TUI Travel PLC

7 February 2012

TUI Travel PLC (Other OTC: TTVLF.PKnews)

(“TUI Travel”)

First Quarter Results for the three months ended 31 December 2011 and Interim Management Statement

Key (NYSE: KEYnews) financials

First (OTC BB: FSTC.OBnews) quarter ended 31 December

1Underlying operating loss excludes separately disclosed items, amortisation of business combination intangibles, acquisition related expenses, predecessor accounting for Magic Life and interest and taxation of results of the Group’s joint ventures and associates
2Prior year figures have been re-presented to include Jet4You which was previously reported as a discontinued operation, and to incorporate the results of Magic Life under predecessor accounting

Highlights

·

Winter (Stuttgart: A0XFUKnews) 2011/12 and Summer 2012 bookings overall have progressed as anticipated since our last update, with an improvement in the cumulative booked position in all key source markets.

·

As expected, underlying operating loss for the quarter increased by £23m, principally driven by lower demand for North African destinations.

·

Business improvement programme progressing to plan.

·

Improved UK Winter trading with load factors and late sales margins ahead of the prior year.

·

Outperformed the UK leisure travel market, as defined by GFK Ascent, during the key booking period in January:


·

TUI Summer 2012 bookings flat versus -14% for total market.

·

Our business strategy to grow differentiated product and to be online driven is progressing well:


·

Differentiated product currently accounts for 64% of UK bookings for Summer 2012, up seven percentage points on prior year.


·

UK Summer 2012 differentiated product volumes up 16% in January versus prior year.


·

UK Mainstream websites occupy a number one position in online travel*.


·

Thomson website visits up 11% and First Choice up 45% in January versus prior year.


·

Online bookings up 19% for Winter and 16% for Summer 2012 in January versus prior year.


·

Increase in holidays booked online in the UK during January: 49% booked online for Winter, up ten percentage points versus prior year and 42% for Summer, up six percentage points versus prior year.


·

Summer 2012 online accommodation bookings in the Accommodations mp; Destinations Sector up 21% to date on the prior year.


* Hitwise



Peter Long, Chief Executive of TUI Travel PLC, commented

“We are satisfied with the progress in trading since our last update and are particularly pleased with the performance of differentiated product, which continues to book earlier, demonstrating the resilience of our business model. We are also pleased with the development of bookings and pricing in the UK, where we have outperformed the market during the key booking period in January. We have also had a particularly good performance in online sales. We believe that this outperformance reflects the trust that customers place in our market leading brands.

“As anticipated, underlying operating loss for the quarter increased principally due to lower demand for North African destinations.

“Our performance remains in line with our expectations and the flexibility of our business model means that we are able to manage capacity to match profitable demand. In addition, our business improvement programme is progressing according to plan. These self-help measures, coupled with our strategy of increasing differentiated product, controlled distribution and online sales, will help us to deliver in the current challenging macro-economic environment.”

Investor and Analyst Conference Call

A conference call for investors and analysts will take place today at 8.00am (GMT). The dial-in arrangements for the call are as follows:

A presentation to accompany the conference call will be made available at 7.30am (GMT) via our corporate website:

http://www.tuitravelplc.com

A recording of the conference call will be available for 30 days on:

Enquiries:



CURRENT TRADING

Winter 2011/12

Trading for Winter has been encouraging since our last update on 5 December 2011. The cumulative booked position has improved in all of our key source markets, reflecting the anticipated later booking profile.

1These statistics are up to 29 January 2012
2These statistics relate to all customers whether risk or non-risk

3These statistics include all risk capacity programmes
4 These statistics refer to online accommodation businesses only; sales refer to total transaction value (TTV (Taiwan OTC: 8329.TWOnews) ) and customers refers to roomnights

In the UK, bookings since our last announcement have improved, with volumes continuing to trend towards the capacity reduction of 9% and have less left to sell versus last year. Booked load factor is currently 71%, broadly in line with last year. We are pleased with our price performance, with average selling prices up 5% in light of inflationary cost increases and increased differentiated sales. Demand for differentiated products continues to be strong with volumes up 15%. These products now account for 62% of our sales, up 12 percentage points on prior year. As anticipated, North Africa remains challenging with volumes down 23%. Across our programme strong demand in the lates booking period has resulted in improved load factors for November (Stuttgart: A0Z24Enews) , December and January.

In Canada, we are continuing to trade strongly, following capacity expansion to Mexico and the Caribbean.

