TUI AG

Friedrich Joussen - Chairman of Executive Board and CEO Horst Baier - CFO

Jamie Rollo - Morgan Stanley Tobias Sittig - Main First Bank Tim Ramskill - Credit Suisse Richard Clarke - Bernstein Angus Tweedie - Bank of America

Good morning. Very welcome to our Q3 results call.

I just want to open and then hand over to Horst and I do a summary and then we are open to take your questions. The Q3 performance has been a very good performance I think.

When you look at revenue we were up to 12.2%, on the constant currency 16.4, both numbers are double digit. That's very good and has been driven by two things, first, more customers, 7% year-to-date and also higher prices.

When you look at the underlying EBITA, we have been up 37.7% or instead if you take into account the currency and also the Easter movement from Q3 to Q2 or Q2 last year to Q3, this year 18.7%. Reported EBITA up very strong as well and nine months operating cash flow up 400 million.

I think also it's worth noting that we have completed in the meantime the sale of Travelopia as well as the remaining share of Hapag-Lloyd containers. So we are now a fewer tourism business as we have always said we want to be and we are also on track to deliver our guidance and Horst will talk about it in his part.

And if so, we can say on EBITA, we are on track to deliver at least 10% as said and we will be upgrading a little bit on turnover because the turnover development is very strong. So we have a very strong market.

Customers are coming, more customers and customers are prepared to pay higher prices and that is a very good message. Now, when I look into the different parts of our business, it's also very clear that in hotels and resorts as you can expect the investor do not receive a strong growth 16% underlying EBITA on a like-for-like basis.

We opened 28 hotels since March, we always talked about 60, 28 now are opened and we always will open another five in this year. So we are going to funnel into the growth engine of the hotels is actually working very well.

On Cruises, we see continued success, post the 54% underlying EBITA growth on the like-for-like basis driven by new ships, the Mein Schiff 6 which has been launched, the full year operation of Mein Schiff 5 also a true discovery tool actually in the market very strong demand and you will see that in the minutes and I'll talk about that sector in particular. When I look into the Source Markets, interesting Nordic after [indiscernible] as you know very strong summer.

In particularly interesting because we rebranded and we see a strong uptake direct as well as online we are - we have modernized the brand. We have used it through actually repositioned the brand as well and that works quiet well.

And also Germany, I always talk about the change, the turnaround five years and we start to see right now good signals and the performance is very good. Now, partially offset as I said U.K.

as you cannot expect, you know there's a currency movement like the pound you know there has been a little bit degrading, but we see right now is stabilizing. Demand, right now the bookings are on levels of the year before and also people are paying higher prices.

We see also shift in demand, we'll come to that a little bit later. Anyway in the 7% underlying EBITA and we see right now, also the first effects on our new IP systems, which we have here and in particular where we had one-to-one of course two customers, we will talk about that also later not today but when we have the full year because we feel very, very strong about that and we are very confident that it will deliver superior results.

Now I have two remarks before I want to go into the sectors more in detail. And the first one is on page number six and what that says is that after nine months it's the first time in company history that we are EBITA, cumulative EBITA positive.

And you see it in the charts, the first nine months in '13/'14 were minus EUR191 million and then next year was minus EUR101 million, last year was minus EUR45 million and this year we are at plus EUR7 million. And that is actually driven by two things.

First of all, it is driven by strong operating performance and I think the general profitability of the company is in a different place than it has been four years ago. And secondly, we are a much less seasonal.

We have divested EBITA contributions of hotel business and we have invested into hotels and cruises, which is of course much less seasonal. Well other effects, which you don't see on that chart is also more cash conversion.

So it is not only that we are after nine months now in a positive territory cumulated but it's also more cash conversion, which is I think something which is very assuring. Now the second thing I want to make is how do you look at the business and how has it changed the last two years, and you see on the next chart that we divested the Hotelbeds, the Travelopia, and the Hapag-Lloyd remain in holding.

And we have now disclosed to you to the last presentations that we of course invest and also we deleverage the company, the balance sheet should be stronger and you'll see our plans of the reinvestment of the policies with cumulative investment of around EUR1.9 billion or cumulative spending if you like of EUR1.9 billion. On the bottom you will see on the left side the deconsolidated EBITA from the divestments which are EUR118 million and the targeted EBITA used from reinvestment is actually EUR236 million.

Now that said we have things in here which actually don't contribute to the EBITA but still unnecessary U.K. pension for example PDP payments because we received our aircraft.

