TUI AG

Friedrich Joussen - CEO Horst Baier - CFO Birgit Conix - Member of the Executive Board

Patrick Coffey - Barclays Adrian Pehl - Commerzbank AG Alex Brignall - Redburn Jamie Rollo - Morgan Stanley Richard Clarke - Sanford Bernstein Tim Ramskill - Crédit Suisse AG James Ainley - Citi Tobias Sittig - MainFirst

Thank you very much, and good morning, everybody, from sunny Frankfurt. We didn't actually introduce everybody on the call because we have on the call as well Birgit Conix.

And so Horst, it's his last investor call, I think after the quarter, and I have done quite some investor calls with Horst. So I know it's not his departure and it will take a little bit of time.

But anyway, I'm very grateful for Horst being with me in the company for such a long time and the great companion to run the Company. But I also want to welcome Birgit.

Birgit, do you want to say a couple of words about yourself? You are now in your fourth week in the company, a couple of words of introduction would be very nice.

Yes. Thank you, Fritz.

I very much look forward to start this new journey at TUI. And my previous role was at Telenet, cable and telco company, where technology and customer insights are a key and equally for TUI apart from its diversified new business model, technology will be a key lever for innovation.

And this is of course very exciting. I would like to thank Horst for spending extensive time with me for my onboarding.

And I look forward to working with all of you in the near future.

So now we start with the Q3 results and I would like to turn to the headline numbers. And overall I think we can say it has been a pretty good first nine months.

Our turnover was up 6.3% accounting to €11.8 billion, 6.3% is of course two components price as well as customers. The good messages, yes, we 4.4% our customers, right so more relevant more customers that is something we strive to be.

We have to be --we want to be winning market share. 2% higher prices are particularly because of our situation in the UK.

There are as you know, we have revenues in pounds and cost in euros and dollars and of course if you have a devaluation of the pound currency then you have to make up for the relative price increases. And that is of course resulting into revenue and price increases.

And that is the reason - main reason for the related price increase. Underlying EBITDA up €28 million, reported EBITDA €42 million year-over-year.

And again, I think good messages is very, very low level of one of --one-offs or SDI's and strict cross control in that respect. At the same time, we are here to say after and based on the first nine months.

We reiterate our guidance at least 10%. We also say that of course we have now the lates business.

We are 86% booked and 4% higher than more customer numbers and more capacity than in the past, but of course good weather is historically indication of difficult lates business. That's reason why we say we caution a little bit that an outperformance like in the last year's where we had in the last three years something 13% to 14% CAGR we will be this year.

It will be above 10% but not very above 10%. And that is something which we don't know because the future is still in front of us, but 10% a certain but not - at least 10% is certain but outperformance not very likely.

That said, let's turn the pages and you see the nine months earnings improvement in the fourth consecutive year. You saw that became a nine month accumulated from minus €101, minus €45.

Last year was plus on a constant currently basis, this is year we are €65. And that's actually a result of our vertically integrated model.

It is more resilient. It is less seasonal and more cash converting but you know less seasonal, you see here the first nine months traditionally in two operating are loss leading, still accumulated, we are not €65 constant currency up.

Then when you look at the major drivers you see plus €71 million is from hotels and Resort and cruise in equal parts. You see then on sales and marketing minus €9 million, strong Central Region performance, but at the same time again hit in northern region put and this is all UK led then you see other minus €40 million and this is mainly two effects in headquarter last year.

We had to run off with VTG, there was booking of €11 million and also this year we have €5 million hit by share based pay valuation. And of course because of our share price that has increased.

Then we had special effects this year €43 million are disposals of Riu. Disposals are underlying because it's a national business but still it is a one of nature and then of course you have a counterbalancing to one of natures.

One is the €20 million which we saw in the first part of this year and of the Nikki bankruptcy and relation related valuation. And then also a traffic control disruptions and strikes rather impacts which actually led to DPC of €30 million.

So that's how you get to the €65 million and then you have two FX translation issues and particularly driving the €30 million loan in Turkey which is of course not cash relevant and it is just sitting there and but evaluation of course is weakening lira that you see here. Now when I turn the pages and get now to Q3 on a standalone basis, you see again hotel resorts up €30 million and the sales and marketing down €21 million, again the effect is mix between the weakening UK and the same time strengthening central region western region.

You see a Riu disposal in that quarter, the St. Martin case is here.

The air traffic control strikes of 2013 to 2017and then you have the Easter timing last year it was in Q2, as well as FX translational, the Turkish lira translation which leads to €193 million you have on the right side. Now when I turn right now to hotels and resource, yes, you see again operationally in the bottom right €70 million to €86 and then you have the non-cash relevant translation effect of the euro loan in Turkey which is the €11 million, but operationally you see the improvement of €1 million and when you see right now what are the main drivers behind it I think the best way of looking at it is on the top left box, they are occupancy in hotels and resorts went €75 million to €80 million.

And here the main driver behind that is --this actually the strong or the strengthening of the business in Turkey and North Africa. So here we had in the last year's hotels with low occupancy now we have with higher occupancy, we had a decision to do 12 months ago there we actually thought about what do we do the Turkish portfolio.

We decided that it was about seven hotels which were under discussion, we decided for all seven to keep them at a better rate. Fortunately, we kept them because now the good hotel content in Turkey is actually now scarce.

And we have enough business and also the bookings in the days right now are pretty strong in Turkey, and then we come to visit a bit later. Just to note average revenue per bed kept constant on a very good level, just a note 32 new hotels opening since merger of the 60, so we are on track to deliver what we are promised.

Coming to cruisers, you see that this year we have this quarter we have not added too much of capacity, and what happens if you don't add too much of capacity, the prices increase. And that is a very good indication of a very solid market.

