TUI Travel reported holiday bookings broadly in line with reduced capacity and prices rising above costs in an upbeat management statement.
The interim report by Europe’s largest travel group contained no surprises, reflecting a ‘steady as she goes’ strategy.
However, the capacity reduction in UK mainstream holidays this summer is 17% and chief executive Peter Long said he could still remove a further 2%-3%. The capacity cut for this winter is 9%.
At least one City analyst detected a note of caution in the statement, despite TUI Travel reporting: “We are achieving our margin targets.”
KBC Peel Hunt analyst Nick Batram said: “The overall tone of the update is more cautious. Demand is clearly falling.
“Aggressive reductions in capacity are helping mitigate decline in demand at present. The key will come in the second quarter. If demand does not come through then, [TUI Travel’s] forecasts will come under pressure.”
TUI Travel reported UK mainstream prices up 10% year on year for this winter, up to February 1, and average selling prices for the summer are 11% higher than a year ago – well ahead of a 6% rise in costs.
Long said he did not believe demand would fall by more than 20%. He reported research suggesting 87% of UK clients who booked by this time in 2008 intend to take a holiday abroad this year – the same as 12 months ago.
TUI Travel’s figures for Germany, its biggest market, were more mixed – with summer capacity down 14% year on year but average prices falling 1%, although the sales season has so far been short. Prices in Germany for this winter are 7% up on a 17% capacity reduction.
The group stressed it would be able to adjust capacity further in all major markets by cutting uncommitted bedstock (80% of the total) and third-party flying (30% of tour operator capacity).
Thomas Cook was due to issue its interim management statement yesterday.
Long does not believe demand will fall by more than 20%
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