Earnings Call: Q3 2021

Aug 12, 2021

Good morning, ladies and gentlemen, and welcome to the TUI AG Conference Call regarding the FY 'twenty one Q3 Results. At this time, all participants have been placed on a listen only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Mr. Frigida Hjussen and Mr. Sebastian Ebel. Thank you very much, and good morning, everybody, And welcome to our Q3 results announcement. I will be opening the floor and I will be followed by Sebastian and then we will be taking questions. So let me turn to Page number 4 And summarize the major developments. I think the first good news is That we added 1,500,000 summer bookings since H1 update. So in the last 3 months, net addings, 1 point 5 and we have right now 4.2 summer bookings in the system. The second good news is That we saw a rebound of working capital, EUR 320,000,000 free cash flow before financing. So it's the Q1 since the pandemic that we don't didn't burn cash, but that we had a positive The cash flow. And when you look at our liquidity position, then our headroom increased To 3,100,000,000. And if you recall, our headroom just 3 months ago was 1.7 Sebastian will talk about it later, but we added 700,000,000 customer mainly customer prepayments, €200,000,000 via the upsizing of our convertible bond and €540,000,000 via our Selling of the real estate portfolio joint venture with Rio 'nineteen real estate, dollars 541,000,000 So altogether, dollars 1,400,000 So our liquidity position is quite strong And it is building as we speak. But at the same time and you will see that our free cash flow is now Mainly built on prepayments and you will see that in a later slide. It is not yet built Based mainly based on revenues because we are talking Q3. So of the $4,200,000 only less than 900,000 customers have We haven't been on the vacation in Q3. So the revenues are still very moderate. The start up costs are high. So the route for our free cash flow is prepayment as we speak in Q3. One major point last quarter was actually The extension of the RCF maturity by 24 months. So the maturity right now is 2024. So we have a good cash position. We got all 24 all 20 banks plus WSF to Agree to our prolongation of our RCF maturity. So we have now some time to I think a little bit better and more detail about the balance sheet and to get to a lower debt profile. But I think it's important that we have now the certainty, we have the liquidity businesses building. Two other things I want to mention in the summary. Global realignments of the saving program is on track. We promised more than $400,000,000 in savings, more than half Have been delivered acceleration of digital strategy, maybe the most important or one of the most impressive things is now 2 thirds of our customers are using Active users of our app. In line with that, by the way, is that we get week over week over week already record sites, for example, Selling our excursion through the app, even with no customers in destinations yet, we see record levels of sales of excursions. Now let's go let's turn to Page number 6. Some major drivers, the 2 83 hotels open In Q3, of course, now more. We have 354, so more than 80% open in Q3. And also, occupancy levels, very good. You see in my next slide. And at the same time, in Q3, it was only 876, Of course, much better than 159,000, but 876,000 packs. So of the 4.2 Much more to come. So this is actually the missing revenue, what I said. The revenue in Q4 will be, of course, much better. And Then the picture will be not so much influenced by the prepayments, but more by the revenue that also has resulting effects in profitability, as you can imagine. We have 8 of 15 ships operating and excursions, of course, have increased their sales as well. Now on digitalization, patient number 17, bookings have been coming in much more online In Q3 and Germany being usually the least online is even Germany is now up 17 percentage points 239, it has been 22 before, so almost a doubling of online sales in Germany with respective positive effects In the U. K, we are now talking about 3 quarters of sales being online and Belgium Netherlands The like. Now in the thing I mentioned was 68% plus in about 21 percentage points, Package departure penetration of our app and that actually you have your documents and everything. You get the cost selling 1 to 1 and next best activity Each and every customer and we see the resulting effects not only in customer care, But also and that's the satisfaction that our app and the ratings of our app very, very high, but also in terms of cross selling. Now Vaccination. Vaccination progress has been significantly and you see the vaccination rates in Source markets, you see they're in destinations. So they have been going up. Still, incidence rates are in some countries In some countries, they are lower. In the U. K, for example, they are now here on the charge, dollars 274,000,000. There has been $400,000,000,000 by the way. And the interesting thing here is actually the hospitalization. And here, it doesn't come as a surprise, but it's Important to note that the hospitalization rates are very low. In the UK, just 1 5th Of peak hospitalization in January, right? So you don't have overloads in the health system and therefore, we expect that we will have No restrictions on vaccinated. In some countries, even more restrictions for people who are not vaccinated, but Who didn't have to vaccinate, shouldn't vaccinate our children. So we expect a stable outcome for Q4. So a lot of the bookings Now turning into revenue. That is the message here, which I want to make. Now, that said, Still there are differences and this is actually the next page where you see the government messaging and restrictions. And here you see the ticks that actually you more or less don't have any procedure, The yellow ticks that you have PCR test and then red ticks and Red Crosses with even more harsh restrictions Until the Red Cross is no operation. But the major difference, which actually is driving right now net bookings and to Some extent also cost bookings is the yellow ticks in the UK. More or less everybody treats vaccinated as Without any restriction, but the UK, now you need to have PCR tests on return, sometimes even 2. And that is, of course, additional efforts, but this is also additional cost that actually has some elasticity. And when you look In the next slide, you see actually the net bookings almost everywhere we see very positive net bookings or catch up effects. Yes. But in the U. K, in the U. K, we have been losing net. We have been losing customers until the last week. In the last week, you see 1st days Actually now positive and the trajectory is quite good. But at least here, you didn't see the very positive And net bookings like you had in all other countries. And that's actually led us to the decision that We thought on risk capacity, we would actually do some of 60 instead of 75. And that is the explanation. Now it will come up in the UK and it has come up, But it