Thomas Cook Demise Leaves Tui Sitting (a Bit) Prettier By

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By Geoffrey Smith — For 150,000 tourists stranded abroad, the collapse of U.K. travel group Thomas Cook is obviously somewhat awkward, to say the least.

For others, the silver lining is so thick that they can hardly see the cloud any more.

German tour operator Tui rose another 2.1% in early trading Tuesday after rising over 6% on Monday, as its biggest competitor among Europe package tour operators gave up the ghost. It’s now up over 25% from its August low, although it’s still lost around half its value since May 2018.

Likewise, Ryanair and EasyJet, two of the online-savvy discount flyers who created the opportunities for people to take their business away from Thomas Cook, also extended their rally, rising 2.2% and 0.9%, respectively.

EasyJet is now testing a four-month high, having recovered in recent weeks amid growing confidence that a disorderly “Hard Brexit” can be avoided at the end of October. Ryanair, which is exposed to almost all the same risks as its rival, has made less of a recovery due to rolling strikes by its aircrew, but that issue also seems as if it may be edging closer to resolution after pilots based in the U.K. called off a series of strikes that were scheduled for this week.

So, all-clear for take-off then? Probably not. Here’s what Tui had to say about the underlying market conditions in a statement to the stock exchange on Monday. A roaring bull case, it isn’t. It starts by saying its vertically integrated business model is “resilient”, but quickly goes on to list some formidable and long-running challenges: “Our Markets & Airlines business faces a number of ongoing external challenges such as the grounding of the 737 MAX aircraft, airline overcapacities and continued Brexit uncertainty. “

Underlying operating profit this year is still expected to drop 26% from 2018, and “these external challenges will continue in (2020) – therefore, we will focus on becoming more cost competitive in our Markets & Airlines business to protect and extend our market share where possible.”

The travel companies are all outperforming their local benchmarks for a second day, after the German ifo business survey reinforced the picture of gloom around Europe’s largest economy and the comparable French Insee business confidence index also inched down. The benchmark Stoxx 600 was up 0.2% at 390.58, while the German Dax was up 0.1% and the FTSE 100 was essentially unchanged.

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