TUI AG

Good morning, everyone, and welcome to the TUI Group Full Year 26 Q2 and H1 Results Analyst and Investor Conference. My name is Seb, and I'll be the operator for your call today. If you would like to ask a question during the Q&A session, then keypad. If you would like to withdraw your question, please press star 2. I'll now hand you over to Nicola Gert, Group Director of Investor Relations. Please go ahead.

Good morning ladies and gentlemen. A very warm welcome to our second quarter results presentation here at the TUI campus in Hanover. My name is Nicola and I'm Group Director in Vestulations and I'm delighted to be joined for the presentation by our CEO Sebastian Ebel as well as our CFO Matthias Kieff. We are pleased to present a strong set of half-year results as well as Q2 results highlighting the strong progress we have made on the transformation whilst absorbing the impact of the Iran war and the Jamaican hurricane. We will also share our ambitions for the outlook of this financial year, which remains to be a challenging market environment. Following the presentation, as always, we shall open the floor for Q&A. And with that, I have the pleasure to hand over to Sebastian.

Thank you, Nicola. I couldn't have done the summary better than you. Thank you. A very warm welcome from rainy Hanover. Rain should mean a good booking, so we hope and pray for similar weather for the coming weeks. The agenda will be very similar to what you are used to it. I will do a summary of the operational and strategic highlights. Matthias will go into the financial details and then trading and outlook in a short summary. We had a strong Q2 and a wonderful H1, and it would have been even better if we wouldn't have had the impact of the Iran war and the Jamaica hurricane. I always say that someone took away the cream on the cake, but that's how it is. Why we were able to see this development, the transformation is gaining momentum The vertical integration is even doing better. The diff products are loved by the customers. And maybe that is the biggest change to before. AI is disruptive, and it helps us a lot in creating efficiency, streamlining processes, getting better processes, but also changing the distribution landscape. Very, very exciting. And having said that, Unfortunately, the second half year, like March, March SF 50 to 50 million because of the Middle East impact, this will also impact or has been impacted and will impact our second half year results. Therefore, we had to change the guidance in April. and we want to reconfirm it. You could rightly ask why is the range from 1 to 1 billion and 1.4 billion a significant one, because visibility is not as much as we are used to it from the beginning. If you look, some highlights on the achievements. We further streamlined the organization. We now have beneath me a COO function who makes sure not only to get all the cost and efficiency synergies but also makes sure that the sales organization makes sure that the very very good load factors occupancies of cruise ships of hotels will further be improved and on the other hand the unique hotel products cruise products amusement products are very important for the sales organization. On the hotel side, we further expand our business in an asset rights model. We have now built a very strong river cruise business, another ship. It helps us to strengthen the TUI ecosystem because a customer who was yesterday traveling to Mallorca tomorrow wants to go to a Christmas cruise in Germany, so we try to offer TUI-branded products in different segments. The functional net target operating model is now established, which means that we align processes all over the markets, which means higher productivity, but it means also higher speed. If you implement something once, like AI, it's there for all the markets. You don't have to do it market by market. Less cost, but higher capacity. What is higher speed? Therefore, especially in the markets of airlines, the operational excellence efficiency is important. Also, in this market environment, we looked at capacity. Nordics was a longer term, but overall, we were more risk-adverse and reducing risk capacity. The commercialization of the airline, which is a big, big project, and we expect huge benefits, are now in the status of being implemented. The first markets where we have implemented are Belgium and France. At the Netherlands, you may recall that this was a market which gave us a headache, and we do see that with a strong airline team, giving them the commercial responsibility has led to significant improvements, and this will be rolled out beginning of next fiscal year. This model will work in all the markets, so we will have then a commercial market responsible airline management, of course, capturing all the synergies, but over, besides the benefits of the synergies, also to get the benefits from getting direct into the market. We are expanding our business. The example here is Romania. We also have had the soft launch in Italy. We will do one or the other market more in in East Europe, but also outside Europe. We have not only now rolled out, and this is now for a year, the One App, with more and more functionality, increasing the number of customers, but what is new, the One Web, is at the moment gradually going live. It started with UK, Ireland, then UK, now the Nordic countries, Berlin, Holland, and Germany, will be the last country in January, February 27. And the most disruptive part of the sector or of the business of, I would say, in the world at the moment is AI. And we understand AI not as one additional tool, but a way of how we work. And it's not only linked to IT, but it's also linked to how we create better processes and better customer experience, and what is important, how we get into new, more cost-effective distribution channels. A very exciting topic which is important for everyone in TUI. A short look about why the march was impacted so much. We had two shifts which we couldn't get out of the region for now 10 weeks. They will be back