Thomas Cook unveiled a turnaround plan for its UK business yesterday after identifying its main problem as a lack of profits in the mainstream sector.
Releasing annual results on Wednesday, Thomas Cook said: “The [UK] business has become overly complex and too volume-driven.”
Mainstream sales accounted for 74% of Thomas Cook’s UK revenue in the year to September but made no profit at all.
In a financial statement released with its results, the group noted: “All the underlying profit [in the UK] was generated by the independent businesses.” However, the company insisted “mainstream package travel continues to be important”.
The new UK management team aim to transform the business and add £110 million a year to the bottom line by cutting the airline fleet and optimising aircraft use, cutting the number of hotels and focussing on exclusive and ‘differentiated’ properties, improving yield management and ‘rationalising’ distribution by cutting the number of shops.
Thomas Cook interim chief executive Sam Weihagen said: “We have new management in the UK implementing a turnaround plan. We plan to sell more exclusive and differentiated product.”
Cook estimates 60% of the £110 million a year will come from cost savings.
The company will reduce in-house flying by Thomas Cook Airlines next summer to about 85%, compared with 93% this year.
It reported it has already cut more than 500 “under-performing hotels” from the 2,200 on offer in the UK this summer and aims to reduce this further to 1,500.
At the same time, the company aims to increase the share of differentiated product from 31% of mainstream sales to 50%.
The statement highlighted “significant operational inefficiencies, driven by a silo structure” in Thomas Cook’s UK businesses.
It said the company had grown through acquisitions to a collection of businesses “which are not well coordinated and in some cases have been significant under-performers”.
“The focus now is on improving the management of these businesses and better integrating them,” it said.
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