THOMAS Cook is exploring options to potentially sell its airline business amid concerns over the company's future.
The travel giant said on Thursday that it will conduct a strategic review of the airline arm, which will look at "all options to enhance value to shareholders".
Its airlines in the UK, Scandinavia and Germany have all been placed under review.
The decision comes after the firm's shares were hammered at the end of last year following its third profit warning of 2018 and stinging full-year losses.
Thomas Cook has been stung by charges related to flight disruptions, writedowns on money owed by hotels and transformation costs.
It was also hit by delayed demand for its tour holidays due to the summer heatwave.
But shares jumped on news of the airlines review, rising over 13% to 35.3p in morning trade.
Boss Peter Fankhauser said: "We are today announcing a strategic review of our group airline.
"We are at an early stage in this review process which will consider all options to enhance value to shareholders and intensify our strategic focus. We will provide an update on this process in due course."
Thomas Cook operates a fleet of 103 aircraft, carrying more than 20 million passengers, and generated £3.5 billion in revenue last year, with underlying operating profits growing 37% to £129 million.
The announcement came as Thomas Cook reported a 1% rise in first-quarter revenue to £1.65 billion, led by strong demand for Turkish and North African destinations, offsetting weaker demand for Spain.
However, underlying operating losses increased by £14 million to £60 million.
"As expected, the knock-on effect from the prolonged summer heatwave and high prices in the Canaries have impacted customer demand for winter sun," Mr Fankhauser added.
"Where summer 2018 bookings started very strongly, bookings for summer 2019 reflect some consumer uncertainty, particularly in the UK, and our decision to reduce capacity will both mitigate risk in our tour operator business and help our airline to consolidate the strong growth achieved last year."
For its winter seasons, total bookings are up 8%, but average selling prices are 10% lower overall.
The summer 2019 programme is 30% sold, slightly ahead of last year, and tour operator bookings are down 12%.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "Reading between the lines of Thomas Cook's latest trading statement, Brexit is dampening summer holiday bookings, as consumers sit on their hands, waiting for more clarity on the UK's withdrawal from the EU.
"Part of the reluctance to book ahead may be logistical, part financial, as Brexit causes concern both over potential travel disruption, and the value of the pound."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here