The leading ASX-listed online travel booking operator will be under the spotlight this morning after its UK partner Thomas Cook collapsed into bankruptcy on the weekend.
This won't be good news for the Webjet Limited (ASX: WEB) share price, which has been under pressure due in no small part to Thomas Cook's struggle for survival.
The Webjet share price nosedived around 30% over the past year when it's brick-and-mortar rival Flight Centre Travel Group Ltd (ASX: FLT) lost around 12% and the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index went in the opposite direction to gain about 9%.
Only the controversy-riddled Corporate Travel Management Ltd (ASX: CTD) share price is faring worse as its share price shed around 40% of its value over the same period.
Thomas Cook getting cooked
There are a reported 600,000 holiday makers who are going to be left stranded because Thomas Cook looks unlikely to be able to secure a £200 million ($368 million) rescue package to avoid bankruptcy, according to the Nine News website. This includes 150,000 British travellers and thousands more from around the world.
Webjet paid £21 million in 2016 to become a strategic partner to the 178-year-old travel group where Webjet would manage the hotel bookings for Thomas Cook customers visiting Europe.
There were hopes that Thomas Cook could be salvaged by a white knight from China in the form of Fosun – the same group that owns the UK's Premier League football club Wolves.
British authorities and Thomas Cook are working on a plan to return stranded tourists who are in the midst of their holiday when the collapse was announced over the weekend.
Thomas Cook is one of the world's oldest travel agents and its demise will put 22,000 jobs around the world at risk, including 9,000 positions in the UK.
The probable closure comes at a dicey time for the British economy, which is already under pressure from the uncertainty of a hard Brexit.
Impact on Webjet
Coming back closer to home, investors will be keenly watching to see if Webjet will have to cut its profit forecast. Management reported that total transaction value (TTV) for its WebBeds business is up by 50% since the start of the current financial year, but that excludes the Thomas Cook business.
Last months, Webjet posted a 27% uplift in group TTV to $3.8 billion in FY19 as earnings before interest, tax, depreciation and amortisation (EBITDA) surged 43% to $124.6 million.
That wasn't enough to keep investors happy but its underperforming share price could soften today's blow as the market was probably pricing in some chance that Thomas Cook would go bust.
On the other hand, Webjet's share price could potentially bounce even from investors using the "sell the rumour, buy the fact" strategy.
We only have to wait 10 minutes before the market opens to find out.
