British sun worshippers help TUI outshine Thomas Cook

Friday, 30 September 2016 00:01 - - {{hitsCtrl.values.hits}}

LONDON (Reuters): Holiday company TUI Group lifted its profit forecast for the year due to demand from British holidaymakers and gave a more positive outlook than smaller rival Thomas Cook, which has been hit by a higher Turkish exposure.

Britons’ growing appetite for winter sun also gave TUI, Europe’s largest tour operator, confidence for the coming year in its trading update on Wednesday.

Turkey’s popularity as a holiday destination has plunged following an attack on tourists in Istanbul in January and a failed coup in July, forcing tour operators such as TUI and Thomas Cook to rapidly add more flights and hotels in alternatives such as Spain and Portugal.

TUI’s operation of the long-haul Boeing Dreamliner 787 aircraft, of which it over 10, has also given it an advantage over Thomas Cook, in an environment where holidaymakers are going further afield to find winter sun.

“Where they’ve (TUI) been a bit more differentiated particularly for winter is looking to put on this additional long-haul product with new 787s,” Cenkos analyst Simon French said.

TUI is the only leisure airline to operate Boeing’s Dreamliner, an aircraft which it says is highly rated by customers.

TUI said that it would deliver underlying profit growth (EBITA) of between 12 and 13% at constant currency rates in the 12 months ended Sept. 30, compared to an August forecast for growth of at least 10%.

That performance was driven by a 5% rise in bookings from the UK over the summer, as Britons defied worries that a devaluation of the pound since the country’s June 23 vote for Brexit would deter people from going on holidays abroad. TUI’s shares rose 2% to 1,108 pence 0915 GMT, hitting their highest level since February and cementing a recovery from a low of 813 pence on the day the Brexit result was announced.

There was also strong British demand for holidays for the 2016/17 winter period, TUI said, with bookings up 22% as customers, who due to security concerns in nearer winter sun destinations such as Egypt and Tunisia, opted to go on long-haul holidays to places like Mexico, the Caribbean and Sri Lanka.

“You’ve still got a very difficult geo-political backdrop but these companies and customers are getting more adept at dealing with that,” French said, referring to the security issues in some formerly popular destinations.

Overall, winter trading was in line with its expectations, TUI said, adding that it had fired the starting gun on the sale of its specialist holiday arm Travelopia, worth a potential 500-600 million euros.