Thomas Cook Group

Germany profits rise 29% as Condor flies back into the black

Thomas Cook’s German tour operating and airline businesses were among key drivers of better group profits this year, while hopes are high for a Turkey comeback next year after this year’s recovery for Egypt.

November 23, 2017
Peter Fankhauser hopes for stronger Turkey bookings.
Photo: Christian Wyrwa

Europe’s second-largest tourism group increased revenue by 9% to just over £9 billion and improved underlying EBIT by 8% to £330 million in the year ending September 2017. Key factors were a strong financial recovery at Condor and increased profits in Continental Europe and Northern Europe which outweighed lower margins in the UK.

CEO Peter Fankhauser stated: “Increased customer demand delivered a 9% growth in revenues in the year. Combined with the successful turnaround of our German airline division, Condor, this led to an underlying operating profit of £330 million, an 8% increase year on year. The strong performance of our Group Airline in what has been a difficult year for European aviation is a particularly encouraging sign of our progress. In our tour operating business, Continental Europe grew strongly while our Nordic division enjoyed another excellent year. After four consecutive years of profit growth, margins in our UK business declined due to a more competitive market environment, especially for holidays to Spain.”

The new ‘Group Tour Operator’ segment (covering all tour operator businesses) increased revenues by 7% to £7.1 billion but saw its underlying EBIT fall by 2% to £250 million, with a strong performance in Continental Europe and Northern Europe offset by lower margins in the UK. Continental Europe was an outperformer with a 35% increase in underlying EBIT to £96 million, based on a 9% revenue rise and cost savings.

“In Germany, we maintained our market share in a highly competitive marketplace, growing revenues by 7%. Underlying EBIT increased by £13 million (29%) to £58 million, helped by business improvement initiatives, including expanding our online bookings by 22%, growing sales of holidays to own-brand hotels by 9%, expanding our relationships with distribution partners, and restructuring our back-office functions,” the group commented.

In contrast, UK operating profits dropped by 23% to £111 million despite a 3% revenue increase. This was mostly due to lower margins on Spain holidays caused by a combination of higher hotel rates that could not be fully passed on to customers, tough competition and airline over-capacity, along with the weaker pound. In Northern Europe, revenue grew by 7% and underlying EBIT grew by a further £4 million to £102 million.

The new ‘Group Airline’ segment, covering all airlines (including Condor), increased revenues by 9% to £3.2 billion due to more long-haul flights and improved its underlying EBIT by 42% to £115 million. This was due mainly to the successful turnaround of Condor which turned a £12 million loss last year to a £12 million profit this year on a 9% rise in revenue and cost savings.

For winter 2017/18, Thomas Cook’s total group revenues are up by 7% on a 5% rise in bookings and 2% increase in average prices. The Group Tour Operator segment has a 6% rise in revenues, including 3% more bookings and 3% higher average prices.

In Continental Europe, bookings are 3% ahead with pricing 1% up on last year. In Germany bookings are up 2% despite continued soft demand for Turkey due to political tensions, the group said. Condor’s bookings are up by 2% on flat prices.

Commenting on trends for summer 2018, Fankhauser told journalists that early bookings are good, with higher average prices, and hoped that a recovery in demand for Turkey and Egypt will help reduce the pressure on margins experienced in Spain, where 42% of all Thomas Cook customers went on holiday this year.

“Turkey is profiting from rising prices in Spain, where demand for summer 2018 is again high,” he commented. Bookings in Germany for Turkey holidays “picked up at the end of the summer”, he underlined. Fankhauser said he expected Spain holidays to cost 6-10% more next summer, although customers “are getting a bit more for their money” due to investments by hoteliers.

Fankhauser continued: “Looking to the year ahead, we can see real momentum in our Group Airline, and expect our Continental Europe and Northern Europe tour operator businesses to continue their good performance. While conditions are challenging in the UK, we have implemented a set of actions to improve performance. Overall, based on current trading, I believe that we are well-positioned to achieve a full year operating result in line with market expectations.”

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