The Stocks Winning and Losing From Thomas Cook's Demise

(Bloomberg) -- The collapse of U.K. tour operator Thomas Cook Group Plc will be to the detriment of some stocks, but the benefit of many others.

Shares of rival TUI AG surged as much as 11% in London, while online peer On The Beach Group Plc gained as much as 9%, boosted by the prospect of reduced industry capacity. Budget airlines also rose, though one decliner was Webjet, the Australian travel group which has a hotel sourcing deal with Thomas Cook.

“The effects will be felt across the sector, not all bad,” Neil Wilson, chief market analyst at Markets.com, said in emailed commentary. “Airlines are firmer today as they should feel the benefit from the abrupt loss of short-haul capacity.”

Bernstein analyst Richard Clarke sees the potential for several other tour operators collapsing, though predicts TUI will be among those that benefit from the shake-out.

Here’s a round-up of stocks affected by Thomas Cook’s collapse:

Tour operators

• TUI is the most significant beneficiary among tour operators, according to Citi analyst James Ainley
  • TUI will be the only tour firm left with “a significant captive retail store base in the U.K. and the only major fully integrated European tour operator,” Ainley writes in a note
  • TUI has an estimated market share of about 19% in the U.K. compared with about 8% for Thomas Cook
• On The Beach is in a strong position to gain “significant market share,” according to Liberum analyst Anna Barnfather
  • Liberum sees potential for On The Beach to increase profit by GBP10m-GBP15m over the medium term
  • On The Beach said it’s assisting Thomas Cook customers who are currently in resort and expects a one-off cost that will be booked in the current financial year
• Australian travel group Webjet said Thomas Cook’s liquidation will impact its FY20 results, with Ebitda being reduced by up to about A$7m
  • Webjet previously indicated it expected to earn A$150m to A$200m in total transactional value from Thomas Cook in FY20
  • Shares closed 3.5% lower in Sydney

Airlines

• The removal of Thomas Cook’s capacity should be positive for airlines’ pricing over the upcoming winter season, according to Liberum analyst Gerald Khoo
• EasyJet shares gain as much as 6.6% in London, while Ryanair rises as much as 3.8% in Dublin
  • The budget airlines were the biggest beneficiaries when U.K. leisure carrier Monarch collapsed two years ago, Khoo says
• Thomas Cook’s exit suggests a “more rational” winter ahead, while key is how Thomas Cook’s slots and capacity will be recycled back into market, RBC analysts led by Damian Brewer write in a note
• Lufthansa upgraded to buy from sell at Bankhaus Metzler
  • Thomas Cook collapse could trigger a reaction similar to that after Air Berlin’s bankruptcy in 2017, when ticket prices rose significantly in some cases and Lufthansa shares surged, analyst Guido Hoymann writes in a note
  • Lufthansa shares advance as much as 1.8% in Frankfurt
• Leeds, England-based Dart Group generated 94% of its FY19 revenue from its leisure airline, according to data compiled by Bloomberg
  • Shares gain as much as 10% in London

Fosun

• Chinese conglomerate Fosun International is Thomas Cook’s biggest shareholder and had led a bailout plan
• Shares of co.’s Fosun Tourism unit fell 4.7% in Hong Kong
  • Fosun International dropped 1.5%
• Fosun Tourism said it’s disappointed that the U.K. company hadn’t been able to find a viable solution
• “For certain Fosun wasn’t prepared to pay a penny more,” said Wilson of Markets.com

Hotels

• The Turkish government is preparing a loan-support package for Turkish businesses which might be harmed from Thomas Cook’s collapse, according to a Twitter post by Turkey’s Culture & Tourism Ministry
  • Thomas Cook U.K. currently has 21,033 guests accommodated in Turkey

Banks

• RBS and Lloyds are among Thomas Cook’s most significant lenders, according to Bloomberg Intelligence analysts Jonathan Tyce and Lento Tang
  • Lloyds drops as much as 3.2%
• Investec is cautious on RBS’s commercial division, given the bank has relationships with half the companies in the FTSE 100 Index, analyst Ian Gordon writes in a note
  • RBS shares fall as much as 3.9% in London

Payment & data processors

• Thomas Cook’s 2010 decision to migrate to a single global distribution services provider -- Travelport -- and take Amadeus out of its network reduces the direct impact on the Spanish company from the U.K. travel operator, according to Bloomberg Intelligence analysts Matthew Kanterman and George Ferguson
  • Even so, Amadeus and U.S. rival Sabre will face additional headwinds from the indirect impact on European air traffic resulting from Thomas Cook’s collapse, building on disruption from the Hong Kong protests and the grounding of Boeing’s 737 Max
• Amadeus shares drop as much as 4.7%, while Sabre rises up to 0.6%

Engine makers

• Thomas Cook’s fleet includes 27 aircraft powered by Rolls-Royce, Citi analyst Charles Armitage writes in a note, citing aviation-data provider Cirium
• Citi estimates that Thomas Cook’s fleet represents about 0.5%-0.7% of the value of Rolls-Royce
• Shares slip as much as 2.4%

--With assistance from Paul Jarvis, Sam Unsted, Hanna Hoikkala, Gaurav Panchal, James Cone, Tugce Ozsoy and Macarena Munoz.

To contact the reporters on this story: Lisa Pham in London at lpham14@bloomberg.net;Penny Peng in London at ppeng18@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Paul Jarvis, Jon Menon

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