TUI’s second-quarter underlying operating profit is expected to have improved by between €5-25mn, compared to last year’s loss of €207mn. The improvement was driven by a strong performance in its Markets and Airlines (M+A) division, which helped more than offset around €40mn of additional costs from the war in Iran.
Due to the uncertainty around the conflict in the Middle East, M+A booked revenue for Summer 2026 is 7% below the prior year. As a result, TUI has suspended its full-year revenue guidance (previously: 2-4% growth).
Full-year underlying operating profit guidance has also been downgraded. It is now expected to be in the €1.1-1.4bn range, pointing to a decline of up to 22% (previously: 7-10% growth).
The shares were down 2.7% in early trading.
Our view
TUI has seen demand for its holidays dry up in the wake of the Middle East conflict, with Summer bookings down 7%. As a result, full-year revenue guidance has been suspended, and there’s also been a sharp cut in underlying operating profit guidance.
At its core, TUI operates a diverse travel business, owning an airline, cruise ships, hotels, and resorts, serving over 20 million customers across more than 180 destinations. Its lower-margin Markets and Airline segment serves as a customer-acquisition tool, funnelling guests into its other, more profitable divisions.
We’ve been impressed with TUI’s progress in recent years. Digital investments have helped drive higher sales, strong demand meant profits growing faster than revenues, and balance sheet health was improving.
The group also made a conscious effort to balance the amount of guaranteed capacity (which carries financial risk if not sold) with options that can be adjusted based on demand. By reducing its own capacity and selling this first, profitability in the markets and airlines division also improved over the first half.
However, the Middle East conflict is having a major impact on demand over the crucial summer season. Alongside a lingering impact from the Caribbean hurricane season, the outlook for revenue and profit growth for the rest of the year has worsened materially. As a result, full-year underlying operating profit guidance has flipped from as much as 10% growth to a decline of up to 22%.
It’s not yet clear just how long the Middle East conflict will last. It's already sent oil prices spiking higher, and while TUI has hedged fuel and energy costs well in the near term, persistently high oil prices will likely weigh on future profitability.
In the meantime, the drain on cash when you have planes, huge hotels and cruise ships to fill is big. The balance sheet is in decent shape, but we could start to see net debt trend higher again. As a result, dividends could become less of a priority.
TUI’s progress in recent years shouldn’t be overlooked. It remains a strong business, and with the recent decline in valuation, we see scope for upside over the long term. But external factors are likely to drive near-term sentiment, and things could get worse before they get better. Until the Middle East conflict ends and holidaymakers are confident that stability has returned in the region, demand for TUI’s services is likely to remain under pressure.
Environmental, social and governance (ESG) risk
The transport industry is medium risk in terms of ESG, with European firms managing them better than others. Carbon emissions, product governance, and quality & safety are the biggest risk drivers. Other key areas are emissions, effluents & waste, labour relations, and employee health & safety.
According to Sustainalytics, TUI’s management of ESG risk is average.
TUI has a very strong whistleblower programme and has appointed board-level responsibility for overseeing ESG issues. However, ESG disclosures fall short of best practice, and there is no reference to linking executive pay to ESG targets.
TUI key facts
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This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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