So as I said, you have a strong demand, a growing demand, and a supply which cannot cope this growth and that's why you see 183 to 200, 126 to 138, and 562 to 571 on the left boxes. So in all of our --in all of our cruise companies we have increased the yields.

And that is of course very nice because it doesn't need additional investment and every additional revenues is an additional margin as well. So underlying EBITDA went from €67 million to €90.9 million and I think that is a very good message.

Now that said, and we have talked about it we will actually extend our fleet in the next year, we will come --we have also decided that also long term so into 2024 and 2026 we use slots at Fincantieri potentially to get a new generation of off ships and the orders are still subject to final negotiation. So I think that's also clear and also what I want to mention is that we had discussions back and forth and came to the conclusion that these ships will be LNG by that time we believe energy infrastructure will be mature that we have enough routes to drive.

So it's also important for the industry to be from a sustainable development and we believe one of the major innovations in that field will be of course natural gas, and that's the reason that we decided to invest in that favor. Now that said, I think when you look at the cruise business I mean the journey is enormous at the time of merger to recover the cruise business was virtually not producing any contribution to our profits and now they are 23% and that journey will go on you can see it is very --it's a very strong growth.

The beauty of this is that the big new ships are invested in equity companies so part of that is EBA, not even EBITDA and therefore I mean it is very much business model and also customers like it a lot. Now that said, holiday experiences, I think a couple of words here.

We believe that will be one of the major growth markets, one of the untapped potential in our industry. Billions of dollars in revenues, hundred thousands of companies serving those markets.

We are one of the bigger players not to say the world market leader, difficult to say, but not we have decided that this will be one of our major growth ambitions. The numbers you see here don't include the acquisition of Hotelbeds Group apart in Destination Management and even there you see revenue up almost 19%; underlying EBITDA up 14.2%, 8% more customers also for the full year 15% on a like for like organic base.

We have concluded right now the transfer of the First Destination Management companies of our acquisition. They will contribute in the last quarter also some profits already.

So but that's not part of the numbers here. So we will --we believe it's very strong and we look very thoroughly together with our CRM systems, together with our opportunity that we have exclusive customer access for more or less four to six months in the lead of their decision to their departure into destination that we can market activities, where we can market excursion on an exclusive basis one-to-one with our CRM system.

IT systems are now built on a global basis to connect the 300,000 providers of services in destination to our customer, base payment solutions are included, easy access from the providers to customers; from customers to provide. That is the strategy but even on the standalone basis this is a very nice business already.

More to come in the next quarter and years. Coming and turning pages to the markets northern region, bottom right is the area they are actually the weakening pounds is played the role but at the same time and you look at top left, you can see more customers.

I mean for us it's very clear that actually the source markets are the customer targeting machines, no loss in market share as long as we win market share in these areas, as long as our cost structure are strong enough that we compete and win markets, win market share, the world is okay and gets a tick. And then all of our major regions, we are winning market share that means risk profile to fill our hotels, risk profile to fill our cruise ships is actually improving.

Of course in the Nordic in UK, pound is weak dollar is strong; euro is equally - not equally but also on high-level that the cost are therefore margin are squeezing a little bit. That said, Central Europe, Central Europe region is actually turning on, you see that here that's --that West on is actually improving.

I think Belgium you can say I think is on an all-time high is very strong. France is an issue that's also very clear, that is something we are targeting also in the future.

But Germany is turning out and therefore I think it's a mixed picture, but at the same time as I said more online distribution, more direct distribution, strong brand awareness and relentless focus on cost. That is what puts in position of our companies in the local market, and position to compete for market share, and that is the picture you see here.

Now that said, let's talk about the trading before I hand over to Horst to talk about finances. I think in many local hotels I saw we had four hotels opening so the story continuous, 42 since merger; 4 in the summer, a shift from --shift back to Turkey, North Africa as I said, we have made the year ago decisions to keep our risk capacity in Turkey.

I think it's the right decision and the business turned back, customer coming back today customers come back volume, now as soon as --and that's how years works, the volume comes then the prices go up, that's what you see right now. So it starts to become a very healthy business again.

Turkey, please remember two years ago or three years ago before the coup was actually the one of the highest margin businesses we operated. So we are looking forward that this business will be coming back even stronger in the next years.

Cruise is as I said, performance very strong, yields up, you continue to see the supply which is actually cannot cope this demand, very nice situation to be in. Destination experience, I talked about is one of the future market and says a marketing I mean 4% bookings up and 86% the book to this capacity.

I mean usually we should say brilliant that said, warm weather historically proven in Northern Europe is not a very good indication for the strong lates business therefore we wanted to caution a little bit 10%, at least 10% is what we say, and strong outperformance of the 10% is not very likely. That said, the prognoses are difficult particularly when they are about the future.

And therefore, let's see how we how we do the last two months. That said, Horst, I turn it to you for the numbers.

Thank you, Fried. Good morning, ladies and gentlemen.

I would like to guide you through nine year months financials and start with the late - at line items not already covered by Fritz. Adjustments sitting at €44 million, this includes purchase price allocation impact of €22 million and then restructuring costs and sales and marketing in the same amount €22 million.

We stick to our guidance of €80 million for the full fiscal year. As far as the interest line is concerned, you see that we are on the same level as in the prior year €90 million three quarter of the years gone, so again €120 million is the guidance to which we will stick.

When you have a look at the tax line - €10 million tax income is not a fit to the loss before taxes. I have to tell you that we remain with our guidance as far as the underlying effective tax rate is concerned, which remains at 20%.

We had a one-off impact in the third quarter therefore we don't show this perfect picture which we typically show and which we have shown the quarters before, but that will not change our overall situation as far as taxation is concerned. Then I would like to draw your attention to the discontinued operations.

We have there a positive impact of €41.4 million; this is due to the expiry of €41 million volumes provision which we needed to build after we have sold the Hotelbeds Destination Management agencies back in 2016. Now we have bought back that business at better multiple and that is the basis for us that we can release this provision.

