Earnings Call: Q2 2021

May 12, 2021

Thanks a lot. Hello, everybody, and good morning. Yes, I'm not all in the same room. So therefore, I think I have to do a little bit of advice, which slides I am on. So and it's great to have you all here and to talk about Hegmann. And what I would like to do is not only Hegmann, but also the year back prices. I think, retaking of What we have been doing over the last year and where the company stands is equally important, right? But you will hear from Sebastian, particularly, on the numbers as well. And then I will focus consequentially On when you think about managing the company through the crisis, so how will the new tree look like and how have we used the crisis in order to be more agile and digital and stronger after the crisis. So let's go to Page number 4, Which is you're saying, yes, 1 year in the pandemic, it was a year of crisis management. Now that is something which Stu is good at, and we reduced cash fixed cost by 70% within a couple of weeks, Reduced our cash fixed costs to $250,000,000 to $300,000,000 That is the basis, which actually was or is needed in order to keep the lights on. Now We also secured liquidity of 4.8%. And by the way, this is also the level we have seen now in Q1. Adding to the liquidity or subtracting from the liquidity is, of course, Wach and Carpe. And now as we expect And we see more bookings coming in. So the cash burn will actually go down over time. Now securing liquidity, 4.8, This is, of course, more than 12 times the monthly cash fixed cost. It's around about EUR 2,000,000,000 more, and that is actually in capital. And the interesting thing is that the 2.5% or 3% will actually is there to stay. This is additional debt burden, But the working capital is actually coming back, right? So as soon as the business comes back and you will see The very promising trends in our markets, the working capital will flow back into the system. Then, of course, we have 2 challenges. The first one is to serve the additional interest. Let's say the additional interest is around 200,000,000 And the other one is, of course, to serve maturities and work on the maturities of our debt. And when you think about right now, the efficiency program that we have promised to you is more than 400,000,000 That should be serving, nevertheless, the additional interest burden, and we are now on a very good path to achieve our targets. Asset rights strategy, sometimes it's talked about that we do that because of liquidity. This is actually not the case. We started with the asset rights strategy way before the crisis. You remember the Hapag Lloyd's Inclusion into TUI Process, which puts the Hapag Lloyd assets off balance sheet. You remember the launch of the first launch of TUI blow now more than 100 hotels will be accelerated over the next years to several 100 hotels at least. This is all done. The growth is done and can only be done if you don't invest, you should never invest it ourselves. So of course, it serves also liquidity, but the main reason, like Hapag Lloyd, it was done before the crisis, is actually acceleration of growth. This is, I will come to that, though not focus it here. First, refinancing Successful particularly, I think I want to highlight the bond, a coupon of 5%. The bond is trending now at 9% up also, it was double over signs. So I think It's it was more demand than supply. So I think that shows that we are back in the markets. And we have more access into the financial markets. Yes, and the recovery, EUR 1,700,000,000 I will talk about in a minute, EUR 1,700,000,000 of liquidity. So then maybe we go to yes, to the next slide. So Slide number 6, and I will make the next ones quite briefly. I think we had 2,700,000 guests since June. And in all kinds of different In the different segments, we have these guests, right? And I think important, We didn't cut we didn't actually close the company. And right now, I think that's very important because you want to have a proper restart, if you start from 0, yes, then the restart is difficult. If the engines are running, You kicked on the gas pedal and there you go. So TUI will be the 1st operator to restart the business and is right now the 1st operator to restart the business properly when the restrictions are lifted. Next slide, customers appreciated the holidays. So the 2,700,000 customers Appreciated the holidays, and we adapted the holidays to their needs, The trust need, the service quality need, but also flexibility and, of course, health and safety. I mean, people wanted to do health and happy holidays, and we adapted our product portfolio. And when you look at the next slide, you'll see The customers could combine safe holidays with positive perception, right? The customer satisfaction score is 8.6, in the score of 1 to 10. So this is very good. People are also confident to channel, and I think that is a good information. Now let's go to Page number 10. And I think this slide says, We have more or less protocols in place like we had for safety also last year. And these protocols produced good results. I mean, on the right column, you see That our incidence rate was very below 1, so not 100 to 100,000, but below 1. So This, I think, was good. On top of that, we see right now very good vaccination levels and good and more forward testing regimes. And when you look on Page number 11, you see what I mean. Sentiment is building, As you see right now, that for example, the preconditions of vaccination and incidents Very good. You see the U. K. World champion in vaccination, very low incidence rate as a consequence of it. The biggest movements right now are done in Germany. So every day, sometimes more than 1,000,000 customers are vaccinated. This slide, I think, is 3 days old. We talk about an incidence rate of 153. And this morning, it was said it's 106. So it's going down significantly with the other countries as well. So people are more vaccinated in light of that sustained reduction of incidence rates. So this is what the blue bars are saying. What the beige bars are saying, in destination, we see similar things, Cyprus, Balearics, Canaris, Portugal. Okay. The biggest ones are, of course, Balearics, Canaris, Portugal and Greek Islands, Very low incidence rates, good vaccination levels. And these 4, including Overland, Account already to 60% of our summer programs. So when you ask the question, how safe or how mature or how clear are we that the Summer program will happen. We are very clear because the incidents are so low. It's not a behavioral result that the incidents are low. It's a vaccination result that the incidents are so low. So I think this is a very good message and I believe an enormous An enormous indication that actually the vacations and so on will happen. Now I think when I go now to Page number 14, and this is In between, you'll find the reopening time lines and you see all them on Page number 13, you see the reopening time lines. All of them are Something May or June, as long as mid of July, yes, is actually the one which I would say for definitely for the U. K. As long as mid or end of July is open, we are catching the summer holidays in schools, and That is, I think, the date. So having schedules which are till May You do the trick, right? That's what we want to say. So go to Page number 14. You You still see very good booking levels, dollars 2,600,000 This is a little bit lower than the last time we saw because, of course, now We had April particularly, where actually summer holidays We're particularly in the U. K. Not possible, so we had to amend bookings. And therefore, the levels are a little bit