Touring organization rearranged. - FTI files for bankruptcy, cancels upcoming journeys.
Europe's third-biggest travel giant, FTI, has filed for bankruptcy. This news was announced on Monday, with the Munich District Court appointing lawyer Axel Bierbach as the temporary insolvency administrator for FTI Touristik GmbH. The firm stated that they're working hard to ensure ongoing trips are completed properly, but any trips that haven't started yet are likely to be cancelled or only partially carried out from June 4th.
It's believed that only the event brand FTI Touristik is being directly affected by the bankruptcy filing; more applications will likely be filed for other subsidiaries as well.
The German government doesn't expect to provide a substantial bailout for German tourists if FTI should go under. According to reports, FTI's travel services are insured against bankruptcy through the German Travel Security Fund (DRS). As such, customers' payments are safeguarded if a trip has already been made, or if a package tour has been booked. This applies to both women and men. Industry sources suggest around 65,000 people are currently traveling with FTI.
Initially, it seemed as though the company's future was secure, especially given that it had received a staggering €595 million in aid from the Economic Stabilization Fund in the midst of the COVID-19 crisis. A consortium led by US financial investor Certares was interested in purchasing the entire FTI Group for a single euro, with plans to invest an additional €125 million in capital. However, this deal was contingent on approval from competitors.
However, recent booking figures have been far less than anticipated. FTI attributes this to many travel suppliers demanding cash up-front, leading to an increased need for liquidity. As a result, they couldn't meet the obligations until the investor deal was closed. Reports suggest a sudden liquidity shortfall of several million euros at FTI, which prompted the government to refuse any further state aid. A spokesperson from the Economy Ministry shared this reasoning on Monday, highlighting that there were financial, legal, and economic restrictions on additional assistance.
Officials note that, as part of negotiations regarding the government's demands due to the pandemic, the investor was supposed to purchase those demands from the government at market prices. This would have resulted in losses for the Federal Government, which could now increase significantly due to the bankruptcy. Government sources project a potential loss of about 84% of investment.
The German Travel Security Fund is geared up for action. It's tasked with refunding customers' advance payments, organizing the repatriation of stranded tourists, and potentially accommodating them until they can be sent home.
This fund, managed by the German tourism sector and supervised by the Federal Ministry of Justice, was established after Thomas Cook's insolvency in September 2019. When the major travel conglomerate collapsed, the insurer only covered a fraction of the costs because it was legally limited, prompting the state to intervene with millions in funds.
The FTI Group, which employed approximately 11,000 people, struggled during the pandemic due to its immense pressure on the industry. FTI was doing well recently, having achieved a 10% increase in sales to €4.1 billion and reporting a minor profit in the double digits in the previous fiscal year. They did not provide any additional financial information. The main shareholder was the Egyptian investor family Sawiris.
Lawyer Bierbach, who has been appointed as the temporary insolvency administrator, has already arrived at FTI's headquarters in Munich. A spokeswoman for Bierbach's firm confirmed this, saying he's already working on things and conversing with stakeholders. No further details are available at present. Bierbach made headlines before as the insolvency administrator for the retail chain Sport Scheck, during which he found an Italian investor.
The FTI Investor Agreement is dated 16th April 2024, with Measures of the Economic Stabilization Fund. The current bankruptcy situation demonstrates how measures of the Economic Stabilization Fund have failed to safeguard the future of the company and its employees.
