Thomas Cook to cut staff as profits hit by staycations and ash

JOB losses loom at foreign holiday tour operator Thomas Cook after the group gave warning yesterday that it was seeking big cost savings across its UK business in light of the uncertain economy.

Thomas Cook said it was reviewing its UK workforce of between 13,000 and 15,000 across all divisions, as well as its suppliers, and would announce the outcome alongside its full-year results on 1 December.

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

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."

Thomas Cook's woes were compounded by technical difficulties among its 100-strong aircraft fleet during the peak August holiday season, it said yesterday, with the repair work likely to slash underlying operating profits by 10 million.

Summer bookings fell 2 per cent in the last four weeks, and the company said it was anticipating another difficult year in 2011.

Industry executives said the past year had been the toughest ever as many Britons opted for so-called "staycations" - either holidaying in the UK or doing without a holiday altogether. Thomas Cook warned over profits in August after seeing worse-than-forecast demand in the UK.

City leisure analysts said that, as well as consumer caution, tour operators had faced headwinds this year from the disruption of Iceland's volcanic ash cloud and the football World Cup.

Fontenla-Novoa said: "We suffered as an industry badly in April, May, June and even July. There is no question consumers took stock of the situation and became a bit hesitant."

More positively, Thomas Cook said winter 2010-11 bookings were up an encouraging 13 per cent in the UK over the last month and up 4 per cent cumulatively. Average selling prices are up 1 per cent and the group said it had sold a third of its winter programme overall. Early bookings are up 9 per cent for summer 2011 with prices ahead 4 per cent.

Thomas Cook's shares, which have lost more than a third of their value over the past six months, fell as much as 9 per cent, hitting a 21-month low, before later recovering somewhat to close down 6 per cent, or 11.6p, at 171.7p.