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  7. Proposed Purchase of 60 Narrow-Bodied Boeing 737 MAX Aircraft

Proposed Purchase of 60 Narrow-Bodied Boeing 737 MAX Aircraft

31 May 2013
  • Commitment to purchase 60 Boeing 737 MAX aircraft (subject to shareholder approval)
  • Option and right to purchase up to a further 90 Boeing 737 MAX aircraft
  • Multi-billion pound investment in the future of the business
  • Continuation of unique holidays strategy

TUI Travel PLC (“TUI Travel” or “the Group”), one of the world’s leading leisure travel companies, is pleased to announce, subject to shareholder approval, a commitment to purchase 60 narrow-body Boeing 737 MAX aircraft from The Boeing Company (“Boeing”) as part of its fleet renewal strategy and move to Modern Mainstream.

Key points of the proposed transaction:

  • TUI Travel will purchase 60 Boeing 737 MAX aircraft powered by LEAP-1B engines manufactured by CFM International (“CFM”).
  • TUI Travel has secured a significant discount to the list price of each aircraft through various concessions, allowances and support from Boeing. At current list prices, the value of 60 Boeing 737 MAX aircraft that TUI Travel is committed to purchase is $6.09 billion (GBP £4 billion).
  • TUI Travel has the option to acquire up to a further 60 Boeing 737 MAX aircraft on the same terms as the committed 60 aircraft.
  • TUI Travel has been offered the right to purchase a further 30 Boeing 737 MAX aircraft on terms to be determined at the time of exercising this purchase right.
  • The delivery period for the 60 committed aircraft will start in January 2018 and run until March 2023.
  • 40 of these aircraft will be the Boeing 737 MAX-8 variant and 20 of these aircraft will be the Boeing 737 MAX-9 variant. The 737 MAX-9 variant offers circa 10% more seat capacity than the 737 MAX-8.
  • The Group will also be required to purchase eight spare LEAP-1B engines from CFM to support the committed 60 aircraft at an aggregated list price of $104 million (GBP £68.7 million). TUI Travel has, however, secured substantial price concessions against this list price.

Benefits of the proposed transaction:

  • Following the delivery of the aircraft, TUI Travel will continue to enjoy the benefits of a modern, fuel-efficient and cost-effective aircraft fleet.
  • The 737 MAX aircraft utilise a new technology engine type from CFM which Boeing asserts results in a 13% improvement in fuel efficiency and a 40% noise reduction over today’s main competitors.
  • Lower per seat costs than current generation aircraft and competitor products.
  • The 737 MAX aircraft incorporate the best future engine technology for unprecedented levels of efficiency, reliability and passenger appeal.

TUI Travel owns and operates six European airlines across its Mainstream Sector - Thomson Airways, TUIfly, TUIfly Nordic, ArkeFly, Jetairfly and Corsair - with 141 aircraft in aggregate. Five of these airlines operate 114 narrow-body aircraft between them serving short and medium-haul destinations. Approximately 80% of the Group’s airline passengers travelled on narrow-bodied aircraft to short and medium-haul destinations for their holiday 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. It comes as the first of our Boeing 787s touches down in the UK to commence replacement of our long-haul fleet with best in class aircraft. We are leading the way in re-defining mainstream holidays and putting our customers at the heart of everything we do is integral to our continued growth. I can confidently say that being able to offer our customers the most advanced, comfortable aircraft, whether they are travelling with us to short or long-haul destinations, while reducing our environmental impact, will only strengthen our position.”

Shareholder Approval The proposed transaction is a Class 1 transaction for the purposes of the UK Listing Rules and consequently is subject to the approval of TUI Travel shareholders to whom a circular setting out details of the proposed transaction will be sent to in due course.  Lazard is acting as Sponsor to TUI Travel for the purposes of the UK Listing Rules in relation to the proposed transaction.

Enquiries:

Analysts & Investors    
Andy Long, Director of Strategy & Investor Relations    
Tel: +44 (0)1293 645 795
Tej Randhawa, Investor Relations Manager    
Tel: +44 (0)1293 645 829
Sarah Coomes, Investor Relations Manager    
Tel: +44 (0)1293 645 827
    
Press    
Lesley Allan, Corporate Communications Director    
Tel: +44 (0)1293 645 790
Mike Ward, External Communications Manager               
Tel: +44 (0)1293 645 776
Michael Sandler / Kate Hoare (Hudson Sandler)    
Tel: +44 (0)20 7796 4133

TUI Travel PLC
TUI Travel PLC is one of the world’s leading international leisure travel groups operating in approximately 180 countries worldwide. It serves more than 30 million customers in over 31 source markets. Headquartered in the UK, the Group employs approximately 54,000 people and operates a pan-European airline group consisting of 141 aircraft.  The company is organised and managed through three business Sectors: Mainstream, Specialist & Activity and Accommodation & Destinations. In the financial year ended 30 September 2012 TUI Travel had revenues of £14.46 billion and an underlying operating profit of £490 million.

For more information visit www.tuitravelplc.com

Lazard & Co., Limited is acting exclusively as sponsor to TUI Travel for the purposes of the UK Listing Rules in connection with the proposed transaction and is acting for no-one else and will not be responsible to anyone other than TUI Travel for providing the protections afforded to clients of Lazard & Co., Limited or for providing advice in relation to the proposed transaction. Neither Lazard & Co., Limited  nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard & Co., Limited in connection with any statement contained herein or otherwise.

The £ to $ exchange rate is as derived from Bloomberg on 30 May of £1 to $1.5140.

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Proposed Purchase of 60 Narrow-Bodied Boeing 737 MAX Aircraft

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