TUI Travel says losses widen as ash cloud bites

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Tourism operator TUI Travel posted widening losses on Tuesday, citing difficult trade in Britain and the impact of volcanic ash cloud chaos, and warned annual earnings would dash expectations.

TUI Travel said in a results statement that net losses grew to 409 million pounds (490 million euros, 647 million dollars) in the nine months to the end of June.

That compared with a net loss of 304 million pounds in the same part of the previous 2008/09 fiscal year. Revenues meanwhile sank eight percent to 8.224 billion pounds.

TUI Travel added that travel chaos caused by the volcanic ash cloud earlier this year had cost the group 105 million pounds, which was higher than the prior estimate of 90 million.

"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," said chief executive Peter Long.

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 recent airspace closure due to the ash cloud, sunny weather, and unease over the impact of the government's recent austerity budget that lifted taxes and cut public spending.

"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.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said that 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 also been suffering losses owing to the recent economic downturn and on costs linked to its creation in late 2007 after the merger of British travel group First Choice and the tourism activities of German travel giant TUI.

© 2010 AFP

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