Sept. 12 (Bloomberg) -- TUI Travel Plc and Thomas Cook Group Plc, Europe's two biggest tour operators, rose in London trading as analysts said the collapse of nearest U.K. competitor XL Leisure Group Plc will benefit the industry by cutting capacity.

XL's failure will cut the supply of U.K. package vacations by about 7 percent, Investec analyst Joseph Thomas wrote in a note. Added to planned reductions in capacity by TUI Travel and Thomas Cook, the total number of package trips available may drop 20 percent in 2009, according to Dresdner Kleinwort analysts.

``This is great news for the industry,'' Dresdner analysts led by Tim Ramskill said in a note. He raised his recommendations on TUI Travel and Thomas Cook to ``buy'' from ``hold.''

XL Leisure is the second British travel company to cease trading in a month after transatlantic carrier Zoom collapsed. Both cited rising fuel costs as the underlying cause. Oil prices spiked to $147.27 a barrel in July before retreating.

Thomas Cook rose 15.75 pence, or 6.7 percent, to 250.75 pence, valuing the Peterborough, England-based company at 2.3 billion pounds ($4.1 billion). The close was the company's highest since May 27.

TUI Travel climbed 16.25 pence, or 7.3 percent, to 238 pence, giving the tour operator a market value of 2.7 billion pounds ($4.8 billion)

``We see TUI Travel and Thomas Cook as clear beneficiaries of today's announcement,'' Investec's Thomas wrote. The likely reduction in capacity is ``clearly helpful in an industry that faces obvious consumer uncertainty next year.'' Thomas has ratings of ``buy'' on Thomas Cook and ``hold'' on TUI Travel.

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

Last Updated: September 12, 2008 11:55 EDT