TUI CEO Fritz Joussen said that the group would “have to do something in terms of M&A and capital, but not right now”.
The group said that it was looking at a €1.5bn fundraising once the travel market had stabilised, with a possible sale of its hotels and cruise arm Marella,
Joussen said: “At some point we will think about a capital increase, but that is practically impossible at a share price of €3.20.”
The comments came as the group announced further support from the German Economic Stabilisation Fund in the form of a €150m bond. The bond meant that TUI Group has €2.0bn at its disposal, which the group said ensured sufficient liquidity to cover the seasonal fluctuations over winter 20/21.
Joussen said: "We continue to operate in a very volatile market environment. Travel advice and travel disruptions in our markets and destinations are constantly changing. There are still significant restrictions on worldwide travel through Covid-19 and on our business.
“This makes planning more difficult and requires enormous flexibility from tour operators. The increased stabilisation package with government loans will above all secure liquidity during the pandemic. We have to bridge this period without any significant turnover and at the same time accelerate the restructuring for the post-Covid-19 period. TUI will become more digital and efficient. In addition, we want to continue to set standards for more sustainability in tourism in the future, even if the current focus has to be on overcoming the crisis.”
Last month the company announced that it had cut winter capacity by 40%.
TUI said that it had launched a programme to try and cut costs by 30% across the whole group, with the goal of a permanent annual saving of more than €300m, with the first benefits expected to be delivered from full-year 2021 and full benefits to be delivered by full year 2023.
Joussen said: “Leisure holidays remain important to customers and have been one of the most missed activities during the pandemic, with leisure travel expected to recover faster than business travel. Our integrated model, underpinned by our trusted and leading brand, offering differentiated products and attractive value propositions, combined with proven flexibility in a volatile environment, means we are strategically well placed to benefit as leisure travel volume recovers over the coming seasons.
“Destination availability is highly influenced by government policy and development of the pandemic, meaning the environment remains volatile, and is likely to remain so for the next few quarters.”
In its Hotels & Resorts division, the group reopened 157 hotels, around 44% of total group owned portfolio by the end of August across its worldwide destinations.
All three cruise operations remained suspended, adhering to both German and UK government advice on cruising.
The operator said that Summer 2021 capacity had been “cautiously adjusted by 20%”, with flexibility to adjust as it gained more visibility. TUI said: “Bookings were currently up significantly as customers both rebook holidays from this Summer and look to secure new holidays early”.
Bookings for Summer 2020 were down 83%.
The group has completed the sale of Hapag-Lloyd Cruises to TUI Cruises’ joint venture against, it said, a difficult market environment on the terms and conditions agreed in February 2020. The first stage of disposal proceeds has been received in the third quarter with remaining proceeds and full de-consolidation to be competed in the final quarter of the current financial year.
In August the group agreed an additional €1.2bn “stabilisation package” with the German government, having previously been approved for €1.8bn loan from KfW, the state development bank, in April.
Insight: The support the German government has given TUI must stick a little in the craw at the former Thomas Cook, where the company’s executives found it hard to get so much as a meeting with the government and where, in a statement to parliament following the company’s collapse, transport secretary Grant Shapps said the government did not want to “risk throwing away good money after bad”.
Then-CEO Peter Fankhauser was, however, dragged in front of a select committee to talk about the company’s debt levels, accounting practices and executive pay after the event, in what became something of an unedifying spectacle, with Fankhauser being asked about events which pre-dated him and at one point being asked whether he would return his pay.
Not a reassuring scene for those in the sector in the UK given current events. TUI and Thomas Cook were, of course, different companies but both had been through the restructuring forced by the advent of the internet and analysts saw value in both. Not all countries are supporting hospitality equally and not all countries will see their hospitality sectors emerge intact after the pandemic has passed.