Tui reports €3.2bn loss as Covid hits travel

Tui, the travel group, has slumped to a €3bn loss after the Covid-19 pandemic forced it to slash its holiday and cruise itineraries and seek emergency aid from the German government.

The tour operator, which also revealed €4.2bn net debt, said on Thursday that it had managed to increase cost savings from €300m to €400m as it scrambled to slim down its asset-heavy structure in order to cope with the fallout from the crisis.

Revenues in the year to the end of September fell 58 per cent to €7.9bn, resulting in a €3.2bn pre-tax loss, down from a profit of €692m in 2019.

Last week, it secured a €1.8bn financing deal from a consortium of investors, banks and Germany’s state-backed economic support fund.

As part of the funding Tui’s largest shareholder, the Russian businessman Alexei Mordashov, will increase his 25 per cent stake in the business. It is Tui’s third government-backed financing since the crisis began, bringing the total to €4.8bn.

The group had €2.5bn of cash on its balance sheet at the end of November. It has fixed costs of €250m to €300m and said it had paid out about €140m in customer refunds over the summer.

Tui, which has a fleet of roughly 150 aircraft and 17 cruise ships, has struggled more than nimble online rivals such as Love Holidays and On The Beach to cope with the fallout from frequently changing travel advice that has resulted in holiday cancellations and the knock-on hit to consumer confidence.

It normally carries roughly 21m travellers on holiday each year — a number that fell to 8.1m in the year to the end of September.

Despite the promise of mass vaccinations before the 2021 summer season, Tui’s chief executive Fritz Joussen said that demanding customers were inoculated before travelling would be “a mistake”.

“It is not even 100 per cent clear if a vaccinated person is infectious or not,” he added.

Some airlines such as Qantas and Air Asia have said that they are considering compulsory vaccination for travellers flying on their aircraft.

Tui said that bookings for next year had picked up and that 50 per cent of its holidays from May were sold, although it will run at only 80 per cent of its usual capacity. It expects a recovery to pre-pandemic levels in 2022.

The company added that average prices for summer holidays next year were 14 per cent higher than in 2019. “Next year must be a year of good margin . . . that is part of our plans,” Mr Joussen said.

On The Beach, which reported on Thursday that it had fallen to a £46.3m pre-tax loss on revenues of £33.7m for the full year, said that Tui was taking advantage of customers after they had been forced to postpone holidays from this year.

“Tui’s announcement . . . shows nothing other than that they are bullying customers into taking overpriced holidays,” said Simon Cooper, OTB’s chief executive.

Mr Cooper said that he expected pricing to be “pretty competitive” next year as hotels and airlines increased capacity again.

Tui countered that its teams had “worked tirelessly to ensure prices for holidays in 2021 are similar”. “There are many variables to take into account when looking at holiday pricing, and these can contribute to price fluctuations,” it added.

Richard Clarke, an analyst at Bernstein, said Tui was “a tough stock to call”, warning that despite using the opportunity to dispose of non-core assets such as its Marella cruise line, the company had “made nearly no revenue since March and is continuously pushing back the recovery”.

Shares in London-listed Tui were down 3 per cent by lunchtime and are down more than 50 per cent in the year to date. (ft.com)

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