TUI’s profit warning likely to be the first of many linked to 737 MAX grounding, says GlobalData

TUI today announced that its annual profits will be severely impacted by the global grounding of Boeing 737 MAX jets. Nick Wyatt, Head of R&A, Travel & Tourism at GlobalData, a leading data and analytics company, offers his view on the announcement:

“TUI’s 737 MAX-related profit warning announcement feels like a watershed moment.

“It marks the first time that a company directly affected by the grounding has spoken publicly on the impact it expects the grounding to have and it doesn’t make for good reading.

“TUI had 15 of the affected aircraft in operation and the likes of Southwest Airlines, Air Canada, American Airlines, China Southern, and Norwegian all had more.

“Given this, TUI’s warning is unlikely to be the last and the impact for airlines that need to cover a greater number of grounded jets by both extending leases and taking out new ones will be even more acute.

“If flights resume in time for peak holiday season in July, TUI estimates the grounding will reduce profits by around 17% year-on-year, if the flight ban extends beyond that date, the impact will be closer to 25%.

“TUI has declined to say whether it is seeking compensation from Boeing, but if it does and that becomes a theme across all affected airlines, Boeing could end up with a very expensive bill.”

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