TUI AG, the German tour operator that is listed in London, has reported a strong rise in the revenues of its cruise operations for three months to 31 December 2019, but profitability of the operations did keep pace with the volume growth.

Turnover rose by 25% to €238.4 million year on, but underlying operating result (EBIT) only grew by 3.8% to €48.8 million, the company said in a statement.

TUI’s cruise operations comprised of fully owned Hapag-Lloyd Cruises in Germany and Marella Cruises in the UK plus a 50% share in TUI Cruises in Germany at the time. However, Hapag-Lloyd Cruises has since been sold to TUI Cruises.

The company said the underlying EBIT result had increased by €2 million in the quarter, with annualisation benefits from three new ships launched during the course of the financial year to 30 September 2019.

However, these were mostly offset by higher cost base principally from the impact of IMO2020 fuel regulations and adverse foreign exchange effects, which could not be fully recovered through pricing.

“TUI Cruises’ earnings increased due to the annualisation benefit of the new Mein Schiff 2 launched in February 2019, although average daily rates decreased in the quarter as a result of route mix,” the company said in a statement..

“Marella Cruises’ overall earnings, as expected, decreased due to a higher cost base not fully recovered, combined with lower occupancies from slower winter rates of sale and itinerary disruption.

The average daily rate increased due to higher pricing of our newer fleet in the quarter. Itinerary disruption in the Middle East and operational disruption in Asia cost €2 million in the quarter.

Marella Discovery, one of the company’s ships, reportedly suffered from technical problems while operating in Asia in the quarter.

Hapag Lloyd Cruises had benefitted from good trading of two new expedition ships, but the cost of dry docking of luxury segment vessel Europa and the introduction of an expedition ship had exceeded the effects of the positive developments.