TUI capacity cuts in line with First Choice’s original strategy

TUI Travel UK’s announcement of capacity cuts of 15% for summer 2009 is part of an ongoing strategy developed by First Choice to trim capacity in the shoulder seasons and less upmarket destinations.

Following the merger of Thomson and First Choice last year, TUI Travel has already cut its total capacity by 13% for summer 2008 and is preparing for similar cuts for next summer.

TUI Travel chief executive Peter Long, speaking at last week’s results announcement for the nine months ending June 30, defended the cuts by saying the vertically integrated operator is preparing its business for a potentially worsening economy.

He added: “We are taking out capacity for the coming seasons where it makes sense to do so and retaining significant flexibility to adjust supply further if demand changes.”

However, leisure analyst Michael East, managing director of Eastcastle, said the cuts are not just being driven by the economy, adding: “The capacity cuts that TUI Travel are putting in place for 2009 are not just in response to the market but also represent Long’s policy of trimming the shoulder periods and certain short-haul destinations such as Costa Brava.

“Long’s strong strategy offers a very sophisticated insight into the marketplace and where it is going.”

Meanwhile, Long said the summer 2009 programme is already 7% sold, a broadly similar proportion to 2007’s early sales for 2008. The average selling prices for charter
holidays in 2009 excluding scheduled flying is up by 12%.

Sales for winter 2008/09 are 2% ahead of where they were this time last year, while the average selling price is 13% up. Customer numbers have fallen by 10%, although this follows a capacity cut of around 21% for the season.

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