The impact of a slump in demand for holidays to Turkey and the Brussels terrorist attacks hit quarterly revenues and profits at Thomas Cook.
Underlying operating profits for the three months to June 30 fell by £22 million to just £2 million as group revenue fell by 8% or £154 million to £1.85 billion.
Overall summer bookings are down by 5% year-on-year due to weak demand for Turkey.
“While demand for most other destinations has been strong, demand for Turkey has been volatile and remains significantly below last year’s levels,” Cook said.
“We have made further capacity cuts to Turkey for summer 2016 and switched this into alternative destinations including Spain, Bulgaria, Greece, Cuba and the USA.”
The company reported growth to the Canary Islands of 18%, the Balearics of 11% and the US of 30%.
Cook now expects full year earnings of around £300 million based on current trading, including foreign exchange benefits of £32 million.
UK summer bookings are 1% down with average selling prices down by 4%, reflecting planned growth in seat-only sales. Package holidays pricing from the UK is 2% up.
The slump in quarterly earnings was blamed on a “significant fall” in profits within Cook’s Airlines Germany division due to overcapacity and weak Turkey demand.
The company has also seen a “sharp decline” in profits in its Belgian business following the Brussels airport attack in March.
Chief executive Peter Fankhauser said: “Our financial result in the third quarter was in line with our expectations when we last reported in May, following the impact of the attack on Brussels airport in March and continued weak customer demand for Turkey, which has affected Airlines Germany in particular.
“Since the half year, we’ve taken action to further reduce our capacity to Turkey and increased sales of holidays to other areas, including the Western Mediterranean and long-haul destinations such as the USA. Growth to smaller destinations such as Bulgaria and Cuba is also strong.”
He added: “We are operating in a challenging geopolitical environment, with repeated disruption in some of our key source and destination markets.
“In addition, while Brexit has had no noticeable impact on our bookings so far, it has added to a general sense of uncertainty – for our business and our customers alike.
“Against this backdrop, our focus is to give customers great quality holidays as part of a package that provides the reassurance that they will be cared for at all points, from booking their holiday through to their return home.
“Our all-inclusive holidays in particular enable customers to enjoy their holidays without worrying about unexpected costs. Meanwhile, we continue to make good progress with our underlying strategy, with sales to our own-brand hotels up by 7% so far this year.
“Our net promoter score (NPS) – the metric we use to measure customer satisfaction – further improved across the group, reflecting the actions we’ve taken to improve our customers’ holiday experience.
“We’ve seen a particularly strong performance in the 1,500 hotels where we’ve launched our 24-hour hotel satisfaction promise, with NPS so far 9 percentage points higher than in our other hotels.
“Overall, our improving operations and significantly stronger balance sheet give us the flexibility to navigate through the current market conditions.
“I am confident that our focus on strengthening our holiday offering, transforming our customer service, and bringing our businesses closer together, is laying strong foundations for future growth.”