Aug. 31 (Bloomberg) -- Thomas Cook Group Plc, the travel company formed by the merger of Thomas Cook AG and MyTravel Group Plc, said a revival in U.K. profit margins was weaker than forecast because of passenger taxes and higher fuel costs.

Air Passenger Duty cost an extra 60 million euros ($82 million), and price increases for vacations did not make up for gains in fuel expenses, the Peterborough, England-based company said today in a Regulatory News Service statement. Thomas Cook expects to meet its forecast for annual earnings on better-then- expected Scandinavian bookings.

Tour companies, unlike airlines, are barred by law from passing on the tax of 10 pounds ($20) a head to passengers, prompting an industry trade group to go to court last month in an attempt to have the duty deemed illegal. The government imposed the measure to reduce carbon emissions generated by aircraft.

``There was demand for our product, and we've got better revenue for it,'' joint Chief Executive Officer Manny Fontenla- Novoa said today on a conference call. ``The margins are not as much as we were hoping to get. Some of that is fuel, and some of that is'' the tax, he said.

Thomas Cook shares rose 7.5 pence, or 2.7 percent, to 286 pence, erasing a slide of as much as 2.7 percent. They have lost 13 percent since trading began in June.

The travel operator in June forecast an improvement in U.K. summer bookings from last year, when fewer people traveled amid airport security concerns and record temperatures. Bookings are ``in line'' with a 5 percent reduction in the number of hotel rooms and plane seats reserved ahead of time, today's statement shows.

Cost Savings

Thomas Cook, which sponsors English soccer club Manchester City to keep its brand in the public eye, also said today it's ``increasingly confident'' of beating a goal of saving at least 95 million pounds a year before taxes from the merger. The company, a unit of German retailer Arcandor AG, merged with MyTravel to reduce costs after online rivals and budget airlines cut prices.

The travel company plans to eliminate as many as 2,800 jobs to meet cost-cutting goals, closing about 150 stores and six offices in the U.K. Fontenla-Novoa said today the confidence about further savings was not linked to more job cuts, although he could not rule out further reductions.

To contact the reporter on this story: Amy Wilson in London at awilson23@bloomberg.net.

Last Updated: August 31, 2007 12:11 EDT