Thomas Cook and TUI warn of summer booking turbulence

(c) Sky News 2019: <a href="http://news.sky.com/story/thomas-cook-and-tui-warn-of-summer-booking-turbulence-11630436">Thomas Cook and TUI warn of summer booking turbulence</a>
 

Thomas Cook (Frankfurt: A0MR3W - news) has warned that anxiety among UK consumers is affecting summer holiday bookings - hours after rival TUI (LSE: 0NLA.L - news) said it was facing a profit squeeze in the British market.

The updates from the two travel giants also pointed to the ongoing impact of last year's heatwave on the travel sector.

Thomas Cook revealed it was considering a sale of its airline business as it seeks increased resources to carry out a shake-up, while TUI issued a profit warning that sent shares 19% lower.

The turbulence in the industry has already led Thomas Cook to reduce capacity and it said this had helped support prices for the summer ahead.

But chief executive Peter Fankhauser said: "Bookings for summer 2019 reflect some consumer uncertainty, particularly in the UK."

Thomas Cook also took a hit from reduced demand for winter sun, partly blamed on last summer's record temperatures and partly on high prices in the Canary Islands.

The company said it had faced "highly competitive market conditions in the UK" at the end of last summer, helping push it to a £60m loss for the quarter to the end of December - up from a £14m loss in the same period a year ago.

Mr Fankhauser said the company needed "greater flexibility and increased resources" to ramp up a transformation programme which will mean cost-cutting and a focus on high-quality holidays.

He said this had prompted a strategic review of its airline business, currently in its early stage, which will "consider all options to enhance value to shareholders and intensify our strategic focus".

That helped shares rise 12% - closing 10% up.

Rival TUI published an unscheduled update on Wednesday night, warning that it now expected full-year earnings to be flat compared with the year before.

It said bookings for the summer were broadly in line with the prior year but that profit margins were not, thanks to ongoing factors including the weakness of the pound.

TUI said that made it "difficult to improve margins on holidays sold to UK customers".

The pound's weakness has been weighing on the purchasing power of British holidaymakers - meaning that holiday firms would have to put up prices to maintain profit margins.

TUI also pointed to other factors including "negative impact from the extraordinary hot weather in 2018".

Laith Khalaf, senior analyst at Hargreaves Lansdown (Frankfurt: DMB.F - news) , said: "Reading between the lines of Thomas Cook's latest trading statement, Brexit is dampening summer holiday bookings, as consumers sit on their hands, waiting for more clarity on the UK's withdrawal from the EU."