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TUI warns of Omicron hit to winter bookings

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·Business Reporter, Yahoo Finance UK
·3 min read
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A Boeing 787 of the travel company TUI taxis close to the northern runway at Gatwick Airport in Crawley, Britain, August 25, 2021.  REUTERS/Peter Nicholls
Revenues for TUI rebounded strongly in the fourth quarter due to vaccination programmes and the return of leisure travel, while the first quarter of the new financial year is 93% booked, the company said. Photo: REUTERS/Peter Nicholls

TUI (TUI.L), the world’s largest package holiday operator, has warned that bookings for winter holidays have taken a hit following the emergence of the Omicron variant.

The Anglo-German company said it is now reviewing whether to cut capacity for the rest of its winter programme.

It made a loss of €2.5bn (£2.1bn, $2.8bn) in the year to the end of September, a narrower annual loss compared to the year before which stood at €3.2bn.

Revenues rebounded strongly in the fourth quarter due to the success of vaccination programmes and the return of leisure travel, while the first quarter of the new financial year is 93% booked, the company said. However, this is still almost a third lower than its pre-pandemic levels.

The Easter period is already running at about 90% of pre-pandemic levels “predominantly booked by the UK”.

Read more: Stock market rally continues in Europe despite rising Delta infections

TUI is now eyeing up a summer recovery after reporting that it is close to breaking even in the final three months of the year. The company has so far received 2.2 million bookings for the summer period, an increase of 535,000 since its last update in early October.

Shares fell as much as 5% on the back of the news before recovering slightly.

“It is still too early to make a real forecast for the 2022 summer season. We are optimistic that tourism will be able to recover to 2019 levels next summer. We want to, we can and we will find our way back to economic strength,” Fritz Joussen, chief executive, said.

“The programme of the first financial quarter of 2022 is already almost fully sold. This means that we are currently achieving 69% of the pre-crisis level. We expect summer 2022 to reach a largely normalised booking level.”

He added that the coronavirus pandemic was causing holidaymakers to book “much later and at shorter notice”.

TUI shares slipped on Wednesday as traders digested the announcement. Chart: Yahoo Finance
TUI shares slipped on Wednesday as traders digested the announcement. Chart: Yahoo Finance

In October, Tui announced plans to raise €1.1bn by selling shares at a 35% discount to help pay off more than €4bn of state-backed loans it took from the German government.

The announcement comes as new travel rules came into effect on Tuesday as the UK government tries to prevent the spread of the Omicron variant. The changes include pre-departure tests for people arriving in Britain, while 11 African countries have been placed on the red list.

In addition to this, all travellers returning to the UK must take a PCR test and self-isolate until they receive a negative result.

Adam Vettese, analyst at eToro, said: “Even if Omicron doesn’t prove to be a serious risk, the uncertainty caused by a lack of information could harm consumer confidence severely.

“Extra travel restrictions have already been imposed in the UK and some EU nations. Plus, countries such as Austria, The Netherlands and Germany were already taking steps to introduce limited forms of lockdown even before Omicron became an issue.

“All this together acts as a huge discouragement for consumers, unsure if their holiday bookings will be unceremoniously wiped out. This will certainly put a dampener on trading for the firm regardless of the actual outcomes with Omicron. TUI could find itself soon having another mountain to climb and investors won’t be supportive as it makes the attempt,” he added.

Watch: Should I book a holiday in 2021?

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