The European travel operator Tui AG was so proud of its fleet of 15 shiny new Boeing 737 Max jets that it’s been naming them after popular holiday destinations: Costa del Sol, Rhodes and Tenerife Alegria are among those christened since deliveries started last year.

Tui was expecting to take delivery of another eight 737 Max aircraft by the end of May. But with doubts growing about the jet’s safety, none of these planes will be flying anywhere for the time being.

On Friday, Tui clarified the expense of grounding all of these jets (which account for about 10 percent of its fleet). If they’re forced to stay on the tarmac until the end of the summer holiday season, the company may have to forgo up to one-quarter of its anticipated full-year profit.(1)

Expenses related to securing alternative aircraft and extra fuel could reach 300 million euros ($337 million), Tui said. The size of the potential profit hit clearly took investors by surprise. The shares slumped as much as 11 percent, extending the past year’s decline to more than 50 percent.

Compared to the deaths of 346 people in the Indonesian and Ethiopian 737 Max crashes, Tui’s scheduling difficulties are unimportant. But this comes at a difficult time financially for the company.

Like its European peer Thomas Cook Group Plc, Tui’s tour operator margins have been compressed by overcapacity in the Mediterranean region and a knock-on impact from last year’s hot summer – which encouraged holidaymakers to stay at home. Those effects contributed to a shock profit warning in February and, barely a month later, Tui has followed up with another one.

While its results have been cushioned by the good performance of its hotels and cruise ships business, investors are on the lookout for signs of whether the travel market remains challenged. Even if the 737 Max is certified to fly again soon, some customers may decide they’d rather fly on other aircraft. 

There are questions about whether Tui can keep paying a chunky dividend. Net debt had swelled to 1.8 billion euros at the end of December and the company is likely to consume about 155 million euros of cash in fiscal 2019, according to the Bloomberg consensus of analyst estimates.

In February, the group paid out 423 million euros in dividends for the 2018 financial year, or 72 cents a share. At the current share price, that equates to a 9 percent yield – a level that suggests some concern is justified. 

Tui may well try to get the 737 Max expenses back from Boeing. However, unlike Norwegian Air Shuttle, it hasn’t said so publicly and it’s possible that not all of its bills will be recoverable. The dividend policy is based on the development of underlying profit(2), which before today was expected to be flat this year. Now it will probably decline.

While the company may try to classify the 737 Max costs as one-off items, it’s becoming more likely that the board will have to cut the dividend next year. If it does, it will doubtless blame a certain plane manufacturer in Chicago.

(1) Tui’s financial year ends in September. The measure of profit I’m referring to is underlying earnings before interest, taxation and amortization.

(2) Again, the profit measure is Ebita

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Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.

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