TUI takes off on 12bn-dollar modernisation journey

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.

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.

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.

OH

Most Popular

The MoneyWeek Podcast: Asia, financial repression and the nature of capitalism
Economy

The MoneyWeek Podcast: Asia, financial repression and the nature of capitalism

Russell Napier talks to Merryn about financial repression – or "stealing money from old people slowly" – plus how Asian capitalism is taking over in t…
16 Jul 2021
Three companies that are reaping the rewards of investment
Share tips

Three companies that are reaping the rewards of investment

Professional investor Edward Wielechowski of the Odyssean Investment Trust highlights three stocks that have have invested well – and are able to deal…
19 Jul 2021
The future belongs to emerging markets – three EM stocks to buy now
Share tips

The future belongs to emerging markets – three EM stocks to buy now

Professional investor Carlos von Hardenberg of Mobius Capital Partners picks three of his favourite emerging-market stocks.
5 Jul 2021