Along with most other business concerns, the travel industry is feeling the crunch of economic hard times.  TUI Travel, the largest travel operator in Europe, reported this week that the company’s annual profits will be “at the bottom end” of projected estimates, and the news was reflected in the drop in share prices of almost 10 % on Tuesday.  Shares in Thomas Cook, TUI’s biggest, rival fell by about 5%.

Company executives are blaming the slow-down in travel bookings and revenues on a number of factors including the weather.  Unusually nice weather in the U.K. has kept many potential overseas holidaymakers at home, but the travel industry in general suffered severe losses during the volcanic ash cloud tie-up in May and June.

In addition to cancelled flights, there was the cost of getting stranded passengers home again and accommodations while they waited.  TUI and many other travel-related businesses had hopes that the government would reimburse some of those costs, but this has not happened.

Paul Bowtell, chief financial officer for TUI, reported that the company still has a huge number of flights and packages for the summer, which means there will probably be some very good deals for travellers, but the downside of that for the company is that so many of those potential customers are waiting for the best deals and making last-minute bookings.  TUI expects the last minute booking trend to continue, partially due to the general uncertainty in the economy.

Both TUI and Thomas Cook have stayed on a fairly good financial footing over the past couple of years due to cost cutting in the form of mergers and other measures, but once those savings were incorporated, both are being forced to look elsewhere for ways to save their profit margin.

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