By Joanna Plucinska and Paolo Laudani
(Reuters) -Europe’s largest travel operator TUI reported a jump in first-quarter profit and maintained its profit outlook for the coming year on Tuesday, but saw its shares sink nearly 11% as bookings growth weakened.
While European airlines faced struggles last year, travel companies such as TUI benefited from a resurgence of packaged holidays. However, TUI said bookings for the upcoming summer were up only 2%, with one third of packages booked.
“The first quarter was good, but the bookings development should counteract that,” a trader told Reuters.
Bookings growth slowed as TUI eased off on expanding capacity and on pricing, Group CEO Sebastian Ebel said. Demand was also shifting to new destinations and away from previously strong markets like Turkey.
There was a slight dip in bookings after Christmas, Ebel said, likely tied to adverse weather in Britain and less consumer spending after the holidays.
Holidaymakers are increasingly turning to all-inclusive package holidays due to soaring hotel and flight prices.
TUI shares sank 10.9% in afternoon trading. Shares of rival airlines such as Lufthansa, easyJet and Wizz Air also slipped.
OUTLOOK
TUI confirmed its annual outlook and reported first-quarter underlying earnings before interest and taxes (EBIT) of 51 million euros ($52.55 million), jumping from 6 million euros a year earlier as it began recovering from the pandemic.
Chief Financial Officer Mathias Kiep told an annual shareholders meeting after the results announcement that the firm wanted to communicate its future dividend policy by the end of this year. He said the low share price was below the expectations of the board.
At the end of last year, the company forecast 2025 EBIT growth to ease to 7% to 10% due to one-off costs, significantly slower than TUI’s expected EBIT growth of 25% for 2024.
High expenses, amid investments in marketing and IT, and a renewed interest in dynamic packages and flexible pricing, will likely hamper growth this year.
Its outlook could also be impacted by a later date for Easter this year, with a 30 million euro ($30.90 million) drop in revenues set for the second quarter, as a bookings spike tied to the holiday spills into the third quarter instead.
TUI, like other European airline businesses, has been affected by Boeing delivery delays and high costs. Ebel said he hoped the Boeing 737 MAX delivery delays would be resolved by 2027.
($1 = 0.9706 euros)
(Additional reporting by Ilona Wissenbach; Editing by Milla Nissi, Sherry Jacob-Phillips and Bernadette Baum)
