TUI AG Eyes Cruise Expansion

Restructuring Enters Next Stage

Published May 16, 2014 9:08 AM by The Maritime Executive

German travel and tourism group TUI AG said it was on track to meet its targets for the next two years and was considering expanding its hotels and cruises operations as it reported a smaller than expected second-quarter loss.

TUI AG, which owns a 55 percent stake in Europe's largest tour operator TUI Travel, is undergoing a restructuring program in a bid to reach underlying profit of 1 billion euros ($1.4 billion) in its 2014/15 fiscal year.

Some analysts have cast doubt on the targets recently, but TUI said on Friday the program was on track and the group was now entering the growth phase of the plan.

TUI, which also runs its own hotels and cruise operations alongside the stake in TUI Travel, said it expected a turnaround in its cruise operations this year while profitability in its hotel operations would be up.

TUI said it was considering expanding TUI Cruises to offer holidays for UK customers, where TUI Travel brand Thomson Cruises already operates, although no decision had yet been taken.

In hotels, it said the RIU Group's return on invested capital was due to increase beyond 12 percent, while its Robinson hotels would see the figure rise to more than 9 percent this year from a previous 6 percent.

It also plans to expand the number of Robinson club resorts to around 40 from 24 in the coming years.

Overall, its underlying loss before earnings, tax and amortization (EBITA) reached 205.1 million euros in the second quarter, against analyst forecasts for a loss of 223 million.

"Against the background of the improved business performance of the sectors, we are very confident to fully reach our earnings targets for the full year," Chief Executive Friedrich Joussen said in a statement.

TUI AG expects sales to rise between 2 and 4 percent in its 2013/14 year and underlying EBITA to grow by between 6 and 12 percent.

TUI Travel reported results earlier this week, showing a dip in the number of holidays sold for this summer due to a slow recovery in Europe.

($1 = 0.7291 Euros)