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FTSE 250: TUI takes £63m hit from travel chaos

A Boeing 787 of the travel company TUI takes off from the southern runway at Gatwick Airport in Crawley, Britain, August 25, 2021.  REUTERS/Peter Nicholls
Tui said it was on track to deliver close to pre-pandemic levels of trading this summer. Photo: Peter Nicholls/Reuters

Holiday group TUI (TUI.L) has taken a €75m (£63m) hit from the recent travel chaos that's led to lengthy delays and cancellations at airports.

The German company, which runs tour operators, travel agencies, airlines, hotels and cruise liners in holiday destinations across the world, said its customers were affected by about 200 cancelled flights in May and June, in particular due to woes at Manchester Airport amid staff shortages.

TUI remained loss-making in the three months to the end of June due to the costs of the airport disruption, reporting underlying pre-tax losses of €27m.

“With summer holidays in full flow, everyone who isn’t sitting on a beach is no doubt dreaming of dipping their feet in the sea and kicking back with a cocktail in the sun. It’s therefore understandable that TUI is confident about holiday demand for the rest of the summer.

"Nonetheless, it cannot brush over the fact that flight disruptions are still a major thorn in its side," Danni Hewson, financial analyst at AJ Bell, said.

Read more: Qantas bosses asked to work as baggage handlers amid shortages

The company stated that, with the airport disruption impact stripped out, it would have reported underlying earnings of €48m – its first quarterly profit since the pandemic struck.

Both Heathrow and Gatwick have told airlines to cut their flight schedules as staff shortages have left them unable to cope with the rebound in travel demand after the pandemic.

TUI'S chief financial officer and incoming boss, Sebastian Ebel, said he will hold "intensive" talks with airports and airlines, as well as resorts, as he looks to improve the customer experience.

Bookings for the summer peak months of July and August have returned to 93% of the pre-pandemic crisis levels. Tui has 11.5 million customers for summer 2022. As many as 3.9 million bookings have been added since May 11.

Average selling prices in the quarter were 18% ahead of three years ago and the group said it would moderately increase hotel prices in coming years.

UK bookings for winter 2022-23 have “started positively” with volumes up 16% compared to the same stage of winter 2018-19 with the programme around 27% sold.

Read more: British Airways suspends short haul ticket sales from Heathrow

While costs of the airport troubles kept the group in the red over its third quarter, the result still marked a big improvement on the €669.8m underlying loss suffered a year earlier thanks to the recent rebound in travel demand.

“People want to travel. Holidays continue to top the list of planned spending – this has not changed,” Ebel said.

“Although the entire European airline sector continues to face challenges, we have successfully ramped up our business with a significant increase in demand and achieved a good third quarter.”

The company confirmed expectations of a return to “significantly positive” profit for the full financial year.

Watch: Airline refunds: What are your rights as a consumer?