And from the effect that we still kept this provision on our books, you can see a little bit that we never have really made use of the provision which we have built back in 2016. So far to the most important line items as far as our P&L is concerned.

And then I would like to draw your attention to the next chart which is the cash flow and the movement in net cash. You are familiar with this chart when you look at the operating cash flow then this one is slightly reduced compared to the nine month period of the prior year, and when you look into the working capital line, you see that there is a deviation which is from the magnitude of roughly €170 million, so less working capital positive working capital inflow compared to the year prior nine months period.

What are the reasons for that number one, we de-consolidated the Travelopia business. That means a loss of roughly €100 million, and on top of that we have done earlier in the year more hotel advance payments in order to secure exclusive product which is quite important for our business.

And with a guest going now in the fourth quarter into the hotels, we will recuperate these additional hotel prepayments so that we will see these monies come back when we see the first month working capital line. At equity income sitting at €199 million and that shows the very positive performance of at equity companies.

And at the same time, we have received more dividends from joint ventures and associated which is a fit to the improved performance of our joint venture. Tax paid higher than in the prior year, this is due to the fact that we had quite some positive development in Spain, especially where we are paid on this fantastic performance of Spain in the last year, higher taxes.

Net CapEx quite interesting sitting at €580 million which is €40 million less compared to the nine-month period of the prior year. So how consequent we are as far as our CapEx is concerned.

And therefore I'm not really surprised that we had a little bit slower than we anticipated. Let's see how that works as far as the 12-month period is concerned.

The closing net cash as per balance sheet as per the 30th June, 2018 is sitting at roughly €590 million, which is an improvement over the prior year. Reason for that is we have cashed in the monies from the disposals, and we have not yet spent all the money for all of our projects, which are still sitting on the pipeline.

And you will see that a little bit later when I come to my as you know favorite chart. So far to the cash flow and now I move on with a financial profile.

You are familiar with our financial policy. Our leverage ratio has improved over the years; credit rating has improved over the years, and that financial discipline merge has helped us to achieve post an improvement in our leverage ratio and global credit profiles.

Ultimately, these improvements have been able to us to access finance at more attractive rates. We have achieved as I said already a higher credit rating on our issued securities than our group corporate rating.

And I believe meanwhile the perception on the market as far as us as a credit risk is concerned is better than that what the rating agencies say about us. And one proof of that is the Schuldscheindarlehen which we have issued the amount of €425 million in June, 2018 that means the further diversification of our different elements which we have raised our financing.

And I have to say that I'm quite proud that we were able to lock in long term money average lifetime for Schuldscheindarlehen roughly 6.7 years or so at rate which is around 1.7%. The procedure of the Schuldscheindarlehen will be partly used to finance our aircraft re-fleeting that we are moving away from the 737 NG generations to the 737 MAX generations.

So what we will have going forward is less cost of ownership, will have saving up fuel as far as this aircraft is concerned and ultimately that means reduced co2 emission while we have at the same time an increased flying range which is quite important when you think about our flying to the Cape Verde where we have a very strong position as well our hotel portfolio is concerned. Continuing now with our reinvestment program for the year 2016 through 2019.

My favorite shots as I already have said, we have cash €10 billion and we started to spend the money. There's still an amount of € 550 million sitting on our balance sheet, which needs to get spent going forward and after we have done this exercise we will have doubled our quality of earnings.

We lost roughly €106 million by selling these businesses and we expect that we will have a €260 million building block of profitability after we have done all these investment. And financial discipline remains very important in this context.

And now ultimately I would like to draw your attention to our 2018year guidance. We expect as far as turnover is concerned a growth of around 3%, however, that is excluding currency inflation and when you look at that what we have achieved after nine months you may get second thoughts positively as far as our full year is concerned.

Next, line item to guide on its underlying EBITDA, Fritz already spoke contentiously about it. We stick to at least 10% growth as far as our EBITDA is concerned.

However, outperformance is less likely and that is the consequence of this long period of hot summer weeks which we have seen in all of our source markets in Europe. However, from my point of view that is another proof how robust our business models is and when I'm looking back over the last couple of years, we saw quite a lot of challenges.

And we always master these challenges and delivers on our guidance. And that is our clear intention, Fritz and I are absolutely aligned and with Birgit as well that we will deliver on that what we have promised to you guys.

Let me make one remark about the Turkish lira valuation impact. Fritz which has already spoken about that one.

We have euro loans as financing in Turkish hotel entities. The Turkish hotel entities receive euro rates, so they receive euros and to the P&L and these euro incomes is a natural hedge as far as the euro loans are concerned because we make use of these euros in order to pay interest, and in order to pay back these loans over time.

However, according to IFRS rules, we cannot build a perfect hedge. So what we need to do is we have to revalue our euro loans in the Turkish entities every month.

So what we see in our P&L is loss from that one. However, this loss will never materialize and there will be never cash out as far as this loss is concerned.

So that it's quite important from my point of view that you understand what this FX impact really means. Adjustments €80 million as already indicated interest expense €120 million were attached based on as well and on top of that I would like to reconfirm our underlying effective tax rate of 20%.

I discussed already little bit the net CapEx investments including PD piece line; we still guide on €1.2 billion, there may be a little bit of an opportunity but that is typically phasing what we have every year. And so let's see what happens.

Net cash, net debt slightly negative, leverage ratio and interest coverage we are on track as you expected, and our dividend per share will grow in line with our underlying EBITDA. So guidance reconfirmed with this one remark as far as our performance is concerned.

Ladies and gentlemen, this is now for me the last appearance in a conference call. And I would like to thank you for all the inspiring discussions which we have had over the last couple of years.

I enjoyed that very much. Sometimes I'm getting a little bit melancholic when I think back on the other end; I'm looking forward to new horizons.

