Thomas Cook warns of 'fragile' UK sector

Thomas Cook, the tour operator, said the downturn in consumer spending had forced it to cut holiday capacity in the UK, and it confirmed its prediction that the unrest in Egypt and Tunisia earlier this year would knock £20m off its second quarter profits.

The travel company said summer holiday bookings were ahead of last year across much of the group, with its German tour operator and airline, and its Northern Europe division being the star performers.

However, Thomas Cook is finding the going tougher in the UK, as hard-pressed British people give up or delay booking their summer holidays. Manny Fontenla-Novoa, chief executive, said: "It is a weaker picture in the UK where recent trading has also been affected by fragile consumer sentiment. In response, we have taken a more prudent approach to capacity."

Thomas Cook said although bookings are 1 per cent ahead of last year, it has reduced capacity to around last year's level.

It has reservations for 55 per cent of its UK holidays and said average selling prices are up 4 per cent, boosted by sales of more all-inclusive holidays.

It is also seeing "a lot of interest" from Brits intending to capitalise on the bank holidays around Easter, the Royal Wedding and May Day, particularly in getting away to Turkey and the Canaries. Thomas Cook has added more than 100,000 extra holidays for the period.

In a pre-close trading statement for the half-year to 31 March, Thomas Cook said travel restrictions to Egypt and Tunisia had led to 150,000 cancellations, which would hit second-quarter profits by £20m: £5m of repatriation costs and £15m of lost margin.

Along similar lines, the industry body Iata said the political turmoil in North Africa and the Middle East had contributed to a 1 per cent fall in international traffic. The growth in passenger numbers slowed to 6 per cent in February, compared with 8.4 per cent in January.