TUI AG

Fritz Joussen - Chief Executive Officer Horst Baier - Chief Financial Officer

Alex Brignall - Redburn Partners Jamie Rollo - Morgan Stanley Jaafar Mestari - J.P. Morgan Cazenove Tim Ramskill - Credit Suisse Johannes Braun - Commerzbank Tobias Sittig - Main First Bank Stuart Gordon - Berenberg Bank Patrick Coffey - Barclays Investment Bank James Ainley - Citi

Thank you very much and good morning. I'm happy to sit here with Horst to talk about our Q3 results so the results which actually have been published this morning.

I think everybody can draw the conclusion that we had a very good performance in the quarter and the performance has once again shown the variance of our vertically integrated model. Secondly, the summer 2016 sighting is strong and I will be talking about future seasons later today and not only it has not been only strong and previous to the EU referendum but also afterwards, we see, where we saw no apparent slowdown in UK booking.

The disposal processes for Hotelbeds where we expect the closing this quarter and also Travelopia, are on track. And therefore we remain confident to the achieve at least 10% growth in underlying EBITDA for the full year 2015 and 2016.

Yes there have been some geopolitical events also this quarter, but the development shows the strength of our Group strategic position. First of all, I think and basis for all good markets we saw a very strong resilience of demand, so people want to travel.

Yes, we see a remix in capacity. We see a remix in demand from East Mediterranean to West Mediterranean but our integrated model allows us to replan capacities fast and very efficiently.

At the same time, we have started to transform right now our business into a more vertically integrated model which actually in cruise, yes capacity in destinations. We have I think right now already have business which has very balanced portfolio, numerous source markets, winter and summer destinations, regional portfolios also and the hotels so that we have a very balanced portfolio of the destinations as well and last but not least very balanced portfolio of ownership models being management and also, some ownership or leases, if necessary.

Last not least Horst will be talking about, we have been achieving rating improvements by Moody's and Standard & Poor's and therefore I think it is very strong balance sheet, we're now stronger business and we have been before and we have continue investing into businesses with higher cash returns and less volatility and less seasonality than before. Today we are talking about the one third of our profits in content related businesses and two-thirds in trading related businesses prior to achieve something every year, which is a more balanced mix of EBITDA growth positions.

So we are very positioned to deal with the geopolitical and macroeconomic changes and chose that actually despite all these changes to keep our guidance at least in percent to EBITDA growth. Now let me focus on Q3 like-for-like.

So if you take constant currency and if you exclude Easter effect, we have achieved 14.1% EBITDA growth this quarter despite effect that revenue was going backwards driven by the earlier Easter and geopolitical events. I will come to it later, when you look at our today's booking for summer particularly, we can already say that we will be growing our revenues for the full year, so this is actually phasing effect of the first three quarters as you all know, the strongest quarter is still to come.

The strong performance in EBITDA is actually mainly driven by UK, Riu and Cruise. But also improved performances in Germany is a quarter that Germany outperformed last year's third quarter.

The first time for a long time and also France actually is on its way to turn around and we have said that in the French business is altogether potentially will be close to zero turn around already this year, that was the reason why we've also bought [indiscernible] business we're on a good case past to achieve it. Last not least, we promised about synergies of €9 million and we delivered not just synergies of €9 million.

Let me now focus onto flow charts you see €178 million last year, you see the like-for-like number total [indiscernible], this year underlying trading up €15 million, profit disposal of Grecotel last year minus €10 million. the repatriation cost which didn't occur this year again of Tunisia €10 million, €9 million merger synergies and then a little bit of €1 million debt refinance changes in the aircraft fleet delivered to Toronto [ph] fleet and then you see the two effects which I talked about is the timing which last year was in April, this year was in March.

The €12 million and the €11 million translation effect because of our Pounds revenue which we translate into Euros. No operation effect, the Pounds stay where they are, they say in the UK.

But you know as we show our numbers the consolidated numbers in Euro, of course the translation effect is something which you see in the number. Now when I look at the Source Market, you see Northern region minus €6 million that is mainly driven by a very strong trading in the UK.

But at the same time some exposure in the Nordics market is highly reliant on the Turkish destination. Therefore you see a little bit of deterioration.

Then you see the Central region plus €7 million this is all Germany and you see the Western region plus €4 million, this is mainly driven by the turnaround in France but also strong trading performances in particularly Holland and the Netherland. This is very important because you know we still see the strong effects of market share gains more direct distribution and high unaided rent awareness after the brand change, which we did in the end of last year and beginning of this year.

So when I look at hotels and resorts, we see EBITDA improvement in Riu, this is strongly dependent on strongly the result of presence in Spain and the Canaries and Balearics, 5% improvement in occupancy and 3% increase in average rate result into these and compound €13 million upwards development in EBITDA. And then you have the minus €22 million in other which is highly related to our hotels in Turkey, Tunisia, Egypt.

