Friedrich Joussen is the type with whom you can safely book a two-week package tour in an expensive club hotel on the Mediterranean with a diving course – and you have the feeling that you are doing exactly the right thing. Now Joussen does not work in a travel agency somewhere in a German city center, this Wednesday evening he is promoting the idea of travel to journalists in Frankfurt. “People enjoy their vacation,” is the message. As soon as they are allowed to travel again, they will too.
Joussen needs the optimism of purpose, because he is the head of the largest European tourism group, Tui from Hanover. Thanks to state aid, the company survived the corona crisis without bankruptcy, but hard times lie ahead, as Joussen also admits. That is what private investors should keep an eye on, who have traded a lot with Tui shares in the past. The company is sitting on a huge mountain of debt, has to pay high interest to the state and may even have to raise its capital again.
Joussen was asked by a Spanish journalist that evening whether it was true that Tui was flying to the Canary Islands again with immediate effect. “Yes” is the answer, accompanied by a big smile. “We are setting an example.” Joussen is happy to “open a destination” again, as the end of travel restrictions is called in the tourism industry. And every destination and every tourist plane to Southern Europe counts, because Tui had to brake hard at the beginning of the year, simply brutal. “In January we had a booking increase of 20 percent compared to the previous year, we chartered 50 additional aircraft with crews,” reports Joussen.
The rescue costs Tui dearly
The Tui of course also helped on the way to the supposed record year 2020 that the competitor Thomas Cook (including the brands Neckermann-Reisen and Condor) went bankrupt in September 2019. And then this weekend was at the beginning of March when the borders in Europe were closed and Tui somehow had to get around 200,000 customers home. “With zero turnover, everything is nothing,” says Joussen. Tui was the first company in Germany to apply for state aid during the corona pandemic. “The alternative would have been bankruptcy.”
Now things are slowly improving, and the bookings for the summer season 2021 make Tui confident, for 2022 they are even hoping for “a normal season”. But the rescue in the pandemic has a price for the company, it is sitting on an additional mountain of debt of around 3 billion euros. And that is expensive, because the German state, represented by its promotional bank KfW, is paying for the high risk involved in supporting a company that is temporarily without sales. According to Joussen, Tui pays interest “in the high single-digit range” for the rescue loan. “I never would have thought that you would have to pay such high interest.”
The high debts have also put the balance sheet of the group in an imbalance, Joussen speaks of the necessary “balance sheet repair”. “We have to reduce the debt and a rescheduling is due in 2022.” As the Tui boss admits, the whole range of instruments is on the table: issuing further bonds, selling company shares or a capital increase, the latter at a current share price of 3, 20 euros is illusory. According to analyst calculations, Tui might have to issue new shares worth a total of 1.5 billion euros. But also the sale of parts of the company or new joint ventures – the Tui airlines should become “partner-friendly” – would lower the value of the entire company and thus also the fair value of a company share.
Even if the Corona crisis is behind Tui, the share will not become attractive again for investors for a long time.
Speaking of shares: Tui is a German company based in Hanover, but the main listing of the share is in London as a result of the merger with the early subsidiary Tui Travel. That is why the Tui share is not a member of a selection index of the Dax family in Frankfurt, but of the UK’s leading index FTSE 100. Brexit will not change that, Joussen emphasizes. In the course of the negotiations on the rescue package, politicians did not demand that the listing be brought “home”, as he said when asked.
Nevertheless, Joussen is worried about Brexit and that has to do with the company’s flight subsidiary. Tui must be at least half owned by investors based in the EU so that flight rights are not lost. This is currently not a problem, emphasizes Joussen. However, the policy on both sides of the English Channel is “well advised” to recognize mutual ownership.
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