TUI AG has reported a narrowing in its net losses over the first quarter of the financial year.

The Hanover-based firm – which owns Europe’s largest travel company, TUI Travel – saw net losses fall to €102.8 million (£89.3 million) in the three months to December 31st, compared with a figure of €155.1 million (£134 million) a year earlier.

The tourism and shipping company said reduced administrative costs and an improved tax environment had been responsible for the fall. However, overall sales for the period dropped 15 per cent to €2.95 billion (£2.56 billion) from €3.47 billion (£3.01 billion).

This was mirrored at TUI Travel, where sales fell by 15 per cent. TUI AG holds a 52 per cent stake in UK-listed TUI Travel.

Bookings were lower in all travel markets in the three months to December, explained TUI AG, while the number of hotel stays and reservations aboard its luxury cruise line also fell.

“The German-speaking cruise market reflected the persistently tight economic conditions in the period,” TUI said in a statement to markets.

“Lower bookings were recorded both in the volume market for premium cruises as well as in the niche market for luxury and expedition cruises.”

Following the results, TUI AG maintains an optimistic outlook for the coming year.

“Bookings in the key source markets have improved notably in the past few weeks, and the strategy of flexible capacity management will be continued,” the company said in a statement.

European markets welcomed the news and at 10:00 GMT, TUI shares were up 7.2 per cent to €6.81, on the MDAX exchange.