But even if you consider them as of course deliver EBITA contribution, the EBITA contribution of the new investments are above them of what we divested. That said less seasonal, it's not only the amount of EBITA, it's less seasonal, it's more cash converting.

So overall, I think we have brought the company in a very disciplined shape than while it's been a couple of years ago. Now let me turn to trading and commercial performance.

You see again the 18.7% increase, underlying trading delivering the remaining merger synergies, particularly Destination Services, I think help from EUR161 million to EUR191 million. On top of that we see Easter timing, which is the phasing issue and which we didn't have in Q2, but now Easter happens in Q3 and that's the reason why you have the effect, we have the small FX translation and this is actually the EUR222 million I think the mean analyst expectation has been EUR 214 million, so tick on the books, yeah.

Now then I turn to a minute or two to the segments, you will see the hotels and resort performance. And here you will see that everybody contributed, you will see the Robinson with a nice performance, Riu with a nice performance, but also Blue Diamond reports since last quarter separately these are the hotels which we operate in loss joint venture mainly in the Caribbean.

You also see the Easter timing, a positive FX effect, so overall very positive. I think on the left side you see some very interesting numbers as though.

Average occupancy up 3%, average use per bed or price per bed 2% up, so it is quality and that's what we always said the vertical integration drives quality, helps to yield, it helps to create additional occupancies. On the lower left side, 10 hotels opened this year, 28 since merger.

And still you have to know the increased capacity and at the same time the increased use and the increased occupancy, so that's what quality is all about and then the relative changes in EBITA 15.8% on a like for like basis says everything. So now let's turn to cruises, cruises up from EUR45 million to EUR69 million.

And it's TUI Cruises as well as Thomson Cruises and Hapag-Lloyd Cruises as well. And Hapag-Lloyd with a constant capacity which is minus when you have a constant capacity and get higher yields that is very good.

And then of course TUI Cruises one additional ship, EUR 40 million is very good, a very, very strong demand. And Thomson Cruises is in a similar magnitude and that is also very nice.

Now when I see I draw your attention on the left side, I think the important point here is that in the lower box you see the full products of TUI Cruises and Thomson Cruises. So you will see 100% occupancy.

The 101% actually the additional that for children and so on, but I mean you can drive to about 100% is not a mistake, it is really about 100%. But what you see is additional capacity still 100% occupancy and increased use on the top right box plus 2%, plus 6%.

Thomson classics particularly interesting because the ships we are adding are significantly higher quality. And therefore that number is so important.

On Hapag-Lloyd, 73%. These are luxuries, these are not used.

So prices are kept stable as you see the average daily rates drove occupancy plus 3% that's what is the basis for two various conditional EBITA in that quarter. Now source markets, I think particularly interesting on the top left side 11% more customers, that is of course partially eased up but it is also partially underlying.

Online distribution up, direct distribution flat, underlying EBITA on a like for like basis plus 7.2%. And then you look to the lower right box you'll see that's particularly driven by Central region and Central region is Germany.

And that I think is a very interesting and of course you have Easter as well. But also underlying you'll see an improving trend.

I always talked about the five years and I stick to the five years as we are not where we want to be but we are getting where we want to be and a significant step up plus 17%. Now on the Northern region, it's a mix, we have a very strong in the Nordic Cluster and compared to a year ago in the U.K., still the difference of the currency and the currency movement, which is influencing that.

But you know that said I want to say we see now a stabilizing demand and the demand is more or less on the level of the year before. We see increasing prices, which largely mitigate the increased cost position.

So we are very confident that U.K. will stay, it has been our most profitable market and it will stay a very profitable market also long term.

In Western region, it is actually two effects you'll see here, one is actually is the rebranding, which is happening here. And the other one is - the first one inclusion of Transat, Transat doubled our size in France.

And therefore you know of course the typical seasonal losses are still in Q3 and therefore that is contributing, both are contributing on about half of the moment which you will you see here. Now let me talk and finalize before I hand over to Horst about trading going forward.

We are for summer '17 88% sold, bookings are up 4%, sales prices are up 5%. That is actually the reason why we've increased our prognosis for our turnover.

And it is, I think, very strong, and more customers and also higher prices. You might say, yes, but there are also higher costs in the U.K.

that's also true, but we are able to get the prices from customers no matter what and that shows resilience and that shows that customers want to go on vacation. And of course now that you see on the second line, it's changing a little bit, new destinations come into play, particularly Bulgaria, particularly Cape Verde.