into commercial service 15th and 17th of May. This was a significant cost for the second quarter, but also for the third quarter. We had to bring customers home from the Gulf region, but what was even more costly from the long-haul eastern coast countries which went through the U.A., up the Maldives, Thailand, and so on. And we also had impact on our hotel business in the Middle East, but also in the Far East. We are really proud not only that the two ships left safely the Gulf, but that we had own repatriation flights to the Dubai-Saudi border to bring customers home safely, very quickly and that really boost the brand not only awareness but trust and loyalty. I never got so many positive letters or emails from customers but it was a significant cost and it will take till the end of the year I assume till the Middle East and the Far East go back to normal situation. So the impact was 40 million plus in the Q2, and in cruise we see, because back to commercial business in the middle of May, another 20 million, and what has changed in market in airlines is customer sentiment, first from east to western net. Long haul east, middle east is almost zero, so very, very low bookings. And what we also see, and maybe this is related to the discussion on kerosene, that people book very late. So if you see later on that we still need to book a significant amount to get back to the last year's numbers, we see, for example, that May is on the same level as June. last year and this is a clear trend of the last minute bookings. If you go into the details, the hotel business despite Jamaica and despite the impact in the Middle East with our own hotels almost on the same level as last year, without Jamaica the occupancy would be on the same level or slightly above. and the rates would have been gone up. The problem was with Jamaica as the hotels had to close for minimum two months, maximum for six months for renovation or restructuring. Even when we were able to open the one or the other, we had to do it with lower yield. That will normalize in the summer. Cruise, outstandingly strong. If we would have had the impact of 20 million in the second quarter, we would have seen even a stronger quarter than last year, despite the same capacity. And the half year was outstanding. And we haven't seen any slowdown even in the last days. The demand is huge. And what I found really amazing is, as we didn't expect to get the ships out when we got them out, we had canceled the cruise until the end of May. So then we were able to open bookings again earlier for the cruise from 15th and 17th of May onwards, and they are almost as booked as before, so there was a rush on this capacity. To amusement doing well, What is also nice to see is despite a stable passenger numbers, they are able to sell more to existing, but what is even nicer, to gain more new customers. And this is important for our TUI ecosystem. So a good development, a very good next. If we look for Markland Airlines, actually it's, the first time for a long time when we do see a significant improvement of the result, less losses in winter, and if we wouldn't have had the impact of Iran, then the results would have improved even stronger, so we're a little bit frustrated about this. The benefit came in all markets, especially in the northern region and in the western region, Germany is influenced by some one-offs last year. And this is on a stable passenger number. Dynamic is growing. The differentiated product sales are growing. F-sales are growing. And we were even able to increase the load factor of our airline. So a good development. And this is a result of the trans formation. What is also important is that We're talking about AI not only as a tool to streamline processes, to improve processes, but like in 2E amusement, that is, for me, an eye-opening project. Within a couple of weeks, the Excel-based transfer planning was newly made through an AI agent, three, four weeks, and it's so much reducing the cost of the number of people who have to work there, but also the load factor of our buses have gone up by 5%. So this is a quite significant example of what we do see in a lot of areas of the company. When it comes to products, We have now implemented also in the UK, that was the last market, or the last major market, two-week tours. So this is where the customer individually can do his trip, his round trip, and that we do powered by Google and Google content, which had, of course, on a small basis, but it could start in all the markets. We are also proud that we are now also on ChatGPT. We do see that Gemini probably is the most advanced LMM, at least that's what I would say as a user, and you will find TUI there, and we are convinced through the great collaboration with Google last week that you will have the TUI booking way to be integrated. there in the LMM, so if you would ask for a nice hotel in Mallorca with this and this benefit, you would not only see, like today, this is offered by TUI, but then you could, in a seamless process, book this package or this hotel of ours. And further LMM integrations are underway. We want to play a leading role there, and it will help us and bring us forward a lot. We have also introduced our reward program. We started in Finland six, seven weeks ago. It went very well. The other Nordic markets followed, and we will have all the major markets on this system, on this reward scheme, until the end of the year. It's not a system like we have it. Some airlines have it. You collect points, and then you get 100 points, a rebate of one euro. It's about value, recognition, status, treats. So we want to recognize with our own enhancement customer, loyal customers, which can mean the free coffee on the aircraft or a a longer stay in late checkout in the hotel. So not only in the booking process, but also when it comes to benefits during the travel. And the good thing is these are things which doesn't cost us a lot of money, but gives a lot of recognition to the customer. Matthias. Thank you. After a lot of prosa, the numbers.