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Thomas Cook revenues fall after terror attacks slow holiday demand Thomas Cook revenues fall after terror attacks slow holiday demand
(about 7 hours later)
Thomas Cook has slumped to a quarterly loss and will miss annual profit targets after terror attacks in Turkey hit trade. All-inclusive package holidays could become more popular as British holidaymakers try and avoid Brexit-related price rises, according to Thomas Cook.
The group reported a £25m pretax loss on operations in the three months to 30 June, compared with a £3m profit in the same period a year before, after revenues slid 8% to £1.85bn. The travel company revealed on Thursday that it had slumped to a quarterly loss and would miss annual profit targets after terror attacks in Turkey hit trade.
It now expects an annual profit of £300m compared with previous forecasts of between £310m to £335m. Thomas Cook reported a £25m pretax loss on operations in the three months to 30 June, compared with a £3m profit in the same period a year before, after revenues slid 8% to £1.85bn. It now expects an annual profit of £300m compared with previous forecasts of between £310m and £335m.
Despite the warning, shares in Thomas Cook rose 6.5% to 63.9p as investors appeared relieved that trading was not worse. Related: Sharp rise in cost of holidays abroad leads to staycation boom
Peter Fankhauser, chief executive of the travel company, said: “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.” Despite the warning, shares in Thomas Cook rose 6.5% to 63.9p as investors appeared relieved trading was not worse and chief executive Peter Fankhauser suggested Thomas Cook could benefit from a change in holiday habits.
Overall bookings slid 5% as a jump in travel to Spain and the US failed to offset a drop in holidays to Turkey, Egypt and Tunisia, all of which have been hit by terror attacks. So far this year bookings to Turkey were down by up to 40% after Thomas Cook cut the number of flights to the country. “Package holidays are already popular but they could become even more popular in this environment, because of the uncertainty on price movement and, in this volatile environment that we are taking care [of holidaymakers] whatever happens at their destination,” Fankhauser said.
The numbers reflected a 41% drop in tourists visiting Turkey in June revealed by Ankara’s tourist ministry on Thursday - its worst-ever single monthly decline. The value of the pound has sunk 12% against the the dollar and 9% against the euro since the UK voted to exit the EU last month, potentially raising the cost of holiday spending money, hotels and travel abroad. But Fankhauser said Thomas Cook had hedged its currency arrangements until next autumn so that its holiday prices would not change. “It doesn’t cost people more to go with us,” he said.
Thomas Cook’s bookings from the UK were down 1% in the three months to the end of June, but the company said it expected a strong start to the winter season in the UK, with bookings up by 19% despite Brexit worries.
Analysts at Mintel had predicted more growth in independent city breaks rather than package holidays this year but Fergal McGivney, travel analyst for the market research firm, says any recession might alter the outlook.
With heavy competition for a more limited number of package destinations, as carriers switch away from places like Turkey and Egypt, prices have come down and more people have already opted to take a charter flight this year. Any recession or drop in the value of the pound is only likely to increase price competition as companies try to persuade families to go abroad rather than opting for a staycation in the UK.
“Everything is up in the air following Brexit but if there is a recession it could give package holidays a boost,” McGivney said. But he said he didn’t think the boost would be as strong as the last recession as competition from budget players such EasyJet and Ryanair was strong.
In the three months to the end of June, overall bookings at Thomas Cook slid 5% as a jump in travel to Spain and the US failed to offset a drop in holidays to Turkey, Egypt and Tunisia, all of which have been hit by terror attacks. So far this year bookings to Turkey were down by up to 40% after Thomas Cook cut the number of flights to the country.
The numbers reflected a 41% drop in tourists visiting Turkey in June, revealed by Ankara’s tourist ministry on Thursday - its worst-ever single monthly decline.
Thomas Cook also booked £60m less business from Belgium after a bombing at Brussels airport in March disrupted travel and made locals nervous about holidaying abroad.Thomas Cook also booked £60m less business from Belgium after a bombing at Brussels airport in March disrupted travel and made locals nervous about holidaying abroad.
Bookings from the UK were down 1%, but the company said it was focusing on providing package holidays that provided reassurance on costs in the face of fluctuating exchange rates.
It expects a strong start to the winter season in the UK, with bookings up by 19% despite Brexit worries. Fankhauser said: “Our all-inclusive holidays in particular enable customers to enjoy their holidays without worrying about unexpected costs.”
Thomas Cook said it expected holidaymakers to switch to Spain, Bulgaria, Greece, Cuba and the US as alternatives to Turkey and Egypt.Thomas Cook said it expected holidaymakers to switch to Spain, Bulgaria, Greece, Cuba and the US as alternatives to Turkey and Egypt.
Fankhauser said: “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.”