TUI Group is ready to resume travel activities but will cut 8,000 jobs

TUI Group has made this announcement:

  • CEO Fritz Joussen: “People want to travel. Europe must now gradually open up. Summer holidays are possible responsibly and with clear rules. We will reinvent the holiday in 2020.”
  • TUI hotels in Germany and Europe ready to go. Increased hygiene and safety measures for all tourism activities of the Group.
  • Strong start to the 2020 financial year before the pandemic: turnover grows by +6 per cent to 6.0 billion euros in the first five months. Operating underlying EBIT after five months +21 per cent to -240 million euros1 2
  • First bookings for summer 2021: +114 per cent
  • Occupancy rate TUI Cruises 2021 at normal level 
  • Targeting 30 per cent overhead cost reduction across the Group
  • Available liquidity (as of 10 May 2020): 2.1 billion euros

TUI is ready for an early resumption of travel activities in Germany and Europe. Barely two months after almost all business units had to be shut down due to the worldwide travel bans, the tourism group is prepared for a resumption of its operational activities. TUI’s first hotels on Sylt and in Mecklenburg-Western Pomerania will open their doors for guests in the coming days. TUI’s hotels and clubs in European destinations are also ready to welcome holidaymakers. A 10-point catalogue for increased hygiene and protection measures is currently being implemented in the Group’s hotels worldwide, offering guests the greatest possible safety. Fritz Joussen, CEO TUI Group: “The safety and well-being of our guests and employees around the world continue to be our top priority. Summer holidays in Europe can now gradually be made possible again – responsibly and with clear rules. Organised travel offers great advantages especially now: With the trusted TUI brand, we offer safety, local support and, in special situations, guarantee the return journey home. Together with the destinations and our partners we have developed extensive measures to protect our guests. The demand for holidays is still very high. People want to travel. Our integrated business model allows us to start travel activities as soon as this is possible again. The season starts later, but could last longer. For 2020 we will also reinvent the holiday: New destinations, changed travel seasons, new local offerings, more digitalisation.”

Strong development before the pandemic
In mid-March, before the end of the first six months of the 2020 financial year, the Group had to suspend operational travel activities due to COVID-19 and the resulting worldwide travel bans. Up to this point, the world’s leading tourism group was on track: in the first five months of the fiscal year, turnover increased by six percent to 6.0 billion euros. Excluding one-off effects operating underlying EBIT amounted to -240 million euros – an improvement of 21 percent over the same period last year. Joussen: “We were very successful economically before the crisis and will be again after the end of the crisis. We have a functioning and successful business model and over 21 million loyal customers who trust our strong brand.”

Bridging loan ensures liquidity
Immediately after TUI was forced to largely discontinue its business due to the worldwide travel restrictions, the Group decided to apply for a KfW bridging loan of 1.8 billion euros. This is intended to cushion the unprecedented effects of the pandemic until normal business operations can be resumed. The German government approved the loan on March 27. On April 8, the banks providing TUI’s existing credit line of 1.75 billion euros (“Revolving Credit Facility”) also gave their approval for the contractual integration of the new credit. The swift action of TUI’s Executive Board thus enabled additional liquidity to be secured at short notice. As at May 10, 2020, the Group had financial resources and available credit facilities of around 2.1 billion euros.

Global realignment accelerates transformation
The loans received are to be repaid within a short period of time and the high level of debt is to be rapidly reduced again. To ensure that the strong operational performance can continue in a globally weakened market following the pandemic, the Group is now implementing a global program with extensive cost-cutting measures. This will further accelerate the transformation to a digital platform company that has already been initiated. Joussen: “TUI should emerge from the crisis stronger. But it will be a different TUI and it will find a different market environment than before the pandemic. This will require cuts: in investments, in costs, in our size and our presence around the world. We must be leaner than before, more efficient, faster and more digital. We will implement our “asset right” strategy, which we launched in 2019, even more purposefully and quickly. We will become more digital at all levels – in particular, we will accelerate the expansion of digital platforms in new markets and for our activities in the destinations. We are targeting to permanently reduce our overhead cost base by 30 percent across the entire Group. This will have an impact on potentially 8,000 roles globally that will either not be recruited or reduced. In order to return to the successful development of the past years after the crisis, we must now implement the realignment quickly.”

Outlook: Full-year guidance not yet possible 
On 15 March, the Executive Board withdrew the guidance given for 2020 as a whole. Due to the ongoing pandemic and the continuing worldwide travel restrictions, the Executive Board refrains from providing a new guidance for fiscal year 2020 also under the current circumstances. Currently, 35 percent of the 2020 summer program is still booked.

1At constant currency

2 Excluding impact from opex in digital platforms, impact of grounding of 737 MAX and one-off hedging gain in previous year