needs to turn positive over the next weeks. Maybe when you look at capacity, then it's even more Yes, what I mean. Capacity, you see here on the left side, April, May June. And in June, for example, we saw a capacity of around about 350,000. In July, you already saw a capacity of 700,000,000, right? So the capacity is building nicely. Yes. And when you look for example right now in the UK, it has been quadrupling from June, but it is still only half the level of what it is in Germany. You should be, let's say, 30% above Germany, right? So that's actually what I mean. The dynamic is there. It is getting there, But it's getting there later than we originally expected and that's the reason why we actually are now more targeting 60% of summer Then 75% of the summer 'nineteen. Now load factors anyhow are very good in very stable environments between 80 €389,000,000 So on the right side, €71,000,000 is actually related to the strong buildup From June to July, when you have this strong build of program, you have this anti lag Challenge, you fly much more customers into destination than you get back and that actually makes it 71. Otherwise, it would be also Higher than 80%. But I think interesting here is still 71% is not a bad load When you compare to competitors. So we are internalizing demand. We are getting good load factors into aircraft. And therefore, I think you will see the results in revenues and EBIT also in Q4. Also internalization is working well in the hotels. I mean, even This July pattern, which is around 45, let's say, Percent of program we achieved in all of our destinations more than average index average Occupancy in our hotels. And I could have I did Germany and Greece and Turkey and I could have done Spain. I mean Mallorca or the Canaris are equally booked and you even have scarcity of supply. Now the next page actually shows the numbers on net bookings up from 2.6 for summer 2021 24.2 percent. Summer next year is 120% higher than we would expect. Capacity cleaning, as I said, you reduced slightly from $0.75 to $0.60 Summer 'twenty two, by the way, says not fixed. We actually pushed out here our dates to really fix the capacity to something in February March So that we have enough time to react. Maybe one last point before I hand over to Sebastian, Our positioning on vaccination, I think the vaccinations levels are very good. I think there's some sentiment building in the EU and also in UK That whoever is vaccinated should have the full get the freedom rights back and travel. So I think this is very good. And for us, it is the cornerstone for Q4 and future This year and future seasons to believe that the program will be much more stable than the last year where we had on and off developments based Quite to the contrary, we believe incident is less and less important than hospitalization is important. So there are 2 camps in different countries. The one camp says, well, the non vaccinated, if they don't want to protect themselves, the society shouldn't protect them. But it is their own right to determine And there are others to say we should push them to vaccinate themselves. I think good arguments for both sides. I believe the only thing we are lobbying for is, of course, that people, particularly children, Well, the recommendation is not to vaccinate. They should not suffer any restrictions. And like for example, in the UK, if they are part of the family Travel, they should be traveling without quarantine requirements and I think that is important. With that, I would like Stop for a moment and would like to hand over to Sebastian. Sebastian? Many thanks, Fritz, and a very warm welcome also from my side. Let me guide you on the following pages through the Q3 results of the financial year 2021. I would like to start with our achievements during the last quarter. Post the completion of the 3rd support package in Q2, including a €500,000,000 capital increase, we managed to successfully further enhance our financing structure and liquidity position with the following We used the favorable capital markets environment to issue convertible bonds in the total volume of €590,000,000 This includes the upsizing of our bonds with a tap issue of around €190,000,000 in June. Post balance sheet date, we Successfully agreed with our 19 banks and KfW the prolongation of our maturity profile with the extension of our 4,700,000,000 RCF. We achieved an extension by 24 months, the new maturity now being July 2024. Based on our current rating, the margin will be 4.5% per annum. As you will all remember, part of our state support package was the agreement of covenant waivers for September 2020 March 2021. Reflecting the continued disruption and limitation on our operations as a result of travel restriction, In May, we again agreed with our banks and KfW a further covenant testing waiver until the end of March 2022. So covenant testing will resume in September 2022 with higher ratio limits set for testing in September 2022 and March 23. For these dates, net leverage was agreed at 4.5 multiple and interest cover at 2.25. Normalized limits have been agreed to resume from September 2023. Here the ratios are for net leverage 3 and for interest cover 2.5. And finally, we made further progress with our asset rights strategy by disposing of a real estate portfolio of 21 properties to the Real family. The transaction with an equity value of around 1,500,000,000 It implies an equity value EBITDA multiple of close to 12, closed earlier than expected on 30th July And we received cash proceeds of €541,000,000 There is an additional earnout of €130,000,000 payable Upon Rio Hotel delivering its full year 2022 and full year 2020 A considerable book gain of around €200,000,000 which will benefit our adjustment line in the P and L in the Q4. Strategically, Allow me to mention once again that the 21 hotels will still be operated under our core entity, Riosa Doss, and thus remain exclusively available to our customers. Only the ownership structure of the 21 Rio properties is changing from owned under Rio Hotelis to a managed structure under Rio 2. All in all, we have achieved important steps regarding our and financing this quarter. And operationally, we are very pleased that with the rebound of customer deposits And the inflow in working capital, Q3 is the 1st quarter to deliver a positive cash flow since the start of the pandemic, reflecting the strong pent up Demand for travel. So with the current liquidity position of €3,100,000,000 we are fully financed through the winter. And let me confirm again that we will work hard to return to solid and healthy balance sheet and a gross leverage of less than 3. Let me now come to our Q3 results. The ongoing effects Of the coronavirus crisis are still putting considerable pressure on our business performance overall. However, Clear signs of recovery started to emerge in the Q3, and we expect to see further improvements in the Q4. Before I start to take you through the detailed analysis of our income statement, cash