3rd Apr 2019 08:14
LONDON (Alliance News) - Moody's Investors Service on Wednesday affirmed the Ba2 corporate family rating of holiday operator TUI AG, while the outlook has been changed to negative from stable, citing the troubles cause by the grounding of the Boeing 737 Max 8 jet.
"The outlook change to negative reflects the downward trend of TUI's operating performance in 2019 due to structural challenges in the tour operator business, increasing macroeconomic challenges and the negative cost impact of the recently announced grounding of the Boeing 737 Max 8," said Vitali Morgovski, a Moody's assistant vice president-analyst & lead analyst for TUI.
The ratings agency noted that the grounding of the Boeing 737 Max 8 prompted TUI last Friday to revise its guidance for the second time this year.
In contrast to the previous guidance of broadly stable underlying earnings before interest, taxes, and amortization, TUI now expects EUR200 million negative impact in connection with the Boeing 737 MAX 8 grounding, attributable to the leasing of additional aircraft in order to secure customer holidays.
TUI guided for a decline in underlying Ebita of between 17% to 26% in financial 2019, which ends in September, depending on whether Boeing 737 MAX 8 will resume flying by mid-July or the issues persist through the end of the summer season.
If the plane isn't flying again by the end of September, TUI said it estimates an additional one-off charge of up to EUR100 million and for annual underlying Ebitda to decline by 26% year-on-year.
Moody's said the negative outlook reflects the uncertainty with regards to the length of the Boeing 737 MAX 8 grounding and TUI's ability to recover its credit metrics to the extent required for the Ba2 rating, given also the market challenges in the tourism sector and the risk of a no-deal Brexit.
Looking ahead, Moody's said it would consider upgrading TUI's rating if the company were to demonstrate further resilience of its business model to external shocks and to continue the adaption of its business model to structural challenges.
The rating could be downgraded, however, should TUI not be able to fully offset any additional external shocks that might occur or shows a lack of ability to offset structural challenges.
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