Thomas Cook’s underlying UK profit this year fell to under £124 million from £162 million in 2009 with an operating margin down to 3.4% from 5.2%.
This came despite overall capacity being trimmed by almost 5%, with 13% taken out of winter and summer held flat following “significant” cuts in summer 2009.
The company said its UK business had “experienced a tough year against a difficult market and economic backdrop”.
“Despite the reduced capacity and the impact of the volcanic ash cloud, revenue was slightly up year on year as a result of higher selling prices in both the mainstream and independent businesses and the full year effect of acquisitions made this year and last year – mainly Essential Travel and Gold Medal.”
But the volcanic ash cloud and airspace closure had a “significant impact” on the April flying programme and a knock-on effect on demand throughout the summer.
Lost sales as a result of the ash cloud are estimated to be around £55 million with margin adversely affected by £16.4 million.
The direct costs of the volcanic ash cloud were £24.3 million, the company reported.
“The volcanic ash cloud, good early summer weather across much of the UK, and the uncertain economic outlook meant that summer trading was softer than expected and the increases we achieved in selling prices were not sufficient to compensate for other trading challenges,” Thomas Cook said.
“One such challenge was the weakness of sterling which management estimate led to an increase in our foreign currency denominated costs, mainly fuel, aircraft lease costs and accommodation costs, of around £160 million year on year.
“Just over half of this was compensated for by lower underlying dollar fuel prices and our successful supplier negotiations, most notably with hoteliers.
“In addition, we realised £10m of airline synergies which helped to partly offset some of the trading downside.”
The company described the performance of its independent businesses as being “mixed” with Gold Medal and Hotels4U trading “reasonably” but other areas finding conditions “difficult”.
Thomas Cook’s share of controlled distribution grew by 3.4% to 72%.
“The main driver for this increase was our share of internet distribution which grew by 8.7% to 32.6%,” the company said.