These are destinations that prices and costs are lower. So we see a little bit of remixing but also long haul this is growing strongly, Greece is growing strongly, Croatia is growing strongly, Spain is not growing strongly because it is full.

I mean there is clear maybe one thing about Turkey and that is the fourth bullet, North Africa and Turkey. And in spite of the decision to hold our lease agreements for a little bit more favorable conditions in our favorite spots for some resource in Turkey and we are pretty bullish on Turkey.

I mean we see not only a stabilizing demand, not only Russia coming in, but also rebuilding demand in Europe. So we decided to go along if you like some of the hotels as well.

Because there might be situations and there will be situations we believe that actually we will have scarcity of supply of good hotels in Turkey. So we started to extend lease agreements again.

That's just to give a little bit of flavor that we are bullish on demand. And as I said the U.K.

demand is where we can see the bookings remain, last time there was achieved last year's with increased prices. So we see a positive development and a stable development in U.K.

Future seasons, it's still early stage for winter 25% sold, bookings up 9%, so 9% more customers, prices up 3%. Six new openings or five new openings I think for Group hotels in winter.

And new cruise ships which are coming all to plan and therefore we see the built of our content business very strongly. One thing we have done and I want to be open about that as well.

We have in the U.K. business, we always had a free different sources for our flying.

One is our own aircraft that is tick on the box then we have charted third-party aircraft that we have reduced a little bit because we have the third-party flying, which is beautiful because we can fit on a risk free basis. And as our prognosis is that there will be surplus of capacity in the U.K.

market we believe that we can roll our U.K. business on a risk-free basis.

And therefore we have reduced a little bit of the charter to third-party carriers. But for our airplanes, we stick to our capacity.

With that I would like to turn over to Horst, to go through P&L, the income statement, cash flow and also the balance sheet.

Thank you very much, Fritz. Good morning, everybody.

I would like to run you quick through the P&L first. Let's convey to you the story about the positive underlying EBITA up in nine months.

Investments are on track and net interest expense is coming down as we have indicated to you already before. Coming to Hapag-Lloyd, you may have heard we sold our remaining stake in Hapag-Lloyd on the 10 of July in the Sienna block trade.

At the end of the quarter three, we had already sold 6 million shares that was before the block trade by way of dribbling out these shares. The book profit which we generated by the end of June was in total EUR35 million, including the 8.5 million shares which was sold in the block trade.

We will achieve a total profit in the fiscal year and the amount of EUR173 million. So that's a little bit the story about Hapag-Lloyd.

And finally I would like to come to the effective tax rate, you now that we are down to 20%, which is good because it has our EPS. Group result after minorities according to the seasonality of our business still at EUR315 million, however there is more to come as far as fourth quarter is concerned.

Then I would like to turn pages to the cash flow statement. The first remarkable line item is the development of the working capital where we see an improvement in the magnitude of EUR231 million.

This is especially driven by the effect that we have a deconsolidated Hotelbeds group which we still have within our numbers last year. So by not having Hotelbeds group any longer in our consolidations, we are improving our working capital profile, which is good and which is a fir to that what Fritz had said for seasonality of the profit contribution of our different businesses is.

The higher equity, equity income coming to the next interesting line, which needs to be replaced by the dividends received from joint ventures for the purpose of the cash flow nicely mirrors the corporate development which we see at the time being in our joint venture companies in Canada and the Riu joint venture and in Blue Diamond hotels that means our joint venture which we have with our Canadian friends and the Caribbean. Hence certainly what we have included TUI Cruises as well.

And parallel, the dividends which we have received from joint ventures has increased as well and that was mainly due to the fact that we have got more dividends from TUI Cruises. Paid tax and interests are developing as expected and as guided to you.

Net CapEx is going up according to our transformation. So it's a normal development as well.

And that leads me down then to the next financial investments. And these are standing at a negative, minus EUR23 million.

You may have expected a higher positive number due to the disposal or the partial disposal of Hapag-Lloyd shares and due to the disposal of Travelopia. I have seen some financial investments to recall that we haven't quiet done that and we did something on Robinson clubs in Thailand and these financial investments netted off the Hapag-Lloyd proceeds EUR86 million which we have cashed in.

Travelopia is included in line items of the cash flow statement as well as you recall we have cashed in an entity value in the magnitude of EUR400 million. This number sits in here as well.

