Thomas Cook warns of job cuts in review

Europe's second-biggest tour operator said it is reviewing its UK workforce of between 13,000 and 15,000 staff, as well as its supplier base and all divisions in the UK arm.

Thomas Cook, which will announce the results of its review in December, said the moves will help it combat tough public sector spending cuts.

The group said trading in the UK has been relatively stable in recent weeks, while its other markets have been trading at or ahead of expectations.

Thomas Cook revealed greater-than-expected UK costs due to aircraft disruption throughout August and September, which will knock 10m from profits. It flies from airports including Humberside, Leeds Bradford and Doncaster Robin Hood, and has travel agencies across the region.

Thomas Cook chief executive Manny Fontenla-Novoa confirmed there would be job losses, but said it was too early to reveal numbers.

"The review is looking at everything from the bottom up and top down," he said. "The review is comprehensive and we are looking at every single cost-cutting opportunity in our business.

"They include staff costs, suppliers, overheads, IT. We are taking stock of the situation, trying to foresee what the trading conditions will be like next year and cutting our cloth accordingly."

Shares in the group shed 11.6p to close yesterday down 6.3 per cent at 171.7p.

The past year has been the toughest yet seen by Thomas Cook as holidaymakers opt to stay at home amid considerable economic uncertainty. It warned over profits in August after seeing worse-than-forecast demand in the UK, as did rival TUI Travel.

Its load factor during the summer was 94 per cent, with UK bookings down one per cent. Bookings during the past four weeks in the UK were down two per cent.

British tour operators have suffered from consumer caution, as well as good early summer weather, the General Election, Emergency Budget, football World Cup and disruption from Iceland's volcanic ash cloud.

Thomas Cook's woes were compounded by technical difficulties among its 100-strong aircraft fleet during the peak August holiday season, which it said would hit underlying operating profits by around 10m.

The group is planning for flat capacity in 2011 as it prepares for another difficult year.

"We suffered as an industry badly in April, May, June and even July," said Mr Fontenla-Novoa. "There is no question consumers took stock of the situation and became a bit hesitant. From about August onwards, trading has been relatively strong."

However, he remained cautious on the outlook for 2011.

"You cannot look into 2011 and think anything other than it is going to be another tough year," he said.

"We see the UK economy continuing to be fragile until next year. My view is it is going to be tough in the UK at least until autumn next year. However, we do see strength returning to most of our other European markets," he said.

Thomas Cook said it was seeing encouraging winter 2010/11 bookings, up 13 per cent in the UK over the last month and up four per cent cumulatively.

Thomas Cook said it has made "good progress" selling the early months of the season, with November now 65 per cent sold, six percentage points ahead of last year. December is 51 per cent sold, two points up.

Average UK selling prices have risen one per cent and the group said it had sold 34 per cent of its winter programme.

Early bookings are up nine per cent for summer 2011 with prices ahead by four per cent, although the group said trading would be tough amid the Government's austerity drive.

Mr Fontenla-Novoa said Thomas Cook continues to look at acquisition opportunities and is closing in on a deal to enter the Russian market.