Published on Wednesday, May 13, 2020

TUI to shed 8,000 jobs as it seeks to cut costs by almost a third

TUI is to shed 8,000 jobs as it seeks to cut costs by 30% following a dramatic rise in losses during the first half of the year due to the coronavirus pandemic and the grounding of the Boeing Max aircraft.

The group saw a 10% drop in turnover in the second quarter of 2020 compared to this time last year, down to €2.98 billion, resulting in a loss for the period of €681 million, an increase of €438 million year on year. Its first half loss rose to €829 million, up 175%.

However, prior to March when it was forced to stop selling holidays, turnover for the first five months of the financial year was up 6% to €6 billion and losses were down 21% year on year to €240 million. "We were very successful economically before the crisis and will be again after the end of the crisis," said CEO Fritz Joussen.

The travel giant said the staff reductions would be achieved via a freeze on recruitment and redundancies. Already 90% of its 53,000-plus global workforce are either furloughed, working part-time, with reduced pay, or taking unpaid leave.

The Group said further cost cuts were necessary to quickly repay the €1.8 billion German government-backed loan received when it was forced to suspend its operations in March, and increased its credit facility.

TUI has access to around €2.1 billion, in a mix of cash and credit, to see it through the crisis, but it's spending €250 million to €300 million a month during the travel shutdown, despite having reduced its fixed costs to the bare minimum.

"To ensure that the strong operational performance can continue in a globally weakened market following the pandemic, the Group is now implementing a global program with extensive cost-cutting measures. This will further accelerate the transformation to a digital platform company that has already been initiated," said CEO Fritz Joussen.

The Group is also looking at selling off unprofitable parts of the business, resizing its airline and increasing seat-only and accommodation only sales and dynamic packages.

"TUI should emerge from the crisis stronger," added Joussen. "But it will be a different TUI and it will find a different market environment than before the pandemic. This will require cuts: in investments, in costs, in our size and our presence around the world. We must be leaner than before, more efficient, faster and more digital. 

"We will implement our 'asset right' strategy, which we launched in 2019, even more purposefully and quickly. We will become more digital at all levels - in particular, we will accelerate the expansion of digital platforms in new markets and for our activities in the destinations. 

"We are targeting to permanently reduce our overhead cost base by 30 percent across the entire Group. This will have an impact on potentially 8,000 roles globally that will either not be recruited or reduced. In order to return to the successful development of the past years after the crisis, we must now implement the realignment quickly."

TUI said it was 'ready for an early resumption of travel activities' in Europe. A 10-point catalogue for increased hygiene and protection measures is being implemented in its hotels worldwide, it said. 

"Summer holidays in Europe can now gradually be made possible again - responsibly and with clear rules. Organised travel offers great advantages especially now: with the trusted TUI brand, we offer safety, local support and, in special situations, guarantee the return journey home," added Joussen. 

"Together with the destinations and our partners we have developed extensive measures to protect our guests. The demand for holidays is still very high. People want to travel. Our integrated business model allows us to start travel activities as soon as this is possible again. The season starts later, but could last longer. For 2020 we will also reinvent the holiday: New destinations, changed travel seasons, new local offerings, more digitalisation."

While bookings for this summer are 36% down, TUI said UK winter bookings are up 8% year on year and summer 2021 sales are 'looking positive on small volumes'.

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