Travel firm TUI sees growth as Canaries and Cyprus replace Egypt, Tunisia

By Sarah Young

LONDON (Reuters) - TUI Group (TUIT.L), the world's largest tour operator, said it was confident of increasing earnings by more than 10 percent this year, as holidays to the Canary Islands and Cyprus replace security-threatened destinations in Egypt and Tunisia.

The positive outlook from Germany-based TUI echoed comments from Britain's Thomas Cook (TCG.L) in November, showing holiday companies have defied market worries that security concerns would dent appetite for travel.

Holiday firms were forced to stop holidays to the Egyptian resort of Sharm al-Sheikh in November. That followed the cancellation of trips to Tunisia earlier in the year, after the death of 38 holidaymakers, most of whom were TUI customers, in a massacre on a beach in June.

The security threat was further intensified by the attacks in Paris which killed 130 people on Nov. 13.

TUI's joint chief executive Peter Long said TUI's growth forecast for the current financial year took into account the costs of disruption in Egypt.

"We have the ability to absorb this and still be comfortable with the guidance of at least 10 percent growth in earnings," he told reporters on Thursday.

For the three years to 2018, TUI also reiterated guidance for underlying annual earnings (EBITA) growth on a constant currency basis of at least 10 percent.

Shares in TUI traded up 6 percent to 1,187 pence at 1014 GMT, returning to around the level at which they traded before the suspension of holidays to Sharm al-Sheikh.

Customers were choosing to go to the Canary Islands, Cape Verde, Cyprus, the Caribbean and Mexico, Long said, instead of Tunisia and Egypt, noting TUI was benefiting from its ownership of Boeing (BA.N) Dreamliners, allowing it to expand its long-haul offerings.

Long also said TUI was likely to sell most of its Hotelbeds unit, a business-to-business accommodation wholesaler, which has been the subject of a strategic review since May, a divestment expected by analysts.

TUI said that for its summer 2016 programme, the period during which it makes the bulk of profits, it had seen a good start to trading, with bookings from Britain up 11 percent.

For the 12 months ended Sept. 30, TUI reported underlying core earnings of 1 billion euros (£721 million) on a constant currency basis, 15.4 percent higher than last year and beating the top end of its own guidance for a rise of between 12.5 and 15 percent.

Group profit had taken a 52 million euros hit from the cancellation of Tunisia holidays in the period.

TUI, formed last December through the merger of London-listed TUI Travel and German majority owner TUI AG, also said it would raise its dividend per share to 56 cents from 33 cents.

(Editing by Kate Holton and David Holmes)