 million) to £60 million, and that the review was in its early stages.
"We've made further good progress in transforming our business with a rigorous focus on managing our cost base while innovating to deliver high-quality holidays for our customers," states Thomas Cook chief executive Peter Fankhauser.
"At the same time, we recognise that we need greater financial flexibility and increased resources to accelerate the execution of our strategy of differentiation: to invest in strengthening our own-brand hotel portfolio; further digitising our sales channels; and driving greater efficiencies across the business.
"As a result, we are today announcing a strategic review of our Group Airline [unit]. 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."
While the overall group result worsened in 2018, the airline division improved its underlying operating profit by 37% to reach £129 million. This was based on revenue of £3.5 billion for the year. The group's airline division operates 103 aircraft, of which a quarter serve long-haul destinations, and carried more than 20 million passengers in 2018.
Speaking on a trading call today, Fankhauser said the group was considering "all options" when it comes to any divestment of individual airline units, but could not divulge any more. He notes the airline division has "great" airport slots, including at Frankfurt, Munich, Manchester and London Gatwick.