Here we have negative development year-on-year that's directly. Late trading generate in results in lower margin, it's not so much occupancy because we still have more than, we expect to have more than 1 million customer in Turkey, this capacity is of 270,000 customers in owned hotels and 300,000 customers in committed hotels.

So I think the customer numbers will be still okay, but margin situation in these destinations are weaker than the year before. Anyhow, I also want to say that you know we expect our for example, Egypt hotels, owned hotels will be profitable adjusting elimination of quarter-to-quarter self-development.

Now we talked about the extension of our hotel capacities, I talked about that we want that we are striving for more profit fluids in higher cash converting businesses that season of business, of course that this investment and you see that some of our hotels which we had in summer 2015, summer 2016 on the next page. You know you see Dominican Republic, Sri Lanka but you see also a decision for management contract.

So you know no owned capacity but management contract in Turkey, Greece and again Sensatori Dominican Republic you see, how much it is to actually kind of being which in August [indiscernible] high profitability, high return in retrospect. Now talking about cruises, a good development from €19 million to €29 million, driven by both businesses TUI Cruises and Hapag-Lloyd Cruises.

€6 million TUI Cruises and this with the additional ship, six times four, 24 obviously our share of ship is round about €25 million in terms of profitability, amazing. It just delivers.

We have added capacity, we have kept yield and constant and the market is very good and growing market, with a limited supply. Hapag-Lloyd Cruises mainly driven by an increase of performance in our luxury division mainly over [indiscernible] and we have here rate which is up 7% occupancies are on a very good level.

So strong performance as well. Now when I look now into the future a little bit, you see.

We obviously have said that Mein Schiff 6 will come next year and 7 and 8 are in order as well. We also have decided to build now similar cruise business on corresponding cruise business in the UK as well.

We took into service the TUI Discovery this year, which is performing quite well and also we have decided to go for another ship next year. Interestingly enough, you can see that there's €200 million of investment for bringing over one ship and our hurdle of 15% ROIC, if you just multiply which is not 100% possible.

But if you just multiply you would see €13 million of profit contribution which is in the order of magnitude similar than actually Mein Schiff 1 and Mein Schiff 2, so very similar than in case which we see in UK, that is very encouraging because originally we had thought that potentially the competition this international ships in the UK would be bigger than in Germany because you know the difference between German speaking ships and international ships. We thought it would be higher barrier of competition, but you know I think it's a very promising that we have similar profit levels which is we see now in the UK as well.

That actually encourages us to extend our fleet and for matter of completeness I have added the growth of the cruise fleet from all of companies where we do cruises. So TUI Cruises, Thomas Cruises as well as Hapag-Lloyd and I hope you find that helpful in order to adjust about future profitability of the business.

With that, I would like to hand over to Horst to talk about the financial performance.

Thank you very much, Fritz. I start as usual with the income statement as expected adjustments which consist of separately disclosed items and purchase price allocation are reduced by €60 million in the period due to lower merger related cost.

Then I come to the interest chart, which is also reduced by €26 million and that is primarily result of no longer having interest this year on the convertible bonds which we paid. Then the valuation of our shares in Hapag-Lloyd AG, the charge of €100 million reflects the share price as at end of March, 2016.

I believe today's Hapag-Lloyd share price is approximately on the same level. As usual, at this stage of the year we have an income tax credit and the prior year figure that was included a credit in respect on of post-merger tax restructuring then I come to discontinued operations, which include Hotelbeds and additionally LateRooms Group the prior year.

We expect the Hotelbeds disposal to complete by the end of this financial year and we stick to this guidance of disposal gain of approximately €600 million. Specialist Group still reported was in our continuing operations result, however Fritz already touched on earlier.

As a preparation for the disposal of the Specialist Group with on Travelopia, Crystal Ski and Thomson Lakes & Mountains is now included in the northern region reporting. For your modeling purposes, we have restated the segments of prior periods in the appendix to reflect this.

And finally to note in relation to minority interest the prior year included the TUI Travel minority of roughly €50 million. Having another looking into the underlying EBITDA for the nine months period of this fiscal year, we have added this chart there and you see how we performed [technical difficulty] whether our some offsetting effects as far as disposal of Grecotel and as far as the repatriation of Tunisia is concerned are included.

Merger synergies are coming through as already mentioned by Fritz as scheduled and then we have some positive from the Europa financing and the debt respect to lease finance fees of some aircraft. So ultimately, I think this is very strong development which you have seen over the nine months period.

A little bit of negative comes from the foreign exchange translation which is at [indiscernible] to the development of the Pound Sterling against the Euro. Now having a look into the cash flow statement, the positive development and our movement in cash net of debt has been driven firstly by the improvement in operational results.

As previously outlined to the variance in working capital in the nine months reflects a normalization of our cash flow in the prior year and we have spoken about that on already as we presented our half year numbers. The pension contribution of €120 million relates to all schemes.