lower. But this is, of course, now changing, and I can't do that in a minute. But particularly promising in summer 2022, We have 3 times, 4 times the level of bookings already in the systems, which we would expect normally. And when you think right now that the average sales price is 22% up because of mix and because of buying up more 5 star and 4 star longer vacation durations. I think this is a very good news. Now I think the most interesting slide right now comes now because it shows what happened from 1st April to 7th May, In particularly, Germany and Belgium, yes, in Germany, up 288%, in Belgium, up 249%. In Germany, we had last weekend, we were only down 30% from summer 19 levels. So The average in our bookings is even Down more than 70%. So you see now actually the pent up demand kicking in and overall plus 258,000,000. So 56,000,000. And this 256,000,000 is even almost Almost leaving U. K. Aside because in U. K, interestingly enough, you have low incidence rate, higher vaccination rates, But you have only Portugal open as green, right? And I think interesting year, I would say that when you just have a look at Portugal, that's the next slide, When actually Portugal was open on Friday, we had an immediate jump of +100. So weekend over weekend, enormous demand. So I think that's very good. And now I have a couple of anecdotal evidences Before I hand over to Sebastian, I mean, to Netherlands, I didn't talk about Netherlands. I talked about Germany, I talked about UK, I talked about Belgium, but Netherlands. We had We had a trial with 180 guests early May to Gran Canaria. That was a trial we agreed with the government. And we have over 60,000 applicants. I mean, that's the kind of things you see, and I'll leave the anecdotes for your digestion and you have a look. Maybe on a statistical more relevant basis is 20, On Page number 20, 70% of consumers have a holiday intention or have booked holidays. And this is actually more or less more or less what we would see in the benchmark in 2019 as well. So 81 in 2019 and 2017 right now. So the Demand and sentiment is actually intact. The desire to travel is absolutely there. And also maybe on a note, the savings ratios are significantly up in all of the European countries. So the money is there. The demand is there. Now we need to open the borders. And what you can see is In Germany, the borders in April started to open. When you are vaccinated, you don't need to test or quarantine when you come back. I mean and then the bookings go up threefold. I mean, this is, I think, a very, very good sign. And this even leaves Turkey out. I mean, Turkey from Germany, which is also 15% or so, is not even there, right? So we are just talking traditional destinations. And I think in at least in April, most of the time, Canaris was still a risk country. So this currency for non vaccinated coming back. So I think You see demand, I think, every news, every sentiment right now is pointing in the right direction. So I'm very confident that we see a good summer. And with that, I would like to hand over to Sebastian, and I will talk about next priorities. So the question about How did we use the time of the crisis to help transform the company? And how does the company look after the crisis in a minute? But Sebastian, first to you. Many thanks, Fritz, and a very warm welcome also from my side. As Fritz said, Very exciting times after a long and depressive winter in tourism. We feel the spring, and we do see positive changes And momentum every day also in numbers. Let me guide you through the following pages, Through the H1 results of the financial year 2021, I would like to start Page number 19, I would like to start with our achievements during the 1st 6 months regarding our financial priorities. You do probably well remember The 3 buckets we introduced in December. 1st, manage liquidity second, drive revenue and earnings and third, Optimize financing. Regarding our liquidity, we successfully completed 3rd support package in January, including a €500,000,000 of capital increase. Additionally, we issued €400,000,000 of convertible bond In April, based on the new AGM authorizations, which we received on 25th March, and I will come to the details of the convertible on my next slide. And last but not least, our H1 results were in line And are in line with expectations, we kept cash consumption at a minimum and recorded positive net investments, Thus being on track to deliver on our full year assumptions for positive inflow of up to 250,000,000 As Fritz already mentioned, we use every opportunity to drive revenue and earnings and the Immediate jump in bookings when restrictions are eased, like when the German government took Mallorca from the red list, demonstrates once more That pent up demand is there. We are convinced and experienced that people want to travel, and we are very well positioned as a group as we can We start our business within days. We also rigorously executed on our global realignment program And expect to deliver almost 50% of the total cost cutting volume of €400,000,000 per annum already by the end of this financial Coming to the 3rd bucket, we received shareholder approval for capital authorizations At the AGM in March with a total share volume of around 640,000,000 shares. And just 2 weeks after the approval Through our shareholders, we use the first window of opportunity with the successful placement of €400,000,000 convertible bonds. This being the first refinancing step in a still challenging market environment. Moving On to some key facts on the convertible bond, the full documentation being available on our website, Slide 20. For the issue, we utilized 6.8 percent of the new conditional capital with a total volume of 10%, which corresponds to around 70 €5,000,000 of underlying shares. The senior unsecured convertible bonds are due in 2028, Have a denomination of €100,000 per bond and pay a coupon of 5% per annum payable, semi and durian. Investors also have the possibility to convert the bonds into new ordinary registered shares. The conversion price was set at €5.4 representing a conversion premium of 25% above the reference The issue was 2x oversubscribed and is a proof that Capital Markets We remain confident in TUI's strategy and business model and support our journey going forward. We all expect a major recovery of the tourism industry And a strong transformed and lean TUI post pandemic. With a successful offering, TUI plans to start the refinancing of loans From the COVID-nineteen stabilization packages, bolstering our current liquidity headroom. The bond currently trades at around 115. Let me now come to our H1 results, Slide 21. We generated around €700,000,000 of revenue in the 1st 6 months, a decrease of almost 90%, highlighting the comprehensive travel restriction during winter season, Forcing the cancellation of the majority of our winter program. H1 underlying EBIT loss of €1,300,000,000 Was better than expected, demonstrating our continued strict cost management in times of the pandemic. 