What I really appreciate is that Birgit is around and I believe after these weeks which we have spent now together, she will be a fantastic fit to this company, to this business interest. So, yes, once again thank you and goodbye, which at the same time means that I will be available for Q&A at this time.

And with these words, I hand back to Fritz.

Yes. I would have said you don't want to answer some questions, Horst.

I mean so I think it's not much for me to say. I think the slides, the two slides are just for you to recall.

I mean vertical integration means double diversification, it means profit pools of 60% in experiences which is of course less season, cannot be attached by OTA players, it's real. It's differentiating cash converting all these nice things.

It is brilliant and it is a very good business, and it shows that the business is something which also in the future is pretty solid. And if you look at the last slide, I also have shown it but I like it so much that I show them all the times, it says more or less from strong strategic position, earnings gross ,cash generation.

We - from 2014 to 2020, the plan is to double underlying EBITDA in the six years without any raising of capital try to control this good yield and dividends we are very proud that we have delivered from 2014 to 2018, four times in a row double-digit already the proof is in the pudding for the next years but that is a plan and that is our ambition, and I am looking forward to your questions. Thank you very much.

Hi, everyone. And three questions for me please.

You mentioned that it's about Turkish margins being the highest - one of the highest in business three years ago. Could you maybe just tell us what they were three years ago, maybe what they got to last year and where you expect them to get to this yea?

And some granularity there. Second question on UK margins, you gave a bit of granularity back at the half year results but maybe you could give us a sense of where UK margins get to this year?

And then finally just on the commentary, there's a reiteration of the commentary from the first half as well around the UK duration of holidays reducing. Can just kind of quantify for that?

Is that a devaluation of sterling issue, is it more millennials booking with, spending less time. Is it people spending less time on holidays but spending more on experiences?

Or is a bit more of a bearish and commentary on the UK consumer. Thanks.

I can --I don't have numbers at my hand when it comes really to the Turkish margins. I mean I don't know if we have guided on that or if we have talked about it.

I mean one thing is very clear, yes; that of course the strongest margins in the business we have is of course long haul as well as cruises. When comes to mid-haul, usually the East med was stronger than west med and that was led by the better --or let say better but newer hotel content.

I mean at that time the margins in Spain were so bad that hoteliers couldn't even renovate properly their hotels, of course, now they have caught up particularly when it comes to our own hotels and the margins now in Turkey I would say are still under the margins in Spain, but you see a recovery already kicking in. And this is particularly the latest tool that we don't try to the contrary of last year's need to do late discount, late trading discounts because the hotels are full.

Next year, the margins will start from a different level, and prices will start from a different level because the demand is back. Maybe I leave it to Horst if we want to do on a more precisely the margin level and as I said he didn't guide on the UK.

Maybe to say that we had devaluation, yes, and the pound is not stable for a year. I would say around about 0.88 to 0.9 is always the same, before the Brexit vote it was 7.75.

So in relative terms we saw a cost increase of 20% when it euro. When it comes to dollar even more because the dollar has been strengthening against the euro.

So in order to keep relative margins we would have had to increase prices by 20% or so which of course could not be done and last time I was on the call that you had said we had a mid to high single digit price increases, and therefore the margins were squeezed and that situation is pretty much stable since a year and now from now on and it will be let's say more or less how do you say year-over-year comparison you will not see that anymore right. So prior to the contrary I believe what I see right now in bookings for the time going forward that part of the development we saw in the last month were actually to relative movement of the time before the strong and after or before the poll and after the poll.

So therefore I think at least cumulatively the bookings in UK are stronger for the winter season than they have been last year. Now last not least we see a trend which I would obviously a development which we --which I would say a budgetary --largely budgetary within the UK.

So people spent a little - spent the same money but get a little bit less. And that is actually a little bit of re-mixing in destination and it is the strong remix of days.

So stronger remix of days, and the remix of days meaning shorter vacations and that is in my view not such a big issue because each and every bed night you are selling, has the same margin. We just need to sell more bed night and that means more customers, and that's what you see.

You see and also in the UK an increase of customers. And so in principle of course we didn't want the pound to be weaker, no, we cannot change the pound, but in light of the pound being weaker, I think the development is the best we could have hoped for, but maybe Horst, and do we have more -

We never guided on margins for specific countries. I don't believe that this would be meaningful.

However, I would like to focus on one issue. We saw some challenges as far as our Turkish hotels were concerned because back in 2015 we had two million guests to Turkey and then a drop down to 1.16 million roughly or even below 1.17 million.

Now we get more people back and every percentage points of occupancy which you have in addition in the hotel is positive, very simple. And that is kind of the story why we are so positive in Turkey.

And that again is a proof of our strategy. We have holiday experiences.

We have hotels. We have cruise ships, and we have the power to serve these efforts in a very good positive way.

Okay, thank you. And Horst this would be the last time I know you address this sort of question, but on the UK would you think that the UK margins going forward will be below the historic average margin for the UK which I believe is around 5% or?

Thanks.

Patrick, I believe until 2016 the UK had a fantastic period. There was a booming economy in the UK, growth rates were above the ones which we saw on the other EU 27 countries.

We had a very positive consumer attitude in UK. There was the story about the credit card refunds.

We had a situation where maybe one of the competitors was struggling with some other issues. So it was a fantastic period of time and now we are in a different game.

None of us really wanted to get into that place, but the fact that we are still in a very positive margin area as far as the UK is concerned. And the fact that we are gaining customers is something I believe which is making me quite positive for our UK business going forward.

And when I think about the management and the aggressiveness how they take on the challenges and already can say that is probably one of the best organizations which we have in our group.

Actually, a couple of questions. Well, first of all, just to be clear and are confirming, is it we should still think of the 3-year corridor for your underlying EBITDA to increase 10% at least?