flow and balance sheet, Where I will focus on the quarter on quarter development, meaning Q2 versus the ramp up quarter Q3, allow me a quick view on the year On year comparison, compared to last year's Q3, where our operations were in standstill, we saw a significant improvement of performance, 2 benefited from market recovery with increasing customer numbers. Relaxation of travel restriction in an international air traffic And the pent up demand drove both demand and activity. This leads to an increase in revenue year on year by more than 8 times to €650,000,000 Also EBITDA and EBIT improved significantly by 28% And 43%, respectively. Now I will continue with the income statement and our Q3 versus Q2 commentary. As already mentioned, Q3 group revenue of €650,000,000 reflects the restart of travel across our markets and reopening of destinations ahead of the key summer period. This is an increase of €400,000,000 compared to Q2 And it was driven by 876,000 markets and airline passengers, departing in the quarter compared To 159,000 in Q2. But after this mixed start into the summer season, due constantly changing governmental advice, We recently see an improvement booking trend for the remainder of the season. Q3 underlying EBIT loss of Minus EUR 670,000,000 demonstrated our continued cost discipline on fixed costs, but also higher operational ramp up costs ahead of peak summer period, with a limited opportunity to recover these due to the change in restrictions. This was particularly true for the UK, and I will give you some more color on the following chart. But let me continue first with my comments on the income statement. Adjustments this quarter were predominantly related to the group realignment program. Overall, portfolio 2021, we now assume a positive adjustment range of between plus €50,000,000 and plus €70,000,000 taking the expected real estate portfolio booking of around €200,000,000 in Q4 into account. Lower Q3 net interest cost versus Q2 reflect the non of the bond modification cost in Q2 and lower RCF drawings in the period. For full year 2021, we can reconfirm expected net interest charges of between €400,000,000 to €450,000,000 The increase in the tax expense was mainly attributable to a future tax rate increase From 19% to 25% in the United Kingdom, which affects the valuation of deferred tax balances. However, this has no effect on cash Taxes. As said, with the following chart, I would like to give Some more color on the ramp up cost, which occurred in the 3rd in the quarter to prepare for the peak summer period as well as in context of limited opportunities to cover these due to constant and late changes The first bucket of ramp cost is airline related and reflects the start up of our airlines from minimum Operations to the peak season. This is seasonal staff coming to the business as well as necessary engineering maintenance and additional airport Flying and landing parking changes. And of course, when you start the operation, you have a lower factor load factor and Especially the return flight, you hardly have any customers. The second bucket is in the amount of €50,000,000 refers To the impact of changing restrictions, an example of which you probably all remember is the change of governmental advice in the UK regarding Portugal. The 3rd bucket is the distribution cost, which includes expenses for online distribution and also for the reopening of our Stores, as Fred said, we have an increase of our online booking share and the cost of sale for online bookings have to be recognized immediately as costs. The 4th bucket consists Of course, for getting our hotels ready for operations ahead the summer season. The following bucket is related to our crew segment in connection with additional ships Returning to the fleet during the quarter and last but not least, the 6th bucket is new to amusement, facing €5,000,000 in ramp up cost as we prepared our cost base for receiving our SaaS customer. Some are customers, so overall in total 125 €1,000,000 This brings me to our underlying EBITDA bridge. As in the prior quarters, We continued to focus on cost discipline as we quite successfully do since the beginning of the corona crisis And we're also trying to capture margins where possible. Nevertheless, we achieved a lower result in Q3 compared to Q2 as a result of permanent change in travel advice during the period of ramp up of operations, and I explained the cost in detail on my previous slide. When we look on the performance of the segment, we saw improved contribution from Hotels due to the increase in levels of operations. Similarly, for Continental Europe, we saw increased passenger numbers, which also led to an improvement of results. The remaining businesses, however, were impacted by operational ramp up costs, which Could not be recovered in an environment of constantly changing travel advice restrictions. Looking now at the development of the senior segment. I will start with Hotels and Resorts. Within Hotels and Resorts, 283 hotels, almost 80% of group portfolio, were open at the end of the Q3 across destinations such as Bel Airx, Canaries, North Africa, Greek Islands, Mexico, Turkey and Cuba. This delivered these hotels delivered an average occupancy rate of 48% and average revenue per bed of €70 Underlying EBIT loss improved by €28,000,000 versus prior quarter as a result. During Q3, TUI Cruises increased its operation from May from 3 ships to 4, offering itineraries to the Canaries, Spanish coast, Greek Islands and Baltic Sea. Average daily rate of the operated fleet was under 20 Euros reflecting shorter average duration of itineraries offered. Occupancy of the operated fleet was 41%. For Hapag Lloyd Cruises, in addition to Europa 2, which was already in operation, expedition class Ship Hanseatic Nature and Hanseatic Inspiration resumed sailings with short cruises from Hamburg and to the Baltic Sea. Every daily rate of the operator fleet was €443, reflecting the pricing of shorter and more local itineraries. Occupancy of the operated lease was 42%. Our UK cruise, Brent Marella, resumed sailing With Explorer with the ship Explorer at the end of June, which with a domestic program from Southampton, It's first since the government imposed suspension of cruise operations in March 2020. Average daily rate and Occupancy of the operated fleet was £127.48 respectively, with occupancy kept at 50% as required by UK government restrictions. The segment underlying EBIT loss declined by 26 Mailing versus prior quarter reflecting the ramp up of operations in preparing our fleet and returning our crew on board ahead of our peak summer period. On 2 amusements. As Fritz already mentioned, 2 amusements sold 212 ks Excursions and activities in the quarter, reflecting the increased departures and reopening of destinations. Online sales participation were 39 1%. Underlying EBIT loss declined by €5,000,000 including ramp up costs as we prepared staff to return to destinations ahead of peak summer period. Our markets and the airline