In the Nordic region, volumes since our last announcement are up 17% and the Winter programme is now 92% sold, broadly in line with prior year. Demand for Thailand continues to be weak following the flooding in Bangkok. Demand for differentiated products continues to be strong with volumes up 31% on prior year.

In Germany, bookings since our last announcement are up 4% leading to improved load factors year on year for December and January. Demand for North Africa remains weak, with volumes down 37%, however volumes for the Canaries have offset some of this decline, with customer numbers up 16%. Load factors for the remaining months of the Winter season are ahead of prior year. The late selling market has benefited our direct seller L’tur with volumes up 18% since our last announcement.

In France, the market continues to be impacted by the weaker demand for North Africa. For the French tour operators volumes to North Africa are down 23%.

In Belgium and the Netherlands, bookings have been strong since our last announcement, reflecting an increase in capacity in those source markets.

Trading in the Specialist mp; Activity sector remains positive, with sales up 8%.

In the Accommodation mp; Destinations sector (Amp;D) bookings are now up 16% driven by the B2B division, where bookings are up 20%. Volumes in B2C have improved since our last update and are now 9% ahead of last year.



Summer 2012

Since our last announcement the markets outside of Northern Region have launched their Summer 2012 brochures. Early trading has been in line with expectations, against what was a strong comparative period.

1These statistics are up to 29 January 2012

2These statistics relate to all customers whether risk or non-risk
3These statistics include all risk capacity programmes
4 These statistics refer to online accommodation businesses only; sales refer to total transaction value (TTV) and customers refers to roomnights

In the UK, we have significantly outperformed the market in the month of January where volumes have continued to improve and are now ahead of our 9% capacity reduction, with 35% sold to date, which is in line with prior year. Capacity has been reduced for North Africa and the Eastern Mediterranean, with some of this reduction offset by increased capacity in the Canaries. Turn of year trading has been ahead of expectations and we are particularly pleased with our online performance. We have continued to increase the proportion of holidays sold online with 42% booked online for Summer 2012, up six percentage points versus the prior year. Average selling price is currently up 8% reflecting cost base inflation of approximately 5% and the continued increase in differentiated content.

This Summer is the first season that First Choice will be exclusively all inclusive. The attractiveness of all inclusive holidays, particularly in the current economic environment, is demonstrated by all inclusive products making up 55% of bookings to date, up seven percentage points on prior year. As we continue to expand our differentiated offering, which traditionally books earlier, these products have accounted for 64% of bookings to date, up seven percentage points on the prior year.

In the Nordic Region, trading has improved since our last update, with volumes now down 8% on last year and average selling price up 2%. To date we have sold 29% of the programme. Despite the reduction in volumes, differentiated content continues to increase within the sales mix, with these products accounting for 81% of bookings to date, up seventeen percentage points on prior year.

In Germany, where the programme is 26% sold (broadly in line with prior year), volumes are currently down 4% against a very strong position this time last year, however, we are seeing a weekly improvement in volumes. The reduction in volumes is driven by Greece, due to the change in consumer sentiment towards the destination, with volumes down 27%, and the continued impact of North Africa where volumes were strong at this stage last year. This is reflected in our capacity reduction of 8%.

In France, volumes are down 13% to date, due to the difficult trading background we are encountering, particularly in North Africa. We are very early in the booking cycle for France and have sold just over 12% of the programme. The joint capacity management across the French tour operators which we began in Winter 2011/12 will allow us to balance capacity, especially to North Africa.

Early trading in the Netherlands and Belgium has been in line with our expectations as we continue to encounter later booking profiles in both markets. With 25% of the programme now sold (broadly in line with prior year), volumes in Belgium are down 1% year on year. Compared to very strong early trading last year, volumes in the Netherlands are 6% behind this stage of Summer 2011, with 27% of the programme sold to date.

Sales in Specialist mp; Activity are up 3% on prior year. The Adventure division continues to be affected by lower demand for North Africa, however, trading in the Sport division has benefited from our role as official tour operator for the 2012 UEFA European Championships.

In Amp;D, bookings are up 21% versus prior year, driven by both the B2B (up 22%) and B2C (up 14%) divisions. The strong trends experienced in the Winter season have continued for Summer 2012.

Fuel/Foreign exchange

We are largely hedged for the current financial year, which gives us certainty of costs when planning capacity and pricing.



