Thomas Cook to stop bonding holidays

Thomas Cook has warned that it will change the way it sells holidays within the next two years to get around the bonding laws.

UK chief executive Manny Fontenla-Novoa said financial protection was costing the company £8 million per year and was no longer necessary.

He said he was not prepared to tolerate an unlevel playing field, as airlines were able to sell flight tickets and accommodation without bonding.

“If we split up our packages and present them to the customer as different components, we can get around the bonding laws,” he said.

“We’ve given it a lot of thought and we will do it, no question. It will happen within the next two years. It is not something the customer is worried about and we’re not prepared to put up with the situation which is costing us a lot of money.”

Fontenla-Novoa said it would not follow Thomson with further commission cuts and would continue to have a relationship with the Co-ops and regional players. However, he said the operator needed agents to support them.

“I think the days of retailers chopping and changing their support for different companies has gone. They need to know who they are backing,” he said.

“Some independent retailers are going to find it very difficult to make it work selling Thomson holidays, because not only has the operator cut commissions, but it is selling its packages cheaper through its own shops. You can’t compete with that situation.”

Thomas Cook reported a profit of £83 million last year and, Fontenla-Novoa admitted, made seven times more profit out of sales to Turkey than to Spain and its islands.

This year, bookings to Turkey are down 28%, partly because of scares about bird flu, and this has hurt the company. The operator has pulled around 100,000 holidays off sale. Despite this, Fontenla-Novoa predicted further success this year for Thomas Cook and said his aim was to eventually achieve annual profits of £100 million.

Elsewhere, bookings to Egypt are down significantly following the Dahab bombing and Greece sales had also fallen for this summer. Spain bookings are up, however.

Fontenla-Novoa said holidaymakers would find it tough to get bargains during peak season and made no apologies for hiking prices at this time.

“We have cut back our capacity. It’s down to supply and demand. A lot of people want holidays in the peak season and that drives up the price.”

Report by Jeremy Skidmore (www.jeremyskidmore.com)

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