Thanks to high demand, the travel group TUI generated a profit in the otherwise seasonally weak first quarter.
Travel bookings for winter and summer are eight percent higher than a year ago, TUI announced before the general meeting on Tuesday in Hanover. For the current financial year 2023/24, CEO Sebastian Ebel continues to expect a record profit in day-to-day business. However, CFO Mathias Kiep did not want to decide whether more guests would actually travel with TUI this time than before the Corona crisis.
The latest business development was well received on the financial market: TUI shares rose by more than four percent to 7.12 euros in the morning in Frankfurt. In doing so, they made up for the price losses they had accumulated since the turn of the year. Analysts were positively surprised by the latest business figures.
The group achieved an operating profit in the usually loss-making quarter from October to December: before interest, taxes and special items (adjusted EBIT) there was an increase of 6 million euros after a loss of 153 million a year earlier.
In the past quarter, not only did six percent more guests travel with TUI – they also spent, on average, more money on their vacation than the year before. Sales grew by 15 percent year-on-year to 4.3 billion euros. The net loss attributable to shareholders was roughly halved to just under 123 million euros. Travel companies are usually in the red in winter. They make their profits during the peak travel season in summer.
And according to management’s assessment, things are looking good. Customers have not only booked eight percent more trips with TUI for winter and summer than a year ago. According to previous figures, they also spend an average of four percent more on it.
If business continues to grow at this rate, TUI’s guest numbers will return to the level of 2019, said CFO Kiep. In the last financial year, the group had around 19 million guests, which was still well below the 20.5 million from before the crisis. The slump in business as a result of the pandemic plunged TUI into an existential crisis in 2020. The German state saved the company from collapse with billions in aid.
TUI now sees itself on the rise again. In the current financial year until the end of September, Ebel and Kiep want to increase operating profit before special items (adjusted EBIT) by at least a quarter. After 977 million in the previous year, TUI would achieve a record operating result of 1.2 billion euros. In the medium term, operating profit is expected to grow by an annual average of 7 to 10 percent.
The group is still struggling to bear its debt burden from the Corona crisis. At the end of December, net debt was just under 4 billion euros, around 1.3 billion lower than a year earlier. This was mainly due to the money from a capital increase last spring. In the medium term, the board wants to further reduce debt in order to reduce the interest burden and free up money for investments. Financial expenses amounted to more than 120 million euros in the last quarter alone.
Meanwhile, TUI once again has to arm itself against problems at aircraft manufacturer Boeing. Because the delivery of new medium-haul jets from the 737 Max series is continuing to be delayed, the travel provider has extended leasing contracts for older jets in the group fleet, according to Ebel. The manager said he therefore does not expect any flight cancellations.
Boeing has to face stricter controls from the US Federal Aviation Administration (FAA) after a near-accident involving a 737-9 Max. In addition, the manufacturer is not allowed to ramp up production of the entire 737 Max series any further for the time being.
TUI still has almost 60 machines in the series available, reported Ebel. However, this does not include the 737-9 Max variant, which had a fuselage part popping out on an Alaska Airlines flight at the beginning of January. TUI only ordered the 737-8 and 737-10 versions. However, he does not expect delivery of the long version 737-10 until 2025 or 2026. So far, the variant has not received official approval.
Meanwhile, TUI shareholders should clear the way for the stock exchange listing to be moved from London to Frankfurt. Unlike before Brexit, most of the group’s securities are now changing hands in Germany. In addition, most TUI shareholders come from the European Union. TUI moved the main listing of the share to London more than nine years ago. The reason was the merger of the group with its British tour operator subsidiary TUI Travel.
To end the listing in London, TUI management needs the support of shareholders with 75 percent of the vote. If it works, TUI shares should be included in the Prime Standard of the German stock exchange at the beginning of April, according to CFO Kiep. It is expected to move into the MDAX, the index of medium-sized stocks, in June.
The TUI leadership expects the change to result in simpler structures and advantages for the ownership structure of the group’s own airlines. Their traffic rights depend on whether TUI is majority owned by shareholders from the European Union. However, this quota is “not even remotely a problem” for European airlines, said Ebel in a video conference. Conversely, the problem does not arise for the British TUI Airways thanks to looser regulations in Great Britain.
Jefferies leaves Tui on hold
The analysis house Jefferies has left the rating for TUI at “Hold” according to quarterly figures with a price target of 7 euros. Sales and operating results (adjusted EBIT) were better than the market expected, wrote analyst Jaina Mistry in an initial reaction available on Tuesday. In addition, the tourism group’s current winter business and bookings for the summer season are encouraging. Despite the operational progress and the historically comparatively low valuation, she still sees some risks at Tui and therefore prefers other stocks from the industry, such as the shares in the British low-cost airline Jet2. FRANKFURT (dpa-AFX)
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