FTI's Overlooked Opportunity in the Travel Boom
Germans aren't traveling any less than they used to, in fact, they're spending more than ever before. The tourism sector is back on its feet after the Covid-19 crisis, but not for everyone. FTI, Europe's third-largest travel company, has gone bankrupt. What happened?
2023 was a record year for German tourism. The industry had taken a massive hit during the pandemic, but it's back on track. Travel agencies and tour operators have been seeing high bookings for months. Yet, there's one company that didn't manage to make a comeback: FTI - the parent company of Sonnenklar.TV.
During the pandemic, FTI, like other travel businesses, struggled. The German government stepped in to help, offering financial aid through the Economic Stabilization Fund. TUI, the largest tourism company in the world, received billions in aid but has since repaid it. Lufthansa also received support, which has been fully repaid.
Despite aid from the government, FTI couldn't shake off its Covid-19 debts. The company's search for investors willing to help reduce its debts was unsuccessful. A potential merger with the second-largest German tourism company, DER Touristik, wasn't viable either. FTI's major shareholders, the Sawiris family, remained optimistic but didn't have the funds to save the company.
The company's debt situation was so dire that there were discussions on a partial write-off. However, the German government refused to follow through for fear of provoking criticism about giving away "money gifts" to rich investors. This made it harder for FTI to find new capital.
As debts mounted, customers started cancelling their bookings, afraid the company might go under. Business partners also began demanding upfront payments. Before FTI slid into a downward spiral, a rescue plan emerged. In April, the US financial investor Certares announced plans to buy FTI for a euro but promised to invest $125 million and take on the debts.
Soon after, the German government said it would sell its claims for a market price - a significant discount.
Everything looked good. But over the weekend, chaos still ensued. Rescue attempts failed completely. Certares remained committed to spending $50 million, enough to keep FTI afloat initially. However, the condition was to create a reliable liquidity plan, which FTI couldn't do. Fearful investors pulled back, causing concern among travelers and business partners.
Frantic efforts to find more funds or alternative sources of cash failed, too. Even the Sawiris family, shareholders in FTI, seemed displeased. Attempts to use the German Travel Guarantee Fund didn't work - the government would have had to provide a guarantee for that.
On Monday, FTI Touristik GmbH filed for insolvency, and other companies were expected to follow.