The additional top up contribution of circa €200 million that I disclosed at H1 relating to the UK pension liability will be made post receipt of Hotelbeds Group risk proceeds. CapEx is a little bit higher compared to last year reflecting the capitalization of future deliveries of aircraft payments.

And now I'm coming to movement in net debt. The movement in cash net of debt of €193 million is for the cash flow reconciliation, we have just run through on the previous slide.

This is versus a movement of €323 million in the prior year. The €323 million movement was reduced by an inflow of €300 million raised from the disposal of shares in a money market fund post-merger, which we have separated out as at H1 for greater transparency.

This related to the cash health in Escrow for the high yield bond which we issue as one financing element around the merger. FX movement for the nine months reduced net debt by €75 million.

Asset backed finance in the current year related mainly to the new B787 on finance lease for roughly €120 million and the new TUI Discovery 6 and that's touched base on the front, also finance leased for roughly €190 million. And finally the last element of our reconciliation to the balance sheet discontinued operations, net cash relating to Hotelbeds amounted to €173 million as at the end of the period.

Coming now to FX and Fuel, as you know we have hedging policy for currency and fuel, which we consistently apply. This slide shows the current hedge position for the Euro, US Dollar and jet fuel demonstrating the level of certainty we have over our currency and fuel costs for the current and future seasons.

However, we cannot hedge the foreign exchange translation impact on underlying EBITDA. Based on current Sterling Euro rates, we expect at the full year foreign exchange translation to be an adverse impact around of €100 million.

And now I will hand back to Fritz for some final words on current trading and the outlook.

Thank you, Horst. So let's turn to summer 2016.

Source Market programme now is 87% sold, which is higher than last year, revenues are up 1% on this 87%, that's the reason why we believe that revenues will be up for the full year as well. Continued strong performance in the UK, revenue and bookings are up 6% and no apparent slowdown in bookings as a result of the EU referendum.

Source Market's booking generally are up 8% if you don't consider Turkey and this shows that actually we had a remix effect, but the demand is resilient and high. Of course we have some effect of Turkey in some markets higher than in other than Germany and Nordics naturally.

The share of Turkish is certainly lot higher and therefore you know the effect are little bit higher and also you know the nine months number still include the Brussels Airport effect as well. But overall as I said, in the number 87% plus 1% sold, plus 1% in revenue.

Now when you look into winter 2016 and 2017 and very early summer, 2017 is then is clear that the numbers are relatively small because it's only a small portion of the program sold. For winter 2016 and 2017 is less than 25%, but for these 25% you know the booking are up 8% and average selling prices are up 5%.

We also don't see strong influence of the EU referendum there as well. Therefore, it's early days but it's a very promising start, also this will actually show it's effect fully in next year.

Well I'll turn now to the outlook and we keep our outlook as set, the most important one at least 10% EBITDA growth. We adapted a little bit in brand turnover and turnover.

The brand turnover we had said we were planning at least 5% for the full year, we consolidated the turnover at least 3%. We say, we think right now the numbers will be more 3% and 2% respectively.

I think the important point is, [indiscernible] markets year-over-year and to keep our EBITDA guidance [indiscernible] growth on constant currency basis. Now summarizing, I think we have seen a good Q3 performance summer 2016 remains in line with our expectations and no apparent slowdown as a result of EU referendum.

We see a strong resilience of demand. Are well positioned as vertically integrated business to cope with the changing geopolitical and macroeconomic environment and therefore we remain confident of delivering at least 10% underlying EBITDA growth for 2015 and 2016 and by the way, also for three years 2017/2018 as we have merger times going to be similarly confident as we are confident for this year.

With that, I want to close [indiscernible] for questions. Thank you very much.

Just one question from me, please. So looking at the back of presentation, your comments pricing in Riu is particularly strong, maybe slightly [indiscernible] and Robinson but hotel EBITDA on in Q3 was sort of flattish and I know there's some shorter period effect on that, but could you just talk us through how we should think about the Q4 profit performance and change year-on-year in context to that pricing, please?

Thank you.

I think as you've said there are shorter effect. I mean, the seasonality in our Riu properties is still much bigger than the seasonality in our Robinson properties is still much bigger than in Riu because it's all Mediterranean locations.

So it's really the end of the year, where you still see the full effect. But one thing is also clear Riu has an exceptionally strong position because very strong position in long haul which is going a lot in the Caribbean and now as well in the Spanish market that actually more or less every bed is sold.

And therefore you know, you don't have late's [ph] business in Spanish market this year at all. Prior to the contrary, you know you see it when you look at some of the low cost airlines you know they have trouble to get occupancy in their aeroplanes high enough because you know beds are all sold and these affects you see in Riu, therefore Riu remains very strong.

Robinson will actually catch up in the fourth quarter.

Thank you very much and just one follow-up, if I could? Obviously, the situation in Turkey it doesn't look like getting altogether that much better.

