Tour operator TUI 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 737 Max jets.
The Hanover, Germany-based company reiterated its expectation for a 2019 drop of 17 per cent 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 per cent, 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 U.S) as overcapacities 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 per cent. While average prices are up 1 per cent, 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 per cent in the immediate aftermath of the Ethiopian Airlines crash of March 10, and they still haven’t fully recovered.
Read more: Travel operator TUI issues profit warning over 737 grounding
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 per cent. They were up 2.8 per cent to 827.8 pence at 8:07 a.m. in London. Consecutive profit warnings in February and March had led to drop of 28 per cent this year through Tuesday.