Sept. 29 (Bloomberg) -- Thomas Cook Group Plc scrapped talks on a three-way merger of German budget airlines with Deutsche Lufthansa AG and TUI Travel Plc, saying its Condor unit can stand alone now that competitors have failed.

Month-old talks to combine Condor with Lufthansa's Germanwings and TUIfly Germany held too little ``upside,'' Chief Executive Officer Manny Fontenla-Novoa said today.

Condor had been slated for sale to Air Berlin Plc, which pulled out of purchase talks in July, spurring Peterborough, England-based Thomas Cook, Europe's second-largest travel company, to pursue discussions with Lufthansa and TUI Travel. The airline industry is being roiled by higher fuel prices that have caused the likes of XL Leisure Group Plc to collapse.

``Any deal was going to be at a bargain price,'' Mark Reed, an analyst at Landsbanki in London, said in a research report. ``Thomas Cook is clearly more bullish than this.'' Reed has a ``buy'' recommendation on Thomas Cook shares.

The company also said it expects to meet annual profit goals, helped by reduced industry capacity following XL's collapse. Sales for the 2008-09 winter season are meeting its forecast and are ``particularly strong'' in the U.K., the statement shows.

``The outlook for 2009 is as expected,'' Reed said.

Thomas Cook closed unchanged at 202.75 pence in London trading today. The shares have declined 28 percent this year, about the same as those of TUI Travel.

`Totally Changed'

``In the last year, the whole airline industry has totally changed,'' Fontenla-Novoa said on a conference call. ``Capacity has been taken out by almost everybody. We are much more comfortable that Condor can continue as a standalone airline,'' he said, calling the division ``extremely profitable.''

TUI Travel will keep looking at ``alternatives'' for TUIfly, Chief Executive Officer Peter Long said today on a separate call, without elaborating. TUI Travel also said profit will meet its forecast for the fiscal year ending tomorrow and the coming period after fewer vacations were sold at discounts.

Business remains ``strong'' for the summer 2008 season, said Thomas Cook, whose financial year ends tomorrow. Arcandor, Germany's biggest department-store owner and owner of a majority shareholding in Thomas Cook, said today it will keep its stake. It had said last week a sale of its 52 percent holding might be possible under terms of a recent loan agreement.

U.K. margins are ``well ahead'' of last year, Thomas Cook said today. Average selling prices are 3 percent higher than last year, while bookings over the last four weeks are 2 percent ahead of last year. The company also said it restarted stock buybacks on Aug. 28 and has spent about 250 million pounds to repurchase 100.4 million shares.

To contact the reporters on this story: Louisa Nesbitt in Dublin at lnesbitt@bloomberg.net

Last Updated: September 29, 2008 12:23 EDT