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Thomas Cook suffers from fall in summer holidays Thomas Cook suffers from fall in summer holidays
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Britain's squeezed middle are cutting back on holidays to the Canary Islands and similar destinations, adding to the woes of Thomas Cook.Britain's squeezed middle are cutting back on holidays to the Canary Islands and similar destinations, adding to the woes of Thomas Cook.
The world's oldest travel company saw a 10% drop in bookings for mainstream summer holidays - its core business of sending families off on package tours to such destinations as the Canaries and Balearics. The world's oldest travel company has seen a 10% drop in bookings for mainstream summer holidays – its core business of sending families off on package tours to such destinations as the Canaries and Balearics.
The Association of British Travel Agents said it was an industry-wide trend, with a drop in "mainstream, squeezed-middle, bucket and spade in Spain-type holidays" as families cut back in the downturn.The Association of British Travel Agents said it was an industry-wide trend, with a drop in "mainstream, squeezed-middle, bucket and spade in Spain-type holidays" as families cut back in the downturn.
It is just one of the many problems faced by Thomas Cook, which also failed to announce a new chief executive on Wednesday, despite assurances someone would be appointed to the job by the end of March.It is just one of the many problems faced by Thomas Cook, which also failed to announce a new chief executive on Wednesday, despite assurances someone would be appointed to the job by the end of March.
Thomas Cook shares have slumped 86% over the past year as it issued a string of profit warnings, leading to the departure of former chief executive, Manny Fontenla-Novoa. In November, it was plunged into a fresh crisis when grim trading forced it to turn to its lenders for financial help. The banks came through with a £200m lifeline but many of Thomas Cook's problems persist. Thomas Cook shares have slumped 86% over the past year as it issued a string of profit warnings, leading to the departure of former chief executive Manny Fontenla-Novoa. In November, it was plunged into a fresh crisis when grim trading forced it to turn to its lenders for financial help. The banks came through with a £200m lifeline but many of Thomas Cook's problems persist.
The company has long suffered from the rise of online travel agents, as well as ongoing pressure on consumer spending. Analysts say its well-publicised financial troubles have also damaged its reputation with hoteliers and customers. The company has long suffered from the rise of online travel agents, as well as continuing pressure on consumer spending. Analysts say its well-publicised financial troubles have also damaged its reputation with hoteliers and customers.
Investec, which rates the shares a 'buy', said on Wednesday: "Thomas Cook is facing continued difficult trading conditions across Europe and it needs to rigorously address its cost base, particularly in the UK. This is made more difficult without a permanent chief executive and we are disappointed that an appointment has not been announced today." Investec, which rates the shares a "buy", said on Wednesday: "Thomas Cook is facing continued difficult trading conditions across Europe and it needs to rigorously address its cost base, particularly in the UK. This is made more difficult without a permanent chief executive and we are disappointed that an appointment has not been announced today."
Overall bookings for summer 2012 were down 2% in the UK, with the drop in mainstream holiday bookings partially offset by a 14% increase in specialist and independent holidays. Thomas Cook said all-inclusive holidays were selling particularly well, because they helped cash-strapped customers stick to holiday budgets.Overall bookings for summer 2012 were down 2% in the UK, with the drop in mainstream holiday bookings partially offset by a 14% increase in specialist and independent holidays. Thomas Cook said all-inclusive holidays were selling particularly well, because they helped cash-strapped customers stick to holiday budgets.
It said it had cut capacity of mainstream holidays by 12%, but pricing held up, rising 4% compared with last year. Outside the UK, summer bookings were slower than expected in northern, western and eastern Europe. It said it had cut capacity of mainstream holidays by 12%, but pricing had held up, rising 4% compared with last year. Outside the UK, summer bookings were slower than expected in northern, western and eastern Europe.
The winter season, which Thomas Cook counts as October to April, remained "subdued", although bookings have improved in recent weeks. Trips from the UK to Tunisia, in particular, have picked up, after a drop in travel to the Middle East and North Africa during the Arab Spring of 2011. The winter season, which Thomas Cook counts as October to April, remained "subdued", although bookings have improved in recent weeks. Trips from the UK to Tunisia, in particular, have picked up, after a drop in travel to the Middle East and north Africa during the Arab spring of 2011.
Thomas Cook said: "We continue to expect 2011/12 to be a challenging year given the economic backdrop and difficult trading environment, particularly for winter. The trends which we saw in the first quarter have continued through the second quarter, but summer trading is more encouraging." There had been an improvement in the UK over the past few weeks, it added, helped by the recent advertising campaign and upgrades to its website. Thomas Cook said: "We continue to expect 2011-12 to be a challenging year given the economic backdrop and difficult trading environment, particularly for winter. The trends which we saw in the first quarter have continued through the second quarter, but summer trading is more encouraging." There had been an improvement in the UK over the past few weeks, it added, helped by the recent advertising campaign and upgrades to its website.
Simon French at Panmure Gordon said consensus forecasts for full-year earnings before interest and tax would likely drop to around £200m following the statement, compared with £304m in 2011. Simon French, at Panmure Gordon, said consensus forecasts for full-year earnings before interest and tax would probably drop to around £200m following the statement, compared with £304m in 2011.
He said the group's balance sheet remained stretched and that level of profitability would put pressure on bank covenants due to be tested in December. "More disposals will therefore be needed and we question whether there is a viable sustainable ongoing business," he said. He said the group's balance sheet remained stretched and that level of profitability would put pressure on bank covenants due to be tested in December. "More disposals will therefore be needed and we question whether there is a viable, sustainable, ongoing business," he said.
Thomas Cook is looking to sell £200m of assets, as part of an effort to cut its £890m debt pile. It is in the process of selling its 77% stake in Thomas Cook India, which has a market cap of $250m (£157m). The company said on Wednesday that had seen a good level of interest and the disposal process was progressing well. Thomas Cook is looking to sell £200m of assets as part of an effort to cut its £890m debt pile. It is in the process of selling its 77% stake in Thomas Cook India, which has a market cap of $250m (£157m). The company said on Wednesday that it had seen a good level of interest and the disposal process was progressing well.
The shares dropped 2% to 22.75p.The shares dropped 2% to 22.75p.