Virgin Atlantic is bidding for Thomas Cook’s long-haul business – but does it make sense?

Sky News reported last night that Virgin Atlantic has bid for Thomas Cook’s long-haul operation.

This is, primarily, a Manchester-based business although Cook also flies long-haul from Gatwick and, in Summer, Glasgow.

Virgin Atlantic and Thomas Cook have been fighting for control of the Manchester long-haul market for years.  Past discussions I have had with industry insiders implied that the market was not big enough for both of them.

As with the acquisition of Flybe, this may be a partially defensive move by Virgin Atlantic.  By taking control of the bulk of the Manchester long-haul market – at a point when the airport is finally emerging from its major expansion programme – it can gain more control over capacity and pricing.

I’m sure Virgin would be even happier if Thomas Cook closed down its Manchester long-haul operation instead.  That is very unlikely to happen, and the downsides of another long-haul carrier buying it – especially a dedicated low-cost operator – are substantial.  Acquiring the business may be the least worst option.

Thomas Cook is also inviting single bids for its entire airline operation but Lufthansa has emerged as a strong bidder for the German charter arm Condor.  This would potentially allow the UK business to be sold separately.

What is up for sale at Thomas Cook?

You are looking at four separate airline operations:

• Condor
• Thomas Cook UK
• Thomas Cook Scandinavia
• Thomas Cook Balearics

There is a total fleet of over 100 aircraft carrying 20 million passengers per year.  The snag for any buyer is that only 38% of seats are sold as ‘seat only’ – the rest is sold via tour operators, primarily Thomas Cook itself.

Travel Weekly stated recently that Thomas Cook has 200 weekly slots at Gatwick and 350 weekly slots at Manchester.  There is value here, but it is dwarfed by Condor which has 400 weekly slots at Frankfurt alone.

What is the Thomas Cook UK fleet size?

This is where it gets complicated.

The UK operation has 33 aircraft.  This comprises:

• 24 short-haul A321
• 7 long-haul A330-200
• 2 Boeing 757-200 (one-aisle but can be used long-haul)

Additional aircraft are leased to cover key seasonal peaks.  The CAA reports UK passenger numbers of 7.3 million in 2017, with a 90% load factor.

The key here is the 24 short-haul aircraft.  These operate from Belfast International, Birmingham, Bristol, Cardiff, East Midlands, Glasgow, London Gatwick, London Stansted, Manchester and Newcastle.

Where does the long-haul operation fly?

Over Summer 2019, Thomas Cook will operate the following routes:

• Cancun – Glasgow, Gatwick, Manchester
• Cayo Coco (Cuba) – Gatwick, Manchester
• Holguin – Gatwick, Manchester
• Las Vegas – Manchester
• Los Angeles – Manchester
• Montego Bay – Manchester
• New York JFK – Manchester
• Orlando – Glasgow, Gatwick, Manchester
• Punta Cana – Manchester
• San Francisco – Manchester
• Seattle – Manchester
• Varadero – Manchester

The Sky News report suggests that Virgin Atlantic is only interested in the long-haul routes.  This may well be right unless there is any substantial element of connecting traffic to the long-haul operation.

Virgin Atlantic has no short-haul operation at the moment if you exclude its investment in Flybe.  It is very unlikely that the A321 operation would sit well with Flybe, which is entirely based around smaller aircraft.

You could argue what value the long-haul operation has on its own.  Virgin could presumably, at modest cost, lease nine equivalent aircraft and gain equivalent slots at Gatwick and Manchester.  Would Thomas Cook be happy to keep putting its customers on Virgin Atlantic aircraft when Virgin is competing against it via Virgin Holidays?

The deal obviously removes a competitor at Gatwick and Manchester, but what would stop Norwegian or someone similar starting its own Manchester operation on similar routes?

It will be a key call for new Virgin Atlantic CEO Shai Weiss who has only been in the job since January.  Is he willing to make such a substantial bet so soon?  More importantly, will his shareholders Delta and Air France KLM support him?  It will be interesting to watch this unfold.

---

How to earn Virgin Points from UK credit cards (October 2024)

As a reminder, there are various ways of earning Virgin Points from UK credit cards.  Many cards also have generous sign-up bonuses.

You can choose from two official Virgin Atlantic credit cards (apply here, the Reward+ card has a bonus of 18,000 Virgin Points and the free card has a bonus of 3,000 Virgin Points):

You can also earn Virgin Points from various American Express cards – and these have sign-up bonuses too.

American Express Preferred Rewards Gold is FREE for a year and comes with 20,000 Membership Rewards points, which convert into 20,000 Virgin Points.

The Platinum Card from American Express comes with 50,000 Membership Rewards points, which convert into 50,000 Virgin Points.

Small business owners should consider the two American Express Business cards. Points convert at 1:1 into Virgin Points.

SPECIAL OFFER: Until 22nd October 2024, the bonus on American Express Business Platinum is increased to up to 80,000 Membership Rewards points, worth 80,000 Virgin Points. You will receive 8 points per £1 spent for the first three months, on up to £10,000 of spending. Click here to read our full card review. Click here to apply.

SPECIAL OFFER: Until 22nd October 2024, the bonus on American Express Business Gold is increased to up to 40,000 Membership Rewards points, worth 40,000 Virgin Points. You will receive 4 points per £1 spent for the first three months, on up to £10,000 of spending. The card is FREE for your first year. Click here to read our full card review. Click here to apply.

Click here to read our detailed summary of all UK credit cards which earn Virgin Points. 

(Want to earn more Virgin Points?  Click here to see our recent articles on Virgin Atlantic and Flying Club and click here for our home page with the latest news on earning and spending other airline and hotel points.)