Thomas Cook sees turbulence ahead in 'unpredictable' travel market

8 February 2018, 09:54

Thomas Cook has warned of a highly competitive and unpredictable travel market even as it reported a boost to quarterly results following the collapse of rivals Monarch and Air Berlin.

Shares fell 3.9% by the end of trading, after chief executive Peter Fankhauser revealed a continued squeeze on profit margins due to higher hotel costs in Spain, its largest market.

In response, the travel operator is trying to shift demand back towards destinations such as Turkey and Egypt – which have been hit in recent years due to terrorism and political instability.

Revenues for the first quarter to the end of December rose 7% to £1.75bn, while underlying losses – during the traditionally tough winter period – narrowed by 19% to £42m.

But chief executive Peter Fankhauser said: "This remains a highly competitive – and, at times, unpredictable – market, as the disruption in the airlines sector in recent months demonstrates."

He said the group continued to see "significant margin pressure in holidays to Spain, our largest destination, due to higher hotel cost inflation and increased flight capacity".

"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."

Demand for Thomas Cook's airline rose 8% in the quarter as it carried 3.5 million passengers, and it plans to increase to capacity by 10% over the summer.

Mr Fankhauser said: "While it remains early in our sales cycle, we've got the year off to a good start."

He said it had been helped by "a particularly strong performance from our group airline, taking advantage of the disruption in the UK and German markets".

Mr Fankhauser added: "From all that we see so far, customers' appetite for a summer holiday abroad shows no sign of slowing down."

Average selling prices are up 6% for holidays sold in the UK both for the winter and the coming summer seasons, and the company remained on track for full-year forecasts, he said.