Shares in Thomas Cook surged sharply higher after the newly merged tour operator said that it would beat the City's profit forecasts by about 12 per cent this year.

Shares jumped more than 6 per cent, up 15.75p to 274.25p, after the group brought forward a trading update to boast that full year operating profits should hit €375.3 million (£270.3 million).

This is a 26 per cent increase on last year and comfortably ahead of analysts forecasts of about €335 million.

The group, merged with embattled rival operator MyTravel in June, said that it planned to pay out a 5p a share dividend and embark on a €375 million shares buyback programme

The merger deal was progressing well and would generate cost savings of "at least" €200 million, it said.

Manny Fontenla-Novoa, joint chief executive, said: "Both our current trading and our first operating result as Thomas Cook plc are very encouraging."

He said that Thomas Cook should be generating profits before tax and exceptionals of more than €800 million during its 2009 to 2010 financial year.

Joe Thomas, analyst at Investec, said: "A surprise results announcement shows profits well ahead of our estimates on underlying margin strength plus accounting changes.

"The group has also announced plans for a €375m share buyback and says that current trading is healthy, with holidays well sold for the important summer season. We expect to increase estimates by [about] 15 per cent and see value in the shares."

In the UK, bookings for winter holidays had improved but continued to run about 2 per cent below last year, Thomas Cook said.

Revenues in the UK for the year to the end of October, at €4.7 billion, were €22.3 million below last year, Thomas Cook said, although it said that cost saving measures meant that operating profits would be €32.3 million above 2006.

"Early indications for the UK summer season 2008 are good, with bookings and average selling prices ahead even though capacity is expected to be lower than for summer 2007," Thomas Cook said. It said that margins per passenger had markedly improved over the past 12 weeks.

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