Tui says Boeing 737 Max grounding could cost firm up to €300m | Business

Tui has warned the grounding of its fleet of 15 Boeing 737 Max planes could cost the UK travel firm up to €300m (£258m), as it scrambles to make alternative plans to fly customers to their holiday destinations over the busy Easter and summer periods.

In a profit warning on Friday, the company said it was making arrangements to guarantee customer holidays, including leasing more planes, extending expiring leases that were supposed to be replaced by the 737 Max and using spare aircraft in its existing fleet. Shares fell 10% to 694p.

The 737 Max planes – Boeing’s newest aircraft – were grounded worldwide after two fatal accidents in five months raised questions over its safety. An Ethiopian Airlines crash on 10 March killed 157 people and followed a Lion Air crash in Indonesia that killed 189 people last October.

With a total of 150 aircraft, Tui’s 737 Max planes account for one in 10 of its entire fleet. The travel company has ordered a further eight of the planes, scheduled for delivery by the end of May.

Tui said that assuming the 737 Max planes were back in operation by mid-July, it would expect a one-off cost of €200m relating to the grounding of the aircraft. However, if flights had not resumed by that point, it would take an additional hit of €100m to cover the summer season ending on 30 September.

It added in a statement: “No dates have yet been announced for modifications of the existing aircraft model by the manufacturer (Boeing), neither for approval of such modifications by the Federal Aviation Administration and the European Aviation Safety Agency.

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

Tui said if the disruption lasts throughout the summer season, underlying earnings for 2019 are likely to be 26% lower than the €1.18bn achieved in 2018. Should 737 Max flights resume by mid-July, underlying earnings would be about 17% lower, Tui said.

Michael Hewson, the chief market analyst at CMC Markets, said: “It can only be a matter of time before travel operators and airlines start knocking on Boeing’s door for compensation as a result of lowered guidance and profit expectations, which has seen investors knock millions of pounds of their market valuations.”

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