Earnings Call: Q1 2020

Feb 11, 2020

Good morning, ladies and gentlemen. Welcome to the TUI AG Conference Call regarding Q1 Results for 2020. At this time, all participants have been placed on a listen only mode. The floor will be opened for questions following the presentation. Let me now turn the floor over to your hosts, Mr. Friedrich Julesen and Ms. Birgit Koenigs. Thank you very much, operator. Good morning, everybody, from Hannover, where we have our Annual General Meeting in due course. I'm very happy to update you on the latest quarter results. Before I do that, a very short recap of last week's development where we actually sold our 100% J on the 100% Harbac Loyd cruise into the JV with two cruises. That has been, I think, very strong and good transaction for us. It has been part of the Holiday Experiences asset right expansion strategy piece. So it is the question of how to grow our businesses with the right input of capital. Now when you look at the acquisition, we sold Harpag Lloyd for an enterprise value of €1,200,000,000 which is, when you compare it to our EBIT, a very strong multiple, I would say. We had that business we had to restructure the business. We're now on top of the €1,200,000,000 we keep a net present value of around $30,000,000,350,000,000 plus for the 50% profit pool, including the synergies, the transaction is largely debt financed and will be closing in June or around summer twenty twenty. When you look at the strategic benefits and financial benefits, on the strategic front, we had two businesses which were more or less not growing anymore, 2E or not growing fast enough, 2E Cruises because of the yard capacity for big ships, Harbacloid because of internationalization, which was not really possible with the German brand and also the financing of new ships. So we put these two together and suddenly, Tuohy Cruises can grow via Harpaglut and Harpaglut can grow because it's part of an international group, including the debt facilities of that company. So it's a win win situation. At the same time, we keep control of the brand, of the product, of the marketing and sales. RCL is contributing the international global footprint. So that is also from that point of view great. And we keep our power drive for digital expansion, which we'll come to later. So strategically, it's good, but also financially, it's good. As I said, the value crystallization of 1,200,000,000.0 plus the retained profit pool. So that's something good. Truly Crusis could finance the transaction largely through debt. A little bit of €75,000,000 of equity had to be injected. But think about it, 75,000,000 equity, 1,200,000,000.0 of enterprise value plus €300,000,000 plus additional benefits. So it's a no brainer of a very good transaction. Now also in our numbers, you will see that, but it's not part of our numbers today because, as usual, we only put this into our numbers when the closing has happened. But just the offloading of debt would have generated or will generate a cost leverage decrease by 0.1 to 0.2. The net cash proceeds, of course, we said we would largely use for deleveraging the company. So I believe it is it's a great transaction. So that actually as a pre Phase four for our today's results announcement. Let's talk about the Q1 for a moment. We had an exceptional start in Q1. And you can see that in the winter trading and you can see that in the summer trading. In the winter trading, we are now 83% sold. At the same time, you see the PAX growth on average is three percent. The sales price is actually up 6%. And what that really says is, by the way, revenue results to 10. That's also clear as a combination of Paxson and average sales price. When Thomas Cook went insolvent, the capacity for winter was largely fixed. And therefore, we had a little bit of regular home, that is 3%, but the big benefit came on price. So that's how the winter went. And interestingly enough, you see all regions a little bit similar. In the summer trading, we have more room and had more room for actually extending capacity. That's why you see the capacity growth of 14%. We still kept an eye on profitability, so also the sales price up 3%. And we you can see that also that we actually have been, how do you say, moderate with our capacity growth. So we are now on the load factor, which is important as well, at 36%. Now the question, of course, is how are we doing with that? My view is twofold on this. The first one is, I think, in the big markets, after the insolvency of Thomas Cook, I think what I see today is a shrinking of the market. So we will have taken over proportionate number of customers from the market because we secured the Thomas Cook hotels, particularly in Turkey, where Thomas Cook was very big. Others will have taken capacity. But altogether, it will be smaller than Thomas Cook has been before the insolvency. Now I have been asked also, do I believe that is long term? Maybe it is and maybe it isn't. If it wasn't, then I would say it's even a better message because then we have seen not the full effect yet because then the full effect would come in late trading. That would be very good as well. So if the market has shrunk, I would say then you have seen the effect. If it has not, then at least we don't have not seen it yet because today the market has been small. Now let's see how it works. We don't know, but we are prepared. Let's talk very briefly on so trading is very good. And by the way, when I come to guidance when we come to guidance, we will say we had $950,000,000 to 1,500,000,000 That was the range where we said the original guidance range, and we said that excluded the additional Boeing costs and so on. Yes, it's true. So we are now saying upper end of it, yes? And we are saying high single digit growth in revenue. Of course, when you see these numbers here, you would argue why not high single digit. Well, at the end of the day, we are preferring cautious approaches because we have seen hot summers and so on and so on, and we don't know how the next summer will be. But at the end of the day, I can say we never had a stronger January in our company history. So the January was very good, and let's see how it will go on. Now on