And second, sorry to bother again on the northern region, but this is obviously very important to gauge the performance of the businesses. Can you a little bit strip out the performance that you had there in terms of what you think are actually one-off kinds of effects and what do you think is structural in the performance, in particular, that we saw in Q2 actually as the result was down quite substantially?

I'm not referring obviously to the Easter effect that has been, I think, quite well-explained in the report, but we had air traffic control issues. I perceive overall €13 million you mentioned, but I'm not quite sure how that allocates to the Northern region.

And there were obviously also other effects like the soccer World Cup. So just to get a sense of what you think is a structural issue and what we should consider is more one-off.

And then a question on the central region that has obviously done quite well, so also here a little bit - some clarity on what we should think is the improvement of profitability for the airline part of the business and what is, let's say, the underlying booking relevant part here? And then lastly, obviously, you mentioned that your business has been affected by the hot weather in summer across the Source Markets.

So given that we had like the past 3, 4 years with record heat in summer and taking that this is not necessarily a one-off year, how can you actually react to that situation? And could you also a little bit quantify the effects that you think we are going to see in this year?

Thank you.

Okay. I take it the questions Adrian I mean in --this question was for --so yes if we had left three year corridor would have said you --then have told it to you, so it's very clear that's the nature of guidance is that if you change it that you tell investor, so we have not changed anything and also I want to make clear is that we have actually grown our profits double-digit last three years, also this year we've done double digit.

So we should not feel I think too miserable about but what the market is yes. In the UK of this disruption is €8 million of the €13 million as I recall it and of course then you have all kind of effects which you could argue being it weather, being the world cup, being whatever, and my view on this is pretty much we cannot foresee what next summer and the summer thereafter will be, and you might have good weather or you might have turbulences somewhere else and you might have --I don't know what incident.

What we can do? We can set up a business that it can deal with the shocks or deal with these months of - I don't like to call it one of, the instabilities and uncertainties in the world.

And that's what we have done, and if you ask me how we do these things in the future. For me, it is pretty clear.

We will invest and we will grow our profit streams from cruises as well as hotels and resorts in destinations their demand is significantly going faster than supply. And that is cruises in Germany, cruises in UK, as well as hotels and resorts in the Caribbean, why in the Caribbean because every year 3% or what more US Americans get passports and long-haul business from Europe, short-haul business from US.

The same thing we are seeing in Southeast Asia, the China investing there. The developer's maybe 10 years advanced more advanced in the Caribbean than it is in Southeast Asia.

But Southeast Asia will be the next Caribbean when China opens. And we see right now already more than 50% in our hotels in Southeast Asia are Asian guests.

Half of that all about Chinese. So that said, in the Source Markets, we need to be and that is our vision cost because if we are competitive on cost, and that is overhead and sales then we cannot be squeezed and if it cannot be squeezed then we keep market share or the increased market share and then we keep the funnel open in order for filling our hotels and cruises.

And to achieve that harmonization of cost, harmonization of platforms, one IT, one brand, one process, one, one is that what we have given off as a strategy already four years ago. And we are now have been going the next step by combining all of our agents under David Burling in order to actually even harmonize more and take out more cost, more lean, more automized, more digital, that's what we said before.

So therefore we might have good weather or not good weather. We might have of course World Championship is an influence; of course weather is an influence, Turkey coup was an influence, terrorist attack influence that too was influenced.

I mean we need to set up a business that we can cope with external things. And therefore it's a little bit difficult to say.

In Germany, of course we see the turnaround. This is driven by two things.

The first one was of course disruption also Air Berlin last year as well as one competitor less like Monarch by the way as well. So we have one competitor less that is of course sustainable and of course in the future also in Germany that needs to be a lot more things done because digital, as well as direct distribution is amongst the lowest in the group, and of course needs to be catching up.

And of course Germany has a lot of levers still for the future. A lot of upside potential.

Some that's what I --that's all I can say, but as I said, I mean at the end of the day, a company which is doing double digit growth in four years in row and also this year again at least 10%. I mean I think the proof is there that the models are working.

Right, good. Actually just 1 follow-up on Turkey.

I recall that in the past, you said you're going to do some opportunistic investments obviously here. Now that the tourist streams are coming back quite substantially, I was wondering whether, is that still valid?

Would you try and do more in Turkey or would you say, well, momentum has gone that far, we probably look rather at other markets?

In Turkey and I would say this opportunistic view is still a good view. We have been --we have been looking in all fairness there were not so much opportunistic stuff which actually was good enough to meet our investment hurdles.

And I'm - and Horst and I, we share one view is money needs to be spent wisely. And wisely means above 15% returns.

And if you don't achieve it, a little bit of the issue in Turkey is that the season is not the longest when it comes to the full booking. There you have this winter space but the winter spaces are more keeping a residual level of service up.

Yes, so our investment is better place, the money is better place now in the Caribbean, in Southeast Asia as well as in particular in cruises.

Good morning, guys. Thank you for taking the questions.

The first one is to Horst --you enjoy answering on the FX. In terms of the mix of how it will affect this year, but then more importantly next year bringing the loan balances across from Turkey and just changing the value of those for spot is a non-cash item, but how does it affect the base the next year?

I guess what I mean by that is it euro earnings or euro or UK earnings so is it that we have a one-off hit that you just put through this year and then there's no loss and the base is the same because it's still euros for next year? Or do we have to rebase this year so therefore there's no kind of you don't get - it doesn't come back next year?

I have not asked that very well but I'm sure you can give a good stab at answering it. And then for next year in terms of Spanish hotels.

Could you just give us an indication of any prizes that you've been getting for deals you've signed so far for next so 2019 summer please? Thank you.

So as far as the revaluation of euro loans and Turkish legal entities is concerned that depends on the further development of the Turkish lira. What we have seen was a sharp drop of the Turkish lira and I believe even in the last month it dropped once again.

