TUI is very well prepared to meet future challenges company expects recovery of tourist market

Hanover, June 18, 2003

Following the crisis-related shortfalls in bookings in the first few months of the current fiscal year, TUI now expects a sustained recovery of the tourist market. At today's Annual General Meeting in Hanover, Dr Michael Frenzel, the CEO of TUI AG, said that the original shortfall of 15.2 per cent in summer bookings for 2003 had declined to currently 10.7 per cent below the previous year's level. Taking the last winter season into consideration overall bookings are 7.2 percent down on last year.

"I'm convinced that the positive trends observed in the past few weeks will continue", emphasised TUI's CEO as he spoke before over 2000 shareholders and guests in Hannover.

The recovery trend in the source market of Northern Europe was particularly positive. Driven by much better booking figures in the U.K., the shortfall in bookings improved from minus 16 to minus 9 per cent, while the source market of Central Europe and Germany recovered only moderately from minus 16 to minus 13 per cent up till now. The situation in Western Europe improved from minus 9 to minus 8 per cent. Since the late-booking trend is expected to continue in the summer the recovery of the market should be ongoing.

Unchanged dividend of 77 cents
In the past fiscal year, TUI generated a consolidated turnover of Euro 20.3 billion (2001: Euro 22 billion) despite a very difficult economic and geopolitical environment. The results by divisions before taxes and goodwill amortisation (EBTA) decreased by 25 per cent to Euro 608 million. Due to higher goodwill amortisation and higher taxes, the Group's consolidated net income decreased considerably to Euro 41 million, compared to Euro 411 million in the previous year. However, TUI pursues a continuous dividend policy even in a weak economic environment: the company's management proposed to the Annual General Meeting an unchanged dividend of 77 cents per share.

Restructuring of the Group almost completed
One year after changing the Group's name from Preussag to TUI, the restructuring of the Group has now been largely completed with the sale of the Energy Division. The next few steps planned by the company will be the divestment of the Trading Division as well as portfolio adjustments in the logistics business. In this context, the company's primary goal will continue to be the reduction of its debt. By the end of 2004, TUI wants to reduce its net-debt to a level of under three billion euros, which is less than half the net-debt the company had in the year 2000.

New management structure has been implemented
As of 1 June 2003, a new management structure came into effect for the Group's central management. With the Group's new management body – the Executive Committee – which includes the four members of the Board of Management of TUI AG, i.e. Michael Frenzel (Chairman), Rainer Feuerhake, Sebastian Ebel and Peter Engelen, and the four divisional board members, i.e. Volker Böttcher, Eric Debry, Peter Rothwell and Helmut Stodieck, TUI AG has given itself a modern management structure that is increasingly being practised by companies in Germany and abroad.

Integrated business model improves profit opportunities
TUI is emphasising the advantages that a tourism group stands to gain from using an integrated business model. The fact that an integrated group covers the entire value chain from travel agencies to hotel beds makes it possible to effectively meet the quality expectations of customers and to achieve optimum capacity utilisation. In addition, this business model provides an ideal combination of flexibility and market proximity, which enables the company to benefit from synergies.

Package tours are TUI's mainstay
High-quality package tours are still the primary turnover driver of TUI's tourism division. In Germany, for instance, package tours account for approximately 80 per cent of the turnover in tourism. In the near future, TUI AG does not expect any changes in this area due to the growing low-price segment and the increasing specialist business. The great importance and the high standard of this most important market segment will be underlined by launching a quality initiative. In addition, the company will adapt its products in all segments to changing customer expectations. In future, customers will be able to combine various TUI products in a more personalised fashion without having to do without the convenience of package tours.

Innovative products off to a good start
As the market and innovation leader, TUI also feels that it is excellently positioned to master the challenges posed by major changes in customer behaviour. With its brand Hapag-Lloyd Express, for instance, TUI has made a very successful investment in the rapidly growing segment of low-cost airlines. To date, the company has received over one million bookings for Hapag-Lloyd Express. With its second new brand – Discount Travel – which is mainly designed to market residual capacity, TUI has closed a gap in its brand portfolio, and it has improved aircraft and hotel capacity utilisation. As its next innovation step, TUI will launch a hotel portal in the Internet in the next few weeks to market hotel beds of its own and of third parties.

Outlook: results by divisions in 2003 much better than in the previous year
While the company was off to a weak start in the current fiscal year, mainly due to the Iraq crisis and the sluggish economic environment, the expected recovery is becoming more and more manifest now. The shortfall in summer bookings is continuously being reduced by (partly double-digit) weekly growth rates relative to the previous year. Nevertheless, TUI AG expects that – due to the negative effects observed to date – the Tourism Division's result in 2003 will be clearly positive, although it will not match the previous year's level.

The Group's overall results by divisions will be much higher than in 2002, due to higher earnings by the Logistics Division, primarily supported by volume growth and higher freight rates in container shipping. In addition, the divestment of the Energy Division will produce substantial non-recurrent income, which will considerably improve the results by divisions.

By successively implementing the TOP (TUI Optimising Performance) Programme, TUI focuses on adjusting the portfolio, introducing innovative products as well as continuously cutting costs in order to remain competitive, especially in the currently difficult environment. In summary, CEO Frenzel stated: “We will continue to profitably consolidate our leading position in the tourist market and consistently pursue the successful approach we have adopted in logistics. We are very well prepared to cope with the dynamic changes in our markets.”


For further information please contact:
Björn Beroleit, phone +49 511 566-1310
Nicola Gehrt, phone +49 511 566-1435