LONDON — European travel company TUI on Wednesday said it needs to reduce its fixed cost base by 30 percent and cut thousands of jobs as it looks to stay aloft in a market weakened by the coronavirus pandemic.
The Germany-headquartered group said turnover would decline significantly in the current financial year, with cost savings only partly compensating for the virus-induced downturn.
TUI was forced to cancel holidays from mid-March as the virus spread rapidly around the world. It sunk to an underlying loss in core earnings (EBIT) of 813 million euros ($882 million) in its first half-year due to virus-related costs and ineffective hedges. The result was 512 million euros lower than the prior year.
Travel restrictions aimed at stopping the spread of the novel coronavirus have grounded aircraft worldwide and stopped holidays, with airline bosses saying international travel will take as much as three years to return to normal.
Since the crisis struck, TUI's balance sheet has been supported by a 1.8 billion euro German state-backed bridging loan. TUI said the loan must be paid back by mid-2022, increasing the pressure to reduce debt.
TUI said cutting its overhead cost base by 30 percent could result in the loss of 8,000 roles which are either reduced or not recruited. Its staff levels fluctuate, usually employing 70,000 people during the summer holiday season and 60,000 in quieter months.
The company, which operates a fleet of aircraft, said restructuring would be across its 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 a statement.
TUI also said it was ready to resume providing holidays which would be possible this year with social distancing and cleaning measures.
"The demand for holidays is still very high. People want to travel," said TUI Chief Executive Fritz Joussen.
The company said it is well-positioned to benefit from a recovery in travel demand. It said there will still be a summer holiday season this year, and that it is likely to last longer because it will start later.
It said bookings for summer 2021 were already up strongly compared to where they usually are at this time of year.