Europe’s largest travel company wants to raise additional capital in order to have more financial leeway and to repay government loans granted to it to support the corona pandemic. For this, Tui plans to issue new shares for 1.1 billion euros. The money will be used to repay a loan of 375 million euros granted by the public bank KfW. In addition, debts with other banks must be reduced.
The supervisory board approved the plan, the company said on Wednesday. “With the capital increase, we are getting closer to our goal of repaying government loans quickly,” said CEO Fritz Joussen. A silent participation and a convertible bond of the federal government totaling approximately 1.2 billion euros are not affected by this decision. In addition, the line of credit granted by KfW remains in place for a little over three billion euros in order to be able to react flexibly to the evolution of the pandemic, he indicates.
Another capital increase is long overdue in the industry. Tui is not taking this step for the first time. The travel group had already increased its capital by 500 million euros in January. At the beginning of October, he said he had financial resources of 3.4 billion euros, including the proceeds of the capital increase, which is now 4.5 billion euros. Shortly after trading started, Tui stock was around 1% in the red.
When a company issues new shares, the percentage of old shareholders decreases. For this reason, they usually have the right to buy new stocks before entering the open market. With the capital increase underway, Tui is issuing just over half a million new shares at a subscription ratio of 10:21. This means that existing shareholders will be offered ten new shares for 21 existing shares. The largest shareholder in the travel group is Russian billionaire Alexei Mordashov. He currently owns 32 percent. He would have promised to exercise all the subscription rights attributable to his participation.
Where travel restrictions fall, reservation numbers rise quickly
It is still unclear if and how quickly the company will recover from the corona pandemic. Therefore, according to various analysts, buying Tui shares is only attractive to investors willing to take risks. But there are also experts who think an investment makes sense, for example Markus Heller of the management consultancy Dr. Fried und Partner, who mainly advises tourism companies. “With the vertical business model, if it stays in place and you don’t sell any significant assets, Tui has the great opportunity to disproportionately benefit from the expected tourism boom,” Heller says.
The travel agency is currently trying to spread optimism. The reservations situation has improved significantly. 5.2 million trips have been booked for this summer. “Wherever government travel restrictions are lifted, we immediately see a rapid return of business, catch-up effects and higher sales for customers for their trips,” he says. Bookings for Germany or the Netherlands were even higher than in the summer of 2019, that is to say before the pandemic. Tui also called the number of 1.6 million bookings for the summer of 2022 so far “very encouraging.”
For the coming winter, Tui plans 60 to 80% of the normal schedule, according to his own information. The most popular winter travel destinations are the Canary Islands, mainland Spain, Egypt and Cape Verde. The group is taking advantage of the fact that travel restrictions for short and medium-haul destinations were largely lifted in winter. The company expects a slower recovery for long-haul destinations.
The fact that Tui has yet to survive the Corona crisis can be seen, among other things, by the fact that employees of the group’s own travel agencies have been on short-time working again since early October.