Thomas Cook playing to strengths in challenging market

Geopolitical uncertainty and the threat of terrorism were putting a dampener on some of Thomas Cook's operations in its first quarter, though the company appeared to have a handle on it, with solid volumes and increased prices on its winter holidays.

The FTSE 250 travel company saw group revenue rise 1% over the comparative period in the three months to 31 December 2015, to £1.41bn. Its gross margin increased 20 basis points to 22.2%.

Thomas Cook's underlying operating loss improved by 11% to £49m. Its loss before tax grew by £1m, however, to £116m.

Chief executive Peter Fankhauser said the company had made a good start to the year in spite of the challenging environment.

"Having acted fast to offer our customers a broad range of alternatives to Tunisia and Egypt, we delivered a 1% increase in the first quarter," he said.

"Sales of our holidays to our own-brand hotels grew by a further 24%, following strong growth in the prior year," Fankhauser added.

The company's board said robust customer demand in the UK and Northern Europe was offsetting muted trading in Continental Europe and its Airlines Germany division.

Thomas Cook launched a new training programme for customer-facing staff during the period, as part of its focus on service. It said the implementation of its 'New Operating Model' as part of a group-wide transformation was also on track.

"Overall, trading for Winter 2015/16 is robust, and we have been able to maintain good margins across almost all of our source markets, helped by a strong online performance," said Fankhauser.

The company's board said 82% of the Winter 2015/16 programme was sold, which was broadly in line with last year, but with significantly higher pricing.

Its summer 2016 programme was 29% sold, 2% less than last year, with firm pricing in all source markets.

"It is clear that the awful attacks in Paris and Istanbul impacted confidence, leading some customers to delay booking their holidays," Fankhauser explained.

"However, we've seen clear signs of recovery in recent weeks: customers still have money in their pockets, and want to go on holiday. In this uncertain geopolitical environment, we are also seeing more of our customers choose a package holiday, valuing the greater security it provides," he added.

Looking ahead, Thomas Cook said it was implementing disciplined capacity management and continuing to focus on quality in a bid to optimise margins.

It had rebalanced it programme to include more holidays to the Western Mediterranean, in anticipation of changes in customer demand.