Thomas Cook, the world’s oldest travel agency, has announced that it will close 200 UK branches over the next two years.
The cuts, which will see 125 more branches shut than previously announced, are part of the firm’s plan to turn around its flailing business in the UK.
The news of the rash of closures came after the travel firm announced a £398 million loss for the year to the end of September.
Thomas Cook says that the closures are a tough but necessary decision that is meant to cut debts and build investor confidence.
In November, it received £200 million in financing that was desperately needed after shares plunged 75% in one day. The lenders, which include Barclays, HSBC, Royal Bank of Scotland, and UniCredit, have all agreed to provide this money until April 2013.
This means that Thomas Cook has just 14 months to get back on its feet and become independently profitable.
The job cuts are part of this profitability model, with staff at 115 of the affected branches having learned their fate on Wednesday. Already, there has been a loss of 661 jobs.
The devastating job cuts come just after new figures from the Office of National Statistics report the highest unemployment on record, with youth unemployment pushing past 20%.
Bad for business
Thomas Cook has blamed world events out of their control for the brutal hit to their profit margins. Tunisia and Egypt experienced political unrest over the past year, while Thailand experienced a devastating flood.
Since there were all top holiday destinations for the firm, sales have taken a noticeable hit.
News of the company’s financial woes has also been bad for business, as rival travel firms have been running ads alluding to weakness in Thomas Cook.
Despite the “very challenging year,” chief executive Sam Weihagen has said that the firm “still delivered an underlying operating profit of over £300 million.”
Still, winter bookings from the UK are down 11% from last year. Weihagen points out that bookings for next summer are up 8%, and that bookings for trips outside of the UK were unaffected by the news of “our refinancing.”
Despite the cheerful outlook, the fact remains that Thomas Cook shares are worth 90% less than they were in March.
Their shares fell a further 3.5% on Wednesday when the firm announced charges of £573 million, including write-downs in the values of UK and Canadian businesses.