Thomas Cook confirmed it has cut 500 jobs to cut costs, mainly at its head office.
The majority involved the scrapping of vacant posts, but about 120 managerial staff have left in the past six weeks, said the group. Thomas Cook insisted no customer-facing staff had taken redundancy.
The move came as part of a restructuring of the UK business into three divisions – mainstream, independent and retail. This followed “the challenges experienced in the UK this year, and the uncertain outlook”.
Thomas Cook expects to make overhead savings of between £40 million-£50 million through a combination of job cuts; a renegotiation of supplier costs and reduction in buying requirements; and consolidating and upgrading its IT infrastructure.
These, and other savings, will be achieved in full in 2012, “helping to mitigate input cost pressures and any further deterioration in the trading environment,” the company said.
The cost of the revamp is estimated to be £20 million in the 2010/11 financial year.
The move coincides with Cook’s high street agency and foreign exchange merger with The Co-operative Travel and Midlands Co-op to create a network of 1,300 branches.
This will result in annual savings of at least £35 million and further “upstream synergies” in Thomas Cook of at least £10 million.
“As previously advised, the cost to the merged entity of delivering these synergies is expected to be approximately £30 million and will be incurred in the 2010/11 financial year,” the company said.
“Whilst the merger is still subject to competition clearance, we are working with the relevant authorities to achieve an expedited clearance.
“We believe that the restructuring, combined with the merger with The Co-operatives, will greatly strengthen our UK business going forward.”
Cook will own 66.5% of the merged entity, The Co-operative Travel 30% and Midlands Co-operative 3.5%.
The group is also reviewing its fleet of 93 aircraft and aims to replace its 71 narrow body aircraft with Airbus A320s over five years from December 2012.
The group has reached a memorandum of understanding with Airbus for 12 new Airbus A321 aircraft costing $96 million each, scheduled for delivery in 2014, together with options to purchase further aircraft from 2015.
“The replacement programme will deliver optimum flexibility by sourcing new narrow body aircraft through a combination of firm and flexible orders direct with the manufacturer and through accessing the aircraft leasing market.
“A review of the wide body fleet replacement requirements will be undertaken during the 2010/11 financial year,” the company said.