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By John Helmer, Moscow


Alexei Mordashov is the largest single shareholder of Tui, the Germany-based tourism company. After the September crash of Thomas Cook, Tui is the leading tourism brand and travel company in the world.  In theory Tui has gained from the misfortune of its market competitor. But in practice the gain has been offset because of Tui’s losses from the crash of the Boeing 737 MAX, which Tui had been counting on to expand its capacity to carry additional travellers to their holidays.

Tui is already the biggest operator of the 737 MAX in the UK, and the second in Europe after Norwegian Air Shuttle. Tui has ordered another 72 of the aircraft from Boeing.

The 737 MAX crashes on October 29, 2018, and March 10, 2019, killed 346 passengers and crew. The US Federal Aviation Administration (FAA) was forced to follow worldwide bans of the aircraft on March 13. This decertification, and the widespread perception that Boeing had acted corruptly and illegally in the approvals process for the new aircraft, have cut Tui’s share price from its high last November 8, 2018, by 21%. That’s a drop from a market capitalization of €9 billion then to €7 billion now.

This €2 billion subtraction means that Mordashov’s near-25% stake in Tui has lost him half a billion dollars already. He will also not be receiving any dividend: Tui’s loss in the nine months to June 30 has ballooned to €240 million. The losses to the company and to Mordashov are expected to grow when the accounts for the end of Tui’s financial year, September 30, are published shortly.

So why did Tui’s chief executive, Friedrich Joussen, summon a reporter for the Financial Times of London to announce in the headline this morning: “Tui stands by Boeing 737 Max — with safeguards”. Joussen claimed, according to the newspaper,  that he and his company  plan “to add 2m more airline seats next summer to cater for extra demand following the collapse of major rival Thomas Cook this year. He said that the aircraft would be the 737 Max model 8: ‘If they are approved to be safe we would fly them. It will be potentially the most checked aircraft,’ he said…. ‘We need to know what the damage is but we don’t know what the damage is until it’s flying again.’

By damage, Joussen meant losses on Tui’s balance-sheet. He didn’t mean death to passengers from a faulty aircraft Boeing has been lobbying the US Government to certify for flying again, since the ban was imposed by a hesitant FAA eight months ago. Passenger death, or Tui’s profit – that’s the tradeoff Joussen discussed with his management and board before letting fly in the Financial Times this morning.

There is another profit tradeoff which Mordashov has in mind. This is to make a public show of Tui’s backing for Boeing now in exchange for Boeing’s help to lobby the US Government to lift the sanctions on Mordashov’s engineering company, Power Machines, imposed since January 2018.  

Many Russian oligarchs fly personal Boeing aircraft.  Mordashov doesn’t. His private flying machine is a Canadian-made Bombardier-6000. 

Left, Mordashov about to board his Bombardier-6000 (right).

When the US Treasury announced on January 26, 2018,  that it was imposing sanctions on Power Machines, it said the reason was that “the Russian co-owner of the joint venture that produced the turbines, and its director has [sic] publicly stated his support for Crimean infrastructure projects.  Power Machines is being designated for having materially assisted, sponsored, or provided financial, material, technological, or other support for, or goods or services to or in support of, OAO Technopromexport and Technopromexport LLC.”

Mordashov, who has been one of the largest Russian investors in the US, announced this was discriminatory and unfair. “In this JV we have 35 percent and Siemens has 65 percent, and the management of the JV is fully controlled by Siemens,” Mordashov told Reuters at the time. “It is Siemens’ technology, Siemens’ turbines, Siemens’ design… But the [US] Department of State has no problem with Siemens, nothing even with the JV, and yet everything is against Power Machines,  although it has no executive power in this JV. We have to review seriously our participation in this JV. It does not create a lot of benefits for us and it creates a lot of problems. Most probably we will have to review it substantially and withdraw from the JV.”

Mordashov has been careful to avoid adding Tui tourism to Crimea to the aggravation of his position in Washington. Instead, he has promised to fly more Russians on Tui to Cyprus. For that story, and the impact of the US sanctions on all of Mordashov’s assets, read this

Mordashov’s stake in Tui is publicly reported at 24.95%; since the sanctions were imposed in Washington, he has transferred part-ownership of the stake to Cyprus entities benefitting two of his children. Tui confirms Mordashov is the predominant single shareholder of the company: 

According to the German corporate governance rules, Mordashov’s shareholding entitles him to just one vote on the board. If his stake were 0.05% larger – that’s 25% or more – this would substantially increase his board voting power and his policy influence.

