TUI Travel Slashes capacity, Raises Prices

TUI Travel has reduced its U.K. winter capacity by 28 percent, which has helped boost vacation prices an average of 10 percent, the U.K. travel company said in a trading update released Friday.

“In anticipation of a period of weaker demand, we have implemented significant capacity reductions across our source markets,” TUI Travel said. “These reductions have enabled us to maintain and in certain markets (U.K. and Central Europe) increase the average selling prices we are achieving, reach the necessary load factors and deliver our margin targets.”

The company said that summer 2009 volume has dropped 17 percent compared to this time last year, countered somewhat by an 11 percent price increase. TUI Travel said it anticipates reduced early bookings and has cut summer capacity by 16 percent.

“Despite a more challenging trading environment, we are satisfied with our current position across all our source markets and businesses,” TUI Travel said. “Within our mainstream source markets, through a combination of reducing fixed capacity, third-party flying (which is 30 percent of all tour operator capacity) and uncommitted bed stock (which accounts for 80 percent of bed stock), we believe we can manage the current market conditions and continue to improve the profitability of the business.”