TUi counts the cost of heatwave

Holiday giant Tui has blamed last year’s “unusually long and hot summer” and the weak pound as first-quarter losses more than doubled.

Tuesday, 12th February 2019, 08:08 am
Updated Tuesday, 12th February 2019, 08:16 am
The long, hot UK summer affected TUI's financial performance. Picture: James Hardisty

The group - which last week sent shares tumbling after warning over full-year profits - reported seasonal underlying losses of 83.6 million euros (£73.3 million) for the three months to December 31 against losses of 36.7 million euros (£32.2 million) a year earlier.

It said results were impacted by last year’s prolonged hot weather across northern Europe, combined with the Brexit-hit pound and overcapacity in western Mediterranean destinations, such as the Canary Islands.

The group said summer 2019 bookings were “broadly” in line with a year earlier and holiday prices had held firm, but cautioned its profit margins were taking a hit.

“The market environment for all tour operators remains challenging,” it added.

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Shares fell 5%, having tanked last week when Tui warned underlying earnings for the year to September 30 were expected to come in flat at around 1.17 billion euros (£1 billion).

This compares with previous guidance for at least 10% growth in earnings.

Tui had previously been seen to be weathering the market woes that have already knocked rivals such as Thomas Cook, which is now looking at a possible sale of its airline business.

Fritz Joussen, chief executive of Tui, said: “The overall trends for our sector are intact.

“Travel and tourism remain a growth market.

“Customers continue to travel, but they are currently resistant to increases in price.”

Over its first quarter, Tui said turnover rose 4.4% to 3.7 billion euros (£3.2 billion).

Its markets and airlines arm - which is bearing the brunt of the tough industry conditions - saw losses widen to 177.7 million euros (£155.8 million), up from 140.8 million euros (£123.4 million).

Its holiday experiences division - which accounts for 70% of annual earnings and includes hotels and resorts and cruises - posted an 11.8% fall in earnings to 111 million euros (£97 million).

But the group said overall customer numbers grew by 1.2% in the first quarter.

Emma-Lou Montgomery, associate director at Fidelity Personal Investing’s share dealing service, said: “Holidaymakers are staying away from the Nordic region and the Canary Islands and worries that the winter season would be affected has now also crept into the summer season, with lower margins and flat sales showing signs that Tui isn’t going to get the break it needs any time soon.

“It’s pinning its hopes on cruises and holidaymakers being prepared to fork out extra for ‘experiences’ while away to keep the good ship Tui afloat.”