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Winter is coming

23 September 2020 by jbchevrel

TUI AG is Europe’s largest tour operator. TUI is in all XOvers since s03, except s25. Yesterday TUI widened +3.5% to 13% on the 5y. Today it closed 13.5%. For context, Before TUI got saved by the state in April, CDS reached 46%. It then tightened to just 6%, a week ago. The reason it widened this week is that the outlook for winter is pretty grim. TUI made further cuts to their winter holiday schedule. They warned of a hit from more refund requests. In August, TUI had said it expected to break even during the late summer months as travel resumed. That may have been the only window this year, though. Time will tell. Meanwhile, yesterday, TUI downgraded its view, arguing that “volatile changes” to travel advice from European countries created more demand for refunds and even discouraged people from booking for winter, at all. As a consequence, TUI expects to be cash flow negative in late August and September (~€400m monthly cash burn rate). Liquidity-wise, TUI said it had available funding of €2bn, compared with €2.4bn it announced in August after it agreed 2 state-backed loans from the German government. Back in May, TUI launched a €300m cost-saving programme (8,000 jobs cut), but the real force keeping them up is that Germany is standing behind. Credit friendly options such as asset disposals or a rights issue (mkt cap €1.7bn) are also on the table.