Thomas Cook Shares Soar as Prospects Firm Up for an Airline Deal

(Bloomberg) -- Thomas Cook Group Plc shares rose the most in more than two months after the U.K. tour operator confirmed it’s open to a possible deal for its airline business.

“While we are open to consolidation where it makes sense for our business, we have no current plans to sell our airline,” Thomas Cook spokesman Johannes Winter said by e-mail on Monday in response to a report in the Sunday Times. The shares rose as much as 6.4 percent in London.

The newspaper said the group held internal talks about selling a minority stake in its airline operations, possibly to shareholder Fosun International Holdings Ltd., in a move that would lead to the breakup of the 177-year-old travel company. The discussions centered on splitting the carrier out to free up cash, which would be used to repay debt and help finance expansion, the newspaper said. A possible separation is thought to be at an early stage and could lead to a capacity agreement with the acquirer, it said.

Europe’s airline industry is in the midst of consolidation following last year’s demise of Air Berlin, Germany’s second-largest carrier which was mostly taken over by Deutsche Lufthansa AG, and Monarch Airlines Ltd. British Airways parent IAG SA has also made advances to buy Norwegian Air Shuttle, while carriers including Lufthansa and EasyJet Plc have signaled interest in Alitalia SpA, which is being kept afloat by Italian government support.

Thomas Cook has struggled to pay down debt and fund expansion of its hotels business as fierce competition from low-cost airlines depresses its margins in the transport sector. Added to that, online travel agencies have put pressure on tour operator margins.

The company has about 100 aircraft, 55 of which fly at its German Condor arm, 33 at its U.K. airline and 12 with Thomas Cook Airlines Scandinavia. Last year, it dissolved its Belgian airline, handing some jets to Lufthansa’s Brussels Airlines and relocating others within the group.

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