Travel giant TUI beats forecast with early summer quarter profit

Underlying earnings rose to €169m in the quarter to the end of June, TUI's first profitable early summer since the pandemic

Wed, 09 Aug, 2023 - 16:26

William Wilkes

Travel giant TUI expects its summer 2023 season to be close to pre-pandemic levels even as the pace of growth tapers off amid high inflation and rising interest rates.

The world’s biggest tour operator said underlying earnings before interest and tax rose to €169m in the quarter to the end of June, its first profitable early summer quarter since the pandemic, beating analyst forecasts for a €145m result.

However, TUI’s figures show that growth in demand from consumers in the UK was cooling.

CEO Sebastian Ebel said: “Where we see challenges — in the UK market and in the Nordic countries — we have taken actions to strengthen and grow our market position. But overall it will be a very good travel summer and a good year for TUI in 2023.”

TUI stuck to guidance for underlying earnings before interest and tax (EBIT) to be higher than the €409m it reported for the financial year to the end of September when the removal of covid-related curbs paved the way for a bumper travel season across Europe.

Shares rose at one stage by as much as 4% but ended down by over 2% in London trade. Still, there are signs that the breakneck pace of recovery from the coronavirus pandemic is starting to slow as inflation and rising interest rates constrain household travel budgets.

In the UK, one of TUI’s core markets, bookings were just above 2022 levels and 4% higher than before the pandemic. Average holiday prices are 7% higher than last year, TUI said, adding that winter travel bookings were “at a very early stage” although it claimed it was starting “promisingly”.

TUI said its summer bookings were at 95% of pre-pandemic levels, in line with previous guidance.

The tour operator expects the costs of recent wildfires on the Greek island of Rhodes to be around €25m, including compensation and repatriation flights.

European travel firms are reporting strong financial results despite inflation and high energy costs damping consumer spending. Last week, Lufthansa said its second quarter earnings tripled as soaring demand for travel boosted ticket prices.

In Asia, Cathay Pacific Airways said it expects its strong recovery from the covid crisis to continue through the rest of the year after the carrier announced its biggest half-yearly profit since 2010.

“We’re extremely pleased with the performance to date,” chairman Patrick Healy said at a post-earnings media briefing. “We expect to see a solid performance through the rest of the year.”