Times are tough all over, and the travel industry in general is feeling the crunch. Thomas Cook, second largest travel operator in Europe, is no exception. Following a series of profit warnings that began in August last year, the company has announced that there will be no shareholder dividends paid until the balance sheet is in better shape.
Finance Director Paul Hollingworth said that “constructive talks” are in progress with the company’s lending banks, and he expects to reach an agreement that will allow some manoeuvring room, but that no dividends will be paid in the short term. He also said that a new Chief Executive will probably not be instated this year.
Thomas Cook’s CEO Manny Fontenia-Novoa, who has held the position for four years, was forced to step down as of August, after the third profit warning the of year. Reasons given for the poor performance included disruption due to the volcanic ash cloud, but for the most part the problems have been laid on the unrest in the Middle East and North Africa, and on the dreary economic climate in Britain.
In a recent statement the company said that though profits were mostly in line with expectations during July and August, September showed an unwelcome drop from projected earnings, and they are reviewing strategies and options to bolster an iffy outlook. The intent is to reduce the company’s debt by a very substantial amount over the next year or two.
Reports are that Thomas Cook can raise a quick £300m by scrapping dividends, cutting some low-profit flights and closing down some of their least profitable branch offices. Further reports indicate that most of the cut-backs will be in the U.K., where travellers are staying home in droves.