Thomas Cook confirmed today it will close an additional 200 “underperforming” travel agency branches in the next two years.
The closures are forecast to bring £25 million worth of cost savings as the company aims to increase its proportion of UK online bookings from 25% to 40%-50% “over time”. The level of job losses was not detailed.
The announcement came as Europe’s second-largest travel group revealed a plunge into the red with a pre-tax loss of £398 million in the year to September against a profit of £43 million a year earlier. Operating profit dropped by 16%, or £58 million, to £304 million.
A review of the UK business will result in the 1,300-strong network of travel shops being trimmed back following the merger with The Co-operative Travel.
“We will continue to review the performance of the remaining portfolio as leases come up for expiry and more customers move online,” the company said. “In addition, we will continue with the modernisation programme of our remaining stores to ensure that the brand retains customer appeal.”
Other UK cost-savings measures include taking six aircraft out of the Thomas Cook Airlines fleet, bringing it down to 35.
Looking forward, Cook said: “The first half of the current financial year and in particular the first quarter, is expected to be adversely impacted by the uncertain economic environment across Europe, input cost inflation and the ongoing disruption in MENA (the Middle East and North Africa).
“In addition, the acquisition of the Co-op and Intourist will add to seasonal losses in the first half given that these businesses earn all their profit over the summer months. We have taken action to cut capacity and costs where appropriate. In the second half, results should begin to see the benefits of the UK turnaround plan.
“Overall, we expect it to be another challenging year given the economic backdrop and we will focus hard on strengthening the balance sheet and improving the performance of our UK business.”
The group said it was still searching for a chief executive to succeed Manny Fontenla-Novoa, who left in August. The group is currently led by interim chief executive Sam Weihagen.
“This has been a very challenging year for the group, despite which we still delivered an underlying operating profit of over £300 million,” said Weihagen. “We have instigated significant management changes and implemented a turnaround plan in the UK to address our areas of underperformance.
“We continue to take action to substantially strengthen the balance sheet and the board is undertaking a full strategic review. I am confident that these changes will improve profitability and build a stable foundation from which to rebuild shareholder value.
“Customers have been very supportive in recent weeks and are continuing to book with Thomas Cook. Bookings outside the UK were broadly unaffected by news of our refinancing and in the UK bookings have recovered well. For over 170 years Thomas Cook has provided customers with fantastic holiday experiences and we will continue to do so.”
Susan Duinhoven will become chief executive for the West Europe business from January 1. The East Europe business will be transferred into the Central Europe segment under the leadership of chief executive Peter Fankhauser.
Thomas Döring, the current chief executive of West & East Europe, who started building a group-wide OTA function a year ago, will turn his full attention to group e-commerce and hotel only business, the company said.
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