As results season gathers pace, TUI Group has announced its first-quarter results in a delirium of comments about the clear path out of the pandemic and how much it was going to ‘push ahead’ with the repayment of state aid.
This, it bears hammering home over and over again, from TUI, the company which was written off multiple times as it was expected to keel over under the weight of the pandemic. It was now, CEO Fritz Joussen said: “leaner and more efficient and becoming more profitable than before the crisis”.
Of course there was a point where Joussen may not have believed that the group would have survived the crisis at all. Maybe not – he’s a positive person – but thoughts popped into a lot of heads at 3am around the March 2020 time.
But the German federal government acted quickly and before the end of March 2020, had approved a bridging loan of €1.8bn to TUI Group. Joussen thanked the government “for acting quickly”, adding: “TUI is a very healthy company. We were economically successful before the crisis and will be again after the crisis. Our business model is intact and we have over 21 million loyal customers. However, we are currently facing unprecedented international travel restrictions.”
The funds of Germany’s state-owned development bank, the KfW, were to be used to increase TUI’s existing credit line with its banks to €1.75bn, giving the company access to financial resources and credit lines totalling €3.1bn. One of the conditions of the KfW bridge loan was that TUI waived dividend payments for the duration of the bridge loan. This was followed by more government support and a rights issue, which meant that, as at 4 February this year, TUI had cash and cash equivalents of €3.3bn.
In the spring the group plans to hand back around €700,000 in state aid as a first step, after reporting that, in the first quarter, revenue was at €2.37bn, five times higher than in the previous year. As of 30 January, 3.5 million TUI customers had booked a trip for Summer 2022, around 72% of the level of Summer 2019 at the same time. New bookings were now over 100% of the level of Summer 2019, so the group expected Summer 2022 to be close to the pre-crisis level.
We try and be pan European here at NewDog, and that means looking at Europe as a geographic state, not a political body. But it’s not always possible and the TUI results seem like a good time to appreciate that, before returning to our more hopeful lookout next week.
In the UK, March 2020 was experienced in the same way as TUI, by a sudden cessation in revenue and no view on when that might change.
The EC was very specific in its special temporary pandemic state aid framework – no cash for businesses already in trouble and, before at least 75% of recapitalisation was achieved, no lavish bonuses or running around buying competitors. The EC recognised the hotel and leisure sector as one of the sectors hit hardest by the COVID-19 outbreak and acted accordingly – although not everyone was happy, with airports very grumpy indeed.
Within the EU, individual countries took a similar view. We saw Germany back TUI, France talked about how hospitality was central to its way of life, across the bloc there was a general appreciation of the importance of the sector to the economy and people’s wellbeing.
In the UK Rishi Sunak also leapt forwards, offering wage support, cutting VAT and offering various different types of debt. Much of that is now over, but the recovery is far from underway. The government is of the opinion that the pandemic is over and is acting accordingly. And now the debt must be repaid and VAT is due to bounce back.
This is not another opportunity to talk about how the UK government doesn’t care about the sector. Everyone reading this knows that. The general lack of enthusiasm for service felt by the general population seeps into the mood at the top and it’s not viewed as a serious industry.
Efforts to bring in a dedicated MP failed, but the sector must regroup and find ways that public and private sectors can work together.
McKinsey took a look at Spain as it comes out of the pandemic and there are thievable options here which may be applicable. Like dealing with a recalcitrant toddler, it’s about letting the government think it thought of it first.
Last week’s levelling up paper talked of devolution. McKinsey suggests: “Local governments could become a more proactive player in tourism management, employing measures to promote destination appeal, fostering cross-sector collaborations, and reskilling and retraining the travel workforce”. This also plays into fostering more domestic travel, which in turn supports sustainability. Pretty dandy for a country which hosted Cop.
It would have been nice to have a government which gave a damn during the pandemic. But maybe one can be fashioned just out of its view. Germany has a great enthusiasm for devolution and it certainly keeps politicians grounded and away from their ivory towers. Maybe levelling up can be more than a catchphrase after all.