Travel giant TUI upbeat as summer bookings soar

Travel company giant TUI said an exceptional number of holiday bookings would help offset the impact of the Boeing 737 Max grounding on its annual profit, enabling it to lift the bottom end of annual earnings guidance.

TUI is benefiting from the failure of rival travel company Thomas Cook last September, helping it to pick up new customers and gain market share, but at the same time it faces headwinds from the Max grounding as it has to pay to lease other planes.

TUI’s London-listed shares soared by almost 13%

in London

to post a gain of 8% in the past year.

The company said for the 12 months to the end of September, it now expected underlying core earnings to be in the range of €850m to €1.05bn.

It had warned as recently as December that Max costs could drag annual earnings down to €680m in a worse-case scenario.

TUI said the UK recorded its best ever January in booking terms.

“January this year was very, very strong,” chief executive Fritz Joussen told reporters on a call.

The company grew first-quarter earnings in its markets and airline business by 14%, helped by adding new airline capacity and as it contracted hotels that had formerly served Thomas Cook in destinations like Turkey.

Mr Joussen said that fears about the spread of the coronavirus were not impacting customer demand for holidays, but added that was partly because European customers did not tend to book holidays to Asia at this time of year.

The Boeing 737 Max was grounded last March after two crashes killed 346 people and the aircraft is not expected back in service until at least mid-2020.

TUI said that an extended grounding period was now expected for the rest of its financial year, estimating that would cost it between €220m to €245m, compared to the €220m to €270m cost it had warned of in December.

It said its updated annual profit guidance included a “certain level” of compensation it expected to receive from Boeing this year, but there were questions over how this would be structured.

“There will be compensation from Boeing but it is a matter of negotiation and a matter of mutual agreement, how much is paid in cash, how much is paid in future deliveries, how much is credit notes,” Mr Joussen said.

The €220m to €245m hit from the Max comes on top of the €130m cost for this financial year, which had already been flagged by the company in December.

- Reuters