the downside a little bit is, of course, July MAX. You have been all seeing that the new announcement is middle of the year, whatever that means. We have decided that we take on board a more cautious approach and say it will not be available this year. So it might be either September 1 or October 1. We will be incurring a little bit less cost than we had said. Originally, we had said $220,000,000 to $270,000,000 additional cost. Now we talk about $220,000,000 to $245,000,000 At the end of the day, we don't know 100%. The only thing we know is this time of the year, actually, the market shares are distributed. Thomas Cook went insolvent. We are more or less extending our program with 21 aircraft. We are extending the program with 21 aircraft because we believe it will stick. Otherwise, we wouldn't do it, right? So we believe it's a long term sustainable growth, what we are talking about. And now the market shares are distributed. We have actually got the hotels of Thomas Cook. So we believe we will be a long term beneficiary of the development even if it costs a little bit more with $7.37 MAX being at wet leases or dry leases. So that's a little bit how I see it. And also how I see is it's not nice. It's big numbers, yes? We might also see first compensation this year. At least the negotiation are shaping up. At the end of the day, it doesn't hinder us to take the market share. It doesn't hinder us to do the strategic transformation. And the strong trading, I think, will be more visible also in the bottom line numbers as soon as the MAX effect will be off our shoulders. And we hope it will be not too far in the future. Now a very brief word on sustainability because also in the Annual General Meeting today, that will be a big subject. We always been having working very hard on sustainability. And over the years, you can see a couple of examples being the one or four airline in terms of efficiency or having 85% of our or 83% of our hotels and resorts with certifications. So we take this very serious. We are working on our new sustainability strategy for 2020 to 2030, in line with the UN goals. That means not only ecological but also social and economic. We believe everything needs to come together. So we are driving very hard. By the way, many people talk about purpose of business. So what is the purpose of the business? I think one thing is very clear. Without tourism, inequality in the world would be bigger. In most of the countries, we are the biggest investors. Sometimes, only source of value our customers bring benefits to destinations. By the way, if you are interested, you can see in my Annual General Meeting speech, which will be published, and we can also send to you a comparison between Haiti and Dominican Republic, two states on the same island. The only difference is 10x the tourism in the Dominican Republic, and you see what it does. So anyway, so that's a small excursion in terms of our strategy in sustainability. Let's look very briefly on the numbers. In the first quarter, we were almost 7% turnover up. As I said, for the full winter, it will be more around 10 So it started first quarter a little bit slower, then it became stronger. And for summer, we are up 17%, as you could see. So we believe that's very strong. That also resulted in underlying EBIT decrease. Of course, because of the MAX, if you like for like excluding MAX, it's a little bit up. But this little bit only is little bit because we have so much more program right now in Turkey that actually is additional capacity, which, of course, doesn't generate any results in the winter. So it's a very strong trend. Then reported EBIT up 25%. This includes a one off effect of a disposal of Berger and MEA, one of the businesses we have, and we had a book gain. And then the guidance, we will be talking later. It's a composition of upper end of trading shaping up to the €1.5 and more control, less uncertainty on Boeing, unfortunately, a higher number of cost. But maybe even also some mitigating factors, also maybe a little bit of payment as well, We are very certain that including everything, we will not be below €850,000,000 And if you compare that so we still can achieve the upper end. We will not be below $8.50 I mean just to give you an idea, when we started the year, the lower end of trading would have been $9.50. The upper end of the Boeing additional cost would have been $2.70. So if you had added these two, then we would have started at EUR $680,000,000. So we are now talking we are not below EUR $850,000,000. So it's shaping up nicely to the upper end of what we believe, and the basis is particularly the strong trading, which is there to stay even after Boeing is actually the Boeing grounding will be actually ended. Now on the holiday experiences, you see a couple of trends, which but the quarter is small. I think the most important trend you see is the average revenue per bed. It's up €3 So that is something which shows capacity is scarce. Now that said, of course, we have a bigger program. Of course, we have more in Turkey and so on and so on. So we have a couple of underlying negative effects because of the seasonality of the whole program, but we believe that actually will be shaping up nicely over the year. On the cruising, very strong. Maybe the only caveat we have here, so very strong capacity growth, stable average daily rates and so on and so on. One slight caveat is Marella because you see an increase in the per diems from 137,000,000 to 143,000,000 Unfortunately, still a negative development in EBIT. There's a couple of one off effects, but there's also a sustainable one off effect, and that is our recurring effect, and that is actually fueled cost development and regulation. Here, we need to watch out a little bit. That said, it's not worrying. It's still on a high level. But compared to the super strong last years, it's a little bit of a deterioration. On holiday experiences destination destination experiences, I mean, we had last year, as you remember, an EBIT increase of like for like, excluding matter of course for integration, of around about 40% -plus. Even if you include that integration was 20% -plus. This year will be also good, but profit