The world economy is still in recession. For 2009, the International Monetary Fund (IMF, World Economic Outlook, July 2009) projects a contraction of global gross domestic product of 1.4%. The rate of decline in economic activity moderated in the second quarter of 2009. In addition, several key indicators stabilised worldwide, so that it appears possible that the decline will bottom out in the second half of 2009. The core problems regarding a recovery of the world economy remain the continued uncertainty in the financial markets and the persistent fall in many assets, in particular real estate, adversely impacting financing conditions for the real economy and curbing investments worldwide. The crisis is also partly driven by the weakness of global trade, which the IMF expects to decline by around 12% in 2009 and which primarily affects export-oriented countries such as Germany and Japan as well as Central and Eastern European countries and some minor emerging economies in Asia. Overall, the world economy is expected to only recover gradually over time. In the industrialised countries, production is not expected to pick up substantially until the end of 2009, with activity in the Eurozone projected to recover more slowly than in the US and Japan. In the light of rising unemployment and increasing fuel costs, private consumption is not expected to expand considerably in the near future. The tight situation in the labour market, in particular, is expected to intensify further in the next few months. Corporate investments are expected to remain considerably lower than before in the next few months in the light of extremely low capacity utilisation and difficult financing conditions. Prospects for increases in industrial production in the near future have improved, benefiting from substantial inventory cutting in recent quarters. Inventory adjustment might trigger considerable production rises in the short term and thus create a more notable economic recovery. On the other hand, however, severe downward risks, resulting above all from the development in the financial markets, remain in effect.
With regard to the resolution adopted at TUI AG’s Annual General Meeting on 13 May 2009 to change the financial year and have an short financial year in 2009, the comments made below shall refer to the TUI Group’s expected development of turnover and operating earnings (underlying divisional EBITA) for the period from 1 January 2009 to 30 September 2009.
Tourism
According to UNWTO estimates (World Tourism Barometer, June 2009), international tourist arrivals declined by 8% in the first four months of the year. The negative trend recorded in the second half of 2008 thus continued in 2009. For the overall year 2009, UNWTO has revised its forecast downward and now expects the tourism market to decline by 4 to 6%. According to UNWTO, risks in the tourism market include the uncertain economic development and the further impact of swine flu.
In the first half of 2009, the persistently difficult economic climate caused the expected weakening of incoming bookings in TUI Travel’s volume business. For the summer season, booked turnover is 10% down year-on-year, with customer volumes 11% down. At the same time, TUI Travel has cut capacity for the 2009 summer season by 15%. This active capacity management has proven its worth in the year to date. For the forthcoming summer season, TUI Travel therefore expects to be able to achieve the planned pricing and occupancy targets in an overall declining market. While negative earnings effects were recorded in the first half of 2009 from external disruption of travel to individual destinations, cost savings will be achieved and synergies delivered from the integration of tourism activities as the year progresses. They will total 200m British pounds in the final stage. TUI Travel expects to reproduce the previous year’s earnings levels in the short financial year despite the shortfall in earnings in the first half of the year. This will in particular be driven by improvements in the lates business and the cost savings resulting from the integration measures taken in 2008.
TUI Hotels & Resorts expects a slight decline in earnings year-on-year for the current short financial year. The fall in customer numbers from the major source markets will cause lower occupancy rates in hotels in Spain and Portugal. In addition, occupancy in Mexico will fall short of the usual level for some time to come due to the impact of swine flu.
Due in particular to the start-up costs for TUI Cruises, the cruises activities will not reproduce the previous year’s earnings level.
Based on the current earnings estimates for TUI Travel, TUI Hotels & Resorts and Cruises, the TUI Group expects tourism, its core business, to generate operating earnings slightly below last year’s level. The development of earnings will depend to a considerable extent on the further development of the lates business for the summer months from July to September 2009.
Continuing operations
Overall, the Executive Board expects turnover by the TUI Group’s continuing operations (tourism and central operations) to decline in the short financial year 2009 due to lower business volumes in tourism and the persistently weak exchange rate of the British pound.
Given an overall development of tourism being slightly below last year’s level underlying earnings by the TUI Group’s continuing operations are expected to decline year-on-year in the short financial year 2009 since 2008 figures included income by central operations from the reversal of provisions no longer required.
Consolidated earnings
In the short financial year 2009, reported consolidated earnings will be strongly affected by the realised gains on disposal from the sale of container shipping and charges for interest effects on loans extended to the ‘Albert Ballin’/Hapag-Lloyd Group. Taking account of the year-on-year decline in integration expenses in tourism and the adverse effect of the negative at equity profit contributions in container shipping, consolidated earnings are overall expected to be positive.