Thomas Cook and Air Berlin abandon merger

Tour operator, Thomas Cook, has announced that the deal to merge its low-cost carrier, Condor, with Germany’s largest budget airline, Air Berlin, has been abandoned.

The deal, which would have created a rival to easyJet and Ryannair, would have seen Thomas Cook become a major shareholder in the German airline.

Thomas Cook was set to become a shareholder of up to 29% of the shares of Air Berlin. However, the application to merge the airlines has been scrapped after indications that the German Cartel Office would raise objections on competition grounds.

In a statement, Thomas Cook said it had suspended the share buyback as it is seeking other options for Condor.

Yesterday, Thomas Cook was the largest faller in the FTSE 100 after its shares fell nearly 10% in late trading, indicating that the deal had hit problems.

The credit crunch has meant consumers are cutting back on spending. The airline industry has been hit particularly hard as consumer demand falls, as well as a fall in demand for package holidays. This has meant investors are concerned about the industry.

Furthermore, the pound’s weakness against the euro is discouraging holidaymakers from going away this summer.

Six weeks ago, Thomas Cook signed a new £1.4 billion credit facility. However, nearly 20% of that was only going to be made available only when the Condor/Air Berlin merger was successful.

Analysts believe the failed merger is bad news for the tour operator, with Blue Oar Securities issuing a ‘sell’ note.

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