In a trading update this morning (Tuesday) prior to entering its closed period ahead of reporting its full-year results for the 12 months ending 30 September, the German travel giant revealed some key financial updates, although said overall full-year 2020 Q4 cash outflow “remains as expected”.

In terms of markets and airlines, Tui said since restarting operations in mid-June with new hygiene protocols, it had carried 1.4 million customers on holiday, with an average load factor of 84% based on adjusted capacity. 

It said though that over the last month it has been impacted by the 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,” said Tui in a statement. 

“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 
 
Bookings for Summer 2020 are currently 83% down versus the prior year – 15% sold of its original programme versus 97% sold at the same point last year. Rebased on its adjusted capacity plans, the group is 82% sold to date “which has been influenced by the current later booking trend”.
 
The winter 20/21 programme has been further reduced by 20% since its Q3 update, to 40% adjusted capacity reflecting the current uncertainty relating to travel restrictions. It is 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.

For summer 2021 Tui expects to operate 80% adjusted capacity.

“Although we remain early in the booking cycle, we see a favourable development, with bookings up 84% and average selling price up 10% versus prior year, made up of both new bookings and rebookings, and helped by the early launch of the summer 21 programme,” the group added.

“On an underlying basis we see strong customer intention to travel, with many customers wanting to secure their summer holidays well ahead of time.”

A total of 157 hotels (about 44% of the total group owned portfolio) had been opened by the end of August across Tui’s worldwide destinations.

737 Max

The resumption of the 737 Max remains subject to the clearance decision of the civil aviation authorities, Tui said. Over the last few weeks recertification flights have been completed by both the FAA (Federal Aviation Administration) and EASA (European Union Aviation Safety Agency) in Canada and in the UK respectively “indicating progress to return the Boeing 737 Max to commercial service by late this calendar year”. 
 
Refunds 
 
In general, with the partial restart during the summer months, customer refund obligations are reducing, Tui said, adding it was “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, however. 

“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,” Tui said.  

“The implications of the recent update from the UK Competition & Markets Authority are already incorporated in our cash outflow indication above.
 
“For full-year 2021 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 year. 

“Overall, we expect monthly cash outflow now to be slightly higher, between low to mid-single digit hundreds million per month.”

Chief executive of Tui Group, Friedrich Joussen, said: "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 activities 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.”
 
He added: "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 under way 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."
 
The realignment programme targets to permanently reduce annual overhead cost base by 30% across the entire group and potentially impacts 8,000 roles. 

The group is targeting permanent annual saving of more than €300 million.