29th Mar 2019 09:00
LONDON (Alliance News) - TUI AG on Friday warned that the grounding of the Boeing 737 Max aircraft will hit annual earnings and will result in a large exceptional charge.
The 737 Max aircraft manufactured by the US's Boeing Co have been grounded by countries around the world following two fatal crashes in the past five months.
London-listed shares in TUI fell 9.0% to 700.20 pence following the profit warning.
The Anglo-German travel and tourism company said that it has made alternate arrangements to guarantee customers' holidays.
Assuming resumption of 737 Max flights by mid-July, TUI is estimating a one-off charge of EUR200 million on adjusted earnings before interest, taxes and amortisation for its financial year to the end of September. The charge relates to the replacement of aircraft, higher fuel costs, other disruption costs, and the anticipated impact on trading.
As a result of the exceptional charge, TUI expects underlying Ebitda for 2019 financial to fall by 17%, versus previous broadly flat guidance. In 2018 financial, the company recorded underlying Ebitda of EUR1.18 billion.
"Should it not become clear within the coming weeks that flying the 737 MAX will resume by mid-July, TUI will need to extend the above-mentioned measures until the end of the summer season," the company said.
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.
TUI said it has taken precautions, covering the time until mid-July, in order to be prepared for the Easter, Whitsun and start of the summer holiday season, as no specific dates have yet been announced for modifications of the existing 737 Max aircraft by Boeing for approval by the US Federal Aviation Administration and the European Aviation Safety Agency.
The tour company said it is utilising spare aircraft of its fleet, extending expiring leases for aircraft that were supposed to be replaced by 737 Max aircraft, and leasing in additional aircraft.
TUI's fleet of around 150 aircraft includes 15 grounded 737 Max for the UK, Belgium, the Netherlands and Sweden. A further eight 737 Max planes are scheduled for delivery by the end of May.
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