Egypt crisis 'will cut TUI profits by up to £30m'

Thomson Holidays-owner Tui Travel yesterday warned that political unrest in Egypt and Tunisia could hit profits by up to £30 million in the coming months.

The company said it had cancelled holidays to the riot-hit countries, as well as incurring the costs of returning travellers, which were likely to hit its second-quarter results.

Tui chief executive Peter Long said: "We are closely monitoring events in Egypt and Tunisia and the safety of our customers is our primary consideration."

Violent demonstrations against the government in Egypt have grabbed attention across the world for the past week after similar action in fellow North African country Tunisia last month.

The travel company, whose shares slipped 4p to 243p, said it had cancelled trips to Egypt from markets including Germany, France and the Netherlands, but was still operating holidays to Egypt's Red Sea resorts from the UK, in line with government advice.

Even with those packages open, if the company is unable to operate holidays from any other markets for the rest of the winter it will cost it at least 20m.

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And if UK government advice changes against visiting Egypt, Tui expects the impact to be a further 5m.

The company has also incurred costs to repatriate customers from Tunisia, which together with cancelled holidays, is likely to top 5m.

Tui said early indications suggest customers are choosing to re-book to alternative destinations, and it is taking action to "remix" programmes in line with demand.

The warning came as Tui posted a pre-tax loss of 134m in the three months to 31 December, compared to a 166m deficit in the same period a year earlier.

Last week, Tui said booking volumes for near-term departures since its previous trading statement in early December were down 1 per cent as Arctic conditions shut off British airports and stopped would-be holidaymakers visiting its shops. But yesterday the company said total revenues were up 6 per cent to 2.69 billion, and the results, for the first quarter of its financial year, were seen as generally positive in the City.

The company, formed in 2007 through a tie-up between British holiday business First Choice and the travel division of Germany's Tui AG, unveiled underlying operating profit up 11 per cent at 447m in the year to end of September.

Tui said its integration was now complete, with 200m of merger synergies delivered. Long said: "The progress in the first quarter represents an encouraging start to 2011 and the forward booking position is good.We remain cautious, however, given the current economic and geopolitical uncertainty."

Nick Batram, an analyst at Peel Hunt, said: "The short-term impact from the events in North Africa is overshadowing the underlying strategic progress that is being made at Tui Travel. We still see a potential bid from Tui AG as a strong possibility and this should limit the downside."