Q&A Sessions - Troubling news prior to summer holiday: FTI bankrupt - What's next?
The travel firm FTI is declaring bankruptcy, putting a spanner in the works for many tourists who were expecting to go on their summer vacations. FTI Touristik GmbH, based in Munich, has already submitted an application to the local court, but this ruling will also be extended to other subsidiary companies.
So, what's going to happen to people who are currently on holidays with FTI?
FTI is making every effort to ensure that trips already in progress are able to be completed properly. If that's not possible, they'll organize a return journey back to the original departure point. The German Travel Security Fund (DRSF) is expected to play a role in this process, taking care of the transportation and accommodation of stranded travelers until they can make their way back home. It's estimated that around 65,000 people are holidaying with FTI at the moment.
The federal government doesn't anticipate a large-scale rescue operation for German tourists on the same scale as the evacuation from Thomas Cook in 2019. This won't be necessary, as FTI primarily sells package holidays, which are covered by the DRSF. The Foreign Office has confirmed that the Travel Security Fund won't allow any of these travellers to be abandoned in locations affected by the FTI insolvency.
It's a different story for those who've booked hotel services directly through the organiser - these aren't protected by the legal safeguards for package holidays and are therefore not insured by the DRSF. FTI is trying to determine if those affected can still claim the services they've booked.
What about those who've already booked but not yet started their package holiday?
These have been canceled. FTI is legally required to terminate all bookings and the DRSF will refund the money already paid for a package holiday. However, hotel reservations aren't covered by the DRSF as individual services.
Why has FTI gone bust?
FTI, a company with around 11,000 employees, was struggling due to the COVID-19 pandemic, causing huge problems in the tourism sector. The company received 595 million euros in support from the Economic Stabilization Fund (WSF) but has only repaid a small amount so far. A consortium led by American financial investor Certares wanted to acquire FTI for a symbolic one euro and inject 125 million euros into the company. However, this deal had to be approved by the competition authorities, and that seems to have caused issues.
Despite the proposed takeover, many hotels initially refused to provide accommodation to FTI customers, resulting in a decrease in offerings from the third-largest European travel company. The company also suffered a drop in income as several suppliers demanded advance payment. "This resulted in an increased cash requirement that couldn't be met until the investor process had been finalised," FTI says. "Handelsblatt" reports that a sudden liquidity crisis of several million euros has emerged at the company.
Why isn't there any more state assistance?
The federal government is refusing any further aid for the travel company. A spokesperson for the Economy Ministry explained that there are budget, legal, and economic reasons for not providing more support beyond the "many major aid measures" already given.
Could the taxpayer end up footing the bill again?
The German Travel Security Fund should prevent this. The fund was created in 2021 by the German travel industry and overseen by the Federal Justice Ministry. It was formed in response to the collapse of travel company Thomas Cook in September 2019, which cost the state millions. The fund is expected to receive around 750 million euros from travel organisers by the end of October 2027. The government is currently supporting the fund via a credit line, but it's still unknown how much the insolvency will cost the Fund.
Read also:
- The insolvency of FTI Touristik GmbH, based in Berlin, has implications for package tours during the summer vacation.
- This bankruptcy filing at Munich Local Court will affect other subsidiary companies of FTI as well.
- The travel security fund in Europe, DRSF, is expected to play a role in ensuring safe returns for stranded travelers on FTI package tours.
- Thomas Cook's evacuation in 2019 serves as a reminder of the potential scale of issues faced during tourism-related insolvencies.
- The Federal Government in Germany is not planning a large-scale rescue operation for the affected travel group, primarily due to the nature of FTI's package holiday offerings.
- Directly booked hotel services through FTI are not covered by the legal safeguards of package holidays, leaving affected customers without protection.
- Those who had already booked but not yet started their package holiday will receive refunds for their cancellations.
- Struggles in the tourism sector due to COVID-19 and insufficient repayment of state aid contributed to FTI's financial downturn.
- Reports suggest that FTI's insolvency is due to a sudden liquidity crisis of several million euros, further complicating the company's financial situation.
- As the German Travel Security Fund takes over, the taxpayer is expected to be spared from bearing additional costs from FTI's insolvency.
