TUI AG (TUI)
TUI AG: ACS-Annual Financial Report - Part 2
10-Dec-2020 / 07:00 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
FINANCIAL HIGHLIGHTS
TUI Group - financial highlights
&euro million 2020 2019 Var. in %
adjusted
Revenue 7,943.7 18,928.1 - 58.0
Underlying EBIT (IAS 17) 1
Hotels & Resorts - 399.6 451.8 n. a.
Cruises - 322.8 366.0 n. a.
TUI Musement - 114.6 55.7 n. a.
Holiday Experiences - 837.0 873.5 n. a.
Northern Region - 975.1 58.5 n. a.
Central Region - 619.8 101.9 n. a.
Western Region - 440.8 - 28.6 n. a.
Markets & Airlines - 2,035.7 131.8 n. a.
All other segments - 160.2 - 111.8 - 43.3
TUI Group - 3,032.8 893.5 n. a.
Underlying EBITDA (IAS 17) 2 - 2,242.6 1,359.5 n. a.
Underlying EBIT (IFRS 16) - 2,997.0 893.5 n. a.
EBIT (IFRS 16) 1 - 2,927.4 768.7 n. a.
Underlying EBITDA (IFRS 16) - 1,615.0 1,359.5 n. a.
EBITDA (IFRS 16) 2 - 1,355.0 1,277.5 n. a.
Group loss - 3,139.1 532.1 n. a.
Earnings per share&euro - 5.34 0.71 n. a.
Net capex and investment - 149.3 1,118.4 n. a.
Equity ratio (30 Sept) 3% 1.4 25.7 - 24.3
Net financial position (30 Sept) - 6,420.9 - 909.7 - 605.8
Employees (30 Sept) 48,330 71,473 - 32.4
Due to rounding, some of the figures may not add up precisely to the stated totals, and percentages may not precisely reflect
the absolute figures.
This Annual Report 2020 of the TUI Group was prepared for the reporting period from 1 October 2019 to 30 September 2020.
TUI Group applied IFRS 16 from 1 October 2019. Prior year figures were not adjusted.
Please refer to page 154 for the Restatement of comparative periods.
In FY 2020, underlying EBIT is also adjusted for the earnings effect of IFRS 16 ('underlying EBIT (IAS 17)') as part of internal
reporting in order to facili-tate year-on-year comparability. Accordingly, adjusted EBIT (IAS 17) represents the segment performance
measure within the meaning of IFRS 8.
1 We define the EBIT in underlying EBIT as earnings before interest, income taxes and result of the measurement of the Group's interest
hedges. For further details please see page 29
2 EBITDA is defined as earnings before interest, income taxes, goodwill impairment and amortisation and write-downs of other intangible
assets, depreciation and write-downs of property, plant and equipment, investments and current assets.
3 Equity divided by balance sheet total in %, variance is given in percentage points.
Interview with Friedrich Joussen
»TUI was in robust health
before the crisis, and
after the crisis we will be
in robust health again.«
It was going to be a record year. But then COVID-19 rocked the world as we know it - and brought
tourism to a standstill. In this interview, CEO Fritz Joussen doesn't just describe what the crisis has meant for TUI. He also reveals
how the Group is preparing for a different world after the pandemic and reaping the benefits of decisions taken long
before the crisis.
Mr Joussen, 2020 has tested TUI in ways nobody could have imagined. And it all began so well .
Yes, we really were on course for a record year. We went into financial year 2020 stronger than ever before. TUI had never taken so many
bookings in January in the company's entire history, 14 per cent more than the previous year. And in February the trend was unbroken.
Then came the shutdown on 16 March .
. like slamming on the brake in the middle of a motorway. TUI's sales hit zero virtually overnight. Suddenly we had to tackle three
crises at once. First, we had about 200,000 holiday-makers and 2,000 employees out in the destinations who had to be brought back when
the shutdown caught them by surprise. From every corner of the globe, sometimes under difficult conditions. Parallel to that we had to
suspend operations and cut costs as quickly as possible - within a few weeks we reduced our cash costs by more than 70 per cent, and at
the same time we had to refund the deposits for cancelled holidays. And thirdly, our survival depended on applying to the German
government immediately for bridging loans, which were promptly approved.
Could you sleep at all?
They were long days and short nights. It was crucial at that point to convince the government that they would be saving a fundamentally
healthy company that would be able to repay the loans plus interest. Because TUI is exactly that: a picture of good health and the market
leader in a growth sector that will stay intact over the long term.
The media and the public were asking whether TUI is relevant to the system. Is it?
We are a global market leader with German roots. Looking around Europe, we can say that TUI plays a stabilising role in Southern Europe,
and in Northern Africa too, with investment, infrastructure and jobs. In some countries tourism contributes over 20 per cent to the gross
domestic product. Where there is tourism, everything fares better, from education to health care. We need to preserve that stability and
TUI is making a substantial contribution towards that.
