Thomas Cook Group is to initiate a strategic review of its pan-European airline after reporting deeper winter losses.
The company said it was at an early stage in the airline review process “which will consider all options to enhance value to shareholders and intensify our strategic focus”.
Thomas Cook said: “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.”
The disclosure came as the group reported that losses for the three months to December 31 increased by £14 million to £60 million year-on-year.
Group revenue for the quarter was broadly unchanged, rising by 1% on a like-for-like basis to £1.6 billion, 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.
The seasonal loss was led by the group’s tour operating businesses where a weaker performance in the UK and northern Europe was partially offset by a good performance in continental Europe.
“Our group airline continued to perform well, delivering a seasonal underlying loss in line with a strong comparative period last year,” Thomas Cook said.
The group’s summer programme is 30% sold, slightly ahead of last year with bookings described as being are consistent with capacity cuts “to closely manage our risk capacity throughout the year,” Thomas Cook said.
“As a result, tour operator bookings are down 12%, helping to support pricing, which is up in all key segments, and 4% higher overall.
“We are addressing some of the challenges we faced in summer 2018 by reducing our committed airline capacity for 2019 and increasing the focus on high quality, higher-margin hotels and destinations.
“In addition, we continue rigorously to drive down costs to give us greater operational flexibility, while remaining fully focused on our strategy, and managing our financial and commercial commitments.
“We are making no changes to the full-year expectations set out in November 2018, reflecting the early stage in the year and limited visibility due to wider market uncertainty, particularly in the UK.”
Chief executive Peter Fankhauser said: “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’ve 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. In addition, we are set to open 20 new own brand hotels this summer, including three Casa Cooks and eight Cook’s Clubs, and have announced two new hotel projects with Fosun in China.
“At the same time, we recognise that we need greater financial flexibility and increased resources to accelerate the execution of our strategy of differentiation – to invest in strengthening our own-brand hotel portfolio; further digitising our sales channels; and driving greater efficiencies across the business.
“As a result, we are today announcing a strategic review of our group airline.
“We are at an early stage in this review process which will consider all options to enhance value to shareholders and intensify our strategic focus.
“We will provide an update on this process in due course.”
The group’s airlines with a fleet of 103 aircraft carried more than 20 million passengers in 2018 and generated £3.5 billion in revenue, with underlying operating profits growing 37% year-on-year to £129 million.
The strong growth came in the face of industry-wide disruption.
“We made good progress in strengthening our seat-only offer, and growing services to third-party tour operators,” Thomas Cook said.