The loss of Thomas Cook from the high street should see TUI the marginal winner, the sole remaining tourism company with any significant retail store base. In the UK, Thomas Cook had an 8% market share compared to TUI which has 19%; in Germany, Thomas Cook had a 10% market share versus TUI with 17%. Following the demise of Thomas Cook a significant portion of market share will go to TUI in both countries.
While the public may be worried about the collapse of Thomas Cook being repeated at TUI, they should be mindful that both companies have materially different balance sheets. For starters, the TUI credit rating is 10 notches higher at BB (versus D for Thomas Cook). TUI also has more than double the amount of equity in its capital structure when compared to debt. In comparison, Thomas Cook had zero equity with its debt trading below face value, resulting in an inability to perform any type of rights issue. TUI has larger scale with €19bn of revenues (versus £9bn), but crucially has access to liquidity.
What ultimately caused Thomas Cook’s decline was not Brexit, not margin pressure, and not a hot British summer – it was ultimately banks pulling their funding lines as the proposed rescue plan left them still worrying about the company’s liquidity position. With TUI having almost €1.6bn of cash on hand, it is an entirely different story to Thomas Cook.