TUI's Dark Cloud With a Silver Lining?

The most recent quantification of the drastic toll the coronavirus pandemic has taken on the travel industry was revealed today in the latest TUI Group quarterly financial statements. The largest holiday company in the world recorded an 88 percent drop in revenue, leading to a devastating underlying EBIT of -€699m - a fall of 376 percent on the same period last year.

Thanks in large part to financial support packages from the company's native German government though, liquidity of €2.1 billion at the start of February means according to current internal forecasts, TUI should be able to survive to the summer when it has planned capacity of 80 percent compared to 2019 levels in order to honour the 2.8 million bookings they have already received for the coming season.

A lot is riding on restrictions being lifted by this point though, with the new Covid variants only adding uncertainty to such forecasts. Nevertheless, TUI's working assumption for Q2 2021 "is for working capital development to correlate with vaccine programme rollout and lifting of travel restrictions, with significant upside anticipated should travel restrictions be lifted ahead of Easter." Adding: "For Q3, we assume significant positive working capital inflow and net costs moving towards cash break-even as both operations and bookings begin to normalise."