Thomas Cook's losses hit €251m

THOMAS Cook has revealed that its losses doubled last year and that it will remain mired in the red until at least 2005 - but claimed that its UK business remains strong.

Hammered by the impact on tourism of the war in Iraq, the SARS outbreak and continued fears of global terrorism, Europe’s second-largest travel firm said its net losses ballooned to a record €251 million (168.7 million), from €120m (80.6m) last year. Although the firm - jointly owned by Lufthansa and retail chain KarstadtQuelle - plans to cut costs by €150m (100m), Thomas Cook insisted its UK arm would be unaffected by the cuts.

While the rest of the group suffered, the UK arm returned to the black to turn in a financial performance that was "one of the best ever achieved in its 163-year history". It also created 200 call centre jobs in Falkirk.

Ian Derbyshire, sales director of Thomas Cook UK, said: "The UK is a very resilient market, and has always been a very buoyant sector.

"Taking a break away is generally always at the top of the British consumer’s agenda, and I don’t expect that to change. I think they have already thought about the threat of terrorism, dealt with it and are now over it, so that’s not going to stop them taking a trip away.

"Admittedly, the market is down 15 per cent at the moment, but without any unexpected shocks, we expect it to be level by the end of the year, or at worst 5 per cent down. We remain confident that the British consumer will keep coming back."

At a group level, the cost savings will see 10 per cent of the group’s 5,500-strong German workforce axed. The company’s airline alone will have to save €100m (67m) by 2005.

To underline its commitment to the cost-cutting programme, the company said that 50 of its top managers would take a 10 per cent pay cut over the next three years

The company’s new chairman, Wolfgang Beeser, who took over in November after a boardroom shake-up, said: "We’ve put on weight everywhere. Costs have so far not been reined in. Talking about cost cuts and implementing them are two different things."

The company - which said it expects another significant, if smaller, loss in its current business year - did not say when it expected to return to profit.

Beeser added: "We also want to win market share, but it is more important to make a profit again as quickly as possible."

But Beeser dismissed speculation that Thomas Cook could be broken up. "Major structural changes are not on the agenda," he said. "We are not selling Thomas Cook UK, nor will we be disposing of our activities in France."

Despite 12.5 million customers using Thomas Cook during the past financial year, this was still down 6.4 per cent, and resulted in sales revenue falling by 10 per cent to 7.2 billion (4.8 billion).

But in the UK business, Derbyshire’s confidence will provide a much-needed boost to the UK’s travel industry.

Last December, rival tour-operator MyTravel announced pre-tax losses of almost 1bn, about 18 times the market value of the firm.

Last month Ryanair, the low-cost airline, issued the first profit-warning in the company’s history, and last week P&O, the shipping and logistics company, announced a review into its ferry operations after a severe drop in demand.

Apart from Thomas Cook UK, the only tour-operator to maintain a level of stability has been First Choice, which has cut capacity and moved away from the highly competitive mass market. Thomas Cook said that 2004 had started well, with a 3.7 per cent rise in bookings.