A pedestrian wearing a protective face mask passes an electronic advertising screen inside a closed travel agency store operated by Tui, in Harlow, England, earlier this month
Tui’s rebound relies more than its peers on a quick return to something approaching normality © Chris Ratcliffe/Bloomberg

Investors have had an understandably tough time this year finding the right price for Tui. In February, the tour operator was reporting record monthly bookings. By March, it was applying for state aid.

Covid-19 is what forced the FTSE 250 company into survival mode. A total shutdown cut Tui’s monthly cash outflow from fixed costs to between €250m and €300m, from as much as €1.4bn before the crisis. Nevertheless, about half its customers have demanded refunds rather than vouchers for their bookings, meaning cash may still run out before the end of the summer season. The stock hit a record low in mid-May on worries that it might be on the same path as main rival Thomas Cook, which collapsed in September.

Then came the bounce. News this week that Spain and Germany planned to lift travel restrictions gave Tui a weekly gain of about 50 per cent. But even with that rise, its market value is less than half where it started in 2020.

Smaller rivals tell a similar story of volatile trading. On the Beach jumped by about the same amount this week but is still about 35 per cent lower for the year to date. Dart, owner of the Jet2 airline and package-holiday business, has surged this week but is down more than 40 per cent since the start of January.

Both companies have a key advantage over Tui, however. On the Beach and Dart raised survival funds last week with equity placings, ahead of the rally, whereas Tui has yet to tap shareholders. Its management has said that a depressed share price made an equity bailout unworkable.

As a result, Dart can keep its planes grounded well into 2021 if necessary. Meanwhile, On the Beach has enough cash to survive at current burn rates for up to five years. But, on reported figures, Tui will still run out of money before the autumn.

Tui’s rebound therefore relies more than its peers on a quick return to something approaching normality. Tours can begin again from July 1, Tui’s UK arm said on Friday, but will tourists want to travel by then? The evidence either way is not yet convincing.

A YouGov survey for Barclays this month found that 62 per cent of package-holiday customers did not expect Covid-19 to affect their booking habits. But nearly half of those surveyed would not seek to make up for missed holidays in 2020 and 26 per cent said they would be taking fewer flights permanently.

Health was the main reason for hesitance. Just 34 per cent of those surveyed were waiting for the lifting of international lockdowns to book a trip, whereas more than half wanted to see a vaccine or a zero case count before packing their suitcases. It all suggests that the question of whether the holiday industry ever fully recovers is one for epidemiologists rather than tour operators.

Public opinion changes and fear of missing out is a powerful force. But no one quite knows yet what is being missed out on. It seems unlikely, for example, that Ibiza and Faliraki will have the same draw under social distancing rules, so using tour operators’ historic performance as a measure of future earnings power looks a very risky exercise.

And there are other complicating factors for Tui’s stock rebound.

Boeing this month compensated Brazilian airline Gol to cover the enforced grounding of its 737 Max jets. The payment, equivalent to $4m a plane, suggests Tui may soon get a cash infusion of about €250m in relation to its inactive Boeing fleet. Management might also be able to push back the delivery date on jet orders, which would lessen balance-sheet pressure ahead of debt covenant tests returning in September 2021. These are all sticking plasters, however, not cures.

The second complication is Tui’s short interest. Bets against the stock peaked in mid-May as the price cratered, according to Financial Conduct Authority data, then were pared back over the next few weeks as Tui looked less likely to be heading for insolvency.

Longer-term investors ought to have broader concerns than survival. Tui will emerge from the crisis burdened with at least €2bn in net debt and beholden to the German government, whose €1.8bn bailout loan makes any future dividend policy politically charged. And while Tui has been permanently weakened by the crisis, its main competitors have strengthened themselves to take market share.

It would be no surprise, following Tui’s rush higher from May’s lows, to see the company now tap shareholders for funds. But with the destination still unknown, investors should be wary of being taken for a ride.

bryce.elder@ft.com

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