TUI’s half-year losses worsen

TUI Group reported an underlying operating loss of £289m in the six months to March 31, higher than the loss of £250m in the first half of 2008.

It blamed the loss on the devaluation of Sterling, the timing of Easter, weaker trading in Canada and “destination specific issues” in France and Nordics.

Outlining trading for this summer, it said UK bookings are 16% down on 2008 due to weaker demand and capacity cuts.

But it said UK bookings have picked up in recent weeks.

“As evidenced in the winter booking cycle, the trend towards later booking has continued, but as a result of our capacity reductions we have less stock left to sell across all of our source markets,” it said.

UK bookings in the last eight weeks were down by 10% year on year, and in the last two weeks they were down 5%, hit by cancellations to Mexico.

If Mexico cancellations are taken out of the equation, UK bookings in the last two weeks were actually 5% higher than 2008.

“The impact of swine flu has largely remained a Mexico issue,” said a TUI statement.

“Although cancellations to Mexico have increased in the immediate period after the outbreak of swine flu, most customers who have decided not to travel to Mexico at present have rebooked to other destinations or have delayed their departure date.

“The medium and long haul destinations of Egypt (+23% in the last two weeks), Jamaica (+30%) and the Dominican Republic (+19%) have been particularly popular in the last few weeks.”

Around 2,500 TUI UK customers were in Mexico at the time of the outbreak, but only around 10% accepted its offer to repatriate them early.

Looking forward, TUI said: “We are encouraged that the improvements in demand experienced in February and March trading have continued into April and May, despite the ongoing economic weakness.

“We continue to expect a flatter booking profile in the current market, however, the strength of the lates market in winter 2008/09, where we achieved strong pricing and target load factors, combined with having significantly less product left to sell, gives us reason to be confident.

“For the next financial year, we are leveraging our scale position to maximise cost opportunities in the supply chain through reduced hotel rates while continuing to assess our capacity plans.

“As a consequence of the inherent flexibility in our business model, where third party flying accounts for around 30% of our tour operator capacity and only around .20% of our bed stock
is committed, we have the ability to align supply with demand.”

Chief executive officer Peter Long added: ‘‘TUI Travel has delivered a first half performance in line with our expectations, having managed certain source market and destination specific issues, while continuing to deliver our key strategic goals and synergy targets.

“In addition, during the first half we agreed the joint venture in Russia and Ukraine and the strategic co-operation between TUIfly and Air Berlin.

“Despite the ongoing economic weakness, we are encouraged by current trading patterns and consumer sentiment across the breadth of the Group.

“This confidence coupled with our strong brands, market leading positions and our flexible business model means we remain well positioned to meet our expectations for the year to 30 September 2009.”

By Bev Fearis