684,000 customers enjoyed their holidays with us, this being a reduction of 89%, a decline in line with revenue. Pro form a cash and available facilities, including the convertible bonds, amounted to EUR 1,700,000,000 As at May 7, we're more than comfortable positioned till the expected resumption of travel in line with the communicated cash Coming to the TUI income statement on the Page 22, Here you can see that underlying EBITDA stood at minus €856,000,000 while underlying EBITDA came in at €1,300,000,000 Demonstrating the strong discipline on costs, while using every operational opportunity to offer holidays to those customers wanting to travel. Thus, We managed to reduce our average monthly EBITDA loss to roughly €140,000,000 to €220,000,000 on EBITDA level, Being better on cost compared to quarter 1. Adjustment of €10,000,000 were driven by a 50 1,000,000 provision released for lower restructuring requirements, outweighing costs to date from the global realignment program. Following this positive development, we also now have adjusted our assumption for full year 'twenty one to 100,000,000 to 150,000,000 Formerly being €180,000,000 to €200,000,000 The increase in net interest was driven predominantly by the Greater Revolver Dorrance, enter phasing impact between Q1 and Q2 in the context of the bond modification, this being only a valuation effect, No cash impact. So we booked again in Q1, which was reversed in Q2. Let me remind you here That the overall assumption for the interest result are unchanged for fiscal year 2021 of between €400,000,000 to €450,000,000 Coming to our underlying EBITDA bridge, Slide 23. The deviation of the segment results demonstrates The limited operations possible due to the COVID government imposed travel restrictions. As already mentioned, we continued to focus on cost discipline As we quite successfully do since the beginning of the crisis and are also trying to capture margins where possible. Therefore, we managed to limit the average monthly EBITDA loss to 220 in the quarter. Looking now at the development of the single segments, I want to start with Hotels and Resorts. 122 hotels were open, which are roughly 1 third of the group hotel portfolio, Reflecting both the winter seasonality and travel restrictions currently in place. Demonstrating the benefit of our diverse markets And destinations, our hotel in Greece, Miami, Mexico, Egypt, Maldives and Mainland Europe delivered reasonable levels of occupancy, posting customers From the local markets as well as from the U. S, Russia, Asia, in addition to our source market customers. Overall, H1 occupancy rate declined 35% to 40% across our operating portfolio. H1 average daily rates declined by 13% to €63,500,000 This led to an underlying EBIT, which was down EUR 247,000,000 as we operated limited capacity over the period as a result of travel restrictions and only Partially offset by continued cost savings actions. In our cruise segment, TUI Cruises has successfully operated under pandemic conditions since July 22, being the only European cruise operator to continuously do so. We think that is a big achievement. Since December, only the Canary Islands has been available as a destination. However, 1400 customers Have extended their voyage onboard Mindshift 12 during this time, demonstrating both continued appetite for cruise holidays and high satisfaction levels of guests Who have cruised under current conditions. H1 average daily rate of the operated fleet was 104 Euro is down 27%, reflecting the shorter average duration and more local routes of Blue Cruises. Blue Cruises, which means that you stay in The country without going to other ports. H1 occupancy of the operator fleet was 35%, reflecting the overall more Advise capping the numbers of passengers on board, the maximum we take at the moment or up to now we have taken were 60% of the capacity. Hapag Lloyd Cruises, now part of TUI Cruises, operated 2 ships during the Q1, the Europa 2 and the Hanseatic Inspiration, which offered sailings To the Baltic Sea and the Canaries, the Europa too continued to sail in the 2nd quarter offering itineraries to the Canary Islands. H1 average rate For the operator fleet, it was 411, for Hapag Lloyd, down 33%, reflecting the pricing of shorter and more local itineraries. H1 occupancy was 33% compared to 77% in the prior year. Marella cruises remained suspended throughout the period, in line with the UK governmental travel advice, which Our teams in preparation mode for restart towards the end of Q3. Underlying EBIT loss down €280,000,000 versus prior year as a result of travel restrictions, including a €21,000,000 impairment charge related to mine shift heads, Partially offset by cost saving measures across the three brands. As a reminder, prior year included 100% results of Hapag Lloyd Cruises, which is now consolidated at equity within the TUI Cruises joint venture. Coming to new To amusement, 141,000 excursions and activities were sold, down 90% versus prior year, reflecting the limited operations Throughout the period, resulting in a decline in underlying EBIT of €34,000,000 Online distribution was 50%, increasing from 21 in H1 prior year, driven by the successful integration of amusement inventory across our 3 Source Markets Now I would like to come to market and airlines. As covered already, due to the extended lockdown measures across many of our KeySource Markets operations have been highly limited for the majority of the first half year. A total of 684 1,000 customers departed in the first half, down 89% versus prior year, which around half departing in the month October prior to the more recent restrictions. All markets experienced a strong increase in direct online distribution As retail shops remain closed, an effect which we expect to stay also post crisis to a certain extent. To give you two examples, online sales In the Northern region amounted to 76%, up to 11% year points year over year and also Central region increased Online sales by 15% to 37%. Underlying EBIT declined by EUR 336,000,000 Due to the limited capacity operated over the period. Total one offs of a positive €100,000,000 comprise the year on year, not repeat of €146,000,000 of net hedge ineffectiveness, €75,000,000 for the Boeing MAX grounding, €43,000,000 of COVID repatriation compensation costs and €19,000,000 impairment costs for Marella celebration. This year, we recorded net positive one offs Of €10,000,000 comprising positive hedging impact of €38,000,000 offset by €28,000,000 of impairments on Hotels and Market and Airlines, mainly in the retail segment. Moving over To the cash flow, where we see Q2 cash flow slightly improved versus Q1, Slide 24. I would like to start right away with the working capital movement. The Q2 outflow was around 200 It was around €300,000,000 mainly reflecting further settlement of outstanding supplier payments in context of agreed deferral schemes and further refunds Due to cancellations, which are still waiting on customers' deposit. Based on the positive news regarding resumption of travel, We expect the significant turnaround in working capital towards Q4 in line with operational and booking normalization. And As I said in the beginning, we have started to see this effect since 10, 14 days. Moving on to other cash items. The higher Q2 outflow is driven by the non repeat of receivable inflow in Q1 and the non cash effect of a positive P and L impact From derivatives. Cash interest is stable in line with Q1. Net investment is an inflow of €108,000,000 As announced at our full year 2020 results, we are looking at all kind of financing initiatives to support our liquidity. We make no compromise regarding CapEx for our ongoing IT digitization initiatives as well as for maintenance of aircraft and hotels, But these were more than offset by the sale and leaseback of spare parts and aircraft and divestment proceeds. Also here, our assumptions for the development of net investment for financial year 2021 are unchanged compared to what we stated in December. We On the free cash flow after dividends, which stood at minus €1,500,000,000 with Q2 cash outflow in line with Q1. The cash inflow from financing was driven by the capital increase and