Will TUI, easyJet, IAG and Ryanair benefit from Thomas Cook’s demise?

Thomas Cook share price grounded

This week has seen Thomas Cook cease trading, to the detriment of 150,000 holidaymakers that have been stranded without a journey home. Of course, the impact on Thomas Cook shares is obvious, yet we have seen the whole sector move in the opposite direction as they seek to gobble up market share surrendered by their demise.

For the short term, we are seeing reports of sharp upside in prices from competitors, as they take advantage from the jump in demand that this bottleneck has caused. We are also likely to see the government invest in short-term solutions which will include the chartering of competitor planes to help bring stranded people back to the UK.

What are the trading opportunities after Thomas Cook’s demise?

However, there are longer-term consequences to this crisis, with the company amounting almost £10 billion worth of revenues in 2018. Those earnings will represent a bounty for competitors, and that has not gone unnoticed by traders. With airlines having suffered heavily amid falling margins, could this represent the bottom for Thomas Cook’s competitors?

TUI (TUI)

TUI has been deemed the likeliest to gain from Thomas Cook’s demise, with the company similarly offering package holidays. The share price has seen a sharp rise through £8.82, completing a double bottom formation. This provides the first higher high in over a year, seemingly breaking out of a downtrend that has been in play since the June 2018 peak of £16.86.

With the price passing through the 61.8% Fibonacci retracement level, there is a good chance we could see a continuation of this rally from here. The next resistance level of note comes at £10.35, with the £11.42 swing high forming the definitive level that will signal a wider uptrend if broken.

EasyJet (EZJ)

easyJet is another firm that has enjoyed a bullish week thus far, with the price managing to form a four-month high. The wider downtrend seen throughout the past year is certainly under pressure, with the price rising through £11.21 resistance after a failure to create a new low last month.

Unlike TUI, we have already seen such a move, with the price having rose through £12.31 in January, only to sell-off once again. Thus, while this recent break has boosted the chances of a wider uptrend coming into play, there is also a chance we are seeing a A-B-C style retracement. With that in mind, watch for the Fibonacci resitance at £11.27 and £11.95 to potentially come into play as we move higher.

International Consolidated Airlines (IAG)

IAG gains have been somewhat limited this week, despite the upside seen over the past month. The wider trend does point towards the sell-off seen since mid-2018 as being a potential retracement before we turn higher once more. Thus, there is a good chance we could bottom out here following a deep retracement that came close to the 76.4% Fibonacci support level at £3.82. For confirmation of this bullish reversal, watch for a break through £5.12. Alternately, with the price having rallied into the 76.4% Fibonacci level, it makes sense to look out for a whether this £4.84 level is respected as a gauge of whether this is a retracement or reversal.

Ryanair (RYA)

Gains in Ryanair have been similarly uninspiring this week, with the airline having already gained a significant amount of ground over the course of the past month. A break through ‎€11.01 would bring about a more convincing bullish story, yet the recent respect of 76.4% Fibonacci resistance does raise the possibility of a bearish continuation coming back into play. Ultimately if we want to see a bullish reversal come into play, we would want to see a break through the €12.88 swing high from March.

TUI the big winners so far

The biggest winner has clearly been TUI this week, with the package holiday element of that company convincing markets that they will gain significantly from a consolidated market going forward. TUI revenues for 2018 were roughly twice that of Thomas Cook, meaning that there are significant opportunities for the firm to grow if senior management play their cards right in the aftermath of this corporate decline.