TT. Tui Travel

Thomas Cook Group PLC (TCG.LN) Thursday reported its first-quarter operating loss was wider than expected as falling demand forced it to trim capacity, but said it's confident it will perform in line with its own expectations as it undertakes a program of cost cutting.

The U.K.'s big travel companies were initially resilient to the recession as they kept up prices by taking capacity out of the market to meet lower demand, but as time has gone on the lower number of holidays sold has hit revenues and profits.

However, Thomas Cook Chief Executive Manny Fontenla-Novoa said he is confident for the year because the company will cut costs and because its summer holidays will earn more for the company. He said the company is on track to hit its target of a margin of earnings before interest and tax of 4.5%.

"The full-year results are underpinned by our strong summer program weighted towards higher margin, medium haul destinations," Fontenla-Novoa said. "As a result of this and our cost reduction plans, we are confident that the group will perform in line with board expectations."

The company has a bank facility of EUR1.8 billion that doesn't expire until May, 2011. Fontenla-Novoa said it's still on track to refinance at a similar level, with the majority of refinancing likely bank debt.

Thomas Cook in the three months to Dec. 31 posted an operating loss before exceptional items of GBP41.3 million, wider than the GBP27.4 million loss it posted last year, mainly as a result of capacity cuts. It incurred exceptional items of GBP14.2 million, down from GBP46.9 million a year earlier, largely to reflect the restructuring programs that began in 2009.

Revenue fell 5.6% to GBP1.70 billion from GBP1.80 billion, or down 12% on a constant capacity basis.

Due to seasonal distortions, travel companies usually make losses in the first half.

"Recent bookings for both winter and summer have recovered well following the disruption caused by poor weather conditions across Europe and particularly in the U.K. We are underpinning our margins by reducing input costs across all our markets," Fontenla-Novoa said.

For the summer 2010 season, the company has lowered capacity in the U.K. by 3% as customer bookings fell 8% from Dec. 1. Average selling prices for the summer in the U.K. are up 2% year-on-year, which it said "reflect the shift in mix away from higher priced long haul to lower priced but higher margin medium haul."

Fontenla-Novoa said he expects 2010 to be a "tough year" and has no plans to add capacity for this summer season or next.

TUI Travel PLC (TT.LN), by contrast, earlier this week said it plans to increase capacity in the U.K. by 3% as customer bookings rose 6%, and by 11% in the Nordic region, after seeing bookings up 40% for the summer season.

Cancellation on a cumulative basis since the start of the year were down 20% in U.K. with the company now able to demand more in deposits, Fontenla-Novoa said.

Average selling prices for the winter season 2009/2010 were down 6% in Continental Europe with bookings off 2% in the past four weeks. Across Northern Europe, prices rose 11% as bookings rose 16% in recent weeks. Prices were up 6% in the U.K. despite bookings down 6%.

In the U.K. some 77% of its winter holidays have been already been sold, with 41% to 42% of summer season sold.

At 0958 GMT, shares traded up 2 pence, or 0.7%, at 234 pence, while the benchmark FTSE 100 index traded up 1.1%. The stock has gained 18% in value in the past 12 months.

-By Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842 9299; kaveri.niththyananthan@dowjones.com

Grafico Azioni TUI Travel (LSE:TT.)
Storico
Da Giu 2024 a Lug 2024

Grafico Azioni TUI Travel (LSE:TT.)
Storico
Da Lug 2023 a Lug 2024