Thomas Cook hopes for late rush as losses widen

Under pressure travel firm Thomas Cook said that summer bookings have improved in recent weeks but, as expected, first half seasonal losses have widened.

Though audited figures are not yet available, the group reckons it made an operating loss of £262.7m in the six months to March 31st, compared to a loss of £165.8m the year before.

Northern Europe was the only profitable region for the group, with operating profit down to £25.0m from £34.0m.

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The core UK business saw operating losses widen to £173.6m from £158.7m while losses in West Europe - where bookings from France have been affected by civil unrest in popular North African destinations - almost doubled to £65.6m from £34.1m the year before.

"The results reflect the continued difficult trading conditions being experienced in most of the Group's markets and particularly the impact of MENA [Middle East and North Africa] on West Europe and the poor trading in the Canadian mainstream business following the loss of a key hotel supplier and overcapacity in that market," Thomas Cook said.

The group, which has concluded a well-flagged sale and leaseback of aircraft to raise £182.9m, said the winter season closed with bookings more or less in line with the situation outlined at the end of March update.

Cumulative winter bookings in the UK were down 4% year-on-year, as they were in Central Europe. In West Europe, cumulative winter bookings were down 18%, while in Northern Europe, where the group increased capacity as opposed to cutting it back as it had done in other parts of Europe, winter bookings were up 10%. Airlines Germany, which also increased its capacity, saw bookings in the winter season rise 21%.

Turning to the more important summer season, things are a bit mixed in the company's mainstream UK business, where cumulative bookings are down 9% on last year, while the average selling price is up 4%. The UK mainstream business has cut planned capacity back by 13% from last year's levels, and the group said it sash 19% less left to sell than it had at the same stage of last year.

The Specialist & Independent holidays division of the UK operations has seen an 11% increase in cumulative bookings, which means that the UK business as a whole has seen cumulative bookings down just 1% on last year.

In Central Europe cumulative bookings are on a par with last year while the average selling price has edged up 1%. Capacity is unchanged from last year. Thomas Cook said it had seen sustained improvement in bookings from this region in the last four weeks.

West Europe has seen a 10% year-on-year (y/y) decline in cumulative bookings, reflecting a 12% reduction in capacity and a 4% hike in the average selling price. The group conceded that trading in this region remains tough, especially in France, although bookings in recent weeks have begun to improve.

Northern Europe's cumulative summer bookings are down 6% y/y, which is actually a bigger reduction than the 3% cut-back in planned capacity; the average selling price in this region is up 4%. On the plus side, bookings have continued to improve and are trending towards capacity.

Airlines Germany's cumulative summer bookings are up 4% (planned capacity: +7%), with the average selling price up 5%, partly driven by a higher share of intercontinental routes and the introduction of a fuel surcharge.

The unaudited net debt at March 31st 2012 was £1,389.9m, up from £1,094.2m a year earlier, reflecting the increased opening debt balance, higher seasonal losses and the impact that planned reductions in capacity have on booking receipts.

"We continue to expect this year to be challenging given the economic backdrop and difficult trading environment. The performance of our North American and French businesses has been particularly poor and is a major contributor to the increased losses in the first half. Whilst our booking position for the second half is more encouraging trading will be dependant on how well the group performs during the important lates market," the statement concluded.

The shares were down 0.75p to 20.75p in the first two hours of dealing after the trading update.

JH