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Thomas Cook Seeks To Split With Airline Business: Media Report

Thomas Cook Seeks To Split With Airline Business: Media Report
There is a possibility that the 177-year old travel company Thomas Cook could be broken up as the firm has been reportedly holding talks for selling off a part of the airline that it operates according to media reports
According to a The Times newspaper of the United Kingdom, the company has bene holding internal discussions on the process and manner of splitting up of the airline business away from its core business of tour operations so that it is able to free up some cash. The company intends to make use of the additional cash at hand to service and reduce a big debt burden as well as use it for expansion activities.
Reports suggest that the company is still in its early stages of a possible separation and there is no chance of anything taking place immediately. But an ultimate decision to do so would reinvigorate the firm following years of disorder.
Having faced with severe competition from low cost budget airlines and online holiday booking startups, Thomas Cook has for long being grappling with ways and means to reduce its debt burden and to finance growth.
A £1.6bn capital restructuring helped the company to partly mend its finances in 2013 under former boss Harriet Green. However, experts consider its financial condition to be highly unsustainable given that the firm still has a debt of £886m as of March and reported annual profits of just £12m against a revenue of £9bn.
But the need for securing flights for its holiday making customers and restrictions on foreign ownership of airline sin the UK would complicate an eventual sale of its airline business which is now run by travel veteran Peter Fankhauser. But a multi-year deal with the airline can help Thomas Cook secure flights for travelers, said an industry source. The airline in turn would be made an attractive proposition for buyers if Thomas Cook is able to guarantee 50% occupancy of the seats by holidaymakers.
Through the merger of its different airline brands into one standalone company, Thomas Cook has already created a conducive structure for a potential split.
The airline would be able to buy more crafts and will Thomas Cook will have access to finances for the expansion of its business by the sale of a minority stake in the carrier which would generate cash for the firm. Sources have said that the company is looking at Fosun – a Chinese conglomerate which has a 12 per cent stake in the airline could be a potential buyer.  
Thomas Cook is slated to inform its shareholders about the performance of the company for the second quarter later this week which is not very encouraging according to City.
The company said: “Thomas Cook has consistently said that we are open to playing our part in consolidation where it makes sense for our business. We have no current plans to sell our airline.”

Christopher J. Mitchell

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