Tui Reports 10% Decline in UK Summer Holiday Bookings Due to Iran War
Tui, Europe's largest travel operator, has announced a 10% fall in revenue from summer holiday bookings made by its UK clientele. The company attributes this downturn to heightened customer caution following the US-Israel coalition's commencement of hostilities against Iran, which began with wide-ranging strikes on 28 February, killing Iran's Supreme Leader and hundreds of civilians, including 110 children at an Iranian primary school.
The company noted a distinct shift in consumer behaviour, with demand migrating from Eastern to Western Mediterranean destinations. Additionally, customers are now booking trips closer to their intended departure dates, rather than well in advance.
In response, Tui is reducing the number of seats it procures from its airline partners by 4-5% for the summer season, although its own flying programme will remain at current levels. Chief executive Sebastien Ebel, while acknowledging these adjustments, stated he does not anticipate jet fuel shortages in the coming weeks, despite concerns raised by the effective closure of the Strait of Hormuz. This critical waterway for oil and liquefied natural gas has driven up jet fuel prices, prompting some airlines to increase ticket prices and others to trim capacity to attract hesitant customers.
Tui's financial results for the first three months of the year revealed a €40 million hit to profits, directly linked to the US-Israel conflict with Iran. This figure includes costs associated with customer repatriation, welfare provisions, and lost income. The company reported an underlying loss before interest and tax of €188 million for the quarter, an improvement on the €207 million loss recorded in the same period last year.
Overall, Tui observed a 7% decline in revenue from total summer bookings compared to the previous year. Investment director Russ Mould of AJ Bell commented that while the holiday and airline industry maintains there are no immediate fuel shortages, "consumers are getting jittery." He added that "there needs to be greater clarity on alternative sources of fuel to the Middle East before the public feels convinced to hit the buy button for their summer holiday."
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, echoed this sentiment, stating that consumers "have understandably become more cautious about splashing out on a holiday." However, Chiekrie also noted that "it doesn't appear that holidaymakers are abandoning their vacation plans completely. Recent data suggests they're simply leaving it until later to book. And while that's not ideal, it's better than complete demand destruction."
