Strong UK performance boosts TUI profits

TUI managed to grow underlying operating profit by 57% to £88 million in the third quarter thanks to a “strong” performance in the UK and Nordic countries.

The travel giant said the late timing of Easter, the lack of volcanic ash disruption and the sale of differentiated product had helped drive its performance.

But events in North Africa have continued to impact significantly on trading for its French tour operators.

It said selling prices and margins continue to develop in line with expectations in all source markets except France.

Overall, volumes left to sell are in line with prior year.

Chief executive Peter Long said: “This performance is particularly pleasing in the UK against a background of weak consumer sentiment.

“I believe that this is testament to our management team and our focus on exclusive and differentiated product which offers our customers quality, value holidays that are only available through our brands and sold principally across our own distribution channels.”

He said the group had reacted quickly to events in North Africa by moving capacity mainly to the Western Mediterranean, but many French consumers are choosing to holiday in France.

“For the Summer, our overall volumes left to sell are in line with the prior year and we are confident of meeting our expectations for the full year in what is a challenging trading environment,” he added.

In the UK, load factors and margins are ahead of last year for all remaining months of the season.

Average selling price has improved by 4% year on year, driven by the higher proportion of differentiated product sales, which are up 15% for summer 2011.

Shorter duration holidays have proved more popular this year, with 10-11 night and 7-night stays increasing by 24% and 4% respectively.

All-inclusive holidays have continued to sell well, now making up 46% of sales to date, up 2 percentage points on last year.

The proportion of bookings made online has increased from 38% to 40%, equating to 1.3 million UK customers booking via TUI’s websites.

For winter 2011/12, UK cumulative bookings are down 9% on the back of a capacity cut of 7%.

Load factors to date are in line with prior year.

Average selling price is up 5%, which partly reflects increases in fuel and accommodation costs.

Sales of differentiated product are up 14% compared with this time last year.

Looking ahead, TUI said: “The travel and aviation industry is facing a number of headwinds. These include the high cost of fuel, weakness of sterling and the slower than anticipated recovery in the important North African tourist destinations particularly for the French tour operators.

“Like the rest of the industry we are not immune to these pressures. Our market leading positions, together with our ability to manage capacity due to the flexibility of our business model, mean that we are able to focus on maintaining margins and delivering operational efficiencies in these continuing challenging times.”

by Bev Fearis