Are holidays too risky in a pandemic?
No, people can travel safely even in a pandemic! The overwhelming majority of travellers returning with a COVID-19 infection weren't
ordinary tourists, but people who had been visiting friends and family abroad. After the shutdown in March, we very quickly devised an
all-round hygiene strategy to be equipped for the relaunch. Even today, we have only seen a few cases of COVID-19 in our "TUI ecosystem"
- meaning flights, transfers, hotels, cruises, activities. The seven-day incidence among our customers was way below 1 in 100,000.
Statistically, travelling with TUI is much safer than a family celebration or commuting to work every day. We showed that holidays in
hotels and on cruise liners can be safe and yet relaxing. Holidays aren't decisive, but how people behave. That is as true on holiday as
it is at home.
When will you restore last year's levels?
People want to travel. COVID-19 hasn't changed that. 2021 will be a transition year, but the summer bookings so far have been very
encouraging. We are still taking things as they come, but as it stands now - and depending on how the travel restrictions pan out - I am
assuming our business will return to normal in 2022. Besides, package holidays are very popular compared with individual travel. They
offer maximum safety and reliability, and all from a one-stop shop.
TUI will be paying back loans for a long time .
We are getting ready for that. TUI will be leaner, faster and more efficient. In the long run that makes us more profitable. But we are
also getting ready for a different world after the pandemic: COVID-19 has sped up so many changes, digitalisation is advancing apace.
Customers increasingly purchase online, there is also a growing readiness to let a smart app take care of their needs. We are
accelerating our digitalisation, revamping the firm for the future. We will come out more digital and at the same time better. On the
cost side we have set a medium-term savings target of more than 300 million euros. We are also trimming investments in hotels and
cruises.
Does that mean switching from asset right to asset light?
The differentiation and brand experience are delivered by our products, our ships and our hotels, but also our colleagues in sales and in
the destinations. The quality of a hotel or a ship is key to our customers' holiday experience. That is what TUI is all about. It's
reflected in brands like Riu, Robinson, TUI Blue and TUI Cruises. But to control the brand, the service and the distribution, we don't
necessarily have to own the hotel building or the cruise liner. Of course we review our hotel portfolio constantly. There will be no
hasty fire sales. But we do own attractive assets and there are some sound options that fit well with the strategy we announced in
December 2019 for investing less in hotel properties and new vessels, and instead operating them ourselves or with partners. It's another
story where hotel capacity is in short supply, like in the Cape Verde Islands or in new destinations. There we need our own hotels
because there aren't any others to meet the quality we expect of our brand. That strategy hasn't changed at all.
At Hapag-Lloyd Cruises you have already gone down the partnership route.
Exactly. Selling Hapag-Lloyd Cruises to TUI Cruises, our joint venture with Royal Caribbean, is an extremely attractive move. We
completed the sale, as planned, in early July 2020. In the medium term, the synergies from integration will more than compensate for the
fact that we now only own half a stake and receive half the profits.
TUI Musement is another important pillar in the digital growth strategy. What plans do you have for that segment?
TUI Musement will speed up our digital transformation even more. The focus in future will be on the world's leading online platform for
activities and excursions. This segment will form a strategic core of company operations. The activities market is worth 160 billion
euros. That makes it the third largest market in tourism after hotels and airlines, even bigger than cruises. However, it is also
extremely fragmented. There are hundreds of thousands of service providers. And practically no digitalisation. That is where our platform
comes in. We bring TUI's 21 million customers and the providers together. As part of our strategic partnership with Booking.com, millions
of customers all around the world have access to the Musement product portfolio. The same goes for people who use the market leader in
China, Trip.com. By the way, digitalisation doesn't mean our customers get less attention locally, just more service. We have an
advantage over other providers because we have people in the destinations who can evaluate the experience and optimise it for the
customer.
So digital transformation is on course, never mind the COVID-19 crisis?
Yes, absolutely. We are speeding up digital change. Apart from the activities platform, we are expanding another platform - one for
hotels. Each year we are investing many tens of millions of euros in each of those platforms. The hotel platform allows hotels to present
a far more differentiated profile. Instead of sticking to rigid categories like sea view or garden view, they can market every room
individually. Hotels can improve their revenues by catering better for what customers want. We originally built that platform to market
our own hotels, and it's already up and running there. It has enabled us to increase our prices per room-night by 10- 15 euros. The
platform has already paid off for us, and we believe it will be a success story for third-party hotels, too.
Climate protection and sustainability seem to have been overshadowed by the pandemic. Does that apply to TUI?
