TUI Travel shrugs off Egypt/Tunisia disruption

LONDON Tue May 10, 2011 2:04pm BST

1 of 2. A pedestrian is reflected in the window of a branch of travel agent Thomas Cook in London May 9, 2011.

Credit: Reuters/Luke MacGregor

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LONDON (Reuters) - TUI Travel (TT.L), Europe's biggest tour operator, said it was on track to meet full-year expectations as increased demand for alternative destinations offset the impact of unrest in Egypt and Tunisia.

The FTSE 100 company, majority owned by German group TUI AG (TUIGn.DE), said on Tuesday disruption from troubles in Egypt and Tunisia had knocked 29 million pounds off first-half profit, compared with the 30 million it anticipated.

For the second half, TUI Travel expected to be able to fully mitigate the impact by increasing the amount of holidays on sale to alternative destinations.

"The flexibility of our business model has allowed us to react quickly to mitigate the impact of the events in North Africa in the upcoming summer season," chief executive Peter Long said.

"We have reshaped our programmes across all source markets to satisfy the shift in demand to alternative destinations including Spain, Greece and Turkey."

In contrast, arch-rival Thomas Cook (TCG.L) had said on Monday the impact of unrest in the Arab world had been worse than previously thought and had been compounded by tough trading conditions in Britain.

TUI Travel shares, which were down 13 percent since January, were up 1.5 percent at 1020 GMT, while Thomas Cook shares was down 1.0 percent.

Long told reporters the performance demonstrated the strength in Britain of TUI Travel's key brands -- First Choice and Thomson -- compared with rivals.

"We are outperforming in the UK. The Thomson brand has a much broader customer base and that clearly gives us an advantage," Long said. "We are not only just in the family market but also the couples market and there is undoubtedly more pressure on young families in terms of their budget."

RBS analyst Jason Streets said TUI Travel's first-half was positive compared with Thomas Cook. "It managed to report first-half losses better than last year despite the Arab Spring and the 'missing' Easter, a combination of improved profitability in the turnarounds and strong trading in the Nordics."

TUI Travel said overall trading for summer 2011 remained satisfactory with booking volumes ahead of last year and margins in line with expectations.

It made an underlying first-half operating loss of 307 million pounds, compared with a 322 million loss in the 2009/10 period and a forecast for 312 million, according to a poll provided by the company.

Tour operators traditionally make a loss in the first half of the year, which does not include the key summer period.

TUI Travel said it had benefited from turning around previously struggling parts of its business, especially in Canada, and from stronger underlying trading, particularly in the Nordics and Corsair, its loss-making French airline.

Analysts have speculated TUI AG will look to buy out the shares in TUI Travel it does not already know once it has completed either a sale of or an IPO of its stake in shipping group Hapag Lloyd.

Long declined to comment on the likelihood of such a deal.

The average forecast for TUI Travel's full-year EBIT (earnings before interest and tax) stands at 470 million, according to a Thomson Reuters I/B/E/S poll. (Editing by Rhys Jones and Dan Lalor)

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