By Joanna Plucinska, Ilona Wissenbach and Andrey Sychev
(Reuters) -Europe’s largest tour operator TUI beat third-quarter profit expectations on Wednesday, buoyed by strong demand for summer travel, a revival of package holidays and a boost from the bankruptcy of German rival FTI.
Travel companies and airlines had hoped this summer season would surpass pre-pandemic levels despite economic uncertainty, aircraft delivery delays and rising jet fuel prices.
“Holidays are still a high priority for consumers,” with summer bookings 6% higher than last year, chief financial officer Mathias Kiep said on a media call.
TUI posted 232 million euros ($254.92 million) in underlying earnings before interest and taxes for the April-June quarter, up 37% from 169 million euros a year earlier. Analysts consulted by LSEG had expected 217 million euros.
Shares rose 3.6% in morning trading.
TUI confirmed its forecast for a 25% increase in operating profit this year and 10% revenue growth, despite delivery delays from Boeing (NYSE:) and costs related to an outage at cybersecurity technology company CrowdStrike (NASDAQ:) previous month.
The German group recently moved its listing from London to Frankfurt, but has a large customer base in Britain and saw a boost from the insolvency of rival FTI.
RESILIENCE IN THE SECTOR
While demand remained strong, some airlines’ results in the quarter were impacted by rising costs related to labor stoppages, maintenance or weaker business bookings.
“TUI’s third quarter results prove that the travel sector is more resilient than some parts of the market thought this summer, as price increases across the sector led to some weakness in demand,” said Julie Palmer, partner at Begbies Traynor.
Although budget carrier Ryanair had warned that ticket prices could fall as customers become more price sensitive, TUI said bookings were not slowing despite a 3% year-on-year price increase for its flights and packages.
TUI has helped as package holidays are making a comeback, with hotel, sightseeing and restaurant prices rising. Packages offer tourists more price certainty, experts say, with fewer unexpected external costs.
Analysts said TUI’s positive update was a good sign for other package holiday providers, including Britain’s Jet2.
Rival easyJet’s (LON:) holiday business has also been successful and has strengthened the wider aviation sector.
Chief Executive Sebastian Ebel said TUI is positioning itself further outside Europe to strengthen its business, including in Latin America, the Caribbean and Asia.
($1 = 0.9101 euros)