Sustainability has been in our DNA for many years now. Our fleets of aircraft and ships are new and consume relatively little fuel. This
has placed us amid the top rungs of the climate rankings. Our hotels and resorts have environment certification. Our sector depends on
healthy landscapes and marine environments. To preserve those sustainably, we will rigorously champion reductions in the consumption of
resources. The challenges deriving from climate change are huge. Doing without things is no solution. I believe that innovations will
help us to uncouple growth from rising carbon emissions. Hydrogen, if produced much more cheaply, can play a big role in this. Another
dimension to sustainability are the social aspects, and for us those are particularly important - they will be even more significant as a
result of the coronavirus crisis. We must strengthen local participation in the destinations. Local people should benefit more from the
visitors who come. That is something we work for as a company and through the TUI Care Foundation we created in 2016. As market leaders
in our sector, we stand by our responsibility for people and the natural environment. The crisis won't change that. Quite the reverse.
Where do you draw hope amid the crisis?
First and foremost, the holiday sector will remain on its long-term pathway of growth. People have not lost their appetite for travel.
2021 will be a transition year. The following year we expect to return to pre-crisis levels in tourism. Besides, there is no other
company like ours that uniquely caters for the entire travel chain in a highly fragmented sector: our own hotels, cruise ships,
destination agencies with our own teams in every country in the world where people like to travel, our own aircraft, strong tour
operators that customers trust, leading online platforms. Our Group strategy is future-proof. We have demonstrated in recent years that
we can change successfully. Like no other company we offer reliable safety and quality standards for holiday-makers. This will be more
important than ever when the crisis is over. Besides, there are not many companies with employees who are so resilient and so experienced
in handling crises as they are at TUI. The crisis has placed huge demands on them, and we are grateful to have such a strong team behind
us. To everyone who has helped to manoeuvre TUI through this crisis, I express my heartfelt thanks, also on behalf of all my colleagues
on the Group Executive Committee. We can sum it all up in a single sentence: TUI was in robust health before the crisis, and after the
crisis we will be in robust health again.
The interview took place in late November 2020.
REPORT OF THE SUPERVISORY BOARD
Dear Sir or Madam,
This year we are again one of the first listed companies out of the blocks in the reporting season. That in itself is not unusual.
However, this makes us one of the first companies to be reporting on a year that took a quite extraordinary course. It is now generally
known that the tourism sector has been especially hard hit by the restrictions imposed due to the COVID-19-pandemic. This holds true for
our company as well. Our business model is robust, which was demonstrated most recently by our ability to manage and minimise the
negative impacts of the Boeing 737 Max grounding. However, the travel restrictions have meant that we have been in effect prevented from
conducting large parts of our commercial operations since mid-March.
At our Annual General Meeting in February 2020, we were still in a very optimistic mood due to the record booking figures. The
Corona-virus was not yet playing a major role and the company was on the way to enjoying the most successful year in its history - only
to have the brakes slammed on in the weekend of 14 / 15 March. This weekend saw the closure of almost all destinations and we had to
react to a staggering drop in revenue to almost zero at the drop of a hat. No one could predict how long this situation would last.
At the beginning, as we also looked to developments in China, where the first cases were reported, we still assumed we would be able to
resume commercial operations in June. Indeed, travel restrictions were increasingly being lifted across Europe from June onwards, only
for lockdown to be largely reimposed just weeks later. In operational terms, our employees had to keep adapting to changing situations in
the various source and destination markets, which in some cases were announced with practically no notice. This situation placed extreme,
previously unthinkable challenges on our company. Over this rollercoaster ride, however, the feedback from the trips carried out under
COVID-19 conditions and the booking situation for the coming year demonstrated that our customers enjoyed their holiday with TUI and felt
very safe. TUI is a brand that represents trust. We are certain that we will enjoy high levels of demand as soon as travel is possible
again. We hope that the progress on the availability of vaccines in 2021 as recently announced will initiate the transition into this new
normality. In parallel, we have used the time to press ahead with the restructuring process into a platform company, to hugely improve
the cost position and to make TUI more sustainable. As the Supervisory Board, we have supported the work of the Executive Board at a
string of extraordinary meetings since the start of the crisis and are convinced that TUI is well on track to quickly regain its former
strength in a post-COVID-19 era.
The way we work has also changed in the long term - for us as the Supervisory Board, too. Even though the German Corporate Governance
Code still says that attending Supervisory Board meetings by videoconference should be the exception rather than the rule, this has been
pretty much unavoidable since March. And it has worked amazingly well. Yet, just like the company as a whole and our customers, we as the
Supervisory Board long for the day in the future where we can again meet in person without any restrictions.
The COVID-19-pandemic has again taught us to exercise humility but at the same time not to give up on our dreams. After all, one day we
will again be able to travel without restrictions.
