Thomas Cook shifts capacity from Spain to higher margin destinations

Thomas Cook revenues were up 7% to £1,749 million for the first three months of its financial year to the end of December.

Its seasonal underlying operating loss improved by £10 million to £42 million.

Its net debt increased by £71 million over the 12-month period to the end of December, when it stood at £1,296 million, but the Group put this down to £88 million of non-recurring payments to The Co-operative Group in connection with exiting their UK retail joint venture.

Chief executive Peter Fankhauser said: "While it remains early in our sales cycle, we’ve got the year off to a good start. A particularly strong performance from our group airline, taking advantage of the disruption in the UK and German markets by providing a high quality and reliable service to customers, has helped deliver revenue growth of 7% and a £10 million improvement in the seasonal underlying operating loss for the first quarter.

"From all that we see so far, customers’ appetite for a summer holiday abroad shows no sign of slowing down. We’ve taken early action to meet strong demand for destinations in the Eastern Mediterranean. This has enabled us to shift capacity out of the Spanish islands where we have seen a continuation of the margin pressures we experienced last summer, particularly for the UK market.

"We’ve also continued our drive to innovate and invest in ways to help customers get more from their holidays, with the launch last week of our ‘Choose Your Favourite Sunbed’ service, which will be available in at least 30 of our own-brand hotels and resorts for Summer 18. This builds on the success of our ‘Choose Your Room’ feature which attracted more than 10,000 bookings during the trial phase in 60 hotels and is set to be rolled out to 300 hotels for the peak Summer 18 holiday season.

"In addition, we’ve made good progress in strengthening our group airline. This includes expanding our capacity by 10% for 2018 to meet the increased customer demand we have experienced in recent months, and builds on the strong recovery in our German airline, Condor.

"This remains a highly competitive – and, at times, unpredictable – market, as the disruption in the airlines sector in recent months demonstrates. However, based on current trading and the continued progress we are making on implementing our customer-focused strategy for profitable growth, we expect to deliver a performance in line with current expectations for the full year."

Winter trading is in line with expectations, said the group, with 80% of the programme sold, which is a similar level to last year. Total bookings are up 8%, but average selling prices are lower due to shift from long-haul to medium and short-haul destinations.

Summer 2018 is 34% sold, 3% higher than this time last year. In the UK, average selling prices are up 6%.

"We continue to see significant margin pressure in holidays to Spain, our largest destination, due to higher hotel cost inflation and increased flight capacity," Thomas Cook said. "We continue to take actions to help mitigate this, by rebalancing our programme towards higher margin destinations such as Turkey and Egypt, generating efficiencies, and repositioning the business through greater online distribution and an intense focus on sales of holidays to own-brand hotels."