Cook optimistic despite deepening of winter losses

Political unrest in North Africa and the Middle East saw Thomas Cook’s winter half year operating losses deepen by £36 million to £166 million.

The disruption in programmes to Egypt and Tunisia cost £22 million while the later timing of Easter had an impact of around £15 million. 

This came on revenue up by 4% to £3.431 million in the six months to March 31.

While Thomas Cook reported “strong” summer trading across Continental and Northern Europe, the UK was described as “facing a tougher trading environment”.

The group’s UK performance was £42 million down and “remains weak as we keep prices competitive to stimulate demand resulting in tighter margins”. 

Thomas Cook admitted: “Cost savings of £16.5 million achieved in the UK were not enough to compensate for weak trading. 

“We continue to review the UK business and are progressing with our plans to improve performance.”

The company added that the ongoing unrest in Libya and other countries in Middle East “is weighing on consumer demand” and recovery is slower than expected, despite the significant bed rate reductions. 

“At this stage, we estimate that our programme to Egypt, Tunisia and Morocco for summer will operate at approximately 60% of the level originally planned, but this could change if the political situation does not improve,” Thomas Cook said.

“As a result we currently expect a further financial impact of around £35 million in the second half of the year. 

“We continue to work on mitigating the financial impact through redirecting our flying programme and securing additional accommodation in alternative destinations.”

Summer trading in the UK “continues to be tough” with bookings flat year on year and margins lower as prices are cut to stimulate demand. 

The programme is 63% booked, just 1% ahead over the time last year, with average selling prices up by 4%, reflecting changes in mix towards more all-inclusive product.

The size of group’s UK airline fleet is being revised due to difficult trading conditions in an effort to cut winter flying losses while “broadly maintaining” summer capacity.

The group’s UK defined benefit pension plans are being closed to all active members and pension provision will be through a defined contribution scheme.

A decision on the planned merger with The Co-operative Travel, being probed by the Competition Commission, is expected in August.
“We continue to cooperate with the Competition Commission regarding obtaining clearance for our merger with the Co-operative Travel,” Thomas Cook said.

The build-up of the group’s European Online Travel Agent (OTA) saw first half gross bookings rise by 10%, mainly driven from growth on the Continent while UK trading was described as “weak”. 

Chief executive Manny Fontenla-Novoa said: “I am constantly impressed at how resilient our business and people are to ever changing business conditions.
“We have responded to the challenges of political unrest in MENA and the weak UK consumer environment by redirecting our flying programme, cutting costs and continue to focus on our strategic priorities.

“As expected, first half trading was impacted by the timing of Easter and the unrest in the MENA region but despite the difficult UK trading environment in the first half, we have contained the seasonal loss and kept our focus on cash flow. 

“Our Continental and Northern European businesses have performed well, supported by an improving economic backdrop.

“Whilst results in our UK business are likely to be below last year’s levels and the MENA situation remains uncertain, our Continental and Northern European businesses are performing well and summer booking levels are encouraging.  Therefore we remain well positioned to make progress for the year.”

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