Thomas Cook has signalled that “substantial” cuts in the UK will have to be made “against a difficult market backdrop”.
The group said today that underlying profits will be hit by £10 million due to higher costs, particularly at its in-house airline. A review of the UK cost base to streamline operations announced last month is now underway.
The company said it was “targeting substantial cost savings” to “help to offset the uncertain economic backdrop that continues to prevail in the UK”.
Further details are due to emerge when Thomas Cook gives its full year financial results on December 1. The move was disclosed in a trading statement which described UK summer bookings as having been “relatively stable”.
Meanwhile, winter 2011-12 bookings have got off to an “encouraging” start. “Our cost experience in the UK has not been as favourable as expected, particularly in the airline, and this will result in a net impact of around £10 million on the underlying group operating profit,” the company said.
“As previously reported, trading in the UK business over the summer was softer than expected.” For the coming winter capacity from the UK and Northern Europe has been pegged at previous year’s levels.
“Pricing trends, bookings and booked load factors in most of our major source markets are currently ahead of last year,” the company said.
Winter bookings are 4% ahead of last year on “broadly flat” capacity and the programme is 34% booked overall, 1% ahead of last year.
“We have made good progress selling the early months of the season, with November now 65% sold, 6% points ahead of last year, and December 51% sold, 2% points up. Cumulative average selling prices are currently 1% ahead of last year,” said Thomas Cook.
Summer 2011 bookings from the UK are currently up by 9% with average selling prices 4% ahead of last year. More than half of bookings are for “differentiated product concepts”.
This supports Thomas Cook’s strategy of further improving the holiday mix, with customers responding particularly well to new formats in the Style brand and family range.