Thomas Cook views cloudy outlook

The benefits of cheaper fuel and its own cost-cutting were countered by lower holiday prices and the extra compensation in the final three months of last year

European airlines now have to compensate for mechanical delays following a court ruling (AFP)

The holiday giant Thomas Cook survived the turbulence from its chief executive Harriet Green’s shock departure, but has been hit by new payouts to passengers whose planes are delayed.

The benefits of cheaper fuel and its own cost-cutting were countered by lower holiday prices and the extra compensation in the final three months of last year, the company said today.

After a court ruling in the late summer, European airlines were made to include mechanical delays among factors forcing them to compensate delayed passengers.

Thomas Cook said this was now costing it about £1.5m a month. “We have cut lengthy delays by around 50 per cent and are continuing to improve our on-time record,” its new chief executive, Peter Fankhauser, said. “But this legislation is hurting us badly.”

That showed in gross profits, which were flat on a like-for-like basis at £327m in the quarter on revenues up 24 per cent at £1.5bn. Gross profit margins were 0.3 percentage points lower at 21.6 per cent.

UK bookings for both winter and summer holidays are ahead of last year, particularly on premium packages and holidays to the US. But it said trading conditions in Europe remained tough, although there has been a pick up in recent weeks.

Shares in Thomas Cook fell 7.3p to 12.5.9p.