Michael Frenzel: He wants to take you on holiday - but has no time to take one himself

Pulling off coups such as the purchase of Thomson, TUI's tireless boss has prospered in a fast-moving industry. Abigail Townsend caught up with him

Forget all those German clichés of towels on sunbeds, holidays in sunny Spain and naturism. The best way to sum up Michael Frenzel, the chief executive of TUI, is shrewd. For a start, he looks a bit shrew-like, with beady eyes and pronounced features on top of a lithe frame. On the rare occasions he makes direct eye contact, he stares intently back.

Forget all those German clichés of towels on sunbeds, holidays in sunny Spain and naturism. The best way to sum up Michael Frenzel, the chief executive of TUI, is shrewd. For a start, he looks a bit shrew-like, with beady eyes and pronounced features on top of a lithe frame. On the rare occasions he makes direct eye contact, he stares intently back.

Then there is what he achieved at TUI, transforming the old Preussag from a lumbering mess of industrial businesses into a pan-European leisure giant. The owner of UK travel group Thomson, it boasts 80 tour operators, 3,700 travel agencies, seven airlines and 18 million customers. Frenzel unveiled annual group sales of €18bn (£12.5bn) last week while operating profits doubled to €489.5m.

Fellow executives who do not agree with him rarely stay long. His pay package, including a performance-related bonus of €1.01m, is €3.22m. Shrewd manoeuvring indeed.

But perhaps one of the most telling episodes is this. Reports surfaced in April 2002 that he was being lined up as the next chairman of RWE, the giant utility that owns npower and Thames Water in the UK. Come July, and the German press said he was first choice to take over at Deutsche Telekom. And in November, TUI extended his contract to 2008. After which, the rumours ceased.

Frenzel, 58, is quick to dismiss the reports as speculation and coincidence, as they probably were. After all, he has become one of Germany's most respected businessmen during his 11 years in charge at TUI.

Preussag started in 1923, operating former state-owned saltworks and smelters. It grew to encompass a host of engineering and mining interests but, by the 1990s, was in trouble. "We had a clear vision of what we had to do," says Frenzel. "We knew the old company had no chance of survival. We had to find another focus, another strategy. We have not only bought businesses but we have changed the business, bringing integrated thinking to the group."

The industrial businesses were offloaded as Frenzel stubbornly steered the group towards leisure and services. The biggest transforming deal was buying Thomson, owner of Britannia Airways and Lunn Poly, for £1.8bn in 2000, swiping it from under the nose of rival suitor C&N Touristic at the eleventh hour.

That he pulled off such a coup is not surprising when you realise Frenzel trained as a lawyer and was then a banker, so knows about putting deals together. He worked for WestLB, the German bank that was until recently TUI's biggest shareholder, before joining Preussag in 1988. Six years later, he was made chairman and, in 2002, changed the name to TUI after the German travel group, Touristik Union International, it acquired in 1998. WestLB's 31 per cent stake was sold in December to investors, most of which are long-term partners of TUI - another canny move, widely seen as having Frenzel's fingerprints all over it.

Frenzel appears unfazed by the changes he has wrought at TUI, however, and is the master of understatement when reviewing the leisure industry, which in recent years has been transformed by terrorist attacks, wars, the internet and budget airlines. "It is a fascinating industry and there have been lots of changes," he says. "We have changed the European business model in tourism but this process was managed step by step." When pushed, he concedes the time and effort the creation of TUI has required, adding with something close to irony: "This is my life. I don't have much time for holidays."

The transformation will be complete by the end of this year, with all remaining non-core businesses sold off. The one U-turn involved Hapag-Lloyd, its logistics unit. TUI was to float up to 49 per cent but that was delayed because of market conditions and has now been shelved.

"Hapag-Lloyd was a conglomerate of different businesses but we decided to focus on shipping and it's now a promising business," Frenzel says. "This year has started well. Therefore we decided to keep it as one of the businesses in a group that concentrates on services."

The plan is to continue growing TUI but further deals, while never ruled out, are not on the agenda. "Our priority is clear: organic growth and not acquisitions. It is cheaper and more efficient." Which sounds like a marvellously German attitude, but Frenzel repeatedly stresses that TUI is more than the sum of its Hanover headquarters. "Of our 56,000 employees, only a third are German, and when I have meetings with my managers, 20 languages can be spoken." (Shortly after the Thomson deal, new executives who had been mugging up on German were informed in no uncertain terms that everyone was to use English.)

Frenzel was born in Leipzig in the old East Germany. Aged nine, he fled across the border with his father. He spent three years in a refugee camp near Hamburg but plays down the drama of his adolescence, noting that "millions" have the same story to tell.

Now married with three children, he lives outside Hanover. He is one of the grandees of the conservative German business community, which is dominated - to the disquiet of some - by a handful of senior executives. He is also close to Chancellor Gerhard Schröder, but that does not stop him speaking frankly.

"Germany lost its competitiveness. We have to increase productivity, and we have to reduce bureaucracy. The tax burden for companies is too high and it must come down." He concedes that changes are starting to happen but warns: "They have to continue. There is no other choice."

Frenzel does not hold forth on everything, however. He will not discuss his pay, nor give an indication of what he will do when his contract expires. A criticism in Germany is that chief executives retire but then promptly join the supervisory board. But Frenzel will not be drawn, saying only: "It is very early. As long as I can contribute and create value, then I am a part of this company. But it is the role of the shareholders to decide. They own the company."

Yet while the investors might own TUI, it is Frenzel who created it. Asked what he does in his spare time, he pauses before finally coming up with: "I like banking." Which for a split second doesn't sound particularly odd - he comes across as a man who might well indulge in a spot of banking during his leisure hours. (He actually said "biking", proving that, whether they are German or pan-European, accents can still cause problems.)

So do not expect the shrewd Frenzel to go out with a whimper. He still has much to do with TUI, with the rise of the internet and budget travel the biggest obstacles that the reborn company - whose roots are in package holidays - must continue to address. But more than that, TUI belongs to Frenzel - and no one gives up their well-paying baby without a second glance.

BIOGRAPHY

Born: 2 March 1947.

Education: studied science and then law at Ruhr University, Bochum.

Career

1980: trainee at Sparkasse Bank.

1981: joins WestLB.

1983: manager, industrial holdings department.

1985: overall manager, equity holdings division.

1988: joins Preussag's executive board with responsibility for trading and logistics.

1994: chief executive.

Other positions: on the board of Volkswagen, state-controlled rail group Deutsche Bahn, tyre specialist Continental and German bank NordLB. Also member of the International Chamber of Commerce.