TUI faces losses of $335.5 million after Boeing 737 Max grounding

World’s largest travel group reports sharp drop in quarterly earnings
TUI, Financial Performance, Boeing 737 MAX, Boeing 737 MAX 8 grounding

Travel group TUI has reported a sharp drop in its Q3 earnings following the grounding of Boeing’s 737 Max aircraft after two crashes that killed 346 people this year.
TUI disclosed underlying earnings for Q2 were 46 per cent lower at $113 million compared with the same quarter last year. 
While turnover in the period increased 4.4 per cent year on year, to $5.37 bn at constant currencies. The total losses from the grounding of the 737 Max aircraft came to $161m in the quarter because of the cost of replacement aircraft. 
TUI expects the full cost of the Boeing grounding for the year was expected to be about $335.5m. Earnings were also hit by market uncertainty surrounding Brexit and weakened demand from European travellers. 
TUI is now looking to tap new markets, in emerging economies with growing middle classes such as China, India, Brazil and Malaysia.  Last week it agreed a partnership with Malaysia Airlines to provide holidays to the airline’s customers. 
TUI said underlying earnings for 2019 would be roughly 26 per cent below last year’s reported earnings of $2bn. Of this figure, $161 million has occurred in the second and third quarters.
The loss of capacity due to the groundings has impacted airlines heavily, with thousands of flights cancelled and lease replacement aircraft put in place to cover the short falls within the various fleets.
TUI Group anticipates the losses from the 737 MAX grounding to hit €300 million for the 2019 financial period. In June, TUI announced it would be rescheduling its 737 MAX flights out of Gatwick from April 2020 onwards.

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