Tuesday, January 05, 2021
Green light for rescue package
Brussels approves billions in aid for Tui
The EU competition watchdogs have approved German state aid of up to 1.25 billion euros for the travel group Tui, which has been hard hit by the Corona crisis. This was announced by the EU Commission in Brussels. Already today, Tuesday, the Tui shareholders are to approve a capital increase and financial aid for the ailing travel company at an extraordinary general meeting.
The responsible EU Commission Vice-President Margrethe Vestager said: “Like many other tourism companies, Tui was hit hard by the Corona crisis.” Germany will contribute up to 1.25 billion euros to the recapitalization of Tui as part of the announced measures. “For the risk borne by the taxpayers” the state “will receive sufficient remuneration and combine the support with conditions in order to limit possible distortions of competition”, stressed Vestager.
According to the EU Commission, the 1.25 billion euros of the federal government include a silent participation of 420 million euros, which the federal government could convert into shares and thus participate in Tui. In addition, the package includes a non-convertible silent partnership of up to 680 million euros and a convertible bond with warrants of 150 million euros. The approval of the general meeting is required in the narrower sense for the capital increase itself as well as for the intended state entry.
High sales losses in the ongoing pandemic
The state aid for the world’s largest travel company Tui is part of a larger support package in which private investors are also involved. According to the EU Commission, state aid is “necessary, suitable and appropriate” in order to remedy a “serious disturbance in the economic life of a member state”. It aims to restore “Tui’s financial position and liquidity that existed before the pandemic-related exceptional situation, while maintaining the necessary precautions to limit the distortion of competition”. In addition, Tui “does not have significant market power in the relevant markets in which it operates”.
In addition to air traffic and gastronomy, the tourism industry is particularly hard hit by the decline in demand during the pandemic. Tui had already benefited from further government aid in the course of the year. Including private funds, the group has now been awarded around 4.8 billion euros in support in order to offset the high sales losses in the ongoing pandemic.