At the same time and that is something where I touched base on before as well, we have deconsolidated the working capital, driven cash of Traveloipa and as per the end of June that was at the highest point during the year, managed it again roughly EUR400,000. So that is a netting off between the cash which we have received enterprise value and deconsolidation of cash that's a little bit the reason why we show with a net financial investment minus EUR23 million.

Net pre-delivery take payments on aircraft we always guided to around EUR200 million. So free cash flow sits at EUR482 million after deduction of dividends, we are positive at EUR25 million.

Now I would like to come to the outlook for fiscal year '16/'17. Move it to the positive development of those bookings are concerned here and so to the development starting prices and on that basis, we are guiding now the turnover growth which is in excess of 8%.

And that is different to that what we have done previously where we said 3% so it gives you kind of the flavor of what we said earlier. We would like to iterate our at least 10% growth as far as underlying EBITA is concerned.

We expect today that will be in foreign exchange translation effect on the magnitude of EUR10 million negative depending on the future development of the Sterling especially. Adjustments around EUR100 million last time I explained to you that we have advanced to a certain extent restructuring expenses in France but therefore we are getting to the EUR100 million.

The net interest is developing nicely as expected and as you have already seen after nine months guidance remains at EUR140 million. Our net CapEx and investments will be roughly EUR1 billion, the same as we have guided you to before.

If those pre-delivery payments that I just mentioned that we expect to have EUR200 pre-delivery payments for the first year. Net cash and debt is broadly neutral.

That means around zero. And that was a change compared to our previous guidance which was at EUR800 million net financial debt.

And this guidance already excluded any working capital aspect and that means when you look at the previously guided EUR800 million and think about the proceeds which we get in total from Hapag-Lloyd and total from the disposable of Travelopia when you get to this broadly neutral net financial debt number for the end of the fiscal year. So far from my end, I already alluded for underlying effective tax rate.

Therefore I can hand back to Fritz who is now talking about a summary.

Okay. Horst, thank you very much.

May I summarize, I think what you can see is we have concluded right now the cleaning up of the company. So we are now a pure tourism business.

We are vertically integrated more profit contributions from hotels, more profit contribution from cruises, which are bringing now the nine months to more to positive which are more cash concerting which are more stable over the year. So that's a good thing.

We have also promised efficiency numbers like the synergy and occupancy which we delivered as to the promise. And we are in a process to build our new businesses, hotels and cruises as we have promised at merger and with the effect that we actually on a consistent basis now over the last year's EBITA double-digit growing so in order to keep our guidance for this year.

Anyway as we say we have more or less tick the boxes, we are not thinking about what next and what actually we should be doing and this is particularly as we have obvious that you know we grow in hotels and we grow in cruises, in particular with the focus of the source market and how we see them and we will do a little bit of a strategic update if you like in December and we will talk mainly focused around how we see the efficiency of the local market development and the competitiveness, developing, we are very bullish on that aspect because it is big numbers. It is growing as we have seen more customers are prepared to pay, the question is how do we actually set up the markets, how do we create higher efficiencies, what can we see and what additional profitability should be possible and that's actually the focus of we will be talking about in the strategic update in December.

So stay tuned, it will be interesting. Anyway so now we are open for your questions.

Thanks. Good morning, everyone.

This first question is, Fritz, just on the update in December I'm sure you can't tell us much now but should we expect the company to extend the current targets? Should we expect any sort of material change in strategy or the efficiency program or is it more looking at new markets and potential queries there?

Secondly just on back on the third quarter results on source markets, it's hard for us to calculate the margins because you've not give us the Easter adjusted revenues, but is it fair to say that Northern region margins are down and they still will be down for the full year? And thirdly, could you elaborate a bit more on the recent U.K.

trading in the market and also what sort of module you're seeing for the winter and your capacity plans? Thank you very much.

Okay. Jamie, thank you.

I think the second question because it's so detailed, I'd give to Horst and for him to think about the answer. I'll talk about the other two.

Jamie, I think when you know - the point is a little bit. To answer the first question, we are not talking about the new market.

I think it's very clear we have said we want to do 1 million customers with a billion of revenue you call it in five years to 2022. So this is I think the Travelopia, I think what my view on this is when you look at our markets, you could have a look to say these are more or less 20 million customers.

And more or less they are generating EUR800 revenue per customer per year. And one of the question is of course couldn't it be more, and the question is how do we get more out of our customer base, and that is something what is the driving thinking behind modern CRM.

