TUI to make big cost cuts to survive pandemic hit

LONDON (Reuters) – European travel company TUI said that it needed to cut its fixed cost base by 30% and thousands of jobs would be lost as it looks to right-size its business to survive in a market weakened by the coronavirus pandemic.

The Germany-headquartered group warned on Wednesday that group turnover and earnings would decline significantly in its current financial year, with cost savings only partly compensating for the downturn caused by the novel coronavirus.

As the virus spread rapidly around the world, TUI was forced to cancel the majority of its travel programme in March, and its finances have since been boosted by a 1.8 billion euro ($1.95 billion) state-backed bridging loan in Germany.

TUI said cutting its overhead cost base by 30% could result in the loss of 8,000 roles which are either reduced or not recruited. Its staff levels fluctuate, usually employing 70,000 during the summer holiday season and 60,000 in quieter months.

The company, which operates a fleet of aircraft, said the restructuring would be across its whole business and that there could be divestments and aircraft deferrals.

“We will right-size our airlines and order book, alongside restructuring. We will divest and address non-profitable activities within our business,” TUI said in its statement.

TUI also said it was ready to resume providing holidays and that they would be possible this year using new social distancing and cleaning measures.

“The demand for holidays is still very high. People want to travel,” said TUI’s chief executive Fritz Joussen.