TUI said political unrest in the Middle East and North Africa was still putting customers off vacationing in the region.
The group, which operates the Thomson and First Choice chains, cut the amount of holidays it sold to Egypt and Tunisia this summer and increased holidays on sale to alternative destinations such as Spain, Greece and Turkey.
“We are anticipating a slow recovery in trading to Egypt and Tunisia and have managed our capacity accordingly,” Chief Executive Peter Long said in a statement on Thursday.
Shares in TUI Travel, which have lost nearly half their value since January on concerns over the consumer environment, were down 4.3 percent to 148.3 pence at 1037 GMT.
Numis analyst Wyn Ellis downgraded the stock to “hold” from “add” and cut his price target to 160 pence from 180p, flagging concerns over rising fuel prices, Middle East and North Africa unrest and macro-economic concerns.
“Today’s pre-close update from TUI was reassuring with regards to short term trading, but we continue to believe that 2012 estimates look vulnerable,” Ellis said.
TUI Travel, majority owned by Germany’s TUI AG, said in May that troubles in Egypt and Tunisia had knocked 29 million pounds ($45 million) off its first half profit but expected to fully mitigate the impact in the second half.
The group said it was confident its full year results would be in line with expectations following strong late demand for summer holidays. It said the summer season had traded well with bookings up across most of its markets while margins for late bookings had been in line with its expectations.
“We are pleased with our performance in the lates market for summer 2011 and most of our programs are now almost fully sold. We remain confident that the full year results will be in line with our expectations,” Long said.
The group added that trading for winter 2011/12 had been satisfactory overall.
TUI Travel’s performance has held up despite challenging economic conditions helped by the broader diversity of its customer base which has a high proportion of couples, especially ‘empty nesters’ whose children have left home and who have disposable income.
“Our focus remains on differentiated product, maintaining margins, prudent capacity management and delivering our turnaround and cost savings program,” Long said.
In contrast, rival Thomas Cook has issued a string of profit warnings leading to the departure of veteran chief executive Manny Fontenla-Novoa. Thomas Cook shares were down 5.6 percent to 39.3 pence at 1028 GMT.
British consumer confidence slipped to a four-month low in August.
Market expectations for TUI Travel’s full-year pretax profit range between 326 million and 367 million pounds, with the average forecast at 352 million, according to a Thomson Reuters I/B/E/S poll of 13 analysts.