the WSF silent participation. Payments made include The redemption of €300,000,000 senior notes. Moving now on to the balance sheet, Slide 25. The net financial position improved by €360,000,000 quarter on quarter and stood at €6,800,000,000 at 31st March 2021. The improvement in net debt in the 2nd quarter predominantly reflects the positive impact from the capital increase in connection with the 3rd More than offsetting the negative free cash flow after dividends and cash out for asset financing. On the right And side of the slide, we have included for your convenience the split of our financial liabilities with the full details on lease liabilities and liabilities to banks, and we hope you find this information helpful. To conclude on this slide, I would like to give Some further explanation regarding the 3rd support package. After consultation with our auditors, we I now confirm that the silent participation of the 3rd support package, SP1 of EUR 420,000,000 and SP2 of EUR671 €1,000,000 are classified according to IFRS as equity. The dividend due on any drawdown are calculated According to the agreed coupon rate. As at the balance sheet to date, EUR 420,000,000 We're drawn from SB1 and €500,000,000 were drawn from SB2. The timing of the Dear participants, we lost connection to Mr. Evele. I'll get him back into the call. One moment, please. Just heard that we lost the connection. I don't know where I stopped, so I will start again on Page 24, the cash flow, Where we see Q2 cash flow slightly improved versus Q1, I would Sebastian, We lost you at Page number 25 on the comments box. So the drawing status of our facilities. Okay. Yes. So you said more or less the last step was we have fully drawn SP1 and we have partly dropped drawn SB2. And then you wanted to move, I think, to lease liabilities and liabilities to bank on the right side. Yes. So Slide 26, coming to the liquidity management during the quarter and our assumptions for the next quarters. Pro form a cash and available facilities as at May 7, 2021, including 3rd support As well as the proceeds from the convertible bonds amounts to €1,700,000,000 The overall monthly cash outflow in the Q1 and the month Of April, it was within €300,000,000 per month, slightly better than anticipated given the ongoing travel restrictions and resulting net working capital outflow Looking ahead, our assumption for Q3 is for departure volumes in the quarter to be muted in light of continued travel restrictions. Therefore, we anticipate NASH cash fixed cost outflow to be Again, in the range of €250,000,000 to €300,000,000 per month. We, however, anticipate significant working capital inflow once reopening of markets are confirmed and destinations are amounted in line with our planned capacity. If I look at the last 10 days, we have seen a change in the trend. Therefore, we assume the Q4 significant positive contributions from strong volumes and normalized level of operations. Overall, we remain positive and expect a significant upside on easing of restrictions. I would like to finalize my section highlighting again our achievements. We undertook the first important step towards refinancing With placement of €400,000,000 convertible bonds, Tui is back at the Capital Markets. We achieved the prolongation of our maturity profile through the Completion of the 3rd support package with 1st maturities now due in July 2022. TUI Cruises successfully Placement of a 3 year, 5 year senior bonds with a volume of €300,000,000 at a 6.5% coupon Being 5 times oversubscribed demonstrates investor trust in our strategy and the prospect of the tourism and the cruise industry And the strong belief in the return to success and growth after the pandemic. We continue to be strict on CapEx And deliver on our communicated divestments for full year 2021 without making any compromise with regard to our transformation initiatives. H1 net investment showing an inflow with around €108,000,000 Cash consumption H1 results are in line with expectations. And last but not least, as international leisure travel resumes When global markets begin to recover, it is our priority to rebuild a robust financial profile and return to a gross leverage Ratio target of less than 3 times. We continue to explore measures to accelerate delevering and ensure the appropriate capitalization to support growth over the long term. With this, I would like to hand back to Fritz. Sebastian, thanks a lot. So you have heard that actually we see promising trends on bookings. You have seen the numbers of H1 and our actions. What I would like to share now is 2 things. The first one is actually what did we do in the crisis transform the company. How do we see the company in the 3 to 5 year horizon? And the next one is some final remarks on the market and demand. So turning to Page number 29, it's This is how I see the world of transformation. This is how I see the tool transformation into a digital platform company and what does it mean. You have 4 components. The first one is trips. We traditionally, like many other Fellow companies in the business have used booking systems of 3rd party developers. As booking is so instrumental and as digitalization needs so much attention and needs so much Translation of business into IT, we decided a couple of years ago to do an own development in that field, and we staffed up the business significantly. What we wanted to achieve is lower cost because our cash out on trips on IT was big. But even more so, we wanted to do 2 things, which you see down in the box. Digital mass individualization, so the question of how can we address each and every Customer of our 27,000,000 customers individually, according to our learnings, What this customer or recognition what this customers might want, other people who Like him, what did we learn? What is actually the activity profile of that customer over time? Access, Accessible everywhere around the globe in the cloud real time, particularly in the app. As you can imagine, Each and every customer has now the documents in the app. So what do we do with the eyeballs when they open the app? How can we cross sell and up sell? And what would be right systems in order to do that? The individualization on the hotel side, not the marketing Hotel room categories, but individual rooms, select your room and these things, I talked about it. So this Mass individualization is so important to us that we said this is where we put our development resources. We will actually not adapt SAP systems, we use plain vanilla, everything to signal. But where we want to differentiate, that's actually where we want to have our own IPR and Software Code. The second thing is not only mass intervention. The second thing is accelerate innovation and customer governance. So we are now building the system as we speak. New software drops more or less continuously in an agile mode coming to the system, and I will talk about that in a minute. The second component is actually amusement. This market, the activities market being the 3rd biggest touristic market after hotels and after flights, But bigger than cruises and growing very strongly, not consolidated, not digital. So the 100,000 of providers actually, sales through the blackboard in the hotel. And we So more or less, our proposition by buying the Muse Mint Company in 2 years was, if you have an Internet access, you can be Active to 27,000,000 customers. So consolidation upstream, meaning 1,000,000 things to do, that's what we want to achieve in order to and maybe differentiation and also for digitalization. So this is number 2. It's a growth pillar, right? It's growth. We have been active in that field, but the reason for being here is actually to growing the business strongly. 