Thomas Cook cuts staff to offset profit slide

TOUR operator Thomas Cook said yesterday it had eliminated 500 back-office roles in the UK in a bid to recover from a tough year hit by the weak pound and volcanic ash cloud disruption.

The company expects to generate up to 50 million of savings after cutting 350 managerial and support staff jobs, and leaving 150 vacancies unfilled, as well as renegotiating supplier costs and upgrading IT.

The travel group also revealed plans to revamp its fleet of aircraft in a five-year replacement programme for an undisclosed sum.

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Good early-summer weather in the UK, the closure of European airspace in April and the weak pound all contributed to a 34 per cent fall in UK adjusted operating profits to 107.5m in the year to 30 September.

Thomas Cook said growth in central Europe and Germany slightly offset the decline in Britain, with group revenues dropping 5 per cent to 8.9 billion in the year, while adjusted, underlying pre-tax profits fell 6 per cent to 277m.

The group undertook a review earlier this year of its UK workforce, which ranges between 13,000 and 15,000, to help combat uncertain economic conditions in the wake of public spending cuts.

Manny Fontenla-Novoa, the firm's chief executive, said the actions would "simplify and streamline" the UK business, resulting in significant cost savings on an annualised basis.

"I am confident that the actions we have now taken to reinforce the UK business, together with continued progress on our strategic initiatives, leave us well positioned to make progress in the current year," he added.

The group has also entered into joint ventures at home and abroad in a bid to broaden its customer base, including a move into the Russian market through a partnership with VAO Intourist and a merger of its high street travel business with the Co-op.

The deal with Co-operative Travel and the Midlands Co-operative will create around 1,300 shops, and the newly-formed company will be the UK's largest travel agent and second biggest in foreign exchange.

But Fontenla-Novoa said there were currently no plans for further mergers or takeovers.

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The group said the volcanic ash cloud resulted in 52.9m of direct exceptional costs to manage the welfare of customers, while the lost margin from not being able to operate its holiday programme was around 29.2m.

The company, which operates 93 Boeing and Airbus aircraft, said it has decided to move away from a mixed fleet strategy and will look to replace its narrow body aircraft with the Airbus A320.

It will begin a five-year narrow body replacement programme, which will start in December 2012 and phased in with the planned retirement of existing aircraft.Fontenla-Novoa said the value of the new aircraft was "commercially sensitive" but added the deal was subject to "substantial price concessions" from the list price.

Looking ahead, the company said bookings for summer 2011 were in line with last year with prices up by around 5 per cent. Winter holidays are currently ahead of last year in all markets except Canada.