The travel firm Tui has reported a 46% drop in quarterly profits after a dip in bookings after last year’s heatwave and ongoing Brexit uncertainty, while also being hit by hefty costs over the grounding of Boeing 737 Max aircraft.
Tui had already issued two profit warnings this year, in part due to the impact of the 737 Max grounding, but stuck to its full-year guidance on Tuesday. It is forecasting a 26% drop from last year’s underlying earnings of €1.18bn (£1.09bn).
The firm’s earnings fell to €100.9m from €186.8m in the three months to 30 June, its third quarter. It blamed extra costs of €144m after Boeing grounded its 737 Max planes following two fatal crashes, as Tui had to lease replacement aircraft. The company still expects this to raise total costs of up to €300m over the year as a whole. Tui is the largest operator of the 737 Max in Europe – its fleet of 150 aircraft includes 15 of the troubled planes, and it had ordered another eight.
Tui said summer bookings slipped 1% in the quarter with customers booking later, tempted to stay home after last year’s scorching temperatures. Demand also continues to be dented by Brexit uncertainty. Of those who do travel, many are heading to Turkey or north Africa, leaving Tui with too much capacity in Spain.
It wants to ramp up the transformation of its tour operating business to become an online platform selling holidays rather than a traditional tour operator. Tui announced the sale of two specialist German tour operators on Monday. Analysts at Jefferies said: “We see this as positive as Tui further reduces its dependence on the traditional tour operator model.”
To reduce its reliance on Europe, the company, which has more than 21 million customers, said it would “tap new markets, in particular in emerging economies with growing middle classes such as China, India, Brazil and Malaysia”. It has entered a partnership with Malaysian Airlines to provide holidays to the carrier’s customers.
Turnover grew 4.4% to €4.8bn in the quarter. Friedrich Joussen, the chief executive, said: “Despite the challenging environment in 2019 to date, our underlying business remains robust, and we expect to deliver a solid performance in 2019, which, however, will not match the prior year’s result, as expected due to the grounding of the 737 Max.”