Strong winter trading has not offset concern about the deteriorating economy at Thomas Cook.
Chief executive Manny Fontenla-Novoa said: “We are planning for a tough year.” Indeed, he expects a minimum of two hard years.
The company reported a “robust” UK performance for the three months to December 2008 and Fontenla-Novoa said: “We had a very good January.” But he adds: “It is tough out there.”
The group’s recent quarterly figures showed a reduced first-quarter loss, demand in line with capacity and higher average selling prices across winter and summer.
Yet the Thomas Cook boss insists: “We are far from complacent. It was a good start, but the first quarter is not the most important. We are planning for a tough time and 2010 will be tougher. That is in all our assumptions.”
The UK has consistently proved the most resilient of the major travel markets, but Fontenla-Novoa fears it will not be immune to the downturn this time.
“Probably the toughest economic conditions are in the UK,” he said, adding: “I ignore a lot of what people say about the economy. But there will probably be one million more unemployed in the UK next year and four to five million across Europe. That is a concern.
“The pound is weaker. We are hedged [against sterling] at an average rate of €1.25-€1.30, but we cannot continue to hedge at that level. Fuel costs have come down, but the dollar has strengthened [wiping out much of the gain]. It is all bad news.”
Take these factors together, he said, and companies face “a real test”. He continued: “It is going to be tough for anyone not properly funded and without a strong balance sheet.”
Fontenla-Novoa believes the biggest companies will emerge stronger, thanks to the consolidation in June 2007 that brought Thomas Cook and MyTravel together, but he expects there to be failures along the way.
“The worst is yet to come,” he said. “The market is generally strong for winter, and it is important from our point of view that everyone does okay. But we do not have our heads in the sand. There is a danger of failures.”
He adds: “Thank God we consolidated – if not, it would be carnage. Capacity has come out [of the UK market] and that has helped everyone. Without it, this would be a horrible place right now.
“Capacity is more or less where it should be – supply and demand is about right – but we have the flexibility to take out more.”
Read the full interview with Manny Fontenla-Novoa in Travel Weekly’s sister title Travolution