TUI’s tour operator and airline business slips into loss as Middle East crisis weighs on demand and fuel costs

TUI Group’s tour operator and airline activities fell into the red during the third quarter of its 2026 financial year, as the war involving Iran affected holiday demand, pushed up fuel costs and encouraged customers to postpone their bookings.

However, the deterioration cannot be attributed to the Middle East crisis alone. Increased competition, excess capacity in parts of the European leisure market, economic weakness and changing booking habits also contributed to the loss.

For the April-to-June quarter, TUI’s “Markets + Airline” division recorded an underlying operating loss of €17.4 million, compared with a profit of €49.7 million during the same period last year. The year-on-year deterioration therefore reached €67 million.

The division’s revenue fell by 7.9% to just under €5 billion, while the number of customers declined by 6.4% to 5.49 million. The average load factor of TUI’s flights remained relatively high at 91%, but was three percentage points below the 94% achieved a year earlier.

Airlines and tour operators reported together

It is important to note that TUI does not disclose a separate profit or loss figure for its airlines. The results of TUI Airways, TUI fly Germany, TUI fly Belgium, TUI fly Netherlands and TUI fly Nordic are combined with those of the group’s tour operators and sales activities.

It would therefore be inaccurate to say that TUI’s airlines alone lost €17.4 million or €474 million. These figures relate to the entire Markets + Airline division, including the companies that assemble and sell package holidays.

Over the first nine months of the financial year, the division accumulated an underlying operating loss of €474 million, compared with €440 million a year earlier. Although this appears substantial, the figure is partly explained by TUI’s highly seasonal business: tour operators and leisure airlines traditionally incur losses during the winter before generating most of their annual profit during the peak summer quarter.

Nevertheless, the fact that the division remained loss-making during the April-to-June period—when it had earned almost €50 million a year earlier—is a clearer indication of the pressure currently affecting the business.

Middle East crisis weakens demand

The conflict in the Middle East had several consequences for TUI. Airspace closures and uncertainty surrounding destinations in and around the eastern Mediterranean disrupted operations and made customers more reluctant to book holidays to countries perceived as being close to the conflict.

Demand weakened particularly for the eastern Mediterranean, while travellers from Central Europe also booked fewer long-haul holidays to the United States. Greece and Spain—including the Balearic and Canary Islands—became the group’s most popular destinations as customers favoured locations farther away from the conflict.

The crisis also forced TUI to repatriate customers. The group attributes €20 million of the nine-month loss in Markets + Airline directly to war-related repatriation costs. A further €6 million was linked to Hurricane Melissa in Jamaica.

The wider impact is considerably greater than these specifically identified exceptional expenses. Lost bookings, weaker aircraft occupancy and the need to reduce prices are reflected in the ordinary operating result and are not all classified as one-off costs.

Higher fuel prices compound the problem

The war also drove up the price of jet fuel. Although TUI had hedged 96% of its expected fuel requirements for summer 2026 as of early August, hedging does not make the company completely immune.

Fuel may have been secured at prices higher than those prevailing a year earlier, while unhedged requirements, operational changes and future seasons remain exposed. Only 63% of TUI’s expected fuel needs for winter 2026-27 and 39% for summer 2027 had been hedged.

Higher fuel costs came at a particularly unfavourable time. TUI said the European holiday market was characterised by additional capacity and strong price competition. The company therefore had limited scope to pass all its increased costs on to passengers without risking further losses in market share.

This combination—fewer customers, slightly lower load factors, higher fuel expenditure and pressure on ticket and package-holiday prices—explains much of the deterioration.

Economic uncertainty and later bookings

The geopolitical situation is only part of the explanation. TUI also pointed to weak economic conditions, inflation and cautious consumer spending in its principal European markets.

Customers are still travelling, but increasingly wait until shortly before departure before committing themselves. This makes it more difficult for TUI to forecast demand and manage aircraft and hotel capacity months in advance.

The trend also affects cash flow. Customer deposits are received later, contributing to an increase in TUI’s net debt from €1.9 billion to €2.35 billion at the end of June. The group said the difference was mainly related to working-capital movements, including lower advance payments caused by later bookings.

Summer 2026 booked revenue for Markets + Airline remained 6% below last year’s level. The decline was particularly pronounced in the UK, where revenue was down 8%, compared with a 3% fall in Germany.

TUI reduces the capacity carried at its own risk

In response, TUI has reduced its “own-risk” airline capacity by 5%. This refers to seats that the group commits to operating or purchasing in advance, regardless of whether they are eventually sold.

The adjustment gives TUI greater flexibility to add capacity only when actual demand becomes clearer. Chief executive Sebastian Ebel nevertheless said that the group had been able to keep all its aircraft flying and had even operated one more aircraft in the UK than a year earlier. The reduction therefore does not necessarily mean that aircraft have been grounded; rather, TUI is taking fewer advance commercial risks and making greater use of flexible or dynamically packaged holidays.

TUI is also trying to make its airlines more commercially independent. The group launched TUIfly.com in June as a direct booking platform, initially selling flights operated by its German carrier. The other TUI airlines are due to join the platform during 2026. By selling more seats and ancillary services directly, TUI hopes to improve margins and reduce its dependence on tour packages and third-party distribution.

At the same time, 14 new Boeing 737 MAX aircraft have joined the fleet during the current financial year. According to TUI, they consume approximately 15% less fuel than the aircraft they replace, although the financial benefit of fleet renewal will take time to materialise.

Belgian and Western European activities perform slightly better

Within Markets + Airline, the Western Region—which includes Belgium, the Netherlands and France—reported a quarterly loss of €16 million. Although still negative, this was an improvement on the €21 million loss recorded a year earlier.

By contrast, the Central Region, covering Germany, Austria, Switzerland and Poland, moved from a €25 million profit to a €10 million loss. The Northern Region, comprising the United Kingdom, Ireland and the Nordic countries, remained profitable, but its result fell from €45 million to €10 million.

The figures do not disclose the individual performance of TUI fly Belgium. They nevertheless suggest that the sharpest year-on-year deterioration occurred in TUI’s German-speaking and northern markets rather than in the Western Region.

Hotels and cruises cushion the airline weakness

TUI Group as a whole remained profitable because its integrated model allowed stronger businesses to offset the weakness of Markets + Airline.

Hotels & Resorts generated an underlying quarterly operating profit of approximately €123 million, while Cruises contributed €132 million and TUI Musement nearly €23 million. Group underlying operating profit reached €234.6 million, although this was 27% below the previous year and lower than analysts had expected.

TUI therefore maintained its full-year underlying operating profit forecast of between €1.1 billion and €1.4 billion, provided geopolitical tensions do not escalate significantly, and fuel supplies remain secure. The group has, however, suspended its revenue forecast.

There are also tentative signs of recovery. Revenue from bookings made during the latest four-week period was 7% higher than a year earlier, suggesting that customers had begun returning as the peak summer season approached. TUI will provide its next update on 22 September.

The conclusion is therefore nuanced. TUI’s tour operator and airline division is undeniably under considerable pressure, and its return to a quarterly loss is significant. The Middle East crisis was an important trigger, through cancellations, repatriation costs, weaker demand and more expensive fuel. But the figures also reveal deeper commercial difficulties: cautious European consumers, increasingly late bookings, excess market capacity and intense price competition.

TUI’s hotels and cruise ships currently provide the profits needed to absorb that weakness. The real test will be whether the airline and tour operator activities can recover during the peak summer quarter—and whether the improvement in last-minute bookings proves durable rather than temporary.