wise, not that good because we always have said, here, the market is consolidated as we speak or consolidating as we speak. So we will invest into growth and put priority onto growth for the time being. And you see that your total turnover is 35% up, volume is 70% up even in a very small quarter. So I think that's also good. Now on the Markets and Airlines, you have a couple of effects, which you see on the bottom right. The previous year hedging, which we had actually disclosed, the MAX impact, which last year was not happening, both are negative, positive, is actually the start of the increase of the trading, which is 24%. That is more to come in the next quarters. So we believe that's good. You see also here on the customer front, you see the 3%. So I mean, at the end of the day, it's a starting consolidation, and we believe that we will be a beneficiary of that environment. Now the only thing which is maybe a little bit astonishing that online distribution isn't growing on the top left. This is despite the fact that in all countries, the online penetration is growing. But the issue is that Germany is growing in number of customer faster than the Nordics. Actually, Nordics is more or less flat. And Nordics has a very high online penetration. Germany has a very low online penetration. Therefore, the mix has actually pulled down a little bit. But all markets, think, Germany, we are more or less online, something always between 3050% up right now. So also Germany is now catching up in terms of online. Outlook, all good. The only gray arrow we have is actually cruises because of the fuel price development. Maybe on the top right, we'll see 36% of summer sold, which is up 240% booking, up 3% price up. I think I have actually not seen a January like this since I'm here. So January, as you know, is the strongest trading month we have. So I'm quite bullish for the year. With that, I would like to hand over to Birgit. Thanks, Sitz, and a warm welcome to everyone to our full year 'twenty first quarter results presentation. For our Markets and Airlines business, I'm pleased to report that the first quarter has started well with exceptional bookings for our summer twenty twenty program. Some of the challenges we saw in 2019 in the travel industry remain, and we continue to see, in particular, the Boeing MAX grounded, which has cost us €45,000,000 in this first quarter. As covered by Fritz, we now expect a full year impact of the Boeing MAX grounding. And while I will comment on implications for the full year 'twenty guidance later on, I would like to reiterate our continuous strong focus on our financial priorities, which are cost efficiencies, improvement of our operating cash flow and our focus on our capital allocation with a disciplined investment approach. We focus on growth with an asset right strategy. This is further evidenced by the announced Hapag Lloyd Cruises transaction, which apart from its strategic intent also enables us to strengthen our balance sheet. Before I start with the slides, one comment on IFRS 16. So this is the first quarter that we have adopted the IFRS 16 standards. And in order to make the year on year comparisons more meaningful and present the numbers in line with our guidance, the following slides also show the Q1 financials on a pro form a calculation according to IAS 17. So moving to Slide 21. As in the previous quarters, I kick off my financial update with our Q1 underlying EBIT bridge, where I will focus on the most significant items. So as you can see from this slide, whilst the fundamentals of our Holiday Experience business remains strong with top line growth in each segment, we have seen some minor headwinds in Q1 with our hotel segments, for instance, in particular. This is due to higher winter costs from portfolio expansion, some adverse foreign exchange effects from the Turkish lira and reduced capacity at Rio against strong prior year comparables. Additionally, as expected, there was accelerated investment in our amusement platform, which leads or which led to a negative contribution year on year for Holiday Experiences. And then you can see the next block. Our Markets and Airlines businesses show a solid underlying trading, up €26,000,000 at constant currency versus prior year. And excluding MAX costs and prior year hedging gain, this results in a growth like for like versus previous year. And this is a clear uplift in the bookings following the insolvency of one of our key competitors. The positive in all other segments is driven by the non inclusion of cost savings winter losses. This leaves us with an operational EBIT performance of EUR 104,000,000, which year on year grows when we exclude, as I said earlier, the one off hedging gain in Q1 and the cost of the MAX grounding. We incurred €45,000,000 of operational seven thirty seven MAX costs during this first winter quarter, which is in line with our expectations. Including the MAX grounding costs, we delivered underlying EBIT of minus 148,000,000 at actual rates and minus €149,000,000 at constant currency, about onethree lower versus previous year on a like for like basis and entirely to the Boeing seven thirty seven MAX impact. And let me now comment this one position, the €1,000,000 that you see there. You need I would like to highlight that this impact of €1,000,000 from IFRS 16 in the first quarter is lower than expected and is due to adverse foreign exchange effects as well as phasing, which we expect to at least partly reverse over the remainder of the financial year. Then moving on to the next page. The income statement. As indicated earlier already, I will focus on the year on year comparison with pro form a IAS 17 figures, which is the second column. So given our customer growth and strong trading in Markets and Airlines, we achieved a turnover of almost €3,900,000,000 in the 2020, which was up 8% compared to the same period of last year and up 7% on a constant currency basis. And here, I would like to highlight the following. While our underlying EBIT is down by €65,000,000 versus last year, it is up plus 8% excluding the €45,000,000 MAX grounding costs and €29,000,000 prior year hedging gain despite an increase in depreciation, which