FIRST QUARTER BUSINESS AND FINANCIAL REVIEW

Group Performance

First quarter ended 31 December

1Underlying operating loss excludes separately disclosed items, amortisation of business combination intangibles, acquisition related expenses, predecessor accounting for Magic Life and interest and taxation of results of the Group’s joint ventures and associates
2Prior year figures have been re-presented to include Jet4You which was previously reported as a discontinued operation, and to incorporate the results of Magic Life under predecessor accounting

Group revenue increased by 5% to £2,845m (Q1 11: £2,716m). Organic revenue growth was 4%, driven by strong pricing across the Group and volume growth in Amp;D. The annualisation impact of acquisitions in the prior year increased revenues by 1%.

The Group’s underlying operating loss increased by £23m against the prior year to £109m (Q1 11: loss of £86m). The main drivers of the year on year increase in underlying operating loss were:

A reconciliation of underlying operating loss to statutory operating loss is as follows:

Segmental Performance

Segmental performance is based on underlying financial information (which excludes certain items, including separately disclosed items, acquisition related expenses and predecessor accounting).

As previously announced, we reported Jet4You’s results as a discontinued operation in the first quarter of the prior year, as we expected to dispose of the business in the near term. As a sale agreement has not been reached, the prior year figures have been re-presented to include Jet4You’s results. In addition, the impact of predecessor accounting for Magic Life is included within the revenue figures for the Hotels division.



1Underlying operating (loss)/profit excludes separately disclosed items, amortisation of business combination intangibles, acquisition related expenses, predecessor accounting for Magic Life and interest and taxation of results of the Group’s joint ventures and associates

2Prior year figures have been re-presented to include Jet4You which was previously reported as a discontinued operation, and to incorporate the results of Magic Life under predecessor accounting

3Customer figures for Germany and Switzerland have been restated for Q1 2011 to reflect redefined product reporting following the implementation of a new system

Mainstream Sector

Northern Region

Underlying operating loss in the Northern Region reduced by £3m to £36m (Q1 11: loss of £39m).

In the UK, the result improved versus prior year. Adverse trading as a result of the continued impact of unrest in North Africa was offset by airline pension cost savings of £2m. The result also benefited from a four percent increase in controlled distribution compared with the prior year and strong load factors during the period.

The Nordic region result was flat year-on-year, with bookings to Thailand adversely impacted by the flooding in Bangkok. This was mitigated by an increase in volumes to alternative destinations, such as the Canaries, and cost actions.

The strategic venture with Sunwing in Canada continues to perform well, delivering an improved result in the quarter, mainly due to higher volumes.

As anticipated, the Hotels result was down year-on-year due primarily to the inclusion of Winter losses for the Magic Life properties acquired in July 2011, which are included under predecessor accounting for the prior year.

Central Europe

Underlying operating loss in Central Europe increased by £1m to £15m (Q1 11: loss of £14m). The result in Germany improved, with adverse trading to North African destinations offset by increased sales to other destinations such as the Canaries, and a strong performance by our lates retailer, L’tur. The improvement in Germany was offset by the results for the other Central Europe source markets, where trading conditions have been challenging.

Western Europe

In Western Europe, underlying operating loss increased by £15m to £34m (Q1 11: loss of £19m). As expected, the French result was adversely impacted by lower demand for Tunisia, Egypt and Morocco, which were unaffected by political unrest in the comparative period. Unfavourable hedging on fuel costs versus prior year led to a deterioration of results at Corsair in the quarter, however, this is expected to improve going forwards.

Emerging Markets Sector

In the Emerging Markets Sector, our Russian business suffered, particularly in the first quarter, due to the continued impact of unrest in Egypt. Underlying operating losses were £9m (Q1 11: loss of £3m).

Specialist mp; Activity Sector

The Specialist mp; Activity Sector reported an underlying operating loss of £15m, down £6m on prior year (Q1 11: loss of £9m). The adverse variance to prior year was driven primarily by the Specialist Holiday Group, Education and Adventure divisions, partly offset by North American Specialist.

The Specialist Holidays Group result was adversely affected by poor snow conditions in key ski resorts in October and November, which have since improved, but with margins adversely affected in December. In Education, trading remains subdued due to the challenging economic climate, in particular on premium products such as School Ski, and a weakness in gap year travel due to a rise in university tuition fees. In addition, the Adventure division continues to experience lower demand for North African and Australian holidays (the latter being due to the strong Australian dollar) which offset the inclusion of the results of the strategic venture with Intrepid Travel, which began in April 2011.

The North American Specialist division benefited from increased demand in its Starquest business (private jet tours), with six tours offered in the quarter compared with two tours in the prior year. In addition occupancy rates improved within the Quark polar cruising business.

