Thomas Cook Airport Slots Coveted By Other Carriers

Thomas Cook lucrative airport slots are in play.

As new details emerge on the shutdown and liquidation of U.K.-based tour operator Thomas Cook Group, rival carriers are eyeing takeoff and landing slots still allocated to Cook at two U.K. airports. Although Thomas Cook Airlines is no longer flying, the carrier's air-operator certificate (AOC) has not been revoked.

The shutdown stranded approximately 600,000 passengers, including 150,000 U.K. travelers, spurring the U.K. government to begin the largest peacetime repatriation effort in history.

Thomas Cook Airlines holds lucrative slots at U.K. airports, with London Gatwick and Manchester (U.K.) accounting for over half of the carrier's overall slot portfolio. 

International Airlines Group (IAG), parent of British Airways, Aer Lingus, Iberia and several smaller carriers, has expressed interest in Cook's Gatwick slots, as have Ireland-based low-cost carrier Ryanair, London-listed low-cost carrier Wizz Air and Virgin Atlantic. U.K.-based low-cost carrier EasyJet may also be interested in Cook's slots at capacity-constrained Gatwick. Germany-based TUI Group, the world's largest tour operator with six airlines and around 150 aircraft, may also be interested.

Wizz Air is eyeing the Gatwick airport slots as part of a plan to expand in the London market. In 2017, Wizz Air acquired slots at London Luton following the collapse of Monarch Airlines. Monarch was a holiday carrier that tried to remake itself—unsuccessfully—as a low-cost carrier. It was on track to lose an estimated £60 million ($80 million) in 2017 and more than £100 million in 2018. The collapse in the value of the British currency after the Brexit vote also raised some dollar-denominated costs.

Efforts to find a buyer for the airline failed. Monarch blamed its demise on a prolonged period of falling ticket prices, especially in key markets on flights from the U.K. to Spain and Portugal.

Wizz, eastern Europe's largest low-cost airline, has been expanding in the U.K. and currently accounts for over 40% of capacity at Luton. Virgin Atlantic is expected to be most interested in evening flights from Gatwick.

If the slots were all operated every week of the season, Thomas Cook Airlines would have approximately 15 daily slot-pairs in summer at Gatwick, and about eight in winter; at Manchester, the numbers would be 24 in summer and 10 in winter. The International Air Transport Association (IATA) has determined that summer starts at the end of end of March 2020, while winter starts at the end of October, although slots can be traded at any time and airlines are entitled to start new routes about a month after these IATA seasons.

The reality is that slots aren't operated every week and activity can be focused on certain days, for example, Saturdays and Sundays for ski holiday flights from December to March. 

In terms of percentages of total slots held by Cook at the airports, for summer 2019, the carrier held 3.5% of Gatwick slots and 8% of slots at Manchester; winter 2019 percentages are 2% and 4%, respectively.

What is clear is that all parties involved, including U.K.-based slot coordinator Airport Coordination Ltd. (ACL) and airports that previously hosted Cook flights, want to avoid a rerun of the recent Monarch controversy. Europe's cutthroat airline market claimed another victim with U.K.-based Monarch declaring bankruptcy in early October 2017, grounding flights and leaving more than 100,000 passengers stranded overseas. At the time, Monarch's shutdown represented by far the largest U.K. airline failure in history.

In late 2017, IAG bought the takeoff and landing slots at Gatwick previously belonging to Monarch. Private equity firm Greybull Capital, former owner of Monarch, received a £60 million windfall after a U.K. appeals court ruled that administrators had the right to sell Monarch's slots. The judgment overturned a previous High Court ruling that an airline going into bankruptcy automatically forgoes takeoff and landing rights and that those slots should be redistributed by ACL.

The appeals court ruling was seen as a legal victory for financial services giant KPMG, which acted as joint administrator of Monarch.

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