The collapse of the world’s oldest travel company Thomas Cook has major implications for other companies on the stock market. Our preferred stocks to play this situation are Dart (DTG:AIM) and On The Beach (OTB).

Thomas Cook has approximately 2.5m customers, representing 28% of the UK’s offline market and 10% of the online market. Rival travel companies will now be trying to lure these individuals and increase their own market share. Capacity will also reduce significantly, boosting the pricing environment.

On the day of Thomas Cook’s collapse shares rallied in various travel operators including holiday sellers and airlines.

There is some logic to these moves if the collapse of Monarch airlines in October 2017 is any guide to the current situation.

Back then short-haul holiday revenues from the UK were boosted across the whole sector, with Dart seeing a 16% jump in its average fare per passenger mile in the summer of 2018.

Dart could be a major beneficiary because it offers both flight-only and package holidays and is a natural home for customers looking for something similar to Thomas Cook’s propositions.

In particular, Dart’s Jet2.com and Jet2Holidays are well placed to strengthen their market leading positions on the Iberian Peninsula given that the region represented a third of Thomas Cook’s capacity.

TUI (TUI) should welcome the removal of Thomas Cook from the market, particularly as it reduces competition at a time when it is finding life hard.

On The Beach is well positioned to profit from the situation, but will likely suffer shorter term costs. Historically 15% to 20% of its flights were booked using Thomas Cook so the company will have to find alternative arrangements, which will inevitably be more expensive.

Analysts at Liberum believe the company will take around a £7m hit, higher than the £2m charge it booked due to the Monarch collapse.

However there will be opportunities to grab market share in light of the company’s Classic Package Holidays business which boasts over 1,300 agents on its business-to-business portal.

The effects should crystallise in the second half of next year with more significant benefits from 2021 onwards. Liberum calculates that if the company were to hold its current market share, it could see revenues increase by close to a third.

EasyJet (EZJ) and Ryanair (RYA) should benefit strategically from reduced competition in the European short haul market. It also comes at an interesting time for EasyJet which is trying to build up a holiday business.

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