DJ TUI AG: Pre-Close Trading & C-19 Update
TUI AG (TUI)
TUI AG: Pre-Close Trading & C-19 Update
22-Sep-2020 / 08:00 CET/CEST
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The issuer is solely responsible for the content of this announcement.
22 September 2020
TUI GROUP
Pre-Close Trading & C-19 Update
Prior to entering its close period ahead of reporting its full year results
for the twelve months ending 30 September 2020 in December, TUI Group
announces the following update.
C-19 Highlights
· Prior to the C-19 pandemic, January 2020 saw the best booking month in
the company's history
· TUI was on track to deliver a strong result for financial year 2020
· Since the worldwide travel suspension in March, significant self-help
actions have been taken to address the impact of the C-19 pandemic across
the business
· Liquidity swiftly managed by securing state aid from the German Federal
government
· Cash fixed costs reduced by more than 70% during the immediate lockdown
period
· Comprehensive compensation agreement finalised with Boeing
· Completed the Hapag-Lloyd Cruises disposal to TUI Cruises joint venture
in a challenging environment
· First tour operator to successfully restart operations across multiple
markets and destinations, helped by the advantage of our integrated and
diversified business model
· Global Realignment Programme launched to permanently reduce overhead
cost base by 30% across the Group
· Summer 2020 and Winter 2020/21 capacity reduced as a result of recent
volatile changes in travel restrictions
· Overall FY20 Q4 cash outflow remains as expected
· As at 20 September 2020, cash and available facilities on a pro forma
basis including additional stabilisation package, would amount to
&euro2.0bn
Chief Executive of TUI Group, Friedrich Joussen, commented:
"We have successfully restarted our operations; customers are enjoying their
holidays with newly adapted hygiene protocols and we have taken 1.4m
customers on their holidays since restart1. Destination availability at
present 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.
"Leisure holidays remain important to customers and have been one of the
most missed activities2 during the pandemic, with leisure travel expected to
recover faster than business travel. Our integrated model, underpinned by
our trusted and leading brand, offering differentiated products and
attractive value propositions, combined with proven flexibility in a
volatile environment, means we are strategically well placed to benefit as
leisure travel volume recovers over the coming seasons.
"We are on track to complete the additional stabilisation package provided
by the German Federal government as announced on 12 August with waiver
approval secured from our Senior Notes bond holders. Our Global Realignment
Programme is firmly underway with digitalisation initiatives accelerated
throughout the Group. TUI will emerge a stronger, leaner, more digitalised
business and is well positioned to benefit from the expected recovery."
1 Since restart of operations in mid-June to end of August 2020
2 BCG COVID-19 consumer sentiment survey UK, US, Italy and France
https://www.bcg.com/en-gb/publications/2020/covid-consumer-sentiment-survey-
snapshot-5-18-20 [1]
Current Trading
In Markets & Airlines, we successfully restarted operations from mid-June,
with newly introduced comprehensive hygiene protocols in place. Since
restart1, we carried 1.4m customers on holiday, achieving an average load
factor of 84% based on adjusted capacity. Over the last month, we have been
impacted by continuous changes in travel advice by various governments
across our markets. We have adapted by remixing and trimming our Q4 capacity
from 30% to 25%, to alternative low-risk destinations, enabling many
customers to continue their holidays as planned. We expect travel advice by
each regional government to remain highly fluid, and we subsequently expect
short term bookings to continue until customers are able to plan with more
certainty. Where possible, we would prefer to see a regional risk assessment
policy being applied by each government rather than a blanket travel policy.
In addition, if testing were to be made more available on arrival in
destination and on departure then this would also help to avoid compulsory
quarantine and movement restrictions.
Bookings for Summer 203 are currently 83% down versus prior year and ASP
down 19%. This equates to 15% sold of our original programme reflecting the
impact of cancellations from mid-March, versus 97% sold at the same point
last year. Rebased on our adjusted capacity plans, we are 82% sold to date,
which has been influenced by the current later booking trend.
