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Thomas Cook crisis escalates as it lands £300m in emergency funding

A Thomas Cook Airbus A321 airplane takes off at the airport in Palma de Mallorca
Thomas Cook said it had received 'multiple bids' for all or part of its airline Credit: REUTERS

Thomas Cook's crisis has escalated after the tour operator was forced to ask for emergency funding to counter soaring losses.

The company has agreed terms for a £300m cash injection from its banks, allowing it more time to sell its airline.

Shares plummeted as the City was left astonished by half-year losses topping £1.5bn, driven by a £1.1bn writedown on the value of MyTravel, a former high street rival with which it merged in 2007. The shares were down 14pc in afternoon trade, touching a six-year low.

The 179-year-old company blamed Brexit uncertainty, saying the process had prompted customers to postpone travel plans.

After suffering a savage stock market sell-off in late 2018, Thomas Cook put its airline up for sale earlier this year in a bid to pay down some of its cumbersome debt pile.

The bank funding, which will only be available if “progress” is made with the airline sale, is the latest show of support from Thomas Cook’s lenders, which waived the testing of banking covenants last year as the travel agent saw its profits squeezed by record temperatures across northern Europe.

The company said it had received “multiple bids” for either part of all of its airline but declined to provide further details. The airline had been expected to fetch bids in the region of £1bn.

“There is no doubt that we are operating in a challenging environment,” said chief executive Peter Fankhauser. “There are high levels of discounting.”

He went on to say there was “little doubt” that the Brexit process had led to many customers delaying their holiday plans. The problems continued despite the deadline for Brexit being pushed back until later this year.

He added: “We have seen no material change to booking patterns in recent weeks. It is a cloud that is still above the consumer.”

The package of new loans will “make sure we have adequate liquidity”, Mr Fankhauser added.

The tough environment, driven by political and economic uncertainty, along with higher fuel and hotel costs would act as a drag on second half performance and full-year earnings, the company said. It warned that it now expected underlying earnings before interest and tax in the second half of the year would be behind the same period last year. 

Thomas Cook is planning further cost savings in the second half to offset tougher trading, following its decision in March to shut 21 stores and axe more than 300 retail jobs.