Should you trust in Thomas Cook?

By | Category: Travel rumblings

After last week’s loss was announced by Thomas Cook, the shares dived. I don’t think that is too strong a word to use because the shares did drop from about 23p to under 12p by Friday. At lunchtime yesterday they were under 10p. a year ago they were over £1.40.

Thomas Cook logo. Should you book with the company?

Two New York banks, Citigroup and J P Morgan both suggested over the weekend that the shares were worthless. That analysis seems not to take into account the value of the airline and its landing slots which could be worth from £600 million to over a billion. Rumour says that Thomas Cook has received some offers for the airline already.

Does all this mean that you shouldn’t book with Thomas Cook?

At this point I should declare an interest. I have a small number of Thomas Cook shares so you may consider that what I write below is biased and I am trying to boost the share value by taking an optimistic view.

If you book a holiday with Thomas Cook and it comes under the ATOL bond then every passenger’s money will be safe. The inconvenience in having to re-book if the worst happens and the company collapses is, however, a slim possibility. I say “slim” because there are companies already circling as they sniff a bargain buy.

If you book just a flight or a holiday component from the company then pay by credit card and you should be fine. Check your travel insurance to see what cover it gives you in the event of the airline going under or the component not being honoured. You can still buy and sell foreign exchange without any problems at any time.

easyJet, (which has a fast growing holiday side having hired a number of ex-TUI staff) and TUI both announced losses as well and eDreams Odigeo (which owns Opodo) has seen declining revenue and declining passenger numbers so the financial situation isn’t limited to just Thomas Cook.

As I said last week, the key factor in the loss at Thomas Cook is a one-off goodwill write-off relating to the purchase of Airtours over a decade ago. Remove that and the loss is only about £300-£350 million.

I say “only” but that is still an unhealthy figure. To many the company needs a good skake-up. Management ineptitude must be part of the problem as it has for many years

What downside for holidaymakers is there?

Given the interest shown in buying parts of the group, I can see little risk for holidaymakers.

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