IAG Not Interested In Thomas Cook Acquisition

The parent company of British Airways, IAG, will not be bidding to buy Thomas Cook’s airline business.

Thomas cook sale
Thomas Cook’s airline branch is up for sale. Photo: Thomas Cook

Reuters reporting yesterday reveals IAG Chief Executive Willie Walsh has told reporters:

“In relation to Thomas Cook… we’re not putting in any bid.”

Though later in the day Walsh, holding an analyst call, says IAG is in a strong position to pursue a merger or acquisition. But, at the moment IAG is not pursuing any deals.

Virgin Atlantic has made an offer

Also on Friday rival Virgin Atlantic emerged as potentially interested in part of the Thomas Cook business. According to Reuters and Sky News, Virgin has made a preliminary offer for its UK long-haul business. Neither Thomas Cook or Virgin have yet commented on the news.

On February 8th, Simple Flying speculated why Thomas Cook could be a perfect buy for Virgin Atlantic. Including that some of Thomas Cook’s long-haul routes would fit well with the Virgin Atlantic network.

The new Virgin Atlantic A350. Photo: Virgin Atlantic

Thomas Cook struggled across 2018 and in November suspended its dividends. It also announced profits would be lower than a previously amended forecast. Like other airlines, Thomas Cook may have been affected by the rising price of aviation fuel, poor exchange rates, and looming Brexit. Holiday demand also reportedly fell in 2018 due to a hot European summer.

A Bloomberg Analysis last week put Thomas Cook’s debts at $2.1 billion, above its market capitalization of around $348 million. And, that shareholder sentiment is worsening. Thomas Cook is apparently seeking near-term funding which would see it through short-term and make it a more attractive prospect for buyers. One Citigroup analyst puts the enterprise value of Thomas Cook’s airline division at around $830 million.

Lufthansa may buy Condor

Reuters confirms that Lufthansa is a bidder for Thomas Cook’s German airline Condor and has an option to buy the remaining airlines of the group. Lufthansa’s bid this week came just in time for a deadline for non-binding offers or expressions of interest for Thomas Cook. Carsten Spohr, CEO of Lufthansa, said:

“We decided yesterday in the meeting of the management board to bid for all of Condor with the option to be able to extend this (bid) to all Thomas Cook airlines…We believe that we can offer Condor good prospects and maintain the business as a whole, both long- and short-haul operations.”

Lufthansa A340
Lufthansa operates a fleet of 28 Airbus A340 aircraft. Photo: Lufthansa

Indigo also a potential buyer

Indigo Partners is also a potential buyer for the UK airline. The private equity firm is led by a veteran low-cost airline investor Bill Franke, according to other Reuters reporting. It has made previous investments in airlines including Wizz, Hungary.

Reuters, citing sources, says that potential buyers could target different parts of Thomas Cook’s business because of competition issues. The news outlet, also citing Sky News, says China’s Fosun International, already a Thomas Cook shareholder, may be interested in its tour business. Ryanair has apparently also shown interest. And, other Reuters sources have said private equity investment groups KKR and Apollo may look at a complete takeover of Thomas Cook.

At this time, the more likely airline buyers or investors appear to be Virgin Atlantic, Indigo, and Lufthansa. Thomas Cook’s airline business includes Condor, as well as Thomas Cook UK, Thomas Cook Scandinavia, and Thomas Cook Balearics. Reuters writes that a complete or partial sale would allow Thomas Cook to pay off debt and invest in its hotels and online sales.