Thomas Cook says no change to capacity for 2010

Thomas Cook will not reduce UK capacity further for summer 2010 unless the economy worsens significantly and forces a review, according to group chief executive Manny Fontenla-Novoa.

The travel giant – Europe’s second largest – cut the number of holidays on sale out of the UK by 10% for this summer and by 12% for summer 2008.

Similarly, direct rival TUI Travel reduced capacity by 17% this year and 13%-14% last year, while the collapse of the XL Leisure Group removed a further swathe of holidays out of the market last September.

Fontenla-Novoa said further capacity cuts were unlikely as demand and supply were now evenly matched in the mainstream holiday market.

He said: “We cannot see any more reduction in capacity next year. We are confident we have got capacity right for next year.”

But he admitted: “If the market gets much worse, the recession bites deeper or unemployment gets higher than predicted we will have to review that.”

Large operators do not tend to make large-scale changes to capacity beyond March for the summer because of the disruption it causes to holidaymakers’ bookings.

The news comes as Fontenla-Novoa predicted Thomas Cook would be forced to hike prices next summer by 2%-3% as a result of the weak pound. But he warned average prices in the market could be up by as much as 4.5%, and would be less for Thomas Cook as a result of negotiations with suppliers.

“If we do nothing then it will be 4.5%; we need to cover the cost of currency,” he said.

Fontenla-Novoa, speaking after last week’s interim results, said destinations to have suffered the biggest falls in bookings out of the UK this year included Mexico, Portugal and Spain.

The outbreak of swine flu in Mexico – which forced Thomas Cook to shift most of its capacity out of the destination – will cost the company around £10-12 million in lost margins and aircraft flown out to bring customers home.

The company could cope because the destination makes up just 2% of its total programme, he said, but is unlikely to put capacity back for this summer.

“Demand will not be there for a little while. We have reconcentrated our capacity and cannot keep shifting it around in July and August; we don’t see demand coming back before that,” he added. “The problem is that lots of hotels have shut down.”

Meanwhile, bookings to Portugal are 30% down on last year as a result of the “Maddie effect”, two years on from the disappearance of Madeleine McCann.

“Portugal is still hurting because the family market has not recovered,” he said. “It will come back but it’s just taking its time. I think the Portuguese [tourist authorities] have got it right; they have understood the seriousness of the situation and people’s emotions.”

Holidays to Spain are also still proving “difficult to shift” because they remain expensive compared to non-euro destinations despite price cuts by hoteliers, he said.

Thomas Cook’s Spain bookings are 29% down for this summer, with a 41% market share, while Turkey bookings are 21% up with a 54% market share.

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