Looking forward to your planning on capacity for 2017, how you're considering the remixing, is there enough growth in long haul from your source market that you can keep Turkish capacity low without leaking some business or do you need to go out and look for new locations?

I think you know both is right. I think what we have seen this year like we have seen for the last year's everything after 2009, you have an increased demand and the resilience of demand of course is the basis for good business.

And you're right, it will be remixing and it will be potentially also growth in other destination. Particularly want to mention Cape Verde is very strongly growing now, and if it was to be that strongly growing, if Turkey still fully fledged available who knows.

But at the same time also you know I want to remind everybody that historically at least the destination has been disappearing and suddenly there has been. There again, and therefore it's a matter of risk capacity and the flexibility of your own business model and I think that's what we have shown this year.

All over I think if you take all effects into account by the end of the year, we potentially will have brought 2 million customers which in the beginning of the year, we thought would be bringing to North Africa and Turkey, we brought less to North Africa and Turkey and now brought to some upper places and still we achieve, the at least 10% EBITDA. So the resilience of this point seems intact and that's what we also build our business on in the next year.

Thank you very much.

Three questions, please. First can you help us understand the contribution from Discovery in the fourth quarter presumably to similar return given it finance lease to the Legend of the Seas and presumably most of the profit comes in the sort of peak summer period.

I'm just continuing with the cruise sort of question, has there been any material change in demand trends in the German cruise market in the last few months? The second question is jut on your 10% EBIT growth guidance, can you please confirm whether that may include the profit contribution from further acquisitions as you reinvest some of the cash?

So for example it seems to include the benefit of the Splendour and the Legend cruise ships which has moved to 3% to annual EBIT and then finally as you look into next year, just on the BREXIT impact situation you're clearly 50% also hedged for your Euro accommodation needs. Is that an advantage relatively to independent holidays next year and do you think that could provide some margin benefit or do you imagine that sort of competed away?

Thank you.

Jamie, I will start with the third and actually go backward and maybe Horst, I'm not 100% sure that you know on the numbers for the Discovery as part of the UK business and maybe you can help this particularly. Jamie on the BREXIT one, I think for the seasons as meaning this summer, winter and also next summer.

Our percentage for sold versus the percentage hedged is smaller. Therefore, our cost structure will be more stable and therefore it is a little bit of upside at the same time.

I think you know when you just translate the movement in currency between before the referendum and after referendum we're talking about 9% or so and that of course will be I think potentially provided into some price increases. Now how much of it will be completed as part of competition that remains to be seen.

In the tenancy there will be a little bit of increase in prices but at the same time, you know that's the reason why we have looked onto our numbers very carefully after the referendum. People have not reprieved from booking.

So it seems to be that demand is resilient at least what we see from today as well. And last not least, when this come verse to verse and the pound is weak and so on inclusive holidays like potentially also attractive and 60% of our holidays from the UK are all inclusive, so that might be a potential benefit as well.

Now in terms of the underlying EBITDA growth, we have a normal cost of investment. We have talked about the ships, if we have big acquisitions also then we need to talk about the guidance again.

I mean, I think that's you know also very clear that when you have acquisitions that's the reason why we also do it like-for-like and we say, we have the business for disposal or so, we take out and we look like-for-like. Hotelbeds are also strong growing business and this is strong growing business.

Now that is actually not in the numbers anymore and still we talk about at the same underlying EBITDA growth also, [indiscernible] from the remaining businesses in our group. On the contribution, maybe demand in Germany is very good.

I mean, we can see that we've added capacity and our yields if at all go up or at least our conscience and therefore I think, that is something which we also see right now for quite some time, have seen for quite some time and we expect to see also for quite some time and now to Discovery, I'm not 100% sure.

Yes, Discovery came into the fleet in June, so it will be operating half year, if you saw once and as far as our fiscal year is concerned three months and the acquisition cost, which I mentioned in my presentation was €190 million and we spoke about return on invested capital of 15% and by that I have given all the part of formula to calculate the contribution roughly.

Thanks. Presumably the majority of that €2 million EBITDA comes in your [technical difficulty].

Actually the EBITDA contribution over the quarter as you know because we move the ships is quite constant.

So I think you can calculate 30 and take one for, Jamie for the purpose of remodeling.

Okay and so I guess follow-up on the other ones. So the €400 million you spent on this on Splendour you're going to cut that as a big acquisition.

Transformation of the business model, you know. We sold Hotelbeds and now we get these two ships as a modernization to the UK fleet and I think the EBITDA which will be generated is according to this formula, which I mentioned to you.

So what we have said is, we will transform our business from let's say, a business where Hotelbeds was included which was not core, to more content-centric business and that two ships are elements of this content-centric business and so they're part of the at least 10% underlying EBITDA growth.

Okay and just on the Germany cruise market, is there any evidence that things have got better in the last few months as customers have moved away from sort of airport and flying and perhaps more towards the safer form of holiday.

I think the cruise market is a very strong market, has been before and is still is. I mean, how many markets do we know that actually have more than double-digit supplying phases and still see at least stable unit.

