* H1 op. loss 110.9 mln sterling vs 116-119 mln forecasts
* Says summer 2009 trading robust
* Egypt & Turkey strong but Mexico 'decimated'
* Capacity now at optimum level
* Arcandor committed to retaining stake
(Adds CEO, analyst comment, background)
By Matt Scuffham
LONDON, May 14 (Reuters) - Thomas Cook, Europe's second-biggest travel firm, said on Thursday it was confident of meeting full-year expectations as summer holiday bookings for 2009 remained robust despite tough economic conditions.
The group said it had 5 percent fewer summer holidays left to offload than at this stage last year, while selling prices had increased and margins were in line with its expectations.
The company, formed in 2007 through a tie-up of the travel unit of German retailer Arcandor and Britain's MyTravel, said its first half loss narrowed by 15.6 percent to 110.9 million pounds ($167.7 million).
That was better than market expectations for a loss of between 116 and 119 million pounds, according to a Reuters poll of three analysts.
Holiday operators traditionally make a loss in the first half, which does not include profits from the key summer period.
The consensus forecast for Thomas Cook's full year earnings before interest and taxation stands at 397 million, according to a Reuters Estimates poll of 15 analysts.
"Thomas Cook continues to perform," said Blue Oar Securities analyst Mark Brumby.
"Its buying power and cost and capacity cuts have allowed the group to continue to deliver and the outlook for summer 2009, despite the recession and the strength of the euro, looks pretty good," he said.
Along with its main rival TUI Travel, Thomas Cook has responded to the recession by reducing the amount of holidays it has on sale, enabling it to increase average selling prices and avoid discounting heavily for late bookings.
Both Thomas Cook, in which debt-burdened Arcandor still has a 53 percent stake, and TUI have reduced the amount of holidays they sell by over a quarter in the last two years.
As a result, both companies have continued to grow profits, while smaller operators have struggled to stay afloat. Britain's third-biggest travel firm, XL Leisure, fell into administration last year, taking further capacity out of the market.
Thomas Cook's Chief Executive Manny Fontenla-Novoa told reporters he thinks capacity is now at the optimum level across the industry.
"We think the capacity we reported today is about right. We don't anticipate reducing capacity any further," he said.
The company said long-haul bookings had been hit in the short term by the outbreak of swine flu in Mexico but was confident customers would re-book in the coming weeks as they did after the bird flu and SARS scares.
"Mexico has been pretty much decimated as a destination but what it has meant is other destinations have benefited such as Egypt and Turkey," Fontenla-Novoa said, adding that bookings to Egypt were up over 70 percent in Britain last week.
Fontenla-Novoa, who also serves on the Arcandor board, said the retailer, which in April announced a five-year turnaround plan, remained committed to retaining its stake.
"I know how much they want to retain Thomas Cook. Thomas Cook is very much part of their future and they're fighting extremely hard," he said.
Shares in Thomas Cook, which have risen by nearly 40 percent since the start of the year, were down 0.7 percent to 244.5 pence at 0930 GMT.
Earlier this week InterContinental Hotels met forecasts with a 44 percent drop in first quarter profit but Spain's biggest hotel group Sol Melia said summer bookings in its home market had dropped markedly. ($1=.6611 Pound) (Editing by David Cowell)