The leadership of the state-saved Tui is trying to turn things around. Bookings are picking up again – with rising prices. Aid and loans are to be repaid in a “year of transition”. Are the owners going with you?
Almost three years after the beginning of the Corona crisis, the largest travel provider Tui was able to reduce the typical loss at the beginning of winter and initiated the next steps for the return of the remaining state aid. The bottom line from October to December was around 232 million euros, as the group announced on Tuesday. At the end of 2021, the shortfall was still 387 million euros.
At an online general meeting, the shareholders approved the preparation of another capital increase. This should create the basis for replacing federal funds with own shares and also further reducing the credit line available for Tui.
CEO: “Encouraging momentum”
The Hanover-based company recently felt a significant increase in demand: in the first quarter of the current financial year (until September 2023), 3.3 million customers traveled with the Tui Group, around a million more than a year ago. CEO Sebastian Ebel also spoke of an “encouraging momentum” for the rest of the winter and the upcoming summer. He said: “This pandemic of the century has also thrown us off course. Now we are definitely back.”
According to CFO Mathias Kiep, the recovery shows “that we have now put the pandemic behind us operationally”. Thanks to government support worth billions and fresh money from private owners, Tui got through the phase that threatened its existence. In the last few weeks, more new bookings have been received than in the period immediately before Corona.
At the same time, prices have risen noticeably – in winter by an average of 29 percent compared to the pre-corona level and 8 percent compared to the previous year. General inflation also drives up travel expenses. In addition, Tui has been talking about the trend for some time now that many guests are again able to afford higher-quality holidays.
The company wants to “quickly return” its federal aid. Recently there was talk of at least 730 million euros plus interest until the end of 2023. Credit lines from the KfW development bank are to be further reduced. In addition, there is a silent contribution and the remaining tranche of a bond from the Economic Stabilization Fund – there is no need to convert these shares into public shareholdings at Tui. The fund also supported Lufthansa, among others.
When is the capital increase coming?
In total, the German state had provided more than four billion euros in capital and loans to keep Tui from going out. “We will replace the aid and make Tui fit for profitable growth,” said Kiep. Previously, the shareholders cleared the way for a new capital increase, which is intended to finance the planned returns. The prerequisite for this, in turn, was a capital cut including a reduction in the number of share certificates.
According to industry estimates, the issue of new shares could raise a good 1.5 billion euros. When exactly the capital increase will be implemented is still open. Alexander von Vietinghoff-Scheel from the German Protection Association for Securities Ownership said the move was understandable. From the point of view of small investors, however, he also very much limits their shareholding: “It’s a heavy blow.”
The cold season is usually weaker for tourism in the northern hemisphere, with providers making the majority of their sales in summer. For Tui, however, winter is also of great importance, because the pandemic had almost completely paralyzed the business. In the final three months, sales increased from EUR 2.4 billion in 2021 to EUR 3.8 billion. The loss adjusted for interest, taxes and other factors fell from 274 million to 153 million euros. Tui is sticking to the goal of “significantly” improving the result in 2023.
The private owners had also increased the financial cushion, such as former major shareholder Alexej Mordashov. The Russian oligarch, who was subject to EU sanctions after the start of the war in Ukraine, withdrew – the shares are now primarily held by a company that is believed to control his family. He does not see any financial or image damage for Tui by Mordashov, said Ebel. Chairman of the Supervisory Board Dieter Zetsche added: “We never saw any imminent danger for Tui or its shareholders.”
Hard austerity course and job cuts
The general meeting confirmed the initially court-appointed Metro manager Christian Baier and the Spanish financial expert Helena Murano as the next supervisory board members. Ex-Daimler boss Dieter Zetsche was re-elected chairman of the supervisory body.
Parallel to the use of state aid, Tui drove a tough austerity course, which resulted in job cuts. This “ambitious program” was completed at the end of 2022, according to Ebel. “We will achieve our annual savings target of EUR 400 million in the 2023 financial year.” The tariff policy is also controversial. Verdi called for action in Hanover to protest against the threat of real wage losses. According to the union, 100 employees took part.
Another topic was the role of tourism in climate change. Tui wants to reduce its greenhouse gas emissions by binding values by 2030: by 24 percent for the airlines compared to 2019, by at least 46.2 percent for the hotels, and by 27.5 percent for cruises. Plans include investments in modern aircraft, energy savings, promoting local sourcing for hotels and sustainable fuels.
Online meeting in criticism
The industry has been criticized for its emissions of climate-damaging carbon dioxide and harmful nitrogen oxides. The plans do not go far enough for the umbrella organization of critical shareholders. Her representative Markus Dufner, together with the environmental association Nabu, requested that the Tui leadership be refused relief.
Several shareholders were angry that Tui was hosting an online meeting. “Purely virtual general meetings are not our idea of shareholder democracy,” said von Vietinghoff-Scheel. There were also technical problems during the transmission. According to Vietinghoff-Scheel, at least hybrid meetings are necessary to ensure exchange between the owners and contacts with the management. Dufner said about the process: “The Tui cruise company was in serious distress today and almost shipwrecked.”
Source: Stern
