LONDON, Dec 10 (Reuters) - Europe's largest tour operator TUI on Wednesday gave a more conservative outlook for 2026 than the market had expected, citing the current trading environment and prevailing economic and geopolitical uncertainties.

For 2026, the company expects its revenue to increase by 2% to 4% and underlying operating profit to rise by 7% to 10%, meaning it will not sustain growth from 2025 as markets have assumed.

TUI shares were down 3.2% at 0832 GMT.

CHALLENGES AND COST-CUTTING

The group in November reported preliminary full-year results for 2025 above its own guidance, citing strong performance in the cruise and hotel sectors. Still, it acknowledged challenges in some of its markets and Chief Executive Sebastian Ebel said the group was planning cost cuts in the coming years. 

Despite positive growth in the cruises and hotels sectors, the results showed an overall weaker performance in 2025 for much of the group's airlines segment throughout Europe. 

Ebel said that the more modest outlook, particularly for revenue, was partially an accounting issue where revenues from joint ventures in cruises and hotels were not included in TUI's group numbers.

"All segments will become even more profitable and efficient in the future," he said in an initial statement.

Airline analyst Dudley Shanley at Goodbody brokers said the results and outlook were overall positive despite the challenges.

Underlying earnings before interest and taxes for its fiscal year, which ended on September 30, came in at 1.46 billion euros ($1.70 billion) at constant currencies, up 12.6% from a year earlier and ahead of TUI's targeted rise of between 9% and 11%.

TUI has struggled with weakness in its core German market but has managed to bolster its results by focusing on making its offer more international and emphasizing its more profitable businesses.

Ebel said in a media call that the group was "very unsatisfied" with its current share price, but that a new dividend policy of 0.10 euros per share would help improve the price in the coming year.

Ebel told journalists that TUI would implement cost-cutting measures in its markets and airlines segment in an effort to build efficiency and help the company succeed longer term. 

When asked if that meant job cuts, Ebel said, without elaborating further: "There is a big difference in having less jobs versus cutting jobs."  

He also said that an expected delivery of 20 planes from Boeing ( BA ) in the coming fiscal year would help substantially with cost saving, allowing upgrades to a more efficient fleet.