business restarted operations in April 1stly from our German source markets. In Q3, we took 876 ks customers on their summer holidays, mostly from our Central and Western markets. The Greek Islands, the Belarus and Canaries were the most popular destinations during the quarter. Underlying loss increased by €69,000,000 versus prior quarter, reflecting the ramp up costs of operations as we prepared for airline fleet, retained crew and Increase the number of retail staff in stores ahead of peak summer period. A quick look at the different source markets. In Northern region, 50 ks customers departed in 3rd quarter, reflecting the limited list screen list destinations made available by the UK government. Underlying loss increased by €94,000,000 versus prior quarter as a result of ramp up cost in preparation for peak quarter 4 and related costs from stop start nature of permitting destinations under UK travel restrictions. In Central Region, 510 ks customers departed in the 3rd quarter, reflecting the more consistent travel advice given by our central region governments, Enabling customers to depart with more certainty to destinations such as Greece, the Ballet X Canarias and Turkey. Underlying loss improved by €18,000,000 versus prior quarter reflecting the contribution from more substantial departures and operations. In Western Regions, 317 ks customers departed in the period, reflecting the reopening of destinations partway through the quarter. Underlying loss improved by €7,000,000 versus prior quarter as a result. All other segments and Other one off costs contributed with €30,000,000 to the development of the quarter, an improvement in other segments reflecting Ongoing cost saving measures across head office and other entities as part of our global realignment program. Net one offs quarter on quarter were €5,000,000 mainly comprising the impact from net hedging ineffectiveness and impairments. Moving over to our cash flow slide on of Q3. We are very pleased to have generated a positive free cash For the first time since the start of the pandemic. This positive development was driven as expected by the inflow of working capital. The Q3 inflow of around €790,000,000 is mainly reflecting the increase in customers' deposits for summer 2021 and underlines the high level of short term bookings we are currently seeing. The other main driver was the increase in supplier payables from the operational ramp up. Our assumption for full year 2021 is that we expect the working capital position to further recover during Q4 due to the late summer business. Coming to various other cash items. The Q3 improvement was driven by a lower noncash effect of a positive P and L impact from derivatives compared to Q2 as well as some reduced cash interest due to the lower RCF drawings and the repayment of the senior notes. In line with our initiatives to support liquidity, net investments is an inflow of €14,000,000 While we managed to reduce Q3 CapEx further proceeds from divestments were lower in Q2. The inflow comprises net positive pre delivery payments And the sale of 2 smaller hotel assets, Ilkasterfaifi and Lena Marie. As already mentioned, we have successfully We executed our asset rights strategy, and we are pleased to update our assumptions for the development of net investments for financial year 2021. Including the disposal proceeds for real properties, we now expect overall net investments to show an inflow of EUR 6 to EUR 650,000,000 for full year 2021. That brings me to a positive free cash flow of EUR 320,000,000 And the total cash flow post financing activities of EUR 120,000,000 Overall, total cash flow is in line with Q2 as the cash flow from financing is reflecting our reduction in RCF drawings. We managed to improve our cash And available facilities positioned per 9th August to SEK 3,100,000,000, which is an increase of SEK 1.4 Building compared to our Q4 Q2 update. This position includes the proceeds from the convertible bond tab as well as from the Rio But even more importantly, it demonstrates that we were able to generate positive €700,000,000 cash from our operations in the month of May, June July and the early days of August. As mentioned several times already, This year, we are managing the business with a strong focus on cash. Coming to the left hand side of the chart. With many of our key Continental European markets reopening for travel and confirmation of quarantine exemption and lesser Restrictions for those fully vaccinated, we have seen an increase in customers' confidence and subsequently new bookings momentum from Central and Western region markets. Q3 as a result saw our 1st cash breakeven quarter since the start of the pandemic delivering an average positive €40,000,000 of cash per month in the Q1. Net fixed costs of €225,000,000 per month were better than our assumption range of €250,000,000 to €300,000,000 due to our strict cash discipline. Our assumption for Q3 full year 2021 Is for short term bookings to drive working capital and revenue. Given the prevailing uncertainty in our fixed Capacity over Q4 as a result, we target towards net cash neutral, excluding special items such as Real Estate disposal proceeds. To conclude, I would like to reiterate that we are fully financed through the winter With €3,100,000,000 available liquidity, and I also wanted to remind here that we are also expect to We'll see a lower liquidity swing this winter due to lower volumes this summer compared to a normal year. This brings To my next slide, the balance sheet and the movement in net debt. The net financial position improved by €460,000,000 Quarter on quarter and stood at €6,400,000,000 at 30th June 2021. The improvement in net Predominantly reflects the positive cash flow driven by the positive working capital development and the increase in equity by drawing Silent participation to info. For more details, please find also on this chart our comments regarding drawings of the silent participations as well as under the RCF as at 30 June and post balance sheet date on 10th August. As last time, on the right hand side of the slide, we have included for our convenience For your convenience, the split of our financial liabilities with a full detail on lease liabilities and liabilities to banks. As a reminder and as our commitment, I would like to finalize my section again with the ongoing priorities I have on my agenda as the CFO of TUI, manage liquidity, driving operating effectiveness and optimize financing. We are and remain committed to return to a gross leverage ratio of less than 3 times And the whole of TUI is working hard on achieving this target. We have made very good progress over the quarter, and I want to use the opportunity here to Once thank you to all the teams who go through these challenging times with us. The corona pandemic has been the biggest challenge for the industry and our company. But as a team, we exit quickly and manage the situation, taking important and necessary actions at the right time. We can see the