reflects our transformational investment strategy. The adjustments are significantly better year on year due to a €91,000,000 gain on disposal of our German specialist business. This was Bergen, Mayer and Bummerung, as you know from previous communications, which closed in October 2019. Our full year guidance of 70,000,000 to €90,000,000 adjustments remains unchanged. As a result of the positive adjustments, reported EBIT is up plus 25% compared to last year. There were no significant year on year movements for interest expenses, income taxes and minority interest, and our guidance for underlying ETR remains at 18%. Given that the positive adjustments overcompensate the adverse effects of the MAX grounding and prior year hedging gain, our group results after minorities and basic EPS is up 20% year on year. And then referring to the reported figures under IFRS 16, both depreciation and interest charges are higher as a result of IFRS 16. As already mentioned, the underlying impact on EBIT is lower than expected in the first quarter, which is likely to reverse during the remainder of the year. Then moving over to our free cash flow statement on Slide 23. I'm pleased to let you know that we were able to realize an operating cash flow broadly in line with last year despite the Boeing seven thirty seven MAX impact. As anticipated during our full year 2019 results presentation, the typical and seasonal working capital outflow saw a minor increase due to our capacity growth and related working capital commitments. I would also like to highlight that the free cash flow of minus €1,600,000,000 is more than €250,000,000 higher than in the previous year, and this is driven by a lower level of investments for full year 'twenty as per our guidance, some phasing and also the disposal proceeds from the German specialist businesses. Please note that cash from financing has increased because we have drawn €530,000,000 from our RCF and received another €200,000,000 from both commercial paper and bilateral financing arrangements to fund our seasonal working capital requirements. And as you can see from the IFRS 16 column of the cash flow statement, the higher operating cash flow is offset by a lower cash flow from financing due to increased payments for finance lease liabilities. And as you can also see, total cash flow is the same under IFRS 16 and as it is under pro form a IAS 17. Again, I would like to highlight and reiterate here our continuous focus on cash flow generation, and I will keep you updated during the upcoming quarters. If we then move to the next slide, which is the slide on net debt. So starting off with an opening net debt position of €910,000,000 The Q1 closing net debt based on pro form a IAS 17 numbers increased to around 2,800,000,000 and this is the last dark blue bucket on the right. And this is in line with the usual seasonal swing and driven by the discussed development of free cash flow in the first quarter. And then referring to the last bar in orange on the right hand side, So there you can see compared to the previous year, our seasonal swing in net debt has slightly improved to minus €1,900,000,000 on a pro form a IAS 17 basis. So you can see on the right hand side, on the lower part, you see the provision in the 2019. So regarding the other elements of the movement in net debt apart from free cash flow, asset financing increased according to plan, with roughly twothree relating to committed aircraft refleeting of new Dreamliners and the remainder relating to cruise ship financing of around €120,000,000 And then you see this other package. It mainly includes foreign exchange translation effects on financial liabilities. So as expected and due to the first time adoption of IFRS 16 and associated lease liabilities, net debt is higher as expressed in reported IFRS 16 figures. As you see, that is the bigger block with minus €5,100,000,000 under IFRS 16. So then moving to the last slide, which is Slide 25, our guidance for the full year 'twenty. So as already indicated by Fritz, we updated our guidance and therefore show our updated full year 2020 guidance in the left column next to our previous guidance as of December 2019. So we expect our current strong trading trends for our Markets and Airlines business to continue and therefore expect a high single digit percentage turnover growth. And if we translate this strong revenue growth to our original EBIT guidance from our full year 2019 results communication, which still assumed, as you know, a Boeing MAX return as of April, So this would have corresponded to the upper end of our EBIT guidance. And our previous guidance included €130,000,000 cost impact from Boeing until April 2020. And in light of the recent official release from Boeing, we now face a prolongation of the Boeing MAX return to service, and this leads to additional costs versus our previous EBIT guidance, but which we narrowed to $220,000,000 to €245,000,000 compared to our earlier estimates. And we will equally include mitigating factors to partly offset these additional Boeing MAX expenses, such as cost measures and a certain level of compensation from Boeing. So therefore, we widened our EBIT range and opened the bottom end with a maximum of €100,000,000 while keeping the top end of our guidance. And based on this, we updated our guidance range and now expect an underlying EBIT range of approximately €850,000,000 to €1,500,000,000 And as a result of the updated underlying EBIT range, there are corresponding changes to some other elements of our full year 'twenty guidance, including a lower level of assets and debt financing as well as net debt as a result of the now delayed aircraft delivery schedule. And finally, I would like to highlight that all guidance is provided at constant currency on a pro form a IAS 17 basis and pre TUI Cruises acquisition of Hapag Lloyd Cruises. And with that, thank you. I will now hand over to the operator for Q Q The first question is from Jamie Rollo of Morgan Stanley. Three questions, please. First, just trying to get a better handle on the actual change in the underlying guidance. It looks like it's up by about €180,000,000 in total if we strip out the extra strip out all the