Tui counts cost of Boeing 737 Max grounding

Travel operator Tui has warned of a potential 300 million euro (£258.7 million) hit from the grounding of Boeing 737 Max planes.

The figure is attributed to costs for replacement aircraft, higher fuel charges, disruption and the impact on trading following the global grounding of the planes in the wake of the Ethiopian Airlines crash which killed 157 people.

If the disruption lasts until July, the firm is pencilling in a 200 million euro (£172.5 million) hit.

As a result, Tui has downgraded its full-year profit guidance and now expects underlying earnings to be down 17% on last year’s 1.18 billion euros (£1 billion). This compares with previous forecasts of flat earnings.

However, the travel giant also warned that, should it not become clear within the coming weeks that flying the 737 Max will resume by mid-July, it will need to extend the measures until the end of the summer season.

This would add another 100 million euros (£86 million) in costs and result in a 26% hit to last year’s earnings.

Tui shares collapsed more than 10% to 692p following the announcement.

The firm said it has made arrangements in order to “guarantee customers’ holidays” by utilising spare aircraft in its fleet, extending expiring leases for planes that were supposed to be replaced by the 737 Max aircraft, as well as leasing in additional aircraft.

Tui’s fleet, which comprises around 150 aircraft, currently includes 15 grounded 737 Max planes for the UK, Belgium, the Netherlands and Sweden. A further eight 737 Max aircraft are scheduled for delivery by the end of May 2019.

The firm said: “No dates have yet been announced for modifications of the existing aircraft model by the manufacturer, neither for approval of such modifications by the Federal Aviation Administration and the European Aviation Safety Agency.

“Therefore, Tui has taken precautions, along with other airlines, covering the time until mid-July, in order to be prepared for Easter, Whitsun, and start of the summer holiday season and to secure holidays for its customers and their families.”

Boeing faces a challenge of proving the Max jets are safe to fly amid suspicions that faulty sensors and software contributed to the two crashes in less than five months.

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