Europe's largest travel operator TUI on Tuesday reported far better-than-expected first quarter results as it swung to a profit on the back of robust travel demand
The results helped send the German-based company's shares higher in Frankfurt and London as shareholders prepared to vote on whether TUI should delist from the London Stock Exchange, in what would be a blow to the UK market.
TUI reported an operating profit of 6 million euros ($6.46 million) versus a loss of 153 million in the year-earlier period and an LSEG forecast for a loss of 102 million euros.
Europe's airlines are entering 2024 with robust outlooks as travel demand is expected to surpass pre-pandemic levels despite economic uncertainty, delays in plane deliveries from manufacturers and rising jet fuel prices.
TUI's first-quarter beat is a positive signal for the airline sector as a whole, an investor in other airlines, who did not wish to be named, said.
"These updates highlight the strength of demand for holidays at present," Dudley Shanley, an analyst at Goodbody, said in a note. "This summer should be very strong for... the European airlines."
The first half of the fiscal year is usually weak with the bulk of annual profit coming from the main April to September summer season.
TUI's shares jumped more than 7% in early trade in Frankfurt but were up just 1.9% by 1136 GMT.
TUI shares in London were up 1.5%. The company's executive and supervisory boards recommended that shareholders vote to remove TUI from the London Stock Exchange at Tuesday's annual general meeting to focus on the Frankfurt listing.
Higher prices and bookings helped lift TUI's earnings in the first quarter, with the company serving 3.5 million travellers, compared with 3.3 million travellers in the year-earlier quarter.
"People's willingness to travel is still high, despite a market environment that remains challenging. We are thus creating the basis for TUI's future profitable growth," TUI Chief Executive Sebastian Ebel said in a statement.
Customer numbers are set to hit 20 million this year, reaching pre-pandemic levels, up from 19 million last year, Chief Financial Officer Mathias Kiep told a media call, adding later that second-quarter results are also expected to be stronger than last year.
TUI maintained its outlook for a 25% increase in operating profit in the 2024 financial year which ends in September, and also set a medium-term target for a compound annual growth rate of 7%-10%.
Deliveries of Boeing MAX 737 10s are expected to be delayed but MAX 737 8 planes on order should arrive on time, CEO Ebel said on the call, adding that some leasing deals have been extended to ensure capacity.
TUI shares in Frankfurt have fallen 12% since the start of 2023. Kiep told shareholders during the company's annual general meeting on Tuesday that the "share performance was and is clearly unsatisfactory."
On de-listing from the London Stock Exchange, the Hanover-headquartered company said having a single German listing could better reflect its ownership and trading patterns.
Three-quarters of shareholders at the annual general meeting need to vote in favour of the delisting to pass the motion.
TUI Travel's dual London and Frankfurt listings resulted from the combination of Germany's TUI with Britain's First Choice Holidays in 2007.
($1 = 0.9289 euros)
(Reporting by Joanna Plucinska; Editing by Muralikumar Anantharaman, Sherry Jacob-Phillips, Kirsten Donovan and Susan Fenton)