FRANKFURT (Reuters) -Holiday group TUI expects to become profitable again in 2022 as countries lift COVID-19 restrictions and people book package tours, eager to pay more for higher hotel grades or extra services on their long-awaited vacations.
The group’s announcement chimes in with other recent positive updates from the travel sector including stronger-than-expected sales at German flag carrier Lufthansa and airport operator Fraport.
TUI expects the recovery to be lasting as people are valuing experiences more highly than goods, and as oil and gas prices should eventually normalize, CEO Fritz Joussen said after TUI’s second-quarter results on Wednesday.
Commenting on oil price levels of $105-110 per barrel, Joussen said, “historically, I have not seen such pricing levels last very long.”
Asked if consumer worries about rising living costs might curb soaring demand, he said, “I think there might even be upside potential if oil and gas prices normalize because they are the driver of inflation today.”
Many analysts say the effects of inflation are the main risk to the travel industry’s 2022 earnings. Joussen said he agreed that rising consumer prices might affect TUI if they remain too high for too long.
He also said rising average travel prices – thanks to more guests treating themselves with higher hotel categories, and people booking longer holidays making rooms more scarce – were covering higher fuel costs.
“There will be practically no last minute offers at low prices this summer,” Joussen said.
He added he expects TUI’s capacity to almost reach the pre-crisis level of 2019 this year, and the company does not need taxpayers’ money, just a little from the banks at the moment.
Germany had given TUI aid of 4.3 billion euros ($4.54 billion) as COVID-19 hit the travel industry in 2020-2021 but second-quarter bookings helped the group further cut debt and it plans to repay all state aid soon.
Germany-listed shares in TUI were up 4.5% by 1230 GMT.
In the second quarter, TUI’s underlying loss before interest and taxes (EBIT) narrowed to 330 million euros, almost halving the loss of 633 million euros it reported for the same period last year.
TUI also said it generated sales of 2.13 billion euros in the second quarter of its 2022 financial year starting in October – nine times as much as in the second quarter of 2021.
It last posted a profit in 2019.
($1 = 0.9476 euros)
(Reporting by Zuzanna Szymanska, editing by Kirsti Knolle, Kim Coghill, Alexandra Hudson)
