UPDATE: Thomas Cook Losses Widen Due To Capacity Cuts
11 Februar 2010 - 11:31AM
Dow Jones News
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
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