The firm says it is implementing the cost cutting in an attempt to revive profitability, which has been struggling ever since the global financial crisis and the ongoing eurozone woes. It insists that most of the cuts will happen in its back-office functions and its retail network, rather than its planes, accommodation or any other part of the business.
What’s wrong with the finances to prompt a decision like this, we hear you ask? Well, in the financial year to September 2012, the company posted pre-tax losses of £485.3m, which it blames on a ‘difficult trading environment.’
In a statement, Thomas Cook’s chief executive Peter Fankhauser said: ‘It is never easy to make decisions that impact directly on our people, but we also owe it to our customers to shape the business effectively and ensure that, when they book their holiday with us, our administrative costs are as low as possible.’
In a wider statement, the company said: ‘Even after these changes we will still have one of the largest retail networks in UK travel.’ It’s a nice claim, but cuts are cuts, in our book.
Still, the company is a lot bigger than the cuts it is making: it employs 15,500 people in the UK at the moment, and it currently has 1,069 stores, so whilst the cuts will be significant, there leave behind a large business.
The fundamentals of package holidays look better than they used to, however. There has been an uptick in sales for the package holidays market since customers began to realise that the insurance covering you if your airline goes bust while you’re abroad is worth something. Booking all of the components of your holiday separately leaves you pretty exposed.
Whether the job losses will help the firm turn around its fortunes remains to be seen, but it is worth noting that increasing numbers of people now book their holiday online. So to some extent, a company realising that it can pare down its high street presence is fair enough…