Tui maintains profit outlook amid strong summer holiday demand

Tui Group maintains its full-year expectation of underlying revenue growth “significantly” as it continues to benefit from an uptick in travel demand.

The German travel giant revealed that bookings for the upcoming summer season are 13 percent higher than last year and 6 percent higher than before the pandemic, supported by higher prices and stronger passenger demand.

It follows a massive winter schedule for the company, with bookings up a third from last year’s volumes, with Cape Verde, Turkey and Egypt among the most popular destinations.

Travel companies have seen a resurgence in trade after experiencing unprecedented disruption and financial pain from the imposition of Covid-related curbs in 2020 and 2021.

For the three months ended March, Tui’s revenues rose by about €1 billion to €3.15 billion, amid rising occupancy rates at its hotels and cruise travel.

Of the 2.4 million people who vacationed with the company during the quarter, Mexico and the Caribbean were particularly popular destinations, with Tui’s hotel occupancy rates in both areas exceeding 90 percent.

But despite the exceptional trade recovery, Tui still posted an operating loss of €395.3 million in the first half of the fiscal year.

Net debt also stood at €4.2 billion at the end of March, up 6.6 percent from the same period in 2022, due in part to large cash outflows due to weaker bookings in December and skyrocketing prepayments to suppliers.

However, the company expects to reduce this amount by €1.8 billion by the end of September thanks to a recent discounted allowance offering that has allowed it to fully repay aid borrowed from the German government during the pandemic.

Sophie Lund-Yates, principal equity analyst at Hargreaves Lansdown, said: ‘Liquidity risk remains at the forefront of investors’ minds. The airline industry is marred by consolidation even in difficult times, and weaker links are more at risk of getting into trouble.

Tui’s strong brand and more affordable price points do provide pillars of strength. The main thing to monitor from here is the reliability of demand once this summer is over.

“Much of this will be beyond TUI’s control, but those in power will certainly hope for a soft economic landing.”

The company’s results follow after British Airways owner IAG, EasyJet and Jet2 all raised their profit forecasts in recent weeks amid a recovery in summer bookings, even though the British have been increasingly hit by a cost-of-living crisis.

Tui shares were down 4.8 percent on Wednesday morning to 535.2 pence, though their value is still up about 45 percent since the start of the year.