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TUI’s figures said it all. But, while that 98% drop in revenue from April to June, at Europe’s largest tour operator, might have been shocking, it came as no real surprise. The fact that TUI’s share price ended the day just 5% lower proves that.
The once high-flying travel industry has been reduced to a slow motion car crash in 2020 and TUI is no exception. The company, which employs about 70,000 people and runs 400-plus hotels,150 aircraft and 18 cruise ships, has been buffeted about by global travel bans, quarantine restrictions and a dearth of travellers. Yesterday it said it doesn’t expect “normalised levels of business” to return until 2022. The stop-start travel bans, while presumably justifiable, certainly won’t help.
In the meantime, TUI is putting a brave face on the figures, where it can. It says summer bookings for 2021 are up 145% year-on-year, but that is only if you count pre-paid vouchers and re-bookings. It has €2.4 billion in cash at its disposal, to see it through the rest of 2020 and beyond. But €1.2 billion of that has come from the German government and is on top of the first loan of €1.8 billion granted in April. Meanwhile, net debt stands at about €3.85 billion, although analysts at Jefferies reckon TUI’s gross debt is probably near €7billion.
TUI’s chief executive, Fritz Joussen, knows the balance sheet needs restructuring. He is keen to stress there is to be no fire sale of assets, although the sale of its Marella cruise line is a possibility. And while he described it as “early days”, a rights issue looks likely. Transformation is though, underway. The first of TUI’s high street shops to be given the chop have been earmarked, affecting up to 900 jobs. Those that haven’t reopened since lockdown now look unlikely to ever reopen.
For TUI, it isn’t just the Coronavirus pandemic hanging over its head, the fate of its erstwhile rival Thomas Cook, also looms large. Back in May TUI announced that as 70% of all UK bookings take place online, it would be rethinking how it operates. It also said 8,000 jobs would have to go globally in a bid to reduce overheads by 30%. For now, TUI is doing all it can simply to survive.
Of course, it is far from alone. The entire travel sector has been one of the worst affected during the pandemic.
The latest news, that the UK government has placed travel restrictions on France, the Netherlands and Malta, as Covid numbers continue to rise in these countries, shows that the problems TUI and co have faced so far this year, are nowhere near over. The longer the pandemic goes on, the less likely that 2022 resurgence looks set to come good.
Life is no beach for any of the travel companies or airlines in the short term. According to the World Travel and Tourism Council (WTTC) which has written to Boris Johnson and nine other heads of state of the G7 countries, as well as Australia, South Korea and Spain, with the backing of more than 100 of the world’s major travel and global business leaders, from airlines, airports, hotels, tour operators and travel companies, "irreversible damage" is on the cards.
While the International Air Transport Association has already warned that 2020 will go down as the worst year in the history of aviation, with forecasts that airlines will see revenue fall to $419 billion in 2020, just half the $838 billion booked in 2019 before the pandemic. And that estimate was made in June, before the crucial July and August peak holiday months came and will likely go with little, if any, improvement.
For now, the outlook for the travel industry is decidedly grim. Until a vaccine is found and leisure and business travel can resume unhindered by lockdowns, travel corridors and quarantine restrictions, there is unlikely to be any positive change.
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