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’

The Daily Telegraph - Business - - Business Comment - Ben Mar­low

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.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.