TUI Holds to Forecast Despite Spain Glut, Boeing Max Deadline
(Bloomberg) -- Tour operator TUI AG held to its forecast while warning that it’s battling overcapacity this summer in the Spanish vacation market, as a deadline looms for its grounded fleet of Boeing Co. 737 Max jets.
The Hanover, Germany-based company reiterated its expectation for a 2019 drop of 17% in underlying earnings before interest and taxes. But expenses related to the Max grounding will rise by one-third if it can’t get the jet airborne by July. That would lead to an Ebita drop of 26%, and TUI needs to know about the Max’s status by the end of this month to make the deadline.
- Through the first half of its fiscal year, TUI’s seasonal operating loss widened by three quarters to just over 300 million euros ($336 million) as over-capacities in Spain, especially on the popular Canary Islands, depressed profitability. The Max planes accounted for only 5 million euros of that. Brexit uncertainty was another factor it cited.
- Through May 5, bookings for the most important summer season are down 3%. While average prices are up 1%, margins are so far “considerably lower” than a year ago.
- The Max grounding has hit TUI, the plane’s biggest operator in Europe after Norwegian Air Shuttle, in a second way. Some tourists are avoiding flying altogether, as TUI saw bookings drop 10% in the immediate aftermath of the Ethiopian Airlines crash of March 10, and they still haven’t fully recovered.
- TUI Chief Executive Officer Fritz Joussen took a swing at struggling competitor Thomas Cook Group Plc. “TUI will emerge as a stronger, more efficient and more profitable group from the current consolidation of our sector in Europe,” he said. “We will be among the winners, not among the losers.”
- TUI shares gained as much as 3.2%. They were up 2.8% to 827.8 pence at 8:07 a.m. in London. Consecutive profit warnings in February and March had led to drop of 28% this year through Tuesday.
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