Tour operator Thomas Cook (TCG.L) has recently reported its 2010 fiscal earnings, with revenues lower than expected, particularly in travel areas influenced by the volcanic ash cloud spewed by the Icelandic volcano Eyjafjallajökull (E15), which erupted violently April 14, 2010, leading to air travel disruption in northwest Europe for six days from 15 April and in May 2010, including the closure of airspace over many parts of Europe. The company incurred volcanic ash costs of GBP 53 million in fiscal 2010, excluding which exceptional charges fell to GBP 132 million from last year’s GBP 217 million as the integration costs associated with the MyTravel merger fell away.
An unfortunate side effect of low full-year earnings for Thomas Cook will impact 500 employees in UK, whose jobs will be eliminated, in an effort by the travel agency to save between 40 million and 50 million pounds. The company also plans to renegotiate supplier costs, to reduce its buying requirements, and to upgrade its IT infrastructure. These additional changes are expected to cost 20 million pounds to implement. The expense will be incurred in the 2010/11 financial year.
“We have taken further actions to simplify and streamline our UK business resulting in significant cost savings on an annualised basis which will help mitigate input cost pressures and any further deterioration in the trading environment,” Chief Executive Manny Fontenla-Novoa said in a statement on Wednesday.