light At the end of the tunnel, and we are preparing TUI to be even stronger and more resilient in the future. With this, Let me hand over to Fritz again for his closing remarks. Thank you, Sebastian. So before you get to the questions, I think 3 things are worth mentioning. First of all, the pandemic has been Pushing the pause button for our industry, but there is no reason to assume that travel is not a megatrend in the future. Tourism has been growing above GDP in the last 15 years and it will be growing above GDP. We have Aging populations, more time, more money, more healthy. I think one major contribution, the other one, experience new It's more important what people want to experience and what they own and And tourism as a force for good in destinations, I mean, you see it everywhere. So travel will be a megatrend. Travel will be Leshav Capital will be a great business. Our business model, I think, is fit for purpose. When you look at our brand positioning, leading markets position, the integrated model which helps us right now To steer up the demand and steer the demand into our hotels, Get good occupancy levels, no two factors in our aircraft. So good hygiene Concepts and high quality in destination. I think it's important. And last, Yes, we understand and we know that we have to transform more digital, less cost, Better quality at the same time and that is digitalization and we stay committed to the balance sheet target Of the leverage ratio less than 3 times. So when the crisis will be gone and we are now In front of, I think, the full back to normality, then we will be in a better position And before and with that, I would like to open for your questions. Thanks a And the first question comes from Jamie Rolla. Your line is open now. Good morning, everyone. Jamie Rollo from Morgan Stanley. I've got three questions, please. First, the statement talks about having sufficient liquidity to get over the winter season. So I've just got a question about that liquidity number of €3,100,000,000 What's the customer deposit number behind that On that 9th August date, I can see it's about €2,800,000,000 at June, including both elements, But it's probably gone up since then. So it looks like company cash is actually still quite small. And although you're expecting Cash neutrality in the Q4, are you not expecting an outflow in your fiscal Q1? Secondly, Fritz, I saw Reuters interview this morning where you're talking about raising you might raise more capital at some point. What does that sort of mean? Is that equity? Also could you talk a bit about what the German government's View on the Solent participation is particularly the convertible one. It looks like Lufthansa is trying to repay theirs As soon as possible. I'm just wondering whether that's your plan or whether you think they might convert that. And then just finally, just on some trading numbers, The 120% increase in volumes for next summer sounds great, but what percent of summer 2022 is sold at this stage? And also you've not mentioned winter much. That was mentioned in the last update, but what percent of the winter season is also sold both compared to 2019? Thank you. Should I yes, do you want to start, Sebastien? Or If you like. The customer prepayments, if we compare the situation to 2019, we should have had in a normal year roughly EUR 5,000,000,000 And we would not see a significant Reduction from the base we have now if there would be a normal winter, so EUR 500,000,000 to EUR 1,000,000,000 €1,000,000,000 So that shows very clearly that we are well financed. And what we can see is that the strong short term intake Improves the liquidity situation in general. So that's why we will have significant cash Above any threshold. Capital measures, as we said in the past, we are looking at all the options. And if there are Opportunities, we will take them. We are screening the markets, and We will always take decisions on the latest development. On the bookings for summer, the overall magnitude and the increase is on a base of 20 1%. So this is a reasonable high number, which shows that there is pent up demand, especially compared to the booking pattern We have seen before, the winter has seen a slow start. It's very difficult to judge As we see, actually a very strong momentum on short term bookings for always the next 2 to 3, 4 months. So that's why it's very difficult for us to predict how much increase we can achieve. At the moment, we are roughly at 50%. And with taking into account the short term bookings, there will be a significantly higher number to be achieved. Maybe one thing to add, Jamie, when you look operationally. Today, we just add the last week before departure Between 13% 15% load factor in our aircraft. I mean this is absolutely unprecedented. And therefore, winter will be okay. In summer, by the way, we pushed out The time when we really have to fix our capacity to some time, let's say mid end February. Yes. So therefore, that is something that I think is important In times where it's not 100% clear where we will stand. So the risk capacity will be finally fixed On the end of February 'twenty two, for summer 'twenty two. Thanks. So can I just follow-up on First two questions? Is there any company cash then? Or is all that liquidity essentially customer deposits? And also on the second question, what's the view on the German government's approach to the solar participation, 1 in particular? I think on the maybe the cash position is something Sebastian and the team are looking forward I think we are in constant discussions and with the German state. I think that the likelihood that they will convert It's very high, right. Therefore, they will convert, if that was the question. That's what we assume at least. And we want to repay, of course, we want to get out of government that As soon as possible, but let's say as soon as reasonably possible, right? And when you think about Our cash position right now, which is still building, so 3.1 liquidity is still building as we speak. I think the position is not so bad, Particularly when we think about maybe M and A or maybe a liquidity raise that might be coming. Okay. So just to clarify, you think it's a very high likelihood that the state converts. So the discussion about raising equity is not to repay the Solent Participation 1, that's just to support Other company liquidity needs and deleverage? So we have no De leverage, yes. What the government wants to do. But it is very likely that it will do it. That's right. Okay. Thank you very much. And the next questioner is Alex Brignell. Please go ahead. Yes, morning. Thank you so much for taking the questions. I Got it. A couple. Looking at 2022, I didn't quite get answers that you gave to Jamie on how much Of 2022 is booked. And therefore, within that, could you tell us if there are sort of coupons, tokens that have been Rolled over that couldn't be taken sort of in the early part of this summer. The second question is on restricted cash. That's a bit higher now