TUI Travel has committed to spend 6.1bn dollars on 60 new aircraft with the option to acquire the same amount again at the same price.
As part of the modernisation of its Mainstream European travel business the group has secured "significant" discounts on 60 Boeing 737 MAX aircraft, but will require shareholder approval for the transaction.
TUI said the new planes are more fuel-efficient and cost-effective, with a 13% increase in fuel efficiency and 40% decrease in noise levels over its current fleet.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
The aeroplanes will be delivered between January 2018 and March 2023 as part of TUI's fleet renewal strategy.
The group also has the option to acquire a further 60 Boeing 737s on the same terms, as well as being offered the right to purchase a further 30 Boeing 737s on new terms to be agreed.
TUI explained that five of its six Mainstream Sector European airlines use narrow-body aircraft such as the Boeing 737 Max for short and medium-haul destinations, representing roughly 80% of the group's airline passengers during the last financial year.
"Having a modern, cost-efficient and reliable fleet is strategically important to the group."
"In order to maintain cost competitiveness and support TUI Travel's aim to minimise the environmental impact of its activities, the existing narrow-bodied aircraft will need to be replaced in the next decade."
"The proposed transaction will ensure that the group has sufficient aircraft to fulfil its long-term plans and that the expected accrued value justifies the cost of the purchase."
Peter Long, Chief Executive of TUI Travel PLC, said: "A major part of TUI Travel's strategy is to provide our customers with unique holiday experiences they can only get from us.
"This multi-billion pound investment in the B737 MAX - representing the future generation of more fuel-efficient aircraft for our short and medium-haul programmes - will be a further driver in delivering this."
A circular will shortly be sent to shareholders to determine their approval of the deal.
Lloyds, Halifax and Bank of Scotland to shut another 45 branches
Lloyds Banking Group, which includes Halifax and Bank of Scotland, is set to close a further 45 branches in 2024 - find out if a branch near you is closing.
By Vaishali Varu Published
US stock trading app Robinhood launches in the UK
The low-cost trading platform has opened another waiting list for British investors - following two failed attempts to launch in this country - and is hoping to be fully operational next year.
By Ruth Emery Published