MIAMI – TUI Group has announced that it will cut 8,000 jobs as it seeks to reduce its fixed cost base by 30% to stay afloat amid the current crisis.
The largest leisure, travel and tourism European company, TUI’s move comes after it lost €845.8m during the first half of 2020 due to the negative impact of COVID-19 on the tourism industry.
The pandemic is the greatest crisis the group has ever faced, much like the rest of the commercial aviation industry worldwide.
Behind TUI’s CEO Friedrich Joussen’s decision to change TUI to make it leaner, faster and less capital-intensive, is the policy where these jobs will neither be recruited nor reduced.
Financial concerns behind the payroll halt
Even though the company has already received a €1.8b loan from the German government to be paid back in 2022, Joussen also announced that TUI was burning €250m in cash as it expected a radical drop in revenue since mid-March as reported by the restructuring firm Begbies Traynor.
Julie Palmer, a partner at the corporation, added that there was no certainty on when restrictions will be lifted, saying that “the road ahead is looking bleak,” even when TUI has managed to cut costs by 70%.
However, Joussen also expects that when travel is allowed back, “cabin fever will be a great sales tool” as long as the group survives and is in capacity to provide the right service and handle the necessary offer when that time comes.
Post-COVID-19 action plan in a uncertain scenario
As part of the survival actions, the diversified travel corporation announced a 10-point plan to better its post-pandemic performance. TUI’s guideline shows considerable changes to its public areas throughout its hotels in accordance with safety and healthy measures.
While this is a response for its worst-case forecasted scenario during holidays seasons, TUI’s revenues may remain heavily affected if worldwide governments announce guidelines that do not allow foreign travel for the rest of the year and beyond prior to a vaccine release.
Already, the company has seen a huge negative impact on finances with the grounding of the Boeing 737 MAX aircraft in the past year as its charter carrier TUI Airways (BY) was the launch customer for the Boeing model, being the largest MAX family member in 2017.