Ash cloud costs Thomas Cook £70m
Tuesday, 13 May, 2010
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Thomas Cook estimates the Icelandic ash cloud which shutdown airspace across Europe last month will cost it £70 million.
The figure is £20 million less than the disruption cost rival TUI Travel (see earlier TravelMole story)
Thomas Cook group chief executive Manny Fontenla-Novoa said: “The eruption of the volcano in Iceland provided us with a significant operational challenge.
“Our focus was rightly on the welfare and repatriation of our customers and we’ve received excellent customer feedback.
“This reflects the hard work and dedication of the Thomas Cook team, minimising the stress and disruption to our holidaymakers.
“Within five days of the ban being lifted, the vast majority of our customers had been returned home. I would like to record my gratitude to both staff and customers for their superb response to this unprecedented event.
“As we stated on April 19, the precise financial impact is difficult to calculate and may take some time to finalise given the unprecedented nature of the event and the number of customers affected.
“However, our best estimate of the impact on our results is around £70 million, of which £15 million to £20 million relates to lost contribution.”
He was speaking as the group announced an 18% cut in winter half year pre-tax losses to £252.2 million over the same period in 2008-09.
“Our first half results demonstrate a solid operating result and strong cash flow performance. Our flexible capacity model has enabled us to adjust to lower demand in winter while planning for more resilient demand this summer,” said Fontenla-Novoa.
“Whilst we are faced with a backdrop of increasing economic uncertainty, our flexible business model and the importance of the holiday to the consumer stands us in good stead.”
He added: “We are pleased with the development of our summer bookings programme, particularly given the disruption caused by the volcanic ash cloud.
“If we exclude the estimated impact of the volcanic ash cloud, then the group remains confident of meeting board expectations for the year."
The half year statement to March 31 said: “We were seeing a good upswing in summer bookings ahead of the volcanic eruption. However, clearly this event disrupted normal booking patterns, although we are now seeing a return to more normal trading."
UK sales of holidays for this summer continue to show “significant improvement”, with bookings up 5% in the last four weeks and cumulative bookings ahead of planned capacity levels.
The programme is now 65% sold, two percentage points ahead of last year, with 9% less left to sell for the season than at the same time last year.
“We have continued with our strategy to sell the shoulder months early and have 18% less left to sell in May, 13% less left to sell in June and 8% less left to sell in October,” Thomas Cook said.
Cumulative average selling prices remain 2% ahead of last year.
“This reflects the continued shift in mix away from higher priced long haul to lower priced but higher margin medium haul.
“We continue to expect prices to trend upwards against last year as less lates activity is anticipated, and in the last four weeks average selling prices have been 11% ahead.
“Price increases and a reduction in accommodation costs are required to offset foreign exchange pressures due to the weakness of sterling.”
Independent businesses are trading well “on the whole”.
Bookings in Hotels4U are up around 79% and in Gold Medal Netflights Retail are up 45% year on year.
Trading for winter 2009/10 finished “strongly” with group bookings down 9%, in line with planned capacity reductions, the company said.
Average selling prices were +7% and +12% in the UK and Northern Europe respectively.
“The season ended, despite disruption from the volcanic ash cloud, with an average tour operator departed load factor of 97%, a good performance given the economic backdrop and an improvement on last year.”
by Phil Davies
Phil Davies
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