Thomas Cook has confirmed it will sell its North American travel business to Red Label Vacations in a deal worth £3.4 million.

The business includes the tour operator Sunquest and the 60-branch My Travel retail chain in Canada.

However, the organisation is deeply in the red, having made a loss of almost £40m last year.

The sale includes Thomas Cook Canada and Thomas Cook USA, which are together known as Thomas Cook North America (TCNA).

Thomas Cook group head of communications, Jenny Peters, said: “Canada is a very competitive market with quite significant over capacity.

“It has not been a core part of our business for a while.”

TCNA also owns ABC Corporate Services and D-FW Travel Arrangements in the United States.

Proceeds from the sale will be used to reduce the borrowings at Thomas Cook.

Group chief executive Harriet Green said: “As we continue to drive the transformation of the Thomas Cook Group I am pleased to have reached agreement to divest our North American business, enabling us to focus on our core segments and future growth.

“The combination of TCNA’s product portfolio and Red Tag’s online presence form an attractive proposition for Canadian customers and we wish the team every success in the future.”

The sale of its North America business is the first to be completed since Green announced her strategic review of the company last week.