Tour operators have struggled to maintained profits despite a strong volume growth in leisure and meeting-incentive tours in the second quarter of the current fiscal.
Weighed down by high interest costs Cox & Kings has reported a 87 percent fall in profit on standalone basis while Thomas Cook's profit is down 50 percent due to lower income and certain one off transactions.
Profits have slumped despite a strong growth in outbound leisure business for both the companies in what is traditionally a weak quarter. While Cox & King's consolidated profit has increased 438 percent to Rs 147 crore on a year-on-year basis following acquisition of UK travel firm Holidaybreak, Indian operations profits fell from Rs 12 crore to Rs 1.5 crore in the second quarter 2013.
Cox & Kings had raised equivalent of Rs 1,400 crore in dollar debt to finance the Holidaybreak deal resulting increase in debt costs. The standalone interest costs of Cox & Kings increased from Rs 13 crore to Rs 30 crore lowering its profit.
"The higher interest cost is due to working capital debt which was taken post Holidaybreak transaction. Interest costs will reduce in coming quarters due to private equity investment of $140 million which is being used to retire debt,'' said Cox &Kings chief financial officer Anil Khandelwal.
Indian operations constitute about 25 percent of Cox & Kings total revenue and the domestic operations saw 43 percent increase in revenue and 69 percent increase in operating profit. The company said the growth was fuelled due to rise in meeting and incentive tours and new weekend holiday products.
Thomas Cook too said its outbound business had seen 20 percent increase in volume and meeting-incentive tours had seen a growth of 39 percent in the second quarter.
Meanwhile Thomas Cook's standalone profit dropped 50 percent from Rs 24 crore to Rs 12 crore in second quarter. Net income declined from Rs 93 crore to Rs 90 crore as the company transferred its Sri Lanka business to a separate subsidiary.
In an earlier interaction Thomas Cook managing director Madhavan Menon said there were several one off transactions in September. He said the July-September is lean period for company and it was expecting to register double digit growth this year.
"We are seeing growth in outbound travel over last year. It has grown at about 22-25 percent. We are also seeing pattern change. This year we are receiving requests from customers to travel to Europe in winter. Australia has come into focus as a destination. People want to travel to South Africa and Kenya,'' Menon said and added there was no dip in demand despite rise in airfares.