Accommodation mp; Destinations (Amp;D) Sector

The Amp;D Sector reported an underlying operating profit of £8m (Q1 11: £4m). In the B2B division volumes increased due to continued growth in the source markets and destinations of the Americas and Asia and demand for the destinations of Spain and Cape Verde which helped to offset the impact of reduced volumes to North Africa. Volumes in the B2C division also improved, driven by increased brand awareness following marketing campaigns in 2011 and investment to improve conversion rates. This was partly offset by a further £1m investment in the accommodation OTA. AsiaRooms performed well during the quarter with bookings and conversion rates ahead of our initial expectations. Intercruises reported a good start to the year with 2,000 port calls achieved in the quarter.

Separately disclosed items (SDIs)

SDIs in the quarter were a charge of £5m (Q1 11: charge of £7m). These related primarily to the planned merger of the French tour operators.

Financing

We remain satisfied with our funding and liquidity position. We have three main sources of long-term debt funding – these include the external bank revolving syndicated credit facilities totalling £970m which mature in June 2015, a £350m convertible bond (due October 2014) issued in October 2009, and a £400m convertible bond (due April 2017) issued in April 2010. The external bank revolving facility is used to manage the seasonality of the Group’s cash flows and liquidity.



Consolidated (Berlin: YO3.BEnews) income statement (unaudited)

for the 3 month period ended 31 December 2011



Note 1. Basis of preparation (unaudited)

The unaudited financial information in this report relates to the 3 month periods ended 31 December 2011 and 31 December 2010. This unaudited financial information does not constitute the statutory accounts of TUI Travel PLC within the meaning of section 434 of the Companies Act 2006.

The unaudited financial information relating to the income statement for the 3 month periods ended 31 December 2011 and 31 December 2010 has been prepared on the basis of the Company’s Adopted IFRSs accounting policies, which are disclosed in Note 1 of the consolidated financial statements for the year ended 30 September 2011, except that the Group has adopted a number of amendments to existing standards that have become effective in the current period. These have not had an impact on the financial information contained in this report.

Note 2. Restatement of prior period results

The unaudited financial information of the Group for the comparative quarter ended 30 December 2010 has been restated in respect of Jet4You and Magic Life. The results of the Group’s business of Société d’Investissement Aérien S.A. (Jet4You) were previously separately classified as a discontinued operation for the comparative period ended 31 December 2010. The acquisition of six operating companies, referred to as Magic Life, occurred on the 22 June 2011 and for the year ended 30 September 2011 was accounted for in accordance with ‘predecessor accounting’ rules. Further information regarding both of these is provided on pages 72-74 of the TUI Travel PLC 2011 Annual Report mp; Accounts.

The Consolidated income statement for the 3 month period ended 31 December 2010 has not been published since these restatements were announced and as such, the Consolidated income statement has now been restated as shown below.

Consolidated income statement


Greece misses bail-out deadline

Last updated:
February 7, 2012 6:47 pm


Greece troubles translate to hotel deals

Old Town is one of the delights of a visit to Corfu. And now's a good time to book that Greek vacation.Old Town is one of the delights of a visit to Corfu. And now's a good time to book that Greek vacation.

Old Town is one of the delights of a visit to Corfu. And now’s a good time to book that Greek vacation.

dreamstime photo

Image

This item appeared earlier today on travel editor Jim Byers blog: www.thestar.blogs.com/travel.

Dying to see the Acropolis or check out one of those beautiful Greek islands with those great beaches, blue-painted roofs and doors and seaside cafes? It appears to be a good time.

According to a story I spotted on travelmole, a study by Tripadvisor in the UK showed hotel prices in Greece have fallen as much as 20 per cent.

The company looked at nine popular Greek destinations and found that all but two (sadly, but expectedly, perhaps, two of the most popular spots for tourists) have seen hotel rates fall significantly in the past year.

The biggest fall was in Corfu, where hotel rates have dropped on average by 20 per cent. Corfu is full of rich history and sights. I haven’t been but here’s what Frommers has to say about the island on its web site: “Cast aside the Corfu package tour…and you will find Homer’s ‘rich and beautiful land’ of hazy olive groves and rugged mountains, 20 miles off the west coast of Greece. The ouzo-fuelled revelry and beaches are there if you want them, but this island also has culture and poetic landscapes.”

Rates in Zakynthos dropped 12.4 per cent, while rates in Athens dropped 7.9 per cent and prices in Crete – another lovely part of Greece – fell 7.7 per cent.

Prices, however, in Santorini were up 0.1 per cent and rates in Mykonos rose 0.7 per cent.

“While the Greek economy has experienced a traumatic year, the silver lining for tourism could be an increase in visitors due to the lower prices in many of its popular destinations,” said Emma Shaw, a TripAdvisor spokesperson.

