TUI AG blamed the grounding of its Boeing Co. 737 Max fleet for wiping out a profit rebound as the world’s largest holiday company cut costs and expanded in cruise ships.
The global idling of the Max following two fatal crashes meant TUI had to lease in less-efficient jets from third parties, according to a statement Tuesday, cutting earnings by 144 million euros ($161 million) in the fiscal third quarter and causing profit to slump 46% when it would otherwise have gained.
TUI reiterated that the grounding will cost it about 300 million euros for the full year, saying it will step up efficiency measures at its tour operator arm to help cope, and reiterating its earnings forecast. Hanover, Germany-based TUI has a fleet of 15 Max aircraft and was due take several more this year.
“It’s a critical situation, with the jet on the ground now for almost five months. It’s a lot of stress,” Chief Executive Officer Friedrich Joussen said on a conference call, adding that leased planes are “very, very expensive” and the fuel bill considerably higher. He said TUI remains in compensation talks with Boeing, without commenting further.
Prices delayed by at least 15 minutes.
While the U.S. manufacturer is striving to get the Max back into service before the end of 2019 as it works on a fix for software blamed for the crashes, carriers including Southwest Airlines Co. have taken the plane out of their schedules until January.
Shares of TUI trading in London were priced 2.2% higher at 828.40 pence as of 8:17 a.m., paring their decline this year to 26%.
TUI said customers are still booking later than they used to after the summer 2018 heatwave led many to stay home, leaving it with too much flight capacity in Spanish markets.
Uncertainty around Brexit presents a further obstacle to a company that relies on the U.K. for much of its revenue, with some Britons holding back on vacations amid concern about a possible no-deal split from the European Union at the end of October.
Other indicators are more positive, Joussen said, with Turkey bouncing back as a major tourist destination after a slump in the past few years in the wake of terrorist attacks there. TUI is also continuing to build up a profitable cruise ship business which leaves it less dependent on demand for beach holidays.
©2019 Bloomberg L.P. This article was written by Richard Weiss from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to firstname.lastname@example.org.
Free Newsroom email alerts
Register for daily/weekly email alerts with news from The Financial Times, Forbes, Reuters, The Economist and more.