Tourism bankruptcy
How FTI missed the travel boom
By Max Borowski
04.06.2024, 17:30
Germans are traveling more than ever before and spending record amounts on it. The tourism industry has left the Corona crisis behind – except for FTI. Europe’s third-largest travel group is bankrupt. How could this happen?
2023 was a record year for the German tourism industry. After the severe slump during the Corona pandemic, sales exceeded pre-crisis levels for the first time. The industry is expecting further growth this year, and travel agencies and tour operators have been reporting high booking numbers for months. But one company clearly did not benefit at all from this development: Europe’s third-largest travel group FTI.
Like other companies in the industry, FTI also fell into crisis during the Corona period. The German government helped the FTI Group with more than 500 million euros through the Economic Stabilization Fund. The world’s largest tourism group, TUI, also received state aid worth several billion euros at the time, although this has since been fully repaid. Lufthansa received aid from several countries, including billions in federal loans and deposits, which have since been repaid.
FTI, the parent company of the travel shopping channel Sonnenklar.TV, among others, was unable to get rid of its Corona legacy. On the contrary – for months the group had been slipping so deeply into crisis that it could no longer benefit from the current booking boom in the industry. The group spent a long time unsuccessfully searching for investors who would help with new capital to reduce the high debts from the Corona period, among other things. A possible merger with the number two in the industry in Germany, DER Touristik, was also considered. FTI’s main owner, the Egyptian billionaire family Sawiris, publicly expressed its confidence in the future of the group, but was not willing or able to pay for the necessary additional investments.
Corona debts taken over at “market price”
While the search for fresh capital proved difficult, the first reports of liquidity problems at FTI emerged. The need for a partial debt relief was discussed. According to reports, the federal government rejected this in order to avoid the impression that it was giving investors like the Sawiris family cash gifts. Such criticism had been heard repeatedly during the Corona crisis when companies received state aid from which their investors and shareholders also benefited.
However, reports about FTI’s potentially overwhelming debts meant that customers were reluctant to make bookings for fear of bankruptcy – which has now occurred. Business partners are also said to have increasingly demanded payment in advance. Before FTI threatened to sink into the vicious circle, news came in April that a savior had been found. The US financial investor Certares wanted to take over FTI for a symbolic euro, but with the promise of investing 125 million dollars in the company and taking over the debts. The German government was prepared to assign its claims at the “market price”, which meant a significant discount.
Last rescue attempts failed at the weekend
According to a report by “Business Insider”, the agreement revealed chaos in the management of the travel group, making rescue impossible. Certares initially transferred 50 million euros to FTI as planned, which initially enabled operations to be maintained. However, the condition for paying the outstanding 175 million euros in further tranches was that FTI should draw up reliable liquidity planning, which the company was apparently no longer able to do. At the same time, new reports of possible insolvency fueled concerns among travelers and business partners.
Attempts to find other sources of money at the last minute were unsuccessful. According to information from “Business Insider”, the Sawiris family declined the offer, not least out of anger because the FTI management was unable to provide reliable figures. The idea that the company could tap into its deposits in the German Travel Insurance Fund, worth 200 million euros, as a kind of emergency reserve is said to have failed because the federal government would have had to provide a guarantee for this.
Last weekend, it became increasingly clear that the rescue of the company had finally failed. On Monday, FTI Touristik GmbH was the first to file for insolvency, with other companies in the group expected to follow suit.