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Max grounding costs tear into TUI figures

Tour operator TUI Group is expecting a €300 million ($335 million) impact on full-year financial results as a consequence of the continuing suspension of Boeing 737 Max operations.

TUI says, in a third-quarter briefing, that it has secured replacement aircraft leases to the end of its summer 2019 flight programme.

But it puts the combined cost of the Max grounding at €149 million, with €144 million of this figure arising from second and third quarters.

As a result the company's markets and airlines division suffered, turning in a near-€115 million earnings loss compared with the previous €26 million profit.

TUI points out that the performance for this division reflects "tougher prior-year comparables" as well as the Max costs.

"We have seen a later booking behaviour to date from the ongoing knock-on impact of last year's extraordinary hot summer with demand continuing to be impacted by 'Brexit' uncertainty," says the company.

"Overcapacity to Spanish destinations has resulted in increased competition, putting pressure on margins for the division."

Grounding of the Max cost TUI's Northern Region operation some €84 million during the third quarter, wiping out the €14 million benefit of the later Easter holiday period. The Max costs also means the share of earnings for Canada were down €8 million.

Similarly the Easter benefit of €7 million for the Central Region was fully offset by €17 million in Max-related aircraft replacement costs, while the Western Region bore Max costs of €43 million.

TUI Group's overall net profit for the third quarter more than halved to €47.3 million, which dragged the company into a nine-month net loss of €240 million compared with the previous loss of €106 million.

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