Thomas Cook reported a sharp increase in losses for the six months to March, but insisted it has ‘stabilised the business’. Acting chief executive Sam Weihagen spoke exclusively to Ian Taylor
Thomas Cook “probably cut too much capacity” in the UK following its high-profile financial problems in November, Sam Weihagen has admitted.
The group’s acting chief executive reported substantial first-half losses and conceded UK consumer sentiment towards Thomas Cook was “heavily affected” by the company’s cash crisis in November and December.
“Fortunately, we were quickly able to restore the situation with the banks,” he told Travel Weekly.
“There was maybe a £20 million impact on the profit line. We measure customer loyalty and brand performance continually and saw big drops in November/ December. Recent surveys show we are back.”
The company is now in a position to add “a little capacity” from the UK. Weihagen said: “Our share of the UK mainstream market this summer is 40%.
“Last year it was 42%. We cut capacity 12% and that is probably a little too much. We are adding a little, mainly at Manchester, mainly for Tunisia.”
He added: “Tunisia has picked up considerably. It is up by about 50% in the UK on last year. It is probably one of the places in the Mediterranean to get a good price right now.”
The group’s headline figures look bad, with an operating loss of £643 million for the first half of the financial year, more than three times the amount a year earlier.
However, £300 million of this was due to a write-down in the value of “goodwill”. The “underlying” operating losses totalled £263 million, up £97 million on a year ago.
Cook attributed most of the increase to poor trading in France and North America and to losses at recently-acquired businesses, including the Co-ops.
The bulk of the remaining losses were in the UK where, with the exception of the Co-ops, they did not increase despite a 3% fall in revenue and 9% underlying loss from operations.
Weihagen told analysts: “[UK] bookings started to pick up in April. We’ve seen a good improvement in summer bookings. We have done some good management changes. We are rebuilding our balance sheet. We have stabilised the business. It is a platform to move forward. We are ready for the next phase.
“We attacked the things we saw were very wrong. We adopted a lot of things we were doing in Scandinavia and Germany. If it is not enough, [incoming chief executive] Harriet Green will have to take bolder steps.”
Weihagen told Travel Weekly: “Harriet will review the turnaround plan and have her own views.”
Green will take over on July 30 and Weihagen conceded her lack of experience in travel was “a challenge”. But he insisted it could also be an advantage, adding: “Harriet will maybe ask questions that otherwise we would not ask.”
He said: “There were two key issues with Harriet. One, she has worked in four continents; she has international experience. Two, none of the suitable candidates had big experience in travel, but we have plenty in the company. The management board has probably 300 years of experience.”
Weihagen will remain available to give advice. “I have promised to be around until the end of September,” he said. Beyond that: “If people believe my knowledge is of value, I would be happy to help.”
In the meantime Weihagen downplayed concerns about the crisis in Greece, saying: “As a company we don’t have plans to deal with the euro crisis. It will not have an impact in the short term. For next summer, like everyone, we will have an opportunity to renegotiate agreements.”
In fact, he reported the market to Greece holding up well other than from Germany. “We took capacity to Greece down 9% from the UK and are trading 7% down on last year,” said Weihagen. “In the UK, people see they might get good value in Greece.”
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