Vacation Giant & Airline Thomas Cook Verges on Collapse

Citi Group analysts slashed their price target to zero.

The shares of 178-year-old British global travel company Thomas Cook are in free fall, tumbling 10% on Thursday and another 40% today, after it issued a zinger of a profit warning for the second half of its fiscal year — the third profit warning in less than a year — and announced a £1.46 billion loss before taxes for its fiscal first half, ended March 31. It also unveiled a 12% slump in tour operator bookings, and a 37% rise in net debt.

The company’s shares are now worth just 11 pence a piece, down 92% from 130 pence a year ago. At that time, Thomas Cook Group was worth £2.5 billion. Today, its worth a couple of hundred million.

Citi Group analysts said first thing this morning that the company has “zero equity value” and slashed their target price for the shares from 28 pence to zero pence. The analysts also cited a warning from Thomas Cook’s auditor, EY, regarding “material uncertainties” over the group’s sale of its airline, a sale on which a new £300 million loan facility depends.

Thomas Cook Group has been seeking a buyer for Thomas Cook Airlines for some time. Though many of its routes are desirable — to popular vacation destinations such as Palma de Mallorca, Pointe-à-Pitre, and Santorini — the airline is bogged down with aging, less fuel-efficient aircraft. Potential buyers are scarce, and all of them would attract close scrutiny from EU antitrust authorities

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