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Travel giant TUI to break up leisure and shipping units

Germany's TUI, the biggest European travel group, said on Monday that its supervisory board had decided to separate its Hapag Lloyd shipping unit from its travel and leisure activities.

Travel giant TUI to break up leisure and shipping units
Photo: DPA

TUI said it would examine all options for Hapag-Lloyd, including a spin-off, a merger with a peer or a sale to an investor, in what appeared to be a defeat for company boss Michael Frenzel. The shipping division posted €6.2 billion ($9.8 billion) in sales last year, according to preliminary figures released early this month.

“The interests of our shareholders, bondholders and employees are to be taken into account in an appropriate manner,” the company said in a statement.

At the same time, the board had asked TUI’s management to come up with “further growth options” for the tourism division, which posted €15.6 billion in sales, according to the preliminary figures. Further information was to be released on Tuesday at the company’s annual results press conference, TUI said.

The news spelled defeat for Frenzel, who had staunchly defended a two-pillar strategy for the group despite scepticism from analysts and some key shareholders. Calls had increased in the past week in favour of a break-up, in particular from Norwegian shareholder John Fredriksen.

US shareholder Guy Wyser-Pratte bought one percent of TUI in late September for €40 million and launched a campaign against Frenzel, who nonetheless saw his mandate renewed until 2012.

Stock market rumours have suggested renewed interest by the Singapore holding company Temasek for a merger of its container shipping unit Neptune Orient Lines, with Hapag Lloyd.

ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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