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Demand for packaged holidays is still strong despite the economic downturn, according to Thomson owner TUI Travel.

So far there is no evidence that consumers are cutting back on their holidays or cancelling them in the face of economic uncertainty, TUI said.

However, the company said it would be cutting back its capacity for next summer by 15 per cent as it believes consumer demand may slow.

"Our customers continue to place enormous value on their holidays and we are seeing no evidence to suggest that demand is slowing for any of our seasons on sale," chief executive Peter Long said.

Oil costs have hit the travel operator, which expects to spend £1.8 billion this year on jet fuel.

For summer 2009, TUI estimates the added cost of fuel per passenger will be £59 for long-haul flights and £11 for short-haul trips.

Prices would need to rise by around six per cent in the UK to compensate for the increase in fuel costs, as well as the added costs of a strong euro.

Egypt, Turkey and Greece have all been strong selling destinations for the company, with the popularity of Greece largely due to the performance of Thomson's exclusive Sensatori resort in Crete.

However, the strong demand for holidays coupled with TUI's capacity cut-backs means there are less holidays left to sell at the end of the summer – meaning less discount late-deals will be available from the firm this year.