I mean, it is very strong. I would say the nature of the highest of the numbers, let's say of customers who are traveling with us in let's say in one course.

It is such, it's a different magnitude. I mean, it's a lot of numbers and I would say the stronger influence now potentially, the trend with long haul and also a very strong trend to the investment including in Canaries, including Cape Verde Islands.

And therefore I think that's what you really see in my point of view. I think the cruise trend what you'd have seen also without Turkey.

Okay, thank you very much.

Three questions, if that's okay. The first one is on hotels where you're adding five new properties this summer, you added 11 last year.

Looking ahead what does your pipeline look like for the next two years and can you really add another four tier [ph] 45 hotels between 2017 and 2018. And then my second question is on France, could you maybe give us some color off on the tour operator performance because it looks from your comments like Corsair is doing well, so if together tour option Corsair are going to end the year about breakeven, are we talking about say double-digit profit in Corsair and double-digit loss in tour operators or something even wider than that?

And finally on fuel hedging you're 77% hedged for summer 2017 already. So I'm sure this is well within the range of your policy, but in history you were generally lower closer to 50% or 60% hedged at this stage of the year.

Can you maybe just elaborate on why you're doing this and if you've already got to an estimate of the year-on-year fuel benefits that you would be looking in full year 2017?

The hedging, I'll give to Horst. I think of course we had - it's for us it's important at very low prices this year to get the advantage also in the future and also we're looking of course at competition as well because you know that is a very important time of our hedging policy to stay competitive in local market.

So it seems to be that the whole market somehow is moving in that direction. Now on France, all right just a blend and you're also right.

Last year we have been in the French operator something between €35 million to €40 million loss leading this year will be more around let's 10, 11, 12-ish. Let's see where we actually end up.

And so you see a strong movement and you can say, similar level maybe whatever 8, 9, 10, 11-ish, might be Corsair and of course the main driver here is of course the fuel. And it is something which is of course helping the whole industry.

Initially we have thought it would be competed away but it seems to be that, we can actually at least keep our hands on some of part of the additional benefit, but you know there's another two months to go. So we'll have to look.

On the hotel's front. I think we have a strong pipeline.

We are not dogmatic on the numbers, but more on the bets and we are very dogmatic when it comes return on invested capital. So the investment obviously if we have communicated.

But we have a view on the pipeline or do we have a view on?

Yes, we have view on pipeline and I can confirm that what Fritz has said, that it's as far as year 2017 concern maybe a pipeline, which is about 13 hotels. However what I really have to underline, we are not crazy about deliver 60 hotels.

The real issue is, that we have a pipeline of hotels which are delivering the return on investments, which we have indicated to you and on top of that, I think is - the size of hotels what we have seen over the last CapEx decisions, so that we're rather going for bigger units and therefore, we're pretty confident that profit building block which we had in front of our minds as we spoke about the 60 hotels, will be delivered by the pipeline which we have at the time being. So it is not fix yet, can be 50, 54 but that we explained to you.

Our growth story as far as profits are concerned will be delivered by that pipeline, which is available. The other question was on fuel hedging and Jaafar, you're absolutely, right.

We are hedged as far as fuel is concerned to higher degree for the summer 2017. We may use very low level of the oil price, which we have seen and we applied our hedging policy to a certain extent a little to what competitors have done in the different market as well, so that is a basis for us to be attractive going forward as far as summer 2017 is concerned.

I cannot give you a detailed view on the margin impact, at least I think Fritz was very outspoken as he reiterate the guidance through the years 2017, 2018 as well. So that is the story about the fuel hedging, which we have applied.

All right, thank you very much.

The first is clearly, you've traded very well and you've hold the guidance for the year. I'm just interested to understand going into 2017, with more time to plan.

Do you think you've got scope for better optimize choice of destinations. To [indiscernible] what I'm trying to get to is, has this year been somewhat impacted by the [indiscernible] notwithstanding, the gun is being held.

Second question is just on the cruise ship CapEx, that the two ships that are now obviously been bought in from Royal Caribbean. Is that sort of 20 plus years in age and certainly the cruise operators depreciate these assets over 30 years, how much more life do you think when the assets that you're buying and then also off to spend on them.

I mean, I know you've probably this consumed commercial sensitivity there. But what portion of the CapEx is paid across to Royal Caribbean and is the money incremental money being spent on the ships to refurbish them, so maybe just a sense of that split.

And then my final question is around Germany and specifically the sort of airline portion of Germany. Clearly Thomas Cook report Condor as a separate business line.

Your operations in Germany, one very similarly even though they reported differently. So have you seen similar profit pressure within the two fly businesses in Germany that the Thomas Cook is seeing and if not, why do you - how can you explain that?

Tim, I'm - on the Thomson Cruises, I potentially would leave it to Horst, to talk to you about you know how our time, we depreciated the ships and how it's accounted for and how long it's used. But for the Thomson business is very clear, the ships we've been buying in are very modern in comparison to the older ships and the portion of renovation is relatively low.

