Visiting different places can be an enjoyable and informative experience. - FTI's bankruptcy restructures the thriving tourism industry.
Following the bankruptcy of Europe's third-largest travel agency FTI, the industry anticipates a restructuring of the market. "People will continue to travel despite the FTI bankruptcy, and the billion-dollar pie will be divided among other agencies," remarks tourism expert Torsten Kirstges from the Jade University in Wilhelmshaven. Potential beneficiaries could include competitors like TUI and DER Touristik. Overall, the travel sector remains healthy.
The first competitors are already making their moves: Europe's largest travel agency TUI has announced plans to expand its offerings and is advertising with discounts and a temporary waiver of deposits to lure FTI's customers. "We plan to increase our capacities," says a TUI spokesperson. This includes adding more hotel beds and flight seats while taking over capacities from the insolvent competitor. Some hotels that previously contracted with FTI have reportedly reached out to TUI.
The industry seeks to limit the damage
On Monday, Europe's third-largest travel company FTI filed for bankruptcy at the Munich District Court, a blow to the industry since the bankruptcy of Thomas Cook in 2019. "It's crucial that other providers now restore trust," stresses the TUI spokesperson. Unlike Thomas Cook, there is now the German Travel Security Fund, which covers losses. Travelers can expect reimbursement for their package tours.
Unlike FTI, TUI and industry giant DER Touristik have weathered the Corona pandemic and are seeing renewed travel enthusiasm from Germans. Both companies reported increasing booking figures, sales, and profits in the previous financial year. TUI CEO Sebastian Ebel expresses optimism about continued investment this year. Summer bookings are already significantly higher than the previous year. "Holiday trips remain a top priority for our customers. This is more stable than we thought," comments Ebel.
New clients from FTI could provide a further boost. "We're not only doing well in the summer, we'll also be putting together additional attractive offers with hoteliers in destination countries in the coming days," emphasizes TUI Germany CEO Stefan Baumert. They are specifically targeting regions where FTI was particularly strong, like Egypt, Turkey, and the United Arab Emirates.
The German Travel Security Fund ensures hotel payments
The German Travel Security Fund (DRSF) has taken early action to secure vacations. The fund has sent "cost assumption letters" to hotels to allow travelers to continue their vacations without interruption. They are in contact with affected customers as soon as they have the necessary data from the travel agency.
The DRSF is working with FTI, the Foreign Office, airlines, bus companies, and hotels to aid stranded travelers. "Given the vast number of countries and travelers, this is a massive undertaking." Legal issues cannot be assessed in every individual case immediately. Priority is given to quickly resolving issues for the directly affected travelers.
Customers whose holidays have not yet started will be contacted once the DRSF has the required data. "It is impossible to provide a timeline for when FTI Tourism package tour customers can expect their refunds," states the fund. However, they assure that payments will be made. They possess enough capital to cover losses from FTI's insolvency.
Cruises are experiencing a resurgence
According to experts, the industry is thriving once more. Although the Corona crisis still lingers with debts and bank loans, says Kirstges. "But there's a lot of traveling, premium trips are in fashion, and cruises are making a comeback." Tui recently stated that its ships are nearly fully booked for the summer. In general, clients are spending more on vacations.
The fact that FTI has gone bankrupt despite this can be attributed to its business model. "FTI was more price-aggressive and made little profit per trip with a weak equity capital," explains Kirstges. The travel restrictions during the Corona pandemic heavily impacted FTI.
The pandemic travel restrictions made life challenging for the entire industry. Tui and FTI were both bailed out by the state with billions. Unlike FTI, the listed Tui group repaid the state aid through a capital increase. The travel company DER Touristik, backed by the financially solid trading company Rewe, managed without state aid. At FTI, the repayment of the bulk of the nearly 600 million euros in state aid was still due.
FTI bankruptcy affects Lufthansa subsidiary Discover
The bankruptcy of travel company FTI also impacts Lufthansa's holiday airline Discover Airlines. Discover CEO Bernd Bauer shared his insights in Munich: "FTI is an important FTI partner for Discover."
The consequences of the bankruptcy for Discover and the Lufthansa Group as a whole are being evaluated. No figures can be quoted at the moment.
It's being buzzed around in the business world that approximately 65,000 vacationers are traveling with FTI overseas at present. Stefan Schmidt, the tourism lobbyist for the Greens in the German parliament, comments, "Now we're proving that we've taken the right lessons from the collapse of Thomas Cook's business in '19 and created a sound measure through the Travel Guarantee Fund." He expresses optimism that the bankruptcy will be handled better than the previous major industry collapse in '19.
On Monday, the federal government declined any additional financial aid to FTI. Tim Wagner, a Green parliament member and a Tourism Committee member, commends the decision from a taxpayer's standpoint, "It doesn't make sense to save FTI." Wagner points out that they've witnessed other travel companies rebounded on their own. "The reality that FTI didn't bounce back despite high income and a strong demand situation reflects an unwise strategy and dubious pricing strategy."
Lots of FTI travelers are impacted in Greece. Yannis Hatzis, the president of the Greek Hotel Association, shares on X (previously Twitter) that 7,500 tourists are spread evenly across around 250 hotels in the nation. Greek media is reporting that FTI holds unpaid bills of about 1.8 million euros to the hotels. This is minute compared to the debts from Thomas Cook's bankruptcy in '19 - at that point, the outstanding obligations to the hotels were around 200 million euros.
Read also:
- Torsten Kirstge, a tourism expert from Jade University in Wilhelmshaven, believes that despite FTI's bankruptcy, people will continue to travel, and the market will be restructured.
- TUI, Europe's largest travel agency, is expanding its offerings and advertising with discounts to attract FTI's customers, aiming to increase capacities by adding more hotel beds and flight seats.
- The TUI spokesperson emphasizes the importance of restoring trust in the industry following FTI's bankruptcy, as TUI and other companies, like DER Touristik, have weathered the Corona pandemic.
- The German Travel Security Fund, which did not exist at the time of Thomas Cook's bankruptcy, will cover losses for FTI's package tour customers, reassuring travelers that they can expect reimbursement.
- DER Touristik, backed by the financially solid trading company Rewe, successfully navigated the Corona pandemic without requiring state aid, while FTI still had to repay a significant portion of its nearly 600 million euros in state aid.
- TUI Germany CEO Stefan Baumert intends to target regions where FTI was particularly strong, such as Egypt, Turkey, and the United Arab Emirates, to attract new clients from FTI.
- Lufthansa's holiday airline Discover Airlines, an important partner for FTI, could also be impacted by FTI's bankruptcy, but the consequences for Discover and the Lufthansa Group are still being evaluated.
- Green parliament member and Tourism Committee member Tim Wagner commends the federal government's decision not to provide additional financial aid to FTI, emphasizing that saving FTI would not make sense from a taxpayer's standpoint.
- Approximately 65,000 vacationers are currently traveling with FTI overseas, according to unnamed sources, causing potential issues for travelers in countries like Greece, where FTI reportedly has unpaid bills of about 1.8 million euros to hotels.
- TUI CEO Sebastian Ebel remains optimistic about the travel industry and investment plans, as bookings, sales, and profits have increased following the Corona pandemic, and cruises have made a comeback with premium trips in fashion.
- FTI's bankruptcy can be attributed to its business model, which was overly price-aggressive, leading to minimal profit per trip and a weak equity capital, making it vulnerable to travel restrictions during the Corona pandemic.
