Prospects

The global economy has recovered substantially since mid-2009, driven by the dynamic development in Asia. Economic activity has also continued to expand in the industrialised countries. However, the recovery has lost some steam since the turn of the year since economic activities have been impacted by adjustment processes resulting from the financial crisis, in particular in the industrialised countries.

For calendar year 2010, the economic indicators of the global economy are expected to increase, albeit with considerable regional variations. Expansion will continue to be driven by the developing countries and emerging markets, although they may lose some momentum as the year progresses due to tighter economic policies, with much of the crisis-induced catch-up growth coming to a halt. Risks are associated with development of international financial markets, which still have to prove whether their recovery will be sustained. It also remains to be seen whether private consumption will be able to compensate for the state-backed economic stimulus programmes when they expire and to what extent the labour market will be impacted by a reduction in production capacity.

In spite of these risks, the International Monetary Fund has again lifted its forecast for calendar year 2010 (IMF, World Economic Outlook, April 2010) and now expects global growth of 4.2%, with growth of 3.1% in the United States, 1.9% in Japan and 1.0% in the Eurozone, as before. By contrast, the emerging Asian economies are expected to achieve growth rates almost matching the precrisis levels. For 2010, the IMF expects growth of 10.0% for China and 8.8% for India.

Tourism markets usually follow the general economic development with a time lag. After international tourist arrivals declined in the first three calendar quarters of 2009, this trend reversed at the end of the year. Total growth in calendar year 2009 was around 2%. Tourism continued to pick up again in the first quarter of 2010. Asia, the Pacific region and the Middle East, in particular, recorded considerable growth, while international tourist arrivals grew less strongly in Europe and America. The UNWTO (World Tourism Barometer, Interim Update April 2010) essentially confirmed its forecast for 2010 and expects international tourist arrivals to grow by 3 to 4%. A negative effect will result from the closure of Europe’s airspace due to the volcanic eruption in Iceland in April 2010, not yet taken into account in the forecast. According to preliminary estimates, the UNWTO expects this effect to account for minus 0.3% worldwide. Earnings by the TUI Group commented on under 'Prospects' have been adjusted for the cost presently known to have been incurred on account of airspace closure.

In line with the change in TUI AG’s financial year, the information provided below relates to the expected development of turnover and operating earnings (underlying divisional EBITA) of the TUI Group for the period from 1 October 2009 to 30 September 2010.

TUI Travel   
For financial year 2009/10, TUI Travel continues to expect underlying earnings to be stable versus the prior year. For the completed Winter 2009/10 season, booked turnover declined by a total of 7% year-on-year, with customer volumes down 8%. In anticipation of this decline in demand, capacity had been cut at the beginning of the Winter 2009/10 season in order to limit the impact on tour operators. For the current Summer 2010 season, by contrast, booked turnover in the Mainstream business is 6% ahead of prior year, with booking volumes 2% up year-on-year. In the light of this positive trading performance, TUI Travel is implementing a moderate and selective expansion of its capacity in the framework of flexible capacity management in order to continue to be able to benefit from a prospective increase in demand as the season progresses.

Cooperation between TUIfly and Air Berlin in Central Europe will also continue to generate positive effects. Earnings by TUI Travel are also expected to benefit from the delivery of additional synergies due to the integration of the tourism business in the UK and positive effects of a strategic venture in the Canadian travel market. Risks are associated with the exchange rate of Sterling against the Euro and the future development of airline activities in France.

TUI Hotels & Resorts   
TUI Hotels & Resorts expects a slight year-on-year decline in earnings for the current financial year. The anticipated positive effects of active cost management are expected to be more than offset by declines in average rates per bednight. Should the positive booking trend for Summer 2010 continue to consolidate, however, this might help to catch up on the year-on-year decline in earnings.

Cruises   
For the current year 2010, the cruise market is expected to continue to grow. This may benefit the companies of the Cruises sector in their respective market segments: While Hapag-Lloyd Kreuzfahrten is well positioned in the niche markets for luxury, premium and expedition cruises, TUI Cruises has successfully established its position in the premium volume segment. Based on a continued positive booking trend for the Summer 2010 season, earnings are currently expected to rise slightly year-on-year.

Tourism   
Based on the current earnings estimate for TUI Travel, TUI Hotels & Resorts and Cruises, the TUI Group expects underlying earnings to be stable overall versus the prior year in its core business Tourism in financial year 2009/10.  The development of business in Tourism will hinge on whether economic recovery and hence consumer demand in the large volume markets will continue to consolidate and the current positive booking trend for the Summer 2010 season will thus be sustainable.

Continuing Operations 
For financial year 2009/10, the TUI Group expects operating earnings by Tourism to be stable versus the comparative prior-year period, with Central Operations achieving cost reductions. Underlying earnings by the TUI Group’s Continuing Operations will thus rise slightly year-on-year.