Comment: Ryanair tie-up is evolutionary

Tui’s distribution deal marks a new chapter for the outbound market, says Steve Endacott

Tui won the battle of the vertically integrated tour operators with the collapse of Thomas Cook in September 2019 but had the spoils stolen from it by the Covid-19 outbreak shortly thereafter which brought the travel industry to a halt.

Unlike Thomas Cook, Tui had protected itself from the growth of online travel agents and expansion of low-cost airlines by securing exclusive access to the best-located, large beach hotels in the Mediterranean, allowing it to create holiday ‘concepts’ such as Holiday Villages and Sensatori Hotels.

This exclusive hotel stock, combined with a fleet of 13 Boeing 787 Dreamliners, created a high-quality package holiday product that built brand loyalty and relatively high margins.

However, ‘the bigger you were, the harder you fell’ during the pandemic. Tui’s high level of hotel commitments and empty aircraft quickly created a debt mountain that required a major intervention by the German government.

Now, with a new fleet of short‑haul B737 Max aircraft, Tui is attacking Jet2holidays’ market leadership by adding a whopping 12% or 1.1 million Atol-protected packages to its short‑haul programme.

It will have its hands full to fill this capacity in a summer 2024 lates market that has seen an increase of millions of holidays to sell. Whether the lates market becomes a bloodbath or not remains to be seen, but the timing of Tui’s deal with Ryanair to add even more capacity seems odd and probably indicates it is based more on the PR timing for Ryanair than a major new strategic alliance.

Tui will protect itself from Ryanair’s poor customer-service ethos by selling its flights under its secondary First Choice holidays brand, keeping the Tui brand based on its in-house flying.

Tui intends to increase its relatively low mix of dynamically packaged holidays from the current 2.5 million passengers and could easily sell one million Ryanair seats. Out of small dynamic packaging ‘acorns’, major strategic alliances can grow, and competitors will rightly fear the coming together of Europe’s strongest tour operating brand and Ryanair.

Although the relationship will be more huff than puff in the short term, in the longer term we could see the evolution of the Tui brand. This could keep Tui in the fight for UK market leadership. However, the future will be dominated by easyJet holidays, as most partnership deals with Ryanair fall away due to the airline’s excessive demands.

The evolution of the UK holiday market is happening fast.


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