TT. Tui Travel

Travel operator Thomas Cook Group PLC (TCG.LN) said Thursday that its performance this year will be in line with its expectations, echoing comments by larger rival TUI Travel PLC (TT.LN) a day earlier.

As the winter 2009/10 season draws to a close, the company said trading has continued to show progress and summer bookings have continued to pick up across all major markets.

Chief Executive Manny Fontenla-Novoa said there was a return in confidence, especially in the U.K., as customers relied on trusted brands following the collapse of U.K. tour operators XL Leisure in 2008 and, more recently, Globespan.

For the winter season that runs from November to the end of April, aircraft load factor--a measure of how efficiently it fills planes--was 93%. Average selling prices were up 6% year-on-year, with cumulative bookings down 9%. It sold 91% of winter holidays, in line with last year.

For the summer season, the company has lowered capacity in the U.K. by 3% as cumulative bookings fell 2%. However, over the past four weeks, bookings have risen 30%, boosted in part by a television advertising campaign that has run longer than usual.

Average selling prices for the summer in the U.K. are up 2% year-on-year, which reflect the shift in mix away from higher priced long-haul vacations to lower priced but higher margin medium-haul holidays. In the U.K., Thomas Cook has sold 54% of its summer program.

Thomas Cook so far has seen 50% fewer cancellations in the U.K. for summer holidays as customers book closer to departures and higher deposits discourage holiday makers from walking away.

Fontenla-Novoa said bookings were returning to Spain as hoteliers cut prices amid a realization that the shift in travel to Egypt and Turkey was not just a fad influenced by foreign-exchange rate movements. He added that Turkey, which is popular with the British, now also is gaining popularity with German travelers.

Numis Securities analyst Wyn Ellis said Thomas Cook's trading was positive but lacked the punch provided by TUI Travel. Ellis raised his price target to 250 pence from 230 pence but maintained his hold recommendation.

TUI Travel PLC (TT.LN) Wednesday said it was seeing "a significant recovery in consumer demand for leisure holidays" and added it's well positioned to meet its own expectations for the year ending Sept. 30.

Both operators have adopted strategies to cut capacity that would help buoy selling prices and maintain margins.

However, in February, Thomas Cook posted a wider first-quarter operating loss as lower demand forced it to cut capacity, but it said it's confident it will perform in line with its own expectations as it undertakes a program of cost cutting.

Fontenla-Novoa said a deal to enter the Russian travel market through the acquisition of a stake in a local operator has now reached final negotiations, with price the only sticking point.

Media reports have identified Intourist, owned by Sistema (AFKS.RS), as the likely target.

Fontenla-Novoa added that Thomas Cook is keen to enter the Russian market through a bolt-on acquisition and would walk away from any deal if the price is too high.

The Russian market is considered by industry watchers as potentially lucrative as European countries become more relaxed about handing out travel visas to Russians.

In 2008, some 11.3 million Russians traveled abroad, up from the 9.4 million in 2007 and 5.1 million in 2002.

At 0942 GMT, Thomas Cook shares traded up 8 pence, or 3.2%, at 264 pence.

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

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