Good morning, ladies and gentlemen, and welcome to the TUI AG Conference Call regarding the 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, Friedrich Joussen.
Good morning, everybody. I'm sitting here with Sebastian and Mathias, and we are doing a joint act together today, coming to Q3 results. It has been a long journey for me. It has been 10 years. I will just do the opening statement and then I hand over for everything concrete to actually the new management and new leadership in the company. It has been a long journey for me, 10 years. It was great. At the same time, I decided to step down and actually move on end of September. It has been two reasons for me to do that and decide that really, you know, actually I will go.
As much as I had fun over the 10 years, you know, every journey comes to an end. You know, now is the right time. The first reason is the company is out of the crisis. We actually have delivered, and you will see that the numbers in almost break even, broadly break-even result, if you take out the operational disruption primary effects. Definitely we will be significantly profitable for the full year. We see the booking numbers 90%, 180% on prices. That's great. Liquidity is very high. We have not drawn any lines actually quite to the contrary. We have handed back lines to the state, particularly Silent Participation II, which is expensive. That's all good.
We keep a little bit of security for the winter. That's the reason why we have not everything back right now, you know, liquidity is not an issue anymore. Also we have made the company, you know, more digital. We have actually, you know, pulled off the EUR 400 million per year savings. You will see in the summary that it will be a very good quarter. The crisis is over. That was the primary responsibility I've had. It's a good time to hand over to next management. Second, who are the people who take over? You know, do the company have a strong succession plan in place? I can say that because I know the people very well.
I worked with Sebastian for 10 years right now. When we joined the company together, it was all the gossip about we must take over, you know, TUI Travel should take on, you know, everything, and TUI AG would disappear. Now, that was actually shaped in a different form. Sebastian and I remember very well, when we combined the companies, that was good. By the way, at that time, Mathias was already M&A responsible. You know, also his tenure in the company is and I know the Mathias as well. Then we shaped the company to the vertically integrated shape we have it right now. We invested in the first cruise ships. We invested into more hotels.
Before the crisis, two-thirds of profits was actually what we call the experiences businesses. We invested into Musement. The digitalization of experiences, the strongest growth market in tourism, very fragmented and so on. Guess what? When you look at Q3, that's where the new profitability comes from. I mean, hotels is now already in the quarter doing more than EUR 100 million of profits. These are the things, the growth factors coming strongly out of the crisis. We reshaped, and that's also Sebastian and I. You know, I remember Sebastian took the role then in Germany. We reshaped the German P&L. German P&L was always below 1% EBIT and was a little bit of a problem child. Guess what? You know, now look at the Q3 results.
This is the strongest performer right now. We did a lot. Then, you know, the crisis came. 2020, as you know, was strong summer bookings, you know, in the funnel. We thought it would become a record year. Unfortunately, it turned out differently. We couldn't do any business, and the company without revenues. Sebastian and I remember very well, you know, as CFO, CEO couple, you are close. Particularly close in that time. We worked 24 hours to save the company. There was a trust building and, you know, a strong alignment. You learn each other very well in these crisis moments.
Also I have to say, Mathias, it was not just us, Mathias as well. I mean, being responsible for, you know, the capital increases over the years, you know, to make us capital market ready again, you know, after the state support and reduce debt and all these things and financing growth and, you know, the turn of the crisis and so on. The people are there and ask myself, you know, after the crisis, you know, coming back to profitable growth, people are ready for succession. What would be better in three years? My conclusion, nothing will be better in three years. We said we will hand over now. This, of course, is not easy for me.
You know, 10 years is a long tenure and particularly I like to work with the team, particularly the team members who take over right now the responsibility. It's not that easy, but at the same time, I'm confident it's the right decision. It's the right decision for the company, it's the right decision for you know, also I think for me personally, it's the right decision for actually my successors in place. That's great. I will actually anyhow miss also all of you, Jamie, just three questions. I could always bet you were the first with three questions. I will miss it, right?
You know, today I'm still sitting here, I'm listening in, but you know, the three questions of Jamie will be also rather answered by Sebastian and Mathias. Thank you very much for your companionship, for working together with us in a constructive way over the last 10 years. With that, I would like to hand over to Sebastian and Mathias to lead you through the, I think, very strong quarterly performance.
Thank you very much, Fritz. Also warm welcome from my side. Yes, Fritz, we had 10 exciting years, challenging years with the merger, good years, and we expected a record profit year in 2020, then corona standstill. We fought for survival and now the strong recovery. If companies are at the edge, they fall apart. If management doesn't stick together, if management stick together, then you can survive, and that's what we did. Therefore, through your leadership, you have built a very strong team, and I'm very happy to lead this team. It is not about changing strategy, it's now about execution. We have a lot of good plans. We broadened the product portfolio for our customers of dynamic packaging, accommodation only, and activities.
We built the direct access to our customers through our app. We are now. The main task is to deliver, to execute what we have built. That is more looking further out, but we had the third quarter, the highlights there. We up and the third quarter was still a quarter back to normality. If you look at how April was and how June had been, then you really see that the more we come into the summer, the better the situation got. Can you make the next slide, please? Okay. We operated in the third quarter roughly 82% of the capacity with customers even above this level.
As said, April was slower than June, and we do see that July has seen a very strong momentum. That is also true for August. For September, there's still something to do because short-term bookings are kicking in. That means we had five million customers, which are four million more than the year before. I think we can be pretty proud of achieving 92% load factor. Historically, in best month, we have 95, so we're getting very close to the historical level. That led us to a broad break even as we say, to a minus EUR 20 million loss, EBIT. If we wouldn't have had the direct cost impact from additional flight disruptions of EUR 75 million, it would have been even positive.
