TUI AG (LON:TUI) is planning an operational rehaul to create a "leaner" business model, resulting in 8,000 job losses.
The FTSE 250-listed firm will review its airlines, offload loss-making operations and cut overhead costs by 30% permanently.
READ: TUI downgraded to ‘sell’ by UBS as recovery could be slower than expected
The tour operator warned that group turnover and underlying earnings for the year to September will decline significantly as the coronavirus pandemic batters the travel sector.
TUI said customers are still actively researching holidays and it is planning new safety procedures to restart operations once restrictions are lifted.
Since halting most of its operations in mid-March, monthly fixed expenses have been reduced to €250-300mln, but refunds for cancelled holidays are expected to cost up to €500mln per month.
In the six months to March 31, 2020, turnover was broadly flat at €6.6bn, with a 10% drop in the second quarter due to lockdowns being implemented worldwide.
Loss before tax expanded by 130% to €881mln, driven by lower margins and a one-off €77mln charge for the grounding of the Boeing 737 Max fleet. Unused fuel hedges cost €146mln.
Net debt at the period-end was 150% wider at €4.9bn, with €1bn in the bank.
As a condition to a €1.8bn loan received by the German government, TUI will not pay dividends until it pays it back by July 2022.
"An adoption of voucher systems and future bookings should help to limit the working capital outflow going forward, which would be expected to reverse rapidly once travel resumes," analysts at Shore Capital commented.
"A resumption of the summer holiday season is crucial to a recovery in bookings and working capital reversion. This remains uncertain, especially in the UK, and long-term impact on the balance sheet the longer it continues cannot be overlooked."
Shares slipped 6% to 247.4p on Wednesday morning.
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