Tui Travel says the worst could be over

Tui Travel, Europe’s biggest tour operator, believes the worst could be over as it reported an improvement in trading.

The company said second quarter trading was better than the first quarter, and it was confident of meeting expectations for 2010. It made a £107m loss for the first three months of the year, compared to a £35m loss the same time last year – but holiday companies are traditionally loss-making in the first half since this does not included the key summer period. Chief executive Peter Long said:

Trading has been difficult, but sustained improvements in demand over a number of months leave us more confident that the worst is behind us.

The company’s shares have edged up 0.2p to 258.1p. Analysts at Investec said:

Today’s update indicates improving booking patterns year on year as TuiI begins to lap easier comparatives. While local difficulties remain in France, all other regions show healthy positions and the group remains comfortable with published consensus expectations, despite widening first quarter losses. We will downgrade our estimates slightly, but remain comfortable with the outlook for the shares as summer bookings continue. We retain our hold recommendation.

Panmure Gordon was more positive, saying:

Although Tui Travel has reported a £107m first quarter loss the group is experiencing a significant improvement in profitability in the second quarter and expects to meet first half and full year expectations for 2010 (around £400m of profit before tax). Current trading for winter and summer is strong with extra capacity being added in the UK and Nordics for Summer 2010. This is an encouraging sign and we retain our buy recommendation and 325p price target.