TUI AG (TUI1.XE), a holding company with assets in tourism and shipping, Wednesday reported a net loss in the second quarter but said the upward trend in the European tourism sector and global container shipping continued and it confirmed its full-year outlook.

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. The company's tourism operations comprise mainly U.K.-listed TUI Travel PLC (TT.LN), in which it holds a 54% stake.

Net loss for the January-through-March period hit EUR176.8 million, after a profit of EUR744.3 million a year earlier. It was a slightly narrower loss than the average EUR181 million in a Dow Jones Newswires poll of seven analysts.

The year-ago net profit figure was skewed after TUI sold a majority stake in container-shipping company Hapag-Lloyd AG (GD-HPL) in March 2009 and booked a EUR990 million gain. After the EUR3.25 billion disposal, which erased EUR1.2 billion in debt for TUI, the Albert Ballin GmbH & Co. KG consortium owns a 56.7% stake in Hapag-Lloyd, while TUI owns the remaining 43.3%.

Hapag-Lloyd "showed a gratifying performance" in the second quarter, according to Chief Executive Officer Michael Frenzel. It generated a positive equity contribution of EUR6 million. The container shipping company's sales soared 13% to EUR1.3 billion and adjusted Ebita rose to EUR13 million from a EUR222 million loss a year ago due to cost cutting and higher transport volumes and freight rates.

WestLB analyst Raimon Kaufeld said the improvement of Hapag-Lloyd "was the biggest surprise," beside solid earnings. At 0919 GMT, TUI shares traded up 3.1% at EUR8.25, having risen more than 30% since the start of the year, as investors welcomed a moderate recovery in shipping volumes.

Adjusted Ebita loss from continuing operations in the second quarter narrowed to EUR228.6 million, better than the EUR273.8 million loss a year earlier, boosted by higher synergies, improving market conditions and ongoing cost cutting. Because of advance payments that have to be made, earnings in tourism are traditionally negative in the first two quarters.

"TUI Travel and our cruises division have contributed to the growth in our operating earnings in (the second quarter)," Frenzel said in a statement.

Sales contracted 6.5% to EUR2.88 billion in the second quarter as the economic downturn dragged shipping volumes down across the globe. Analysts had forecast sales at EUR2.89 billion. Sales at TUI Travel, which accounts for the bulk of TUI's earnings, fell 7% to EUR2.7 billion.

The MDAX-listed company said it expects around EUR100 million in costs from the air-traffic disruptions caused by the volcanic eruption in Iceland. It noted it mainly hurts TUI Travel's earnings and will be visible in the third quarter.

To weather the economic downturn, TUI has established a restructuring program including exiting activities that will be unprofitable in the long run, refinancing assets and selling non-core assets.

The company changed its fiscal year to bring it in line with that of TUI Travel and after a short financial year for 2009, the company's financial year now runs from October through September.

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