In the nine-month financial results announced by Tui in mid-August,   the company warned that the global ban on the 737 MAX aircraft had severely cut the company’s capacity to sell tourist flights. That cut nine-month earnings (Ebitda) from €312.5 million a year ago to €141.8 million – a loss of €170.7 million. According to the company presentation, the “underlying Ebitda” – meaning earnings as if Boeing’s aircraft hadn’t crashed twice, and then been grounded – “would have been nearer to last year’s result.” But because negligence, deceit and cover-up have been revealed at Boeing, prolonging the aircraft ban, Tui has reported that for the final quarter of its financial year the earnings and profit lines on the balance-sheet will worsen, and the impact of the ban reach €300 million or more.

Left: Tui’s chief executive since 2013, Friedrich Joussen; right, Mordashov at the Tui board meeting in Hanover, February 13, 2018.


Source: https://www.tuigroup.com/

Tui’s press office in Hanover was asked to clarify if CEO Joussen had discussed the 737 MAX  problem with the company board in advance of publishing his endorsement of the Boeing aircraft this week.  The company spokesman Kusey Esener said the board is “very well informed by management”, but he added that Mordashov is only one member and has only one vote on the 20-man board.

Esener disputes that Joussen’s remarks represent a change of policy on Tui’s part towards the 737 MAX. “We have an all-Boeing fleet. There is no way we can change that”. On the other hand, “we rely on EASA. If the FAA approves the 737 MAX but EASA does not, we will certainly not fly it. Definitely we will wait for EASA approval.”

EASA stands for the European Union Aviation Safety Agency;   it is based in Cologne, Germany. EASA acted ahead of the FAA with an order on March 12 suspending all 737 MAX flights into or out of Europe. The press release said: “EASA is continuously analysing the data as it becomes available. The accident investigation is currently ongoing, and it is too early to draw any conclusions as to the cause of the accident.” EASA delegated investigation of the aircraft, and the cause of the last fatal accident, to the US authorities, adding “EASA has offered their assistance in supporting the accident investigation.”

On September 27, EASA issued a fresh statement.  This claimed the agency was conducting its own investigation of pilot training, simulator operation of normal and abnormal flight conditions, and flight testing of a modified 737 MAX. “Some investigations are ongoing on the certification process followed by the FAA in the case of the B737 MAX. EASA do not wish to comment on the presumable ‘self-certification’ or on the level of delegation to Boeing that the FAA has granted. On the matter of the necessity of hardware changes, aircraft redesign and pilot retraining on full-motion simulators, we stated: ‘Our design review is not completed yet and we have not reached a conclusion yet on that matter.’ EASA has set requirements for flight and simulator evaluation with 70 test points to be evaluated, covering both normal and abnormal operations. The simulator evaluation were [sic] performed in June and July. Among the next milestones are flight tests performed by EASA on a modified Boeing 737 MAX that will last a full week.  Our review of pilot training requirements is not completed yet and we have not reached a conclusion yet on that matter.”

 “As we fly our aircraft in Europe and have European AOCs [air operator’s certificate], Esener said for Tui, “we will only be able to fly the 737 MAX after approval of EASA and the European authorities declaring it safe to fly. Please also note that we took our 737 MAX aircraft out of service in all our markets (UK; NL, BE, GE and Nordics) already after the British authorities grounded it.”

The UK Civil Aviation Authority (CAA) issued its statement on the 737 MAX on March 11. That passed the buck in two different directions at once.   “The US Federal Aviation Administration (FAA) is responsible for certifying all Boeing 737 Max 8 models and it is the European Aviation Safety Agency (EASA) that validates this certification across the EU, including the UK.  The UK Civil Aviation Authority is liaising very closely with the EASA as the facts of this incident are established.”

 Mordashov’s spokesman in Moscow was asked if he has discussed the 737 MAX problem with Joussen, and if Boeing’s help has been sought in Washington. The spokesman requested an email of the questions; he has not replied.

Aeroflot, the Russian state-owned airline, has planned to order twenty 737 MAX aircraft for its low-cost, short-haul Pobeda subsidiary. However, when the worldwide ban commenced, Aeroflot’s chief executive, Vitaly Saveliev, issued this statement:     “If there isn’t a 100 percent guarantee that the machine is safe then no one will take it. Deliveries for Pobeda were due to be no earlier than November 2019. Either Boeing resolves the safety problem with the 737 Max by that time or we will order a different plane.” Four months later, in mid-July, Aeroflot told the aviation industry press it was no closer to a decision on whether to scrap the 737 MAX in favour of Airbus. Asked today what the airline has decided to do, Aeroflot declined to say.   

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