As Tui gets a break Britain throws in the towel
Ministers should take note of Berlin’s decisive bailout package for the holiday giant when dealing with our own beleaguered sector ‘It makes sense to help an otherwise healthy company through the storm’
Tui boss Fritz Joussen must be yearning for the sun lounger. He has spent the last few months desperately trying to stop the tour operator from becoming permanently grounded while governments across Europe do their best to wreck everyone’s holiday plans. Still, at this rate Joussen will be leaving his trusty beach towel at home and heading to Bavaria or the Black Forest.
The Hanover-based firm has been forced to cancel another slew of holidays and flights to popular summer destinations such as Spain, Cyprus, Portugal and Morocco as the pandemic restrictions become more chaotic by the week.
Hotels, cruise ships and flights have all ground to a halt, devastating one of the industry’s biggest names. The company swung €1.45bn (£1.3bn) into the red in the three month period to the end of June and turnover crashed from £4.2bn to just £67.8m in the same period last year, a reversal of such magnitude that it requires a double take.
Yet, help is at hand in the form of the German federal government. Germany Inc has hardly covered itself in glory in recent years. Domestic champions like Volkswagen and Deutsche Bank which were once admired around the world have become a laughing stock after a series of embarrassing and damaging controversies.
But there is a lot to be said for the decisive action that Berlin has taken to protect its titans. Indeed this is Tui’s second state bailout in five months. In between there has been a €3bn rescue of trainer giant adidas, and €9bn of state aid for flag carrier Lufthansa, much to the fury of Ryanair’s Michael O’Leary.
Meanwhile, apart from a tiny £30m loan for the UK operations of Spanish steel maker Celsa, ministers here seem determined to resist direct support for struggling companies. Our own travel giants have been left to fend for themselves while their European rivals are propped up by taxpayer money.
The Germans have come up with a carefully crafted bailout package that will help Tui navigate further drops in demand over the summer and help see it through the traditional winter lull.
Free marketeers will baulk at this unabashed state intervention but this isn’t a free handout of the sort that we are used to seeing on the Continent. A further £1.1bn emergency convertible loan on top of a £1.6bn state-backed credit line in April is tied to a series of tough conditions including the suspension of dividends, job guarantees, and restraint on boardroom pay. A rights issue and disposals are also on the table and a cost-cutting plan has been drawn up.
And it’s not as if this is a failing company being artificially kept alive by cheap state credit. The government is charging a punchy 9.5pc interest rate on the bond and as a spokesman for the German economics ministry pointed out: “Tui was a profitable company. The measures are aimed at getting the company and the workers through the crisis.”
Quite. There has been a 145pc jump in holiday bookings for next summer so it makes perfect sense to help an otherwise healthy company of this size through the storm.
Besides, don’t governments have a duty to lend a hand when it is their ham-fisted policies that are causing much of the pain? Her Majesty’s Treasury should waste no time in plagiarising this approach.
CMA accepts grave situation
The track record of the Competition and Markets Authority leaves a lot to be desired so its decision to rein in an investigation into prices in the funeral sector is a welcome moment of common sense.
The crackdown had been hanging over the industry like an executioner’s sword since March. The regulator stepped in amid concerns that poor bereaved families were being rippedoff in their hour of need.
Shares in market leader Dignity leapt 63pc to 634p, recovering all of the losses it had suffered since the inquiry was unveiled and ending the day at a 12-month high.
Funeral directors had been braced for price caps and tighter regulation for undertakers and crematoria but have been saved by the pandemic. Because of Covid restrictions, operators have only been able to provide the most basic of services at the expense of profit margins. They have also been too busy to provide the data the CMA needed.
It leaves the watchdog in something of a quandary because it still thinks the industry needs reform. As it says: “On the one hand, it is clear that the funerals sector is not working well. On the other hand, the pandemic has created insurmountable obstacles to some of the solutions needed.”
Still, even by the inconsistent standards of the watchdog, inflicting a premature death on the funeral industry would have been a spectacular new low.