TUI to boost winter holiday fleet after Thomas Cook collapse

Bloomberg

TUI AG is taking steps to expand its winter jetliner fleet to meet increasing demand for package holidays following the collapse of UK rival Thomas Cook Group Plc.
The world’s biggest tour operator is working to retain leased aircraft it has been operating through the summer in preparation for an anticipated surge in bookings, Chief Executive Officer Fritz Joussen said.
“We are extending some leases that would otherwise expire as we believe the need for some extra capacity is there following Thomas Cook,” Joussen said by telephone, adding that the UK company’s demise will bring “significant opportunities” for remaining players, especially in Britain.
While 150,000 of Thomas Cook’s UK customers who were already on holiday when the company failed should be able to complete their trips, the collapse will leave many more who had yet to travel in the market for alternative plans. In the longer term, Germany’s TUI should also benefit from the exit of its biggest rival in Europe’s $47 billion package-holiday market.
TUI has already been leasing planes because of the global grounding of the Boeing Co 737 Max after two fatal crashes, of which it has 15 in the fleet with several more due to have been taken this year.
The Hanover-based company earlier moved to calm investors after Thomas Cook’s failure, saying in a statement that the summer season is “closing out in line with expectations,” with its model of owning hotels and cruise ships outright proving resilient.
Joussen said the market is “still not where it should be” as the tourism sector is roiled slowing economies, fluctuating oil prices, a strong dollar, uncertainty around Brexit and changing booking patterns in response to warmer summers in northern Europe. Asked what Thomas Cook’s failure says about the industry, he said that “those who change will be successful, those who don’t won’t.” European leisure airlines still have too much capacity and with so many external risks in play TUI must be “careful,” he said.
Joussen said the company has not declared any interest in Thomas Cook’s Condor airline, based near Frankfurt, which is continuing to operate while seeking a buyer. The carrier is set to receive a $420 million bridge loan from the German government, valid for six months, provided that the European Commission approves the plan.
In contrast, Thomas Cook’s German tour operating arm with the Neckermann Reisen, Oeger Tours and Bucher Reisen brands filed for insolvency, according to a statement.
UBS analyst Cristian Nedelcu said in a note that any boost to TUI’s profitability and free cash flow could prove to be fleeting as other companies also move to fill the gap left by Thomas Cook within a year or two.
Joussen said he remains hopeful that the Boeing Max will return to service this year as the US manufacturer works with regulators on changes to flight-control software blamed for the crashes in Indonesia and Ethiopia.