Profits Improve by 4% at TUI Travel

But one-off costs result in an overall pre-tax loss for the operator.


Despite continuing uncertainty in the travel and tourism industry, TUI Travel has reported today a rise in pre-tax profits by 4% to €400 million (£337 million) for the financial year ending 30 September. This is good news for the operator, which is 57.5% owned by the Germany-based international leisure group TUI AG, since multiple factors have frustrated the outbound sector’s attempts at growth this year as Europe emerges from recession.

However, while Europe’s biggest tour operator also reported underlying operating profits rising by 11% to €531 million for 2009-10, this excludes an estimated cost of the ash crisis of €124 million. When one-off costs such as the ash-cloud losses are factored in, TUI Travel made a pre-tax loss of €43 million for the year. That compares to a loss of €112 million the previous year. Sales stayed weak through the period, keeping the company’s executives’ attitudes to the business environment cautious, although sales did improve markedly in August and September 2010.

“The 2010 result was affected by a weaker trading performance in the UK, primarily due to increased winter losses resulting from capacity-led volume reductions in anticipation of lower demand,” explained CEO Peter Long. “The early summer period was disrupted by a number of factors that increased customer uncertainty, including the volcanic ash related airspace closures. We then experienced an improvement in demand later in the summer period and trading closed out well in all source markets, including the UK.”

The company said that concerns over the fragile economy in Europe and the relatively early stage of the booking cycle make it cautious about the outlook for 2011. TUI’s long-term rival Thomas Cook announced this week that it would sack 500 employees, many of them in middle management positions at its UK head office.