TUI continues positive trend in Q2 Higher turnover and better earnings for tourism and shipping / Booking figures for the summer season are promising for 2005 financial year

Hanover, August 11, 2005

In the second quarter, the core business sectors of TUI AG have continued on their successful start to the new financial year. Both tourism and shipping increased turnover and reported better earnings than in the previous year. Turnover in the tourism sector for the first half of 2005 consequently rose by approx. 5 per cent to 6.0 billion euros, while shipping turnover rose by 15 per cent to 1.4 billion euros. Tourism earnings for that same period improved by around 17 per cent, although the figure was still negative at the end of the six-month period owing to the typical seasonal effects for the tourism business. Shipping earnings for the first half of 2005 were approx. 4 per cent up on the previous year.

The application of several new IFRS accounting standards has been mandatory since 1 January 2005. As a result, the interim financial statements for the first half of 2005 contain changes in the disclosure and valuation of several items in the profit and loss statement and the balance sheet. For comparative figures for the previous year appropriate adjustments have been made.

Adjusted earnings by divisions in Q2 up 25 per cent year-on-year

In the second quarter of 2005, earnings by divisions (EBTA), adjusted for the effects of the IFRS changes as well as unusual expenses and income, rose 25 per cent year-on-year to 140 million euros (previous year: 112 million euros). The figure for the first half of 2005 thus totalled -68 million euros, which was up 40.9 per cent year-on-year (-115 million euros).

Earnings of continuing operations improved once again

As in the first quarter, earnings of continuing operations tourism and shipping as well as central operations again reported an improvement. Earnings in the second quarter of 2005 rose by 34.7 per cent to 132 million euros (previous year: 98 million euros). Cumulative earnings for the first six month of the year reached a figure of -129 million euros, a 36.1 per cent improvement year-on-year (-202 million euros). This was attributable to tourism, where earnings were up 16.9 per cent, as well as shipping, where earnings were up 3.8 per cent. The reduction in the costs of central operations also had a positive effect on earnings performance, with earnings of -141 million euros in the first half of 2005 reflecting a 25.8 per cent improvement year-on-year (-190 million euros).

Earnings of discontinuing operations trading and special logistics dropped to 57 million euros in the second quarter of 2005 (previous year including divestments: 63 million euros). Cumulative earnings in the first half of 2005 amounted to 83 million euros, which corresponds to a decrease of 27.8 per cent year-on-year (previous year including divestments: 115 million euros). This was due primarily to the low earnings figure for the trading sector, where business continues to develop satisfactorily, but was unable to match the record figures of the previous year which had benefited from the effects of exceptional market trends.

Total earnings by divisions for the TUI Group in the second quarter of 2005 increased by 17.4 per cent to 189 million euros (previous year: 161 million euros). At -46 million euros, earnings by divisions reported for the first half of 2005 were up 47.1 per cent (previous year: -87 million euros).

Turnover of continuing operations improves year-on-year

Turnover generated by continuing operations (tourism, shipping, central operations) in the second quarter of 2005 amounted to 4.34 billion euros, which is up 6.1 per cent year-on-year (4.09 billion euros). This increase could be attributed to 4.2 per cent growth in tourism and 13.8 per cent growth in shipping. Turnover of continuing operations in the first half of 2005 amounted to 7.57 billion euros, which corresponds to an increase of 6.9 per cent year-on-year (7.08 billion euros), with tourism accounting for an increase of 5.2 per cent and shipping 15 per cent.

The discontinuing operations of trading and special logistics reported turnover of 359 million euros for the second quarter, which was 19 per cent down year-on-year (444 million euros) owing to the divestments in special logistics. Cumulative turnover in the first half of 2005 amounted to 712 million euros, and is thus 26.6 per cent down year-on-year (970 million euros).