So depending on how the overall economic situation in Turkey develops, I believe you will see others stabilization of Turkish lira or further drop. And if it would come to a further drop then this impact what materialize again in next year.

But what still stays the same is it has definitely no cash out impact, and it's a pure revaluation issue because due to the fact that we continue to have euro contracts with Turkish hotels. These Turkish entities will get lower income euro income, yes, and I cannot quantify the size because I don't know what will happen with the Turkish lira next year.

I mean the interesting effect I have to say operationally, our cost base is improving in Turkey right. So therefore I mean it is the one effect--

With high inflation in Turkey itself. And you guys know that all --so what do we get Turkish income into the Turkish hotels.

It's kind of already an inflation accounting model where you would like to have kind of the stability of a hard currency as far as income is concerned to a certain extent, all the expenses which are linked to hard currencies like fuel and so on. You have to some imports and on top of that you have the in-country inflation.

So therefore the euro setup which we have established is for us something which is quite helpful because we don't get lost on all of these terrible inflation accounting features.

Okay. So on the Spanish hotel, let's - it's difficult for me.

I cannot talk about it because for next year because we are now in the midst of a change. I mean this is more or less the first time now this Spanish-Portuguese sees that - our customers are also going back to Turkey.

So it is now in the midst of a change and therefore we need to be, of course, we as you can imagine we are on top of it. And we believe part of our business model is of course that we know faster what the market does than anybody else because we are close to a customer.

That said, here my view would be let's wait a little bit and in half a year we can be e talking more so on it.

Alex, I believe what we said to you guys that there was a strong move into Spain and we've got all these questions what does it mean as far as prices are concerned. We always confirmed to you.

We have very long-standing, stable relationships with partners and with Spanish hoteliers that enabled us to get additional capacity in the years 2015 late, 2016 and in 2017. And now we see a little bit less capacity coming to Spain.

And I can tell you what we have always managed was to adjust with this stable group of business partner.

Thanks. Good morning, everyone.

Three questions please. And first on cruise, and obviously pretty good pricing numbers, but occupancy down 2% in Q3.

So could you talk a bit about that please? And secondly on Riu, I know the quarter sort of flat profits ex capital gains and revenue per bed slightly down.

So I'm just wondering about any sort of mitigating action you might be taking to stop the performance getting any worse, particularly if that sort of Spanish REVPAR, recent Spanish REVPAR drops rolls into the contracts for next year? And then finally could you please talk a bit about your confidence level for this year's 10% target?

I mean you sound very confident for its --I mean are you assuming any more capital gains in the fourth quarter to hit that number? And also how do you feel about next year's 10% target?

Because clearly, we have a fairly weak performance in hotels, fewer new ships and cruise; the reverse of the hotel capital gains. Does that 10% for next year look a bit of a stretch?

Thank you.

Okay. So on cruising, here we are talking about route mix; here we are talking about almost always occupied.

And the interesting thing is, Jamie, is that's how you have to see it. These ships are always fully yielded.

Yes, so when the cabins are always full. Okay, so when we talk about 99% or 100%, we are talking about children in the parent's room or whatsoever.

Maybe they have been a couple of less children. The interesting thing is the full year's environment delivers this your €17 up or so.

So it's always full yielded, so you should not read too much into 99% or 100% or 101% because that is the over, how do you say the over occupancy which is due to children beds in parent rooms or infants and so on. And on the Riu, here my view is a little bit, when you look at Riu three year ago and when you look at Riu today, you have an enormous development and this is of course related to openings in Caribbean.

So the mix has become different in Cape Verde as well as the strong, extremely strong business in Spain. Now that said also we have closed and sold non-performing hotels.

And therefore you will see an operational reverse --seeing operational leveling I would say. So an increased like the last three years I would not expect and nobody expect.

Am I confident on the next year's 10%? I mean - no, on this year's 10%, was - am I confident?

If I was not confident I wouldn't promise it. So and next year of course the only thing I can see today, what I see today is cumulative booking up versus a year before.

What I see today is this year's one off effect which we had disruption, hot summer, Air Berlin, and so on and so on. So I would say good reason to assume that next year will be also good year.

And now that said, we are in the process now of doing budgets and all of that. So and of course now we are focusing on delivering on the --in the best or the highest months of this year then comes December right.

Are you seeing any capital gains or should we assume any more capital gains in the fourth quarter of this year?

No. Not enough no was - loud and clear, no.

Good morning. Three questions from me as well if I may.

Just coming back to the UK, you kicked over the beginning of this year sort of talking about maybe taking some capacity out of the UK because you were seeing some of the risks coming into it. And then today you're talking about customer numbers up and happy if your markets share is growing.

It feels like a change in message there that you're just happy as long as you're growing customers and maybe not being so sort of cautious about risks in particular markets. And maybe you can talk to that.

Second question, just wondering with the Turkish loans, it seems to have reared itself up as an issue this quarter, but the lira has been weakening against the euro for quite some time, for quite a number of years. So why suddenly this quarter court or is it --it has been a material impact?

And then lastly on the ex Riu hotels, just duck tailing with Jamie's question a little bit. Occupancy up quite a lot in the quarter which looks like good performance, but still in aggregate loss-making.

Are you expecting that to come back in Q4? I know you've talked about your happy with Turkey and what's happening there?

Is it really Q4 for that we're starting seeing that coming through?

The last question I didn't get - I mean okay, so no, yes, as clear I mean when you look --when you look at the other hotels ex Riu which are our own brand, I mean the difference between them and Riu is that they are predominantly located in summer seasonal destinations right. So that's by the way much not true with Riu and not true with Oilton service, our Sunwing.

