Holiday Giant TUI Puts Upbeat Spin on Critical Summer Season

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TUI AG said it’s more optimistic about a summer tourism rebound as the U.K.’s travel restart spurs bookings, even as it signaled potential turbulence in the months ahead.

The world’s biggest tour operator said in a statement Wednesday that a pick-up in demand has been “clearly evident in recent weeks,” with reservations doubling in April.

Still, the Hanover, Germany-based company said it expects a revenue decline in the fiscal year that ends in September. If the air-travel outlook deteriorates, it could face challenges refinancing some 4.6 billion euros in debt maturing in the following 12 months.

“Forward guidance on revenues may disappoint,” Jefferies analyst Becky Lane said in a note. “We continue to see short to medium-term liquidity risk and balance sheet risk beyond that.”

The shares dropped 1.7% as of 8:27 a.m. in London, where the stock has its main listing.

Summer Optimism

Confidence in a travel revival has been rekindled by Britain’s move to restore leisure travel following the success of its coronavirus vaccination program.

Still, only a handful of destinations have been green-lit, meaning people won’t require a quarantine. The EU is trying to get its vaccine passport system running by the end of June.

“The prospects for early summer 2021 make me optimistic for tourism and for TUI,” Chief Executive Officer Fritz Joussen said in a statement. “England in particular offers potential when new travel corridors to southern Europe open there too in the next few weeks.”

Read more: British Travel Diverted to Algarve With Spain, Greece Off-Limits

TUI is banking on a rebound to restore cash flows after reporting an operating loss of 1.3 billion euros ($1.6 billion) in the fiscal first half ended March 31. It reiterated that it will offer 75% of 2019 capacity in the peak summer months of July through September.

Solvency Test

At that point, the company’s solvency “could also be jeopardized” if it can’t obtain further debt-covenant compliance suspensions, it said in its financial report. In the following year, loans from Germany’s KfW fund and revolving credit facilities will have to be refinanced.

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