Thomas Cook Says Travelers Defy Downturn

August 13, 2008

Thomas Cook, Europe’s number two travel company, reported strong trading as consumers continued to book leisure travel despite an economic slowdown stretching household budgets.

Thomas Cook Chief Executive Manny Fontenla-Novoa told reporters the group, a unit of German retailer Arcandor, has so far seen no evidence of consumers cutting back on holidays or trading down.

“The main holiday is a ‘must have’ item for consumers. In our experience, people will cut back on all sorts of other things before they cut back on their holiday,” he said.

The group, created last year from the tie-up of Arcandor’s travel unit and Britain’s MyTravel, said trading in the 2008 summer season is strong in all markets and early indications show bookings to be ahead of last year for winter 2008/9 and summer 2009.

Thomas Cook said it is on track to meet its expectations for the current financial year.

The group said it has taken steps to increase flexibility for summer 2009 in capacity, accommodation, cost base, and fuel hedging. Fuel has been 92 percent hedged for 2008/9.

Thomas Cook and rival TUI Travel have been cutting capacity, stripping out unprofitable or less profitable lines, leaving them with fewer packages to sell and enabling them to avoid deep discounting on late bookings.

They have also been adapting their product offering to sell fewer packages to expensive euro-denominated countries such as Spain and Portugal and more in non-Euro countries such as Egypt and Turkey, which are rapidly growing in popularity.

Winter bookings to Egypt are 20 percent up year-on-year, with Turkey bookings up 13 percent.

Last month, German carrier Air Berlin scrapped its takeover of Thomas Cook’s charter airline Condor, putting the brake on attempts to create a rival network to Lufthansa.

Thomas Cook said, while talks are continuing with Air Berlin about the feasibility of an alternative transaction, it is pursuing other options for Condor.

Sources familiar with the situation said last month that these could include a three-way merger with fellow charter airline TUI Fly and Lufthansa unit Germanwings.

(Reuters)