Thomson and First Choice owner, TUI Travel, claimed trading remained "buoyant" as households showed no sign of ditching summer travel plans, but still suffered losses.
TUI Travel, which has a head office at Westwood Business Park, Coventry, announced it made an underlying loss before tax of £294 million in the six months to March 31, an improvement compared with a £339 million loss the year before. Revenues were up from £4.7 billion to £5.2 billion.
Europe's biggest travel firm revealed in the past six weeks holiday sales in the UK for summer 2008 were up eight per cent on a year earlier, with 61 per cent of its UK programme booked.
It has 21 per cent less product left to sell and added it had achieved "strong pricing" in recent weeks.
It's medium and long haul trips from the UK performed strongly, with sales up 21 per cent and eight per cent in the six-week period. Greece, Turkey, Egypt, the US, Dominican Republic and Mexico were amongst the most popular destinations. The group said it is seeing "no indication customers are trading down or altering holiday plans as a result of economic conditions".
TUI Travel chief executive Peter Long said there was no evidence of deteriorating consumer sentiment in booking patterns, or in average holiday duration, selling price or cancellation rates.
"This confirms our research the annual holiday is an important component of the family budget," he said.
But analysts have warned next year's market will be different.
"Travel demand lags consumer expenditure trends by six to 12 months, so we never expected 2008 to show any deterioration; we believe 2009 will be a different market," commented Andrew Fitchie, analyst at Collins Stewart.
TUI has also assured its customers they would not be facing surcharges due to a weaker pound to euro. In six months, the rate dropped from 1.45 euros to 1.26, causing operators to ask customers for more money.
Mr Long said: "We bought the euro last year at good rates, so our customers are in a better position."
The group did, however, impose a fuel surcharge last month amid soaring oil prices. Short haul passengers have to pay an extra £5, medium haul £10 and long haul travellers £30.
TUI's customer capacity is 13 per cent lower than last year, following a purge of loss-making routes, particularly short haul across Europe. A number of city routes have been culled, reflecting the growing trend for consumers to book their own short-haul trips online.
The group said it would be operating with six fewer aircraft this winter and ten fewer aircraft in summer 2009 as part of its attempts to increase load factors.
TUI Travel, which was created last year from the tie-up of TUI AG's travel division and Britain's First Choice, added discussions are continuing with Lufthansa regarding a potential merger of Germanwings and TUIfly.
The group has acquired 10 "niche specialist" businesses in the year to date for a maximum of £85.2 million and said it continues to "explore a significant number of opportunities".
TUI Travel said it was on track to meet its upgraded annual synergy target of £150 million and is confident of meeting market expectations for the current year. It is paying a second interim dividend of 2.8 pence per share.