To close this introduction, let me again look back on the changes of personnel within the Supervisory Board in financial year 2020: At
the close of the Annual General Meeting in February 2020, Ms Valerie Gooding and Ms Janis Kong left the Supervisory Board of TUI AG after
over five years. Both have been with the company since the merger with TUI Travel PLC in December 2014 and significantly enriched it with
their international experience and expertise. They made an essential contribution to the highly successful cultural integration on the
merger of the two companies. At this point, I would like to thank them for their outstanding work and commitment and wish them well for
the future. In February 2020, the Annual General Meeting appointed Ms Ingrid-Helen Arnold and Ms Maria Garaña Corces to the Supervisory
Board as their replacements, each for a term of four years. Ms Arnold brings experience from a long career at SAP and we are delighted to
have her expertise in the field of transformation processes, both as an external service provider and in terms of internal restructuring
for our Board. Ms Garaña Corces, currently Vice President of Professional Services Europe, Middle East and Africa for Adobe Inc., worked
in positions of responsibility at the Microsoft Corporation for many years. Among her many projects, she was responsible for setting up
an Innovation Center on Menorca in cooperation with the tourism sector. The experience of these two new Board members in developing
digital solutions and restructuring a company are crucial as we, too, undergo the transformation into a company with digital platforms.
Further, Ortwin Strubelt stepped down from the Supervisory Board on 30 June 2020 following the successful sale of Hapag-Lloyd Cruises to
the TUI Cruises joint venture. Mr Strubelt had been an employees' representative on the Supervisory Board since 2009 and also sat on the
Audit Committee and the Presiding Committee. His longstanding experience in the company and his expertise in the cruises sector very much
enriched our Board. I would like to thank him for his commitment in the name of the entire Supervisory Board and wish him every success
for the future. At the request of the Executive Board of TUI AG, Mr Stefan Heinemann was appointed by the court as Mr Strubelt's
successor as of 21 July 2020. Mr Heinemann has worked for the subsidiary TUI Infotec GmbH since 2002 and as product owner is responsible
for the departments of Scheduling and Maintenance as well as IMSD (Infrastructure Management and Service Delivery) Aviation. With his
knowledge of the internal company system landscape, he is a valuable partner on the Supervisory Board, especially when it comes to the
transformation process.
Cooperation between the Supervisory Board and the Executive Board
The Executive Board and Supervisory Board cooperate in accordance with the principles set out in the Corporate Governance report (page
106) and in doing so are guided by the principles of good and responsible corporate governance. The focal areas of our monitoring
activities were the lawfulness and orderliness, appropriateness and cost-effectiveness of the business administration and Group
management, with a strong focus on dealing with the effects of the COVID-19-pandemic. This will be considered in further detail elsewhere
in the report.
The Executive Board reported to us regularly, promptly and comprehensively by way of written and verbal reports within and outwith
meetings. The reports contained all relevant information on strategy development, liquidity development, planning, business performance
over the course of the year and the situation of the Group, on the risk situation and risk management, on compliance as well as on
reports from the capital markets (e. g. from analysts) and the press. Aside from the effects of the Boeing grounding and Brexit, key
topics in the reports and discussions since March of this year overall have been the handling and the consequences of the
COVID-19-pandemic. In this context, we have been discussing the significant business transactions for the company as well as the
company's further development with the Executive Board. The Supervisory Board was involved in all decisions that were of fundamental
importance to the company in good time. We passed all resolutions required by law, the Articles of Association or the Terms of Reference
subject to taking relevant advice. To that end, we regularly made the necessary preparations on the basis of documents that the Executive
Board provided in advance to the Supervisory Board and its committees. The Executive Board also notified the Supervisory Board of any
urgent matters between the scheduled meetings. As Chairman of the Supervisory Board, I was also regularly informed by the Executive Board
about the current business situation and important business transactions in the company outside the Supervisory Board meetings.
Discussions within the Supervisory Board and its Committees
Prior to the Supervisory Board meetings, the representatives of the shareholders and the employees would convene their own separate
preparatory meetings, in which members of the Executive Board regularly took part. Discussions of the Executive Board matters and
Supervisory Board matters take place without the members of the Executive Board, unless the members of the Supervisory Board request
otherwise. Additionally, each member of the Supervisory Board may request at any time that a meeting be held without the attendance of
the members of the Executive Board.
Alongside the plenary meeting, a total of four committees were existent in the past financial year, namely the Presiding Committee, the
Audit Committee, the Strategy Committee and the Nomination Committee. The Mediation Committee, which is required under section 27 (3)
German Co-Determination Act
(Mitbestimmungsgesetz), did not need to convene. The chairpersons of the committees report regularly and comprehensively on the work of
the committees within the ordinary Supervisory Board meetings. In the context of applying for further stabilisation measures, the
Supervisory Board set up a special committee via a resolution dated 15 September 2020 to guarantee that a final resolution on the
approved stabilisation measure could be passed. Dr Zetsche, Mr Frank Jakobi and Prof. Edgar Ernst sit on the committee.
