Sunny outlook for Thomas Cook as demand exceeds supply

Holidaymakers are shrugging off money worries to head for a week in the sun or on the slopes, according to Thomas Cook.

The holiday company, which merged with Airtours rival MyTravel last year, said demand for both winter and summer holidays was exceeding supply in current trading, echoing comments made by German rival TUI Travel yesterday.

Thomas Cook's chief executive, Manny Fontenla-Novoa, said big snowfalls in Europe had triggered a rush for ski holidays. "Capacity has been taken out of the market and to us it seems that, for the first time, demand is greater than the capacity itself, and that is a great position to be in," he said.

He added that holidays were "the last thing to go" when consumers were under pressure from higher living costs.

The group cut the number of holidays on sale by 10 per cent this year in order to bolster prices.

The update on trading conditions came as Thomas Cook posted annual profits from existing operations of €375.3m (£279.1m), an increase of 26 per cent on a year earlier. The period covered the year to 31 October.

Mr Fontenla-Novoa added that the integration of the two businesses was largely complete.

"Our company has a great brand and heritage and we have laid a firm foundation for the future by integrating the two businesses quickly and effectively," he said. "We now have a clear strategy for growing the business, and I look to the future with confidence."

The company said it was on track to achieve savings of at least €200m (£148.8m) from the merger, which is an increase of €60m (£44.6m) on its original forecast and up to a year ahead of schedule.

The tie-up involved the closure of 144 shops in the UK, leaving an estate of 812, mostly Thomas Cook, stores.

The company's UK headquarters have been established in Peterborough after a number of offices were closed in a rationalisation programme.

TUI Travel said yesterday it planned to close 100 UK stores as part of £150m of cost savings resulting from last year's merger of its tourism arm with First Choice.

Joe Thomas, an analyst at Investec Securities, said he believed both Thomas Cook and TUI Travel are undervalued, given the improved market backdrop, and added that "concerns over consumer weakness have been overplayed".