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TUI shares nosedive as it warns 2019 earnings could fall by over a quarter due to grounding of Boeing 737 MAX aircraft

The travel firm said assuming the MAX planes were cleared to resume flights by mid-July at the latest, underlying EBITA for the current year would be around 17% lower than in 2018, however, if the planes were grounded for longer the figure could be as much as 26% lower

TUI MAX plane
TUI’s fleet currently includes 15 MAX aircraft, with eight more scheduled for delivery by the end of May

TUI AG (LON:TUI) saw its shares tumble in early trading on Friday after it warned its underlying earnings (EBITA) for the year could fall as much as 26% due to the grounding of Boeing Co’s (NYSE:BA) 737 MAX range of aircraft earlier this month.

The FTSE 100 travel firm said assuming the MAX planes were cleared to resume flights by mid-July at the latest, it would take a hit of around €200mln to its underlying EBITA for the 2019 fiscal year due to costs of replacing the grounded aircraft, higher fuel costs, and other disruption.

READ: Boeing bows to pressure and grounds all 737 MAX’s after US bars aircraft

As a result, the company said it now expected underlying EBITA for the year to be around 17% lower than in 2018, having previously forecast a flat performance.

However, if the aircraft was grounded for longer TUI said the figure could be as much as 26% lower.

TUI’s fleet currently includes 15 of the grounded aircraft, with eight more scheduled for delivery by the end of May.

Boeing finally caved to pressure on 14 March after a list of countries including the US, the UK, China, and India all grounded the MAX aircraft following a crash in Ethiopia on 10 March that killed everyone on board.

The accident followed another fatal crash in October involving a MAX plane in Indonesia, prompting concerns over the safety of the new aircraft model.

Should Boeing be unable to appease regulators with its repairs to the MAX aircraft’s systems, other airlines such as budget carrier Ryanair Holdings PLC (LON:RYA) could be facing massive headaches due to their large number of orders for the aircraft.

READ: Ryanair among airlines heavily exposed to potential MAX 8 grounding

Ryanair currently has around 110 orders for the MAX 200, a high-capacity version of the MAX 8, with options on 100 more to help grow its fleet to 585 by 2024 from its current size of 400.

TUI shares were down 9% at 700.8p.

Quick facts: TUI AG

Price: 365.8 GBX

LSE:TUI
Market: LSE
Market Cap: £2.15 billion
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