Travel demand swings TUI profit back to black

London — Europe’s largest travel operator, TUI, on Tuesday reported far better-than-expected quarterly results as it swung to a profit on the back of robust travel demand.

The results initially sent the German-based company’s shares higher in Frankfurt and London, but they then dropped as shareholders prepared to vote on whether TUI should leave the London Stock Exchange (LSE), in what would be a blow to the UK market.

TUI reported an operating profit of €6m in the three months to the end of December, versus a loss of €153m in the year-earlier period and an LSEG forecast for a loss of €102m.

Europe’s airlines are entering 2024 with robust outlooks as travel demand is expected to surpass pre-pandemic levels despite economic uncertainty, delays in plane deliveries from manufacturers and rising jet fuel prices.

TUI’s first-quarter beat is a positive signal for the airline sector as a whole, an investor in other airlines, who did not wish to be named, said.

The first half of its financial year is usually weak with the bulk of annual profit coming from the main April to September summer season.

“These updates highlight the strength of demand for holidays at present,” Dudley Shanley, an analyst at Goodbody, said in a note. “This summer should be very strong for ... the European airlines.”

TUI’s shares jumped more than 7% in early trade in Frankfurt but were down 4.3% in early afternoon trade. TUI shares in London were also down more than 5%.

The Frankfurt shares have dropped about a fifth since the start of 2023. CFO Mathias Kiep told shareholders during the company’s annual meeting on Tuesday that the “share performance was and is clearly unsatisfactory.”

LSE departure plan

The company’s executive and supervisory boards recommended that shareholders vote to remove TUI from the LSE at the annual meeting. The Hanover-headquartered company said having a single German listing could better reflect its ownership and trading patterns.

Three-quarters of shareholders need to vote in favour of the delisting for it to pass. The dual London and Frankfurt listings resulted from the combination of Germany’s TUI with Britain’s First Choice Holidays in 2007.

Higher prices and bookings helped lift TUI’s earnings in the first quarter, with the company serving 3.5-million travellers, compared with 3.3-million in the year-earlier quarter.

“People’s willingness to travel is still high, despite a market environment that remains challenging. We are thus creating the basis for TUI’s future profitable growth,” TUI CEO Sebastian Ebel said in a statement.

Customer numbers are set to hit 20-million this year, reaching pre-pandemic levels, up from 19-million last year, Kiep told a media call, adding later that second-quarter results are also expected to be stronger than last year.

TUI maintained its outlook for a 25% increase in operating profit in the 2024 financial year which ends in September, and also set a medium-term target for a compound annual growth rate of 7%-10%.

Deliveries of Boeing MAX 737 10s are expected to be delayed but MAX 737 8 planes on order should arrive on time, Ebel said on the call, adding that some leasing deals have been extended to ensure capacity.

Reuters