The next best activity and these things and how to talk about that and how to make it more tangible that's what I think. The other thing you saw maybe have seen me talking about modern IT systems, inventory systems, cloud based systems, which creates higher flexibility and here the question of couldn't we do, couldn't we think more about modern IT system which actually gets better functionality at lower prices.

And also here in the processes how to platform our systems cross broader synergies and these are the things we are talking about. So this is actually what I started to think and we are not, it's not a measure, restructuring program is not about laying off people, it's not about these things, it is more, operating more smart if you like.

And that's what's on my mind but please the issue is today is not December and as we have not cleaned up and we keep up the edges and now we're fully integrated and we're fully steaming ahead with growth and investment and so I thought a little bit of more vigor business and you know would be a good thing to compliment. Now the question is how much that will be and that is something I have to look at because I don't want promise what I cannot deliver and you should be when we promise something we deliver so therefore you it needs a little bit of time.

On the UK the margin or the UK development piece, we have been seeing of course an increase in cost relative to the prices I mean when you look at today 0.9 exchange rate versus the Euro and before the Brexit it was 0.75. It is quite significant.

In the last three to six months, we found that as the people of course were a little bit of cautious, didn't book, now we see a resilience in the demand, we see bookings on very comparable levels if not a little bit ahead of last year. We see people are prepared to pay more because of how much will that actually mitigate the margins again, is something we don't know100 % yet.

And therefore we have said, yeah, we see a significant - we see an excess in revenue growth, but we didn't adjust our EBIT guidance. Still at least 10%, so we don't know yet 100%.

The one thing we have done and that is something you know I was very clear on also with our UK business, we have our own aero planes, our own planes, our own fleet which is a lot. Then we have historically up ahead it's also a certain amount of confected short huts, fully short hut flights and then over the last year as you know we have actually been in a position for the new software development to dynamically package more risk capacity in flight.

And what I have said is let's be a little bit on the cautious side because the biggest risk you have in the geared system is that you have over capacity, that you have more capacity than the demand. Why we don't we reduce the capacity of charted aero planes here and set off the edge.

You know think about dynamic packaging of actually this kind of short party flying. And you this decision would only be wrong if we had shortage of supply, but when - as you know on aviation, but when I am seeing the amount of airplanes which at coming to the U.K.

market, I cannot mention it will be short. So therefore and if you have a little bit too much of capacity in overall aviation then dynamic packaging will be very smart move.

And therefore historically the last year, the dynamic packaging margins were very good and we will be pushing ahead so we will be growing the business based on money risk capacity and that is something which I believe for the U.K. market is a good position to be in.

That's a little bit the story around the U.K. and now host the margins Nordic.

Northern Region.

Northern Region.

Generally, I refer to our quarterly statement which is available on the website as well. Segmental performance in Q3 2017, which is - we are giving a little bit more color to what has happened was in the Northern Region.

When you look at the turn over which is stated here and the underlying EBITA for the quarter of 3, 2017, you can calculate that the margin is 4.7% and the previous quarter in the previous year quarter it was 4.3%. So overall there is a positive development now you know that it include in the Northern Region and U.K., the Nordic countries and the Canadian result.

So it's a little bit blunt what we have here. You know that we are performing better again as far as Scandinavian countries are concerned which is good and Friedrich has alluded to U.K.

developments in his answer which he has given to you a couple of seconds ago. When you then go to the nine months period there is for both the 2017 period and 2016 period still a negative margin 1.4% in 2017 and 1.2% in 2016.

However, what you have to take into consideration is that we have done the rebranding in the Scandinavian countries which is bringing down the margin. When you take that out, then you are roughly at the same margin level that you have seen in the last year.

For all Source Markets and we have a margin in the third quarter of '17 which is at 2.2% that is roughly 0.4, 0.5% ahead of the last year margin and this is good. What you have to take into consideration in this context is that we have included pick out Germany in our numbers that we have included the rebrand exercise in our numbers I am talking about nine months now and that we have still some negative EBITA impact by the first time consolidation of conduct negative and then first nine months and only in the first quarter you will see the positive one.

So that is a little bit the description - the color around the margin development especially in the Northern Region, but in all of the other Source Markets as well.

Thanks. Kind of so like quickly come back on my first question Friedrich.

You talked about CRM and the presentation sets your revenue in enhancement program has been defined. Could you give us an example of the revenues that has delivered in the third quarter please?

Which sentence are you referring to?

Well, it was slide 5. You referred to revenue in enhancement program defined and you sounded quite excited during your commentary about some of the prices you put in place to generate revenue.

