Feb 11 (Reuters) - Europe's largest travel operator TUI reported a jump in its first-quarter profit on Tuesday, driven by strong performance in its packaged holiday business, but saw its shares drop by almost 7% in early trading.
While European airlines faced struggles last year, travel companies such as TUI benefited from the resurgence of packaged holidays. TUI said its bookings for the summer were up 2%, with one third of packages already booked.
Holidaymakers are increasingly turning to package holidays as soaring hotel and flight prices revive demand for all-inclusive deals.
Shares of TUI have climbed 45% since last September following a trading update, but saw a slight drop after its full-year results in December, followed by a further dip of 6.9% at 0806 GMT after announcing its first quarter results.
"People prioritise their holidays even in times of change, and even in a challenging economic environment in Europe for almost all sectors," TUI Group CEO Sebastian Ebel said on Tuesday.
TUI confirmed its annual outlook and also posted first-quarter underlying earnings before interest and taxes (EBIT) of 51 million euros ($52.55 million), up from 6 million euros in the year-ago period.
But high expenses, fuelled by investments into marketing and IT to grow some of its European operations, and a renewed interest in dynamic packages and flexible pricing means its growth is somewhat hampered.
At the end of last year, the company forecast 2025 EBIT growth to ease to between 7% and 10% due to one-off costs.
Ebel also said bookings growth had slowed slightly because the firm had become less aggressive on growing capacity and pricing. Demand was also shifting to new destinations and away from previous strong markets, like Turkey.
In a media call with journalists, Ebel acknowledged there was a slight dip in bookings after Christmas, likely tied to adverse weather in Britain and less consumer spending power after the holidays.
That trend is set to recover, the company said.
CHALLENGES
While travel demand has remained robust, TUI, like other European airline businesses, has been affected by Boeing delivery delays and high costs.
Ebel said on a media call that he hopes the Boeing 737 MAX delivery delays will be resolved by 2027.
The first quarter is usually the weakest for airlines, as travellers are less likely to fly between January and March. For TUI, the first quarter runs from October to December.
TUI reported a decline in performance in the Markets and Airlines segment, which saw a 31% drop in underlying EBIT year-on-year due to seasonal investments ahead of the summer travel period.
However, its Holiday Experiences segment saw an improvement, rising to 150.3 million euros ($154.81 million)in the reported quarter from 90.7 million euros ($93.42 million)last year.
Its outlook will also be impacted by the later date for Easter this year, with a 30 million euro ($30.90 million)drop set for the second quarter, as the booking spike tied to the holiday spills into the third quarter instead.
($1 = 0.9706 euros)
Reporting by Joanna Plucinska and Paolo Laudani; Additional reporting by Ilona Wissenbach; Editing by Milla Nissi, Sherry Jacob-Phillips and Angus MacSwan
Source: Reuters