Brexit chaos hits Thomas Cook as losses dive to £1.5bn


Thomas Cook warned that UK customers had postponed travel plans for this summer because of Brexit uncertainty, as the struggling travel firm plunged deeper into the red and issued a new profits warning.

Shares were down 15% at 19.52p, after hitting 17.68p, the lowest since 2012.The company revealed a pretax loss of £1.5bn for the six months to 31 March, mainly resulting from a £1.1bn write-down of the value of MyTravel, the UK package holiday business it bought in 2007. It followed a £303m loss in the same period last year. Thomas Cook said it had revalued MyTravel “in light of the weak trading environment”.

Britain’s oldest package holiday firm, which dates back to 1841, said it had sold just 57% of its summer 2019 holidays, with tour operator bookings down 12%. It has slashed the number of holidays it offers in response to weaker demand, and is offering big discounts to entice UK customers.

Peter Fankhauser, the chief executive, said: “There is now little doubt that the Brexit process has led many UK customers to delay their holiday plans for this summer.”

He added that the Brexit date delay to 31 October had not made a difference to consumer confidence. “There are a lot of holidays left to sell and there are high levels of discounting.”

The Association of British Travel Agents (Abta) said trading had been tough for the travel sector in the last few months, as customers wait to see what happens with Brexit before making a travel booking.

“There is still a possibility that the UK could leave the EU at the end of October without a deal,” Abta said. “There have been reassurances from UK and EU governments around flights and visas. We have also identified actions travellers may wish to take in advance.”

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Fankhauser said consumer demand for the firm’s holiday packages had weakened across Europe, with the prolonged heatwave last summer and high prices in the Canary islands putting people off booking winter and summer breaks abroad.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Trading in the UK market is challenging, with consumers delaying holiday plans until there’s some clearer direction on Brexit. With last year’s heatwave fresh in the memory, many British holidaymakers will no doubt be thinking it’s best to stay put this summer.

“Thomas Cook’s scaled back the holidays it’s offering in response to lower consumer demand, but the competitive environment means that even so, it’s having to offer discounts to get customers to part with their cash.”

Thomas Cook said it was also being hit by higher fuel and hotel costs, and warned underlying profits in the second half of 2019 would be behind the same period last year.

The company, which is struggling with a £1.2bn debt mountain, has secured £300m of fresh funding from lenders, which is dependent on the sale of its German airline Condor. Fankhauser said the company was assessing bids. Lufthansa has said it put in an offer; Virgin Atlantic is also reportedly interested.

Thomas Cook is being circled by potential bidders for other parts of the business and could be split up. The Chinese company Fosun, the largest Thomas Cook shareholder, is among those eyeing up its high street stores and package holiday business.

Traditional tour operators are under pressure from fierce online competition, from firms such as On the Beach and Airbnb, and a general decline in demand for package holidays.

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To cut costs, Thomas Cook is closing 21 UK branches with the loss of 320 jobs, and is looking to shut more, as well as scaling back its head office in Peterborough. It has a total of 566 shops in the UK.

Mark Benbow, a fund manager at Kames Capital, said: “Thomas Cook is by no means alone in facing uncertainty. Tui is the next weakest in the market in terms of its debt.”

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Thomas Cook faced similar doubts about its survival in 2012, when it was forced to sell hotels and part of its airline to raise money. The company carried out a rights issue in 2013 to shore up its balance sheet.

Fankhauser said the cornerstone of Thomas Cook’s strategy was its directly managed hotels, and was hopeful this would help it get through the tough times. Thomas Cook opened 12 more hotels in the first half, taking the total to 200 hotels, including franchised outlets, and is aiming for 250 by 2021.

He said Cook’s Club holidays were popular with millennials (18- to 35-year-olds), who now account for a quarter of bookings. There has been a boom in short city breaks to San Francisco and Las Vegas. In Europe, Spain remains the most popular destination, followed by Turkey and Greece.



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