Turkey coup and terrorism spoil summer for Thomas Cook
U.K. tour operator Thomas Cook has reported a 5 percent drop in overall summer bookings due to terrorist attacks in Brussels and weak demand for holidays in Turkey as the country is rocked by terrorist attacks and a failed political coup.
Group revenue in the third quarter was £1,85 billion ($2.4 billion), down 8 percent from the previous quarter, "reflecting (the) impact of Turkey and Brussels," the travel company said as it reported an underlying operating profit of £2 million in the third quarter, £22 million lower than last year.
It said summer 2016 bookings to destinations excluding Turkey were up by 8 percent. Overall, however, bookings were down 5 percent because of "continued weak demand for Turkey."
Michael Healy, chief financial officer at Thomas Cook, told CNBC that "no one will be surprised that the results are down."
"We've seen revenues down 8 percent and half of that relates to Turkey and the other half relates to Belgium and the Brussels airport attack. I do think we need to look at the results in a bigger context. We are a business that does have to manage through disruption and we took steps last year to rebalance our holiday program out of the eastern Mediterranean – Turkey, Tunisia and Egypt – and into the western Mediterranean," he said Thursday.
The company's shares opened up over 7 percent in Thursday trading.
Healy said the fourth quarter was the "all-important period" as it encompassed 40 percent of the group's revenues. "We're seeing summer bookings, excluding Turkey, up 8 percent, so that rebalancing has worked and that's a positive," he said.
Thomas Cook trimmed its full-year profit guidance on Thursday, saying that "based on recent trading, and recognizing a degree of uncertainty given the current disruptive market conditions, we now expect full-year underlying operating profit to be around £300 million" down from a previous target of £310 million-£330 million for the year.
Still, the company remained confident about the longer-term outlook.
"Despite the near-term challenges, we remain confident that the actions we are taking to better position the business for the longer term – including improving the quality of our holiday offering, investing in our online proposition, and targeting efficiencies – will lead to further profitable growth," the company said in its earnings statement.
In the company's earnings report, the company's Chief Executive Peter Fankhauser said that the results were in line with expectations and that since the half year, the company had "taken action to further reduce our capacity to Turkey and (had) increased sales of holidays to other areas, including the Western Mediterranean and long-haul destinations such as the USA. Growth to smaller destinations such as Bulgaria and Cuba is also strong," Fankhauser added.
Thomas Cook is not the only travel and tourism operator to suffer: Several large European airlines, including easyJet, Ryanair and their continental counterparts concerned over the recent uptick in terrorist attacks in the region.