Yes they seem to be the flight codes. XG is the airline code for Sun Express, who are a Turkish airline. They are actually part of the Thomas Cook group, and operate a modern fleet of aircraft. More information about them can be found on their website
http://www.sunexpress.de/english/sunexpress-goes-london_100126_0.html. Don't be alarmed that your flight isn't shown on their website. The website is for selling their scheduled flights, your route isn't there as its a charter flight exclusively for Thomas Cook/jmc/Sunset Holidays.
Unfortunately, I don't think there is much you can do about the change of plans except grin and bare it, it probably doesn't count as a major change. It does happen a fair bit from regional airports, if bookings aren't good the tour operator will combine 2 flights into one.
It may be worth phoning your travel agent who sent you the letter and have a bit of a moan. Explain you are not happy etc etc, you probably won't get anything, but they may refund any flight supplements you paid as a goodwill gesture