Tui Hit By £261 million Loss

Travel operator Tui have reported half-year losses of £261 million along with a fall in summer bookings.

Tui has reported a loss of £261 million for the six months to the end of March. This is up from £148 million in the same period a year ago. The travel operator has also suffered because of the grounding of Boeing’s 737 Max aircraft, the operator has warned this could cost them a further £261 million in losses.

The unwelcome news comes just 2 months after budget airline EasyJet reported £275 million in losses, which it says is a direct result of uncertainty over Brexit. EasyJet said that customer demand for ticket sales over the summer period is unexpectedly low, and they expect to see further losses.

TUI said the decline in its first-half performance was partly due to the knock-on impact of last summer’s heatwave holding back bookings and because it had too much capacity in Spain as holidaymakers opted for cheaper destinations such as Turkey.

“This is driven by a number of factors – reduced demand due to last year’s extraordinary hot summer, slowdown of consumer confidence, Brexit uncertainty, shift in demand to the eastern Mediterranean coupled with overcapacity to Spain, as well as the 737 MAX grounding,” TUI said.

How has the Boeing issue affected Tui?

Because all Boeing jets have been grounded until the issue has been resolved, airlines have had to replace these planes and rent out new ones to cover all flights. The issue with Boeing is showing no signs of resolving anytime soon. The head of the FAA has said the fleet should stay grounded until all planes are safe. The Federal Aviation Administration (FAA) is a governmental body of the United States which regulates all aspects of civil aviation in that nation as well as over its surrounding international waters.

Boeing have said that as soon as the software update, along with the training modifications is complete, they hope to have the jets up and running again. Boeing have been trying to lessen the damage by blaming ‘pilot error’ on the two international crashes, but this has not been welcomed by the international aviation community. When Boeing introduced the new 737 Max, the FAA say this system was not overseen by approvers and when a flaw developed in that system, Boeing did not tell the required bodies about it until after a year had passed. So, this issue could continue for some time, and at a great cost to airlines that bought those planes. Tui alone, has warned investors that it faces £174 million hit from the grounding of the aircraft, assuming flights resume by mid-July.

How is Brexit affecting airlines?

 Tui is not the first travel operator to warn of an impact of Brexit on demand. Along with EasyJet, Thomas Cook has been seeking funding from lenders and is also looking into selling the business.

The UK has the biggest aviation network in Europe and the third largest in the world, while London has the busiest airport system of any city in the world. We fly directly to over 370 destinations in more than 100 countries worldwide. We also have the second largest aerospace sector in the world. With so much at stake and such little insight into how aviation will work, the implications of Brexit on the industry have the potential to provide a devastating hit to the UK economy.

If the UK leaves with no deal, many industries will fall back on the basic rules of the World Trade Organization. But aviation does not have the same protections in place. Potentially meaning there’s no agreement allowing planes to continue to fly between the UK and EU countries.

Because the European Aviation Safety Agency currently governs UK aviation regulations, the UK Civil Aviation Authority would probably have to take on the existing rules to continue to operate quickly.

That would mean the UK would be accepting EU courts’ jurisdiction in its aviation, despite not being in the EU. The UK could negotiate its own new deals, but as tickets have already been sold for flights from and to the UK for after Brexit, the industry won’t have much time to keep planes in the air if no deal is in place with the EU.