TUI: Travel further restricted in winter – there is hope for summer

At Tui, customers have to be prepared for a significantly restricted winter program in view of new Corona travel warnings and high uncertainty in further planning. The world's largest tourism group from Hanover cut around a fifth of its offer for the upcoming season. As Tui announced on Tuesday, vacationers will be able to use around 40 percent of the original capacity in the coming months. The company reported that 30 percent of the reduced program was recently booked.

Travel could be better again in summer 2021

Tui was more confident about the summer of 2021. Many areas have largely started up again. Even with cruises, things are progressing gradually – now with corona tests for passengers.

The pandemic has become an existential crisis for the travel industry. After a three-month downtime, Tui has been slowly ramping up operations since mid-June. "Since the resumption, 1.4 million customers have gone on vacation with us," said CEO Fritz Joussen about the period up to the end of August. However, travel warnings and advice make many vacationers hesitate when making long-term bookings. The situation is also tense in Spain, including the Balearic and Canary Islands – destinations that are particularly popular with Germans and British. The entire market environment is volatile, said Joussen. "And this will probably continue to be the case in the coming quarters."

New virus test standards for cruises

For the winter business 2020/2021, Tui reported a booking status that is currently 59 percent below the previous year's value. The prices are on average 3 percent higher. The aim is to be able to "continue to responsibly offer customers a variety of safe winter holiday options" despite the shortened program. However, one still has to reckon with changed travel instructions, "so that the trend towards short-term bookings will continue until the guests have greater planning security". Instead of blanket risk assessments for entire countries, more precise, regional assessments are necessary.

In the cruise line, some sea tours in Europe are back on offer – at Tui Cruises three out of seven ships are in use, at Hapag-Lloyd Cruises three out of five. Among other things, Joussen had presented a concept for shorter journeys in the North and Baltic Seas. A Covid-19 test is now included in the program for all passengers. Customers receive this two or three days before the start of the tour and have to show a negative result at check-in. 44 percent of the group's hotels had reopened by the end of August.

Tui preferred the start of booking for the summer season

For the next summer, Tui is sticking to its plan to offer 80 percent of the originally planned capacity. There is currently "a positive booking development" – but the value of 84 percent above the previous year's level is also based on the special Corona effect: Many holidaymakers have rebooked their trips to the coming year or want to secure seats early, Tui pulled the booking start for the summer season 2021 also before. Prices rose 10 percent.

Joussen expects – despite all the imponderables – a recovery, faster for vacation than for business trips. The group also assumes that the flight ban on the Boeing 737 Max could soon be lifted. Airlines around the world had to leave the model on the ground after two crashes. Now, according to Tui, there were some test flights "for recertification (…), which indicates progress in resuming commercial operations by the end of the calendar year. We expect further communications in the coming weeks."

Financial pressure on Tui increases

The management of the group's Tuifly fleet is also pursuing a tough austerity course, which is highly controversial among trade unions and works councils. Up to 8,000 jobs could be cut in the entire group – Tui wants to save more than 300 million euros per year, and from 2023 this should be "fully effective".

The company is under severe financial pressure. Possibly increasing reimbursements to customers due to changes in travel information could further reduce the available funds. Including the available federal government loan of 1.2 billion euros agreed in August, Tui has access to liquidity of around 2 billion euros. Due to the uncertain travel situation, the group expects the cash situation to develop somewhat worse from October to the end of December.