TUI – things are going badly and MAX is largely to blame

One of Europe’s biggest holiday and airline companies TUI, (formerly Thomson in the UK) is expecting to report a major change in its fortunes this week.

Having been almost immune and the exact opposite of the beleaguered Thomas Cook Group, it suddenly finds itself in an unwelcome financial hole.

Estimating annual losses of €300m the company is blaming one major factor: the 737MAX grounding.

The company has 15 of the aircraft grounded, they should be flying 3-4 flights a day minimum and they’re not. It’s also got eight more waiting formal delivery that should have been in service over the summer – and of course, they’re not.

With so much competition of spare aircraft bringing in leased aircraft is costly, and they can’t get enough to supply demand.

On top of that it goes against the way TUI do things. They offer experiences, an airport to resort and back operation over which they control every aspect to maintain quality.

Coupled to the loss of aircraft, Brexit, along with very hot summer weather across the continent has kept bookings lower. The British are suffering from a sharp decline in the value of Sterling against the Euro as well.

TUI can quite rightly feel aggrieved at one company: Boeing. They’re said to be furious but sanguine about what they can get out of this. But get some kind of recompense they most certainly will. In the meantime the long term damage from the 737MAX saga is hitting hard.

And it’s not just TUI, Norwegian are saying little – simply trying to hold it together is hard enough for the cash strapped airline that’s fast running out of options.

While big airlines like American can survive easily it’s not so straightforward for the small guys. Margins are so tight that air travel costs – which MAX was set to improve dramatically – get worse, especially when the cost of fuel rises by around 18%, it puts airlines in a no win scenario.

TUI isn’t in danger, but it’s suffering severe commercial consequences for Boeing’s mistakes.