TUI blames ash and Budget for bookings slump

Europe's largest holiday firm TUI Travel yesterday warned that its profits would be at the lower end of expectations as it blamed disruption from the volcanic ash cloud and uncertainty over the Government's emergency Budget for a "marked slowdown" in its UK market.

In addition to UK consumers booking their holidays later, the operator of Thomson Holidays said that more German customers had opted for less expensive, lower margin holidays, although bookings remained strong in the country.

TUI had previously guided towards profits of between £440m and £480m for the year to 30 September, but the shortfall in the UK and Germany means it will now be in the low "£440 millions". The update from TUI wiped nearly 10 per cent off its market value.

"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 Peter Long, chief executive of TUI Travel.

"This was particularly marked in the UK source market, where trading was affected by further airspace closures, good weather and post election uncertainty regarding the emergency budget."

As a result, TUI will now have to offload a higher expected proportion of holidays at a lower prices during the remainder of its financial year, which will hit margins.

For the nine months to 30 June, TUI's pre-tax losses widened to £540m, compared to £411m last year.

Its revenues tumbled by 7 per cent to £8.3bn over the period, although the fall was a less painful 4 per cent over the most recent three months.

TUI said it expected the recovery of Sterling against the euro would result in a foreign exchange hit of between £10m and £15m on its full year results. But on the upside, it expects cost savings to be £15m higher at £75m.

TUI painted a picture of UK consumers nervous about making bookings. The holiday operator said that while industry-wide UK booking volumes had tumbled by 10 per cent since its last update on 11 May, TUI's were down by just 2 per cent over the last 12 weeks.

"In the UK, the market has slowed markedly following the recurrence of airspace closures, the emergency budget and subsequent austerity measures and the better-than-average UK weather, combined with quiet trading during the World Cup," Mr Long said.

"Within this difficult market context we traded relatively well."

While TUI said that demand had improved in recent weeks, margins are lower than it previously forecast and load factor is now 83 per cent, which is one percentage point lower than last year. In terms of medium haul destinations, the most popular destinations for summer 2010 were the Balearics, Greece, Turkey, Canaries and mainland Spain. Further afield, consumers opted for Mexico's Cancun, Florida, the Dominican Republic's Punta Cana and Jamaica.

With the dust appearing to have settled on the Icelandic volcanic ash disruption in the spring, TUI said that almost 400,000 of its customers were affected by either having their holidays cancelled or being stranded abroad.

The company raised the total costs of welfare, repatriation and cancelled flights from the volcanic ash crisis by £10m to £105m.

Mr Long also warned on the outlook for the holiday industry, as consumers batten down the hatches.

He said: "It remains difficult to predict how the later booking pattern will change over the next 12 to 18 months, in the light of the current economic environment."

Start your day with The Independent, sign up for daily news emails
ebooksNow available in paperback
The 67P/CG comet as seen from the Philae lander
scienceThe most important scientific breakthroughs of 2014
Arts and Entertainment
Ian McKellen as Gandalf in The Hobbit: The Battle Of The Five Armies
Arts and Entertainment
Sarah Koenig, creator of popular podcast Serial, which is to be broadcast by the BBC
tvReview: The secret to the programme's success is that it allows its audience to play detective
Ruby Wax has previously written about her mental health problems in her book Sane New World
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers