Since Air Berlin told its annual meeting two weeks ago that it was reviewing its purchase of Thomas Cook’s loss-making Condor airline, it seemed only a matter of time before the deal formally fell apart.

That confirmation came this morning with Thomas Cook’s disclosure to the stock exchange that it has withdrawn the merger application that it lodged with the German Federal Cartel Office. Surging jet fuel prices and faltering consumer demand has seen stock in Air Berlin lose nearly three quarters of its value since the cash-and-shares deal was agreed nine months ago, meaning that the German carrier would have to issue nearly four times as many shares to the British package tour operator as originally envisaged.

Not all is lost. Thomas Cook has hinted that it is lining up an alternative buyer for Condor — a disclosure that has forced it to suspend its €375 million share buyback programme. That is welcome given that, with it shares having fallen 39 per cent over the last three months alone, it is clearly not generating the value for shareholders that was first anticipated. As for the future of Condor, one alternative might be to explore a three-way tie-up with TUI Fly and Germanwings, which are discussing their own merger.

The broader worry is the outlook for next summer’s bookings, where a combination of a consumer downturn and higher prices — an inevitability if fuel prices remain high — cannot help but affect sales. Package tour operators have a good track record of preserving operating margins by cutting capacity to match demand. Even so, it is hard to believe that at 181p, or six times next year’s forecast earnings, the shares cannot go lower still.

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