Tourism continues its positive trend

The tourism division reported better results in the second quarter of 2005 than in the previous year. Customer numbers totalled 5.76 million, an increase of 8.5 per cent, with turnover up 4.2 per cent to 3.49 billion euros and earnings reaching 94 million euros, which is 8.1 per cent higher than in the previous year. In the first half of 2005, total customer figures thus increased by 10 per cent to 9.55 million, with turnover up 5.2 per cent to 6.01 billion euros and earnings improving by 16.9 per cent to -98 million euros.

The Central Europe sector increased turnover in the second quarter of 2005 by 2.2 per cent to 1.41 billion euros (previous year: 1.38 billion euros). Cumulative turnover for the first half of 2005 increased by 5.8 per cent to 2.35 billion euros (previous year: 2.23 billion euros). This was attributable primarily to the development of business in Germany. At 31 million euros, earnings for this sector in the second quarter of 2005 were down on the previous year (36 million euros), a development which was due primarily to the early Easter holidays at the end of March in this year as well as marketing expenses in connection with expansion of seat-only business by Hapagfly. In the first half of 2005 earnings of the sector totalled -55 million euro (previous year: -65 million euro). Customer numbers in the second quarter of 2005 climbed by 11.1 per cent to 2.67 million, the cumulative figure for the first half of 2005 was up 12.6 per cent to 4.40 million. In addition to the increases in the number of tour operator customers, this figure was also due to growth in seat-only business by Hapagfly and Hapag-Lloyd Express.

In the Northern Europe sector, the number of customers rose by 3.8 per cent to 1.95 million in the second quarter of 2005. In the first half of 2005, a total of 3.13 million passengers travelled with tour operators in this sector, which is an increase of 5.5 per cent. Turnover for this sector increased from 1.22 billion euros in the previous year to 1.23 billion euros, rising in the first half of 2005 overall by 2.7 per cent from 2.07 billion euros to 2.12 billion euros. At 33 million euros, earnings for the second quarter of 2005 were slightly up year-on-year (32 million euros). The cumulative earnings for the first half of 2005 reached a figure of -73 million euros. The 10.6 per cent year-on-year decline was primarily attributable to the full-year inclusion of the figures for Thomsonfly in this sector. Thomsonfly went into operation in April 2004, i.e. not until the second quarter, and reported negative earnings for the first half of 2005 owing to seasonal reasons and also as a result of start-up expenses for operations from the new departure airports of Bournemouth and Doncaster.

In the second quarter of 2005, the Western Europe sector enjoyed a 10.8 per cent increase in the number of customers up to 1.14 million. In the first half of 2005 a total of 2.01 million passengers travelled with tour operators in this sector, which is an 11.8 per cent increase year-on-year. Turnover in the second quarter of 2005 rose by 12.8 per cent to 666 million euros (previous year: 591 million euros). In the first half of 2005, turnover reached a figure of 1.20 billion euros and was thus up 9.1 per cent year-on-year (1.10 billion euros). At -9 million euros, earnings for this sector in the second quarter of 2005 remained at last year's level. The cumulative earnings for the first half of 2005 were -28 million euros (previous year: -19 million euros). Earnings performance in this sector was affected primarily by the airline sector, which sustained expenses in the first half of 2005 in connection with renovation of the Corsair Boeing 747 fleet and the commencement of operations by TUI Airlines Nederland in April 2005. The inclusion of TUI Airlines Belgium, which had only gone into operation in the second quarter of the previous year, also had a negative effect on the earnings for the first half of 2005.

In the second quarter of 2005, the destinations sector (incoming agencies and hotel companies) generated a turnover of 121 million euros (previous year: 86 million euros). In the first half of 2005, turnover totalled 210 million euros, an increase of 13.4 per cent year-on-year (186 million euros). The reduction in sales following divestment of the Anfi Group in June 2004 was more than compensated for by the full-year inclusion of the Toufag Group (three Spanish Robinson Clubs) for the first time and thanks to brisker business by the hotel companies in the direct marketing sector. Earnings for this sector in the second quarter of 2005 rose to 38 million euros (previous year: 18 million euros) and in the first half of 2005 totalled 61 million euros (previous year: 26 million euros). In addition to the improved earnings in the hotel sector, this is also due to the first-time full-year inclusion of a Turkish hotel company and the first-time consolidation of the Toufag Group.