As in previous years, we enjoyed a constantly high attendance rate at our meetings, with a very high number of meetings taking place in
financial year 2020. Attendance averaged 97.1 % (prior year: 93.5 %) at the plenary meetings and 98.8 % (prior year: 97.3 %) on the
committees. In financial year 2020, all members of the Supervisory Board attended considerably more than half of the meetings of the
Supervisory Board and any of its committees of which they are members. Members who were unable to attend meetings generally took part in
resolutions by way of voting statements. The timely advance distribution of documents for meeting preparation by the Executive Board and
the reduction of handouts to almost zero made it much easier for the Supervisory Board members to prepare for the meetings. Since
mid-March 2020, the COVID-19-
pandemic has meant that all Supervisory Board meetings have been held as telephone or videoconferences. If and to the extent that it is
justified by travel recommendations and rules, and taking account of the risk to health, the Supervisory Board meetings will as a rule
again be organised as physical face-to-face meetings.
Attendance at meetings of Supervisory Board financial year 2020
Attendance at meetings of Supervisory Board financial year
2020
Name Supervisory Presiding Audit Nomination Strategy
Board committee committee committee committee
meetings
Dr Dieter 14 (14) 8 (8) 1 7 (7) 1 (1) 4 (4)
Zetsche
(Chairman)
Frank Jakobi 14 (14) 8 (8) 3 (3) 4 (4)
(deputy
Chairman)
Peter Long 14 (14) 8 (8) 1 (1) 4 (4) 1
(deputy
Chairman)
Ingrid-Helen 10 (10)
Arnold
Andreas 14 (14) 7 (7)
Barczewski
Peter Bremme 13 (14) 8 (8)
Prof. Dr 14 (14) 7 (7) 1 4 (4)
Edgar Ernst
Wolfgang 14 (14)
Flintermann
Maria Garaña 9 (10)
Corces
Angelika 14 (14) 8 (8) 4 (4)
Gifford
Valerie 4 (4) 3 (3)
Frances
Gooding
Stefan 2 (2)
Heinemann
Dr Dierk 14 (14) 7 (7)
Hirschel
Janis Carol 4 (4) 3 (3)
Kong
Vladimir 14 (14) 4 (4)
Lukin
Coline 14 (14) 6 (7)
Lucille
McConville
Alexey A. 8 (14) 6 (8) 1 (1) 4 (4)
Mordashov
Michael 14 (14) 3 (3) 7 (7)
Pönipp
Carola 14 (14)
Schwirn
Anette 14 (14) 8 (8)
Strempel
Ortwin 11 (11) 5 (5) 4 (4)
Strubelt
Joan Trían 14 (14)
Riu
Stefan 14 (14)
Weinhofer
Percentage 97.1 96.9 98.2 100.0 100.0
of meetings
attended
Percentage 98.8
of meetings
on
committees
attended
(In brackets: number of meetings held)
1 Chairperson of committee.
Key topics of the Supervisory Board's work
Fourteen Supervisory Board meetings took place. Additionally, five resolutions were passed via the written circulating procedure. The
following focal areas were the subject of the individual meetings:
1. At its meeting on 9 October 2019, the Supervisory Board started by looking back on the previous financial year and approved the budget
for financial year 2020. A further focal area was the discussion of the Executive Board remuneration, centring first on modifications to
the remuneration system and second on parameters of the variable Executive Board remuneration for the previous and current financial
year. Additionally, the Supervisory Board reviewed the targets both for its own composition and that of the Executive Board. Finally, we
were presented with reports on the progress of the markets and domain transformation.
2. The meeting on 11 December 2019 started with a discussion of the financial statements of the Group and of TUI AG, each issued with an
unqualified audit certificate by the auditor, the combined management report for the Group and TUI AG, the report of the Supervisory
Board, the corporate governance report and the remuneration report. The auditor also attended this meeting. The Audit Committee had
already engaged extensively with these reports on the previous day. Following its own review, the Supervisory Board approved the
auditor's audit result. We then approved the financial statements produced by the Executive Board and the combined management report for
TUI AG and the Group. The annual financial statements for 2019 were thus approved. Further, the Supervisory Board approved the report of
the Supervisory Board, the corporate governance report and the remuneration report. A resolution on the agenda for the ordinary Annual
General Meeting 2020 was also passed. In this context, the proposals made to the Annual General Meeting to appoint Ms Ingrid-Helen Arnold
and Ms Maria Garaña Corces to the seats on the Supervisory Board being vacated by Ms Valerie Gooding and Ms Janis Kong were discussed and
approved. As part of the Executive Board matters, the Supervisory Board extended the service agreement of Mr Joussen by a further five
years, discussed extensions for further Executive Board members and, following intensive discussions, approved an amendment of the
remuneration system with retrospective effect for financial year 2020, among other things. We further approved a revised budget for
financial year 2020, which takes more detailed account of the effects of the Thomas Cook insolvency as well as the impacts of the ongoing
grounding of the Boeing 737 Max, and discussed a correspondingly amended plan for financial years 2021 and 2022. We further received a
report of the current state of the integration of Hapag-Lloyd Cruises into the TUI Cruises joint venture.
