Weak UK market hits TUI’s first quarter earnings

Difficult market conditions in the UK hit TUI’s tourism earnings in Northern Europe in the first quarter of 2007.

Its Northern Europe tourism earnings dropped substantially year-on-year from minus €92 million in 2006 to minus €117 million this year.

“In the Northern Europe sector, the current bookings situation reflects the difficult market environment in the UK,” said a TUI statement today.

“Customer numbers in the UK have risen year-on-year (+1.9%) but booked turnover is currently 6.% down year-on-year.”

It said the Northern Europe sector, which includes UK, Ireland, Nordic countries and airlines Thomsonfly and TUIfly Nordic, showed “an overall difficult trend in the first quarter”.

Although customer numbers rose by 5.8% to 1.28 million, this growth was primarily driven by Thomsonfly’s expansion in the seat-only business.

Therefore, turnover did not reflect this trend, rising by only 2.4% to €937 million.

Overall, TUI’s tourism division recorded year-on-year growth of 3.1% to €2.6 billion.

Underlying earnings by tourism fell to minus €227 million from minus €216 million. Due to the seasonal nature of the tourism business, the first quarter generally produces negative figures.

“With regards to underlying earnings by the tourism division, an uneven trend is emerging for the 2007 financial year,” said TUI.

“The tour operator business in source market Central Europe shows a positive trend. However, an opposite effect is caused by start-up costs for the realignment of flight operations under the new brand TUIfly.com.

“The Northern Europe sector will not be able to fully reproduce the very good performance of 2006, despite a persistently positive trend in the Nordic countries. Earnings by the sector will be impacted by the difficult market environment in the UK.

“Overall, the Group expects slight turnover growth for its continuing operations (tourism, shipping, central operations).

“However, due to the announced merger of TUI AG’s tourism division – excluding the hotel companies jointly operated under TUI Hotels & Resorts – with the British First Choice Holidays PLC, an assessment of the earnings trend cannot be provided at this point in time.”

The European Commission is due to decide on May 16 whether to give the go ahead to the proposed TUI/First Choice merger.

The two companies hope to complete the deal in the third quarter of the year if the commission gives the thumbs up.

By Bev Fearis