TUI Travel Loss Widens on Later Easter Holiday, Egypt Unrest

TUI Travel Plc, Europe’s largest tour operator, reported a wider first-half loss on a later Easter holiday and as it served fewer guests due to political unrest in Egypt and the conflict between Russia and Ukraine.

The underlying operating loss was 298 million pounds ($503 million) in the six months through March, Crawley, England-based TUI Travel said in a statement today. Sales fell 4 percent to 5.19 billion pounds. Excluding the effect from Easter occurring in April rather than March, the adjusted loss narrowed to 277 million pounds.

“What we’re seeing is a very strong demand for all-inclusive holidays, so our average selling prices are higher,” Chief Executive Officer Peter Long said in an interview on Bloomberg Television. “We’ll have a strong summer.”

TUI is cutting costs and is increasingly selling vacation packages directly to customers as Europe emerges from the longest recession since introducing a common currency. Unrest in countries including Egypt, Russia and Thailand contributed to an 8 percent drop in customers at the company’s mainstream business, which excludes adventure and sports excursions.

Keeps Forecast

TUI Travel reiterated a forecast to raise underlying operating profit by 7 percent to 10 percent this year excluding currency shifts. The first-half net loss widened to 273 million pounds from 266 million pounds a year earlier.

The stock fell 1.2 percent to 436.20 pence at 10:03 a.m. in London, giving the company a market value of 4.9 billion pounds. The shares have returned 30 percent in 12 months, compared with 52 percent for larger competitor Thomas Cook Group Plc.

The proportion of sales generated online rose to 38 percent of the total in the period, compared with 34 percent a year ago. Unique holidays, referring to offerings exclusive to the company, amounted to 70 percent of sales, up from 67 percent last year. The company so far sold 60 percent of its summer offering.

TUI’s businesses in Russia and Ukraine also suffered from local political instability, the company said. The operating loss in its emerging-markets unit doubled to 14 million pounds. The company cut its offering for Russian clients by about 20 percent and by about 40 percent for customers in Ukraine, CEO Long said in the television interview.

Thomas Cook CEO Harriet Green today said her company suffered from “a little less travel” by Russians, adding that also the growth rate of Chinese tourists going to Russia was declining. She spoke in an interview on Bloomberg Television. Thomas Cook is scheduled to report second-quarter earnings May 15.

TUI Travel’s French unit may break even in 2016, a year later than planned, as the local economy isn’t improving as much as expected and demand for destinations in North Africa not picking up, Long said on a conference call. The German operation’s performance is “excellent” and that business may reach an operating margin of about 3 percent this year.

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