Thomas Cook has announced a strategic review of its airline group after reporting a sharp rise in financial losses.

Although the company remains at an earlier stage in the review process, the travel agent said it would “consider all options to enhance value to shareholders” as it sought a solution to losses.

The company added: “Our strategy for the airline has been to profitably grow as a leading European leisure airline with a reliable, customer-focused service.

“This has involved a continuous review of our cost structure in order to stay competitive in a highly fragmented market.”

It has been a tough winter for European airlines, with Germania recently following Joon, Monarch, Cobalt Air, Flybe, airBerlin and Primera Air, among others, out of the market.

Thomas Cook Airlines currently operates a fleet of 103 aircraft, of which a quarter serve long-haul destinations.

The airline carried over 20 million passengers and generated £3.5 billion in revenue, with underlying operating profits growing 37 per cent year-on-year to £129 million.

The decision to review airline operations came as the group reported that losses for the three months to December 31st increased by £14 million to £60 million year-on-year.

Group revenue for the quarter was broadly unchanged, rising by one per cent on a like-for-like basis to £1.6 billion.

This was led by strong customer demand for Turkey and North African destinations, offsetting weaker demand for Spain.

But gross margins fell, reflecting a continuation of the “highly competitive” market conditions in the UK at the end of the summer, and weaker demand for winter holidays in the Nordics.

Peter Fankhauser, chief executive of Thomas Cook, commented: “As expected, the knock-on effect from the prolonged summer heatwave and high prices in the Canaries have impacted customer demand for winter sun.

“Where Summer 2018 bookings started very strongly, bookings for summer 2019 reflect some consumer uncertainty, particularly in the UK, and our decision to reduce capacity which will both mitigate risk in our tour operator business and help our airline to consolidate the strong growth achieved last year.”

He added: “We have made further good progress in transforming our business with a rigorous focus on managing our cost base while innovating to deliver high-quality holidays for our customers.

“Our strategic alliance with Expedia is now live in all our key markets.”

Thomas Cook is set to open 20 new own brand hotels this summer, including three Casa Cooks and eight Cook’s Clubs, and has announced two new hotel projects with Fosun in China.

Shares in Thomas Cook were up 11.5 per cent this morning, trading at 34 pence per share.