TUI Travel

Turnover and earnings   
In the second quarter of 2009/10, turnover by TUI Travel decreased by 7% year-on-year. The decline was primarily attributable to lower volumes in the Mainstream business. However, booking volumes already picked up again versus the prior quarter. Turnover benefited slightly from a 2% rise in the exchange rate of Sterling against the Euro.

Underlying earnings by TUI Travel improved in the second quarter of 2009/10, up €44m year-on-year. Although customer volumes were still down year-on-year, earnings improved overall due to better margins resulting from flexible capacity management. Earnings also benefited from TUIfly’s concentration on the tourism route portfolio following the takeover of the citypairs business by Air Berlin. Additional positive earnings effects arose from the restructuring of business in Canada in the wake of the completion of a strategic venture between operations in Canada and tour operator Sunwing in January 2010 as well as the scheduled delivery of integration synergies. On the other hand, earnings were impacted by the continued weak performance in the French airline market.

In the second quarter of 2009/10, TUI Travel had to carry adjustments worth a total of €24m for the following one-off effects:

• gains on disposal of €2m resulting from the sale of the Canadian business operations in connection with the subsequent formation of the joint venture,
• restructuring costs of €10m, in particular for restructuring the airline segment in the UK and realigning tour operator activities in France,
• effects of purchase price allocations worth €16m, and
• one-off effects of €0m in net terms. These one off-effects included one-off income from delayed deliveries of aircraft. On the other hand, one-off expenses had been incurred, primarily for the impairment of receivables from a Turkish hotel management company and the default of a Canadian non-Group airline and the associated expenses for the reintegration of the leased aircraft.

In the second quarter of 2009/10, reported earnings by TUI Travel rose by €96m year-on-year to €-269m. Cumulative reported earnings for the first half of the year rose to €-432m, slightly up year-on-year. Underlying earnings for the first half of the year totalled €-373m, down €17m year-on-year.
 
Mainstream
Mainstream, the largest sector within TUI Travel, comprises sales of flight, ­accommodation and other tourism services in Central Europe, North­ern Region and Western Europe.

Central Europe
In Central Europe (Germany, Austria, Switzerland, Poland and airline TUIfly), customer volumes declined by 25% year-on-year in the second quarter of 2009/10. This was mainly attributable to TUIfly’s exit from the city-pairs business, which was taken over by Air Berlin in accordance with the agreement made.

Thanks to strict capacity management and exiting the city-pairs business, the German airline and tour operator activities achieved a substantial improvement in earnings in spite of lower customer volumes. The Swiss market remained charac­terised by strong competition; nevertheless TUI Suisse managed to achieve higher margins which more than offset lower demand volumes. TUI Austria and TUI Poland benefited from higher customer volumes and successful cost control programmes.

Northern Region   
In Northern Region (UK, Ireland, Canada, Nordics and airlines Thomson Airways and TUIfly Nordic), customer volumes fell by 13% year-on-year in the second quarter of 2009/10. In anticipation of weaker demand driven by the economic environment, capacity had been reduced for the winter season.

Integration of activities in the UK market remained on track in the second quarter of 2009/10 so that the expected synergies were delivered. Business in Canada benefited from the strategic venture with tour operator Sunwing. The joint venture, in which TUI Travel holds a 49% interest, was established in January 2010 in order to enhance the market position. The market environment in Canada remained characterised by excess capacity and associated aggressive pricing.

Western Europe   
Western Europe (France, the Netherlands, Belgium and airlines Cors­airfly, Arkefly and Jetairfly) recorded a slight year-on-year increase in volumes of 1% in the second quarter of 2009/10. Tour operator activities in Belgium benefited from an increase in landbased product, offsetting the continued decline in volumes in France and the Netherlands. Business in France was adversely affected by ­continued weaker demand for the key longhaul destinations La Réunion and the West Indies, affecting the tour operators and in particular the Corsairfly airline. However, it recovered slightly versus the first quarter of the current financial year. TUI tour operators in the Netherlands reported weaker volumes and lower pricing levels. Their business was additionally impacted by higher maintenance costs in aviation.

Specialist & Emerging Markets
The Specialist & Emerging Markets sector consists of specialist tour operators in Europe, North America and emerging markets such as Russia. In the second quarter of 2009/10, customer volumes fell by 4% year-on-year to 167 thousand. While specialist tour operators in Continental Europe benefited from slight growth, specialist tour operators in the UK recorded a decline in volumes. Business in North America decreased year-on-year in the period under review, primarily due to continued weak demand for premium expedition tours. The development of business in the emerging markets reflected increasing price pressure for tours to Egypt in the Russian market and the cost of acquisition for newly acquired interests.

Activity
The Activity sector, which comprises Marine, Adventure, Ski, Student and Sport, recorded a positive development in the second quarter of 2009/10. Marine benefited from cost savings. While Adventure was impacted by lower capacity and tougher competition, in particular in the polar expedition segment, Sport benefited from major sport events in particular the Winter Olympics. The Ski and Student divisions achieved a gratifying performance versus the prior year.

Accommodation and Destinations (A&D)
The A&D sector comprises online services and incoming agencies. Online services again recorded volume growth, in particular in large European cities, following an expansion of their portfolio and promotional activity. The incoming agency business was almost flat versus the prior year. Growth was achieved in particular in services related to the cruise business.