Thomson tour operator TUI Travel yesterday said trading had picked up in the peak summer season but warned UK margins were still being hit by higher fuel costs and air passenger tax.
The firm, created by the merger of TUI's travel division and First Choice in August, said business picked up after a weak start to summer. TUI added forward sales were also "very positive", with winter bookings at First Choice in the UK up 25 per cent on last year and up three per cent for TUI Thomson.
But it said UK and Ireland margins were under pressure by the doubling of air passenger duty in February and year-on-year increases in the cost of fuel.
"The signs for future seasons' trading are very encouraging, particularly in the UK where we are benefiting from two strong franchises," chief executive Peter Long said in a statement.
In the UK mainstream business, the First Choice brand performed well with sales rising six per cent driven by a strong long-haul offering and a recovery in medium-haul compared to last year.
Sales in the Thomson business dropped four per cent on lower capacity, primarily as a result of reducing capacity in the package holiday segment and increasing participation in the independent travel segment. Tightening the package holiday capacity led to good margins in the summer, but overall margins across the TUI Travel UK and Ireland businesses continue to be adversely hit by higher taxes and fuel costs, the company said.
TUI also said its acquisition pipeline remains strong as it continues to target travel companies, especially in the Asia Pacific region, online, activity and North American student travel segments.