TRAVEL WEEKLY BUSINESS
TUI RESULTS: OPERATOR ‘OUTPERFORMS’ MARKET WITH 11% UNDERLYING PROFIT RISE
Tui Travel reported a near 7% profit margin on its UK mainstream operations for the 12 months to September as it unveiled a group operating profit of £612 million. Chief executive Peter Long hailed “another year of outperformance in what has been a competitive trading environment for many operators and airlines”. Tui’s underlying profit was up 11% year
on year on a ‘constant currency basis’ – meaning if exchange rates had not changed.
Long said the results “demonstrate the
strength and resilience of our business model”. He reported group sales of ‘unique’ holidays now at 71% of the mainstream total but at 84% in the UK – up from 83% in 2013 – and at more than 90% through Thomson Holidays. Tui sold 68% of group mainstream
holidays direct but 91% direct in the UK – up from 89% a year ago. The group’s online sales reached 38%,
but breached 50% in the UK – up from 47% last year to 51% this. Total online revenue for the group passed £4 billion. Overall group turnover was down 3% to £14.6 billion and mainstream passenger numbers declined 2% to 19.5 million. Germany remained Tui’s biggest market
by volume with one million more passengers than the UK but returned only £24 million
Peter Long
“Our UK business is going from strength to strength”
more in revenue at a margin less than half the UK figure of 6.9%. The underlying profit in the UK was £271 million. For this winter, Tui reported UK sales up
4% year on year to the end of November and average selling prices up 2% amid “strong demand for long-haul destinations”. For summer 2015, average UK sales prices were up 2% to the start of this month but with bookings up 9% year on year. Long said: “Our UK business is going from strength to strength.”
TUI MERGER: ONE TUI IS BETTER THAN TWO, SAYS CHIEF EXECUTIVE
Tui Travel will merge with German-based Tui AG, its biggest shareholder, this month and go into the New Year as a new company. A court hearing on Wednesday (December 10)
was due to sanction the process formally, making the merger effective from December 11. The group will de-list from the London Stock
Exchange and re-list as Tui AG, with shares in the new group trading from December 17. Tui chief executive Peter Long said: “The merger
will create the world’s largest integrated travel business. It takes the company to a different level. One Tui is better than two.” He added: “The [hotel] content of Tui AG will create an even stronger group, ensuring our access to a pipeline of exclusive hotels.” The combined group will have a fleet of about
140 aircraft, more than 300 hotels, 12 cruise ships and 77,000 staff.
WHAT IS MERGING?
Tui Travel plc Europe’s largest operator 220 brands 142 aircraft 1,800 travel agencies 30 million customers
Tui AG
Europe’s largest holiday hotel company Hotel brands: Riu, Robinson, Grecotel, Grupotel, Iberotel, Tui Hotels & Resorts 232 hotels; 155,000 beds 8 cruise ships Cruise brands: Tui Cruises (JV), Hapag-Lloyd Cruises
APD REFORM MAY HAVE A STING IN ITS TAIL, SAYS COOPER COMMENT: ANDY COOPER
The Treasury impact assessment on the chancellor’s reduction in child APD predicts the change will result in an additional 320,000 passengers or a 0.32% increase. This doesn’t support the industry’s view that APD reductions will lead to increased demand – so let’s hope the Treasury economists are wrong.
The chancellor made comments in his Autumn Statement about airline pricing, saying: “We’re going to require airlines to list [fuel price] surcharges separately from taxes.” The Treasury is concerned that airlines are blaming governments for a lot of the cost
of travel – and while this may be partly true, it is also true that airline pricing policies are not completely transparent. The traditional scheduled carriers have drifted into a practice of charging a base price and adding numerous supplements under a heading of “taxes, fees and charges”. For some time, the concept of a base price plus a “fuel surcharge” was popular, though it is difficult to understand how any airline could fly anywhere without fuel. Airlines seem to have moved away from this practice, but there still seems a habit of selling at a low fare with a lot of additional charges.
If these charges are incorporated back into the ticket price or broken out separately from genuine taxes, airlines are going to incur system costs in making the changes. The old practice of adding fuel surcharges may also be much more difficult to reintroduce if the trend in falling oil prices is reversed.
Andy Cooper is chief executive of Owens Cooper Consulting
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