And mainly in the Caribbean and therefore full destinations in this full year destinations but when you look at Magic Life and you look at Robinson, you look at Blue and the other consolidated hotels, very often in southern Europe as well as in Turkey. And then of course you have summer seasonality therefore we will have - we will see the improvement as Horst noted.

Hotels are developing strongly and they're developing better than we thought in the beginning of the year. On the UK, when we started in the year I talked about uncertainty because of the devaluation of pound.

Therefore we thought about taking out capacity. I think that's what you are referencing to.

Then Monarch went bust, and we actually took slots in our slot-restricted airports in order to build clusters and also because we wanted actually take part of the market share which was available because of the Monarch bankruptcy. And that's led to actually an increase of capacity planning in the UK.

And what you'll see is that capacity planning is actually fully loaded. I mean it's in the system, occupancy is according to capacity, upgrades, so I think that's what --that's what see also going forward.

Now I talked about the question of just-- are you reference to my statement on just market share and so on and so on. One thing is very clear.

I mean and when you look in the markets, you have different kind of levels of profitability that's very clear. And UK was one of the highest or most potentially the highest that has now normalized.

In the UK, we have overheads of let's say 3%. And you have sales cost of let's say 7%.

So between EBIT and GP1, so you have 10%. The question is of course is 10% good enough or not good enough?

And in my view is one thing definitely isn't a mistake. If this 10% get to a 9%, it's better.

And therefore it's very clear that I want to be as cost competitive as possible. And then I see right now for example Sweden where we have 100% online, our sales cost around 4%.

And that's my point, we need to be the best in class in each and every source markets we are. And that is the insurance if you like in order to have a long-term viable business in the source mark.

And that's what I wanted to say. It doesn't say we give all the money away.

It doesn't say we do market extension at the cost of margin or whatever. I mean that's not-- that's not what I wanted to say.

Yes, if maybe that was not understood correctly. The third question I think I forgot.

Yes. That was the question about the revaluation of the Turkish lira loans and what I have done in the meantime when Fritz was speaking.

So I'm loaded myself here a shot over the last three year period Turkish lira against euro. Going back to July 2015 and then moving forward to let's say September 2017, there was probably a devaluation of Turkish lira against the euro, which was 30%.

So that was a two-year period since we have gotten to our fiscal year 2017-2018 1st of October. There was something like a movement again of 60 or something percent evaluation.

And there is a reason why this has become so obvious. And we believe that it was more than fair to show that to you because once again this is pure valuation according to IFRS.

What we have established is a system which is a natural hedge so, yes.

Just to follow up there to be clear. In previous quarters, these are evaluations were going through the FX line.

I mean you're in your charts, or just immaterial and not worth breaking out?

It was immaterial not worth breaking it out, but now the impact is so strong that I believe has to do it to give you the right --let's say elements to work on your models.

Hi, there. There questions for me please.

The first is of taking a big step back and looking again at the source markets business. Your EBIT margins over the last 12 months were 2.9%.

That's 160 basis points lower than they were a few years ago. They've fallen more than your competitors, and I'm just interested to understand whether you see that as a material opportunity.

If those margins have been sustained that would be almost the same amount of profit as you generate from your cruise business. So I wonder if you could talk to that.

Second question is specifically looking out into the fourth quarter. Two things.

One, do you expect a little bit more impact from the air traffic control strikes? Maybe just some sense as to how you think about that.

And also just in terms of the UK, I just wonder whether the pressure you've seen in Q3 which is obviously more of a shoulder period, is that less likely to be an issue in the key summer holiday months of Q4? Just if you could comment on that.

And then my final question is around CapEx, obviously, Horst you reference the fact that you've spent roughly €600 million after nine months. That's a very big gap to your guidance, maybe you could just sort of share with us if there's any element of that CapEx guidance that's not going to land at all, you obviously mentioned phasing.

And maybe you can also touch on the sort of re-fleeting that you mentioned and what the scale of that might be going forwards over the next couple of years?

Okay. And you've asked - definitely number three my question.

On the source market I mean I don't know if it's referenced, Tim, you --which competitors you referenced. I mean if you let's say because it would be interesting to see that because I mean let's assume for a moment you meant Cooks.

And then I would say maybe I don't know and I don't know that --I have not looked at this, but of course different country mixes get to different results. And I think when I looked into there was the real pressure was happening is actually in the UK.

And we have a very strong and big business in the UK. And proportionally --over proportionate margins in the UK.

I think still I believe that we are at the premium margin player in the UK. So therefore I think they should be fine and I think when you look at the Nordics right now, and Nordics of course didn't have that pressure quite to the contrary.

I think we will have one of the strongest years in the Nordics, which we ever had this year. So maybe that is a reason why - because of the mix.

That said, for us, one thing is very clear, overheads are not good and therefore we work on the overheads. Direct distribution is very good, online distribution is very good in terms of cost and also process and quality.

So that's what we are working on. On the fourth and we should also remind all ourselves that for example, we show our margins of UK business in cruises, when we say cruise to our entrepreneur also that in the cruise line and not - so I'm not 100% sure that things are comparable and mix is right.

On the air traffic control, yes, we will see some influence. I believe because some of that is have trouble.

And of course we are preparing ourselves in order to mitigate limited --mitigate effects. That said, one of the areas which comes on top of air traffic control is of course the scarcity of airplanes right now.

And I mean that is another thing which is in the summer season, we have seen because of quality problem of some of the engines and so on and so on. The market of spare aero planes was also not easy.

So when you --I think to mitigate the initial effect that you cannot avoid the question, how fast can you actually get to back to normal if you like? Yes and that is of course very often the question of spare aircraft and how fast can you lease an aircraft, or do you have spare aircraft, which you can --which you can operate and so on and so on.

So I think our plan or our assumption is that for this summer it will be the constrained situation and it will stay constrained. For next season I'm pretty sure with the pressure will relieve, but for this summer it's actually a constraint situation.

