Tui, the world’s largest tour operator, plans to cut its cost base by almost a third to survive a crisis the group described as the worst the tourism industry has ever faced.
The Hanover-based company said on Wednesday that the measures would affect 8,000 positions — either through cuts or the shelving of recruitment plans. Investment would be scaled back as would its operations in certain countries.
“This is the biggest crisis for tourism and also for Tui,” said Fritz Joussen, Tui’s chief executive, who vowed to “reinvent the holiday” by offering customers more local destinations and giving customers more incentives to travel off season.
The reduction in Tui’s 53,000-strong workforce will mostly come from eliminating roles, such as customer representatives, at the destinations it serves. However, Mr Joussen would not rule out cuts at Tui’s high street travel shops.
The plan laid out on Wednesday extends the restructuring at Tui, which had already shrunk its headcount by just over 10 per cent to cope with a collapse in demand. Operating more than 400 hotels and 150 aircraft, Tui mainly sells European holidays to UK and German consumers.
Mr Joussen insisted that Tui would be able to restart all of its operations by July with some destinations such as Greece, Croatia and the Balearics “ready to go” now.
“It needs to be open borders in Europe and it needs to be focused on destinations and source markets where infections are low,” he added, referring to countries such as Greece that had been more successful in containing the virus.
But with many major economies only slowly emerging from lockdown and the global economy in recession, the immediate outlook for the travel industry is grim.
The World Travel and Tourism Council warned on Tuesday that without a global set of health and testing standards for airlines, hotels and travel companies, consumers will not feel safe to travel again.
The overhaul of the company’s cost base came as Tui reported that revenues in the quarter to the end of March fell 10 per cent to €2.8bn. Its loss for the period widened to €740.5m from €176.9m a year earlier. Tui said it aimed to reduced monthly cash burn to between €250m and €300m.
Tui was hit early in the crisis when an outbreak of coronavirus was discovered in one of the hotels it works with in Tenerife in February. It subsequently stopped the majority of its operations in early March and applied for a German state loan to help it navigate through the crisis. It said on Wednesday that it had total cash and available loans of €2.1bn and reduced its fixed costs by about 70 per cent.
Richard Clarke, an analyst at Bernstein, said there was “some light at the end of the tunnel” for the travel company.
Winter bookings from UK customers were up 8 per cent from a year ago and summer bookings for 2021 were “looking positive” despite low volumes, Tui said on Wednesday.
Mr Joussen warned that the travel sector faced the additional pressure of mass payouts to customers requesting a refund. If a voucher system redeemable against future holidays was not mandated, he said “the whole industry could collapse”.
Shares fell 2 per cent in early London trading. They have slumped more than 70 per cent this year.