3rd is actually the asset rights Strategy to facilitate growth and reduce capital mentality, yes? It's particularly true for hotels as well as ships. And as you know, we are offloading and decoupling, let's say, growth and actually using 3rd party equity potential in order to grow faster. And if we invested every hotel, if we invested every ship, we would be very slow. And then the 4th component is the realignment program, so EUR 400,000,000 savings from EUR 23,000,000 onwards. So these The 4 components which we which I have in mind when I say looking through the crisis, these are the 4 things which we want to do incredibly well, Of course, with the final goal to get into a position to be a balance sheet and have a balance sheet repair and be a strong company again. Now let me dwell on each of these components for a moment. Trips, I talked about, One stop shop global owned best in class solution, mass individualization, virtualized rollout in the cloud. We will not have any IT center anymore. Central system for hotel cruise, flight package, pricing and yields, CRM, web front and app, all of this stack It's, of course, developed with partners, it's clear, but all real time micro atomic in the cloud available, productized. Short term development, short development cycles, we will not go and don't have to go to 3rd party software providers. We can change this do changes on the fly. Now the good thing is we have used the crisis to take the system live And as you know in Netherlands since February 21. So we are live. It's not a PowerPoint. It's not a dream, it's there, right? And now as I say, on a continuous development, we have an MVP. And on a continuous development, we are adding systems And we are adding functionality to it. And therefore, the next versions of the software. More hotel contracts, more customers, more target groups, more seasons and so on are now added to the system as we speak. And therefore, it will grow over the coming months. And the rollout for the other markets will start end of 2021. But then based on the system, it's It's actually the same system. It's just the one system, which is there. It's available in the cloud, so we don't need physically to deploy something. We just Open it for new audiences. And by the way, 100 of millions of savings, CapEx and OpEx cash out savings through the new software. But as I said, more importantly, more importantly, closer to the customer, more relevant and more digital. That's what digital means in that respect, mass individualization. We treat each and every customer differently without losing scale effects, right? So let's go to Musement. Musement is on Page number 31, and I have a short we don't start from 0. You 170,000 experienced, 27,000,000 guests, turnover was 1,200,000, more than 10,000,000 excursions and tickets So transfer of €31,000,000 So it is a scalable activity in 140 countries, right? What we do right now is Actually, we opened the platform for 3rd party activities. That's what the strategy is. The things to do strategy, Upstream consolidation, we will be and we want to be our ambition is to be the best activity marketplace, Contrary to downstream consolidation, downstream consolidation would be we shoot for big audiences. We have a native audience. We will not buy predominantly 3rd party audience and expensive B2C audience via Google. That's not our ambition. Our ambition to consolidate to 1,000,000 things to do. When you think about the platform right now, it's interesting, I think, on that slide It's not only the experiences, but for example, part of the platform, the platform we are building or Have been building. It's also, for example, flexible enough to build dynamically activities in different destinations Like a multi day tour, right? You say you go you fly into a country, you do you go into a certain, Let's say, we're on track in Canada. You do things in Toronto, then you hop on the bus, you do things in Calgary. I mean so you do things, you hop on the bus. And this Compilation of dynamic tour building, yes, is complexities, which is part of the system as well. It's not Market shift right now, but the system from an architectural point of view is already capable of doing this, yes. And then maybe on the next slide, it's interesting to say, and what is actually the 2018, 2019 acquisition of What has that resulted in? And you see in the middle, you see our app. And that actually means every customer has the documents now in the app. When you open the app, you immediately see, even 4 months before you go in destination, one click away what you can do. For our CRM systems, we actually have filtered 100,000 of things to your relevant set of applications, right? So So it's one click away experiences for our native reach. But at the same time, what we do is we because we are not in the downstream consolidation business, we decided to open our platform to 3rd party customers as well. And Booking and Trivago, as you know, have contracted and are using our platforms for their customers. Now this is good because we have additional audience and we have additional revenues for our audience, and we consolidate the market even more. But also, it's interesting because many of these customers of Booking in who are not particularly Sun and Beach customers. They are city customers, right? So we even get the opportunity for their customers to grow in activities In cities, where for exhausting our customers, would not be very helpful, right? So it is actually as you can see, it's a full ecosystem of David, which we have been building. The technology is there. The technology is mature. Everything is there. Now we, of course, need some customers, but at the end of the day, we are also seeing right now good booking trends here as well. But The technology implementation and full integration of the Musements deck into the Trips environment is completed And it's waiting for use. Now 34, asset rights, accelerate growth, right? We refocus our business to product brand distributions And core elements, but we finance through partners, management and franchise, right? Now Before I go into airlines and ships, why don't we look at Blue? Because Blue, more or less, will develop in Sun and Beach something like Hilton or Hyatt is, right, because that's Exactly how they operate. They are taking 3rd party equity to build real estate. Hyatt and Hilton Or Stag and Danner, they don't have the real estate. They have the franchise. They have the branded distribution and all of this. And in Sun and Beach Destinations, you don't have a consolidated hotel footprint. It's all family hotels of small companies, and they are lacking Marketing and they are lacking sales capabilities, and that's what we do with TUI GRU. We have now more than 100 hotels. That was actually the effort division when we started 2 years ago or 3 years ago to come to 100 hotels fast to mature the system. And now we are opening up the internal neighbors truly Blue Horizon, and we will have several 100 hotels very when we restart the business. And that actually gives us the opportunity to grow faster And use equity is enough cash available to be built and operate real estate. It's not something we necessarily need to do on our balance Cruises is the most mature because we integrated, as Sebastian said, Hapag Lloyd before the crisis in TUI cruises and Marlena is something to come as well. And new ships will do not finance our balance sheet. There have never or there shouldn't be there have been financed in smaller ships in