Tui warns over further hefty bill from 737 Max groundings as profits tumble
Holiday giant Tui has revealed the grounding of Boeing’s 737 Max planes saw annual earnings nosedive and warned it could cost it up to another 400 million euros (£337 million) over the year ahead.
The tour operator said Boeing’s move to ground the 737 Max fleet after two fatal crashes left it nursing a 29.5% plunge in pre-tax earnings to 691 million euros (£582 million) for the year to September 30.
It warned over a further 130 million euro (£110 million) impact from the grounding in 2019-20 – but said this could rise by a further 220 million euros (£185 million) to 270 million euros (£228 million) if the aircraft does not return to service by the end of April.
However, Tui is being given a boost by the collapse of rival Thomas Cook in September.
It said it has seen a surge in new customers booking thanks to Thomas Cook’s demise – with summer 2020 bookings up by 18% in the UK.
The group said this should help drive a return to profit growth over 2019-20, assuming the 737 Max grounding is lifted as expected.
It is expecting underlying earnings before interest and taxes to rise to between 950 million euros (£801 million) and 1.05 billion euros (£885 million) over the year ahead.
Fritz Joussen, chief executive of Tui, said: “Even in a challenging year for the tourism sector, Tui delivered a strong operating performance, a robust balance sheet and growth in its hotels and resorts and cruises core businesses.”
The group said with the 737 Max plane costs stripped out, annual underlying earnings were largely flat on a year earlier, down 0.8% at 1.2 billion euros (£1 billion), as growth was hampered by tough conditions in its markets and airlines arm.
This division saw underlying earnings plummet 72% to 138.1 million euros (£116.4 million), with Brexit uncertainty and the impact of last summer’s heatwave on bookings adding to woes.
Shares in Tui dropped 3% as it also cut its shareholder dividend for 2018-19 and revised its divi policy to help fund investment in strategic initiatives and future growth opportunities.