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Lower Spain Margins, Boeing 737 MAX Issue Take Toll on TUI Group H1 Results

TUI Group

Airline overcapacity for Spain and the grounding of 15 Boeing 737 MAX airplanes appear to have taken a toll on TUI Group’s first half results, which include posting an underlying loss of 300.6 million euros against a loss of 169.7 million euros a year earlier.

In the meantime, TUI said it expects 2019 to be another solid year. At turnover growth of 1.7 percent to 6.68 billion euros, the performance at the start of the year matched expectations.

“2019 will be another solid year for TUI. We have a clear compass: We will continue to consistently focus on hotels, ships and the expansion of digital platforms and emerge stronger from consolidation,” said TUI Group CEO Fritz Joussen.

The Hannover-based travel giant cited “significant shifts in travel trends and destinations for the full year 2019” including overcapacities to Spain, in particular the Canaries, and consequently lower margins.

TUI did note that it was expecting the positive development of bookings to Turkey and the Eastern Mediterranean to become visible in the second half of the year as most of the countries in the region are summer destinations.

“TUI is on track, both strategically and operationally, and is well positioned. That is why 2019 will be another solid year. Our core businesses with our own hotels, cruises and destination experiences and activities remain strong and currently deliver around 70 percent of our earnings,” said Joussen.

TUI CEO Fritz Joussen.

TUI Group CEO Fritz Joussen

He went on to underline that TUI would emerge as a stronger, more efficient and more profitable group from the current consolidation of the sector in Europe. “Our transformation from a traditional tour operator to a hotel and cruise company has been successfully completed.

Our transformation as a digital and platform business is progressing massively and will deliver crucial results for our business and future growth. Our new strategic Destination Experiences business offers substantial new potential for TUI,” he said.

The company is now anticipating the Hotels & Resorts segment to deliver solid performance in H2 with positive effects driven by shift of demand to Eastern Mediterranean holiday spots.

In H1, underlying EBITA in the Hotels & Resorts segment was down 7.7 percent year-on-year. The company said the shift in demand from the Western Mediterranean to the Eastern Mediterranean resulted in lower margins in Spain.

At the same time, the positive effects in the Eastern Mediterranean, for instance in Turkey, will only be visible in the second half of the financial year.

The Cruises segment continued along its growth roadmap generating underlying EBITA at 13.6 percent to 106.4 million euros against 93.7 million euros a year earlier.

Photo Source: @TUI Group

Photo Source: @TUI Group

The TUI Destination Experiences segment (activities and services in the destinations) also grew with the number of activities and excursions sold nearly double at 2.4 million in the period under review up by 95 percent with underlying EBITA at 21.8 percent to -10.4 million euros (previous year -13.3 million euros).

Looking ahead, the group said that bookings for summer 2019 starting May 5 are down 3 percent year-on-year, while average prices are slightly up by 1 percent. For H2, TUI Group is betting on the Holiday Experiences segment.

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