Aperk Lloyd, but this is all outside our balance sheet and will stay outside our balance sheet. In the airlines, we just did deferment and reduced reduction from off the order books. So we will have much less lease with liabilities on the balance sheet, right, particularly lease but also ownership, because we will just restrict the order book and the size of our fleet because there are so much More capacity and overcapacity in the market that we don't need to invest. There is still the open issue how exactly We will get some of the airline assets off the balance sheet. That's something that we might talk about in the future, but that's something to think about. So we rightsize the business, Control the product and the quality and the service and the sales and so on and so on. That's the idea here. Okay. And then we talk about the realignment program. We are now you see in the middle, you see specific actions. More than half of the €400,000,000 are achieved right now. We are very confident to achieve €400,000,000 or even more. Okay. And this all should turn into balance sheet repair, operationally, capital inflows and cost reduction We expect an enormous demand. Finance, on the financing, yes, The maturities are July 2022. We will delamish. We will actually Use M and A to do that actions to come, but we have a pipeline. And then, of course, We have a capital resolution as through the AGM to also do capital measures. But the mix, better sooner than later, we want to Return to gross leverage ratio of below 3%. So this is actually looking for the crisis, right? We saved the cost 70% Also for subsidy for our SKUs, Gudserberg, we invested very little. Actually, we have positive results. We didn't end net we had a net positive number in investment. That means we actually divested more than If number and investment, that means we actually divested more than we invested. And at the same time, so reducing the liquidity also, keeping the business Up and running for 2,600,000 customers. We pushed a transformation in the 4 components. I said, 2 of them targeted to growth, so we use an asset rights. 1 of them targeted to cost, That is a restructuring realignment program and one of them to digitalization platforms globally in the cloud. So these were the major components that we'll make to transform the company and make it a better company in the future. Let me focus on Page number 30 Ed, on one other point I want to make. I mean, you can be a good company, but if the market is not good, when you have an issue. So it's very important to understand and have a feeling of, is the market good or not after the pandemic? And before the pandemic is very clear, 15 years, even in North Europe, 2% outperformed GDP growth by a factor of 2%. And when you think about why that was the case, I mean, it was not a coincidence or a certain phase. It was 15 years in a row. So why was that the case? And these are the three reasons, and it's important to look at them. Tourism has taken benefit and It's taking benefit by demographics. I mean, people today when they are 65 and retired, they live on average almost 30 years. 30 years ago, it was maybe 50. People are more healthy. They go to the gym. They don't smoke. They don't drink or drink less, right? And to have the available funds. So this is not good for issuances. This is very good for 2 vessels. This was the major Growth driver the last 15 years. On top of that, we see a new trend since a couple of years, which comes more from the younger people. Experience is a new luxury. People younger people want to experience something and don't own, less own. They do want to do a world trip Instead of owning a car, they can share a car. They can share a car. And this is something which has built momentum in the younger group and it's extending to the older groups. So when you talk about luxury, when you talk about What makes you interesting is less what you own, it's more what you do. And this is, of course, very good for the tourism industry as right? And the last component is there is an enormous amount of stakeholders having an interest that tourism is actually prospering. And particularly in destination, tourism is the force in most, most, most countries of the world for investment for infrastructure and for Prosperous Participation in Global Wealth. And that was an enormous interest to have tourism as a transfer of wealth mechanism, right? How do you think even Greece or Spain would look without 2 1000000. Look at Mallorca without 2 1000000 after 9 months, even at starving people. I mean, this doesn't say anything like Cabrera or Karabin. I mean, this is an enormous driver in the force for good. And when you think these are the major trends, why tourism What's going so strongly? Then you ask yourself, what has the pandemic changed, right? And My view on this is the pandemic has changed nothing. The pandemic has pushed the pause button. So for the time, people couldn't go. But when the battle is unposed, The market will be there again. And the good thing is, when you have a good market, then you have a chance to perform. If you have a market that is structural decline, However good you are, it will be difficult. So we have a very good market, and we have taken appropriate strategic action in order to be Quite successful. And with that, I would like to close on Page number I don't know, it doesn't have a page. On the last one, That's a summary. Post COVID, Peru will be stronger, leaner, more powerful and more digital and back to growth. So This is the bubble on the right, and I don't want to bore you with the boxes on the left. And with that, I would like to close and actually open for Q and A. Thank you very much. Ladies and gentlemen, the floor is now open for We have a first question, which comes from Jamie Rollo from Morgan Stanley. Your line is open, please. Thanks. Good morning, everyone. I've got three questions, please. The first is the document Give some revenue guidance, which I think is new, which is for 2021 revenue to be down year on year When market expectations are for growth of 20%. And if your 4th quarter Capacity does run at 75% of 2019 as per your plan. I think my math is right. It imply the Q1 is down 70%, 75% versus 2019. Is that broadly the shape of how you see the second half revenues or actually does the Q4 capacity plan look a bit ambitious? Secondly, just following on from that, You're talking about being profitable in the Q4 on that 75% capacity run rate. It would be very helpful maybe if you can give us Some sensitivities on that or maybe talk about where maybe breakeven would be on a sort of revenue comparison. And then finally, you mentioned, Bastian, exploring options to delever. I don't think there's much conditional capital headroom, but Quite a lot, I think 48% on the authorized capital after the AGM. So could you please talk about the sort of options To delever and whether that's more likely to be straight equity now? And also any implications from the recent Sebastian, do you want to take that? Yes. I may start. Yes, As Fred said, we think that in summer, the capacity which we are able to sell will be around 75%. We do see that this is backed by the recent development, 1, by bookings and second, by opportunities, Countries which are open. This takes into account that the Mediterranean countries, Greece, Cyprus, Italy and Spain should be open. And as said, we think that This we can support by the recent bookings since a few weeks. 