By Joanna Plucinska, Ilona Wissenbach and Andrey Sychev
(Reuters) -Europe's largest tour operator TUI exceeded profit expectations for the third quarter on Wednesday, buoyed by strong summer travel demand, a resurgence in packaged holidays and a boost from the bankruptcy of German rival FTI.
Travel firms and airlines had hoped this summer season would outshine pre-pandemic levels, despite economic uncertainty, delays in plane deliveries and rising jet fuel prices.
"Holidays are still highly prioritized by consumers," with summer bookings 6% ahead of last year, Chief Financial Officer Mathias Kiep said on a media call.
TUI posted 232 million euros ($254.92 million) in underlying earnings before interest and tax for the April-June quarter, up 37% from 169 million euros a year earlier. Analysts polled by LSEG had expected 217 million euros.
Shares were up 3.6% in morning trading.
TUI confirmed its forecast for a 25% increase in operating profit this year and 10% revenue growth, despite delivery delays from Boeing (NYSE:BA) and costs associated with an outage at cybersecurity tech firm CrowdStrike (NASDAQ:CRWD) last month.
The German group recently switched its listing from London to Frankfurt but maintains a large customer base in Britain and saw a boost from the insolvency of competitor FTI.
RESILIENCE IN SECTOR
While demand has remained strong, some airlines' results in the quarter were impacted by rising costs associated with labour disruptions, maintenance, or weaker business bookings.
"TUI's Q3 results prove that the travel sector is more resilient than some corners of the market thought it could be this summer as price increases across the sector resulted in some weakness in demand," said Julie Palmer, partner at Begbies Traynor.
Though budget carrier Ryanair had warned that ticket prices could drop as customers become more price-sensitive, TUI said bookings did not slow despite a 3% rise in prices on the year for its flights and packages.
TUI has been helped by packaged holidays making a comeback, with inflation raising hotel, sightseeing and restaurant prices. Packages offer tourists more certainty on pricing, experts say, with fewer unexpected outlying costs.
Analysts said TUI's positive update was a good sign for other packaged holiday providers, including Britain's Jet2.
Rival easyJet (LON:EZJ)'s holiday business has also been successful, bolstering the broader airline sector.
Chief Executive Sebastian Ebel said TUI was positioning itself further outside of Europe to bolster business, including in Latin America, the Caribbean and Asia.
($1 = 0.9101 euros)