Business

Thomas Cook still suffering from heatwave

Swimmers on a beach in Spain Image copyright Getty Images

Thomas Cook has warned that its annual profits are set to be about £30m lower than expected, its second profit warning in two months.

Earnings at its tour operator unit were £88m lower in the year to September, as people delayed booking holidays because of the prolonged heatwave at home.

It also said its bookings for this winter were 3% down on last year and suspended its dividend.

Thomas Cook shares fell nearly 30% in early trade before recovering slightly.

Shares in rival travel firm Tui were also hit, dropping 3.4%.

'Competitive market'

Thomas Cook chief executive Peter Fankhauser said it had been a "disappointing year".

He added: "The UK was particularly hard hit with very high levels of promotional activity coming on top of an already competitive market for holidays to Spain.

"Looking ahead, we must learn the lessons from 2018 and go into the new year focused on where we can make a difference to customers in our core holiday offering."

The company explained that the delay in holiday bookings caused by the heat meant its ability to make a profit from last-minute sales was restricted as a result.

Most people buy their summer holidays in January, but there is also what is known as the "lates" market of bookings made from May onwards.

This year's "lates" market coincided with the extreme heat in the UK, which affected bookings. The result was aggressive discounting of hotel rooms that had already been booked by the tour operators.

Thomas Cook's profits were affected more than most because they had higher operating costs than their rivals.

The heatwave and mild winter weather are also having an impact on Thomas Cook's bookings for winter holidays, with bookings for the 2018-19 season in continental Europe down by 2%.

Fewer people have arranged holidays for the Canary Islands, with holidaymakers switching to cheaper trips to Turkey, Egypt and Tunisia instead.

Thomas Cook's underlying earnings will be £250m to the end of September, £58m lower than in 2017.

Additional charges, including disruption to flights, were partly responsible for this decline, the company said.

Despite the slump in holiday bookings, the company's airline business recorded profit growth of £35m and its future bookings are 11% ahead of last year.

Sales of holidays to its own-brand hotels were up by 15%.

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Media captionWhy there were so many heatwaves around the world in 2018

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