Thomas Cook shares dive on tough Spain market

Thomas Cook shares dive on tough Spain market

Travel group Thomas Cook reported lower profit margins in its British business due to tough competition in Spain, sending its shares down more than 10% and leaving it reliant on a recovery in Egypt and Turkey to ease the pressure, writes Alistair Smout

Tour operators and airlines have expanded capacity in Spain and other western Mediterranean destinations in response to security concerns in markets such as Tunisia, Egypt and Turkey.

That has prompted a price war among tour operators serving Spain, while allowing hotels to increase prices that Thomas Cook must pay, squeezing margins from both sides.

A weaker pound has made the situation more difficult.

The company said that while bookings for next summer were at an early stage, better demand for trips to Egypt and Turkey in 2018 should help alleviate some of the margin pressure.

“My experience tells me that (the Spanish market) is balancing out,” chief executive Peter Fankhauser told reporters.

“As soon as Turkey, Egypt and the eastern Mediterranean destinations (have) increased demand, the Spanish hoteliers will see that they will have to adapt their prices to level it out,” he said. Mr Fankhauser said that 42% of its holidays in summer 2017 were to Spain, but that should go down, with some capacity redirected into Egypt.

The shares slid after Thomas Cook said margins in Britain were lower after four years of profit growth. Shares in larger rival Tui were down 2% at one stage. Underlying earnings before interest and tax (EBIT) were £330m (€372m) in 2016-2017, Thomas Cook said, a little ahead of an analyst consensus of £327m.

The group said it was “well positioned” to achieve current market expectations for 2018, given strong early bookings for next summer.

One positive element was the performance of the group’s airline business, which improved profits by £24m in the year, helped by a recovery for German carrier Condor. Mr Fankhauser said that the performance was especially encouraging in a year when Air Berlin, Monarch and Alitalia have all gone into administration, partly as a result of the intense competition in the industry.


More in this Section

Landlord Yew Grove says its tenants paying almost all rents due this quarterLandlord Yew Grove says its tenants paying almost all rents due this quarter

EU sets up new Covid-19 company fraud unit at EuropolEU sets up new Covid-19 company fraud unit at Europol

Jobs boost for US as lockdown easing sees millions back at workJobs boost for US as lockdown easing sees millions back at work

Passenger numbers in Cork and Dublin airports plunge 99% in April and MayPassenger numbers in Cork and Dublin airports plunge 99% in April and May


Lifestyle

What is the future of fashion and how will the ‘high street’ look when this is all over? Corina Gaffey asks those in the knowThe future of fashion: How the crisis will impact the retail industry and what we wear

Surveying the global market, Des O’Sullivan says when the going gets tough, the tough get goingHow art world is putting changed times in picture

I have fallen for one of my friends and I am extremely confused! This is the first girl I’ve liked so it’s all new for me, and it’s the same for her.Dear Louise: 'This is the first girl I've liked so it's all new to me'

I ’M mad for the snacks these days — I think I will forever associate lockdown with snacking. I’m trying to keep it under control and not just grab whatever comes to hand but it is a bit of an effort for me.Derval O'Rourke's top tips for healthy snacks

More From The Irish Examiner