Travel companies lose millions of pounds with UK tourism next to suffer

Travel companies Tui Travel and Thomas Cook yesterday said they were losing a combined £13m a day as the restrictions on flights in most of Northern Europe stretched into a fifth day.

Tui became one of the first companies to detail the effect of the volcanic ash cloud on the tourist industry, when it warned investors that the hiatus on air travel was costing it as much as £6m a day. It added that it had lost £20m during the first four days of the crisis. Thomas Cook said the flight ban was costing them an average of £7m a day.

Tui has around 100,000 customers stranded overseas. Two of the company's UK subsidiaries, Thomson and First Choice, said they had 45,000 holidaymakers stuck abroad and were launching a rescue for 5,000 Britons in Spain. The group confirmed that it is meeting the costs of people who are unable to travel.

Tui's finance director Paul Bowtell was critical of the British Government's response to the crisis, saying that the industry has been working on contingency plans to get customers home since last Thursday.

"I think the Government has been very slow," he said. "Gatwick Airport on Thursday was still saying it hoped to have flights throughout the day. Now we're five days on and we still haven't got any clarity regarding what the Government is doing to get airspace open."

Groups such as Tui and Thomas Cook had claimed at the start of the recession that the travel industry was insulated from the worst of the economic downturn, only to suffer falls in demand later than other sectors.

"Another year, another crisis for the travel industry," Nick Batram, an analyst at KBC Peel Hunt, said. "Scenes of empty airports and stories of the volcano eruption lasting years are unlikely to stimulate consumers into booking their summer holiday. This is a real risk that didn't exist two weeks ago."

While the short-term effect on the tourist industry is likely to be limited because of the time of year, prolonged disruption could have a major impact, both here and overseas.

Popular UK cities and resorts have benefited from the weak pound in recent months, attracting more overseas visitors looking for a cheap break, and those Britons that have been put off by the higher cost of a foreign holiday.

In the shorter term, stranded passengers unable to return home will also be forced to spend more money than expected – offsetting some of those losses, but the benefits are likely to be short-lived.

Elsewhere, economists said yesterday that Greece, with its precarious public finances, could be among the worst-hit tourist destinations.

Tui yesterday said that, "around 90 per cent are choosing to rebook their holidays for a later date".