TUI's CEO Explains Why You Won't See Any Last Minute Flight Deals This Year

Simple Flying

By Callum Tennant

Published May 11, 2022

The group has managed to halve its losses from last year and is now predicting a possible return to profitability

Photo: Jake Hardiman - Simple Flying

TUI's CEO has warned holidaymakers not to expect any last-minute deals this summer as the TUI group reported a positive half-year report. Fritz Joussen said that demand for travel had rebounded and that over the last six weeks, TUI group had seen demand levels higher than those for the same period in 2019.

With such high levels of demand, airlines have little need to lower prices to stimulate additional demand. Higher costs for airlines are also likely to limit the scope businesses have to offer widespread discounts.

The group has undertaken an aggressive plan to cut its costs before 2023. Photo: Jake Hardiman.

TUI predicts a return to profitability

TUI revealed that summer 2022 bookings are currently at 85% of summer 2019 levels in its half-year report. However, bookings in the last six weeks have firmly surpassed those of 2019. The UK market, in particular, remains the most advanced for the group, with bookings up 11% versus summer 2019.

In May 2020, the group announced that it would aim to make permanent targeted savings of $420 million (€400 million) per year by 2023. The group has achieved 60% of these goals so far, with the markets and airlines section of the group accounting for 85% of those savings.

The group has also managed to half its losses compared to a year ago. The company reported an earnings loss of $642 million (£525 million) for the half-year to March 31, following a $1.3 billion (£1.11 billion) loss for the same period a year earlier.

As a result of that turnaround and a boom in demand, shareholders have been told the business could return to profit by the end of the year. The group has said, however, that due to the war in Ukraine and the risk posed by possible higher levels of inflation, it is not in a position to make a definite forecast for 2022.

The UK market has proved a success for the airline. Photo: Arran Rice.

Summer 2022 is not the Summer of low fares

Unfortunately for travelers, TUI’s decision to not offer any special offer low fares this summer is likely to be the rule and not the exception. The industry is facing a perfect storm of issues that are limiting its ability to keep up with demand and that are forcing prices upward.

The price of fuel is the single largest cash outflow for airlines, accounting for anywhere between 30% and 60% of expenditure. Jet fuel prices have risen by over 100% compared to last year due in part to the war in Ukraine. This rise is already resulting in higher fares for passengers and reduced profits for airlines.

The sector is also seeing its labor prices soar as airlines struggle to recruit the number of workers they need to deal with the expansion in demand. During the height of the pandemic, many airlines slashed their staff numbers. As demand has returned, many airlines haven’t been able to attract enough workers. This has led to flight cancellations and even a reduction in the number of seats on some aircraft.

Rising inflation is also biting into operating profits and forcing many airlines to contemplate a summer price raise rather than a price drop.

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