It is at ITB (Internationale Tourismus Börse) in Berlin every year that the tour and travel industry gets together to conduct business and, almost as important, exchange face-to-face gossip and intelligence with others as to just what the outlook for the remainder of the year is, as well as what prices and product for the next year (in this case, 2020) might be. This year, delegates to ITB, which runs from March 6 to March 10, have been besieged by multiple reports of just how bad things are for TUI, which is the number one tour operator in all of Europe and, of course, the market leader in Germany. Number two in Germany is Thomas Cook, which is number one in the UK (where TUI is number two).

What triggered wave of bad news revolving about the two operators, according to most accounts, were the following:

—There was a long and particularly brutal heat wave that struck in mid-summer then returned at the end of the summer, with daytime highs will likely be as high as 30°C (86° Fahrenheit) as far north as northern Germany. Parts of France, Italy and parts of central Europe climbed well above the 30°C mark.

—Soccer’s 2018 World Cup, which took place in Russia from 14 June 14 to July 15 in Russia, meant that many Europeans held off traveling until after the event. And some decided to forego long-haul travel in favor of holidays in country or within the Eurozone.

—Holidaymakers from the UK traveled to the continent less than expected, due in part to the nervousness over the effects of Brexit on the British economy; the British pound was trading at 120 euros in April 2017, dropped to 109 in August 17 and has stayed at or below 115 since then.

The causes notwithstanding, the cumulative impact was enough for Thomas Cook to issue two profit warnings as the 2017-18 financial year came to a close at the end of September. Shares in the company fell to their lowest price level since 2012 and no dividend was issue.

 

Thomas Cook—the after effect: As of this week, according to Reuters, Thomas Cook has recruited Credit Suisse, Morgan Stanley and Bank of America Merrill Lynch to explore the possible sale of its airline business, a source familiar with the situation said. Thomas Cook indicated last month that it was prepared to sell its profitable airline business—the airline and its partners fly to more than 100 U.S. destinations—to finance what it hopes will be a comeback from the losses racked up in 2018.

TUI—the after effect: During a call-in to discuss the company’s performance in the first quarter of the 2018-19 finance year, the company’s chief executive, Fritz Joussen, announced that it had experienced doubling in seasonal losses to 83.6 million euros ($94,4 million). Shares in TUI fell by almost a third. In a dramatic move apparently aimed at bolstering confidence in the business, company, invested some 1 million euros ($1.13 million) of his own funds in the company.

The industry will have a better feel for the outlook for 2019 and 2020 once ITB gets underway. Somewhere, midst the 180,000 total attendees, including 10,000 exhibitors from all over the world, is an answer.

It Was a Terrible, Horrible, No Good, Very Bad Year: In the wake of an anemic first quarter of the 2018-2019 financial year in which its losses increased by £14 million ($18.1 million) to £60 million ($77.6 million) year-on-year, Thomas Cook Group has launched a strategic review of its airline divisions in Great Britain, Germany (it operates under the Condor brand), Scandinavia and Spain.

In a prepared statement, the company, which is the oldest largest tour operator in the UK, said the airline review process “which will consider all options to enhance value to shareholders and intensify our strategic focus,” adding, “our strategy for the airline has been to profitably grow as a leading European leisure airline with a reliable, customer-focused service.”

While group revenue for the quarter was largely unchanged, gross margins fell, suggesting a continuation of the “highly competitive” market conditions in the UK at the end of the summer, and weaker demand for winter holidays in Nordic markets.

 

Weak Performance by Tour Operator Sector: Leading the company’s seasonal loss was its tour operator businesses, where a weaker performance in the UK and northern Europe was partially offset by a good performance in continental Europe.

For 2019, the group reported, its summer program is 30 percent sold, slightly ahead of last year with bookings described as being are consistent with  capacity cuts “to closely manage our risk capacity throughout the year,”  the company said, noting that, “as a result, tour operator bookings are down 12 percent, helping to support pricing, which is up in all key segments, and 4 percent higher overall.”

The group’s airlines, with a fleet of 103 aircraft, carried more than 20 million passengers in 2018 and generated £3.5 billion ($4.53 billion) in revenue, with underlying operating profits growing 37 percent year-on-year to £129 million ($167 million).

An item in the trade publication International Flight Network suggested this: “An indirect reason to sell the airline is the uncertainty around the Summer 2019 business as more and more people tend to book their holiday last minute, which makes it hard to plan ahead for the airlines. As a result, the carriers will reduce capacity slightly to ensure that they won’t be forced to operate mostly empty aircraft.”

 

How important are the carriers to Visit USA business? INBOUND checked the websites of both Thomas Cook and Condor and found that Thomas Cook says it serves 133 U.S. destinations and Condor indicates that it has service to 101 U.S. destinations.