German tourism group TUI AG expects to return to profit this year thanks to divestments and brighter prospects at TUI Travel as British customers start spending again despite economic gloom. TUI, which just sold its Hapag-Lloyd shipping business to a Hamburg-based investors, posted a 2008 loss of 121.3 million euros ($165 million), after a profit of 173 million in 2007, mainly due to restructuring charges.
"The financial crisis which towards the end of 2008 evolved into an economic crisis of an intensity not experienced for decades also hit TUI AG with full force in the fourth quarter," chief executive Michael Frenzel told reporters.
Airlines and tour operators have grounded planes and cut capacity to adapt to slowing demand as the global economic crisis strains business-travel budgets and holiday budgets. Proceeds of 1.6 billion euros from the Hapag-Lloyd sale and higher expected cost savings of 200 million pounds ($293 million) per year from the 2007 merger of TUI AGs travel division and Britains First Choice will push group earnings back into positive territory this year, it said.
TUI shares rose 3 percent to 4.01 euros at 1055 GMT in Frankfurt while TUI Travel shares fell 0.2 percent in London after TUI CEO Fenzel said he had no plans to increase its 51 percent stake in TUI Travel.
TUI Travel, Europes biggest travel outfit, said it was well positioned to meet expectations for the financial year to end-October after trading in the last four weeks strengthened across key markets. Chief executive Peter Long said interest rate cuts in Britain combined with lower food and energy prices were having a positive impact on consumer behaviour.
"Many of our customers now are feeling slightly better about life in terms of the disposable income," said Long. Trading for both winter and summer seasons had improved since it last gave an update on February 5, and were in line with planned capacity reductions.
For summer 2009, British bookings were down 7 percent in the past four weeks. As a result of cutting capacity, the group has 14 percent fewer holidays to sell in Britain than this time last year and 17 percent fewer in Germany. TUI Travel expected to achieve a slight increase in underlying full-year earnings after its first-quarter underlying operating loss was reduced to 34.9 million pounds from 63.3 million in the same period a year earlier.