Thomas Cook cuts UK jobs as profits fall

Travel group Thomas Cook yesterday revealed plans to cut more than 500 UK jobs after weak summer trading and the volcanic ash cloud disruption hit full-year profits.

The company said it expected to generate up to £50 million of savings by reducing the number of managerial and support staff in the UK, as well as renegotiating supplier costs and upgrading IT.

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

Thomas Cook said growth in central Europe and Germany slightly offset the decline in Britain, with group revenues dropping five per cent to £8.9 billion in the year, while adjusted, underlying pre-tax profits dropped six per cent to £277 million.

Thomas Cook undertook a review of its UK workforce, which stands at around 13,000 to 15,000, to help combat uncertain economic conditions in the wake of public spending cuts.

Manny Fontenla-Novoa, Thomas Cook chief executive, said the actions would “simplify and streamline” the UK business, resulting in significant cost savings on an annualised basis.

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.

Out of the 500 roles, Thomas Cook said just under 200 were vacancies that would not be filled. The remaining job cuts have been implemented, it added.

The group said the volcanic ash cloud resulted in £52.9 million 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 £29.2 million.

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.