2nd, With this capacity, we will be in the Q4 In positive territories, and of course, we do see that this also means now significant inflow of Working capital, as said, this has just started and we see the positive impacts Every day and even accelerating. There is no guidance. It's an IIS requirement On revenues, as said, if we would materialize the 75%, you can calculate the revenues with the half quarter we had given To you, and it's very obvious that we will be below the full year 2019. Of course, if the markets Are stronger, the demand is stronger. We are very quickly can ramp up the capacity and therefore the revenues. And Of course, every 10% more revenue has a significant impact. Yes, we know the discussion with the CIA. We are involved. We are asked to give our Comments, we are well prepared for that. We don't see a short term impact. The medium term impact, We have we are in discussions and we see a very limited impact to the situation we had before. So It has been a very challenging and disappointing half year. April has been still disappointing, but what we do see is a very Quick, at least for the last 10, 15 days ramp up of bookings with all the positive impact we can see. Central Europe, of course, is Ahead, the UK was the first step was green light in Portugal. We expect Further green categorization in the next 3 weeks. And the equity? Hello. I was just asking sorry, the other part of that question was Yes, sorry. Sorry. I was on mute. We have approval for 640,000,000 shares And that could give the frame the theoretical frame what we have, what we can use without further authorization. Thank you. And the 4th quarter profit guidance, I mean, can you help us Stan, the downside to that, if you're maybe running at, say, 50% of capacity in 2019, is that still profitable, for example? I think we don't give any guidance, But we very much believe in a profitable Q4 even with downside. We have structured in a way that The costs are built up in accordance to the revenue intake or the bookings. So we are have done everything what we could do. And we are positive. We are significantly more positive than 2 Wix, even the CFO is positive. Okay. Thanks a lot. The next question comes from James Roland Clarke from Barclays. Your line is open, please. Hi, everyone. Good morning. So a few questions or three questions, please. The first is Summer 2022 bookings from the U. K. Are 3x higher than they might normally be at this time of the year. Could you talk a little bit about the pricing you're seeing on summer 'twenty two bookings? And the same question for winter 'twenty one, 'twenty two bookings. And then on summer 'twenty two capacity, I realize it's a long way away. But Given a limited year this year and ideally pent up demand flowing through for next year's bookings, Can you comment on the sort of level of capacity versus summer 'nineteen that you might expect to offer? And then Finally, on your global realignment strategy, you've got a target of €400,000,000 cost savings by FY 'twenty three. Would you expect to hold on to all of that if you ramped up capacity in 'twenty two and 'twenty three? And if not, how much of those cost savings could you hold on to? Thank you. Maybe if I start Okay. Yes. Whatever. I will start. 1st, the realignment Benefits, of course, it's a very clear objective that these are sustainable savings, so to make Sure that the cost level stays where it is, and we are pretty confident that this will happen and it will happen also very Quickly, the pricing quality of the summer 'twenty two bookings is very positive, very strong pricing. Of course, it's also a mix In fact, but we do see that pricing at the moment is for all seasons very strong. Capacity, summer 2022, I think, One what we have learned is that flexibility for us is really important that we don't Commit to an extent, which we may have committed pre COVID to make sure that our breakeven level is Significant lower than it had been before. This allows us to be more flexible in the capacity Planning, so to have a lower fixed capacity, but a significant higher capacity, which could be built And I think this has been a little bit of mind shift, which would help us because today, I think There is a good reason why we could expect that there will be very strong demand next year, which could mean that our capacity Compared even to 2019, it could be higher, but it's for us very important that the fixed capacity is limited. So risk is limited, but we can take all chances. This is Edmond. James, I think this is possible, yes, because we will see an oversupply. I mean, the biggest lever of profitability for 2022. It's actually twofold. The first one is the consolidation which we have not seen in 2019, right? So we had which we could have seen in 2020 if the market would have been there, right? We had the bookings of 17% up, you remember that in January. So the demand will be there. And the second thing is because we will have oversupplies in the airline, right, in the markets. Our reduction of order book, just think about Germany, has been usually a market with a 1% to 2% margin business. We have now half the fleet only. And we have enormous cost savings, and we can pay over capacity in the yield market. So this will be I think I expect that the profitability will be or the margins will be very good. And as Sebastian said, the reducing the order book and reducing the fleet in our airlines Has the effect of that you can play the market in an overcapacity market? So a market that potentially The prices on marginal cost, right? And the second thing is, if the demand is a little bit less Or one other time, we can actually scale down much faster than we could before the crisis, right? So changing the airline was one of the biggest Benefits on realignment, right, shrinking the airline and taking cost out of the airline. And as you know, Shrinking an airline in a normal environment is almost impossible. But doing it in a crisis environment, it is very well possible, and you see that in our fleet Zeiss, which is much, much smaller. And if I may add, because I could assume that the question could come, We also see very, very strong bookings for crews for all season. It seems to be that recovery there could be very, very quick. Okay. Next, I'll open the line for Christian Nadelco from UBS. Please go ahead. Hi, Christian. Thank you very much. I just have a few, if I may. The first one, talking about the working capital inflow you Back in Q3 and Q4, could you maybe help us a little bit with the range? We are seeing people booking closer to the departure base. So Yes, what expectations of cash inflow do you have there? Secondly, I think you disclosed In the H1 report, the cash restricted as of H1 is around 500,000,000 I remember back pre COVID, it used to be around €100,000,000 So I guess what is driving this higher cash restricted? And equally so, in relation to this on the Civil Aviation Authority, they seem to advocate pretty strongly On segregating the advance payment, either fully or partially, so could you elaborate a little bit there? Your previous I was suggesting you're not that concerned, but could you elaborate a little bit what gives you comfort in that regard? And I guess the last one that I have, please. I think you have 9 deliveries of 7 37 MAX scheduled for this year, and you guided at the beginning A year of €500,000,000 increase in net debt. You also disclosed, I think, 11 deliveries for next year and 16 deliveries Of 7 37 MAX for 2023, how should we think conceptually in terms of net debt? Will this further increase as this aircraft are delivered? Thank you very much. Okay. I may start with the customer deposits. If you compare half year to half year, we are at the moment €2,500,000,000 lower than we would have had in a normal in 2019, it was a normal year, We would have had more. So with this, you can do the calculation. What we can expect also having in mind, if you look at I would say that in the next quarter, this working capital would have prepayment would have been up to €5,000,000,000 So this And we can discuss when that could be and what the size of the market will be, but that is the opportunity we do at sea. And of course, at the moment, we have for this season, summer season, by far more shorter term bookings, but we also see that the bookings The next seasons are very promising. 