Winter 20/21 programme3 has been further reduced by 20% since our Q3
update, to 40% adjusted capacity reflecting the current uncertainty
relating to travel restrictions. We are currently 30% sold for the adjusted
winter capacity, broadly in line with this time last year. Compared to the
normal levels of prior year, bookings are currently down 59%, in line with
adjusted capacity and ASP is up 3%. We will monitor and flexibly adapt our
capacity, in line with demand as well as travel restrictions, to ensure we
continue to responsibly offer our customers a range of safe winter holiday
options.
For Summer 21, we expect to operate 80% adjusted capacity in line with view
shared at our Q3 results. Although we remain early in the booking cycle, we
see a favourable development, with bookings up 84% and ASP up 10% versus
prior year3, made up of both new bookings and rebookings and helped by the
early launch of the Summer 21 programme. On an underlying basis we see
strong customer intention to travel, with many customers wanting to secure
their summer holidays well ahead of time.
3These statistics are up to 13 September 2020, shown on a constant currency
basis and relate to all customers whether risk or non-risk
Resumption of the 737 MAX remains subject to the clearance decision of the
civil aviation authorities. Over the last few weeks, recertification flights
have been completed by both the FAA and EASA in Canada and in the UK
respectively, indicating progress to return the Boeing 737 MAX to commercial
service by late this calendar year. We anticipate further announcements in
the upcoming weeks.
In Hotels & Resorts, we reopened 157 hotels, (44% of total group owned
portfolio) by the end of August across our worldwide destinations.
In Cruises, both TUI Cruises and Hapag-Lloyd Cruises successfully restarted
itineraries offering short, European cruises from the end of July. Three out
of its seven-ship fleet were operated by TUI Cruises during the final
quarter of our financial year. Hapag-Lloyd Cruises operated three out of its
five-ship fleet during the last quarter, offering similar short, European
cruises, such as to the Danish Sea and to the Scandia archipelagos. In
addition to the comprehensive hygiene measures already on board across our
fleets, extensive preventative protocols have been introduced. All guests
going forward will be provided with C-19 testing 48 hours / 72 hours prior
to departure as part of their cruise package, with a mandatory negative PCR
test result a prerequisite for travel. Marella Cruises remained suspended
throughout the Summer, in adherence with UK FCO guidelines and we eagerly
await a positive change in advice.
In Destination Experiences, excursions, tours and activities recommenced
from mid-June, in line with the restart of operations and capacity operated
by our Markets & Airlines segment.
Global Realignment Programme
We have initiated the main projects of our global realignment programme to
address group-wide costs. The programme targets to permanently reduce our
annual overhead cost base by 30% across the entire Group and potentially
impacts 8,000 roles. We are targeting permanent annual saving of more than
&euro300m, with the first benefits expected to be delivered from FY20 and
full benefits to be delivered by FY23. Projects announced and underway
across corporate head office, Markets & Airlines and Destination Services
are already expected to deliver close to the &euro300m target savings.
Restart monthly cash out
In general, with the partial restart during the summer months, customer
refund obligations are reducing, and we are generating immediate working
capital inflow from new bookings. The recent volatile changes in travel
advice have led to higher customer refund obligations over the last few
weeks and subsequently softer working capital inflow from new bookings. On
an operational level, we therefore now expect to see a cash outflow for late
August and September. On balance, including net special items, we continue
to anticipate low single-digit hundreds million outflow per month for the
final quarter of the financial year. The implications of the recent update
from the UK Competition & Markets Authority are already incorporated in our
cash outflow indication above.
For FY21 Q1, we now expect lower working capital from new bookings as a
result of the recent volatile changes in travel advice. We however continue
to expect to see lower outflow of hotelier payments for holidays operated in
the fourth quarter from both utilising capacity where we have prepayments in
place as well as from operating a much smaller programme versus a normal
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