Tui’s losses swell as holiday firm is stung by Boeing 737 Max disasters and later Easter
- In the six months to 31 March, the Tui’s losses rose from £148m to £261m
- Bookings in its package holiday business for this summer fell by 3 per cent
The grounding of Boeing 737 Max aircrafts, last year’s hot summer, this year’s late Easter, Brexit uncertainty and rising competition in Spain have all taken their toll on Tui’s latest results.
In the six months to 31 March, the holiday group’s losses swelled from £148million to £261million.
Bookings in its package holiday and airlines business for this summer fell by 3 per cent, while selling prices rose just 1 per cent amid tough market competition.
Trouble in paradise? In the six months to 31 March, the holiday group’s losses swelled from £148million to £261million
The company has issued warnings over its profits twice so far this year, blaming the one on the UK market and another on the grounding of the Boeings, but it has still held firm on profit guidance for the year.
Tui chief executive Fritz Joussen said: ‘Tui is on track, both strategically and operationally, and is well positioned. That is why 2019 will be another solid year.
‘Our core businesses with our own hotels, cruises and destination experiences and activities remain strong and currently deliver around 70 per cent of our earnings.
‘Tui will emerge as a stronger, more efficient and more profitable group from the current consolidation of our sector in Europe.’
In March, Tui warned that the grounding of Boeing’s 737 Max planes could cost the group up to £261million and today confirmed the issue had eaten into its profits.
The planes were grounded in the wake of the Ethiopian Airlines crash in March which killed 157 people, months after the Lion Air crash in Indonesia which killed 189 people.
Tui’s fleet, which comprises around 150 aircraft, currently includes 15 grounded 737 Max planes for the UK, Belgium, the Netherlands and Sweden. A further eight 737 Max aircraft had been on order.
The firm also said the results reflected the knock-on impact of last summer’s heatwave, a shift in demand from Spanish holidays to eastern Mediterranean destinations and uncertainty surrounding Brexit.
But, turnover rose 1.7 per cent to £5.8billion as it hailed a strong performance by its hotels and cruise ships business.
Tui chief executive Fritz Joussen said: ‘Tui is on track, both strategically and operationally, and is well positioned’
Shares: Tui’s share price is up 0.22 per cent or 1.80p to 807.00p this afternoon
Russ Mould, investment director at AJ Bell, said: ‘Expectations have been very low for holiday companies in light of lower bookings across the sector as consumers worry about how Brexit might impact flights and their own personal finances.
‘Fortunately pushing back the Brexit deadline has given a nice lift to the leisure sector as the public regains confidence in wanting to buy their two weeks in the sun.
‘Tui’s results are far from a disaster which explains why the shares are up on the news. Parts of the market remain in oversupply such as Spain which is having an impact on prices and therefore its margins. It has also had to contend with the impact of Boeing 737 MAX aircraft being grounded. Yet there is some good news.’
He added: ‘Investment in cruises, hotels and experience holidays is paying off and differentiated content is helping to make Tui stand out from the crowd, which helps to drive up the number of people taking its breaks and ultimately should lift the price they pay.
‘While earnings could take another hit if it cannot resume flying 737 MAX aircraft by mid-July, Tui’s management are doing their best to reshape the business to thrive over the longer term. They just need to navigate what is likely to be a bumpy journey.’
Tui’s share price is up 0.22 per cent or 1.8p to 807p.