“The flight paths out of the crisis have begun to be mapped out for the world’s largest travel and tourism operator but the damage caused by the harsh rays of Covid run deep.
Q1 2021 hedge fund letters, conferences and more
TUI AG Posts Losses
TUI AG (LON:TUI) has posted a group loss of almost 1.5 billion euros for the first half of the year as planes were grounded and hotels emptied while rolling lockdowns took hold in key markets for huge chunks of the period.
As revenues plunged by 89%, TUI grabbed hold of a raft of financial life buoys to see it through the crisis. It’s now being kept afloat by 1.7 billion euros of liquidity as the long wait for tourists to be allowed to travel once again continues.
With the accelerated roll out of vaccination programmes, clouds over the business do finally seem to be clearing, and the company doesn’t expect the summer to be a washout. It’s planning for capacity of 75% of 2019 levels during the peak seasonal months on the fourth quarter. It expects demand to be focused on Greece, the Canary islands and the Balearics where it hopes low infection rates should see the destinations given the green light. But many of the 2.6 million customers in the pipeline will have re-booked from cancelled holidays from last year, rather than delivering fresh streams of revenue.
Although it’s not time to recline on the sun lounger just yet, the re-opening of economies and control of Covid rates in key markets does bring hope that the worst of the crisis may be behind the company. However, a lot is still riding on governments giving tourists approval for travel, including the setting up of vaccine and testing passports.
Risks From The New Virus Strains
The possibility of fresh strains emerging as the virus continues to rip through India, or current variants taking hold more aggressively are still risks ahead which could also affect the confidence of the travelling public.
of fresh mutant strains emerging as the virus continues to rip through India, or current variants taking hold more aggressively are still risks ahead which could also affect the confidence of the travelling public.
The company will also be heading into recovery mode, with the baggage of much more debt and red tape linked to government support, which could hamper its progress in returning to financial health."
Article by Susannah Streeter senior investment and markets analyst, Hargreaves Lansdown
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