2nd, the restricted cash, yes, you are right. We had to give significant collaterals. We are working on that and we have seen that there is also opportunities to improve that Further with the situation we are in now, with the CIA, we are In discussions, the model you mentioned is one of the models, which are in discussion. You know that there is a Period where we can give now our input, which we will do. I had one talk. I don't see a preference to 1 or the other model. So, we will be prepared whatever the model will be. On the airline side, we have 'nineteen for this year and 'sixteen for 'twenty two to replace the old ENGIE aircrafts, we are, as Fred said, decreasing the overall number of aircrafts. And So we replace less than aircrafts go out. The good I mean, one which helps us a lot now is with The actual fuel price, the business case for the MAX is very beneficial to the NG Aircraft, so two effects. 1st, we decreased the number of aircrafts. 2nd, it's a very economical Aircraft compared to the fleet to the aircraft we had before. And apologies, is the net debt further Increasing in each of the next 2 years as you're doing asset finance for the incoming MAXs as it happened this year, It's manifesting correct or not really? We think that we can keep it stable. That is the clear task. Maybe there is still some Opportunities or optimization possible, but the working assumption is that we keep it stable. You referred net debt at the group level, but keeping it stable or just to make sure I don't misunderstand, sorry. The lease liabilities you were referring to. The lease liabilities. Understood. Thank you very much. We also have a question from James Ainley from Citi. Please, your line is open. Thank you. Good morning, everybody. Three questions from me, please, and just following up on some earlier points. Firstly, what percentage of pre COVID capacity do you think you will Actually, operating in the Q3, related to that then, what percentage of your summer capacity, say the 75% Is now fully committed. The second question is around that restricted cash, the 500,000,000 Could you just give a bit more color on exactly what they are? You said they're you have to give collaterals, but what does it relate to These customer deposits that you are having to ring fence potentially, and Is that cash restricted cash included in your €1,700,000,000 liquidity estimate? And then the third question is, obviously, there's a lot of debate about ring fencing Customer cash more broadly, given that CAA review, what would be the impact? I mean, if you had to restrict all of your customer cash, how would that change your thinking about your gross leverage target, the less than 3x gross leverage target? What's What's the right level of that going forward if all of your customer cash was restricted? So, So the restricted is not included in the EUR 1,700,000,000. The leverage target, we would not change. And the capacity, Which we will see in the Q3, we on the hotel side, there is hardly anything Committed, yes, of course, we have our own assets, which we predominantly steer the volumes in. But over that, there is a lot of flexibility now built into the system to make sure that we are not hit as we were hit Before and maybe I would like to write the number of Aircrafts, I gave the wrong number. What we expect for 22, 11 aircrafts and 16 for 'twenty three, which is well below what we had anticipated before. Can I just follow-up on a couple of those points? So you gave you said hardly any of the hotels were open, but what kind of What's a realistic expectation for markets and airlines operations in the Q3? And then I also asked what percentage of your 5% peak summer capacity is now committed, fully committed? I mean, on the hotel, it's not so easy to answer because you have to look at destination by destination. If the Mediterranean countries are open. We can steer completely into our own assets, which are 30%, 40% Of the overall capacity, so this should give us not any issue. If, of course, you know our airline capacity, if we are Significantly below what can be expected. Of course, we will not utilize fully Our fleet, so that's why the Q3 will be still a very challenging quarter. On the Q4, there is a lot of flexibility built in because first, we use Our own aircrafts and we will use our own hotel facilities. So There we would be prepared even for a significant drop of the volume, which we definitely not expect. Okay. Thank you. The next question comes from Mark Fortescue from Stifel. Please. Your line is open. Good morning. My questions have been answered actually. But while I'm on, I might just Ask the customer deposits question a different way, if I could. Can you say roughly what percentage Of customer cash, you ring fence now whether or not it's formal in trust accounts or just separated internally? And what percentage of customer cash does contribute towards working capital needs? Thank you. We don't ring fence anything. The next question comes from Ali Nagvi from HSBC. Please go ahead. Hi, Toni. Thank you for taking the questions. Just on your refinancing and extending your maturities beyond 2022, will you require a capital increase to do any of that? And similarly, will you have to do any sort of capital increase to extend the covenant waivers again in September? And my second question is, You've got it to 75% capacity for the balance of the year. And you say that of the list of countries that are Have low incidence rates, 60% of that is covered of the 75%. What would the cash impact be if you couldn't actually fill that remaining 15%? The first question, as we said, we have the approvals of our AGM that gives us The opportunities and depending on our situation, on the market conditions, we will take The relevant actions, and I think it's very clear that we ask for approvals because we think it could be right And the 60% of the capacity We could be still in positive territories. Thank you. There are no further questions. Handing back to Mr. Abel and Mr. Jusson. Thanks a lot. I think the thanks a lot for participating. I think what you see and You should be staying tuned. I mean, week over week over week, we see no improvements. And this is actually early enough for us to have a decent summer. I said everything from commencing July, mid of July is big. Everything before It's actually relatively small. So it's important that we catch the wave. And I see in all countries Very promising science. And I assume that in light of the vaccination levels and incidence levels, that actually also The U. K. Will be opening, but it is a big market. And all of this is still done without Turkey. I want to emphasis once more, 60% of our destinations are in with very good incidence rates and vaccination rates. These markets and these destinations, If Turkey and others don't open, we'll be very full. And therefore, I think very healthy margins And some scarcity of supply, which will be very helpful. So thank you very much for listening in. And I think we see right now good developments. Have a great day.