The credit crunch has not deterred Britons from booking holidays, according to TUI Travel, the owner of the First Choice and Thomson brands.

Reporting its first-quarter results to December 31, the tour operator said that sales of summer holidays were up 9 per cent, and it had sold nearly half of its packages for the season, with 20 per cent fewer left to sell than at the same point last year.

Sales for medium-haul summer breaks rose 23 per cent and long-haul by 7 per cent.

TUI Travel said that sales for winter 2007 holidays rose by 4percent, but the group was “continuing to experience cost pressures, particularly the price of jet fuel oil”.

The group said the strong UK performance, as well as gains in France and Scandinavia, had helped it to cut underlying seasonal losses before tax by 51percent to £60 million.

Peter Long, chief executive, said: “People are saying, ‘with all this going on my holiday is even more important to me and I'll take it'. There's no sign of weakness in demand and we're not seeing any trading down.”

He added: “The consumer is reprioritising expenditure. People are saying ‘I'm not going to replace my car or buy a new home hi-tech entertainment system or do the extension or buy new carpets and furniture. Home improvements are well down the list - I don't think the shed is having a good time at the moment.”

The group said that its UK cost savings drive, which began after the company was formed last summer by the merger of First Choice and TUI's travel division, boosted performance.

TUI Travel, based in Luton, recently increased its annual cost savings target by £50 million to £150 million, leading to the closure of up to 100 Thomson and First Choice shops.

Mr Long said the drive to improve margins in the Thomson business to a level close to that achieved by First Choice was also on track.

Operating losses from its UK arm reduced to £35.6 million from £46.8 million in the quarter. It added that it was “very pleased” with current trading for winter 2007/2008 and summer 2008.

The firm is 47percent booked in the UK for summer holidays, thanks also to a 13percent cut in capacity largely in the short-haul market.

Mr Long said that the company had significantly fewer holidays to sell than at the same time last year for its key markets.

Mr Long said that TUI, of Germany, the shipping and tourism group that owns 51 per cent of TUI Travel, was “very supportive”, adding: “We agree on the strategy and it's a very positive and strong relationship.”

Citigroup analysts said TUI Travel was “continuing to defy consumer concerns”, but warned that soaring fuel bills and any rise in unemployment could hamper profits.

“We would also note that, given the current economic environment, any marked growth in unemployment would prove a concern.”

Tickets to ride

— TUI, the biggest European travel group, merged its non-hotel travel activities with the UK travel firm First Choice in September 2007

— The combined group, TUI Travel, is listed on the London Stock Exchange

— TUI Travel offers customers travel to more than 200 countries

— The group has in excess of 30 million customers across more than 20 markets

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