TUI travel giant blames 737 Max and sterling for hit

TUI travel giant blames 737 Max and sterling for hit
Boeing 737. File photo

By Vera Eckert

Tourist travel giant TUI said the grounding of Boeing’s 737 Max jets was a big burden as it reported a 46% decline in underlying quarterly core earnings, sending its shares lower.

Sterling’s slump as Prime Minister Boris Johnson took office last month had also discouraged British customers during the peak holiday season, TUI chief executive Fritz Joussen said.

TUI posted underlying earnings before interest, taxes, and amortisation of almost €101m in the three months to the end of June, or the company’s third-quarter. Its performance was weighed down by €144m in costs resulting from the grounding of the 737 Max airplanes after two fatal crashes.

TUI operated 15 of the planes, 10% of its fleet, and has another eight 737 Max jets on order. The global idling of the Max meant TUI had to lease in less-efficient jets from third parties, according to a statement, and it expects the grounding to cost up to €300m in the full financial year.

TUI stuck to its guidance for underlying earnings to fall by up to 26% from last year when it posted €1.17bn in earnings.

“The desperate position of its rival Thomas Cook means investors will be breathing a big sigh of relief on the publication of travel outfit TUI’s third-quarter results,” said AJ Bell investment director Russ Mould.

“The biggest takeaway is that full-year guidance is being maintained,” he said. TUI shares in Frankfurt fell by over 2.5% in Frankfurt trade, bringing the losses for in the past year to 46%.

Shares of rival Thomas Cook tumbled a further 10% after a big slide earlier in the week when it announced the latest part of a recapitalisation plan that will dilute exiting shareholders.

TUI’s Mr Joussen said efficiency drives, cost reductions and strong business areas such as excursions, add-on experiences at holiday destinations and cruises set TUI apart from competitors.

“There will be consolidation,” he said, but added: “We will not be the losers.” Hoped-for customer additions of one million by 2022 might even be achieved at an earlier stage, he told reporters.

- Reuters. Additional reporting Irish Examiner and Bloomberg

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