Bookings still falling but Thomas Cook boosted by new campaign

Struggling tour operator Thomas Cook yesterday warned that its UK summer holiday bookings continue to decline – however, that a new advertising campaign has lifted its performance in recent weeks.

The UK’s second-biggest travel company, which was forced to turn to its banks for more help following dire trading last November, said summer bookings are 2 per cent lower than this time last year, compared to a 1 per cent decline reported in February.

But chief executive Sam Weihagen insisted that bookings were “stable” and had improved in recent weeks following the launch of a TV advert, in which a rock cover of Louis Armstrong’s Wonderful World is played over images of holidaymakers.

The group, which has 1,300 shops and reported losses of £151.7 million in its first quarter, wants to sell £200m of assets over the next 18 months as part of plans to take a chunk out of its near-£1 billion debt mountain.

The 170-year-old group has issued a number of profit warnings in the past year and also saw the exit of former chief executive Manny Fontenla-Novoa.

The company was plunged into crisis in November after it went back to its lenders to ask for an additional £100m lifeline. This sparked fears of a collapse, but it later secured £200m from its banks. It has since unveiled a turnaround plan for the UK business, which includes focusing on fewer and better quality hotels and a drive for more online bookings.

The group said winter bookings were 4 per cent lower than a year ago, with the season closing next month, which is stable when compared to the figures published in February.

The UK winter programme is 91 per cent booked, which is broadly in line with last year, Thomas Cook said, while bookings for its specialist holidays are 1 per cent higher.

The decline in summer bookings is driven by its mainstream products, which are down 10 per cent, while its specialist and “independent” holidays are actually 14 per cent higher.

Thomas Cook its mainstream online bookings were up 19 per cent in the past four weeks.

The group said it continues to expect 2011-12 to be a “challenging” year, but summer trading is “more encouraging”. The company said that plans to sell its majority stake in Thomas Cook India had seen good levels of interest and the sales process was progressing well.

Thomas Cook had previously said it would lose six aircraft from its fleet this summer.

Wyn Ellis, an analyst at Numis Securities, said the update suggested trading remains tough at the tour operator, though there is some encouragement for the summer.

Ellis said Thomson Holidays-owner TUI Travel, which is due to update the market today, remains its preferred tour operator stock and is likely to have benefited from Thomas Cook’s reduced capacity.

Richard Curr, head of dealing at Prime Markets, listed Thomas Cook as a “speculative buy for recovery”.

He added: “There are some bright spots – particularly as UK booking trends are up on the back of Thomas Cook being the official London 2012 Olympic Games short-break provider.

“In spite of debt levels, the action Thomas Cook is taking and the trading statement warrants a speculative ‘buy’ rating for the shares as a recovery play.”