That doesn't include the effect that for a couple of weeks we had a slowdown of bookings, because with all the announcement, the press, the in the news about the congestion at airports, people did book slower. When we met last time, we were at 125% booking level compared to the comparable weeks in 2019. This came down to 85%. Now the last two weeks, we seem to be back at around 100% of 2019 levels. The demand is there. People have trust, and I think what we also do see that the efforts we take to stabilize the systems through standby aircraft to wet lease capacity has helped a lot in building further trust into the TUI brand.
If we look at the different segments, Fritz mentioned hotel and resorts. Although we were not in the occupancy levels which we were used, we are above the profitability. That is mainly due to the ADR development. A very good development, and you have to keep in mind that we don't have the result from the Riu property company that we also sold a small activity into a group hotel. This is really a very, very strong result. By also asset light, asset right, further building up the number of hotels, there are good prospects there. We are very proud as well of the result for cruise and Musement.
I didn't expect, and most of us didn't expect such a quick recovery for cruise, especially in Germany. Britain is still a little bit slower. Germany has seen a significant profit, and we are close to the historical levels. If I look at the July, August numbers with a good ADR, that is really amazing, and I think TUI Cruises is probably outperforming the market. Musement also first time positive, not only because they got now the clients, the tour operator provide them, because without a tour operator, customers Musement would be half the size. But especially the new areas where we sell tours and activity to TUI and to third party customers is growing rapidly. For the first time contributes to the profitability.
Although this is a clear area of growth because we think that customers, especially outside of the TUI ecosystem of today, which we gain, will be TUI customers in the TUI ecosystem of tomorrow. Therefore, all the initiatives with our app, with the enlargement of the product portfolio should pay into the acquisition of new customers. Very good in the holiday experience sector. On the airline and the tour operator still needed the time to build up, and we had the disruption costs, but we're getting closer to normal in the fourth quarter. I've heard a lot of question, what do you think about disruption in this quarter? July was still heavily impacted like the two months before with a higher volume.
What we do see the last 10 days, and hopefully, this is a trend, which will stay, that, the numbers are back to historical levels. I just looked today, we only had 10 delays yesterday and only three above three hours. It's really getting normal. We paid a significant price for that because we wanted to make sure that our customers are happy that we don't cancel several thousand flights. We just canceled 200, and that was 200 too many. Most of it was Manchester, where there was no way around. Amsterdam, we got the cuts, but then we brought the customers to Liège, and the customer was happy. We didn't want to leave the customer alone by canceling. We went the extra mile.
We took the additional cost also in the fourth quarter to bring the customers into their well-deserved vacation and to make sure that the TUI brand is strong. We do see that customer satisfaction index also in the last two weeks have been back to normal levels. A very positive start, but as said, by far more to come. We are not yet over and about the future, it's all about execution. The details of the numbers. Sorry. There's one slide for me looking forward. I think for the summer I gave you. I said that in Germany we are really surprised how well the market now came back. Sustainable is very strong on the agenda for us.
This is something we are very much committed to. We believe that is not only commercially viable to do that, but it is also important and getting more and more important for the customer that he can have a good feeling when he goes on vacation. He apparently is also ready to pay the one or two euros/pound more for a highly sustainable travel. Next slide. If you go into the details, you do see here the capacity we run in the last quarter close to 90% in the holiday experience field and with load factors which were coming also closer to the historical levels.
If we look to market and airlines, you do see that the capacity level was around 85%, a very mixed picture. Central and Germany with lower numbers than the U.K.. The U.K., due to the earlier booking standard as a cycle, had capacity of close to 100%. By having this, we significantly improved the EBIT compared to last year's third quarter. As clearly said, we are not there where we had been in 2019. If you look into the results, as mentioned, hotels also above 2019 with EUR 105 million with a smaller portfolio. The increase you will see in the portfolio in the coming years will be asset light, asset optimized. Cruise for the first time profitable again, with a significant part from TUI Cruises.
The recovery in Germany was by far stronger. Also, TUI Musement back to profitability, not only because of the five million guests from the markets, but especially also by own growth through their own distribution enlargement. The northern region still negative with EUR 90 million. A significant part of the disruption were in northern region because of the infrastructure issues we all know. Germany, and that is really good with EUR 25 million or EUR 24 million profit. The measures we have taken really helped us here a lot by right sizing the aircraft by getting back up capacity when we saw that we couldn't fulfill the timelines for outgoing flights. It cost money, but it helped us to become profitable. Very good way forward.
In Western region, you may ask why the size is smaller? Why is the result so negative? You've probably heard all about the main impact in Amsterdam. That was something we could not really overcome because the airport just cut the capacity, and we had to do a lot. We brought customers to Liège, to Rotterdam. We took the extra mile to bring the customer there. Second, the long-haul business, and that is actually also true for Northern region, didn't recover as quickly as the medium and the short-haul business. Right. A lot of things I just relate to the disruption to make it very clear, even that we only canceled 200 flights. These were 200 flights too many.
Every flight meant 189 people impacted, and you read all about in the press, and that is not acceptable, and that's why we took the effort to take care of our customers, even if most cases we were not responsible for the cancellations. I think it's good to know that 96% of our customers arrived in the destination without major impact. There were 3% which had a medium impact, which means a couple of hour, three, four, five hours delays, and we have less than 1% canceled flights. I think almost all out of Manchester for the reasons you all know, which were less than 1% of the summer program.