So, if there are any early examples we can think about ahead of December that will be very helpful.

Yeah, yeah. Of course we always have.

We are talking in our language, yeah. We are talking about usually ancillary services we are - the question if this is everything which comes on top of the booking.

Historically we have been selling extra luggage or we have been selling currency or we have been selling these kinds of things. Now, with our new CRM techniques we can be much more tail lot if you like and we can think about things like if a customer is in front office desk of a hotel, yeah and he has booked a room and then we say for five year or more you get an upgrade to a junior suite which is open right, all which is free in that time.

So, would customers do or not do these kind of additional bookings? Yes they would, but of course we need to be very specific.

You need to be that's what we call one-to-one, which customer the next desk activity of a customers now. I always talked customer systems, the CRM systems, decision in engines, yeah.

That was actually the stuff which we input use and which is not fully deployed. Now the question is how big the affects will be and that's what I am working on together with the teams and to give you a number for that kind of activities that will be the exercised and also a little bit more color how effective it will work.

That's what we do in December.

Thank you very much.

Yes. Good morning.

Thanks for taking my questions. Two for me please.

Firstly, could you run through sort of the cash flow logic for the fourth quarter you are starting off with 234 million net cash now, you got still more than 300 million from Hapag-Lloyd in the quarter. And used last year 400 million free cash flow in the fourth quarter, so, I am wondering why you get to zero only at the net debt guidance for the full year.

And secondly, you are starting rebranding exercise in the UK later this year. Do you have any ballpark figure on how much that will cost, to sharpen my mind on that front?

Thank you.

I need to first, we'll talk about it and on the rebranding, my view on this would be on the like-for-like basis if these things, if UK worked as Netherlands worked as Belgium and almost like Nordic. Nordic is a little bit different , yeah because the Nordics market is already a 100% online market, 90% online market and no retail, no shift to direct and so on and on.

Then the ballpark of the figures would be something on the gross cost, something let's say 50, 70 billion. You know the payback of that in indulgence has been left in turmoil.

So, it was much cost. And the reason for that, you'd drive more direct and to drive more online, by more advertising.

Because what you really do is, when you spend on the rebranding, you spend a box of advertising and online advertising and that all block of calls drives direct specific and that, of course with uses of fortunate tariff cost, that of course gives you more control of the customer base. So, that is the bob packet.

Now, if it's 10 million left, if it's 20 million more we will spend the money because it helps in the good decision in all the markets we've been doing, you know, we are much stronger. And as I said we have gained market shares, in large scale, as well as profitability in the summer program in Nordics as well.

And therefore all the experiments we are doing right now, reflect rebranding from time to time including repositioning, including the price to direct and online, is something which you can be very positive for our company.

That should all, and thank you for that question. Yeah, you are looking at our net financial debt situation during this year, which is 213 million and what you are doing is, you are saying you still must, cash in kind of 310, 30 million Hapag-Lloyd proceeds from the block rate which will come under 10 July for one year.

Add up these two numbers and you are getting into the magnitude of the 56600 for some higher effect, higher revenue, when you have to take them to consideration. And the 30 June is always a high point of working capital within our business, as all of our customers have made the advance payment to a large extent, or remaining payment on the trips.

And at the same time, we have not paid to our suppliers, especially to the Portuguese because we have payment terms. And that means we see kind of an outflow of cash because we are starting in July, August, September where the payment throughout the years, we would still see some cash outflows, as far as investments are concerned.

And, when you take that all together, then you are ending up at zero roughly.

Would you agree that this is a conservative approach because it doesn't give you credit for much operating cash flow in the fourth quarter?

Unlike more than the expressional realistic, as you have a look on the prior year - in the prior year we were still cashed in on the hotel bets proceeds and I think that gives you kind of a flavor, how it works, yeah. When we can agree upon realistic I'm fine.

Always. Thank you.

Thanks. Good morning.

Three questions for me please. You talked about the color changing seasonality of the business over the last few years, but if we step back through the years, it's been a very significant profit contribution from Cruise and Hotels.

But, the source market, probably, sort of in carry roughly twice the losses in the first nine months, they were back then. So, I guess what do you say the key priorities to change that dynamic and improve the performances of the source market businesses is my first question.

Question two is regards the revenue growth guidance in the share of 3%, given the 7% growth you've seen in the first nine months, from revenue. That looks, became very conservative, maybe I am missing something, so that would be helpful to understand what that is.