In a recent story in the Los Angeles Times, a top official with deals site TravelZoo said Greece has to reel in some vacation dollars.

TravelZoo recently offered an eight-night vacation package in Greece with air from New York for $1,499 a person, the official said. It included two nights in Athens, three in Mykonos and three nights in Santorini, plus ferry service and breakfast. (The deal was posted Jan. 25 and may no longer be available.)

“Is this a package that we’d see if the current situation was much different and much better? Probably not,” said Gabe Saglie, senior editor with TravelZoo.

Will you get caught up in the insanity of a riot or a strike? It’s possible, Nicholas Hadgis, dean of the School of Hospitality Management at Widener University in Chester, Penn., told the Times.

“Be prepared to be patient when there are random strikes,” he said. “Greece for years—even before the crisis—had random strikes.”

Being away from Athens also may be a good idea if you’re looking to bask in the sun without the overlay of tension.

Tourism trouble down under?

Another fascinating item I spotted on travelmole.com on Tuesday talks about tourism woes in Australia. The story says 10,000 fewer international visitors came to Australia in 2011 compared to the previous year, while the number of Australians travelling internationally surged to 7.8 million.

Australian Tourism and Transport Forum chief executive John Lee called it “a seriously worrying trend.”

“Uncertainty in many of our traditional markets has seen declines in annual arrivals, including from the UK, Europe, Japan, Canada and the U.S,” he said.

I haven’t seen any studies on the matter such as the Tripadvisor report on Greece, but Qantas ( www.Qantas.com) is advertising seats from Vancouver to several Australian destinations for $998. Be aware, however, that the site says there’s a $500 fuel surcharge plus government fees of $70 to $200. Plus you’ll have to make your way to Vancouver. so this is far from the deal of a lifetime.

Expedia.com today was showing a room at the Travelodge Sydney for $160 a night. Okay, it’s not the Trump but it’s not Joe’s motor hotel, either. I found a room at the two-star Manly Beach house in lovely Manly Beach for just $138, and tons of decent-looking spots in the $200-$250 range. The Quest Potts Point, which is a great little hotel in a fabulous part of town, had one room left in mid-March for just $162.

Air Canada boosts London service

Canadians have another option for getting to London Heathrow. Starting June 2, about seven or eight weeks prior to the start of the London Summer Olympics, Air Canada, Air Canada will boost its Toronto-Heathrow flights from four per day to five.

Even if you don’t care about the Olympics, summer’s a great time to visit London. Or you can hop off at Heathrow and connect to a RyanAir flight or another cheapo airline and get to just about anywhere you want in Europe for a song. Just don’t take too much baggage or you’ll get hit with expensive luggage fees.

Horse Diving – the neigh’s have it in Atlantic City

A report out of New Jersey says things are so tough on the Atlantic City boardwalk that there’s talk of bringing back diving horses.

Steel Pier, one of the Boardwalk’s most storied landmarks, will become a year-round attraction as part of a $100 million makeover that will create new amusement rides and resurrect one famous older-style act – the diving horse, according to the Press of Atlantic City.

“The multiyear renovation project is being done by a new ownership group, including the Catanoso family that operated the pier under lease for 20 years and acclaimed Las Vegas architect Paul Steelman. The investors began exploring ways to revitalize the fading pier after buying it last August for $4.25 million from casino operator Trump Entertainment Resorts Inc.” the paper said.

“We hope to make it a showplace again. We want to make it a major destination,” said Anthony Catanoso, of Steel Pier Associates. “We’re really excited about bringing back some of the old architecture and iconic features, along with new rides. We have what we believe is the perfect balance between the old and new.”

Heaven help us all. USA Today reports that one newspaper reader suggested that instead of diving horses, they should have diving homeless people.

“It’s a win win,” said the reader. “The homeless and downtrodden, who have been residing under the pier for years make a little money and the tourist enjoy the $100,000,000 pier’s show. And Bonus… No animal cruelty.”

Jaunt.ca deal for a romantic getaway

Here’s a romantic getaway in time for Valentine’s Day. With TravelAlerts/Jaunt.ca, you get a room at the Eganridge Inn in Fenelon Falls, Ontario for just $99. The deal includes one night’s accomodation in a Terrace Room for two, featuring a king-sized bed, whirlpool tub and a fireplace. You also get complimentary continental breakfast for two and a 2 p.m. checkout in case you find something to do in your room after a romantic dinner….The deal is valid for stays up until April 30. For more on this and other deals, go to www.jaunt.ca.