The World's Biggest Holiday Company Plans to Bank on Rivals Failing

(Bloomberg) -- TUI AG, the world’s biggest holiday company, plans to renew its jetliner fleet as rising oil prices begin to push weaker rivals to the wall.

TUI is likely to turn options for close to 50 Boeing Co. 737 Max aircraft into firm purchases, giving it a total of 120 orders for the upgraded model, and is switching to more of the largest variant to boost capacity, David Burling, who heads TUI’s airline operations, said in an interview. It’s also evaluating a new mid-range Boeing jet as a replacement for its larger 757 and 767 planes.

The collapse of Air Berlin Plc and Monarch Airlines in 2017 provided a boost for TUI, with the exit of German charter carrier Azur Air GmbH last month and Scandinavia-focused Primera Air on Oct. 1 suggesting higher fuel costs may be about to claim more victims. Not only would a spate of failures boost fares by removing capacity, it could encourage more people to take package holidays since they come with a greater degree of consumer protection, Burling said.

“Primera had 80,000 seats in the market for winter, mostly out of Scandinavia, and those will go to other airlines, which is a big help for us,” he said in London. “The more airlines go bankrupt, the more our brand benefits.”

TUI’s 737 orders and options will allow it to replace pretty much all of its short-haul fleet, while upgrading to the Max 10 from the Max 8 will add a further 32 seats per aircraft, according to Burling. Some 20 orders have already been upgraded to the larger jet.

Range Bonus

The new planes also offer added range, opening up new possibilities for serving locations including Cape Verde, the United Arab Emirates and Egypt, the executive said. At the larger end of the scale TUI could seek to source used 787 Dreamliners if Boeing decides against building the mid-size model, he said.

TUI plans to order three Airbus SE A330neo wide-body planes for its French arm Corsair to replace aging Boeing 747 jumbo jets in 2020 and 2021. The company remains in talks with Germany’s Intro Aviation about a possible sale of the unit, which it has been looking to offload for years.

The holiday company has separately benefited from the impact of freak weather, pilot strikes and air-traffic-control disruption at carriers including Ryanair Holdings Plc and Deutsche Lufthansa AG, Burling said. Rival Thomas Cook Group Plc meanwhile said this month that it will limit its Condor unit’s fleet to four German bases from eight previously.

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