As said, 1% too much, and we have taken all the actions we can do. We need, of course, the infrastructure to work. Some things we can recover. We went to other airports. We had more standby capacity, but at the end also the infrastructure has to fix their issues. We had a drop in our NPS and the customer satisfaction index. What is good to see with all the actions we have taken, we are now back to normal levels in the last two weeks, and we are very confident that we are over the period of significant disruptions. Winter should be easier because of less volumes, and next summer we are well prepared that we should back to normal. Customer trust in our brand that we do see every day when we look at the bookings.
We want, and it's our clear commitment that TUI remains the best choice for travel. As said before, that's why was the reason why we didn't cancel the flights, which maybe had been commercially sensible to cancel. We only canceled the flight where there was no alternative because the infrastructure couldn't provide us the service, and that's why besides sustainability, quality is one of my and the management team priority. If I look at the booking development, you do see that, we were end of July at 90%, so we gained 5% compared to the last May meeting. We, in a way, had, as I said, the drop when there was the disruption in the press.
We can now say that we are back to 2019 levels again, and that's the reason why we expect for July, August the 93%, and it will be interesting to see how the development will be in September. When you look at the ASP 18%, so almost on the level we had been before holding up very strongly. There are different ingredients in that. The customer on average still stays one day longer than compared to 2019. He books one half star higher than he did before. The rest, which were not price cost increases, which went by customer behavior, not obvious. When customer stays a day longer, we also have to pay one night more.
We also had to offset, especially the fuel price, cost increases. You may recall that we were only partly hedged because the hedging line only opened after the rebound of the business. We had a significant impact on fuel increase, which made the one or the other would not have the same magnitude as we had. Looking forward, we are back to the policy that we want to hedge the booking status we have. This year, the ASP increase was also needed to offset the significant increase of the fuel price.
Knowing this, the strong bookings, the strong pricing, we expect a very good fourth quarter, which should lead, and that's what Mathias will explain later on, a significant profit for the full year of 2021-2022. The model which we have works well. We have that is also important to know. Greece has been very strong, quite often up taking over Balearics and Canaries. We do see a return of Turkey. That is probably and that is important also for the future. People have a budget and if they are more concerned about the budget, they look where are the good deals, because we have seen above 18% price increases in the most wanted destinations like Greece.
People start to turn around and look where they find good offers, and that's why Turkey have become very strong back because also due to the inflation or the devaluation of the currency, Turkey is a very price attractive customers. When you would ask, what about winter, next winter, we expect that there will be also strong demand, but also with shift in the destinations from long-haul more to the longer medium-haul destinations, like Cape Verde or Greece. We expect a good occupancy and good rates also in Q4. We do see a short-term booking environment that makes predictions a little bit more difficult as also fuel price development. We were able to benefit a little bit from now the lower prices, but who knows what will be the price of tomorrow.
That's why we are going back to the hedging policy we had before. On cruise, we are operating all ships. Bookings are strong. Prices are strong. For the next coming month, we are well-booked. There is a catch-up still to come a little bit for Marella, but also there we do see a strong winter booking for winter. But as said, predictability is a little bit more difficult because it's all short- term. We have never seen before the short-term bookings with good prices have such a high share, and probably we have to live with that for the long time.
We also see Hapag-Lloyd, our six-star ships. It's almost back to long-term booking pattern because people do see if they wanted to have a cabin, a high-end cabin short-term. It was fully booked out. To Musement, we had issues on the pick-up rate because people were not so sure is it safe to go into an activity. We are also there. 35% of our customers book an activity, and we are back there the last weeks on historical levels. As said, especially through the B2B partnerships, we get strong demand, and that helps us to get really relevant for suppliers. We never had so many suppliers contacting us. They want to be on our platform.
Knowing what you don't know yet, what the pipeline is on rolling out, on getting direct product-wise, we will see a very good Musement activity. By the way, not only in destinations, but also in the source markets, because there's also one clear objective. We want not be that the customer books every two years with us his three-week or two-week vacation. We want him that he books once a month with us. We are not yet there. It's as said, all about execution, but you will see in the next twelve months what I just tried to describe. Mathias.
Thank you. Let me do one technical adjustment. I think you can now hear me as well. Thank you. Thanks for having me. I can also thank Fritz for the last 10 years of very intense and very close working together, and in particular also for this very structured, very team-oriented handover. Of course, I really look forward to the new role. Allow me two minutes or two words on introduction before I go to the details of the quarter. I've brought with me my initial thoughts and what you see for priorities. They are, of course, very closely aligned and linked to the priorities that you just heard from Sebastian.
Number one will be for us to return to profitable growth, and finance will bring the right tools, monitoring, and controlling to that. We'll be the gatekeeper and continue to be gatekeeper to our resources. Our cash and balance sheet, the discipline, that's something which is, I think, now at the heart of the company, and this will continue to be so. To focus on cash, please ensure that this is one of my highest priorities. I think the third element is also very important because if you look at the finance team within TUI, I look at that from the internal side, of course. I think the team has really done a great job everywhere.
This to keep this team together and to develop it further, this is of course something which is really important for me going forward. Now, turning to the quarter, there's one event that I would just to recap on before we go into P&L cash flow and the balance sheet. As you know, we were in a position to return the Silent Participation II, so this hybrid capital of around EUR 670 million to the state end of June. That's something you will see the impact of through all these elements in the quarter. I think it's really a great step that we handed that back, plus the additional undrawn facilities from KfW of a bit more than EUR 300 million, down to EUR 2.1 billion.
