The world’s largest travel and tourism firm swung to a €17m airline loss
A TUI Airways Boeing 737-800 aircraft approaches Zakynthos International Airport(Image: Getty)
Tui has reported a fall in earnings at its airlines division as the Iran conflict continues to cause significant disruption to global tourism routes and drive up fuel costs.
The Frankfurt-listed group, the world’s largest travel and tourism company, swung to a €17m loss in its airlines arm in the six months to June, reversing a €50m profit recorded in the same period the previous year.
“This development was driven by weaker demand as a result of geopolitical developments and increased price pressure in a market environment characterised by higher fuel costs and additional capacity on the market,” the group said.
Tui’s airline revenue fell by eight per cent to €4.9bn over the period, although turnover climbed in its hotels, resorts and cruise divisions.
The group’s overall revenue dropped by six per cent to €5.8bn, while its underlying group profit declined 27 per cent year on year to €235m, falling short of analyst expectations of €274m, as reported by City AM.
“The quarter continued to be characterised by a challenging market environment and ongoing geopolitical uncertainties, in particular the war in Iran, economic weakness in Europe’s core markets and consumer caution evident across many sectors,” Tui told shareholders.
The group’s ‘musements’ division, which offers tours and activities, proved a rare bright spot for Tui, recording a nine per cent rise in underlying profit to €22.7m.
Sebastian Ebel, the firm’s chief executive, maintained that Tui has “held its own well in a difficult global environment”. “Wars and geopolitical tensions, consumer caution, economic weakness and rising inflation in Europe’s core markets – all these factors have influenced consumer sentiment and the timing of purchasing decisions,” he added.
Ebel noted that booking behaviour has been “picking up again” over the past few weeks, but acknowledged that holidaymakers are purchasing tickets at the last minute in an attempt to sidestep the travel disruption caused by the Iran war.
Shares in Tui fell by three per cent to €7 in early trading, leaving the stock down 21 per cent since the start of the year.
Derren Nathan, head of equity research at Hargreaves Lansdown, said Tui’s investors “may feel they need a holiday” following Wednesday’s turbulent results.
“The weak quarter adds more pressure for a clean landing in the final stretch of the year, and while the runway still remains relatively wide, management is likely to be buckling up for a tricky approach,” he added.
On Tuesday, Holiday Inn owner Intercontinental Hotels Group (IHG) disclosed that a downturn in revenue across its Middle East operations is weighing on its overall growth.
The hotels group, which also owns the Crowne Plaza and Vignette Collection brands, reported that its revenue per available room declined by 19 per cent year on year in the three months to June.
The FTSE 100 firm informed shareholders that it is contending with “ongoing impacts from the Middle East conflict, including some wider disruption to international travel flows”.
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