Tui profits slump as Iran war hits holiday demand

With Holiday firm Tui’s profits slumping due to the impact of the Iran war, Derren Nathan – head of equity research at Hargreaves Lansdown – says there are still positives for investors.

He said: “TUI investors may feel they need a holiday after today’s results, but it wasn’t all bad news.

“Geopolitical uncertainty is rarely good for the travel business, but the group’s Holiday Experiences division, which includes its differentiated cruise liners and hotels, put up a resilient performance.

“The more commoditised Markets and Airline arm swung from a €50 million profit to a €17 million loss, impacted by softer demand, high fuel prices and a competitive market.

“Despite the nosedive in earnings, it’s still all to play for with TUI typically making most of its money in the fourth quarter, which covers the peak summer trading period.

“Here, there are signs of improving momentum, with Markets and Airlines booked revenue improving from minus seven per cent in May to minus six per cent, Germany stable at minus three per cent, and the UK picking up from minus 10 per cent to minus eight per cent.

“Management pointed to conflict in the Middle East as a drag on demand, but a spell of ideal staycation weather may also have played a part.

“Bookings over the last four weeks are up seven per cent, as holidaymakers are holding out longer before making a reservation.

“The narrative around disciplined pricing, however, suggests that those waiting for a last-minute bargain may be a little disappointed.

“The weak quarter adds more pressure for a clean landing in the final stretch of the year, and while the runway still remains relatively wide, management is likely to be buckling up for a tricky approach.”