MAX costs. So it's fair to say, I think, €50,000,000 is the sort of better operating performance. Is it fair to say that Boeing compensation is sort of 100,000,130 million And what do we assume for that compensation next year? We're trying to get a feeling for the underlying sort of base ticket to work off. Second, on the hotel side, you have skirted over the bottom line performance. I think it has quite a few sort of one offs mentioned in the detailed report. I mean perhaps the basic question to ask is, do you expect hotel profits to be up or down this year on a full year basis? And then finally, if I understand correctly, €450,000,000 reduction in asset financing, that will just come back next year. Is that right? It's just delayed with the aircraft deliveries? And also the year end net debt guidance post the Hapag Lloyd disposal will be €1,100,000,000 lower net of the equity investment. Is that correct? So thanks, Jaime. These were a lot of questions. I need to think of the last part. I'll check here with the colleagues what that was. On asset financing, let me start with that. Yes, indeed, it is a delay as it depends upon the return of the Boeing MAX into service. And this is why we see a reduction now in fiscal year 'twenty as we will not have any aircraft. Also, on we didn't include any numbers on Habakkloise. Then on the guidance, so we do see so we're not I'm not going to decompose it, of course, but we include various factors that are important, three elements in total. So first of all, this very strong trading and there not to go into detail of what we exactly expect, it would be upper end of the guidance or even in a very positive case, it could even go over, but that is early to say. And then second, we have obviously, we would have cost measures in place, mitigating actions versus this fairly high additional cost of $220,000,000 to €245,000,000 and then a certain level of compensation. But this may also be the regular contractual compensation, but it may also be other compensation measures that we discussed with Boeing. That is to be seen throughout the year. That is early to comment on because of the positions and that they are could swing in a fairly big way. This is why we said, okay, the bottom would be $830,000,000 given what we see on trading, etcetera, and also these other mitigating factors. But we still keep the upper end of the guidance, and this is due to the fact that, yes, it's all still moving a bit. And maybe, Fritz, you would like to comment. Jamie, I mean, your first quarter was up seven winter is up 10%, summer is up 17%. I mean, so you see it shaping up nicely. And it's not only volume, it's also price. I mean, that's really why I say, I mean, the top end of the $1,050,000,000 Underlying is very trading related. And also when you see the high single digit now on revenues, we are cautious people. I mean, we have seen the summers happening and these kind of things. You never know exactly. I mean, personally, as I said, I have seen never seen the summer trading in January like this. So it's very strong. And also, asked a little bit of sustainability. All the questions can we keep more or less, there's all reasons to assume that we can. Otherwise, we would not have increased our fleet by 21 aircraft. I mean that's also clear. But that said, the future is uncertain, and nobody knows exactly. But there's good reasons to assume that the market is consolidating, and we see positive effects, which we also had assumed. And you also asked a question around the hotel profits, and there we still keep our full year guidance. As I said, there were some additional costs due to additional capacity, but we still expect a single digit growth in EBITDA for the full year. So that remains unchanged. Thanks. So the question on net debt was simply that the guidance at the moment excludes the Apoquelid proceeds and removing the debt within Apoquelid. So you have €1,200,000,000 EV. I think 75,000,000 of that is going to go back in. So is it fair to assume the year end net debt guidance will be more like 300,000,000 to €600,000,000 when that completes? Yes, it's broadly. Let's say that the let me talk about it in terms of leverage. It's around 0.2 impact for 2020. And yes, let's say, yes, 0.4 to 0.7, yes. That's a number that you can assume. Okay. And then sorry, if I could have one more. The £50,000,000 underlying increase, Fritz, you mentioned there, that's obviously more than a 2% margin on the extra revenue. It looks like more like 5% or 6%. So that is that correct that you're now looking for a much higher conversion margin than your previous guidance? Average is the death of actually management. I mean, the average of average of average. I mean, at the end of the day, we achieve we said that we would do capacity upgrades of, let's say, double digit. Now we achieve a growth of 14% a price increase of three Of course, that is for that this kind of top end trading is very, very good. Now the question is, of course, is it sustainable? And we all know that the late trading is somehow critical sometimes. The big trading is, of course, generally late trading is critical. But that is also something which you see in our numbers. We are on the load factor, 2% up as well. So therefore, I would assume that it will be a healthy environment, and that's also the reason why we said we go to the top end. That's also the reason why we do all these wet leases and extend our programs because we believe at the end of the day, this is the end of the thing is the underlying business, which has come which has become quite strong. The next question is from James Roland Clarke of Barclays. I've got three questions, please. Can you, first of all, comment on the nature of the compensation you're expecting from Boeing? I know in the past, you referred to better financing and potentially cash back. But if you are any further knowing what that might look like, that would be helpful. And then on the second one, in terms of cost savings, could you just elaborate on exactly what they are? And looking forward to 2021, would you expect to roll out more of these? Or do you really think that would just sort of hold your costs flat? And then finally, internally, what