Just as a reminder, this is something which we haven't drawn that for quite some time. This is a really good step and to see the company and see that also in the balance sheet later to recover step-wise, that's something that was what we planned for. That's also something we expected, but now to see it materialize, this is of course a really good step. Also it was quite encouraging to see the demand that was there when we did the equity raise for TUI story, for the TUI development. We of course very grateful to our investors who supported us on this issue in a very volatile market environment.
Now, turning to the quarter, if I may start with the P&L, almost break even, so that's within what we planned for. As Sebastian said, this disruption were costly, so not only for the customers, and every customer that is affected is one customer too many. At the same time, this is also translate into quite a substantial impact on the quarter with regard to cost of the EUR 75 million, brought us then below the line to something like minus EUR 30 million. Overall, still all effectively break even for this quarter. Good, I think is also the development on EBITDA, because then on the nine months, we are effectively neutral already accumulated, and this is a very good basis for then the fourth quarter.
You're aware that we will start with our covenant test end of September, and so the profit of Q4 will effectively build a good base for that covenant test. If you then combine it with the balance sheet that you will see in a minute, you probably can do your own analysis later. I can only say that we are confident on these covenant tests based on these numbers, and it's probably now you can do your own assumption on that, and that's probably helpful. In terms of adjustments, we have a book position accumulated of -30. We have an assumption for the full year of something like 90 or 110.
We will remain that unchanged, because we expect some of our restructuring from realignment program to translate into further expenses there in the fourth quarter. Net interest, you may see the EUR 120 million is higher than in the year before. We already had, and this is something reported last time, one-off non-cash impact from returning the bond portion of the bond with warrant, one of these government facilities at that time. Now we have another impact from that, which is linked to the return of the Silent Participation II, and is effectively a non-cash interest that we had to book in context of the then assumed at a certain point in time, overall return of the scheme to the state.
Both together, we talk about something around EUR 60 million, and if you add that's why we expect that we have a slightly higher amount for the full year in our P&L, and we have raised our modeling assumption to EUR 450 million-EUR 475 million. Again, the important thing is this is non-cash interest, and this is a one-off. Going forward, this will not impact our P&L. We have and this, and kind of the underlying interest cost for next year will not be affected by that. Whenever we return facilities to the state or expect some volatility in the lines, which I think is natural. Important, the coupon on the Silent Participation II is not in this income statement because it's, from an accounting perspective, below the line.
This is paid as effectively classified as a coupon dividend. It's you can see it in the cash flow, but not here. Tax maybe as a last comment. Also there due to the recovery of the business, you have volatility in the numbers. I tend to look at the cumulative position with the minus seven. Probably we will have some further volatility into fourth quarter because some of our entities will be profitable, some for the full year will be still negative. We will not book kind of the deferred taxes on those. I mean, there's a lot of technical background in the end. The important thing there, again, is that going forward, we want to get back to our underlying tax rate of the past, and we aim for this below 20%.
We had 18% in the past. Now, turning to cash flow, again, this overview I think we can skip because it makes clear how we have recovered, and you can see the EUR 75 million. On cash flow, you see the EBITDA. You also see, I think from a structural point of view, this quarter is brought in line again now with what we would normally see in a quarter. In 2019, you probably, if you look at these numbers, you've seen a similar development, strong inflow of working capital because we ramp up in this quarter for the peak summer period. Other than that, I think there are two items to highlight, plus investments that I would like to touch on. Tax paid, you see a quite significant payment here.
This is not related to what we saw on the P&L. This is a deferred tax payment of the past. I must say we are quite happy that we could arrange for these deferred tax agreements in the past. We expected this to become due and now you can see here the payment. Again, this is one-off payment, and you will not see an impact in the future years that you can assume that we go back to this underlying tax rate again. Same on interest, part of this tax was also booked in interest of this one-off payment. Also you see a little bit more of interest coming from the hedges because you also hedge more. On investment, this is something I also wanted to highlight.
We have a range of 120-280 as our modeling assumption. We already said we are at the upper end of this. We also said that you could expect, because it's coming a bit from the mix, how we finance our aircraft, that we have less from the asset financing come through. Now accumulated, you see 290. We expect in the fourth quarter a significant portion of PDPs to realize, so this will reduce this number. Also we will from the financing through aircraft divestiture, the rest proceeds coming in, that should have bring us back to this quarter of the upper end of 280. That's why we leave that modeling assumptions unchanged for the moment.
The rest of the financing cash flow, you see in particular how the equity raise went in, and we paid back the Silent Participation and reduced the RCF. Now, in terms of liquidity and balance sheet, again, on the headroom, so our undrawn facilities and available cash. If you look at that, you see, of course, what you see in the cash flow statement. The page before, strong ramp up, but in particular, also the hand back of this EUR 1 billion of facilities to the state. The balance sheet. That I think, because we focus here on our financial debt position, important that you don't see an impact here of the Silent Participation, given that it's recorded as equity.
Overall, I think to get back to something like EUR 5 billion of gross debt, 3.3 billion of net debt, that's a really good step in the right direction. Also, as Sebastian said, KfW not drawn, RCF effectively down to EUR 200 million of drawings. That's how we plan for it. It's again very good to see how this materializes. Also because of the interest environment, the net pension obligation went down to something like EUR 400 million. This is also helpful for the gross debt. As I said in the beginning, we look forward, and we are confident on the covenant test and starting as of September. I think overall, therefore, a good quarter. We have seen the ramp up of the company, the recovery of our earnings.