3. The Supervisory Board approved the reference values for the JEV of the members of the Executive Board for financial year 2020 in a
written circulating procedure on 19 December 2019.
4. At the extraordinary meeting on 5 February 2020, the Supervisory Board approved the sale of all shares and ships of Hapag-Lloyd
Kreuzfahrten GmbH to TUI Cruises GmbH, after it had comprehensively and conclusively considered the aspects of financing, dividend
payments and synergy potential.
5. At the meeting on 10 February 2020, we heard reports on the current financial year and the discussed the interim financial statements
of the first quarter as of 31 December 2019. Additionally, the Supervisory Board considered the organisational preparations for the
Annual General Meeting and the new appointments to the committees following the departure of Ms Gooding and Ms Kong. In accordance with
the stipulations of the newly passed German Corporate Governance Code (GCGC), the Supervisory Board also resolved not to credit any board
functions exercised by the Executive Board members outside the Group to their remuneration. Alongside the personnel and social report, we
received a report on sustainability in the Group and an update on the current status of the grounding of the Boeing 737 Max.
Additionally, the Supervisory Board approved the new issue of employee shares as part of the oneShare employee share programme for the
financial year as well as the acquisition or lease of two Boeing 787-9-type aircraft for the long-haul business.
6. An extraordinary meeting on 3 March 2020 was the first occasion at which the Supervisory Board engaged more intensively with the
initial impacts of the global spread of the COVID-19-pandemic and its potential consequences for the company and the tourism sector as a
whole.
7. At a second extraordinary meeting on the emerging COVID-19-pandemic on 16 March 2020, the Supervisory Board considered the effect of
the travel restrictions that came into effect at short notice over the weekend of 14 / 15 March 2020. The consequence of these
restrictions was the almost complete shut-down of operative business and, on the evening of 15 March 2020, the Executive Board announced
that it would be making an application for state assistance to the Kreditanstalt für Wiederaufbau (KfW). As well as the retraction of the
forecast for financial year 2020, we discussed in detail potential measures for safeguarding liquidity and the necessary steps in the
process for the grant of state assistance.
8. At a further extraordinary meeting on 26 March 2020, the Supervisory Board again considered the consequences of the COVID-19-pandemic.
Alongside internal cost-reduction measures and strict liquidity management, we looked extensively at the current situation regarding the
grant of state assistance and the associated conditions and approved a corresponding application.
9. The Supervisory Board approved the conclusion of the first process for the approval of German state assistance by way of a written
circulating procedure on 1 April 2020.
10. At the extraordinary meeting on 28 April 2020, we received an update on the current situation of the company following the receipt of
the state bridging loan. We had intensive discussions on measures for safeguarding and mobilising liquid funds based on different
scenarios concerning the repayment claims for customer payments and potential reductions in capacity of the airlines. Additionally, the
Executive Board reported on the progress of the execution of the Hapag-Lloyd transaction as well as the digitalisation of business
operations.
11. On 12 May 2020, the Executive Board reported on the current financial year 2020, following which the Q2 quarterly financial
statements and the half-yearly financial report 2020 were discussed. Issues within the Executive Board matters included the approval of
Mr Ebel's appointment and service agreement until 30 November 2021. The Executive Board further notified the Supervisory Board that it
would voluntarily waive 30 % of its fixed remuneration for the months of April and May. Additionally, the Supervisory Board considered
the constitution of the Executive Board and the implementation of the reinsurance of pension claims, which is partly approved
contractually, for affected members of the Executive Board. Alongside an update on the new version of the GCGC and an update on the
liquidity status, the Supervisory Board was given an update on the effects of the COVID-19-pandemic and the development of a concept for
the resumption of commercial operations. The Supervisory Board further approved the conferral of commercial powers of attorney.
12. At its extraordinary meeting on 20 May 2020, the Supervisory Board was given an extensive report on the successful conclusion of a
compensation agreement with Boeing.
13. In the context of the announcement on the lifting of the Europe-wide travel restrictions, the Supervisory Board considered the
measures for the resumption of business operations and the financial consequences for the company at its extraordinary meeting on 9 June
2020. The focus here was on the grant of further German state assistance and the indebtedness and reduction of the capacities at TUIfly
GmbH.
14. After the Supervisory Board had again been notified of the current status regarding the effects of the COVID-19-pandemic at its
extraordinary meeting on 7 July 2020, we looked at how to fill the vacancy on the Supervisory Board, the Presiding Committee and the
Audit Committee created by the departure of Mr Strubelt. The Group Works Council suggested Mr Stefan Heinemann as a Supervisory Board
member to be appointed by the court, and the Supervisory Board chose Mr Pönipp as a new member of the Presiding Committee and Mr Jakobi
as a new member of the Audit Committee.
