TUI AG (TUI1.XE), the German holding company with assets in tourism and shipping, Monday reported a narrowed first-quarter net loss thanks to improved administrative expenses, financial result and taxes on income, adding that bookings in its key market increased notably in the past few weeks.

The Hanover-based company reiterated its outlook of slightly higher adjusted earnings before interest, tax and amortization, or Ebita, for continuing operations for fiscal 2010. It also still expects stable adjusted Ebita in its tourism business, while it predicts its container-shipping unit Hapag-Lloyd AG to contribute negatively to the group result.

The MDAX-listed company said its core business tourism sales and adjusted Ebita declined as expected due to the global economic crisis, whereas the stake in Hapag-Lloyd, measured at equity, performed better than expected.

The market welcomed the news and at 1000 GMT, TUI shares were up 7.2% at EUR6.81. Brokerage Landesbank Baden-Wuerttemberg said the narrowed net loss is a positive surprise with the main reason for the positive deviation being the Hapag-Lloyd result. It noted sales and adjusted Ebita "were slightly shy of our and consensus estimates." It kept its hold rating and still has the target price under review.

Martina Noss of NordLB said the only surprise in the earnings was the good financial result, but pointed out this is mainly due to an appreciation from a loan for its container shipping operations. She maintained the hold rating with EUR7 target price.

Though Hapag-Lloyd's transport volumes dropped 13% and average freight rates 16% in the first quarter, some "substantial rate increases were achieved," TUI said.

TUI sold a majority stake in Hapag-Lloyd in March 2009. TUI and booked a EUR990 million gain in the first quarter 2009 from the EUR3.25 billion disposal, unloading EUR1.2 billion in debt. The Albert Ballin GmbH & Co. KG consortium owns a 56.7% stake in Hapag-Lloyd, while TUI owns the remaining 43.3%.

Recovery tendencies in the container shipping business are expected to improve the result situation, however, the earnings situation remains negative. Overall, Hapag-Lloyd contributed a EUR14 million loss to the company's group result in the first quarter.

The company changed its fiscal year to bring it in line with that of TUI Travel PLC (TT.LN) and after a short financial year for 2009, the company's financial year now runs from October through September. TUI holds a 52% stake in U.K.-listed TUI Travel, which accounts for the bulk of TUI's earnings.

Its net loss for the three months ended Dec. 31 was EUR102.8 million from a net loss of EUR155.1 million a year earlier. Sales dropped 15% to EUR2.95 billion, as sales at TUI Travel, Europe's largest travel company, contracted 15% to EUR2.8 billion.

Tourism companies generally post lower results in the winter season. However, TUI said that the October to December period for 2008 wasn't hit by softer demand due to booking lead times, causing a high base year.

TUI shares have climbed about 30% in the past three months, outperforming the Dow Jones Stoxx Europe 600 travel and leisure sector, which rose only 1%. Traders pointed to a power struggle between TUI's management and major shareholder John Fredriksen as a possibility ahead of its annual general meeting Feb. 17.

Company Web site: www.tui-group.com

-By Hilde Arends, Dow Jones Newswires; +49 69 29725 506; hilde.arends@dowjones.com
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