Peter Long, the TUI Travel chief executive, and Manny Fontenla-Novoa, his counterpart at Thomas Cook, are not the sort to dance on graves, but the two men, whose companies dominate the European package travel market, would not be human if they were not to allow themselves a wry smile at the surge in bookings that has followed the collapse of XL Leisure.

The demise of XL has benefited TUI and Thomas Cook in two ways. First, it has removed capacity of about 7 per cent from the market, reducing any pressure to cut prices in the so-called lates market. Secondly, it has highlighted the advantages to the consumer of booking a holiday that is ATOL-protected, so that customers are not left out of pocket if their travel company or airline goes bust.

The other issue thrown up by XL’s failure is that of fuel costs. It is pertinent to ask why, if the UK’s third-biggest tour operator can go bust, neither of the big two are at risk. The simple reason is that they are very different animals – XL was a mouse by comparison with the elephantine TUI and Thomas Cook. While fuel accounted for about 50 per cent of XL’s costs, thanks to its high proportion of flight-only business, it represents an estimated 15 per cent of the big two’s costs.

They are also still reaping significant synergies and other benefits from last year’s mergers, in which Thomas Cook swallowed MyTravel and First Choice Holidays jumped into bed with the tourism business of TUI, the German transport group. Those synergies have included the removal of unprofitable capacity, helping both companies to push up achieved selling prices.

During the summer, Thomas Cook raised British selling prices by 7 per cent on capacity down 10 per cent, while TUI, which had more uneconomic capacity to remove, raised prices by 18 per cent on capacity down 13 per cent. Although so far neither has suffered any fallout from the consumer downturn, it would be naive to imagine that they will be immune.

Even so, with both pretty well hedged against fuel and currency volatility and able to keep cutting capacity in a market where further casualties are inevitable, size will undoubtedly help. It may be a bumpy ride, but hold.

Close Brothers

Six months after Close Brothers ruled out breaking itself up, it is the bank’s chief executive who is being spun off. Not that Colin Keogh, who will stay until his successor is found, should be judged too harshly for this year’s failure of takeover talks.

Those discussions elicited a £10.25 a share indicative bid from Cenkos Securities and Landsbanki but never a firm and fully financed offer that could be put to shareholders. All the same, with Close’s accompanying strategic review having produced little of note, and the shares having since fallen 36 per cent, it is hard to see Mr Keogh’s exit as anything other than an attempt to assuage those investors who would rather have seen Close sold.

Such a deal would have spared them the sight of yesterday’s full-year figures and a further 15 per cent fall in the shares. The 20 per cent fall in operating profits and downbeat outlook was much as expected. Less so was the warning that bad debts in its banking division are likely to rise: impairment charges have ticked up to 1.3 per cent of its loan book. Given Close’s exposure to property, and the experience of the early 1990s – when they rose to more than 2 per cent – a further deterioration seems likely.

That should not detract from the fact that Close has coped with the credit crunch considerably better than the bulk of its peers. It was always in danger of looking excessively cautious in raging bull markets but when the cycle turns the merits of its diversification – four divisions whose fortunes are largely uncorrelated – and its sound balance sheet comes to the fore. Close is one of the few UK-listed banks whose deposits exceed its loan book: some £2.6 billion to £2.2 billion.

There is scope to cut costs but, even at 535p, or eight times current-year earnings, there is little incentive to chase the shares given flat short-term profitability and better gearing to recovery elsewhere. Avoid.

Homeserve

Like the policies it sells, shares in Homeserve, the provider of domestic emergency services, have provided their purchasers with considerable peace of mind.

Since Tempus advised “buy” at the turn of the year, the shares produced a near20 per cent profit at their peak and even this month had maintained their January level – heavily outperforming the FTSE all-share in the process. Until last week, that is. With water utilities scheduled to assume responsibility for the maintenance of outbound domestic sewerage pipes from 2010, Citigroup raised concerns that the profits of Homeserve’s UK plumbing and drainage business – its biggest division – would come under threat.

Yesterday’s first-half trading update gave the company the chance to put its case. First, the change will affect only shared sewers, which fall outside the scope of its existing cover. Secondly, it claims that the publicity surrounding previous regulatory changes have helped policy sales, with homeowners opting to take out standalone emergency cover, rather than the five-day service provided by utilities.

The other reassurance was that Homeserve shows no signs of consumer slowdown. Policy sales are ahead of last year, although retention rates have dipped, in line with a rise in prices. However, the second half, containing the winter months, is far more important to profits, meaning that the greater test lies ahead. At £14.44, Homeserve trades at 14 times current-year earnings: reasonable given double-digit earnings growth and continued progress in the United States and France. Hold.

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