TUI Full-year Travel Loss Widens

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TUI Travel Plc, Europe’s largest tour operator, has just announced its its full-year loss widened due to their decision to reduce capacity and the great decrease in bookings caused by the volcano eruption in Iceland and the many flight issues the volcanic ash floating over Europe had caused.

The net loss disclosed by TUI reached 104 million pounds ($163 million) in the 12 months through September, strongly surpassing the restated loss of 67 million pounds the tour operator experienced a  year earlier, according to a company statement released today. Operating profit rose by 11 percent to 447 million pounds, compared to the 441 million-pound average estimate given by nine analysts on Bloomberg.

The volume of tourist arrivals worldwide is expected to grow, although at a slower pace, in 2011 as consumers spend less because of still struggling economies, shows resent research results  by Euromonitor International. Financial news are not better for TUI Travel’s competitors either. Rival Thomas Cook Group Plc reported yesterday a full-year loss caused by the costs of assisting passengers during the complete shutdown of European airspace caused by the volcanic ash cloud.

TUI Travel’s winter losses in the U.K. and Ireland widened because of capacity reductions caused by a general decrease in travel demand, the statement said. Airspace closures, government austerity measures and better than average U.K. weather were some of the reasons TUI identified for the drop in numbers of people traveling.

TUI Full-year Travel Loss Widens

“We remain cautious about 2011 given the continued economic uncertainty and the relatively early stage of the booking cycle,” Chief Executive Officer Peter Long said in the statement. Still, the company “has seen a sustained improvement in demand since July and recent trading for future seasons remains positive in most source markets,” he said.

“Mass-market tour operators have substantially underperformed” stock indexes this year,Matthias Desmarais, an analyst at Exane BNP Paribas, wrote in a Nov. 29 note.
TUI Travel and Thomas Cook “offer substantial restructuring potential, provided top line recovers from dramatic consumer behavior changes since 2009,” the analyst said. He had a “neutral” recommendation on shares of TUI and an “outperform” rating for Thomas Cook as of Nov. 29.

TUI Travel stocks dropped by 16 percent this year in the London stock exchange, determining a company value of  2.4 billion pounds. Thomas Cook has also declined 23 percent in 2010.