TUI set to be among biggest winners after Thomas Cook collapse, analysts say

German firm's shares surge on Tuesday as it says business model remains "resilient"

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The collapse of UK tour operator Thomas Cook will benefit other companies, with German rival TUI set to be among the biggest winners in the European travel market, though a weaker operating environment remains.

TUI's shares surged 7.8 per cent in London trading on Tuesday after climbing 6 per cent on Monday. The company reiterated its profit guidance for the rest of the year and said its business model remains "resilient" in a statement on Tuesday.

"The Thomas Cook collapse likely gives some breathing room on pricing and some opportunities to take share, we expect they will more likely go for share in the Nordics than the UK," Richard Clark and Harry Martin, analysts at London-based Bernstein, said in a report on Tuesday. "It is a strong message that they have reiterated full-year guidance."

Iconic UK tour operator Thomas Cook filed for liquidation on Monday, spelling the end of a 178-year old company that pioneered the concept of holiday packages with operations across Europe, America, Africa and the Middle East. The absence of Thomas Cook, while a headache for government and holidaymakers, should remove capacity from the saturated European holiday market ahead of the winter holiday season, according to analysts.

Citi analyst James Ainley said TUI is among the most significant beneficiaries among tour operators.

The German company will be the only tour firm left with “a significant captive retail store base in the UK and [is] the only major fully integrated European tour operator”, Mr Ainley said in a research note.

TUI has an estimated market share of about 19 per cent in the UK compared with about 8 per cent for Thomas Cook.

On Tuesday, TUI reiterated that its operating profit will decline by as much as 26 per cent this year.

"Our vertically-integrated business model proves to be resilient, even in this challenging market environment," TUI said. "We are currently assessing the short term impact of Thomas Cook's insolvency under the current circumstances."
Pressures that struck down Thomas Cook could lead to other tour operators collapsing but TUI stands a chance to benefit from its demise, according to Mr Clarke and Mr Martin.

These risks include the challenges from uncertainty arising through Britain exiting the European Union and the effects of Boeing's grounded 737 Max jets.

"As such, we expect the company will not completely remove the shackles and remain cost-focused and only selectively grow into next year," Mr Clarke and Mr Martin said in the Bernstein report.

The removal of Thomas Cook’s capacity should also be positive for airlines’ pricing over the upcoming winter season, according to Liberum analyst Gerald Khoo.