TUI’s underlying EBITA tumbled 26% year-over-year from €1,143 million to €893 million due to the grounding of the Boeing 737 MAX aircraft.
If not for the grounding, the company would have achieved an underlying EBITA of €1,186 million for the full year 2019.
Failure for the 737 MAX jets to return to service by May 2020 could cost TUI an additional €400 million, the company reported.
About 10% of TUI’s fleet were 737 MAX jets, which impacts flight capacity.
In a call to discuss earnings, CEO Friedrich Joussen says, “Underlying EBITDA would've been flat if we didn't have the MAX effect.”
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The markets and airlines segment was impacted the most by the MAX grounding, with a reported 73% year-over-year decrease in EBITA from €497.3 million to €131.8 million.
This isn’t the only instance of a travel company claiming a setback from the 737 MAX grounding, with Sabre also reporting a financial disruption from the incident.
Growth and opportunities
Despite the misfortune with the MAX grounding, TUI increased its annual turnover by 2.7% to €18.9 billion, thanks in part to its surging Holiday Experiences segment.
“Holiday Experiences is the backbone of the business today,” says Joussen.
Destination Experiences reported double-digit earnings growth with turnover up 105% year-over-year from €600 million to €1,231 million.
Cruises, which experienced growth driven by successful deployment of additional capacity, increased EBITA by 13% from €324 million to €366 million.
EBITA for hotels and resorts rose 7.5% year-over-year from €420 million to €451 million.
Joussen says that despite “the 737 MAX and the market conditions,” the company “had a very successful year.”
In the earnings report, chairman of the supervisory board Dr. Dieter Zetsche writes that although there is still some uncertainty with regards “to the return of the 737 MAX jets” and “a potential Brexit,” there are new opportunities for the company.
“We can also see opportunities arising from the market exit of our competitor Thomas Cook, and we are planning to seize these opportunities.”