But on Germany maybe, yes we have seen the pressure here and of course we have over capacity and as you know particularly beds in Spain are scarce and we're seeing some pressure to get it back to up [ph]. But in the third quarter, our German business in the end of [indiscernible] generated better results than the year before and also we have been, we believe we have been taking a little bit of market share as well.

So in general terms in the envelope, I think Germany is still very good business, it's also clear when you look at the margin situation. But it is most likely improving.

I obviously have said that you know the full recovery of German business might be a journey of three to five years and I stick to that. It's not that the first indication turns my view wrong but it's good that we have an indication which now potentially is positive one.

Last not least, the question on our guidance. I mean, this year we will have done or we will do at least 10%, we have promised for the next year also, at least 10% and what we consider in this, is that of course you know the world will be - there are some challenges also, next year as this has been this year, as it has been last year and the good thing is, the resilience of our model allows us to react and still achieve at least 10% and I think there are not so many businesses in the tourism industry who can do this.

And therefore I think the - start more and more demonstrating that actually what we started to see merge, is a good position because we come from the trading business and we're transforming the business into something which we call vertical integration and the integrated tourism business. Less gearing, higher cash conversion of the new profit streams, less seasonality and so on and so on.

And you know there's a balanced approach of our destination portfolio. We limit also the risk that we might have hotels in wrong destination in terms of geopolitical challenges and I think that's shining through the performance of Q3, as it has been for the full year and I think if we achieve at least 10% also the next two years, you know I think we will have even more made our point, why actually we think that the position of vertically integrated business is a good position and Horst, do you want to?

Yes, I can take on the question, in respect of cruise ships. You started with the H Discovery and I think your question is referring to the second ship which we've get into the UK as well.

The two ships are roughly at the same age as Mein Schiff 1 and Mein Schiff 2 in Germany and all of these ships in a very attractive shape from our point of view. So we, are absolutely confident that we will attract with these products our customers and they - hardware one aspect definitely and I think with Discovery and with the Legends of the Seas, we have made the right move as far as hardware is concerned compared to the Thomson fleet which we operated before.

However I think very important as well is the software, the service, which we offer onboard of the ships and that what we get a feedback from our customers, is very encouraging especially when it comes to Discovery. So that was a real success this in production of this ship.

And what we do typically is, as we spend money for drydock and for refurbishment regularly that fits in our regular CapEx on which we guide as well. So that these products from a hardware point of view stay in attractive shape and against the background I believe that you can have periods of operation for ships which are going up to 30 years or even beyond that.

We have some examples for that within our group for instance our expedition ships was in Hapag-Lloyd Cruises are old ships, they were regularly renovated, refurbished and so on. And these ships are attracting customers again and again and we have a high degree of repeaters and we see that already with Mein Schiff 1 and Mein Schiff 2 as well.

In Germany, where there is a community who especially likes Mein Schiff 1 for instance and I wouldn't be surprised if we see such a development in the UK - Discovery and Legends of the Sea as well.

Can I just follow-up very quickly? Fritz you mentioned sort of the scarcity of beds in Spain, what are you sort of seeing and perhaps what you expect to see in 2017 in terms of bed cost inflation in Spain?

Yes, I think potentially we will see a little bit of mark up and that's true at the same time, we have extended our contracts if possible in very early when we saw actually as early when we actually CNI [ph] closing down we started to pull our contracts, so I think there shouldn't be a lot of surprise and therefore, yes it will be a bit of mark up and I also explained to our partners and to also for our old hotels. It's important to see, we should use Spain historically has been because it was the first big destination for the travelers.

The hotels have been relatively old in comparison to Turkey and therefore in the margins as you know, historically have been lower over the last 10 years than in other destinations and therefore the strategy has to be, yes you can increase prices at the same time you should invest in refurbishment of the hotel stock because when the margins are there and the margins are now relatively high in Spain, you should use the money to actually invest a little bit as well and otherwise customers will say, I pay more and I don't get more and that is not a good basis for a long-term relationship. So I think I don't see additional pressure from today's' point of view.

Could you quantify what - just assuming - asked about quite a lot, it will be helpful today.

Actually, I look around and look into the faces. I could - I think we don't guide on inflationary effects of our cost of hotel stock and maybe it will also not be, too helpful because lots of the hotels actually are our hotels.

Right, so you can more or less say main part of the Riu profits which we are seeing is of course related to rate increases and. But increases are of course more related to and customer prices than to B2B prices that was ourselves.

So you should assume the rate will be lower than what you see in customer type related, as we communicated.

Okay, thanks a lot for your answers.

Oh, Johannes, you're in TUI, I guess. That's new.

Yes, that's new. Exactly, no it's from Commerzbank, obviously.

Actually I only have short technical questions. First on, UK performance in statement you're mentioning that there were two kind of one-off effects relating first to maintenance provisions, but also to night boarding claims.

