Just because the travel market is not what it used to be does not mean that it’s down and out. It does mean, however, that companies have to up their game, and that is just what TUI Travel is trying to do. In fact, this well-known travel firm has just announced that it is going to buy at least 60 mid-range Boeing jets. It also has the option to buy up to 90 more if it sees fit.
Of course, some are kind of shocked to see that TUI Travel is buying these planes from Boeing, which is a U.S. plane maker. It would seem like it would want to buy planes from Airbus, which makes planes in Europe. It is very likely that Boeing offered TUI Travel a huge discount to buy from them. This could be seen as a huge win over Airbus for Boeing.
TUI Travel, which actually owns six different European airlines, said that it is very pleased with the deal that it received from Boeing. Although the planes are said to be worth £4 billion, TUI Travel was able to get a big discount off this list price. In the end, that is what made the choice to go with Boeing so easy.
Of course, the deal has not been officially approved just yet. That is because this deal is so large that it is being treated as a “class one transaction.” In short, this means that TUI Travel has to get the approval of its shareholders before it is allowed to make this purchase. However, most travel experts don’t seem to think that TUI Travel will have a problem winning over the members of the board.
Jeffrey Hardwood, who is an analyst at Oriel Securities, said that TUI Travel currently has about 60 planes on lease that expire over the course of the next three years. Instead of leasing more planes, they are looking to buy. It is very likely that TUI Travel believes that this will show the strength of the company and the money it has.
That being said, making any kind of big investment in the airline industry is risky. That is because many European airlines have seen their profits hit hard by rising fuel costs. Since these prices are not going to go down any time soon, investing in more than 60 planes might seem like a risky buy in itself.
It is likely that TUI Travel is going to fight these concerns by telling its shareholders that the Boeing 737 MAX, which is the plane type they are looking to buy, actually burns about 13 percent less jet fuel than other 737 models. Thus, TUI Travel could actually save some money over the years flying these planes than the ones they are currently using.
Although Airbus might have missed out on the TUI Travel deal, it is still battling with Boeing on other deals. For example, they are both bidding to win the business of easyJet, which is actually looking to order at least 100 new planes. It will either order 100 A320neo or 737 MAX jets. As always, it will come down to who offers the best deal.