UPDATE 1-Slow recovery holds back TUI Travel as tourists return to Greece

Tue May 13, 2014 6:23am EDT

* Posts better-than-expected H1 loss of 298 mln stg

* Summer holiday sales volumes slightly down

* CEO says confident on operating profit growth target

* Shares down 2.3 pct (Adds CEO comments, analyst reaction, shares)

By Paul Sandle

LONDON, May 13 (Reuters) - TUI Travel, Europe's biggest tour operator by revenues, reported a dip in the number of holidays sold for this summer, as the slow pace of economic recovery in much of the region offset a resurgence in the popularity of travelling to Greece.

The owner of holiday brands Thomson and First Choice said on Tuesday the number of customers for its mainstream summer holidays were down 2 percent on last year, with trading particularly tough in France and Nordic countries.

But that was offset by a rise in the average price of holidays sold and the group stuck to its target to grow underlying operating profit by 7-10 percent this financial year at constant exchange rates.

While that forecast was "reassuring", Numis analysts described it overall as a "marginally disappointing update given improving consumer confidence in the UK".

At 0950 GMT, TUI Travel shares were down 2.3 percent at 431.35 pence, the second-biggest fall on Britain's benchmark FTSE-100 index.

Chief Executive Peter Long said TUI Travel had seen a "huge resurgence" in demand for holidays to Greece as the country stabilises following its debt crisis and international bailout.

Spain's Balearic Islands and Canary Islands, as well as Turkey, were popular too, while further afield, Jamaica was also attracting more holidaymakers, he added.

However, trading was tough in Nordic countries and in France, with a breakeven in the latter country now more likely in 2016 than next year, Long said.

Bookings were also flat in Germany, TUI Travel's biggest market, as growth in package holiday sales was offset by a planned reduction in the number of airline seats sold separately from a tour package.

The company posted a first-half operating loss of 298 million pounds ($503 million), worse than the 289 million loss reported in the same period the year before due to the timing of Easter, but better than analysts' expectations.

Morgan Stanley analysts had forecast a loss of 305 million pounds and Deutsche Bank analysts a loss of 315 million.

Like most tour operators and airlines, TUI makes losses over winter when fewer Europeans take holidays.

TUI Travel is 55 percent owned by German travel and tourism group TUI AG. Rival operator Thomas Cook is due to report first-half results on Thursday.

($1 = 0.5927 British Pounds) (Editing by Sarah Young and Mark Potter)

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