TUI warns on profits after 737 MAX grounding

Lauren Eldershaw
By Lauren Eldershaw April 2, 2019 15:04

TUI warns on profits after 737 MAX grounding

Following the grounding of the 737 MAX, TUI states that it has made arrangements to guarantee customers’ holidays, including utilising spare aircraft of its fleet, extending expiring leases for aircraft that were supposed to be replaced by 737 MAX aircraft, as well as leasing in additional aircraft. TUI’s fleet, which comprises around 150 aircraft, currently includes 15 grounded 737 MAX for the UK, Belgium, the Netherlands and Sweden. A further eight 737 MAX are scheduled for delivery by the end of May 2019.

Since 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 (FAA) and the European Aviation Safety Agency (EASA), TUI has put in place covering options until mid-July, in order to be prepared for the Easter-, Whitsun- and start of the summer holiday season.

Assuming 737 MAX flight resumption latest by mid-July, the Group currently expects to see a one-off impact on underlying EBITA of approx. €200 million in connection with the 737 MAX grounding. This impact is especially attributable to costs related to the replacement of aircraft, higher fuel costs, other disruption costs, and the anticipated impact on trading. As a result of this one-off impact, TUI now expects an Underlying EBITA rebased for FY19 of approx. minus 17% (previously “broadly flat”) compared with FY18 of €1.177 billion.

Should it not become clear within the coming weeks that flying the 737 MAX will resume by mid-July, TUI says that it will need to extend the abovementioned measures until the end of the summer season. The current assumption for this additional one-off impact until 30 September 2019 is up to €100 million.

Lauren Eldershaw
By Lauren Eldershaw April 2, 2019 15:04