TUI reveals plans to increase merger savings to £150 million
TUI has revised its synergy target from £100 million to £150 million savings within two years following a 100-day review.
Chief executive officer Peter Long said the integration of TUI and First Choice is progressing very well and has led the group to upgrade its synergy target by 50%.
“We have now developed a clear vision and strategy for growth that goes beyond the delivery of the cost synergies,” he said.
“We will leverage our unique portfolio of market leading brands, grow our level of differentiated content and controlled distribution and optimise our business model to deliver organic growth.
“In our portfolio of specialist businesses we are aiming to continue to deliver a mix of strong underlying organic growth and value enhancing acquisitions.”
TUI said the extra £50 million savings will be realised through integration opportunities in the UK, continental Europe and in a number of central functions, such as insurance, treasury and audit fees.
It said within UK mainstream, further cost synergies have been identified in airline network planning, the retail estate and administrative costs, amounting to an incremental £40 million a year.
Within continental Europe, specialist sectors and central functions, TUI said it expects to make savings through distribution opportunities, overhead savings and product efficiencies, amounting to an incremental £10 million per annum.
“In addition, we now anticipate acceleration in the phasing of the synergy benefits with a 31% exit rate in the current financial year, 83% exit rate in the year ended 30 September 2009 and 100% exit rate in the year ended 30 September 2010,” said TUI’s statement.
“It is now expected that the restructuring costs associated with the delivery of the synergies will amount to £180 million (from £130 million), the majority of which will be incurred within the current financial year and the year ended 30 September 2009.”
Following the 100-day review, TUI has set a series of new objectives.
These include “leveraging our unique portfolio of brands to drive customer loyalty and retention through direct routes to market” and “investing in sustainable organic and acquisition growth opportunities, through a rigorous capital allocation framework”.
By Bev Fearis
Bev
Editor in chief Bev Fearis has been a travel journalist for 25 years. She started her career at Travel Weekly, where she became deputy news editor, before joining Business Traveller as deputy editor and launching the magazine’s website. She has also written travel features, news and expert comment for the Guardian, Observer, Times, Telegraph, Boundless and other consumer titles and was named one of the top 50 UK travel journalists by the Press Gazette.
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