TUI to be compensated by Boeing over 737 MAX grounding

In a press release dated 3rd June 2020, Anglo-German travel and tourism company TUI has stated that it has reached a comprehensive agreement to resolve the impacts of the Boeing 737 MAX grounding. The agreement entails compensation, new agreements on the delivery schedule and reduced investments in aircraft. This is in a move that TUI hopes will "strengthen the liquidity of the Group."

A TUI Boeing 737 MAX 8. Photo by Jero Vida | AeroNewsX

The specific details of the agreement have been kept confidential. However, the company's statement expresses that the compensation covers a significant portion of the financial impact, as well as credits for future aircraft orders. The compensation will be realised over the next two years.

Fritz Joussen, CEO of TUI Group, stated that "We have reached a fair agreement that strengthens our long-standing relationship with Boeing. The agreement provides TUI with compensation for a large part of costs that were incurred due to the grounding of the 737 MAX."

The new delivery agreements will see fewer than planned deliveries of the 737 MAX over several years for TUI's order of 61 aircraft. The associated payment schedules have also been adapted. The result will be less than half of the planned aircraft deliveries completed over the next two years.

In early May, the TUI Group announced a move to reduce its overhead costs by 30% due to the COVID-19 shutdown and 737 MAX groundings. This agreement will therefore further assist the Group in its efforts to reduce spending and strengthen liquidity during this unprecedented time for the travel industry. The new delivery schedule provides "considerable flexibility" and according to Mr Joussen, "This enables TUI to rapidly adapt its fleet growth to the currently challenging market environment... And supports our plan to downsize the aircraft fleet and reduce the capital requirements for aircraft investments in the Group."

At the time of the aircraft's global grounding in March 2019, TUI had 15 737 MAX aircraft across its fleet, with eight more scheduled for delivery in 2019.

Headquartered in Hannover, Germany, TUI is the largest travel and tourism company in the world; owning airlines, travel agencies, cruise ships and hotels. The TUI Group recorded a turnover of around €19 billion in the financial year 2019.