Civil unrest in Egypt and Tunisia means TUI Travel will provide fewer holidays to those regions. It already has stopped offering holidays to Egypt from some markets, including Germany, France, Belgium, the Netherlands and the Nordic countries.
However, in line with government advice in the U.K., it continues to offer consumers in the U.K. holidays to the Red Sea resorts, where the political situation remains calm. About 1.3 million British nationals visited Egypt in 2009, according to the Foreign and Commonwealth Office.
Early indications are that customers are choosing to rebook to alternative destinations and we are taking action to remix our programs in line with customer demand," Chief Executive Peter Long said.
Spain, Turkey and Greece were experiencing resurgences in demand as consumers look to take their holidays elsewhere, said a spokeswoman for TUI Travel. She added that Spain had become increasingly competitive as it looked to attract tourists back to the country after suffering from weaker demand in recent years due to the relative strength of the euro against sterling, in particular.
Hoteliers in Spain so far have been careful not take advantage of increased demand by raising rates, the spokeswoman said.
Egyptians' protests against the rule of President Hosni Mubarak were another blow for the country's embattled tourism industry. In December, Thomas Cook Group PLC (TCG.LN) Chief Executive Manny Fontenla-Novoa said U.K. demand for holidays in Egypt dropped after hoteliers raised prices and because the country was subject to higher air passenger duty charges compared with European countries.
TUI Travel continues to monitor events in Egypt and Tunisia. The spokeswoman said the company easily could increase capacity once stability returned, adding that demand in such circumstance tended to rebound quickly, perhaps even within weeks.
TUI Travel said the cost for the second quarter of not operating further holidays to Egypt for the rest of the winter season from any of its source markets except the U.K. would be GBP20 million. Halting operations from the U.K. would cause a further GBP5 million hit.
The cost of repatriating holidaymakers from Tunisia and lost revenue was GBP5 million.
While TUI Travel's first quarter ended Dec. 31 represented an "encouraging start to (fiscal) 2011" and forward bookings were good, Long said, "We remain cautious, however, given the current economic and geopolitical uncertainty."
TUI Travel said revenue for the three months to Dec. 31 rose 6% to GBP2.69 billion, but climbed 10% on higher volumes after the impact from acquisitions was stripped out. Foreign-exchange translation dented revenue by 2%, while the company's exit from scheduled flying operations in Germany and its joint venture in Canada also trimmed revenue by 2%.
Its operating loss fell GBP23 million to GBP84 million, driven by improved trading across northern and western Europe. However, the strengthening sterling reduced its operating loss in the first quarter by GBP3 million because of the translations of foreign currency losses at more favorable exchange rates.
The company said it now had completed integration of operations as a results of the merger between First Choice Holidays PLC and tourism operations of Germany's TUI AG (TUI1.XE) in 2007, and delivered GBP200 million of synergies.
TUI Travel is focusing on increasing its specialist product offering while trying to sell more holidays via its online platform rather than travel agents, moves that will help generate higher profits.
At 0913 GMT, TUI Travel's shares traded down 2 pence, or 0.8%, at 245 pence, while the benchmark FTSE 100 index traded down 0.5%. For the latest updates PRESS CTR + D or visit Stock Market news Today
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