Tui hit by Middle East travel chaos and rising fuel costs
Tui has suffered a slip in earnings at its airlines business as the Iran war continues to wreak havoc on global tourism routes and spike fuel prices.
The Frankfurt-listed group, which is the world’s largest travel and tourism firm, swung to a €17m loss in its airlines arm in the six months to June, reversing a €50m profit from the year before.
“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 slipped by eight per cent to €4.9bn in the period, though turnover jumped in its hotels, resorts and cruise businesses.
The group’s overall revenue fell by six per cent to €5.8bn and its underlying group profit fell 27 per cent year on year to €235m, missing analyst expectations of €274m.
Tui ‘holding its own’
“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’ arm, which provides tours and activities, was a bright spot for Tui, posting a nine per cent jump in underlying profit to €22.7m.
Sebastian Ebel, the firm’s chief executive, insisted 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 said that booking behaviour has been “picking up again” in the last few weeks, but noted that holidaymakers are buying tickets at the last minute in a bid to dodge the travel chaos caused by the Iran war.
Shares in Tui slipped by three per cent to €7 in early trading, leaving the stock down 21 per cent since the start of the year.
Tui investors ‘may need a holiday’
Derren Nathan, head of equity research at Hargreaves Lansdown, said Tui’s investors “may feel they need a holiday” after Wednesday’s shaky 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) revealed that a slump in revenue in its Middle East operations is dragging on its growth.
The hotels group, which also owns the Crowne Plaza and Vignette Collection brands, said its revenue per available room slipped by 19 per cent year on year in the three months to June.
The FTSE 100 firm told shareholders that it is facing “ongoing impacts from the Middle East conflict, including some wider disruption to international travel flows”.