Longing for the summer vacation: The reawakened desire to travel among consumers gives Tui more financial freedom and is intended to stabilize the state-bailed group after the Corona crisis. More customers have decided to book with the industry leader in recent months - despite record inflation and a looming economic downturn that could impact household incomes. Tui is still benefiting from the higher prices of many of its own offers, and demand for longer and higher quality stays has increased.
In 2023 things should continue to improve. The incoming bookings are becoming shorter because customers often want to reschedule before the start of their vacation. Bookings are developing well for the current winter, it said on Wednesday. But Tui also sees various risks.
Corona aid should be repaid
The board of directors around the new CEO Sebastian Ebel nevertheless wants to soon start repaying the aid with which the federal government had saved the tourism giant from going under during the pandemic. The expected profits from the travel business are not sufficient for this. Therefore, shareholders should again inject fresh money. The stock market was initially unconvinced, the Tui course slipped.
The bottom line is that in 2021/2022 (until the end of September) there was still a loss of 277 million euros - but this was reduced to around a tenth of the previous year's value. Without interest, taxes and other factors, 409 million euros remained as a profit, in 2020/2021 Tui had lost more than 2 billion euros on this basis.
People want to travel again
With the comeback of summer vacations among Europeans, the company gradually worked its way out of the problems. "The summer was strong," said Ebel in London. "We are grateful and satisfied that we had a really good quarter. And we see that the willingness to travel is as high as it was before Corona." In some customer groups, the increase in prices is reducing the propensity to consume, and flight cancellations are causing special costs. Tui does not expect a new slump: "The customer will see that he stays within his budget."
In comparison, the travel restrictions in many countries in the previous year “quite paralyzed business. Now we are seeing a return to normality.” In the summer of 2022, Tui now reached 93 percent of the number of guests from the pre-Corona period, and the prices achieved were on average almost a fifth higher than in the 2019 main season. In the past year as a whole, sales were around three and a half times as high at 16.5 billion euros like the year before.
"If you consider that last winter was a complete failure, our result is very pleasing," said Ebel. Business recovered in all sectors - hotels, airlines, cruises and events. Ex-CEO Fritz Joussen had launched a savings program for his own airline Tuifly, which was highly controversial internally and which aligns the size of the fleet with the capacity in the weaker winter. "This means that we can now breathe better when there is a drop in demand," explained Ebel. In addition, Tui no longer owns numerous hotels directly, but primarily only organizes their operation.
Not only package tours on offer
The Hanoverians see new opportunities in individually bookable direct offers, for example for flights, accommodation, round trips, excursions or rental cars. These are intended to complement the classic package tour. "Germany was the first market for it, and we will roll it out in other countries as well," said Ebel. When presenting the next summer program, Tui recently explained that many customers were also particularly interested in all-inclusive packages.
The Tui management believes that 2023 could be solid and good. Ebel emphasized that one is "very aware of the external market factors" - these include the economic consequences of the Ukraine war as well as the Corona aftermath, the general price shock and strong currency fluctuations. But revenue and operating profit are expected to increase. CFO Mathias Kiep qualified: "The uncertainties do not yet allow us to give a concrete orientation."
The job situation seems to be relaxing again. At the end of September, the number of employees was around 61,000, a good fifth more than in the previous year. Tui also cut many jobs during the crisis and is therefore starting from a lower level.
After the state rescue in 2020, the group had to shoulder additional interest costs for loans. Now he announced the next steps to repay the aid. At least 730 million euros plus interest should flow back by the end of 2023, and Tui wants to raise the necessary money by issuing new shares.
The Federal Economic Stabilization Fund (WSF) also supported Lufthansa during the peak phase of the corona pandemic. Tui also wants to reduce its credit line with the state bank KfW, which currently amounts to 2.1 billion euros.
Net debt recently fell significantly by around 1.5 billion to 3.4 billion euros. "We also want to use the capital increase to reduce our liability to KfW," explained Kiep. First you have to look at the actual situation in winter: "How much do we need, how much buffer do we have to have in the company?"
