Short financial year 2009: An overview
Successful performance in Tourism in a difficult market environment
Tourism, the TUI Group’s core business, showed an overall positive performance in the short financial year 2009. While customers booked their holidays later on average due to the uncertain economic environment, the majority of all source markets reported robust demand, in particular in the important summer season. Overall, volumes fell year-on-year.
TUI Travel
TUI Travel adjusted its capacity in the package tour business to the expected decline in demand in due time and therefore managed to achieve its margin and capacity utilisation targets. Due to sound business development and higher realised synergies, underlying earnings (underlying divisional EBITA) rose by €51m to €571m in the short financial year as against the comparative period in 2008. The synergy target has been upgraded to £200m sterling by financial year 2010/11.
TUI Hotels & Resorts
The capacity reductions implemented by tour operators resulted in lower bednight volumes in TUI Hotels & Resorts in the period under review. In addition, the UK market saw a shift in demand from destinations in the western Mediterranean to non-euro destinations due to the persistent weakness of sterling against the euro. This trend affected hotels in Spain in particular. Several hotels in Mexico had to close down temporarily in the spring of 2009 due to swine flu. These strains on operative business were not completely offset by strict cost management so that underlying earnings by TUI Hotels & Resorts fell to €123m, down €10m on the comparative period in 2008.
Cruises
In the Cruises Sector, Hapag-Lloyd Kreuzfahrten reported declines in capacity utilisation on the very good levels recorded in 2008. These declines were largely attributable to the economic climate. In May 2009, joint venture TUI Cruises commissioned its first vessel, which met with sound customer demand. Due to the associated start-up costs, underlying earnings by the Cruises Sector declined year-on-year, as expected, to €1m in the short financial year 2009.
Group
Overall, underlying earnings by Tourism were €32m up year-on-year, totalling €696m. At €657m, underyling earnings by the Group’s Continuing Operations fell €8m short of comparative levels for 2008. The Group’s underlying earnings were impacted by the negative profit contributions posted by Container Shipping for the first quarter, falling by €472m to €408m.
Container Shipping stabilised by shareholder contributions and state aid
TUI AG completed the sale of Hapag-Lloyd AG to Albert Ballin Holding GmbH & Co. KG in the first quarter of 2009 and took a 43.33% stake in the purchasing company. TUI AG also provided a financing facility to Hapag-Lloyd AG and the purchasing company. The total volume of this financing facility amounted to €1.7bn as of 30 September 2009. By the end of March, it is also planned, together with Albert Ballin GmbH & Co. KG and in proportion to the stake held, to convert a part of the remaining loans granted to Albert Ballin Holding GmbH & Co. KG into equity in Albert Ballin Holding GmbH & Co. KG. For TUI AG, this sum amounts to €153m.
The capital and financing measures granted by TUI AG and the other shareholders serve to ensure long-term financial stabilisation of Hapag-Lloyd AG. At the same time, Hapag-Lloyd has initiated a set of measures to generate substantial cost savings. With the restructuring contributions agreed on by the shareholders and Hapag-Lloyd, the company meets the conditions for a state loan guarantee worth €1.2bn, approved on 6 October 2009.
TUI AG seeks to reduce its financial investments in Container Shipping in the medium term.
Measures defined to increase TUI AG’s liquidity reserve
The Executive Board has defined an asset streamlining programme aimed to generate an inflow of around €500m for TUI AG by 2012 in order to secure an appropriate liquidity reserve for TUI AG. The planned measures include in particular refinancing assets such as cruise ships and hotels, currently owned by TUI AG, and selling non-core real estate.
Early repayment of the shareholder loan initiated by TUI Travel
TUI Travel initiated early repayment of the shareholder loan granted by TUI AG with the successful placement of a convertible bond worth £350m sterling. TUI AG received €100m as per 30 September 2009; a further €250m will be due as per 1 April 2010. An additional amount of €509m will be repaid by 1 December 2010 at the latest. The remaining €160m of the shareholder loan will be redeemed as per 30 April 2011. The revised redemption schedule fits TUI AG’s maturity profile, while also securing sufficient liquidity reserves for TUI Travel for the two next winter seasons. In order to maintain the majority of voting rights in TUI Travel PLC in the event of the exercise of all conversion options on the convertible bond, in September and October 2009 TUI AG purchased around 2.9% of the share capital of TUI Travel PLC.
Takeover of TUIfly’s city business by Air Berlin
As of 25 October 2009, with the start of the 2009/10 winter schedule, Air Berlin PLC took over the city route network of Hapag-Lloyd Fluggesellschaft mbH (TUIfly). Air Berlin will initially charter 13 aircraft and crews from TUIfly for the 2009/10 winter season and then 14 from summer 2010 onwards. As a result, TUI Travel’s German airline operations will be able to focus on the tourism route portfolio retained by TUIfly. Due to objections by the anti-trust authorities, the cross-shareholding initially agreed was not implemented. Instead, TUI Travel unilaterally took a 9.9% stake in Air Berlin PLC for €33.5m.