TUI : Q3 Quarterly Statement 2020

1

Quarterly Statement 1 October 2019 - 30 June 2020

Q3 FY20 Summary

• Group revenue of €75m1, down 98%, reflecting business standstill for most of the quarter with partial opera- tions successfully resumed from mid-May.
• 55 hotels reopened in the quarter (~15% of total portfolio) as lockdown restrictions eased worldwide from mid-May. Hotel volumes remain significantly lower than usual summer levels however there were encouraging signs of customer demand with average occupancy of 23% achieved, reflecting the initial restart of operations in Europe, Mexico, the Caribbean and Egypt and the necessary social distancing protocols in place.
• All three Cruise operations remained suspended throughout the quarter, adhering to both German and UK government advice on cruising.
• From mid-June, our Summer tour operator programme was partially restarted from Central Region, taking cus- tomers to Majorca, Ibiza and Formentera. Operations also resumed from Benelux.
• Q3 Group underlying EBIT loss of €1.1bn1 reflects business suspension for most of the quarter, impairments triggered by COVID-19 and net costs arising from ineffective hedging contracts. Fixed costs were reduced to around €235m per month, in line with communication at H1 results, reflecting the swift action of our team to reduce cash fixed costs by more than 70% as the business moved into crisis mode.
• 9M Group underlying EBIT loss of €2.0bn1, an increase of €1.8bn versus prior year, reflects underlying costs of €1.2bn from business suspension since March, impairments triggered totalling €416m and net costs from inef- fective hedges amounting to €189m.
• Comprehensive compensation agreement relating to the Boeing 737 Max grounding was concluded in the quar- ter. The specific details of the agreement with Boeing are confidential however consist of three key elements
• 1. staggered compensation to be received over the next two years
  2. credits against future orders and
  3. a deferral of 61 aircraft deliveries enabling our fleet capacity to be flexed to all demand scenarios as the market recovers post COVID-19.
• Post balance sheet date on 7 July, we successfully completed the sale of Hapag-Lloyd Cruises to TUI Cruises joint venture against a difficult market environment on the terms and conditions agreed in February 2020. The first stage of disposal proceeds has been received in the third quarter with remaining proceeds and full decon- solidation to be competed in the final quarter of the current financial year.

1 at constant currency rates

Bookings - latest position

• Bookings for Summer 2020 are down 81%2 and ASP down 10%. This equates to 16%2 sold of our original pro- gramme reflecting impact of cancellations from mid-March, versus 88% sold at the same point last year. Re- based on our adjusted capacity plans, we are currently 57% sold to date.
• Capacity plans for both Winter 2020/21 and Summer 2021 have been adjusted from original plans to reflect both current government advice and consumer demand. Capacity for Winter 2020/21 has been reduced by 40% and overall bookings are down broadly in line with this capacity adjustment. For the UK, bookings are down 5%2 and ASP is up 2%.
• Summer 2021 capacity has been cautiously adjusted by 20%, with flexibility to adjust as we gain more visibility. Bookings are currently up significantly as customers both rebook holidays from this Summer and look to se- cure new holidays early. Bookings for Summer 2021 are consequently up ~145%2 with ASP up 9%.

2 These statistics are up to 2 August 2020, shown on a constant currency basis and relate to all customers whether risk or non-risk

2

Liquidity - latest position

We have strengthened our liquidity position by successfully securing a further stabilisation package with the German Federal Government for €1.2bn. The additional liquidity will better position the Group in a volatile market environ- ment, to cover TUI's seasonal working capital swing through Winter 2020/21 and thereafter, should there be further periods of travel restrictions and disruptions related to COVID-19.

The additional stabilisation package agreed with the German Federal Government is in the form of both debt and a convertible bond:

• KfW loan increasing TUI's existing Revolving Credit Facility by an additional €1.05bn
• The drawing of the additional KfW tranche is subject to the issuance of a convertible bond to the Economic Stabilisation Fund (WSF) in the amount of €150m by 30 September 2020.
• The additional state aid is furthermore subject to an agreement with the bondholders of the €300m Senior
  Notes due in October 2021 regarding a covenant waiver for potential future limitation of indebtedness.
• The additional €1.05bn RCF will have a maturity date in line with the initial tranche - the maturity date of Oc- tober 2021 will be automatically extended to July 2022 on the refinancing of €300m Senior Notes bond ahead of October 2021.
• Dividend payments and share buy-backs will be restricted for the term of the stabilisation package. In addition, the stabilisation package provided by the WSF will be linked to further limitations regarding, inter alia, invest- ments in other companies and the remuneration for Board Members as long as the WSF remains invested.
• Inclusive of the further liquidity secured, the Group, as at 12 August, has total cash and available facilities amounting to €2.4bn.

