Thomas Cook pulls out of Condor talks
By Amanda Vermeulen
Published: September 29 2008 09:07 | Last updated: September 29 2008 09:07
Tui, the tour operator, said on Monday that rival Thomas Cook had withdrawn from discussions with Tui and Lufthansa, the German flag carrier, about a merger of their German airline operations.
Thomas Cook said Condor, its airline operation, was a strong and profitable business with significant potential on a standalone basis. “It became clear that the opportunity [to merge with Tui and Germanwings, a Lufthansa company] was not attractive, even though there would have been synergies arising from the merger,” it said.
In addition, the rationale for the merger had also included driving capacity out of the market against the background of announced expansion by other carriers prior to the global economic downturn. But Manny Fontenla-Novoa, Thomas Cook chief executive, said the airline industry had changed dramatically of late, and the company was much more confident of Condor’s prospects. It plans to retain control of Condor.
Peter Long, chief executive of Tui – formed by the merger of Britain’s First Choice and Germany’s Tui tourism business – declined to elaborate , saying only that Tui was pursuing alternatives and a further announcement would be made in due course.
In a pre-close trading update, Mr Long said Tui remained confident about its prospects for this year and next, saying the strength and diversity of its model will allow it to meet market forecasts.out today that since its August interim management statement, trading had continued as expected.
Tui has continued the trend of strong sales of the past summer season. Mr Long said it had started its current “lates” booking period in the UK with “significantly” less stock to sell than previous years due to capacity reductions.
It had previously said that it would cut holidays originating in the UK by 21 per cent in winter 2008-09, while summer holiday packages would be trimmed by 15 per cent in Britain.
This has allowed the group to reduce its discounting activity, and see a small increase in sales. The total UK programme is now 94 per cent sold, which is three percentage points ahead of the position this time last year.
Across other European markets, Tui said it has experienced stronger pricing in “lates” bookings. Mr Long believes that holidays remain sacrosanct in the minds of many consumers even in an economic downturn. However, despite this bullish sentiment, the company is reducing capacity by eliminating unprofitable business. The demise of rival XL has taken a further 6 or 7 per cent of capacity out of the total market.
Mr Long said that following actions to eliminate unprofitable capacity, combined with fewer competitors in the marketplace, Tui anticipated that the level of supply would be significantly lower in Europe, particularly in the UK, for both winter 2008-09 and summer 2009.
He sought to differentiate between Tui’s model and that of airlines, many of which are facing intense pressure at the moment from a combination of steep fuel price increases and dwindling demand.
“We are not an airline. We are a tour operator, so we are not in the same situation as low-cost carriers. Fuel comprises less than 10 per cent of our average transaction values, compared with scheduled airlines, where it is about 40 per cent.”
Mr Long said there had been no signs to date of any weakening in Tui’s market, in terms of a decline in demand from consumers, or downsizing to cheaper or shorter holidays.
“In fact we are seeing an increase in prices – people are trading up, not down. And capacity cuts will offset any potential weakness,” he said.
Shares in Tui opened slightly weaker, down 3½p to 206½p.
The Financial Times Limited 2008
By Amanda Vermeulen
Published: September 29 2008 09:07 | Last updated: September 29 2008 09:07
Tui, the tour operator, said on Monday that rival Thomas Cook had withdrawn from discussions with Tui and Lufthansa, the German flag carrier, about a merger of their German airline operations.
Thomas Cook said Condor, its airline operation, was a strong and profitable business with significant potential on a standalone basis. “It became clear that the opportunity [to merge with Tui and Germanwings, a Lufthansa company] was not attractive, even though there would have been synergies arising from the merger,” it said.
In addition, the rationale for the merger had also included driving capacity out of the market against the background of announced expansion by other carriers prior to the global economic downturn. But Manny Fontenla-Novoa, Thomas Cook chief executive, said the airline industry had changed dramatically of late, and the company was much more confident of Condor’s prospects. It plans to retain control of Condor.
Peter Long, chief executive of Tui – formed by the merger of Britain’s First Choice and Germany’s Tui tourism business – declined to elaborate , saying only that Tui was pursuing alternatives and a further announcement would be made in due course.
In a pre-close trading update, Mr Long said Tui remained confident about its prospects for this year and next, saying the strength and diversity of its model will allow it to meet market forecasts.out today that since its August interim management statement, trading had continued as expected.
Tui has continued the trend of strong sales of the past summer season. Mr Long said it had started its current “lates” booking period in the UK with “significantly” less stock to sell than previous years due to capacity reductions.
It had previously said that it would cut holidays originating in the UK by 21 per cent in winter 2008-09, while summer holiday packages would be trimmed by 15 per cent in Britain.
This has allowed the group to reduce its discounting activity, and see a small increase in sales. The total UK programme is now 94 per cent sold, which is three percentage points ahead of the position this time last year.
Across other European markets, Tui said it has experienced stronger pricing in “lates” bookings. Mr Long believes that holidays remain sacrosanct in the minds of many consumers even in an economic downturn. However, despite this bullish sentiment, the company is reducing capacity by eliminating unprofitable business. The demise of rival XL has taken a further 6 or 7 per cent of capacity out of the total market.
Mr Long said that following actions to eliminate unprofitable capacity, combined with fewer competitors in the marketplace, Tui anticipated that the level of supply would be significantly lower in Europe, particularly in the UK, for both winter 2008-09 and summer 2009.
He sought to differentiate between Tui’s model and that of airlines, many of which are facing intense pressure at the moment from a combination of steep fuel price increases and dwindling demand.
“We are not an airline. We are a tour operator, so we are not in the same situation as low-cost carriers. Fuel comprises less than 10 per cent of our average transaction values, compared with scheduled airlines, where it is about 40 per cent.”
Mr Long said there had been no signs to date of any weakening in Tui’s market, in terms of a decline in demand from consumers, or downsizing to cheaper or shorter holidays.
“In fact we are seeing an increase in prices – people are trading up, not down. And capacity cuts will offset any potential weakness,” he said.
Shares in Tui opened slightly weaker, down 3½p to 206½p.
The Financial Times Limited 2008
