Thomas Cook Regulatory News (TCG)

22 March 2016

Pre-close trading update

Highlights

· Winter 2015/16 is closing out as expected, with 90% sold and higher pricing in most source markets

· Summer 2016 is 40% sold, with bookings below last year as we continue to prioritise margins over volumes

· Market conditions remain challenging, with consumer confidence affected by continued disruption in certain key destinations

· Our early moves to rebalance capacity have seen us benefit from higher demand for Spain and long-haul destinations, while limiting the downside from lower demand to Turkey

Peter Fankhauser, Chief Executive of Thomas Cook commented:

"Thomas Cook continues to operate in a volatile market environment. We know that customers want a summer holiday but we can see that some are leaving it later to book this year as they consider their options.

"Against this backdrop I remain confident that we are doing all the right things as a business. It's clear also that customers value packaged travel more than ever and feel safer in our hands.

"The early actions we took to move flights away from Turkey, Tunisia and Egypt have positioned us well for increased customer demand to resorts in the Western Mediterranean, with strong sales to the Canaries, Balearics and the Spanish mainland in recent weeks. We have also seen an increase in sales to long-haul destinations such as the USA and Cuba as customers look further afield for their holidays.

"In addition, we remain focused on delivering our strategy for profitable growth. Sales to our own-brand hotels have continued to increase while customer satisfaction is significantly up across all our markets. I am particularly pleased about this given the huge amount of work that our people have put in across all areas of the business. I am confident that, in spite of the current market conditions, the actions we are taking to implement our strategy will continue to deliver improved results."

Current trading

Winter 2015/16

Based on cumulative bookings to 14 March 2016

Notes: (i) Risk and non-risk customers

(ii) Risk customers only

(iii) UK average selling price is up by 11% for charter risk and 9% for seat-only, resulting in a 1% increase on a blended basis due to the change in mix

(iv) For the tour operator only, the Winter 2015/16 season is 94% sold, the same level as this time last year

The Winter 2015/16 holiday season is closing out as expected, with 90% of the programme sold, 2% lower than at this time last year. Average prices have increased by 3%, while total bookings are 3% lower than last year, broadly reflecting capacity reductions.

The actions we have taken to improve product quality and grow our winter sun business, particularly in long haul, have led to increased average selling prices across most of our tour operating businesses. In Northern Europe and Continental Europe prices are up by 9% and 4% respectively. In the UK, the average selling price is up by 11% for package holidays and by 9% for seat-only sales, while on a blended basis UK pricing is up by 1% reflecting an increased proportion of seat-only sales.

Our performance in Northern Europe remains strong with bookings up 4%, while in the UK bookings are down 3% against a strong comparator last year. In Continental Europe, softer consumer demand especially in Germany has led bookings to decline by 8%.

Airlines Germany has been impacted in particular by a combination of increased competition and weaker demand, with bookings down 2% and pricing down 2% despite an increased proportion of long-haul sales, and as a result margins are significantly behind the high levels seen in the first half of last year.

Summer 2016

Our Summer 2016 programme is 40% sold for the Group as a whole, which is 2% lower than at this time last year(v). Overall pricing is firm across the Group, in line with this time last year. Bookings are 5% lower than last year, while charter risk capacity has been reduced by 3%. The uncertain geopolitical environment is causing some customers to postpone booking their holidays, leading to a later booking pattern.

We are also seeing a marked shift in demand, with significantly lower bookings than last year to Turkey, and higher bookings to Spain, other European and major long haul destinations (including the USA and Cuba). As previously reported, we took early action to rebalance capacity in anticipation of this trend. As a result, we have been able to accommodate the increased demand for Western Mediterranean and long haul destinations at higher average selling prices and margins, while mitigating the impact of reduced demand for Turkey. We retain the flexibility to further adjust our tour operator capacity up or down, depending on demand for the remainder of the booking cycle.

Our focus continues to be on driving margins over volume, which is leading to strong pricing trends in some markets. In Northern Europe, bookings have improved and average selling prices are up by 7%. The UK is also continuing to improve its performance, with average selling prices up by 4% for package holidays and 1% for seat-only, while total bookings are below last year's levels due to the later booking pattern.

In Continental Europe, pricing is broadly firm against last year, although bookings are lower amid weaker consumer demand due to geopolitical concerns. Our German businesses have also been impacted by intense competition, and as a result both Continental Europe and Airlines Germany are trading behind last year.

Note (v). For the tour operator only, the Summer 2016 season is 50% sold, which is 3% lower than this time last year

Outlook

Bookings continue to be disrupted by a volatile geopolitical backdrop, as some customers postpone their holiday decisions, leading to a later booking pattern for the Summer season. However, we believe that underlying demand for our holidays remains strong, as we continue to deliver better holiday experiences, and as consumers benefit from low fuel prices, low interest rates and low inflation.

We remain well positioned in this challenging market, with the scale and flexibility to offer our customers a wide choice of destinations. We therefore maintain our previous guidance for the full year, but as highlighted at our last update, this is dependent on seeing a sustained recovery in customer confidence as we progress through the Summer season.

Forthcoming announcement dates

The Group intends to announce its results for the six months ended 31 March 2016 on 19 May 2016, and to announce its third quarter results on 28 July 2016.

Enquiries