TUI profits plunge amid Boeing 737 grounding and Brexit uncertainty

Weak demand and customers delaying bookings has continued to make for a difficult trading environment.

Article updated: 13 August 2019 10:00am Author: Graham Spooner

  • The group reported an increase in revenue but profit was hit, mainly due to the grounding of Boeing 737’s and the perennial theme that is Brexit.
  • The group eyes increased Asia focus as it hopes emerging markets might offset reliance on Europe.
  • We continue to view the shares as a ‘hold’ for investors willing to be patient and accept a medium to high level of risk.

This morning we’ve had a third quarter trading update from the Anglo-German airline group, TUI. The group reported a 2.5% increase in revenue to €4.745bn but profit was hit by the grounding of Boeing 737’s and the full cost will be in the region of €300m.

The trading environment continues to be difficult with weak demand and customers delaying booking holidays. The group’s situation was not helped by the heatwave last year and continuing Brexit uncertainty, along with lower demand from Brits to holiday in Spain, a once popular choice which is being swapped out for Eastern Mediterranean destinations.

Investors will be relieved that guidance for the year remains unchanged and this has been reflected in a 3% rise in the shares in early trading.

Progress has been made with some of its strategic initiatives which include: growing the hotel and cruise business, increasing its online presence and further stretching into emerging markets in order to diversify from its main European market.

Our view on TUI - Hold

We would suggest much of the problems affecting the group are already reflected in the share price making the shares a hold, but only for those investors willing to be patient and accept a medium to high level of risk.

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Graham Spooner portrait photo
Graham Spooner

Investment Research Analyst

Graham started out as a fully authorised dealer on the Stock Exchange trading floor and for various banks, before becoming an FCA-approved investment adviser. Now a respected voice in the media, Graham’s share tips and comments on the markets are frequently sought by the national press.