Yahoo Finance Tui loses £1.8bn so far this year amid Covid-19 travel shutdown
Tui, Europe’s biggest holiday company, has warned that business is unlikely to return to normal until 2022 as it revealed losses so far this year have totalled €2bn (£1.8bn).
In an illustration of Covid-19’s impact on the package holiday industry, the group said revenues from April to June had crashed by 98% as pandemic lockdowns across the continent wiped out sales.
Over the first nine months of the company’s financial year it has posted a loss of €2bn, with €1.1bn of that in the past three months.
Tui, which began to take people on holiday again in mid-June, said the revival in demand was encouraging but that summer bookings were 80% lower than last year and it did not expect demand to return to normal until 2022.
The German company has reopened more than half of its hotels worldwide, including in Europe, Mexico, Egypt and the Caribbean, although they have an average occupancy rate of only 23% to allow for social distancing. The firm’s cruise operations remain suspended until later in August. The imposition of a mandatory 14-day quarantine on anyone returning to the UK from Spain has also underlined the fragility of the holiday market, with Tui being forced to cancel Britons’ holidays to mainland Spain.
Despite the resumption in travel, Tui said it did not expect a return to normalised levels of business until 2022, with its capacity for summer 2021 reduced by 20%. The company said bookings for next summer were up 145% on the same period last year although customers rescheduling bookings cancelled this year was a factor in the rise.
The firm’s chief executive, Fritz Joussen, said Tui was the first travel company to fly passengers on holiday following the lifting of restrictions and stressed that “summer holidays are conducted responsibly and with the highest standards of hygiene in all markets”.
“We acted very quickly at the beginning of the crisis in March and we responsibly mastered the new start in the summer – together with governments and partners. We will now sustainably reduce our costs and thereby strengthen our position in the market,” Joussen said.
Tui has secured an extra €1.2bn from the German government to get it through the quiet winter season. This is on top of a €1.8bn loan commitment it received from German state lender KfW in March as travel ground to a halt across Europe, taking its total government support to €3bn.
Despite government help, the company and the wider travel sector will remain under pressure in the coming months, according to Julie Palmer, a partner at the insolvency firm Begbies Traynor.
“Costs reductions must be a focus for the board over the next few months if the business is to have any chance of survival, which will likely add to the growing number of redundancies being made by UK firms,” Palmer said.
Tui, which is also the UK’s biggest holiday operator, announced in July it would shut 166 high street travel stores in the UK and Ireland, and ask affected staff to work from home, as the coronavirus pandemic hastened the shift to booking holidays online rather than on the high street.
In addition, the travel operator said customers were booking their trips at shorter notice ahead of their departure.
Toby Nicol, a travel consultant, said he expected that trend would remain as long as spikes in Covid-19 cases around the world lead to the introduction of new travel restrictions and quarantine measures.
Nicol added this would give travel companies less oversight of customer demand and force them to offer competitive prices.
“If you’re a family, you’re not going to be booking for next summer now or in January, you’ll be saying let’s leave it and see. People will go where the deal is, it could be France, Spain or Portugal, people are highly promiscuous when it comes to deciding where to go and who’s got the best deal.”
The winding down of the furlough scheme and economic downturn are also expected to cause problems for travel companies, as consumers watch their outgoings and discretionary spending more closely.
Shares in Tui closed down 6% at 345p.
