MIAMI – “Business is resuming,” says Fritz Joussen, CEO of tourism leader TUI Group, who can hardly hide his relief at the appearance of the first rays of sunshine on a sector that has been at a standstill since early 2020. Between April and June, the German giant multiplied its turnover by nine compared to the same period of 2020 as indicated by the Q3 2021 financial report.
Resumption of operations has generated a cash flow before financing of approximately US$377m (€320m) in the 3rd financial quarter, a positive result for the first time since the start of the pandemic.
This is accompanied by a high demand for holiday travel with plus 1.5 million bookings since May and a total of more than 4mn guests for the current summer season. 70% of bookings were made online or via the TUI App.
During the same period, TUI has implemented several refinancing measures by extending previously placed convertible bonds by €190m while in May TUI realized the sale of real estate, mainly consisting of hotels taken over by RIU, with TUI continuing to jointly operate the facilities along with the new owner.
The deal brought TUI immediate fresh capital in the amount of US$638m (€541m) plus an additional US$153m (€130m) to be paid out in 2023. Moreover, TUI obtained from 19 international banks the extension of the maturity of revolving credit facilities for an amount of €4.7bn until the summer of 2024. TUI financial resources availability on August 9, 2021, amounted to US$3.66bn ( €3.1bn) but with the goal of its government loan repayment as early as possible.
This long-awaited upturn is due to the lifting of travel bans in the markets of continental Europe. TUI has always relied on tourists from the Old Continent, who represents 21 million of its 28 million customers with Germans accounting for a quarter of them.
The British were only able to resume travel in mid-July, and the group’s managers estimate that their return will be felt in the results for the July-September quarter.
The destinations benefitting from this recovery are those in southern Europe. At the top of the list is Spain, with the Balearic Islands and the Canary Islands, followed by the Greek islands, in particular Crete and Rhodes. The communication of Greece to European tourists has been a good thing for the group, which has always relied on low-cost, sunny holidays in very touristy areas. Domestic tourism and cruises are also driving the recovery.
While the rebound looks impressive and the brightening is real, the end of the tunnel actually seems still a long way off for TUI. Its revenues are still in free fall (-86%) compared to the period from April to June 2019. Although the group recorded a positive cash flow of 320 million, the first since the start of the pandemic, it has not yet reached safe grounds.
Job Cuts amid Transformation
The German giant is still suffering a net loss of US$1.11bn (€939.8mn) in the third quarter of its fiscal year 2020/2021. A significant difference compared to the hotel giants (IHG, Marriott, Accor), for whom the slight rebound in business has been accompanied by a return to profits.
This does not dampen the optimism of Fritz Joussen, who assures us that “TUI’s transformation is clearly having an impact.” The CEO is seeing the first effects of his extensive restructuring plan, which started in 2020 with the main objective being to reduce its colossal fixed costs. To achieve this, the company plans to cut 8,000 jobs, or 10% of its workforce worldwide, and to sell 20% of the aircraft in its fleet, Tui Fly (X3).
At the height of the crisis, in the spring of 2020, TUI only survived thanks to the German government, which came to the rescue of its tourism industry flagship. Berlin granted it €4.3bn and the German state may, one day, eventually hold up to 25% of the group.
Article source TUI Group Q3 2021 Financial report
Featured image: TUIfly Boeing 737-800 D-ATUR. Photo: Phil Wilco/Airways