The collapse of 178-year-old UK travel company Thomas Cook Group plc has seen Australian digital travel business Webjet (ASX: WEB) shares drop to the lowest they have been in eight months. This comes after a turbulent period of pressure facing Thomas Cook, which recently has been struggling to secure a £200 million private rescue package to avoid bankruptcy. Despite the efforts of Chinese conglomerate Fosun, Thomas Cook’s biggest shareholder, who proposed to contribute £450 million, they were unable to recapitalise. Thomas Cook also made it clear that other Thomas Cook companies have been liquidated, “with members of either AlixPartners UK LLP or KPMG LLP (depending on the company) being appointed as Special Managers in respect of the relevant Group companies” and it is expected that this catastrophe will cause mayhem in the travel industry. Webjet became strategic partners with Thomas Cook in 2016, when Webjet paid one of the oldest travel agents in the world £21 million, where they would manage the hotel bookings for Thomas Cook customers visiting Europe, which was also a move for Thomas Cook to cut costs by outsourcing.
All eyes were on Webjet stocks upon the market opening on Monday, which is anticipating an earnings loss of $150-$200 million in financial year 2020 total transactional value from Thomas Cook and could write off the $43.7 million that Thomas Cook owed to them following its application for compulsory liquidation. In a statement to the ASX, Webjet said that these “unpaid receivables will be treated as a one-off expense to the income statement” and could be covered by existing cash reserves and undrawn debt facilities. Webjet’s last stock traded down 2.95 per cent at $11.17 and dropped by 6% at 1357 AEST reaching $10.82, it’s lowest since
February. Webjet also expects further loss in additional earnings, approximated at $7 million from its WebBeds accommodation business due to the collapse. Royal Bank of Canada analyst Tim Piper does not view the situation as entirely detrimental to Webjet or WebBeds, citing that existing growth should be able to pull them through, stating:
“With 30 per cent organic EBITDA growth in FY19 (including synergies) within B2B, we remain confident that the WebBeds business can continue to generate solid organic growth.”
On the other hand, Webjet’s share price took a major hit in the previous year, falling around 30 per cent, when its rival Flight Centre Travel Group Ltd (ASX: FLT) fell 12 per cent, against the current of the Australian Stock Exchange S&P/ASX 200 (ASX: XJO), which went up by approximately 9 per cent. Thomas Cook and the Civil Aviation Authority have advised customers not to go to the airport as all flights for September 23 and onwards have been cancelled. It is reported that as much as 600,000 travellers have been left overseas, where 150,000 are from the UK, however, British authorities and the Thomas Cook Group are working on a repatriation programme, which has been announced to return stranded holidaymakers home. Also, it is anticipated that the demise of Thomas Cook will leave 22 000 jobs in jeopardy, 9000 of which are in the UK.
By Mariam Melkonyants