Global Realignment Programme

We have launched a global realignment programme which targets to permanently reduce our annual overhead cost base by 30% across the entire Group. A comprehensive review of our activities across every business unit and group companies worldwide to identify benefits and savings has been triggered. We are targeting a permanent annual saving of more than €300m with the first benefits expected to be delivered from FY21 and full benefits to be delivered by FY23. Negotiations have begun within respective business units and we expect FY20 restructuring costs to be in the region of ~€240m in FY20, ~€40m in FY21 and ~€10m in FY22. In two years' time, TUI Group will emerge stronger, leaner, more digitalised and more agile, in what is likely to be a much more consolidated market.

Restart, transition, return to normalised levels in FY22 and beyond - rebuild financial profile

FY21 will be a year of transition and we expect a normalised level of business from FY22. Our performance to date and priorities over the next few years can be summarised as follows: -

Q3 FY20 performance: Restart and liquidity management

• Successful and responsible restart across our markets, reopening of over 50% of Group hotels worldwide and launching short cruises in Europe by August
• Well managed liquidity position, immediate reduction of cash costs by >70% to crisis mode levels
• Expect to be broadly operationally cash break-even for Q4 FY20 based on present restart operations
• Further liquidity secured with German government to support Winter 20/21 and thereafter

FY21 priorities: Transition

• Further ramp up in bookings as more destinations reopen and consumer confidence returns
• Accelerate digitalisation initiatives and deliver global realignment cost reduction programme
• Rebuild robust group financial profile - reduce gross leverage, restore credit rating and return to profita- bility

3

FY22 and beyond: Return to normalised level of demand and profitable growth

• TUI is well positioned to emerge from the crisis as an even stronger market leader due to its trusted brand and differentiated products
• First synergies from global realignment to be realised
• Benefits from digital accelerations and platform harmonisations
• Return to pre-crisis booking levels with subsequent growth

Our priority will be rebuilding a robust financial profile. The Group will now evaluate options to achieve the optimal balance sheet structure to support the business over the longer term.

4

Income statement of TUI Group for the period from 1 Oct 2019 to 30 Jun 2020

• million
  Turnover Cost of sales
  Gross profit Administrative expenses Other income
  Other expenses Impairment of goodwill Impairment of financial assets Financial income
  Financial expenses
  Share of result of joint ventures and associates

Earnings from continuing operations before income taxes

Income taxes

Group loss

Group loss attributable to shareholders of TUI AG

Group loss attributable to non-controlling interest

Q3 2020
71.8
983.6
- 911.9
202.7
4.5
14.9
53.1
72.1
4.8
56.1
- 158.6
- 1,460.0
- 7.4

- 1,452.7

- 1,424.4

- 28.2

Q3 2019 adjusted

4,745.0

4,519.2

225.8

222.4

1.6

2.1

-

- 7.0

11.7

39.8

78.3

60.0

11.5

48.5

22.8

25.7

Var. %

• 98.5
• 78.2
• 1. a.
  • 8.9

+181.3

+609.5

• 1. a.
  1. a.
• 59.0
• 1. 
     +41.0
  2. a.

n. a.

n. a.

n. a.

n. a.

n. a.

9M 2020
6,710.4
7,954.6
- 1,244.2
731.1
97.6
18.6
53.1
95.6
27.2
206.7
- 116.7
- 2,341.1
- 42.6

- 2,298.5

- 2,316.6

18.1

9M 2019 adjusted

11,421.4

11,146.1

275.3

754.1

14.4

16.0

-

- 9.8

81.6

118.9

184.5

• 323.3 - 82.7
• 240.6
• 320.3
  79.7

Var. %

• 41.2
• 28.6
• 1. a.
  • 3.0

+577.8

• 1. +16.3

  2. a.
  1. a.
• 66.7
• 1. 
     +73.8
  2. a.
• 624.1
• 
  +48.5
• 855.3
• 623.3
• 77.3

Condensed cash flow statement of TUI Group

€ million

Cash inflow / cash outflow from operating activities

Cash outflow from investing activities

Cash inflow / cash outflow from financing activities

Net change in cash and cash equivalents

Change in cash and cash equivalents due to exchange rate fluctuation

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

of which included in the balance sheet as assets held for sale

9M 2020
- 1,959.0
- 39.9
2,303.9
305.0
- 9.1
1,747.6
2,043.6
55.6

9M 2019

700.8

• 948.8
• 718.2
• 966.2
• 16.8

2,548.0

1,564.9

-

5

Financial position of TUI Group as at 30 Jun 2020

• million
  Assets Goodwill
  Other intangible assets Property, plant and equipment Right-of-use assets
  Investments in joint ventures and associates Trade and other receivables
  Derivative financial instruments Other financial assets Touristic payments on account Other non-financial assets Income tax assets
  Deferred tax assets
  Non-current assets

