TUI touched the brakes on its summer holiday plans, lowering its capacity for July onwards to 75% of 2019's level from the previous level of 80%, as Europe's peak travel season hangs in the balance.
Germany-based TUI has secured multiple bailouts from the German government to survive the pandemic.
Like most airlines and travel companies, TUI is banking on a big travel rebound this summer to restore its battered finances.
But hopes for a recovery have been thrown into doubt over the last week due to rising Covid-19 cases in some European countries including Germany, which alongside Britain is TUI's biggest customer market.
TUI, which before the pandemic took 23 million people on holiday a year, said that while it had slightly trimmed capacity it had the ability to flex it up at short notice.
For summer 2021, the company said it had 2.8 million bookings, with 180,000 new trips arranged since February.
Those booking levels are 60% below where they were in 2019, before the pandemic when people could travel freely.
TUI called the bookings encouraging and said the vaccine roll-out and the use of rapid Covid-19 testing meant "there is reason to look ahead very optimistically".
In Britain, people eager for a summer getaway to a Mediterranean beach, are being bombarded with near-daily warnings from government ministers that it is too early to book trips abroad for this summer.
He said, saying progress with the vaccine meant countries would not be able to stop travel for much longer.
In Germany, where infections are rising exponentially, the government said on Monday that people travelling abroad must show evidence of a negative Covid-19 test before arriving home, an initiative TUI said it supported.
But debate over international trips continues there and Germany could still bring in a general travel ban or quarantine requirements.