are you working towards for the July MAX returning to service? And have you started to plan for this winter twenty twenty, 'twenty one season either way, returning or potentially needing to find any other aircraft? Thank you. Yes. So thank you. Let me first take that first question. So on the compensation, as I said earlier, it can vary. It can be just the contractual agreement, but it can also be that we are further in our discussions with Boeing, and it depends on what that compensation would look like. It's really too early to say. But in many cases, this has a cash component and then discounts on future deliveries. That is a possibility, but it's really early to comment on that. And then as to cost, we just continue to focus on cost, and it depends because as I said, there's a lot of moving parts. So we commit to at least the bottom end will not be down further versus the EUR $850,000,000. So it depends on the other moving parts. But if we then would need to, then we can also think of cost reductions that are of a one off nature. But it all depends on the rest of the moving parts. It's just a further focus on cost like we already have and especially in the Markets and Airlines, where we also have the Markets and Airlines transformation initiative. And as we start seeing the first results of those, but it's still, let's say, the beginning phase of that journey. But so maybe, Fritz, you would like to comment further on that? Yes, sure. I mean, as Nirin said, we don't comment in the best interest of our company on negotiations with Boeing. So but we are this is very serious, it will be okay. I think it will be good. Now on return to service, we have actually said we are fleeting or we are putting now capacity in place to return on the September 1. Now that said, we have a little bit of wiggle room. That's the reason why we have the $220,000,000 to $245,000,000 for the September itself. So if September, we will come back, then it would be at the lower end definitely, and we would actually not employ all wet leases in that period. As it is the last big month, then we might also keep them flying. It depends a little bit. Now that said, it's not a big uncertainty right now anymore. It is now certain that I think pretty certain that we will have these additional costs. And even with that uncertainty, I think we have tidying we have been tidying up because we have mitigating measures here. So that's how you should read it, yes. So can I just ask one follow-up on the costs? You've left your investment in the GDN OTA unchanged. So does this given the cost mitigation measures you're putting through this year very effectively, does this give you the opportunity to invest further in the GDN OTA near the top end of the range? No, no. I think one thing we said very clearly, we have two strategic digital platform businesses, and they will be prioritized. And so we have the plans. It was part of the budget. It is actually not it will not be changed. And also, we have a clear plan of guidance, particularly GD and OTA, to achieve the 1,000,000 customers earlier than we had said. So we'll update you on that. And also that, for example, I think, Willy said on Friday, particularly when it comes to now the free cash we will have or we will get from the transaction with Habakk Lloyd, that will be focused on deleveraging. And we had because we had prioritized the investments, we feel fine. We do the right things. It was not limited by funds. It was limited by sensible steps to do in that point in time. We are not limiting available money for or available investment for these two strategic transformation pillars of our business going forward. Therefore, it's not tactical. So we are not saying, obviously, no more money before money added. That actually is a disciplined approach. Yes. And also to add to that, we will also not reduce our investments into JVNOTA platform as a mitigating item. That remains untouched. The next question is from Jaafar Mustari of Exane BNP Paribas. Two questions for me, please, very related. The first one is on your scenarios for how much volumes you expect to win in the economics of this year. It'd be great if you could go through the estimates that you've given us in December and update those. So you said at the time, you expect to capture between one point four million and one point five million extra customers. You expect pricing to be around £800 and you expect the margins to be between 23%. So it would look like maybe volumes are lower end of that, but then pricing is supportive. And as already discussed, margins are much better. Is that correct? And then separately, if you could maybe talk a little bit about the market share wins or the customer growth by region because if I look at your Q1 customer development, obviously, The Nordics is very much business as usual there in terms of competition, not much has changed. But what surprises me is how much volume growth you get in the Central Region, where obviously Thomas Cook commercial retail is gone, but Condor still exists and trades pretty much as before. So how is it that you're winning so much in the Central Region, basically in line with what you're winning in the Western Region, which would seem a bit more obvious that you can win there? Okay. That's all good points. How I see it, I don't see how 14% can be at the lower end. So but maybe this is something different. But I mean, it's dangerous to say. We announced that we go in line with our plans. Actually, are exceeding a little bit our plans. That's the reason why the load factor is higher. Now it's not 100% sure how the late trading will stack up. And therefore, it's only 35% of the big season and now booked. So but it's load factor is up too. So it's a little bit ahead of our capacity planning. And that's also the reason why the prices are exceeding. Now on this on the question of Germany and U. K. And so, it's a very good question because in all fairness, in the winter, particularly after the insolvency, we had seen not that much movement. And we had seen a lot of Condor bookings that the airline was still booking. Now I think what I believe or what I see now is it was rebookings from Thomas Cook, which actually