TUI, the world’s largest tour operator, is optimistic about its summer 2023 season, expecting it to reach pre-pandemic levels despite a slowdown in growth due to high inflation and rising interest rates. In the quarter ending June, TUI reported underlying earnings before interest and tax of €169m, surpassing analyst expectations of €145m. This marked the company’s first profitable early summer quarter since the pandemic. However, TUI’s data reveals a cooling demand from consumers in the UK.
CEO Sebastian Ebel acknowledged the challenges in the UK market and Nordic countries but expressed confidence in strengthening and expanding TUI’s market position. He stated that overall, it would be a successful travel summer and a good year for TUI in 2023. TUI reaffirmed its guidance for higher underlying earnings before interest and tax (EBIT) compared to the €409m reported for the financial year ending September, which saw a surge in travel following the lifting of Covid-related restrictions across Europe.
TUI’s shares initially rose by 4% but ultimately ended the day down by over 2% in London trade. This reflects a broader trend of the travel industry’s recovery from the pandemic gradually slowing down due to inflation and rising interest rates, which are constraining household travel budgets. In the UK, one of TUI’s key markets, bookings were slightly above 2022 levels and 4% higher than pre-pandemic figures. TUI reported that average holiday prices have increased by 7% compared to last year. Although winter travel bookings are still in the early stages, TUI described them as promising.
TUI stated that its summer bookings have reached 95% of pre-pandemic levels, aligning with previous guidance. The company estimates that the costs associated with recent wildfires on the Greek island of Rhodes will amount to approximately €25m, covering compensation and repatriation flights. Despite inflation and high energy costs impacting consumer spending, European travel firms are reporting strong financial results. Lufthansa, for example, announced a tripling of second-quarter earnings due to soaring travel demand and increased ticket prices.
In Asia, Cathay Pacific Airways expects its robust recovery from the Covid crisis to continue throughout the year after announcing its highest half-yearly profit since 2010. Chairman Patrick Healy expressed extreme satisfaction with the company’s performance and predicted a solid performance for the rest of the year.