15. The framework conditions for the receipt of a further stabilisation package in the form of an increase of the existing KfW credit
line and the issue of a convertible bond to the WSF were discussed and approved accordingly at the extraordinary meeting on 12 August
2020.
16. On 13 August 2020, the Supervisory Board approved by way of a written circulating procedure the increase of the share capital of TUI
AG in order to issue employee shares in the scope of the "oneShare 2020" employee share programme and corresponding amendment of article
4 of the Articles of Association.
17. In a further written circulating procedure, the Supervisory Board approved corresponding supplementary agreements for the
implementation of the reinsurance of the pension obligations for the Executive Board under insolvency law contractually guaranteed in the
service agreements of the members of the Executive Board in question (Dr Eller, Mr Ebel and Mr Rosenberger) on 1 September 2020.
18. Over the course of the two-day meeting, the Supervisory Board started by discussing the Liquidity and Financial Profile and then the
draft budget for financial year 2021 and the plan for financial years 2022 and 2023 on 15 September 2020. We then approved the conclusion
of a framework agreement with the WSF on the grant of a stabilisation measure and a transfer agreement on the issue of convertible bonds.
We also set up a committee and authorised it to decide on the final conditions for the stabilisation measure. In the course of the
Executive Board matters, we approved the conclusion of supplementary contracts that implement the requirements concerning Executive Board
remuneration from the framework agreement with the WSF. We also discussed the reference values and targets for the JEV for the coming
financial year 2021 against the backdrop of the current challenges. Additionally, we decided to retain the target for the quota of women
on the Executive Board at one woman. In terms of the Supervisory Board matters, we considered the implementation of the partial waiver of
the fixed remuneration as well as the self-assessment of the effectiveness of our committee that was carried out on the basis of a
questionnaire in September. On the following strategy day, the Supervisory Board heard and intensively discussed extensive reports on the
progress of the transformation from the markets, in the field of IT, the airlines and from the sector of holiday experiences - Hotels,
Cruises and Destination Experiences.
19. On 29 September 2020, the Supervisory Board approved the reference values and targets for the JEV of the Executive Board members as
announced for the coming financial year 2021 via a written circulating procedure.
Presiding Committee
The Presiding Committee is responsible for Executive Board matters (including succession planning, appointment, terms of the employment
contracts, remuneration, proposals for the remuneration system). Additionally, the Presiding Committee prepares the meetings of the
Supervisory Board. Eight meetings were held in the reporting period.
The members of the Presiding Committee are / were:
· Dr Dieter Zetsche · Alexey Mordashov
(Chairman)
· Michael Pönipp (since 7
· Peter Bremme July 2020)
· Angelika Gifford · Anette Strempel
· Frank Jakobi · Ortwin Strubelt (until 30
June 2020)
· Peter Long
1. At the meeting on 9 October 2019, the Presiding Committee considered Executive Board matters. These included discussions on various
topics to do with Executive Board remuneration for the previous and current financial year.
2. As part of the Executive Board matters on 11 December 2019, the Presiding Committee recommended that the Supervisory Board extended
the appointment and service agreement of Mr Joussen and prepared a proposed resolution on the adjustment of the remuneration system.
3. At its meeting of 10 February 2020, the Presiding Committee submitted a proposed resolution for the new appointment of Mr Lukin to the
Audit Committee. Additionally, due to the newly published GCGC, it was recommended that the remuneration for existing positions on
non-Group boards should not be credited to the Executive Board remuneration. Further, the Presiding Committee discussed the potential
extension of Mr Ebel's appointment and service agreement.
4. At its extraordinary meeting on 3 April 2020, the Presiding Committee approved the recommendation of a one-year extension of Mr Ebel's
service agreement and appointment and considered the composition of the Executive Board in general. Additionally, the Presiding Committee
discussed the further handling of the COVID-19-pandemic and the corresponding effects by the Supervisory Board.
5. At its meeting on 12 May 2020, the Presiding Committee again discussed the composition and constitution of the Executive Board and
considered a provisional calculation of the variable remuneration components of the members of the Executive Board for the current
financial year 2020. The Presiding Committee also discussed a financial contribution of the Supervisory Board for the financial year
2020.
6. In terms of the Executive Board matters, the Presiding Committee started its extraordinary meeting on 20 July 2020 by discussing the
Executive Board remuneration against the backdrop of the effects of the COVID-19-pandemic as well as a proposed resolution for the
reinsurance of the pension obligations for the Executive Board under insolvency law contractually guaranteed in the service agreements of
the Executive Board members in question. Additionally, the Presiding Committee considered the organisation of work of the Executive Board
and the cooperation with the Supervisory Board. Alongside an assessment of Mr Rosenberger's target achievement and performance in the
context of the drive for the markets and domain transformation, the Presiding Committee discussed any contractual extensions of the
Executive Board pending in the foreseeable future.
