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StockBeat: Tui, the Systemically-Relevant Package Tour Company

Published 13/08/2020, 10:21
Updated 13/08/2020, 10:28
© Reuters.

© Reuters.

By Geoffrey Smith 

Investing.com -- After its massive bailout of Lufthansa, the German government is moving ever closer to taking a stake in Tui (DE:TUIGn), the world’s largest tourism company, evidently panicked by the inability of another big employer to support itself through the crisis.

The latest injection of state money enabled Tui to present a quarterly report on Thursday that still talked of a year of transition to a rosy future by 2022. But the reality is that without the support, the company would be unviable, and another 70,000 people would be hitting the jobless rolls sooner rather than later.

Berlin is injecting a total of 1.2 billion euros ($1.42 billion) into the group, only four months after lending it an initial 1.8 billion euros. Of that, 150 million euros is in the form of a bond that the government can convert into a stake of 9% in the group. A further cash call on current investors also seems possible, after the group said Thursday that it will “evaluate options to achieve the optimal balance sheet structure to support the business over the longer term.”

The package just about covers the 1.1 billion euros that Tui lost before earnings and taxes in the three months through June, the third quarter of its fiscal year. Revenue fell 98% (sic) as customers across Europe were forced to cancel their vacation plans. To add insult to injury, the company also lost 189 million euros on fuel and foreign exchange hedges. 

After that, surely, the only way is up, at least in the short term. As of today, it has total liquidity and available facilities of 2.4 billion euros. The existential risk to Tui’s business is – if not quite banished – then at least deferred. And bookings for next year are 145% up on year-earlier levels, a sign that the desire for holidays is still very much alive.

It will, however, be interesting to see whether the group hits its target of a cash breakeven in the current quarter, given the uneven progress in reopening Europe’s economy in time for the summer tourism season. Bookings are down 81% and average selling prices down 10%. Its cruise ships are still anchored and many of its planes are still grounded. Only this week, Tui had to expand its suspension of U.K. flights to Spain to include the Canary and Balearic Islands due the resurgence in Covid-19 cases, having already stopped flights to mainland Spain.

CEO Fritz Joussen said in the company’s release that he’s targeting a “transitional” fiscal year starting in October, with a return to a new, leaner normal in fiscal 2022. He told German state television on Wednesday that “the business model is still intact.”

Well yes, if your model can confidently assume over 3 billion euros of government aid and the likelihood of more good money being thrown after bad to space out the likely job losses. The 8,000 already announced are certainly not the last.

Tui shares, which hit a one-month high on the back of the rescue announcement on Wednesday, fell 5.1% on Thursday as the scale of its financial challenges became evident. The DAX fell 0.1% but remained close to its pre-pandemic high.

Latest comments

Ger Ber, one thing you can be relied on is consistency.Every post you have ever made on this site seems to be anti-UK. From now on I won't even bother wasting time reading your posts. No balance. You are simply a bigot.
That‘s absolutely false- records are only been straight- the uk has rather great anti- eu especially to germany than any- probably it‘s a balance but read my comments it‘s always a balance not supporting any country for the subject matter- apologise if you see it this way but the uk refuses to empty its cobwebs instead bury then pointing figures- same with corona
.....what??? Congratulations, you almost formed a cohesive sentence there.
German Health Minister Jens Spahn said on Thursday he expected there will be a coronavirus vaccine in the near future.  "I'm optimistic that in the next months, and certainly in the next year, there can be a vaccine," Spahn told German public broadcaster ZDF, but declined to specify the month the vaccine would be ready.  "One thing we can say is that thanks to us all working together  — researchers, scientists, the public  — we will probably have a vaccine faster than ever before in the history of humanity," he added.
when you spread this good news- AstraZeneca will forcefully also say its vaccine is ready in the coming lol.... the UK always want to challenge any country prematurally but are not above their seniors but still force. all be aware of AstraZeneca for it cannot go through 3rd trial according to reports and therefore seeks china or japan help produce its continious vaccine with their science additional technology- all be aware of AstraZenecs for this good news from Germany will only let the UK fircefully want to announce Astraseneca will be ready in the next few days or months- they did that already on cnn but cnn challenged astrazeneca then they came back to their senses... what’s wrong with the british people and its government... always forcefully pretending to be best ****- self inflicting suffering.... say will say their vaccine Astrazeneca is first ready - very sick people
Thank you for that you bigot. Again I was almost proud of you for being able to form a cohesive sentence. Then you failed as I realised your comment is almost completely non-sensical.
{{uid:210312147} ***** you stupid boy
how dare you accuse people here
Good news for Germany - probably for early vaccine for all but first, Germany obviously- it’s own people first. Germany is known for not just don‘t speaking, but when they speak there is a certainty that it is so..... hope this comes to happens quickly for the world needs quickly a vaccine but truthful vaccines not for the sake of vaccine.... God bless you Germany for you are unique
Germany's health minister has said he is "optimistic" the country will have a vaccine "in the next months, and certainly in the next year." However, he warned the number of new infections among young people was rising.
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