Tour operator TUI (TUI) has brought in some much needed cash after agreeing the sale and leaseback of five new Boeing 737 MAX planes it had ordered.

The deal with state-owned Singaporean firm BOC Aviation, worth around $226 million (€193 million), will help boost TUI’s coffers at a time when its recovery hopes have been dented after it had to cancel holidays to its main market, Spain, due to the government’s quarantine rules.

However, investors didn’t react positively to the news, with the company’s shares down 1.7% in morning trading to 283p.

‘ASSET RIGHT’ APPROACH

TUI said the deal, which applies to aircraft it will receive next year, was part of its ‘asset right’ approach to the planes it owns and it expects to do further sale and leaseback financing on its deliveries of planes beyond next year.

TUI added that it expects the deal, which was made on standard commercial terms, would create a lifetime lease obligation of about $262 million, which will begin by the end of its 2021 financial year.

The first aircraft is expected for delivery in the first quarter of its 2021 financial year with the remaining four aircraft expected to be delivered ahead of the summer 2021 season.

It comes after TUI said previously that it needs to slash 30% of its costs to prepare for a smaller tourism market going forward. As part of this, it plans cut around 8,000 jobs and close 166 of its high street shops.

‘GREATEST CRISIS EVER FACED’

In its half-year results published in May, TUI called the coronavirus pandemic the ‘greatest crisis the tourism industry and TUI has ever faced’.

The company received a €1.8 billion loan from the German government in April – much to the chagrin of rivals including Ryanair (RYA) – but has reportedly been negotiating for further state aid with its cash flow continuing to be severely impacted by the pandemic, while it also grapples with ballooning net debt of around €4.9 billion.

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Issue Date: 03 Aug 2020