Thomas Cook shares dived on Tuesday, as Europe's second-largest travel firm issued a warning on profits amid a squeeze in consumer spending and an Arab Spring that has led to a review of its UK business model.

Shares dived almost 25pc to 92.9p in opening deals in London as Thomas Cook said it now expected to make a full-year operating profit of £320m, down from £362.2m the previous year.

It said the impact of Middle East unrest had been worse than first thought, with demand from French customers in particular decline as the company made less profit from its "key destinations of Egypt, Tunisia and Morocco".

Thomas Cook had warned of a declining UK market in March, when it said that Britons were resisting jetting off into the sun as a result of "continued economic uncertainty".

On Tuesday, the company said that it was "revisiting the effectiveness of our UK business model" as a result of the downturn, and "has begun a fundamental strategic and operational review of the business."

In February, Thomas Cook said it had taken a £20m hit for the disruption caused by the uprisings in Egypt and Tunisia, which had forced it to cancel 150,000 holidays at a loss of £5m on repatriation costs and £15m of lost margin.

Source: The Telegraph