TUI to axe 8,000 jobs as Q2 losses widen on Covid-19 impact
Holiday operator TUI said it would axe up to 8,000 jobs and make permanent cost cuts as it called the Covid-19 pandemic "unquestionably the greatest crisis the industry has ever faced".
Travel & Leisure
7,453.65
09:55 19/04/24
TUI Travel
437.60p
16:59 11/12/14
The UK’s biggest tour operator posted a widened second quarter loss before interest and tax (EBIT) of €680.9m from €242.1m a year ago, as the travel industry found itself battered by a collapse in air travel and the shuttering of hotels and resorts worldwide.
First half underlying EBIT losses increased to €813m from €512m as a result of lost contribution in March and costs arising from Covid-19 shutdown, “most notably from ineffective hedges”, and replacement lease costs relating to Boeing's 737 Max aircraft which has been grounded globally after two fatal crashes.
Total costs in March incurred relating to both Covid-19 measures and the 737 Max amounted to €470m, TUI said.
“We are targeting to permanently reduce our overhead cost base by 30% across the entire group. This will have an impact on potentially 8,000 roles globally that will either not be recruited or reduced,” The Anglo-German company said.
“The tourism industry has weathered a number of macroeconomic shocks throughout the most recent decades, however the Covid-19 pandemic is unquestionably the greatest crisis the industry and TUI has ever faced.”
Net debt at the end of March stood at €2.5bn with cash and available resources at €3.1bn, a €1.8bn German state loan and a suspension of covenants agreed to March 2021. By 10th May, cash and available facilities had reduced to €2.1bn.
TUI in March suspended the vast majority of its travel operations, including package travel, cruises and hotels to help stop the spread of the coronavirus. The company also pulled full year guidance. However, there were signs that customers were still looking for holidays when restrictions were lifted, citing online enquiries.
The travel group on Monday published detailed plans on how it would run its 400 hotels after coronavirus travel restrictions were lifted, including limits on popular self-service buffets and a ban on football tournaments.
Analysts at Shore Capital said the cash drain on TUI had been "laid bare in today’s update".
"TUI appears to have the liquidity to continue for several months, although the limiting of the working capital drain and receiving the cash proceeds from the Hapag-Lloyd (cruise line sale) transaction are clearly important, leaving it better placed then most," they said.
"It is unclear how the post Covid travel world will look, although competition is likely to be much reduced, and repairing the balance sheet must be a key requirement for management."