TUI Plans 8,000 Job Cuts to Adapt to Shrunken Travel Market

(Bloomberg) --

TUI AG will eliminate as many as 8,000 jobs, about 15% of its workforce, to cut costs and slim down its business as people travel less and favor different locations following the coronavirus outbreak.

The world’s biggest package-holiday company is seeking to pare overall costs by almost one-third and offer more local breaks in the hope of encouraging a revival in tourism before the end of summer, it said in a statement Wednesday.

Like other travel firms, Hanover, Germany-based TUI is slashing posts after being left reeling as the pandemic shut national borders and wiped out flights. While some countries are still largely in lockdown, Chief Executive Officer Fritz Joussen said there’s an appetite for vacations and that Europe must open up.

“Summer holidays in Europe can now gradually be made possible again, responsibly and with clear rules,” Joussen said. “People want to travel. The season starts later, but could last longer.”

Shares of TUI traded 1.6% higher at 268.6 pence as of 8:04 a.m. in London, where the company is listed, paring the decline this year to 72%.

TUI had been looking forward to a bumper year before Covid-19 struck after its biggest rival, Thomas Cook Group, went bust last year. The job cuts reveal how reductions at airlines such as British Airways, which plans to eliminate 12,000 posts, are set to extend to the wider tourism industry.

Joussen said TUI must reinvent its holiday portfolio to adapt to realities including changed travel seasons, with new destinations and more local offerings. The company’s Chinese unit has already restarted with trips and flights within the country.

The first German hotels are set to reopen in coming days in North and Baltic Sea resorts, and European destinations are ready to welcome holidaymakers, the CEO said. He also predicted a “renaissance of overland travel” that could see more Germans driving to Mediterranean sunspots such as Croatia.

Joussen said uncertainty over when different countries will open up to travel is making customers holding bookings more and more frustrated, and that “they increasingly don’t understand that we cannot give them an answer.”

Cost cuts could amount to about 400 million euros ($434 million), he said on a conference call. Measures will include “rightsizing” TUI’s airline arm, though plans envisage delaying deliveries of Boeing Co. 737 Max aircraft rather than canceling them outright.

The group has 72 Max jets on order, of which 15 have been delivered, though the model is currently grounded after two fatal crashes.

TUI, which has been granted a 1.8 billion-euro bridging loan from German state bank KfW, had reserves of about 2.1 billion euros as of May 10, according to the statement. “We moved from a very, very critical situation to a critical situation, Joussen said. “So we are fairly upbeat.”

TUI reported an underlying second-quarter loss before interest and tax, depreciation and amortization of 540 million euros, versus a loss of 106 million euros a year earlier.

Joussen said he expects a full recovery of tourism demand by 2022, reasoning that unlike retail and business transactions, technology cannot offer an alternative to vacations.

©2020 Bloomberg L.P.