TUI Travel Plc, Europe’s largest tour operator, said its full-year loss widened after the company reduced capacity and as bookings slowed following airspace closures caused by the eruption of a volcano in Iceland.
The net loss was 104 million pounds ($163 million) in the 12 months through September compared with a restated loss of 67 million pounds a year earlier, the Crawley, England-based company said today in a statement. Bookings have improved since July, Chief Executive Officer Peter Long said in the statement.
The volume of tourist arrivals worldwide will probably grow at a slower pace next year as consumers spend less because of faltering economies, according to research by Euromonitor International. TUI Travel’s smaller rival Thomas Cook Group Plc reported a full-year loss yesterday because of the costs of assisting passengers amid shutdowns of European airspace caused by the volcanic ash cloud in April and May.
“The tone of today’s statement and current trading may see the shares go better, but we continue to believe that the shares are fairly priced, with Thomas Cook offering better value,” Nick Batram, a London-based analyst at KBC Peel Hunt, said in a report today. He has a “hold” recommendation on TUI Travel.
TUI Travel rose as much as 16 pence, or 7.5 percent, to 230.4 pence and was up 4.6 percent as of 9:29 a.m. in London trading. That narrowed the stock’s decline this year to 12 percent, valuing the company at 2.5 billion pounds. Thomas Cook gained as much as 3.8 percent in London today.
Operating Profit Rises
Operating profit at TUI Travel rose 11 percent to 447 million pounds, compared to the 441 million-pound average of nine analyst estimates compiled by Bloomberg.
Winter losses in the U.K. and Ireland widened because of capacity reductions spurred by an expectation that demand for holiday trips would decline, the company said. Airspace closures, government austerity measures and better-than-average U.K. weather reduced people’s desire to travel, it said. Costs resulting from the volcanic-ash cloud amounted to 104 million pounds, TUI Travel said.
The company, which is “cautious about 2011” because of questions about how economic growth will develop, has noted an ’’improvement in demand’’ that has continued since July, Long said on a conference call.
Results for the year ended September 2009 were restated to reflect 117 million pounds in write-offs at the U.K. business after faults in integrating computer systems following the 2007 merger of First Choice Holidays Plc and the tourism unit of TUI AG, the company said. TUI Travel is “totally satisfied” with current accounting controls, Long said.