Tui’s pandemic payback sets path for takeoff
BRUSSELS, March 24 (Reuters Breakingviews) - Tui’s (TUI1n.DE) 1.8 billion euro capital raise releases it from government clutches and sets it up for brighter skies. The travel operator said on Friday it plans to issue new stock to raise 1.8 billion euros, at the high end of the 1.6 billion to 1.8 billion euros flagged in December by Chief Financial Officer Mathias Kiep. Like many travel companies Tui required funds to keep it afloat during the pandemic when holidays were cancelled and flights were grounded. The 2.7 billion euro company received a staggering 4.3 billion euros of German state aid during the Covid-19 outbreak and is repaying much of the remaining 2.6 billion euros of debt with its fresh funds. According to its investor presentation, the capital raise will bring the company’s leverage ratio down to about 3 times expected EBITDA for 2023.
Storm clouds are parting for the travel industry. Tui’s revenue is expected to soar by over 17% this year to top 19 billion euros, according to Refinitiv estimates. Meanwhile, its 2024 sales are forecast to exceed pre-pandemic levels. The company plans to fully repay a German government stake of 750 million euros and redeem its credit line from state lender KfW, while also paring down its use of a cash facility. The company says this will reduce its net interest by as much as 90 million euros over the next 12 months. With increased travel demand and the government mostly off its back, Tui is headed for a smooth post-pandemic landing. (By Rebecca Christie)
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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
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