has been because Thomas Cook was gone, they had to rebook with because they had the vacation, the bookings there was high. Now it seems to be that our customers make a more free decision that at least in Germany, we are taking market share. And I think that is something I see everywhere except The Nordics. In The Nordics, that's a very different thing. But everywhere, I think I see that we are getting market share and actually the market itself is reducing. Now the question is how much it will be reducing or if we have a late trading and it will be catching up, that is something which is not 100% clear. But yesterday, I've also saw that also the airline movements in Germany are going backwards or have been going backwards lately. So it's all a little bit up in the air. The only thing I see is double digit volume growth for summer in all of our markets. And as long as I see that, I'm less fussed about what the market is. And maybe just a follow-up on the two countries where we're not quite clear how the Thomas Cook insolvency will end up, Belgium and France. Any color on what's happening there in terms of your market shares? France is not a part France is a different animal. As you know, we are restructuring France, and we are progressing in line with our plans. Less so important is Thomas Cook. In Belgium, we have said because Belgium and Netherlands both are very slot restricted, so we have actually not added capacities, but we are now qualifying seat only into package. And that's the reason why you will be seeing in particularly in Belgium and The Netherlands, see very good margins, because the and by the way, we have the package interestingly, the margin is higher And because we have restricted seats only now, even on seat only, the margins are okay ish, right? So I think I would say, I keep fingers crossed that the next weeks are good. Let's see. I mean, it's always but as I said, I have the start is very strong, and I cannot recall a strong start like that for the summer season in the last seven years. Thank you very much. The next question is from Adrian Peel of Commerzbank. Yes. Hi, everybody. Two questions left from my side. Well, first of all, sorry to bother on Boeing compensation again. But given that you've taken accumulated hit of somewhere in the region of €650,000,000 for the two years, I was just a little bit wondering, it seems that the cash compensation you're planning in for this year's guidance is not necessarily high versus that amount. So you were already referring to potential discounts. How should we think of it? Are you basically trying to negotiate this year, let's say, an equivalent compensation for the total hit? Or is it just an initial step that we see in the negotiations with Boeing? And the second question is more accounting related. As obviously, Q1 had a very small effect from IFRS 16. I was wondering how we should think of the distribution over the upcoming quarters and the overall effect for 2020. Sorry. In the I mean, please, on the Boeing negotiation, allow me not to elaborate too much. I mean, the because I think whatever we say right now and whatever we do will not improve our position. That said, it will be a combination of cash, cash equivalents as well as discounts. And it's not only the absolute amount, but it's also the maturity of payments, which is very important and the maturity of actually P and L impact, which is very important, right? So therefore, we will be balancing that these things are not only show up in the far, far future. They should be also today because we see the effects today as well, right? So but that said, it is so early. That's also the reason why you don't have it's not so early, let's say, but it is too early to determine exactly what it will be. And we also believe is to be too hard on trying to achieve something soon. Actually, we mitigate also the total value of which will be possible to achieve. So that said, leave it with us. We are pretty sure that we will be talking about it in due course. And of course, the materiality of the damage is in a way that's very clear we are taking the negotiation very serious. That said, on the IFRS 16 Yes. On the IFRS 16, and if you refer to the call that we had in it was when was it? In December. In December, yes, in December, on the IFRS 16 changes, so there and there is a slide on that. You can find it on our web page. We said that we would expect a plus of €75,000,000 more or less on underlying EBIT. But now but what we see is that foreign exchange is relatively unpredictable. So if it stays as of now, then there is a further deterioration to that number, and that's just a translation into from IAS 17 into IFRS 16. So maybe not the full amount of the €75,000,000 because of that FX, but we can detail that later. And can we can also take it off line. And also throughout the course of the year, we will give further updates on what it exactly translates to. The next question is from Richard Clarke of Bernstein. Good morning. Three questions, if I may. Just one just to clarify the situation on the seven thirty seven MAX for this year. You said the current message from Boeing is the middle of the year, whatever that means. But probably obviously, your guidance implies that you won't fly it at all this year. You won't take any delivery of any Boeing 737s this year. Is that fully committed? Or could it possibly be better than that? Could you actually get some planes before the end of the year? Have you got full control over whether asset finance comes in or not? And then second question, sorry, again on compensation, but is that the reason why the guidance range is now GBP200 €100,000,000 rather than €100,000,000 before? Is that because there's uncertainty around the size of the compensation? And then the third question, your working capital movement for Q1 is pretty flat compared to Q1 twenty nineteen despite the fact that you've had this big increase in summer volumes, winter volumes. So maybe you could just explain, is that because you're financing the hotel the holidays slightly differently? And what might that make us think for kind of Q4 working capital inflows given that we're kind of flat at this stage? So I'll first