I was just wondering if you could quantify these effects. And then secondly on the cash flow, which has been quite good and you already mentioned the amortization in the working capital.

But there's also been a positive impact on what you call other cash effect and I was just wondering, if you could clarify that one.

The night boarding, maintenance was up 5, if that helps. And the other cash effect, I would turn it to Horst.

Johannes, this is by the impact of hedges which we have in place with banks and where we have positive market values on the hedges which have gotten prolonged. So we have cash in out of this, when we were off hedges and that is sitting in that line.

Okay, thank you.

Couple from me, please. Firstly on your net debt guidance was standing at €460 million net debt, you got €600 million net proceeds from hotel, that's what should we think that Q4 will be zero free cash flow quarter or should we think that there is some leeway for your net debt guidance baked into your forecast year?

Secondly, could you help us quantify from today's exchange rate. The fixed impact that you've seen for the fourth quarter roundabout.

Thirdly, your hotel strategy I guess in turkey and also in Northern Africa is there now the time for you to make some bargains or can you increase the flexibility with the hotels that you don't own or how do you look at the strategy and are you taking any bets there or just maximizing flexibility? And lastly, you still have a contract with contract with Air Berlin for the planes TUI fly and then when you look at the results of Air Berlin it's pretty scary to see that they don't get out of losses and have a brilliant negative equity, so do you have contingency plans on those planes taking them back at some stage or how do you look at that?

Thank you.

The first two question I leave to Horst in terms of the currency and net debt and I take maybe three and fourth. And I think we have said strategically we're investing into hotels mainly if you see strong growth relatively strong market positions of ourselves and 360 destination at low cost and this is actually mainly Caribbean.

This is Cape Verde this is potentially Southeast Asia. Of course now people come either they come and say, they are resident of Turkey don't you want to buy and then the other people coming and saying, private equities buying a lot of hotels, now in - or some hotels in the Balearics and they're based on, on the back of our commitments, why we shouldn't reinvest into these things.

This equation only works therefore example in the Balearics if it's someone the value is higher or in Turkey if the market demand comes back, both of the destinations are not 365. Both of those destinations are that they 210 or maybe 240 or maybe 270, but that's it and I have a very clear view on this, it's a strategy.

Okay, so we're not short-term changing our strategy particularly as you don't know what the value driver at the end of the day it will be and therefore as you said, we take advantage of flexibility and if we do something in these markets, we would like to do management, if possible and don't run huge risk, in these destinations. Air Berlin and is actually yes, I saw the numbers and of course we have a wet lease.

I just want to correct one thing, the wet leasing mainly cruise and not aeroplanes and therefore, you know the aeroplanes are largely already Air Berlin or at least Air Berlin risk capacity not our capacity. The cruise are of course an obligation and nothing of course our contract is a long lasting contract with Air Berlin and of course the situation is a complicated situation and we're always looking at alternatives.

But you know for the time being we assume they have a position in the market, there have been good strategic reasons for investing into that company and they're part of a bigger picture. Therefore you know I don't assume that there will be changes for the time being.

Maybe Horst, can you talk about the debt.

Yes, the question was referring to our net financial debt guidance for fiscal year 2016, September 30 and we speak to the statement bought in neutral in May we showed I think one chart to you where we explained the movement, we started there was a debt position €500 million and calculated then the disposal proceeds from Hotelbeds minus on working capital impact of our Hotelbeds which will lease the group, whenever we deconsolidate Hotelbeds and finally, we indicated that in the first half year, we do have contribution of €200 million roughly into the UK pension fund and that brings us to this bought in neutral position and it is always a little bit that way, that there is a flexibility and I cannot guide you on the last €50 million exactly what it will be positive and we will work on that to maybe even improve our ability to guide net financial debt. Second question, whatever I understand that correctly was in respect of the FX translation impact and I showed you in this nine months, which that there was a negative impact of €15 million and guided you that we anticipate and adverse impact for the full fiscal year of €100 million when it comes to translation, so that gives again kind of building blocks, you have to think about the fourth quarter impact.

Thank you.

Two questions, please. First on hotels resorts to relate the other hotels and resorts having a tough time given some of their locations.

Could you give us some visibility on how to think of it that particular segment for the fourth quarter given what's happened in Turkey in particular? And secondly, on just in the currency again, could you give us a flavor for how we should be thinking, how the top line progression would be and currency obviously you're looking at the 2% that seems to be constant currency again but how should we be thinking about the top line in terms of the reported currency, perhaps reported position.

Thanks.

Horst looks scared. Was just making a joke, anyway.

Hotels and resorts. I think, the other line contains some impacts of our disposal gains last year of Grecotel and that of course, invert in Q4 because then we're in comparative last year, we had in Q4 didn't have the Grecotel profit.

Grecotel is mainly profitable fourth quarter because of as you can imagine, Grecotel was in Greece. Now then we have two FX.

