Thomas Cook wrote off more than half a billion pounds yesterday and unveiled plans to shut up to 200 shops at a likely cost of 660 jobs.
The stand-in chief executive Sam Weihagen also conceded that its arch-rival Tui Travel, the owner of Thomson Holidays, had outmanoeuvred its chief competition.
Asked why Tui is in better shape, Mr Weihagen replied: "I think they have a model that is functioning better. Their organisation is not as complex as ours. They got the capacity right. All of these things we are addressing."
The turnaround plan unveiled yesterday includes measures to sell planes and underperforming hotels, increase margins by dropping "unnecessary discounting" and seek other cost cuts across the business.
These moves were overshadowed by the results for the year to September, which show a company in serious jeopardy. The write-offs and impairment charges total £573m, plunging Thomas Cook into a £398m loss. Debts now stand at £891m, lower than two weeks ago thanks to the sale on Monday of some Spanish hotels.
The group sells more than 22 million holidays a year in the UK. It delayed its results last month as it revealed it had gone back to its lenders to ask for an additional £100m lifeline. Cook also plans to boost its online offer. The statement said: "We expect to see the current 25 per cent share of total UK online bookings increase to between 40 per cent and 50 per cent over time."
Nick Batram at Peel Hunt said: "The results came in below our expectations and the extent of the deterioration in the UK reflects the structural issues faced by the group. The £573m exceptional charge was higher than we expected at this stage but there is perhaps more to come. There is a turnaround plan for the UK but the market backdrop remains poor and the risks high and we would continue to avoid the shares."
Mr Weihagen conceded it has been a "very challenging year for the group". He said customers remain "supportive" despite attempts by Tui to gain advantage from its rival's strife. He can take some comfort in a 10 per cent rise in sales to £9.8bn, which suggests the package holiday is far from dead.
Not everyone in the City is convinced that Tui is immune to the problems affecting Thomas Cook.
One fund manager, who has a short position on Tui shares, said: "While they may be able to convince punters in the short term that they are better than Thomas Cook and benefit from a short-term bounce in revenues, the same structural issues that Thomas Cook have experienced will, despite a reputation for great management, come back to haunt Tui."
- More about: