TUI AG (LSE:TUI) gave the airline and travel sector a lift today with an upbeat fourth quarter trading statement as holiday makers showed signs of returning to the market with increasing confidence.
The travel giant reiterated its expectation to return to profitability this year despite third quarter losses and elevated flight disruption costs.
Encouragingly for TUI, and others in the industry, average selling prices (ASP) are increasing compared to before the pandemic with the ASP in Summer 2022, up 18% versus Summer 2019, a trend that has continued into Winter 2022/23 with ASPs up 26% when compared to 2019.
Bookings for summer 2022 are at 91% of 2019 levels, with the UK, Germany and Netherlands all ahead of pre-pandemic levels.
Chief executive officer, Fritz Joussen pointed out “The trend has been towards higher value or longer holidays with a higher overall holiday budget.”
“This is encouraging and shows the current importance of holidays and travel experiences in the post-Corona era” with the Canaries, the Balearics, Greece and Turkey continuing to be popular Summer destinations for customers.
Bookings for Winter 2022/23 are so far showing signs of matching pre-pandemic levels with the Canaries, Mexico, Egypt and Cape Verde forming a key part of the holiday offer.
“As in the Summer, we continue to see a trend towards a higher share of short-term bookings for Winter and strong pricing, confirming solid customer demand for holiday travel” TUI said.
Although TUI failed to hold onto its early gains in the market others in the sector did with Wizz Air and IAG (owner of British Airways) both up 1% bucking the weaker market.
Victoria Scholar, Head of Investment, interactive investor said “today’s update comes as a welcomed development for investors….lifting stocks in the broader travel sector such as IAG with it.”
Shares in TUI have plummeted almost 50% year-to-date as the broader market sell-off, soaring cost inflation, labour shortages and the general chaos for international travellers have created a perfect storm for the company.
Challenges remain for the company and industry, not least how much the ongoing consumer credit squeeze will impact on discretionary spending on holidays and flights.
Nevertheless, today’s news represents a rare beacon of positive news flow for an industry ravaged by the pandemic.