than it was sort of pre COVID. I think there was some changes to CAA restricted cash requirements. And obviously, you've had customer deposit inflows. But could you just tell us what restricted cash might look like sort of in a normal world post COVID with some normal customer deposit levels. And then the third question, and again, I think Jamie was looking for this and maybe I just didn't interpret it correctly. But In terms of how that works through the winter, what would you anticipate customer deposits will look like, Let's say that's the end of Q1 or and the end of Q2 versus where we currently are. Thank you so much. Okay. On the restricted cash, which is around EUR 500,000,000, In the medium term, we believe that we can reduce this number again. On the Customer deposits at the end of Q2, I think there we because we anticipate a significant intake of bookings in end of December, January, this should be up to the level we have. The cash outflow in the Q1 It's not easy to calculate. As we said, we have strong short term bookings, but we have no real Knowledge today what the long term bookings will be. If you look at the base where we are today, the outflow should be Something between €500,000,000 and maybe €700,000,000, €800,000,000 maximum €1,000,000,000 So that really depends On the momentum of short term bookings, as we have seen at the moment, we always have underestimated the intake and we assume While the situation gets more stable that we will see this trend also in future. And the 2022 summer bookings, I said 20% of overall. And there is only a small very, very small A portion of bookings rolled over. Brilliant. Thanks very much. And the next question comes from Richard Clarke. Your line is open now. Good morning. Thanks for taking my questions. Just first one on price. The half year results you talked about price for some were up 22%. Today, You said 9%. If I kind of roughly do the calculation, it looks like the incremental bookings have come at a price about 10% Below maybe pre pandemic levels. Is that about right? And with the remaining capacity you've got left to sell The rest of the summer, should we be thinking about that kind of pricing level, sort of running forward? I know there's a mix In there as well, but maybe help with that. Then just the Riu sale, you made about 100,000,000 Euros of EBIT from Rio in Q4 sort of 2018, 2019. What would be the impact from the disposals You've done in Rio on that sort of normalized level when we kind of recover back from there. And then just last one, just want to understand the leverage, The sort of covenant calculation. So could you give us what gross debt is today? Because I know it often differs from the accounting numbers. So where are we on gross debt today. And that's sort of backward looking. So at September 2023 and I guess March sort of 2024, you'll need to make EBITDA was about a third of that gross debt. Is that the way right way to think about it? Maybe on pricing. I mean, one thing is very clear. The pricing is a mix, as you said, Between more holidays, but at the same time the short term booking is of course putting some pressure. And At the end of the day, if we get 2 load factors of, let's say, above 80%, 85% in aircraft, Also 10% discount is producing very, very good margin. And the high pricing period It starts to happen right now. So the biggest margins we are making is summer. So you can assume that the prices It will be lower because it is absolutely the right thing to do in order to marginally sell our aircraft. Yes. On the RIIO and gross leverage, maybe I'll let Sebastian take this. Sebastian, can you move through this? So the average EBIT of the participation in within Rio 1 was Over the years €35,000,000 The cash dividend on average €15,000,000 We expect a book gain of €200,000,000 That shows that this is very value €1,000,000 that shows that this is very value accretive to realize the sale here. Financial liabilities stand end of June at EUR 7.887 €1,000,000,000 so almost €7,900,000,000 This not includes yet the proceeds from Rio with the €4 €50,000,000 And out of this €7,900,000 the lease liabilities are €3,300,000,000 And so does that match your the gross leverage number you use For the covenant calculation? Because I know sometimes the lease liability number is different between the two definitions. No. Okay. What I haven't what you also have to take into account are the pension obligations, which are We're at end of June, €839,000,000 Yes. But the lease liabilities A part or no part of the 3 points, 3 multiple. That's your question, right? Yes. Yes, they are. It's the same number. It's the same calculation. Okay. That's very helpful. Thank you. And the next question comes from Stuart Gordon. Please go ahead. Yes, good morning. A few for me as well. Just Circling back on summer 2022, I know it's been asked a couple of different ways, but last year at this time you told us you had 1,500,000 holidays booked For summer 2021, what is that number now for summer 2022? Question on online distribution, It was rising 1% to 2% per annum prior to the pandemic. That's not really changed, which given what we've Seen elsewhere in terms of online migration seems a little bit disappointing. Is there anything structurally different That is not accelerating that moving forward. And Can you just clarify how many passengers in the summer season travel with children? Okay. Let me tackle online. I mean, when you look at the page with online migration, yes, you see a normal uplift from 10 percentage points to 17 percentage points, right? So 'seventeen is actually Germany. It goes up from 22 to 39. The average is going up So below or single upgrades is a mix Because in Germany, we have the highest migration with the lowest absolute level, right? So the 5% is just The mix. When you want to have the trends, you need to look into the countries. And this is an enormous online shift. I mean, even more so, I think, interesting Is the shift which we see after booking and this is actually the app shift, so the 68% And this is 21 percentage points up. And this is related also To our after sales sales, which we have here, chances. And even Though the customers in destinations are relatively low in Q3 and also today only picking up, We saw week over week over week the highest in app sales, which we have seen ever and particularly also Excursions week over week over week, we see a new record high for excursion sales and accessory sales. So I think that is Something which is remarkable and which is there to stick. On the summer bookings 2022, I think 1.2, 1.3, and it's not a bad number. How much it is, RMB 150 is determined By the by, of course, the capacity which we will fix on the end of February. But the interesting thing I think and that is the difference between last year and this year is, is there's no vaccination levels. It's About 60%. And that's of course something that actually makes the predictability of our revenues much better. Just remember last This year, all the bookings