Profits plunge for Tui as jets stay on ground
HOLIDAY giant Tui hit financial turbulence from the grounding of Boeing’s 737 Max jets as quarterly profits plunged 46 per cent.
The FTSE 100 group, which has already issued two profit warnings this year, ran up extra costs such as leasing replacement aircraft of €144million (£133million). It expects a bill of up to €300million for the whole year.
It also blamed delayed bookings after last summer’s heatwave, Brexit uncertainty and “considerable overcapacity” in Spain as third-quarter underlying pretax earnings dropped to €100.9million from €186.8million last year.
Bookings were down by 1 per cent over the period, although this was an improvement on 3 per cent in the first half. A pick-up in demand for destinations such as Turkey and North Africa has left too much capacity in Spain.
TUI’s quarterly turnover was up nearly 4 per cent to €4.75billion and it remains on course to deliver annual underlying pre-tax earnings up to 26 per cent lower than last year’s €1.77billion.
TUI operated 15 of the Max jets, 10 per cent of its fleet, and has another eight on order. Boeing grounded the planes after two crashed killing 346. Chief Fritz Joussen said: “Despite the challenging environment in 2019 to date, our underlying business remains robust and we expect to deliver a solid performance in 2019, which, however, will not match the prior year’s result.”
He said the transformation of the business, which has “significantly reduced” its dependence on traditional tour operators, would continue as it becomes an online platform.
AJ Bell investment director Russ Mould said the Max jets grounding “remains a cloud which has not shifted”.
He added: “Shareholders might be eyeing TUI’s debt rather nervously given it is creeping towards €1billion.”