TUI Says Cost Cutting Goal in Sight as It Slashes Overheads

(Bloomberg) -- TUI AG said it’s making progress on plans to cut overhead costs by 30% as the world’s largest tour operator struggles to cope with a collapse in demand for its holidays.

Measures including increased digitalization that are underway across TUI’s head office, destination services and markets and airlines operations are already set to deliver close to a 300 million-euro ($352 million) savings target set in May, the German company said in a statement Tuesday.

TUI is cutting a many as 8,000 jobs as the coronavirus continues to flare, causing countries to limit travel. The Hanover-based business said it’s trimming the capacity on offer for the fourth quarter to just 25% of year-ago levels and focusing on lower-risk destinations to attract customers.

“Destination availability is highly influenced by government policy and development of the pandemic, meaning the environment remains volatile, and is likely to remain so for the next few quarters,” Chief Executive Officer Fritz Joussen said in the release.

TUI shares rose as much as 4.4% and were trading 3.1% higher at 279.4 pence as of 8:22 a.m. in London, where the company has its main listing. The stock has lost 71% of its value so far this year.

Bookings for the summer period now ending were down 83% compared from last year, with prices almost one-fifth lower, TUI said,

Sales for the upcoming winter are down 59%, though TUI said it’s more optimistic about next summer, when it plans to operate about four-fifths of normal capacity. Bookings are up 84% and prices up 10% as customers who missed out on breaks because of the virus bet on being able to travel in 2021.

As of Sept. 20, TUI had about 2 billion euros in cash and other facilities. That’s after it received two tranches of government aid totaling 3 billion euros. Cash burn for the quarter through December will be slightly higher than planned.

TUI said it continues to evaluate options to bolster its balance sheet for the longer term, without being more specific. A report last week said the company may seek as much as 1 billion euros in fresh capital.

©2020 Bloomberg L.P.