The first FX is of course lower occupancies and but mainly lower yields. All these contracts which are still running this year and don't expire here for example when you look at Tunisia.

So I think these effects in the fourth quarter will be a little bit less because in the fourth quarter particularly in Turkey, it's actually high season, whereas the cost are running in low season and therefore you know you have cost and revenues in high season. So I would expect this to moderate a little bit and last not least, you'll see some start-up cost as well.

We have created a new brand of TUI blue. So we see hotels in that brand being in the cost base, but not in part of the revenues.

Part of as a nature of starting at businesses if you have cost first and revenues and margins in the periods after, by the way that's the same thing when we actually saw the growth of our TUI Cruises. They're actually - we had for quite some time, not a strong visibility on margins relative to certain assets because there was all this much more assets in the invest phase, in the cost base and then in the revenue base.

Horst, on the -

You already told everybody that I looked scared and definitely I was looking through my textbook looking for the numbers. However, I only have the sales numbers by segment at actual rates with me.

Therefore we have to answer your question afterwards. So Andy, Nicola [ph] and Sarah certainly will help you on that one because I definitely did not put into packet this time.

So I apologize for not being able to answer that question.

No problem, sorry for scaring you.

I'm not really scared.

Can you just give us update on your thoughts on stake on Hapag-Lloyd and what your plans are with that? Thanks.

We're determined to exit, but it must be sensible. I think no change at all.

I think always said, we want to sell this remaining stake in Hapag-Lloyd. You probably have seen the numbers of Hapag-Lloyd which were not very good for the first half year.

However, I think they are performing pretty well when you look at KPI as compared to competition. I think Hapag is on a very good track, they're preparing now, the UASC merger and we are watching very closely how they will develop and whenever we have the right point and time, then we definitely will sell our shares in Hapag-Lloyd.

Okay, thanks.

It's James Ainley from Citi. So three questions, please.

After the remixing, this year. Can you give us a view about since you did the program will ultimately have been to Turkey and correspondingly what are the relevant numbers for Spain and Greece as well.

Second one on the EU referendum I guess it's way too early to see an impact yet, but given the change in the currency what are your thoughts on capacity after the UK for the next year. And then the third one is, reflecting on the recent fall in bond yields basically in the UK and have you got initial view on what that might do the pension deficits?

Okay, I think the last one I'll leave for Horst. I think on the mix of destinations, I think the important point is that we have good and long lasting relationships in destination in Spain.

So we have been in Spain the next year Spain was difficult. We're Spain is now, now Spain is much more attractive and I think our relationships are long lasting, as most of our contract are and also we have a lot of properties ourselves.

So that's clear, on the other hand you know Turkey I think will come back, how big it will be and how fast it will be and it's difficult to say, therefore Turkey will be one of the countries that we will try to be with more flexibility and that actually, as I said are vertically integrated model allow us to do that. So therefore, maybe the position in these two.

On the referendum piece I would say, the interesting thing is, the winter trading is started and obviously strong and also in the UK. And then moderated a little bit but it will be year-on-year still strongly as I have said in my presentation.

Now we all know that only 25% are sold, so it's early days, but after the referendum we didn't see too much of a break. Now do we believe nothing will happen and it will be and you cannot see anything, potentially no because you know, if the Pound really stays weak like it has been against the Euro, of course I think there will be some influence and what of that will result of the currency movements before that will be result into prices and what will be competed away is remains to be seen.

The thing which I'm quite encouraged by is that, all our indications say that people from the UK want to travel and will travel and that is I think, a good indication and we all know the big season is the summer season next year, our booking status is lower than our hedging status. If things come verse to verse and people uncertain or choose a holidays might be more attractive than other holidays, then we have 60%.

So let's see. And we will guide you our top two, to you about our trading status in due courses.

As far as [indiscernible] are concerned, I cannot tell you yet what the impact will be, we have Funding agreement in place, with the pension trustees will live up to this funding agreement. I think the interest rate development is kind of challenge for everybody not only us and we're watching that closely, we're working on that and unfortunately this is not the way that only the interest have impact but there are some other factors which are of important as well.

So how much do we make as a return on the assets which are sitting within the fund and therefore, I don't look I would say immediately after an interest rates decrease on what is the impact because I regard that kind of longer term exercise, which is closely monitored by my team and I think we have done the right stuff as far as the UK pension trustees are concerned with this agreement, which we got couple of weeks ago, in this context over disposal of older debts.

Okay, thanks. Can I just follow-up, can you just tell me what percentage of the program will have been to Turkey this year?

I think, what you can say is, we said there will be potentially 1 million customer which we will bring to Turkey. So of normally 2 million and round about 20 million customers we bring overall, so it is something 5% to 7%, positive percentage points I would say.

Thank you. Mr.

Joussen, Mr. Baier.

There are no further questions.

Thank you very much.

Thank you.

Have a great day.

Good bye, take care.