Tui wings in with £968m profit despite headwinds

Holidays giant Tui yesterday said the weakness of sterling is encouraging UK holidaymakers to switch to cheaper destinations, and revealed it is working on contingency plans for disruption linked to the UK's withdrawal from the European Union.

Rio de Janeiro, Brazil, 3 March 2012 : Ipanema beach in Rio de Janeiro with people swimming in the sea, sunbathing and relaxing in the sun

Tui boss Fritz Joussen said Britons were cutting back on long-haul holidays and some European resorts as the weak pound makes trips more expensive, but that there were still record numbers of UK bookings as holidaymakers choose alternative destinations such as Croatia and Bulgaria. Tui called for a “workable solution” for airlines, including keeping current arrangements in place until a Brexit deal can be reached.

“Whilst we are not able to control the outcome of these negotiations, we are putting contingency plans in place in order to manage potential disruption to our operations,” the company said.

It came as Tui, which ditched the Thomson name in the UK in October as part of a global rebrand, unveiled a 12 per cent lift in underlying earnings to €1.1 billion (£968 million) for the 12 months to end-September. It was the company’s third consecutive year of earnings growth.

Tui targeted earnings growth of at least 10 per cent in the current financial year and for each year to 2020. Profit margins were being squeezed by the fall in the value of sterling since the Brexit vote in June 2016, Joussen added.

He said Britons had maintained the average spend of £1,000 on their foreign holiday, but added: “In reality, if the vacation to some of the destinations for £1,000 is not possible any more, then the destinations will change.”

Despite the headwinds, Tui forecast another strong year in prospect for bookings, partly due to the collapse of rival Monarch in the autumn. The group also cited a robust recovery in demand for trips to Turkey, with bookings for next summer up 70 per cent year-on-year as holidaymakers return to the country after terrorist attacks in recent years.

Tui said its latest annual earnings were also buoyed by strong sales of its own-brand hotels and cruise trips, which offset unexpected losses at its airline, Tui fly. More than half of the holiday business’ earnings now come from the own hotel and cruise brands.

It suffered an exceptional hit of €39m (£34m) at the airline after flight crews called in sick during a bitter industrial dispute, while it was also affected adversely by the collapse of budget airline Air Berlin, which saw it renegotiate flight agreements.