UPDATE 2-Thomas Cook to cut 2,500 jobs in UK
* Plans to cut 2,500 of its 15,000 UK staff
* To close 195 stores, leaving 874 UK outlets
* Share price rises
By Rhys Jones
LONDON, March 6 (Reuters) - Travel firm Thomas Cook said it would cut 2,500 UK jobs and close 195 stores in Britain as the euro crisis, high fuel costs and unrest in key destinations like Egypt and Greece take their toll on the holiday business.
The 172-year-old group has struggled over the last two years with a slump in sales that has forced it to renegotiate bank loans and sell off planes and stores to lighten its debt load while facing a string of profit warnings.
Most of the job losses would be in its retail network and back-office positions and would involve the closure of 195 of its 1,069 UK stores, said the world's oldest travel group, which has a total workforce of 15,500 in the UK and Ireland.
Thomas Cook said jobs at its head offices at Peterborough in eastern England and Preston in the northwest were at risk, while its Accrington office, also in the northwest, would be shut. It also plans to change the terms and conditions of some employees.
"We firmly believe these proposals will mean a better, more profitable, Thomas Cook that continues to be a major employer in the UK," said the group's UK and Ireland chief executive Peter Fankhauser in a statement.
"Thomas Cook needs to make the proposed changes to secure our future," he said.
Travel firms and airlines across Europe have seen bookings fall over the last two years, hit by the euro zone debt crisis, high fuel costs and social and political turmoil in popular holiday destinations such as Greece, Egypt and Tunisia.
Thomas Cook has been hit particularly hard by tough trading conditions in Britain where its core customer base of families with young children has been affected by the economic downturn.
Since travel industry outsider Harriet Green took over as CEO last May, the company has seen a steady improvement in its finances following a series of disposals to slash its 1.5 billion pounds ($2.3 billion) debt pile, including the sale of its Indian business and several Spanish hotels.
"We were well aware of the challenges that Thomas Cook have been facing in turning their UK business around, but the scale and severity of these redundancies come as a real shock," said Sharon Ainsworth, an officer at the Usdaw shopworkers' union.
Usdaw said Thomas Cook planned to replace store managers with cluster bosses, while also removing a layer of management at its larger branches.
This week Thomas Cook said it had decided not to sell its under-performing French business and would instead kick off a restructuring programme to turn the unit around.
Thomas Cook last month reported reduced first-quarter operating losses and said its turnaround plan was on track.
Shares in Thomas Cook, which have risen 78 percent so far this year, were 1.5 percent up at 86.7 pence by 1410 GMT, valuing the business at around 780 million pounds ($1.18 billion).
Peel Hunt analyst Nick Batram said the move provided clarity to the company's turnaround plan and would be welcomed by investors.
Britain's unemployment rate stood at 7.8 percent in the three months to the end of December 2012, with 2.5 million people jobless, official data showed.
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