Thomas Cook and TUI Travel face profits squeeze
UK travel firms' profits suffer
Travel operators Thomas Cook and TUI Travel will reveal how they are coping with soaring fuel prices and weakening consumer confidence in second quarter trading updates in the coming week.
Both companies have admitted their profits suffered after the uprisings in Tunisia and Egypt, which caused concerned holidaymakers to cancel bookings.
Thomas Cook said the problems will hit second-quarter profits by around £20 million, while TUI, which owns First Choice and Thomson Holidays, said profits were down by between £25 million and £30 million.
Weakening consumer confidence combined with fears about political unrest in Arab nations continues to put potential holidaymakers off making bookings, said analysts. The travel industry is also contending with the soaring price of oil, which is being driven upwards by turmoil in Libya.
Thomas Cook, which is due to update the market on Tuesday, made a positive start to its financial year after reporting that revenues were up 7% to £1.8 billion and UK summer holiday bookings were up 6% in its first quarter.
But it admitted that the crisis in the Middle East and North Africa had affected trading at the start of the 2011 calendar year.
Ben O'Toole, an analyst at HSBC, believes its profits may be squeezed this year and is concerned that the growth in bookings may have lost momentum in recent weeks.
Analysts predict Thomas Cook's operating profits will rise 5% to £410 million in the full-year to September but Mr O'Toole is less optimistic and slashed his forecast to £385 million.
TUI, which is due to update the market on Thursday, reported in January that UK winter bookings were up 3% and summer bookings had surged 11%. It said its recovery was on track after its underlying operating losses fell by £23 million to £84 million in the first quarter.
Analysts at Numis Securities said that although bookings across the industry may have weakened in February as the unrest in the Middle East and North Africa puts off potential holidaymakers, they believe TUI is trading ahead of the rest of the market. Numis has forecast that TUI will make operating profits of £458 million in the full-year, a 2% increase on the previous year.