In Brief

Thomas Cook records first profit for five years

Recovery comes despite tragedies in Tunisia and Sharm el-Sheikh

Thomas Cook has recorded its first full-year profit for five years – the first since the group was rescued from bankruptcy in 2011 – despite what its chief executive, Peter Fankhauser, described as an "unprecedented level of disruption".

The company recorded after-tax profits of £19m for the 12 months to September, up from losses of £115m last year, the Financial Times notes. This was despite a higher than expected £22m hit from the terrorist shootings at one of Thomas Cook's resorts in Tunisia earlier this year and other incidents that have potentially harmed the business, such as the bombing of a Russian passenger jet flying out of the popular Sharm el-Sheikh resort in Egypt.  

Thomas Cook is still not offering holidays to Tunisia in most of its markets and has cancelled all flights to Sharm el-Sheikh, which represents around a third of its revenues in Egypt. But despite "turbulence in some of our destinations, the underlying business performed in line with our plans at the start of the year", said Fankhauser.

Sky News reports that the tour operator's overall revenues fell by nine per cent to £7.83bn. But the company says that "on a like-for-like basis adjusting for currency movements, business disposals and store closures, and fuel costs", its income rose by one per cent. Sales of holidays to own-brand hotels were up by £263m.

The holiday giant has suffered a hit to its image as a result of stinging criticism in a recent report into the deaths of two children at a resort in Corfu in 2010, which said it ignored the "human side" of the tragedy (see below). The company has sought to repair this damage by helping to set up a charity with the family and pledging to learn lessons from the report.

Investors have reacted warmly to Thomas Cook’s results, not least because the company has announced it intends to resume dividend payouts of up to 30 per cent of net profit by 2017 for the first time in seven years. 

As a result, shares were up nine per cent to 107.3p at lunchtime today.

Thomas Cook 'ignored human side' of Corfu tragedy

2 November

Thomas Cook "ignored the human side" of the tragic deaths of two children at one of its resorts almost a decade ago, according to a new report that criticises the firm for taking an overly legalistic approach to its own customers.

The study is the outcome of a 12-month independent review undertaken by former Sainsbury's chief executive Justin King. It was commissioned by the company in the wake of an inquest into the deaths, which sparked criticism after its chief executive, Peter Fankhauser, refused to apologise to the parents of Bobby and Christi Shepherd "because there was no wrongdoing by Thomas Cook".

The two children died of carbon monoxide poisoning at a resort in Corfu in 2006. In the past year the company has sought to restore its reputation: Fankhauser has met with the children's parents several times and agreed to underwrite a newly launched carbon monoxide charity to the tune of £1m, The Times notes.

King's report, however, is excoriating of the company's treatment of the parents prior to the inquest. It says they received "untimely and somewhat abrupt responses" or, frequently, "no response at all" to their communication. When it did respond, it's engagement was "intermittent, sometimes ill-timed and often ill-judged".

As for the issue at the heart of the tragedy, King writes that the risks of carbon monoxide are not taken as seriously as the "big five… of swimming pools, balconies, excursions, quad bikes and scooters and food". He recommends putting a section on carbon monoxide inspections in brochures and including the issue in standard health and safety training for resort staff.

But it is the comment on Thomas Cook's approach to customers that make for the most "uncomfortable" reading, as Fankhauser himself admits. The report states that "25 per cent of complaints [to Thomas Cook] are resolved only after some sort of legal process", the Financial Times' Andrew Hill points out.

King concludes that "the law looms much too large in customer engagement". He concedes these problems are sector-wide and are a result in part of the pressure on packaged operators from cheaper do-it-yourself alternatives, but he says that Thomas Cook should take the lead in re-establishing customer service as a differetiator.

"If Thomas Cook can work out how to improve the experience for its customers, provide them with value for money without sacrificing quality or safety, and chart a new path through the uncertainty of an industry riven by disruption, it could again be a leader," says the FT's Hill.

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