Tui braced for hit of up to €400m next year from 737 Max groundings
World’s largest tour operator says summer trade will be impacted if ban not lifted by February
Tui, the world’s largest tour operator, said that the grounding of the Boeing 737 Max fleet could cost the company up to €400m next year if it is not returned to service by April.
The Anglo-German holiday group said that if the ban against flying the Boeing 737 Max aeroplanes, which has been in place since March following two fatal crashes of the model, remained beyond February next year, Tui would not be able to prepare to fleet to fly from April for its summer high season.
The grounding of the planes has cost the company €293m in lost earnings this year.
Tui was the UK’s biggest operator of 737 Max Model 8 with 15 in its fleet and a total of 72 ordered from the US aircraft manufacturer. In an interview with the Financial Times in November, chief executive Friedrich Joussen said that, despite the safety issues with the planes that have emerged since 737 Max was grounded, Tui would fly it once it returned to service as “it will be potentially the most checked aircraft”.
Should the planes be declared fit to fly before February, the company said that it would only have a €130m impact on earnings.
Tui said that earnings in the year to the end of September had dropped 24.5 per cent to €893m compared with 2018 due both to the grounding of the 737 Max jets and continued Brexit uncertainty impacting customer bookings. Turnover increased 2.5 per cent to €18.9bn but remained behind consensus forecast of €19.4bn.
The demise of Tui’s rival Thomas Cook has been a boost to the company, allowing it to grow its capacity and raise prices. It previously said that it has added an additional 2m airline seats to its summer availability next year as well as an extra 135 hotels since Thomas Cook collapsed in September.
However, analysts have said that the upside for Tui may be limited as much of the capacity left by Thomas Cook in the market will be filled by lower cost rivals such as On The Beach and Jet2. The low cost airline easyJet also launched its own holiday business last month.
In a bid to differentiate itself, Tui has invested in its own hotels and cruise ships as well as its online booking service, which allows customers to personalise holidays down to individual room choice.
“Tui is financially strong, economically robust and has made major investments in hotels, cruises and new digital businesses since 2014. The second stage of the transformation, launched to transform Tui to a digital group, will change our company considerably stronger than all steps taken over the past five years,” Mr Joussen said.