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TUI’s profits take hit from flight disruption, but trajectory is still upwards

Story Highlights

The results of tourism company TUI AG were profitable apart from the air travel disruptions. The company remains on track to reach pre-COVID levels this year.

TUI (GB:TUI) reported its third-quarter results for 2022, and believes it will return to profit in 2022 – despite a $77 million loss due to flight disruption in the third quarter.

The company hit a 92% load factor with around 5.1 million customer departures.

The group’s revenues jumped by £3.8 billion on a year-over-year basis to £4.4 billion and the losses were reduced to €331.3 million, on account of normalised travel operations post the pandemic.

TUI’s underlying EBIT was at €48 million before accounting for the impact of flight disruption costs of €75 million.

Air traffic disruptions in May and June were at higher levels, but the company is hoping it will return to normal shortly.

The stock of the company has recovered strongly since the pandemic. The stock is trading down by 43% in the year to date.

TUI operates a diverse portfolio of airlines, hotels, travel agencies, tour operators, and cruise liners around the world.

Strong summer season

The company reported strong demand for passengers this summer season across all its segments and markets, and reinstated its expectations to generate positive earnings for the full year of 2022.

The company is looking forward to positive quarters with strong momentum in the summer bookings, especially in Europe. The Hotels and Resorts segment was already back to pre-COVID levels with positive EBIT for the fourth consecutive quarter.

The company’s total summer bookings for 2022 are 5% higher than 2019 levels. TUI expects the same growth in occupancies and prices to continue in the fourth quarter, leading to a strong summer season.

View from the City

According to TipRanks’ analyst rating consensus, TUI stock has a Moderate Sell rating from eight analysts. It includes five Sell and three Hold.

It has an average price target of 180.7p, which represents a 25.3% change in the price from the current level. The price target has a low and a high forecast of 125p and 279p, respectively.

Ending thoughts

The travel industry in Europe is up for some solid sales this summer season. As the passengers are keen on ‘revenge travel’ after the removal of lockdowns, companies such as TUI are ready to cash in some profits. However, flight delays and cancellations due to staff shortages and high labour make for short-term headwinds for the stock.

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