Thursday 22 August 2019

Tui to update on progress in challenging year

The travel firm is dealing with the Boeing 737 Max groundings and Brexit uncertainty.

Tui has faced a number of challenges so far this year (PA)
Tui has faced a number of challenges so far this year (PA)

By Alys Key, PA City Reporter

Investors are braced for travel giant Tui to count the cost of problems with the Boeing 737 Max aeroplane on Tuesday, as it updates the market on spring and summer trading.

The group is expected to detail its contingency plans after the aircraft was 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.

Meanwhile more favourable market conditions are expected to boost bookings, though this may be driven by discounts which affect the group’s margins.

Analysts at Numis estimate that underlying earnings for the third quarter excluding the cost of the Max problems will come in at 148 million euros (£137.4 million), down 20%, due to tighter margins.

Demand for Winter holidays looks set to be subdued by political uncertainty ahead of the October 31 Brexit deadline.

Analysts at The Share Centre said: “It is fair to say it’s been a difficult year for tourism group Tui due to a range of factors including the grounding of the Boeing 737 Max planes.

“In this Q3 report the market will be looking for an update on the expected impact of that issue on Tui’s full-year earnings.

“Investors will also be hoping for an improvement in the struggling tour operating business and watching the performance at the hotels and cruises operation which has been better of late.”

They added that any comments on dividends will be “significant”, with the market expecting a 20% for this year.

The company has warned on profits twice this year, blaming one on the UK market and another on the Boeing groundings.

But chief executive Fritz Joussen has insisted that the core business remains strong and that Tui will emerge as a “stronger, more efficient and more profitable group” amid consolidation in the industry.

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