Thomas Cook has revealed an unwelcome Olympics legacy: a £17m hole in its accounts after a disastrous attempt to cash in on London 2012.
The troubled travel firm blamed the loss on “marketing and licensing costs” for package deals that offered guaranteed tickets for the Games.
Thomas Cook was “Official Provider of Short Breaks” for the Olympics, and the company had expected its packages to sell strongly. But sales proved sluggish, partly because London hoteliers demanded high rates that in turn obliged Thomas Cook to pitch its package prices high.
Barely two weeks before the Opening Ceremony, Thomas Cook was forced to halve some prices in order to shift unsold capacity. It made a “trading profit” of £9.6m on the Olympics, but this was wiped out by the £26.8m costs of marketing and licensing agreed with the organisers.
Thomas Cook said those agreements had “become onerous during the year”.
The bout of Olympian over-optimism came as the new chief executive of Thomas Cook, Harriet Green, revealed the full-year results. The firm made almost £7 on average from each of its 23 million customers. But despite a healthy operating profit, the firm reported a loss of £590m once exceptional items were taken into account.
Ms Green, who joined the company only 17 weeks ago, said “We have clawed our way back”. She said the damage done a year ago, when Thomas Cook was forced to postpone its results while seeking refinancing, had been repaired. She described Thomas Cook as a “loved brand” and said: “The business is not broken - there are pockets of excellence”.
The company has shed hundreds of jobs in the past year, including many senior executives associated with the previous management. It has closed 147 High Street travel agencies. Ms Green said “That hasn’t been at the detriment of customer service”. She warned there would be further closures in areas “Where we have multiple stores and unprofitable stores”.
Five more aircraft are to be withdrawn from the Thomas Cook Airlines fleet over the winter. The firm has struck a deal with easyJet that involves the no-frills airline carrying thousands of Thomas Cook passengers.
The chief executive will unveil her full strategy in February, but said that Thomas Cook would have an “omni-channel” presence involving High Street agencies, call centres and online sales. “Our customers want hi tech and high touch,” she said.