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TUI losses widen to £261m as Brexit weighs on demand

Sky News logo Sky News 15/05/2019 John-Paul Ford Rojas, business reporter

a blue and white plane sitting on a runway at an airport: TUI has issued two profit warnings this year © Getty TUI has issued two profit warnings this year

Travel operator TUI has reported widening half-year losses and a fall in summer bookings as it counts the cost of weak consumer confidence and Brexit uncertainty.

The group reported an underlying loss of €301m (£261m) for the six months to the end of March, up from €170m (£148m) in the same period a year ago.

It has also been knocked by the grounding of Boeing's 737 MAX aircraft, which it has previously warned could cost up to €300m (£261m) as it leases more aircraft to cover its routes.

TUI said the decline in its first-half performance was partly due to the knock-on impact of last summer's heatwave holding back bookings and because it had too much capacity in Spain as holidaymakers opted for cheaper destinations such as Turkey.

For this summer, bookings in its package holiday and airlines business are down 3% while selling prices are up by only 1% amid a competitive market - not enough for TUI to cover rising costs.

TUI said that for this part of its business "weak demand environment persists", putting pressure on profit margins.

"This is driven by a number of factors - reduced demand due to last year's extraordinary hot summer, slowdown of consumer confidence, Brexit uncertainty, shift in demand to the eastern Mediterranean coupled with overcapacity to Spain, as well as the 737 MAX grounding," TUI said.

a crowded beach on a sunny day: The travel operator was hit by overcapacity in Spain © Getty The travel operator was hit by overcapacity in Spain

However, the group said its hotels and cruise ships business, where it has been investing in expansion over recent years, continued to perform well.

The results come after two profit warnings from TUI earlier this year - one blamed on the weak UK market and the other on the Boeing issue.

TUI's fleet of 150 aircraft includes 15 currently grounded 737 MAX aeroplanes, with a further eight scheduled for delivery after the lifting of the grounding.

It has warned investors that it faces a €200m (£174m) hit from the grounding of the aircraft, assuming flights resume by mid-July.

If it does not become clear by later this month that flying will re-start by that time, it will have to extend measures to cover for this until the end of the summer season, adding a further impact of up to €100m (£87m).

TUI chief executive Fritz Joussen said the company was "on track, both strategically and operationally" and that medium and long term growth forecasts were intact. Shares rose 3%.

The company is not the first travel firm to warn of a Brexit impact on demand, with easyJet saying last month that the uncertainty was having an impact.

Meanwhile, TUI's rival Thomas Cook has been seeking new debt funding from lenders and has been looking to sell its airline business.

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