We have a very good basis now for a profitable fourth quarter and deliver then upon what our target to have a significantly profitable EBIT for the full year. With that, Sebastian, I would hand over back to you.
Thank you, Mathias. If for this year we deliver what we wanted to deliver, and our midterm ambition is of course to significantly grow our EBIT, not only to a historical level, but very clearly above historical levels, and especially by top-line growth. Yes, cost is always an issue, and it will be an issue. At the moment, it's so important to offset cost inflation by reducing cost to at the end also have a financial stability and a leverage ratio. We always said the first target we have is a gross leverage factor of three, but to further reduce this for the future. How do we want to do it? If I start with the box on the right side, the Global Realignment Programme in a way is executed.
I mean, only a very small portion still has to come, but everything has been implemented, and we will see it next year. The growth through asset right financing, the methodology, the methods are available. If we now want to have a hotel and we are able to acquire with the fund or through a joint venture company, the structures are available to grow the business as described earlier. Very, very important is for us the incremental products that we are bringing at the moment. I said, we don't want to be the choice for the traditional package once in two years. We want to be the choice very often in a year. We see dynamic packaging has become more and more important.
Germany, for example, who is the front runner on this in our TUI ecosystem, in the last weeks did 25% of all sales of products dynamically packaged. We are in the process of rolling that out to the other markets in the next twelve months. What's also very important are the component sales. TUI has not been recognized as someone you would have top of the mind when you book a hotel only. We now have built direct access to content suppliers like hoteliers, and we bring it directly to the customer through web, through app, and of course also through retail. Also, the Musement product, tours, and activities, we now have several hundred thousand of products which we can bring to our customers.
As said, not only in the destination, but also in the source market. We want to be, if the customer wants to book a museum ticket, that he does it through us. This only works if we bring these products to the customer, and that's why we have put so much effort in improving our app approach, our mobile first approach, but also the traditional mobile access to the customers. There we are making huge steps forward, from a company who five years ago sold traditional package tickets to a dynamic, agile, full content customers. That is also very important on the key USP of having exclusive content. Our own brands, exclusive also products on when it comes to activity.
This should lead to a significant growth for the foreseeable future, and not only growth but a profitable asset light growth. That's why we are very confident, even in a probably more challenging market environment, consumer behavior and so on, that we will have great products to be more independent from the general trends we may see. Now we go to the Q&A session. We are very happy to answer your questions.
Ladies and gentlemen in the audio conference, if you would like to ask a question, please press nine and star followed by the hash key. In case you wish to cancel your question, please press nine and star again. The first question. Hold on a second. Comes from Jamie Rollo from Morgan Stanley. Please go ahead with your question.
That's predictable. Thank you very much. I've got three questions, please. First of all, you've obviously repaid a lot of state aid already. Are you still expecting the German government to convert the remaining silent participation? Secondly, your gross debt is now down to about EUR 5.5 billion. Do you think you still need to raise more equity, particularly if that's going to go up over the winter, given the normal seasonal losses? Finally, just an operating question, digging into markets and airlines margins in the third quarter. Your revenues were pretty well back to 2019 levels.
If we add back the disruption costs, the margins were sort of negative 2%, and they were positive 2% in the same quarter in 2019 if we add back the max losses. That 400 basis point drop, you talked about cost pressures. Should we expect a similar drop in the fourth quarter when obviously, you know, you normally make a double-digit margin adjusted for disruption costs? Thank you very much.
Thank you, Jamie. The good thing now is the first two questions Mathias has to ask, not me anymore. Maybe a few words on the margin. The third quarter was still for market airlines, a re-ramp up quarter. You see significant differences between April and June. June more normal than April, where you had still significant ramp-up costs and less utilization. We expect month by month a trend to more normalized margin. We still have to keep in mind that our hedging position was not there, where most likely our competitors has been. Because we were able to start, and because our policy is always to hedge at least the booking position and a little bit ahead of that. This was not possible.
That is now more and more possible, and therefore, we haven't had the benefits of hedging earlier, and we had to take the fuel price. Four weeks ago, the spot price was $1,350 per metric ton jet fuel. We had to take this price. There also, we see a normalization to it and that we will be in two or three months on a hedging, most likely on a hedging level, which is comparable to other touristic companies. The margin has been significantly impacted by fuel prices and by ramp-up costs in the quarter. We expect that they should normalize and long- term will be probably a tough winter or a challenging winter.
We have been very careful in planning the capacity, but we don't see no reason why margin should not be on historical levels, especially with all the cost measures we have taken. The more we do also dynamic packaged products, the more we can benefit from good offers from our suppliers. Therefore, the dynamic packaging has been so important to implement that. Mathias, the first two questions for you.
Yes, good morning, and thank you for those questions. On the state aid and whether the government would still convert, I think we need to continue to say this is a bit out of our kind of decision, and knowledge. In the end, I think there is a strong economic incentive still for the state to do so, but this is effectively also all we know. This is a bit out of our things. I think what we can say that the state has been very accommodating in the kind of discussions around the silent participations too, and this is something we really appreciate. In terms of the balance sheet, I think when I listened to your questions, that mirrored how we look at it.
I think it's a really good step to get there, and it's really good to see that the company has now stabilized, recovered, and that we are back to where we wanted to be as a first step. Now, in terms of focus is really get the company back operational where it should be. At the same time, I think we will continue to monitor all kind of opportunities on the capital markets in terms of that something we just have to be open-minded. I think, if we look back over the last two years, to be open on that, has been very helpful. I think that's a bit our financial strategy.
