Holiday operator Thomas Cook insists there is no downturn in consumers booking major foreign trips, despite tougher economic conditions.

The company, which merged with MyTravel in 2007, said demand for winter and summer holidays exceeded supply in the past year. However, Thomas Cook has begun to cut the number of holidays on sale, to reduce the risks of last-minute bookings.

It claims European consumers consider foreign holidays to be a 'high priority'. In year to October 31, it grew profit by 26% to €375.3 million.

Nearly 150 travel agent shops have been closed in the UK as part of the post-merger restructuring.

Thomas Cook has become the company's lead brand, supported by Airtours in the mass market segment, alongside specialist brands such as Thomas Cook Signature, Cresta, Tradewinds, Nielsen and Club 18-30.

The company said it was on track to achieve savings of at least €200 million from the merger. This is an additional €60 million on its original forecast and up to a year ahead of schedule.

Rival group TUI Travel said yesterday it planned to close 100 UK stores as part of £150 million of cost savings resulting from last year's merger of its tourism arm with First Choice.

TUI shares Thomas Cook's bullish outlook on the leisure market, despite unfavourable economic conditions. Cruise ship operator Carnival yesterday warned that its Q1 earnings would be 3% lower than expected, blaming high fuel prices rather than a drop in bookings.

Landsbanki analyst Mark Reed said Thomas Cook's reassuring trading update continues a positive outlook given by the company in December. 'As we expected, trading has held up well. We highlight UK summer bookings are down 2% on capacity down 9%, with average selling prices up 2%. This compares with TUI Travel where UK sales were up 9% on capacity down 14%.

'In Germany, although it is very early on in the booking cycle, Thomas Cook bookings are up 5% and selling prices 1%. This compares with sales up 8% for TUI Travel in Germany.'

Shares in Thomas Cook slipped 2p to 258p in early trading on Wednesday. Investment bank ABN Amro believes its share price could increase by 36% in the next 12 months to 350p.