TUI - Will Sunwing's In-Air Decisions Hurt Results?

TUI Travel PLC (TUIVY or TUIVF) is traded on the LSE and on the OTC (Over The Counter) market in New York. They are substantial owners of the reputable, Canadian, Sunwing Travel and Vacation brands - they own 49% of Sunwing Travel and a 25% voting interest.

Sunwing is not publicly traded. TUI (TT.L) stock has been doing well. Here is the 5-year chart (from the LSE-traded securities, as the OTC ones are inconsistent due to low volumes). The 5-year chart identifies excellent long-term share-price performance. It is off its high this year, but well-above its low:

 

As with any business, operational effectiveness and costs drive business results. Every organization relies on their operational staff to drive profitability.  I see worrying news that may damage the Sunwing brand and impact their - and TUI's - profitability. Their airline staff appear  unable to deal with the smallest disturbances, and reroute their vacation-destination flights back to their points of origin (Toronto).

A comprehensive list of accidents and incidents can be found on AeroInside. There were two recent incidents - one of which I suggest should concern investors:

1. On July 25, 2014, Sunwing Flight 772 was forced to return to Toronto due to the actions of a disruptive passenger. This was a bomb threat, and the crew seems to have followed procedures and responded appropriately.

2. On August 27, 2014, Sunwing Flight 656 was forced to return to Toronto due to the actions of two disruptive passengers. It made all of the Canadian news - you can watch it here.

I was not on either airplane, but at least the second threat did not appear genuine, or at least does not appear to warrant the reaction to turn-around the flight and require a military aircraft escort back home.

Imagine... the experienced Sunwing airline crew could not calm two mid-twenties party girls who were drinking, smoking, and fighting (with each other). This is not exactly a terrorist risk! No weapons and no bomb threats. Any local bar - and their staff almost certainly has less training - would likely have handled it quickly, and possibly with dignity. Can Sunwing not manage rowdy vacationers on a chartered, vacation flight? The aircraft was near Florida; Varadero - their north-Cuba destination - was in the range of 200 miles away, but they returned to Toronto, which was about 1,000 miles back. Not exactly great threat assessment , operational, or security decisions. Then Sunwing had to fly these same passengers - minus the two "dangerous " offenders - back to their vacation destination.

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