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Travel industry news

12 Feb 2019

BY Jennifer Morris

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TRFBLI

Tui cites hot summer 2018 as quarterly loss widens

Tui Group has reported a widening of its underlying loss for Q1 as the market “remains challenging”.

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A shift in demand from the western to the eastern Med and the weakening of the British pound were also listed

Underlying Ebita (earnings before interest, taxes and amortisation) for the quarter was €-83.6 million, compared with €-36.7 million the previous year. Tui’s northern region in particular – which includes the UK market – reported underlying Ebita of €-74.3 million, compared with -€37.3 million in 2018.

 

Group turnover grew by 4.4% to €3.70 billion, while customer volumes across all markets climbed by 1.2% to 3.7 million.

 

Earnings guidance for the full year 2019 was adjusted on February 6.

 

However Tui insisted current trading for summer 2019 was broadly in line with prior year and average selling prices were flat year-on-year.

 

The company said in a statement: “The market environment for all tour operators remains challenging, as they are simultaneously impacted by several factors.

 

“The impact of the unusually long and hot summer 2018, resulting in an increase in the number of late bookings and lower margins in the Markets & Airlines segment.

 

“A shift in demand from the western to the eastern Mediterranean, creating overcapacity in other destinations such as the Canary Islands and going hand in hand with lower margins for the Markets & Airlines segment.

 

“Moreover, sales of higher-margin products to British customers are adversely affected by the weakness of the British pound.”

 

Tui said it had previously expected these market challenges to primarily affect the first half (winter) of the financial year.

 

“From today’s perspective, however, Tui expects to see additional impacts in the second half of the year (summer),” the firm said.

 

“Having previously expected an increase in underlying Ebita of at least 10% on a constant currency basis, Tui now expects its full-year earnings to come in broadly stable versus its record performance delivered in 2018 on a constant currency basis.” Full-year 2018 earnings were €1.177 billion.

 

Chief executive Fritz Joussen said the more challenging segment was Markets & Airlines.

 

“The consistent transformation of Tui launched in 2014 involving a realignment to focus on the group’s own holiday experiences [Holiday Experiences segment] – the hotel companies, cruise lines, activities and services in the destinations – has proven to be the right approach,” said Joussen.

 

“These businesses now account for nearly 70% of the group’s result. The growth strategy for this segment remains intact. Traditional tour operators and airlines tend to be more vulnerable to external factors. The overall trends for our sector are intact. Travel and tourism remain a growth market. Customers continue to travel, but they are currently resistant to increases in price.

 

“During this consolidation phase in our sector, it is particularly important to adequately participate in market growth. Tui has a good strategic and operational positioning, and the transformation of the group as a digital platform company is progressing.

 

“We have paved the way with our investments in hotels and ships, our IT and digital strategy and the acquisition of the Italian digital platform Musement in 2018.”

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