Tui stock price plunges after reporting substantial full-year losses

Shares of Tui Group (LSE: TUI) plunged more than 13% in the last week after the travel giant reported immense losses as coronavirus continues to wreak havoc on the travel and leisure industry.

Fundamental analysis: 3.1 billion euro loss amid a sharp decline in revenue

Tui Group said it expects to operate at a significantly reduced capacity in 2021, after taking a big blow from the coronavirus pandemic in this financial year.  

The largest travel agency company in the world reported a sharp decline in full-year revenue of 58% to 7.95 billion euro from 18.93 billion euro, amounting to a pretax slump of 3.13 billion euro compared to 691 million euro in earnings from last year.

Tui said that the start of 2020 looked promising as the company registered record bookings in January, however, the coronavirus outbreak resulted in the shutdown in company’s operations, leading to significant losses in the second half of the year. 

During the nationwide lockdowns and travel restrictions, Tui said it cut cash fixed costs by over 70% and slashed cash capital expenditure. The group said it has permanently cut costs,  aiming for 300 million euros to 400 million euros per year in savings.

The company pointed out that it was the first travel agency firm to restart operations across the world following the easing of measures in June, emphasizing “the advantage of its integrated and diversified business model”.

Tui reported full-year customer volume of 8.1 million declined by 62% from its year-ago levels, after the introduction of travel restrictions. After the restart in June, over 2 million tourists booked holidays with the company. 

Technical analysis: Shares extended monthly losses

Tui share price closed 13.17% in the red this week to extend monthly losses to nearly 20%, after the buyers recorded gains of over 65% in November. More importantly, the price action closed below the short-term support line at 412p. 

Tui daily chart (TradingView)

Overall, the price action remains very close to record lows recorded in March. Continuous delays in the expected recovery in the travel industry are making the fundamental environment challenging for Tui bulls. 

Summary

The biggest travel agency company in the world, Tui Group, reported significant losses in 2020 as a result of the coronavirus pandemic and said it expects to operate at a sharply reduced capacity in 2021.

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