Just to clarify on that, on that last point, it sounds like you might be considering raising equity. You're not ruling it out. If that is the case, would that be likely to be this year? Also given, I think you've now exhausted the non-preemptive equity offer with that raise the other day. Can you do a preemptive equity raise if the Russian shareholder is blocked from taking up the rights? In other words, are you actually now limited in your ability to raise equity?
May I add to that, Mathias, there are no plans to raise more equity at the moment. I think that is very clear.
Okay, great. Thanks. Fritz, best of luck for the future. Thank you very much.
We pass it on. Thank you.
The next question comes from Cristian Nedelcu from UBS. Please go ahead with your question.
Excellent. Thank you very much for taking my questions. The first one is on liquidity management. Could you give us a bit of color, how do you plan to refinance the KfW RCF? Is that via own cash generation? Is it economical to replace it with a bank RCF? If you can give us a timeline there. Secondly, in cruise pricing, if we look at Q3 TUI Cruises JV, the pricing in there was down 1% versus 2019 levels. This is weak considering the current inflation environment as well as the fuel cost almost doubling since 2019. Can you give us a bit more granularity what is happening there? Is there overcapacity? What is causing this weak price development?
The last one, looking at the free cash flow generation in Q4, I believe in Q4 2019, you were generating around EUR 120 million of free cash flow, positive free cash flow. Could you tell us if you expect a positive free cash flow in Q4 this year? Is it better than 2019 or any type of directional steering you could give us at this stage? Thank you.
Maybe, Mathias, if you take the first and third question, I will answer the cruise question. I mean, I'm really amazed about the recovery of cruise. Being on an occupancy level, which at the moment tends to come to the historical level, on a price level, which had been the price level of 2019, is an outstanding result. If we, for the time being, assume that this trend goes into the fourth quarter and into the future quarters, then the coming back of the cruise market, especially for TUI Cruises, is really strong. We do see that as a very positive development. Second, when it comes to inflation, cruise is probably. I mean, we always say that inflation or price increases on touristic products should be less and will be less than normal inflation.
Probably cruise will have the least impact on inflation because they have a lot of fixed-term contracts. Yes, on fuel they see the impact, but the possibilities to reduce, and that's what they did the last 12 months, consumption has been significantly reduced by going slower, by one or two less hours in the morning in the harbor. They have done a lot of actions to lower the fuel consumption. Yes, they are also impacted, but at a lower level than any other activities. We are very happy and actually surprised by the strong recovery.
Thanks, Cristian, for the two questions that remain. On liquidity KfW, I think from a let's say financing perspective, KfW, as you know, has a term until 2024. We would look at this during the course of next year. I think one is to make sure in terms of that we have sufficient headroom and that we don't return facilities just to return them. We do that in a very structured and stepwise approach as we did in the summer. For the overall financing scheme, I think there's nothing to add compared to what I said before. Focus is now really on the operational recovery. This will, I would expect, also us opportunities going forward.
In terms of free cash flow for the fourth quarter, I think you already brought it up in your question. Looking at 2019, in the fourth quarter, we start to pay our hoteliers. We start to see less prepayments from customers because we go from the peak season to the autumn. In 2019, it was probably EUR 1 billion of working capital. We may see a little bit more this year because we also have this inflation effect to some extent on the working capital. The other ingredient then for the cash flow in the fourth quarter is then the profit. That's something I would like to ask you to make your own assumption, because unfortunately, given where we are, we cannot provide more details on that at the moment.
Understood. Thank you very much. Sorry, just on the cruises, I'm not sure I understood well. Occupancy in Q3 was 70% for TUI Cruises. Did you mean that currently, sort of August, you're back at occupancy back to pre-COVID levels or close to 100%? Was this the message there? Oh, apologies, I didn't fully understand that.
What I tried to say is that the booking development is extremely positive, and we are on a good trend to come to historical levels.
Perfect. Understood. Thank you very much.
The next question comes from Alex Brignall from Redburn. Please go ahead with your question.
Morning. Thank you very much for taking my questions, obviously. On, I guess the first two are digital questions. Could you tell us what the online distribution mix has done? I appreciate that because of the different capacity levels, it's a bit difficult to compare, but maybe directionally how that's looking. In terms of the restructuring, a lot of which is related to digital, could you just give us a bit more detail now that you've completed it? Sort of some of the highlights in terms of accomplishments that have done or things that we can visualize that have fundamentally changed from how you were doing them before to how you're doing them now. The third question, you talked a lot about dynamic packaging and your capacity being more flexible.
Could you talk a little bit about your hotel and airline sourcing? I guess on flights there's less capacity available, so whether you're able to find capacities from third parties. From hoteliers, talk about sort of inflation or lack of inflation in terms of rooms that you are seeing there. Thank you very much.
I start with the third question. The markets in which we are very different. The most extreme differences are between the U.K. and Germany. In Germany, third-party flying is available everywhere. There is a huge capacity on third-party capacity. We have no issues in getting flexible seats. This is different to the U.K., and that's why the fleet in the U.K. is significantly higher. The usage of wet lease partners is also higher in the U.K. We really adapt it to the model. On the other hand, also in the U.K., more and more the third-party seats are available, which we use and package dynamically. It's more difficult, or maybe not difficult.
It's less supply than in Germany, where you could say there is in some areas even oversupply on seats. Hotels, it's a very different story because at the end, we differentiate in two directions. One, our own brands or where we have exclusivity in hotels. There we buy early, we buy for an extremely good price, and we distribute. The other hoteliers, they want more and more direct access from their PMS system, so their inventory system, into our systems. There it's important. There are two scenarios. One, if there is a lack of capacity like we had this year in Greece, the hotelier only wants to give us more allotments for a higher price.
