Travel operator TUI (TUI) reported its ‘first profitable’ third quarter since the pandemic and said it was ‘on track’ to deliver its full year 2023 expectations.

Shares in TUI ticked up nearly 2% to 592p on the news in morning trading.

Group revenue rose 19% to €5.3 billion in the third quarter ending 30 June 2023 compared to €4.4 billion in the same year quarter a year ago due to higher volume and prices.

TUI said it is expecting a total of 12.5 million total bookings for the summer season, up 6% compared to last summer.

Group underlying earnings before interest and tax (EBIT) was €169.4 million for the third quarter ‘improving strongly’ by €196.5 million and €122 million excluding the impact of €75 million of flight disruption costs.

TUI also said it now has improved ratings from credit agencies S&P and Moody’s due to its successful €1.8 billion capital raising in April and having extended its syndicated credit lines to €2.7 billion in May.

GREEK WILDFIRE COSTS

It was not all good news for the Anglo-German tour operator due to fallout from the Greek wildfire’s disaster in July.

TUI said it was ‘impacted in the short-term’ due to flight cancellations to Rhodes.

The travel operator said it evacuated 8,000 guests from Rhodes in total, but added that ‘eighty per cent of our guests on the island were unaffected’.

Wildfires and strikes cause investors to worry about airlines and holiday companies

Rhodes bookings only account for circa 5% of its full summer 2023 programme.

However, the company said: ‘The financial impact of the wildfires in recent weeks covering cancellations and lost margin, customer compensation as well as repatriation flights and welfare costs has added circa €25 million of cost to our full year 2023 results.’

EXPERT VIEW

Russ Mould, investment director at AJ Bell said: ‘Holidays firm TUI has reported its first profitable third quarter period since the pandemic amid continuing signs of consumers prioritising a week on the beach with their dwindling disposable income.

‘The company has taken steps to repair a balance sheet which took severe damage during the pandemic, but it is still sitting on lots of debt. It doesn’t want to be left exposed if the post-Covid boom in travel demand starts to ebb away.

‘This means dividends remain a distant prospect. The Greek wildfires are a reminder of the risks posed by climate change and, amid increasing awareness of this issue, TUI needs to demonstrate how it can reduce its own emissions.’

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (James Crux) own shares in AJ Bell.

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