Thomas Cook takes £25m hit from Tunisia and Greece crises

Thomas Cook takes £25m hit from Tunisia and Greece crises

Thomas Cook expects to take a £25 million earnings hit following the Tunisian beach terrorist attack and concerns over the financial crisis in Greece.

The disclosure came this morning as the travel group revealed that third quarter losses had been almost halved to £44 million from £81 million in the same period last year.

Cook described summer bookings as being in line with expectations and is 78% sold.

“Our UK business continues to trade well, with the peak departure months well sold at good margins,” the company said.

Cook’s UK, Continental Europe and Northern Europe businesses all increased earnings [EBIT] in the three months to June 30, while Airlines Germany was described as being “slightly behind” last year.

“However, our fourth quarter bookings have been disrupted by events in Tunisia and Greece, which we expect will reduce group EBIT for the full year by approximately £25 million, compared with our previous expectations,” Cook said.

“In addition, based on current rates, we expect foreign exchange translation to reduce full year group EBIT by approximately £39 million, up from the £25 million we announced at our interim results due to further depreciation of the euro and Swedish krona against the pound.

“On a constant currency basis, we nevertheless remain confident that Thomas Cook will achieve growth in full year 2015.”

Chief executive Peter Fankhauser said: "We've delivered a good performance in the third quarter, executing on our strategy and improving our underlying operating profit and cash flow in spite of weaker market conditions.

“Customer demand for our differentiated product continues to grow, our focus on quality is achieving positive results, and our digital progress is encouraging.”

But he added: “Since the end of the third quarter, our business has been impacted by significant external shocks.

“In response to the tragic events in Tunisia, we acted swiftly and decisively, evacuating more than 15,000 guests on approximately 60 flights and sending special assistance teams to offer logistical and compassionate support to customers and staff.

“In Greece, our local teams have worked diligently to ensure that economic issues do not disrupt our customers' holidays.

“Our people have shown exemplary commitment during these crises, distinguishing Thomas Cook by personally contacting tens of thousands of customers, and amending and rebooking their holidays in just a few days. It is the dedication of our people that make us one of the most popular travel brands in Europe.

“While the impact of Tunisia and Greece will reduce our fourth quarter and full year profits, and in spite of foreign exchange headwinds, I have every confidence that our progress will continue, supported by the ongoing execution of our profitable growth strategy."

Cook added: “We have reshaped our holiday offering and flight schedule as a result of recent events in Tunisia.

“However, although difficult to assess at this stage, we believe that there may be some continued adverse impact on the group's full year 2016 results, in the event that Foreign Office advice remains negative and demand does not return to former levels.”

Cook was forced to cancel almost its entire programme for Tunisia this summer and shifted capacity to alternative destinations.

“We nevertheless expect this major disruption, occurring in the midst of the lates summer holiday booking period, will have an impact on sales and margin in the fourth quarter of the year.

“We estimate that the net impact of loss of business to Tunisia will be around £20 million, including the margin from cancelled trips, the impact of reconfiguring our summer flying programme and the cost of repatriating our customers to the UK.”

Customer demand reduced during the period while it was uncertain whether Greece would remain in the Eurozone, the operator added.

“Although our holidays to Greece were well sold before the crisis and bookings quickly recovered after an agreement was reached, it has resulted in a higher level of discounting in the summer lates market than anticipated.

“As a result, we estimate that the Greek crisis will impact fourth quarter EBIT by around £5 million through lower margins.”

Cook’s summer programme from the UK is 84% sold, 1% lower than this time last year, with peak months achieving good margins.

This has helped the company to better maintain improved prices and margins in the lates market.

“This also reflects a strategy of expanding our seat only business as we refine our operating model for the UK airline,” the company said.

“Accordingly, although total average selling prices are 1% lower than last year, within the product mix, charter risk and seat only pricing have both improved by 4% and 3% respectively.”

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