We need to accept higher prices, but we still get beds, and we can sell to the customers, or there's less demand, and then we want to benefit from lower prices than maybe before the season. This is something we now are more and more able to do so. By having these two areas of strength, it's working very well. One of the reasons why Germany became so positive is that we, as I said, 25% is now done in package. We estimate roughly that half of it's really incremental demand, and that's why we think this will be a source of growth in the future. What are the digital highlights? I mean, there are a lot of things which we change.
I mean, the most obvious thing is you are in the destination. We now have, I think, service app penetration of 80%-85%. Most of the customers have it. Why do they have it? Because they were concerned, what about corona? Is something changing? Where do I have my documents which I needed to entry and so on. This means that we need less reps in front of the customer to support this. This is a significant benefit. If we now have the service part and the customer use it, we now started very successfully offering the Musement activity, the excursion, because we know that he is on Tenerife, and we want to offer him the water park, the Siam Park.
We tell the customer, which is close to the Siam Park, we have a special ticket offer because it's raining, it's especially priced attractive, and the customer can book immediately. These kind of services where we offer the customer knowing his behavior, knowing where he is, the right product. That's what you can. Like, the activities you can see today, we'll offer that for accommodation only, for flight only in the future. This is really a very strong source of growth. Other things you don't see too much when we link directly to the hotelier system so that he don't have to negotiate a contract with us. Similar to booking, he puts in the content, the prices. Automatically, it goes into our systems.
That is only possible because we are changing our systems. It's behind the scene. There are a lot of things which you may see as a customer. Hopefully, you will recognize and it's a value for you. Upgrading, upselling is also a part which will come now, and others, which you don't see, but it's important to keep costs low and to be agile and to get the best deals out of the market. The online distribution mix, what's happened there. Again, markets are very different. Germany still has a significant share of third-party retail, which is good because it's the customer who decides, it's not us who decides. We support the third-party distribution very heavily, and it's strategic for us.
On the other hand, we do see that the customer goes mobile. That even there's a very strong move from computer to mobile, and that's why the app is so important. If you look at the different markets, the U.K. is, and I don't know if we have given the numbers or not, is very. I mean, Nordics is 90%. U.K. is 70%. Germany is still 30%, but Germany probably this year has doubled. We are getting closer to. I mean, it still needs, you can argue two years, probably three years to come to the U.K. number.
Again, if the customer's choice is to book with third party, we are very happy because the third party is really good in upscale the customer to offer him the better product. It's easier with him in talking to him than booking online. I think it's important for me to say we are supporting third-party retail very much. For us, it's the mobile-first strategy because this helps us to be hopefully customers' first choice more often than it has been in the past. Now you would probably ask, what is a good number on mobile? We are still on a low number. I mean, if the best, at least I know, is Booking.com, is it something which we can achieve in one year? Not.
It shows us very clear the direction we should go to.
That's fantastic. Thank you. Maybe just following up on the capacity sourcing. If we look at your selling rates for this year and what capacity you're hoping to get to versus 2019, could you just split out how much of it is committed and how much of the incremental that you can sell is still flexible at the moment, so you have no risk on it?
Maybe if we can provide you with the exact data, I would say half/half, but maybe this is right or maybe it's probably not too far away, but we will provide you with the exact data. Again, the U.K. market is by far a very high percentage of committed or exclusive, whereas Germany is probably half of this is committed. What you also should have in mind is that our brands, the hotel brands, also cruise, go more and more direct also into other markets. Why is Riu doing so well? Or why is Atlantica doing so well? Because they get a huge share nowadays from Greek customer or from Spanish customers for good rates.
That also has an impact on how much we can commit, and we are going to commit and how much exclusivity we have, because we just start to trade off what is the right, and it can vary. I mean, we had this high season where Riu could sell a significantly higher rate direct than with the tour operator, and we now really try to take the optimum out of that.
Brilliant. Thank you very much.
The next question comes from Richard Clarke from Bernstein. Please go ahead with your question.
Good morning. Thanks for taking my questions. Yeah. Three if I may, all quite related. The first one, you said you believed in the cruise industry. I think it was TUI Cruises that you had gained market share. I'm just wondering what the market share dynamics have been for your markets and airlines business. You know, obviously with Thomas Cook coming out compared to 2019, have you managed to pick up share or has that share gone to someone else? And then maybe related to that, you mentioned the risk of customers potentially trading down, going for a lower star holiday or for a cheap holiday. I think it's probably fair to say that some of your competitors in the market trade a little bit more on price than you do.
How do you protect against the customer going to one of those slightly more discounted provider? Looking a little bit more longer- term, just on kind of capacity planning as we run through the next few years. You used to talk about putting capacity up 20%, with Thomas Cook coming out. You know, with the flight disruption and what's gone on for the last couple of years, you know, how are you thinking about capacity evolving? Do you think we're at the right level now, or do you expect it can get to that sort of Thomas Cook exit planned level?
Maybe to first question on cruises. Also Marella is doing well. They started to recover two months later than TUI Cruises. TUI Cruises was never out of the market, whereas cruising in the U.K. was in a way forbidden. That's why the recovery is as strong as TUI Cruises is just a time delay. If you look at market share, I mean, the German market is the German market, because customers 90% or 95% want a German speaking product. Therefore, there is not so much impact or hardly any impact from MSC or the other international cruise line. As the capacity between AIDA and TUI Cruises is as it is, there are probably not main changes in market share.