Inventories

Trade and other receivables

Derivative financial instruments

Other financial assets

Touristic payments on account

Other non-financial assets

Income tax assets

Cash and cash equivalents

Assets held for sale

Current assets

Total assets

30 Jun 2020 30 Sep 2019 adjusted

2,914.7		3,009.2
656.7		710.7
3,508.7		5,810.7
3,468.9		-
1,330.5		1,507.6
394.0		60.9
15.4		43.9
13.0		43.0
137.7		183.7
415.5		369.9
9.6		9.6
250.1		202.0
13,114.9	11,951.1
87.2		114.7
596.6		876.4
198.0		303.8
9.5		31.1
1,033.0		908.7
113.8		131.5
62.2		155.7
1,988.0		1,741.5
808.3		50.0
4,896.6		4,313.5
18,011.4		16,264.6

6

Financial position of TUI Group as at 30 Jun 2020

€ million		30 Jun 2020 30 Sep 2019 adjusted
Equity and liabilities
Subscribed capital		1,505.8		1,505.8
Capital reserves		4,207.5		4,207.5
Revenue reserves		- 5,245.6		- 2,259.2
Equity before non-controlling interest		467.7		3,454.2
Non-controlling interest		685.5		711.4
Equity	1,153.3	4,165.6
Pension provisions and similar obligations		959.4		1,035.6
Other provisions		769.4		775.0
Non-current provisions		1,728.7		1,810.6
Financial liabilities		4,133.9		2,457.6
Lease liabilities		2,917.4		-
Derivative financial instruments		58.9		59.1
Other financial liabilities		30.8		18.8
Other non-financial liabilities		198.8		100.1
Income tax liabilities		61.7		70.9
Deferred tax liabilities		151.1		226.9
Non-current liabilities		7,552.8		2,933.5
Non-current provisions and liabilities	9,281.6	4,744.2
Pension provisions and similar obligations		30.6		32.4
Other provisions		397.3		361.9
Current provisions		427.9		394.3
Financial liabilities		84.7		224.6
Lease liabilities		727.8		-
Trade payables		1,458.0		2,873.8
Derivative financial instruments		331.4		157.1
Other financial liabilities		686.0		89.6
Touristic advance payments received		2,534.3		2,911.2
Other non-financial liabilities		748.8		519.3
Income tax liabilities		63.4		81.9
Current liabilities		6,634.2		6,857.4
Liabilities related to assets held for sale		514.5		103.1
Current provisions and liabilities		7,576.6		7,354.9
Total equity and liabilities			18,011.4		16,264.6

7

Cautionary statement regarding forward-looking statements

The present Quarterly Statement contains various statements relating to TUI Group's and TUI AG's future development. These statements are based on assumptions and estimates. Although we are convinced that these forward-looking statements are realistic, they are not guarantees of future performance since our assumptions involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Such factors include market fluctuations, the development of world market prices for commodities and exchange rates or fundamental changes in the economic or political environment. TUI does not intend to and does not undertake any obligation to update any forward-looking statements in order to reflect events or developments after the date of this Statement.

Analyst and investor enquiries

Mathias Kiep

Group Director Investor Relations and Corporate Finance

Tel.: + 44 1293 645 925 /

+ 49 511 566-1425

Nicola Gehrt

Director, Head of Group Investor Relations

Tel.: + 49 511 566-1435

Contacts for analysts and investor in UK, Ireland and Americas

Hazel Chung

Senior Investor Relations Manager

Tel.: [phone]

Corvin Martens

Senior Investor Relations Manager

Tel.: + 49 170 566-2321

Contacts for analysts and investor in Continental Europa, Middle East and Asia

Ina Klose

Senior Investor Relations Manager

Tel.: [phone]

This Quarterly Statement, the presentation slides and the video webcast for 9M 2020 are available at the following link: www.tuigroup.com/en-en/investors

Financial Calendar

Quarterly Statement Q3 2020

Pre-Close Trading Update

Annual Report 2020

Annual General Meeting 2021

Date

13 August 2020

September 2020

December 2020

February 2021

TUI AG Karl-Wiechert-Allee 4 30625 Hanover, Germany Tel.: + 49 511 566-00 www.tuigroup.com