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

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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.

Virgin Atlantic to buy Thomas cook airlines

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.

Virgin Atlantic bids for Thomas Cook Airlines

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.

Comments (31)

  • Nigel the pensioner says:

    “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?”

    Available slots? You get the edge by providing a superior service at a price which your Customers find reasonable. Loyalty follows. To buy out competition who are playing the game at a different (lower) level doesn’t make financial sense. If you then up prices, you lose a significant portion of your new Customer base. If you lower prices (!!) you lose your original followers as expected standards fall. BA as a perceived national airline have the edge in the uk for knee jerk reasons ie the bottom line is we are all from the uk. Clearly this is not true these days but it gives a bottom line sense of security. However BA have found that you can go below the lowest acceptable standard on several occasions and they have had to bring back services previously dropped.
    Much better to leave markets alone. Only a third of sales are seats only on TC so it leaves two thirds for TC holidays vs Virgin holidays. Not going to work.

    • Rob says:

      Manchester is not ‘full’ (Gatwick is tighter) although admittedly that doesn’t mean much in itself because you need slots at certain times of day – most US inbound flights land early morning for example – to make it work. Gate availability may be a bigger squeeze at Manchester until the extension is finished.

  • Tony says:

    My thoughts are Virgin will buy the linghaul part and Easyjet the short-haul to get the Gatwick slots which have decent value as evidenced by what BA paid for the Monach slots.
    Could be a joint bid or Virgin buy the lit and then sell seperately.

  • Telecasterman says:

    What about Thomas Cook Engineering at MAN ? Is that for sale? Would be a good fit for Virgin A330.

  • the_real_a says:

    I was shocked how good TC long haul actually is. If i was to fly economy or premium there is no doubt i would choose TC over everyone else. Food is great, IFE decent, very friendly crews…

    • flyforfun says:

      But what are the seats like? Every review I read people complain about leg room. I had an option to come back with them on a holiday soon, but the reviews put me off and I’d rather wait 2 more hours and come back with easyJet on a brand new A321neo.

      • the_real_a says:

        On the A330 in 2 -4- 2 – we always grabbed the 2 seats on aisle and we didn’t feel the legroom was any worse than BA/Virgin. It was a comfortable flight even in economy. Premium is a very decent product as good as, if not better than BA/VA and generally the cash saving is significant.

        • Anne says:

          We did TC premium to Orlando 2 years ago. Last minute cheap deal but were impressed for the price. Pitch was 35in I think so not quite as good as BA or Virgin but perfectly comfortable in a window/aisle pair in 2-3-2 config.

          Food was edible, they weren’t stingy with the drinks and we even had some extra entertainment when someone down the back tried smoking in the toilets and the crew delivered a firm admonishment on the PA!

      • James says:

        Short haul is unbearable. Long haul v good in my opinion!

    • Tim M says:

      Thomas Cook short haul is the worst airline experience of any carrier. No food, drinks or hold luggage included, miserly 55x40x20cm / 8Kg cabin baggage limit, no IFE, and a routine announcement to buy all your drinks in one go even on a four hour flight – so that the cabin crew can draw the curtains and gossip about boyfriends, TV, beauty treatments etc.. I am usually on the front row for the extra legroom (otherwise I am painfully wedged in) and get to hear it all. The whole experience is unbearable.

      I only fly Thomas Cook because they have the monopoly on the Manchester-Kalamata route. I am hoping they will be taken over by a proper airline ASAP.

    • Crafty says:

      +1. Brilliant flights to/from Goa. Upgrade to premium (on one leg) was reasonably priced.

    • Leo says:

      Sorry not paying PE prices for 35″ pitch. Obviously depends on one’s height but that’s not enough for me.

  • PaulC says:

    Sorry OT Is anyone else still having trouble activating the Hilton Offer? Im still getting an error message. Don’t have my fist stay until end of July so no rush.

  • BJ says:

    OT but Virgin: zRocketmiles first booking bonus appears to have been boosted to 4000 Flying Club miles.

    • Michael says:

      I did the Heathrow rewards offer rob advertised a while back – could i get the heathrow rewards offer and a flying club one too?

      • Rob says:

        IF you use a different email AND a different credit card (because they check against both to see if you’re a new customer) you’d get away with it I guess.