TUI continues to blame Brexit and 2018 heatwave as third-quarter earnings halve

UK tourists are holding back on expensive holidays as they await the outcome of Brexit, while people are choosing to book later in case there’s another heatwave and they can ‘staycation’ instead

TUI AG - TUI continues to blame Brexit and 2018 heatwave as third-quarter earnings halve
TUI has two major divisions: Markets & Airlines and Holiday Experiences

TUI AG (LON:TUI) continues to blame Brexit and last summer’s hot weather after underlying earnings almost halved in the third quarter of its financial year.

The FTSE 100 tour operator saw underlying earnings before interest, tax and amortisation (EBITA) fall by 46% to €100.9mln in the three months ended 30 June (Q3 18: €186.8mln).

That excludes the impact of the grounding of Boeing’s 737 MAX planes, which bosses estimate will cost the company around €300mln this year.

READ: TUI blames Brexit, Boeing 737 Max grounding and 2018 heatwave for wider loss

For the nine months so far this year, TUI has made an underlying loss of almost €200mln, compared with a small profit of €17.1mln at this point in 2018.

The Markets & Airlines business remains the biggest drag on performance, and it racked losses of €103.9mln in the quarter (Q3 18: profit of €37.2mln).

“Markets & Airlines continued to see a weak demand environment leading to a later booking behaviour by our customers, reflecting the ongoing knock-on impact of the summer 2018 heatwave and Brexit uncertainty,” said TUI in Tuesday’s announcement.

Summer bookings have picked up

Looking ahead, summer 2019 bookings are 1% versus last year, but a 1% rise in average selling prices has offset that.

Summer trading has improved over the past few weeks as the negative impact of last year’s heatwave starts to drop off.

Despite a recent pick-up in bookings and margins, pricing remains behind cost inflation, so full-year margins are still expected to be lower year-on-year.

Oversupply in Spain as tourists switch to eastern Med

TUI is also struggling to cope as holidaymakers pluck for eastern Mediterranean destinations over those a bit further west.

This has led to a supply glut in Spain – once a lucrative destination for Europe’s travel companies – which has put pressure on margins, although sales of hotel rooms in Turkey have jumped.

As a result, losses in the Western Region widened to €53.5mln (Q3 18 loss of €8.5mln).

Full-year guidance unchanged

Things were rosier in TUI’s other division, Holiday Experiences, where underlying earnings jumped by 17% to €208.3mln (Q3 €178.5mln).

Much of that growth was driven by extra capacity on the company’s cruise ships, while the strong demand for its Turkish hotels also served to bump up profits.

For the full year, TUI kept its guidance in place, and expects underlying EBITDA to fall by up to 26% from the €1.18bn it reported in 2018.

Quick facts: TUI AG

Price: £8.03

Market: LSE
Market Cap: £4.72 billion

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