And also just from a modeling point of view, quick numbers of question just in terms of transaction, obviously, it was making through the winter period et cetera, but just to give us a rough sense, what do you think that is going to contribute in terms of revenues and EBIT for the full year please. Thanks.

I think when you look at; I cannot see what you see for the source market. I mean, we have been improving the source market performance significantly, when you look at previous year.

I mean, of course you had an enormous increase of the UK over the last three years, because the pound was more or less stable, there was no price increases at all. Therefore the volume increased, and so on.

So, of course, what you see, is the increased volume in the source market as well, and then you increase volumes in the source market. You have again high end seasonality, yeah, because when you grow your revenues, we have been growing revenues, I think, year-over-year, in all years, let's say mid-single digits.

And of course that kind of increase increases the seasonality again. So, I think overall profits, the very imagine and particularly driven by the UK, which actually developed from something like 5.5% margin business, to something like an 8% margin business, over the last three years.

Now talking about the revenue, yes we are conservative. I mean, when we pay in the steps of 3 it might also be more than three.

Little bit the issue is, the question is what conclusions do you draw and in my view something which is not clear, is to what this kind of additional revenues will drive in the additional EBITDA. And therefore Tim, it has been clearly saying at least 10%, and the good thing is we might end up to 7; we might end up to 5 or 3.

And the good thing is the revenue of the market, more customers, high appraises, is something which is of course very good basis for our prosperous business. Now, come to that to make our business, to run our business, in to a positive charity, that isn't the assumption.

The overall business in France, it sounds that has been - when we bought it, it was roughly zero. We have been slightly negative and we have said it will be a higher smart in business but it will be a good mark in business in France, when we have integrated the system.

I think this will disclose the synergies.

Yeah, I believe, we were pretty outspoken on that one and to give you some flavor Tim, while you are on the France, last year's standalone was 600 million of sales, at that time a little bit lot's to make some volume, which we will achieve going forward will be roughly $1.1 billion, so nearly that puts our revenues. We clearly said that Transat at the beginning will mean some restructuring expenses.

That's the reason why we have completed our STIs in the last guidance, which we have given after our half-year results. And we have clearly communicated to you guys that Transat ultimately delivered $25 million to $30 million as a synergy case.

That means when you take that all together going forward, brands will be able to generate on $1 billion sales basis 25, 30, 30 something and we have communicated to you guys about our margin idea is sitting, let's say, around 2.5%, 3% going forward for brands, which is not bad when you look at the years, which we have experienced in the past.

Okay. Great.

Just one very quick follow-up on Transat. From recollection, you were hoping for some of the benefit this year.

Has it been any slippage at all in your expectations or is it?

No slippage. We have never expected benefits coming through already in this year, because the time period, which we have had optimal on software shop.

We pushed down the pedal I would say beginning of the year and such a period you cannot make a change to a company. What we are doing is we are bringing brands on one platform at the time being we are shaping the future workforce of the company.

We are underway with a new brand already since some time, so a lot of work is done at the time being everything is on track as we have scheduled.

And, of course it's been very clear. We have actually put in STIs, because we are transforming faster than we had thought and - but the sort it's not a slippish platform to the concept, we actually put in the restructuring, because we are, if at all, looking a bit more faster than we had originally expected.

Okay. Excellent.

Thank you very much.

Hi, good morning. Three questions for me if I may.

Just on the UK price increase, you are reporting a 7% price increase. I wondered if you could provide any color as to how much of that is a like-for-like price increase.

How much is it an increase in long haul and then the offsetting factor in the past you've talked about, people going from five to four star or 10 nights to seven nights, so what's the balance happening in price there. Second question, previous Q3s you've given some initial verbal comment on the next summer.

So, what would be summer 2018? Anything you can say about the release you've had of the program, I think, just in UK so far summer '18?

And then the last question on your planes. I notice your order book has diminished slightly, particularly the auctions you had on planes seems to have fallen off.

Is that you kind of moving towards that dynamic packaging that you were talking about or is it something related to the German Airline that led to those options being taken away?

I think the last one can only be because we got to deliver these. I mean, yeah, so the order book decreased because we placed the deliver, because we didn't change anything.

Yeah. So, to the contrary, as I said, the risk capacity we take out in the UK is actually the third-party shelter, yeah, and this is not our own, because our own has associated with it.

It's not very important for our business and therefore we will not move a single inch. That's very clear.