comment on the first quarter working capital. So there, we always deal with prepayments. And as we are increasing our capacity, of course, that has an impact. And there, we see some shifts, but and there's also a shift from seat only to package holidays with differences in advanced payments. But we see all in all, our working capital for the first quarter was in line with what we internally expected. So from that angle, everything is progressing as planned. Ed? On the July, I mean on the July, I mean, we need to have operational stability. And therefore, we need to secure a mix of dry lease and wet lease. We have now secured wet lease and dry lease through the September 1. Now do we expect additional delivery? No, we don't, because even if they came up and the production would be up, we don't expect deliveries, but we have grounded own aircraft, which actually we have been one of the guys who received it too early or very early in the early stage. So that would be the relief and that actually says in September if in September, it will be flying, then we would be actually able to put out a little bit of the wet leases. That's the difference between largely the difference between 02/20 and February, which you see. So that is the December rigor room, if you like. Now if it was August, maybe it would be even a little bit better, but we have to for stability of our flight plans, we are not assuming it right now, yes? On the compensation, yes, is exactly as you say. I mean, is not known and that's the reason why it might be at the lower end, it might be at the upper end, it might be whatever, it might be also several years or it might be only one year. Because the damage is known, we have some mitigating factors. The other factors are not known. That's the reason why we have kept it a little bit more broad in spite of the effect that our trading is firming up at the higher end, right? So we have broadened the range a little bit, but the cost is less uncertain. The trading is less uncertain. That's what it is, correct? Yes. It needs to be reiterated that it's on the back of a strong trading that we see this better guidance and that the other factors are still unknown, and it's really early to comment. And as you can understand, we will not be able to comment on potential conversations and even on a start of a discussion or anything. So just a follow-up there. Given this inability to comment on this, why have you included the compensation in your guidance now? You didn't include it in December, but why now if you decided to include it? So it's you can argue whether you think it's included or not. But what we see is there is just a minimum level of compensation is included because we have a contractual agreement with Boeing for aircraft. So it's really early to say, but it's on the back of our strong trading that we think, okay, we can and also on the back of the we reduced the MAX grounding prolongation costs somewhat. So we believe and with other factors, which are a bit unknown at the time being, we believe we can commit to the at least to the lower end of the guidance. That should be the positive message, I believe, that you should remember. That is what we commit to, and we really do see strong trading. So that's the main factor actually. And then, of course, as we are prudent in our guidance, we just wanted to highlight the bottom end that sits, and it's due to these mitigating factors. The next question is from Stuart Gordon of Berenberg. Yes. Good morning. Just a couple of questions from me. Thanks. Could you give us some color on how much of the double digit millions in the digital transformation budget was spent in the first quarter? Secondly, what was your gross debt leverage at the December if we use the last twelve months rolling EBITDA? And thirdly, just on your guidance page, I think the at full year, you stipulated that all numbers were pre IFRS 16, but I don't see pre IFRS 16 on the new guidance. Is it now post IFRS 16? So it's now including the improved EBIT from IFRS 16 changes. So on your last question, I can already say, no, we keep our guidance comparable. And so we will do that throughout the full year. It will all be based on IAS 17. So that is definitely the case. Then on the costs related to digitalization, that is I mean, we do not detail them separately by quarter, but they are according to plan. So what I can tell you is that by the end of the year, we will still have spent this double digit million investment. And we are just well on track, I think. We have a very clear time line, which Fritz discussed already earlier in terms of digitalization, and we are spending accordingly. So and then the other question, the leverage again? Yes, the leverage. So the full year 'nineteen leverage ratio, that's what you asked that is was 3x. If you would have excluded the Boeing MAX effect, we would have been at 2.7 times. This is our gross leverage ratio as we always communicated also in the past. So it's gross debt, not net debt. Then Sorry, sorry, was actually what had gross debt what was gross debt leverage at the December, not at the end of the year? No, the end of the financial year, the end of the calendar year? At the end of the calendar year, it would be 3.3x. That is but that is, of course, that is before the three star transaction and everything and it's also but that's normal. I mean, the first quarter we always have a higher what is that? Yes, we never yes, okay. So yes, 3.3x would be for the first quarter. Obviously, we go down. We expect it to be well within our guidance for the full year even before TriStar. So after TriStar I mean, after the Hapag Lloyd transaction, that will be significantly lower. It would you could say around as I said earlier, the leverage would go down by 0.2x. So let's expect 2.8x, more or less. Okay. And just one quick follow-up. Can you just confirm how much of the one off costs in 2020 will be cash? No. No. Oh, you mean no, we don't. Don't So you've got one off of eight years. Okay. Ladies and gentlemen, the question and answer round has now come to an end. Let me turn over to your hosts, Mr. Jussen and Ms. Koenigs. Thank you very much for dialing in. It was a pleasure. Talk to you soon.