Tui first-half losses widen as markets & airlines division struggles

Travel company Tui reported a widening of its losses for the first half on Wednesday as it pointed to a weak demand environment in its markets and airlines segment, but reaffirmed its outlook for FY19.

The group’s first-half underlying earnings before interest, tax and amortisation loss widened to €301m from €170m in H1 2018.

Much of the decline was attributed to tough conditions in the markets & airlines division, where underlying EBITA widened to €496.8m from €375.5m due to the summer 2018 heatwave, overcapacities in Spain from the shift in demand to Eastern Mediterranean, continued Brexit uncertainty and particularly strong comparatives for Nordics in the first half of last year.

Tui also highlighted the fact the results include the initial impact from the Boeing 737 MAX grounding, which started in mid-March, and the later timing of Easter this year.

Tui said that for this summer, 59% of the total programme has been sold compared with 62% at this time last year. Meanwhile, bookings are down 3% and the average selling price is up 1% against strong comparatives.

"The competitive pricing environment means that this average selling price increase is not at a sufficient level to cover cost inflation. All markets are trading on lower margins then prior year, given the weaker demand environment and oversupply to some destinations such as Spain.

"We have taken a disciplined approach to capacity, which is flat compared with prior year, at the same time enabling us to protect our strong market leading positions."

In brighter news, Tui said its holiday experiences business continues to perform well, benefitting from the integrated model and its investments in differentiated content.

The company reiterated the FY19 underlying EBITA guidance it gave back in March for a drop of approximately 17% assuming 737 MAX flight resumption mid-July and a decline of up to 26% assuming measures taken in relation to the grounding are extended to end of summer 2019.

Barclays said EBITA was "soft", as expected, but better than its expectations due to strong trading in the hotels division.

"We remain cautious given the operating leverage and lack of clarity on short-term earnings," it added.