Europe’s largest travel and tourism business said that a sharp rise in Covid infection rates from the Omicron variant had started to hit bookings.
Tui Group said that it was likely to cut its winter capacity to the bottom end of the 80 per cent to 60 per cent range, although it remained positive over next summer’s programme, which was “comparatively well booked”.
Omicron’s greater transmissibility has prompted the UK government to bring back pre-departure Covid testing for incoming travellers in a fresh blow to the travel industry and its customers.
Fritz Joussen, chief executive, admitted there would be an impact from the new variant, but he was optimistic the scale of the damage would be limited by its emergence in the low season.
The Tui boss remained positive, however, claiming yesterday that the group had “taken another step out of the crisis” after reporting positive underlying quarterly results for the first time since the start of the pandemic.
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He declared: “We are generating significant cash inflows and achieving positive results again in many markets.”
He said the programme of the first quarter of 2022 was already almost fully sold. “This means that we are currently achieving 69 per cent of the pre-crisis level. We expect summer 2022 to reach a largely normalised booking level.”
Analysts were more sceptical, however, with Becky Lane at Jefferies bank pointing out that the full-year results were weaker than consensus expectations and she continued to see “long-term balance sheet risk accentuated by potential structural changes”.
Jamie Rollo at Morgan Stanley said trading had weakened since the previous update in early October, with summer 2022 bookings now 3 per cent below 2019 levels, having been strongly ahead.
Joussen, 58, said that as well as 1.4 million bookings since its last update, average prices were up 15 per cent for winter and 23 per cent for summer.
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Tui was created by the merger of Tui Travel, of the UK, and Germany’s Tui in 2014. It employs 70,000 people in more than 100 countries. It has 400 hotels, 16 ships, 100 aircraft and 1,000 agencies.
For the whole of this year, 5.4 million people travelled with Tui and for the coming year it has taken 4.1 million bookings. Joussen said “experiences and encounters are becoming more important to many than property and possessions”, adding: “Whenever restrictions are lifted, demand picks up immediately.”
He said it was successfully implementing its efficiency programme, with about 60 per cent of its €400 million annual cost-saving programme already achieved last year. Tui said it was close to reaching break even at the underlying operating level in the fourth quarter, with a loss of €97 million from revenues almost tripled to €3.5 billion.
Joussen hailed the success of the refinancing taken during the pandemic to strengthen the balance sheet.
For the full-year, Tui reported a 40.5 per cent fall in revenues at constant currency to €4.7 billion. Underlying operating losses narrowed from €3 billion to €2.1 billion. Analysts remain concerned over the level of gross debt, currently at €7.3 billion. Shares of Tui rose 3¾p, or 1.75 per cent, to 221¼p.
