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Boeing's 737 Max issues cost travel operator £278m

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Grounded Boeing 737 MAX aircraft are at Boeing Field in Seattle, Washington. Photo: Lindsey Wasson/Reuters

Tour operator Tui (TUI.L) expects the grounding of Boeing’s (BA) 737 Max airplanes to cost it €300m (£278m) this year, the company said on Tuesday.

Tui, which used to operate under the name Thomson in the UK, said issues with the 737 Max cost it €144m (£134m) in the third quarter alone.

Boeing’s 737 Max jets were grounded around the world in March after the new planes were linked to two deadly crashes. The grounding is still ongoing and Boeing has blamed a fault in the software for the crashes.

The grounding has caused huge disruption for airlines, which have had to charter new planes to maintain flight schedules. Tui said in March that it had 15 grounded 737 Max parked in the UK, Belgium, the Netherlands, and Sweden, and was set to take delivery of 8 more 737 Max planes this year.

“Resumption of the 737 MAX remains subject to the clearance decision of the civil aviation authorities and we have secured replacement aircraft leases out to the end of our Summer 2019 programme,” Tui said on Tuesday.

Aviation services company John Menzies (MNZS.L) also said on Tuesday that it had taken a hit from the 737 Max scandal. John Menzies, which does cargo handling, fuelling, and cargo forwarding, said the grounding of the jets had led to weak “cargo volumes and yields” in the six months to the end of June.

Boeing said in July that it was booking a $4.9bn (£4bn) charge to cover the cost of compensating airlines around the world for 737 issues.

Tui disclosed its costs from the airplane grounding as it reported third quarter results. Turnover rose by 3.7% to €4.7bn (£4.3bn) and underlying earnings crashed by 46% to €100.9m (£93.6m).

“We saw delayed customer bookings driven by the summer 2018 heatwave, the continued Brexit uncertainty and considerable aviation overcapacity to Spanish destinations continued in the third quarter,” Tui said.

Summer bookings are down 1% so far this year, although this marks an improvement from the 3% decline registered in the first half of the year.

Tui shares were up 2.7% at 9.10am UK time. John Menzies shares were down 4.1%.