TUI Travel flies into turbulence as losses deepen

10th August 2010, Comments 0 comments

Tourism operator TUI Travel posted wider losses on Tuesday due to difficult conditions in Britain and the impact of the volcanic ash cloud chaos in April, warning that annual earnings would fall short.

In reaction, TUI Travel shares slumped by more than 10 percent on the London stock market as investors took flight.

TUI Travel said its net losses widened to 409 million pounds (490 million euros, 647 million dollars) in the nine months to June from a loss of 304 million pounds in the same period a year earlier.

Sales were down eight percent to 8.22 billion pounds.

TUI Travel said that travel chaos caused by the Iceland volcanic ash cloud earlier this year had cost the group 105 million pounds.

"The strong booking trends experienced up until the volcanic ash disruption in mid-April and the subsequent rebound in early May were not sustained throughout the early summer period," chief executive Peter Long said.

Holiday booking volumes had been "strong" over the last 12 months -- with the exception of Britain and the Netherlands.

In Britain, TUI Travel blamed factors including April's flight disruption, sunny local weather and unease over the impact of the government's recent austerity budget of higher taxes and public spending cuts.

"The (British) market has been particularly affected by the disruption caused by airspace closures, good weather and the uncertainty around the emergency budget, resulting in a later booking pattern which has adversely affected profitability," the group said.

"Following the difficult trading conditions in these markets and an anticipated adverse foreign exchange translation impact in the final quarter, we now expect our full year results to be at the lower end of expectations."

In addition, German customers were also seeking "lower margin" holiday bookings that are less profitable for the group.

TUI Travel shares tumbled 10.73 percent to 201.2 pence in late afternoon deals on London's FTSE 100 index of leading companies, which was 0.66 percent lower at 5,374.28 points.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said the firm continued to face challenging conditions.

"The financial fallout from the volcanic ash disruption was greater than expected, whilst consumer caution after the government's emergency budget and hot weather in the UK were also cited as reasons for the poor performance."

TUI Travel has suffered generally in the economic downturn and continuing costs linked to its creation in late 2007 in the merger of British travel group First Choice and the tourism activities of German travel giant TUI.

© 2010 AFP

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