Shipping still headed for growth

The shipping division (Hapag-Lloyd Container Linie and Hapag-Lloyd Kreuzfahrten) continued their positive business performance in the second quarter of 2005 despite substantial increases in costs. Transport volume rose by 5 per cent to 655 thousand standard containers (TEU), turnover increased by 13.8 per cent to 765 million euros and earnings at 85 million euros were up 1.2 per cent year-on-year. The cumulative turnover for this sector for the first half of 2005 reached a figure of 1.43 billion euros (previous year: 1.25 billion euros), an increase of 15 per cent, earnings rose by 3.8 per cent to 110 million euros (previous year: 106 million euros). These improvements resulted primarily from the good course of business in the container shipping segment, which in the first half of 2005 transported 1.27 million TEU, an 8.3 per cent increase in the number of standard containers year-on-year (1.17 million TEU). This sector also benefited from the continuing high level of freight rates, which in the first half of 2005 were on average 11 per cent higher year-on-year. The increase in earnings in container shipping was more moderate than the growth in terms of volumes and turnover, as there was a sharp increase in the cost of bunker oil and the charter rates for short-term contracts.

Central operations reduce costs and improve net interest

Central operations (corporate centre functions, real estate companies, industrial activities) reported turnover of 84 million euros for the second quarter of 2005 (previous year: 68 million euros) and turnover of 128 million euros for the first half of 2005 (previous year: 124 million euros). Central operations earnings for the second quarter of 2005 amounted to -47 million euros (previous year: -73 million euros), with total earnings for the first half of 2005 improving by 25.8 per cent to -141 million euros (previous year: -190 million euros).

In the trading sector, the steel service companies of Preussag North America, Inc. (PNA) operating in the USA performed satisfactorily in the second quarter of 2005. At 250 million euros, turnover remained at last year's level (252 million euros), while in the first half of 2005 turnover reached 496 million euros, a 9.9 per cent increase year-on-year (451 million euros). Following the extraordinary market performance in the previous year and the resulting record earnings, business performance remained good, with earnings of 9 million euros for the second quarter of 2005 and 25 million euros for the first half of 2005 however far lower than in the previous year (64 million euros).

Positive prospects for 2005 financial year – Booked turnover for the summer season up by 8 per cent

In the first half of 2005, the TUI Group continued the positive trends of the 2004 financial year, achieving an increase in operating results in tourism and shipping, its core businesses. According to the trend observed in the tourism sector, last year's recovery will continue in the second half of 2005. So far, bookings for the 2005 summer season have – in some cases significantly - exceeded last year's level in all source markets. At Group level, the year-on-year increase in bookings accounted for 15.7 per cent in customer numbers and 8.2 per cent in booked turnover at the end of July. Discounting the first-time inclusion of the airlines Hapag-Lloyd Express and Thomsonfly, the tourism division already reports growth of 5.4 per cent in customer numbers for the 2005 summer season 2005 and 6.8 per cent in terms of turnover. Current booking levels, in particular for the peak holiday season are promising. “If this trend continues, we believe that a low double-digit percentage increase in earnings (EBTA) will be possible for the tourism division for 2005 financial year,” comments Dr Michael Frenzel, CEO of TUI AG.

The forecasts for the further trend in container shipping in the 2005 financial year are favourable. Assumed demand continues to be persistently strong, freight rates are expected to remain at a high level. Should these expectations to be met and should costs and currency relations between euro and the US dollar develop favourably, earnings by the shipping division are expected to continue on last year's high level in the 2005 financial year.

As TUI's CEO Michael Frenzel points out: “We have placed TUI on two strong cornerstones, tourism and shipping. Thus we operate in two growth markets which have excellent medium-term prospects. Therefore we expect a further increase in the Group's earning power.”

For further information please contact:
Björn Beroleit, phone +49(0)511 566-1310
Nicola Gehrt, phone +49(0)511 566-1435