Now, summer next year is very, very early. But I tell you something, because I look into it and UK is open, other markets are open, but UK is a little bit longer open than the other markets.

Let's say in summer this year we had a little bit of pressure and demand slippage. As you know, winter actually has started a little bit stronger than we expected and summer next year is actually better than this year.

So, it seems to be that people get used to the price. That's what I think I see.

Now, as I said, that's very, very early days and we don't know yet, but it seems to be that we see that people get used, which you cannot expect. If you increase prices by 15% or like-for-like bias and then people start to trade down or they go to Bulgaria or they go to other places where actually potentially the prices are a little bit lower.

Then people over time they get used to the price levels and they start to have a moment behavior again and that's I think what I see that also what I expected to see. Therefore, I was never so nervous.

But that said particularly to winter, we looked at capacity planning in order to make sure that we don't have too much. On the first section you had was how much is like-for-like, how much is the mix change, this is so difficult to say.

I mean I would say you would see the normal increase of long haul. Normal increase means a couple of some - single-digit increase now in terms of volume that actually changes the mix a little bit, but the main change is actually because of the cost and because of the used systems trying to cope with that and trying to cooperate the specific customers.

Now, that said, we see some more demand into lower cost destinations. But again, as I said, for summer '18, the first indication I see here is that this is promising.

So, therefore, that's what I said. UK was probably the most profitable market and I think the likelihood that it will stay very profitable is pretty high.

The order book?

The order book, as you know, [indiscernible]

When you compare what we have indicated to you as far as fleet size is concerned I believe, 31st of March was 149, aircraft, now it's an addition of two and its 51 aircraft. When you look into the UK chart where we indicate the firm order book deliveries 221, the optional order book 221.

Yes, indeed, we have reduced a little bit, but it's simply due to the fact that some of the deliveries were pushed out through later year and that has something to do with a fleet planning, with a manufacturing planning, the overhaul order book has stayed the same.

Okay. Very good.

Thank you very much.

Good morning. Just firstly question on cruises and hotels.

I wonder if you could give us some idea of underlying grades in there rather than the grades in profit that you are getting from adding new ships and hotels. And then secondly on TUIfly, I wondered if you could just give us a bit more commentary around your sort of repositioning.

I think you termed in the statement there and what your strategy is there at the moment?

You mean the German TUIfly, right?

Yes, yeah.

Okay. Fine.

I mean the way of looking at is I think is my slice number. In the presentation, in the hotel and resorts presentation, I show 3% that was occupancy, up 2% of gross revenue was a bit up.

That's what I think is you mean as organic, right. So, we add capacity and put things up and we have 3% occupancy up and 2% of gross revenue come back up.

If I'm mathematically not fully mistaken, I would say more or less you can hit the two, you can multiply the two of whatsoever, so then you would say revenue is up 6%, and let's assume four more and is that in the last debt revenue equals March, and it's a little big mistake, I know that, and maybe half is, or it's to start in is March, then you know, you see that it works organic, I think that's what you mean by organic right. So, on the Cruise ships on the box there it says, occupancy is 100%, that means all the ship capacity is used and then you know, the rates are growing up to 2% in cruises, and 6% in Thomson cruises.

The size of the fleet weighted and you can see the size of the fleet and then you know what's organic. So, despite the fact that we put a lot of capacities, organic, you know, these kind of respond to numbers.

And two in lines with Germany, the good thing is we have more customers in Germany than we had last year, for whatever reason. We closed maybe, we are ever great to call back, or we win market share, I think we win market share when you look at the numbers.

And also, on TUI we have more customers, because people prefer our airline for whatever reasons. And so our competition, our kind of performances superior compared to some of the competition, so, people like to fly with us, within didn't extend the capacity, but we have higher, 4% higher low tractor already put there for our program.

So, that is something which is really helping. And that is generating good returns.

Now the question is long term, we already have said, we will see over capacity and some good structuring in the German market, would be helpful. As we said, you know, we would also participate, if it may tends for us.

But, of course options need to be on the table and options are not on the table right now, and therefore we digest our 4% additional loans up to our end and that's what we do.

Thank you.

You're welcome.

Okay, thank you very much. And as I said in December we will sit together, review and do the meeting in person, most likely I assume in London.

And, therefore we will talk to you about our strategic positioning for the future at all. Not only we invest in hotels and cruise, and confirm the business but also how do we become more efficient and what are the future aspects.

So smart content, I hope that is of interest to you as well. See you all latest in December.

Thank you very much.