were more or less in the UK, yes, €1,500,000 And then that actually decreased to something below 750,000 as a base because we couldn't fulfill The travel demand, Portugal on, off and so on and so on. And that is something which I believe is an enormous difference between A year ago in this year. And the third question, I'm not 100% sure that I remember it. Maybe Sebastian, can you answer that when you remember it? It was how many passengers travel with children. Okay. In all fairness, I would be wrong if I I think I would be, of course, And then in seasonality, but I would be wrong if I just picked a number. I'm not sure that I can answer that question. I have an idea, but it's better not to speculate to give you then later the real number. Yes. Okay. Thank you very much. That's great. Thanks. And the next questioner is James Anley. Please go ahead. Yes, good morning everybody. Thank you for taking my questions. Just coming back to 4, you said you expect to be cash neutral after the working capital benefit. So I assume therefore you're suggesting you will be No better than breakeven in the 4th quarter. If you could just confirm that, please. And secondly, when you talk about that really strong online growth, which is encouraging, Do you think there's potential to restructure or close more of your shop network? And how much savings do you think you could make from that? And then 3rd, following the renewed disposal, are there more assets, meaningful assets that you can sell? And what sort Potential asset realization could we be thinking about? Thank you. I mean, let me I think the online migration is something which is around to stick. And therefore, we closed In the U. K, almost half the retail outlets in Germany, we are talking about targeting 70, 80, 90 Of 400. I mean, we need to be careful that we overdo this because customers want to buy retail and we don't have retail like, for example, in Germany, we should be careful. But that said, we are taking the advantage in each and every shop needs to be profitable, right? So but it's baked into our Realignment program, it's a big part of it. Now on Q4, Maybe Sebastian, I think it's a fair assessment what I heard. And more And then asset sales, I mean, yes, maybe you want to take that? Yes. We have a list of assets we look at. We announced in some of the earlier meetings that we are looking for A good harbor for our Marella assets, which would be the TUI cruises. This is something which we have on the agenda. We also have some assets which we would like to disclose. For us, it's very much important that we don't Have a minimum impact on the P and L. Good example always is we have 2 Robinson Clubs on the Maldives. I think with one less, we would probably have the same profitability, but gaining the cash. So we do that very carefully, but there is It's still a significant amount to become. The Q4 assessment or conclusion you made It's a good one. It's very difficult So to predict, we are quite surprised by the very strong intake we see in the last days, but we have also seen Some limitations, which suddenly came from governments. We don't expect that anymore, but that's why we are more Careful. The short term bookings are encouraging, but we would support the conclusions you have made. Okay, great. Thank you. The next questioner is James Roland Clarke. Your line is open now. Hi, there. A couple of questions, please. The first is on the winter cash burn, Excluding working capital, I wondered if you could give us an idea of what the monthly Operating cash burn, so excluding working capital might be through Q1 and Q2. You previously delivered, I think, €225,000,000 of net fixed costs in the Q3. And then secondly, earlier you just talked about restricted cash of €500,000,000 The first question I have is, could you just outline exactly what or why that is restricted? I think what proportion relates to Ring fencing of customer cash and what portion may relate to any debt order requirements? And then a follow-up to that is Exactly how do you expect to reduce that restricted cash number in the future given the ring fencing of UK customer cash Pressure that may come from the atoll review by the CAA at the moment. Thank you. I mean, Sebastian, should I maybe take the first one? Yes. Okay. I mean, In the nature of our business, yes, we have a seasonal swing with our working capital, yes? And therefore, our liquidity will be less and the cash flow point, as you know, is end of December. But the seasonal swing will be less, right? Not because we want it to be less, but because the summer business was less strong than normally, Right. So the seasonal swing of liquidity and that's what Sebastian talked about might be $500,000,000 might be $700,000,000 might be $100,000,000 might be 1,000,000,000 But that's maybe the order of magnitude, yes? But of course, we will be able not to Operationally, we need to earn our costs. I mean, if that answers your question, right? So cash and liquidity wise, we will see a swing, but cost wise, we will be able to cover costs. And the second one or maybe Was the question on the restricted cash, the EUR 500,000,000 as said, It is our target and as the situation eases to reduce this in the next fiscal year, The majority are for customer deposits. So on the other hand, there are items Where we work on. So that's why we predict that this number could go down in the future, not immediately now, But in the time frame of 12 months. So can I just just following up on both of those? On the second one, you don't see any pressure on that minimum liquidity requirement Given the Atoll review at the moment, on the first one, is there any way you could sort of provide a rough monthly operating Cost given through the winter, given you've pulled out a lot of cost already with your global realignment program? I mean, we told you what the costs are. If we are in a hibernation mode, the 2 €1,000,000 in the Q1, €200,000,000 in the second quarter. I mean, Probably it's ambitious goal to offset less revenues by less cost we have. So and if you then take into account that Yes. From end of or middle of December onwards, we should be on the working capital significantly A positive. And we're not talking about $100,000,000 but a several $100,000,000 Then you see how well we are financed through the winter. Thank you. And on the minimum liquidity? You mean the covenant, the €500,000,000 Yes, exactly. I just Wonder where or why you have such conviction that that might come down in the future with the CAA review Of the actual scheme at the moment and ring fencing customer cash? Because we work on like you have seen with all the other cash measures, we work there Very much to come to very good solutions. You may have Seeing that there were significant discussions in Germany, we have now found a good solution with the state authorities. We are in the same process. The market, the sector is in the same process with the UK. As you know, it's normally only for packages And not for flight only or echo