Thomas Cook, the first of the big two travel companies to bring out trading updates this week, has disclosed that political unrest in Egypt and Tunisia cost it an expected £20 million in the first quarter.
The North African disruption does not appear to have hit consumer holiday confidence substantially, the operator said, with summer bookings in most markets, particularly Germany, up on last year, although the UK economic situation is affecting trading.
Group chief excutive Manny Fontenla-Novoa said: “It is a weaker picture in the UK where recent trading has also been affected by fragile consumer sentiment.”
The company has taken “a more prudent approach” to capacity as a result, he disclosed. “Overall, the business is performing well, given the disruption caused by the unrest in Egypt and Tunisia,” said Fontenla-Novoa.
Cook’s warning about consumer confidence comes after the latest index by Markit revealed the “steepest monthly deterioration in household finances since March 2009“. Travel WeeklyCity Insider columnist David Stevenson said:
“To describe these numbers as deeply depressing is, I think, an understatement of epic proportions. Consumer confidence is clearly cratering and I suspect the Budget will have done nothing to lift spirits.”
Travel restrictions to the two north African countries resulted in around 150,000 cancellations, of which 110,000 were to travel to Egypt and 40,000 to Tunisia. Cook said that its programme to Egypt and Tunisia will operate at around 70% of the level originally planned.
The total cost in the group’s second quarter will be £20 million, comprising £15 million of lost margin and £5 million in repatriation costs.
“We have redirected our flying programme and secured additional accommodation at alternative destinations to meet our customers’ holiday requirements, validating the flexibility of our operating model,” the company said.
Summer bookings from the UK are just 1% ahead of this time last year but capacity has been trimmed back to around 2010 levels “in response to the continuing tough trading environment in the UK”.
The programme from the UK is 55% booked, with average selling prices up by 4%, reflecting a shift to more all-inclusive breaks. Bookings for winter 2010/11 from the UK are 5% down. The company said levels had “slowed noticeably in the UK as a result of continued economic uncertainty”.
Thomas Cook said it was continuing to “work closely” with the Competition Commission to reach an “expedited clearance” of its planned high street travel agency merger with The Co-operative Group. The commission has 24 weeks, until mid-August, to reach its conclusion. Tui is to follow Cook with a trading update on Thursday.