737 Max drags down TUI results

HANOVER, 15 August 2019: TUI Group’s tour operators and aviation businesses were impacted by 737 MAX grounding and delayed bookings in its quarter three results.

The group reported the underlying EBITA down year-on-year in Q3 was due to the 737 MAX grounding (impact: EUR144 million). However, group turnover in the period under review gained 3.7%.

TUI CEO Fritz Joussen said: “We are consistently pursuing our digital transformation roadmap, transforming TUI into a global platform company. The strength of our globally unified brand and direct access to our customer base, already comprising more than 21 million customers, offers great potential.

“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.”

The group’s hotels & resorts as well as its cruises will deliver strong growth.

The holiday experiences segment, comprising hotels & resorts, cruises and destination experiences, delivered an increase in underlying EBITA of 16.7% to EUR208.3 million (previous year: EUR178.5 million).

TUI also suffered delayed customer bookings driven by the Summer 2018 heatwave, the continued Brexit uncertainty and considerable aviation overcapacity to Spanish destinations that continued in the third quarter.

Despite the current challenges and volatility in the tour operating business, TUI claims it remains in good shape.

The markets & airlines segment (tour operators) accounts for 30% of TUI’s earnings, while 70% of earnings are delivered by holiday experiences (hotels, cruises, destination experiences). Traditional tour operators ensure direct access to customers in our European source markets.

“We will continue to strengthen our competitiveness in this area, too, by harmonising our tour operation business, accelerating its transformation and thus increasing its efficiency and profitability,” said Joussen.

Within the next 18 to 24 months, the European source markets will be more closely aligned. At the same time, TUI is driving the digitalisation of the group further ahead and is investing in state-of-the-art technologies and a unified customer platform (CRM).

Driven by the acquisition of the Italian technology platform Musement, the tours and activities business in the destinations will be significantly expanded.

Last March, TUI and Ctrip concluded a  cooperation scheme. It involves 200 million users of the leading Chinese online travel agency who will have direct access to the portfolio of tours and activities offered by Musement. T

Under its “TUI 2022” strategy programme, TUI will tap new markets, in particular in emerging economies with growing middle classes such as China, India, Brazil and Malaysia.

A further partnership was recently concluded in Southeast Asia: TUI will team up with Malaysia Airlines to establish its Malaysia Airlines Holidays business.

TUI will tap these future markets through a fully digital approach via an innovative and globally scaling distribution and marketing platform, which forms the basis of TUI’s state-of-the-art IT infrastructure.

Bookings for the current Summer 2019 (as at 4 August 2019) are down 1% year-on-year, improving from the booking performance delivered in the first half of 2019 (-3%). Average prices are up by 1%.