only. You know that payments with a credit card, which has a very high share, It's normally also treated differently and that's why the numbers and you know that we have It's restricted to get already. So that's why the situation is not as sometimes it is described in public. Thank you. And the last question comes from Christian Beletko. Your line is open now. Hi, thank you. This is Christian Nadelco from UBS. Could I please ask you, I think every year in Between January March, you used to get between €1,000,000,000 €1,500,000,000 of cash inflows from advanced payments. And I think we can argue with the CA review in there. We can argue with the fact that people are seems to be booking closer to the departure date. And also I can argue there's more uncertainty than normal due to COVID, maybe some of this cash will not come in. So I guess my question is what do you think is the minimum liquidity that you need in the business in a sort of in a prudent way? What is The minimum liquidity the business needs throughout the winter. The second question, Can you give us a bit of color in terms of your profitability expectations once things come back to normal? And I mean I was looking in your Q3 statement, you the margin levels that you give in the goodwill impairment tests, If I use those margins levels, I get more or less to the old EBIT that you are generating On 2019 revenues, is this the right way to think about it? You think you can the business can generate the same level of EBITDA as in 2019? And I guess the third one, just maybe coming back again to the restricted cash. May I ask you, it was my impression that Some of the cash restricted in relation to the CAA is linked to your volumes. Is that correct? Because I would say, if the thus far the recovery in volumes, the cash restriction would go up. But is that correct or not? Thank you. Maybe on the working capital, you are right. If The bookings come later. This has an impact. On the other hand, the good thing is as the base now is so low and the Intake is so on short term that this could offset the Delay, which we may see in January and March and that's why the impact It's low. And on the capital minimum liquidity needed, it's the €500,000,000 And on the CAA, as I said we are we have managed this very well for all the other markets. We will manage that also in the U. K. Market very well. And that's why we anticipate that the number we have today is a number which is not only defendable, but which we hopefully can also Improve future and maybe, Fritz, you want to say something about the profitability expectations We have I just would add that the €400,000,000,000 of the realignment program is available and has Lowered our cost base in the future. It's It's a permanent reduction. Yes. I would say that's absolutely right and nothing to add here. I also would like to emphasis one thing. This is just cost. If you take into account Commercial positioning and pricing as well. Lower risk capacity and we have taken out 20% of aircrafts, Yes. Lower risk capacity will also normally and should also normally generate higher yields, so higher prices. And particularly when you're on the risk capacity business, that's what you'll see. But that said, this is difficult to predict because you might see over capacities In the airline industry and more competition, so I think it's a safe bet to say the $400,000,000 cost savings will also turn into The profits. That's what we should be seeing definitely. Understood. Thank you. Just a short follow-up on the minimum liquidity requirements. So now you have that 3.1 liquidity in there, but just what would be the minimum level you would be you feel comfortable We throughout the next quarters, is it €2,500,000,000 is it €2,000,000,000 I think I'm trying to understand how much of the German government And that would you be willing to pay from your current cash position? Thank you. Again, it's €500,000,000 But of course, Our expectation with what the cash we have today is significantly higher. I mean, I Fully understand the assessment on the biggest risk, but we are really happy that we have the EUR 3,100,000,000. We see an increase At the moment, day by day, we see the short term bookings. Yes, we will have a €500,000,000 to €1,000,000,000 lower working capital due to the season, but there will be a counter effect because The bookings comes short term. Normally, the October bookings would have been paid. Now as they come in September, we will have that as an incremental. That's we have lowered the cost base significantly. So that's why and we are Sure. That's the level we will have is very reasonable. We don't want to give a number, but we feel Safe and comfortable, but this doesn't take away any pressure in the company to improve the situation. Significant. As said, we have managed the company for cash and that we will do also in future and we have seen a lot of levers to do so And we still have Yes. Maybe Sebastien to add one thing. I mean, before we saw the crisis, before corona, Yes. Usually, we targeted our RCF. So excluding the state debt and so on, the RCF that our minimum liquidity hedge fund was between $500,000,000 and the $1,000,000,000 in the winter low. That's how we managed our business. But of course, I mean, we could give back potentially we could start to hand back Some of the state money, but we always say we need to be careful to be reasonable. I mean, there is still a lot of volatility out. And once we have given back the money, I mean, it's difficult to untap if a Black Swan would come around and so on. I mean, therefore, Being careful is something which we will be doing, let's say, A couple of other quarters, 3, 4 quarters to understand exactly how the Pandemic turned into an endemic and we live with it all. But then of course, I mean, 3.1 is a good number And it shows it is a lot of liquidity. Short term, it's giving the safety net for our company, but long term, it's a Potential to pay out the state and that is of course something we want to do and we will do because That is a prime that's the prime goal to actually pay back the state money. Thank you very much for your answers. Yes. We have no further questions from the audience. So we are closing the Q and A. And I hand over again to Mr. Jusson. Yes. Thank you very much. I think you have seen a good starting point of the recovery. I mean cash inflows and net cash flows of 320, liquidity position as they are. Now is the quarter when we have And we want to turn the prepayments into real revenues. And I think we had a good starting point. You saw The summer capacity in July, how it builds from 350,000 capacity to 700,000 capacity, all those even bigger. And I think this is where we need the eyes on the ball, cost saving remains the main target. And then, of course, Taking care of the balance sheet and the question how we get the state out, again, it's something which is A priority together with a good balance sheet, a solid balance sheet and a solid leverage ratio. Thank you very much