What we do know is that we have recovered very quickly, and very well. The prices have become good. That's why market share is not really variable compared to the airline business. If you look at market share in airlines, it's getting challenging if you lose market share, but it's also a trade-off between the profitability and market share. Therefore, dynamic packaging is so important, because you are right, Thomas. TUI has been always and is very strong in the four-star plus segment. If you look at market shares in Germany, we have by far higher market share there than compared to the two-star segment.
That's why to make sure that we not only get our very good market share in the four or five-star segment, but also in the two or three-star segment, that's where really dynamic packaging kicks in. I think it's fair to say it's not always the case, but the majority come from less high cost or a high star rated product in dynamic packaging. That's actually one thing, how to protect against the other dynamic packages. There is no reason why we should not be as good or even better than they are. What are the exact numbers? I think, and for the U.K., we don't have real numbers, but we think we are doing well. In Germany, we have numbers, and there we know that we do well.
It's also quite interesting that the numbers you do see with us, probably the whole market is still only at 85% of where it has been in 2019. So why are we at 2019 levels? It's because we have taken market share from Thomas Cook. Again, what we say, dynamic packaging, components only, this is now the way we are on. Not everything is there. That's why it will be interesting when we really see the first volumes like we have seen now in Germany will kick in. Hopefully in the next 12 months, we do see this like we do see it with Musement. I think Musement was the first one where we could see strong growth.
Just on the increase in capacity post Thomas Cook, is that still a plan to get back to 20% ahead of 2019 levels?
I mean, we have to be careful because I always say the last beer you drink is the problem, not the first beer you drink when you get a headache. We are cautious on capacity also, especially for winter. Yes, we may take the last EUR 10 million profit chance, but you can easily lose EUR 50 million because you have too much profitability. Especially long haul could be more under pressure because the fuel part of the whole package is of course bigger. Yes, we want to grow. We want to take our fair share also of the Thomas Cook market share. We want to fight. Maybe we have to be even more agile than we had been in the past.
Market share itself can be a dangerous thing, because if you increase the capacity too much and the market is not there, you yield. There we have to be really careful.
Okay. Makes sense. Thank you.
If you do dynamic packaging, you don't care because the yielding comes from the supplier, and he has to take the burden. That's why we put this into the German market. Hopefully in the next six to nine months, we will have that also in the U.K. in full scale, so then we can benefit if there at one stage in some market segment, and probably more in the lower end, is an overcapacity, we benefit and we don't take the burden.
Thank you.
The last question comes from James Rowland Clark from Barclays. Please go ahead with your question.
Hi. Morning, everyone. Three questions, please. Just following up on your U.K. market points just then. Just thinking more medium- term. Do you see growth in U.K. volumes for TUI package holiday customers, just given the medium-term growth plans of the likes of easyJet and Jet2 in that market? And then secondly, on customer reviews, I wonder, well, you said in your remarks that satisfaction levels have recovered after the airport disruption. Could you just give us a feel as to what those scores look like compared to pre-COVID, and also the level of repeat bookings you've got in your system, compared to pre-COVID as well? Finally, just on profitability, looking a little bit further out, we've obviously got softening consumer demand and high cost inflation.
Do you think you would be able to grow the profit per customer going into next year? Thank you.
The most easiest question is the customer satisfaction score. If you look at the rates one to 10 we saw a drop maximum of one point percentage. It's not one point, not a percentage point, one point. That was maximum 10 weeks or two to three months ago. Two months ago. That now has recovered to the historical level. The one point we have gained again, and with this we are back to very, very good levels, which I from what I know in the markets. How do we see growth? TUI is extremely strong in the committed exclusive product range, and there, the competition is less than in the
Because people are prepared and ready to pay the premium for a premium product they only get with TUI. On the other product, that's why the dynamic packaging is so important, that we now bring the products into the market so that we can benefit there. Even if there is, and that is probably not unlikely, that there is consumer sentiment to buy maybe less, that we can further grow our customer base and our profitability. Will it be next year or after next year? That is interesting to see. Next year should be a more normalized year. The whole benefits of what we are doing and what we are implementing will probably come a year later.
We do see that the market not only on the experience products, hotel, Musement, cruise will be strong. There might be a customer demand issue, especially in winter, which we would like to offset with incremental volume we get through incremental products we bring into the market. It's not easy, and it would be if I would say everything is fine and it will moves on like it has moved on the last couple of weeks, that would be not right to say. That's why it's all about execution, that the things we have prepared, we implement, that we do it well, that we communicate well. There are markets which will benefit earlier from it. Others will still need to wait longer. Therefore, the focus.
The customer demand we can hardly influence, but what we can influence is our position in the market, and not only in the traditional tour operator market, in the dynamic packaging and in the activity market, and all the ancillary markets, car rental and so on. We know that it's not an easy way. We don't have to redefine the strategy, but we have to deliver and that is our all focus every week.
Thanks. Your expectations for next year in terms of profit per customer as you look across the group versus 2019 levels?
I don't know if I would have the answer. I think we are well prepared to get something good out of the market. It depends so much on. There's so much volatility still in the market. Fuel price, I just looked it up, $95, and two weeks ago it was $115. Consumer sentiment, it's changing so often. I think there are good reasons to believe that the market recovery will move on. There's still a catch-up pre-COVID crisis, but to have it really in numbers, it's not possible. Vaccination is also an issue. That's why we focus so much on execution. Thank you very much for your interest. Thank you for
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