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Thomas Cook has hit another bump on its painful road to recovery. The travel group’s shares dropped 7% yesterday as it warned of a slow start to winter trading, with warm weather and Middle Eastern unrest hitting demand for Red Sea getaways.
Its warning came as rival tour operator TUI Travel – which owns the Thomson travel brand – increased its forecast for this year’s profits, even though it has slashed its holidays to Egypt, normally a big winter sun destination.
Thomas Cook blamed its slow start to winter trading on the warm weather in Europe, which it said had also affected late summer bookings.
TUI, which also owns First Choice and Crystal, has redeployed flights to Egypt after countries including Germany advised its holidaymakers not to travel there. Thomas Cook also said it is shifting capacity to match demand.
TUI said it had a strong summer of UK trading, with revenues up 8% on 2012. Strong bookings and higher prices for the winter has meant sales up 11% this year. The operator said it was “confident in the flexibility and resilience of our business model, which enables us to more effectively absorb the impacts of geopolitical events, including the current turbulent political situations in Egypt and Syria”. It expects operating profits to rise 11%.
Thomas Cook boss Harriet Green said: “In terms of winter holidays, we are at an early stage in the booking cycle. While we expect geopolitical events may impact destination choice, we are offering customers a wider range of new routes and attractive vacations.”
Green is overseeing a turnaround at the 172-year-old Thomas Cook, which was saved from extinction by an emergency bailout in 2011. The company’s share price – 145p last night – has increased by a factor of 10 over the past year and Green said she was still confident that a programme of cost-cutting and new products could return the company to profit. She added that full-year profit would be in line with market expectations, despite the recent slow sales.
Analysts said that Thomas Cook’s update was “subdued”.
Numis Securities analyst Wyn Ellis said: “Thomas Cook has come a long way and I think there’s just a little too much expectation in the market. It wasn’t a bad update by any means but there’s a few headwinds going into the winter.”
Titans of travel
TUI Founded Berlin, 1923. Bought Thomson in 2000. Current group formed in merger with First Choice in 2007. Owns 240 brands including TUI, Thomson, Laterooms.com, Sunsail, Crystal, Hayes & Jarvis, Jetair, Holiday Villages, Citalia, Meon Villas, Austravel
• operates in 180 countries
• 30m customers, 54,000 employees, 1,800 retail travel shops, 141 aircraft
• 2012 results: sales £14.5bn, profits £390m
Thomas Cook Founded Leicester, 1941. First holiday offered was a day trip to Loughborough. Owns brands including Airtours, Club 18-30, Cresta, Cruise Thomas Cook, Direct Holidays, Elegant Resorts, Neilson, plus exchange and insurance services and a guidebook division.
• operates from 19 countries
• 23m customers, 29,000 full-time equivalent employees, 1,100 UK high-street branches – joint venture with Co-operative Travel and Midlands Co-operative, 35 Thomas Cook Airlines aircraft
• 2012 results: Sales of £9.5bn. Losses of £590m.
This article originally appeared on guardian.co.uk