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On A Holiday From Hell

07 February 2019 by lberuti

TCGLN ( Thomas Cook Group Plc ) had a summer from hell. The company failed to correctly anticipate demand in a year when hot weather disrupted normal travel, particularly in the UK. Its erroneous forecasts led it to report an annual loss and a suspension of its dividend last November, missing estimates that had been lowered twice already. The 5-year risk premium took a beating at the time – it shot up from 400bps to 1288bps - and investors have been nervous ever since. So, when the company announce this morning that it will conduct a strategic review of its airline operation as it seeks to regain some financial flexibility, there was a huge sigh of relief among them. TGNLN said that all options are on the table and could range from a joint venture to an outright sale of the carrier through an auction which could fetch up to GBP1.1Bln according to analysts, as the airline would bring to the buyer the benefit of guaranteed sales, with package holiday guests occupying 45% of seats on the fleet of 103 planes. This rare piece of good news allowed TCGLN’s 5-year risk premium to close another 36bps tighter at 1169bps. That is 136bps tighter than the recent wides reached at the close on Tuesday.