Horst?

Yes. As far as CapEx is concerned, typically the timing profile of our CapEx is back end loaded, and that applies again to this fiscal year.

There are still some hotel projects under construction, and it may be that I have finalization prior to the 30th of September it may well be that and going into October or November. You are familiar with the acquisition of the Destination Management Agencies from Hotelbeds.

So the payout will definitely happen. We gave you an indication as far as the price is concerned.

So that will come as well. The only thing which I wanted to flag to you was there may be a phasing impact, but that is not a major phasing impact.

It is just normal stuff which we have seen in the years before one project comes up to an end, and so the capitalization of the effort only takes place in the new fiscal year.

Great. So there was one sort of sub question I asked about.

The UK margins in the fourth quarter sort of being pink relative to Q3 being more of a shoulder season. I just wondered if you could comment on that.

I mean did you get to say --I think before I say something wrong-- and I don't --I would not like-- I have to think about the question. I never thought about the question this way.

I think what I see right now the main influence I see in the UK business. And this is the overarching influence and that is what you see also in the other marketers actually.

The late booking patterns for the next weeks with respect to the weather. So therefore it's difficult to say how the margins will develop.

I think anyway the load factor we have right now in the system is 86%. So the remaining sales will be relatively I mean are controlled.

So we know pretty much how the season will look like. I mean that's the reason why we said at least 10%.

Yes, and at the same time the three years which were in the past and was very strong late sales also in the UK and particularly in the UK. And therefore, we wanted to caution a little bit saying it will not be above 10%.

But when we say right now at the point in time 10% and that's what we can keep right. That's what we believe is realistic and right.

So we stick to the above 10%. And remaining summer bookings are only let's said I think in the UK even a little bit more than 86.

Yes. So it is pretty certain.

Good morning, everybody. And three questions from me please as well.

And first on Brexit, can you just elaborate a bit more on your contingency planning around that? And especially in relation to the ownership and control arrangements.

And secondly and I guess somewhat related as we think about the UK business going into 2019, you referenced that you would have needed a 20% price rise in the UK in 2018 to hold margins. How does that maths work as we sit here today?

What sort of price rise you need for 2019 for the UK? And how is that impacting your thinking on capacity and potential decreases in capacity as we go into 2019.

And then the final question is on France. You reference the difficulties there.

Can you talk about what action plans are underway and do you still regard that business is core?

Yes, Brexit, I mean when we look at Brexit what I think will happen is reality will be reality right. So and therefore I don't foresee that we will see so many changes, no.

That said, as a company of course you need to do what is actually even on the eventual outcome and that for example the ownership control, you are talking about, we need to have solutions for that. And we are preparing for that.

Okay, so not that we do it but and they pull it off but we will be --we will have a solution in case. The 20% you talked about or I talked about.

I mean if you don't know how the pound will develop. Now it has been pretty stable over the last 12 months.

And if it is stable on the last 12 months in year-over-year there would be no change anymore right. So the change it came up then actually changed and then it came with a year delay because there were hedges a year ago, and therefore it was increasingly coming into the market, but now the full effect is there.

So if the pound doesn't change then there's also no reason to fiddle around its capacity or do something in that respect. On France, after Transat acquisition, we realized our cost effect, now we are bigger business and the issue here is again that the market has been weakening, and we see on the commercial front dilution in prices, as well as an increase in average third party commission.

The French market is strongly driven by the third party retail and therefore one thing is very clear we took already started to take an action. The first one we did is we changed brand and put marketing money behind it.

That's also a part of the dilution and you see in France. Second, we drive this higher unaided event-- unaided awareness we drive traffic to our own online presence in order to be more independent of third party.

Of course, we need a third party for the time being in order to manage risk capacity. So but that said, as soon as we are clear then we can actually also maybe in France take some sacrifice a little bit of market share in order to eliminate the most expensive channels.

Certainly, management is now looking into other more aggressive cost and that might be measures that might be that we actually for example --and I make an example, think about moving maybe parts of the business or part of the actions we are doing into Belgium, that could be one of the areas we are looking at. And now again that's a little bit what I say also for other markets as well, putting everybody under the leadership of David Burning makes all of these decisions a little bit more intuitive and easier.

Yes and but definitely France is the area we need to work on. It's not worse than last year; it is better but it is by far not what we planned and what we plan for breakeven.

I mean that's very clear.

Yes, good morning. Thank you, Mr.

Baier for great job. I've got two questions left after all.

Firstly, on hotel disposals looking in the years ahead, are there still a number of hotels in your mind that will be disposed? Is there anything you can give us in terms of guiding on future disposals there?

And secondly, net debt, it's a bit similar like last year where you guide it for zero and ended up with €600 million net cash in this year. Again, you look to spend more than €600 million in the fourth quarter despite strong operational cash flows in the quarter.

Let me phrase a question like that. Is there a similar wide range of outcomes in your mind that could make the year end up that much higher again or do you have reasonably good visibility that it will not be much better than zero at the end of the day?

Thank you.

I believe Horst will be very good question you have in the second and the first month. There's not a strong pipeline of disposals, if that was your question.

And Horst maybe on -

No. I believe as far as net financial debt is concerned, we are pretty much on that what we have guided on.

So don't expect there is a big deviation.

Horst, something else you wanted to say?

No.

Okay. And no more questions or -

Okay. Thank you very much guys.

Let me say a last word. I mean many of you will see Horst.

I know that appreciated his wisdom and also his temper and knowledge, and a big part of the success of TUI over the last four years. It wouldn't have been possible without him, as much as I look forward to work with Birgit in the future.

I want to also say personally thank you to Horst. It is the first time I say thank you as it was a reason of being - without him now in the future there will be a lot of departures I think from now.

Therefore anyway I think you deserve the big thank you also from the company. Thank you very much.

And have a great day. Bye.