LONDON (Reuters) – Thomas Cook said it was willing to sell its profitable airline business to raise cash to fund its fight back from losses racked up in 2018 and to cope with a tough year ahead, sending the travel group’s shares 12 percent higher.

The oldest travel company in the world stumbled badly last year when a heatwave in northern Europe deterred holiday makers from booking lucrative last minute deals, leading to two major profit warnings and talk of a need to raise funds.

The British group, which had a market valuation of 540 million pounds ($695 million) and net debt of 1.6 billion pounds, said it would consider all options for its airline.

“Thomas Cook doesn’t need to own an airline outright to be a successful holiday company,” Chief Executive Peter Fankhauser said, adding a review was being conducted and the company would retain strong links to the carrier whatever the outcome.

A sale, in whole or in part, would enable the company to invest more in its own hotels, improve its digital sales offering and drive further cost savings.

Its airline, which fared much better last year than the tour operator business, consists of Germany’s Condor, and British, Scandinavian and Spanish divisions.

The airline was insulated because the tour operator guarantees to fill many of its seats and makes up the difference if prices have to be slashed to fill them.

It operates 103 aircraft from airports that include Gatwick, Stansted and Manchester in Britain and Frankfurt and Munich in Germany. It posted a 37 percent rise in operating profit in 2018.

FOCUS ON SLOTS

Fankhauser said the review was at an early stage and would include all options. He told Thomas Cook’s annual general meeting that the review was likely to take several months.

Credit Suisse said easyJet, Lufthansa, IAG and Ryanair could be interested in different parts of the airline business, which it said could be worth 1.8 billion to 3.2 billion pounds. Citi valued the airline at 630 million pounds.

Analysts said there might not be many bidders to take the whole airline in one go, given turmoil in the industry.

Rival TUI on Wednesday slashed its earnings guidance for its fiscal full year after also suffering from last summer’s hot weather. It said its airline division was weaker.

Holiday airline Germania collapsed this week.

“There isn’t a need for anyone to rush in and buy 103 aircraft from Thomas Cook unless it wants access to specific markets and in that case, the primary focus would be on slots,” Nuala McMahon, analyst at Goodbody, said.

“As such, we would be surprised if their strategic review announced they got the entire business away.”

Budget airline Ryanair this week reported its first quarterly loss since 2014, while Norwegian Air scaled back its capacity growth plans for this year.

LONG, HOT SUMMER HANGOVER

Tour operator bookings were down 12 percent for the summer. Thomas Cook said this reflected consumer uncertainty, especially in Britain where concerns about Brexit had hit confidence.

Thomas Cook’s underlying loss from operations in the three months to the end of December expanded to 60 million pounds but it reiterated its full-year outlook. It said it had met its bank covenant tests.

The update reassured credit markets. Thomas Cook five-year credit default swaps fell 135 basis points to trade at 1,085 basis points, having hit an all time high on Tuesday.

A credit trader, who declined to be named, said that if the company raised 1 billion pounds from selling the airline, it would nearly cover all the firm’s debt redemptions for the next three years. He said investors were now pricing the probability of default at 60 percent, down from 70 percent on Wednesday.

“I wouldn’t say it solves the problem or anything like that, but it reduces the immediacy of the problem,” the trader said.

($1 = 0.7754 pounds)