7. At its meeting on 15 September 2020, the Presiding Committee again considered the durations of the current Executive Board contracts
and then discussed proposed resolutions on the agreement of addenda to the service agreements that implement the provisions of the
framework agreements with the WSF as regards Executive Board remuneration. Additionally, the parameters for the annual performance-based
remuneration of the Executive Board for the coming financial year 2021 were discussed pursuant to the GCGC and the retention of the quota
of women on the Executive Board until 2023 was recommended. The Presiding Committee then discussed the implementation of the voluntary
partial waiver of Supervisory Board remuneration as well as the self-assessment of the effectiveness of the Supervisory Board.
8. At an extraordinary meeting on 25 September 2020, the Presiding Committee proposed Mr Ebel as the successor to Ms Conix as CFO and
prepared a formal resolution recommendation for the reference values and targets for the JEV of the Executive Board for the financial
year 2021 and approved the adequacy of the Executive Board remuneration for the financial year 2020.
Audit Committee
The members of the Audit Committee are / were:
· Prof. Dr Edgar Ernst · Vladimir Lukin (since 11
(Chairman) February 2020)
· Andreas Barczewski · Coline McConville
· Dr Dierk Hirschel · Michael Pönipp
· Frank Jakobi (since 7 July · Ortwin Strubelt (until 30
2020) June 2020)
· Janis Kong (until 11 · Dr Dieter Zetsche
February 2020)
Seven ordinary Audit Committee meetings were convened over the financial year. For details of the Audit Committee's remit and the subject
areas on which it consulted and passed resolutions, please refer to page 19.
Nomination Committee
The Nomination Committee proposes suitable candidates from the shareholders to the Supervisory Board, which in turn proposes election
candidates to the Annual General Meeting or for appointment by the local court.
The members of the Nomination Committee, which met once, are / were:
· Dr Dieter Zetsche
(Chairman)
· Peter Long
· Alexey Mordashov
At the meeting on 10 December 2019, the Nomination Committee discussed the resolution recommendation made to the Supervisory Board
whereby Ms Ingrid-Helen Arnold and Ms Maria Garaña Corces would be recommended to the Annual General Meeting 2020 for election as
successors on the Supervisory Board to Ms Valerie Gooding and Ms Janis Kong. Ms Valerie Gooding and Ms Janis Kong stood down from the
Supervisory Board at the close of the Annual General Meeting on 11 February 2020.
Strategy Committee
The task of the Strategy Committee is to advise the Executive Board on the development and implementation of the Group strategy. A total
of four meetings of the committee were convened in the financial year.
The members of the Strategy Committee are / were:
· Peter Long (Chairman) · Frank Jakobi
· Angelika Gifford · Prof. Dr Edgar
Ernst
· Valerie Gooding (until 11 February
2020) · Alexey Mordashov
· Dr Dieter
Zetsche
1. At its meeting on 8 October 2019, live presentations gave the committee an impression of the functioning and progress of the One
Purchasing and Customer Experience platforms, which the committee subsequently discussed.
2. On 10 December 2019, the Strategy Committee was initially given an update in respect of the Thomas Cook insolvency. The progress of
the markets and domain transformation as well as a comparison of the TUI websites in the German and English source market was then
discussed. This concerned the optimisation of the digital customer experience and the generation of corresponding traffic on the pages.
3. The committee considered a further update on the implementation of the markets and domain transformation on 10 February 2020.
Additionally, the extent to which customer requirements were analysed and correspondingly fulfilled was discussed.
4. At its meeting on 11 May 2020, the Strategy Committee discussed the work streams set up as a consequence of the COVID-19-pandemic and
then engaged with the measures for resuming business operations.
Corporate Governance
The TUI AG share has its first quotation on the London Stock Exchange in the United Kingdom. The constitution of TUI AG as a stock
corporation under German law naturally means in this context that the Supervisory Board needs to address both German and British
corporate governance regularly and extensively. As well as mandatory compliance with the stipulations of the German Stock Corporation Act
(AktG), the German Codetermination Act (MitbestG), the Listing Rules and the Disclosure and Transparency Rules, in the course of the
merger TUI AG declared that it would comply with both the German Corporate Governance Code as well as - as far as practicable - the UK
Corporate Governance Code (UK CGC).
For the GCGC, the basic form of which derives among other things from the AktG, we were able to provide the Executive Board with the
unlimited Declaration of Conformity 2020 in accordance with section 161 AktG. Conversely, there were derogations from the UK CGC, which
are primarily to do with the conceptual difference between the monistic governance system of a public listed company in the United
Kingdom (known as a one-tier board) and the dualistic governance system of Executive Board and Supervisory Board in the German
Aktiengesellschaft (known as a two-tier board) under German law.
Further information on corporate governance, the Declaration of Conformity 2020 pursuant to section 161 AktG and the declaration on the
UK CGC can be found in the report on corporate governance jointly produced by the Executive Board and the Supervisory Board in this
management report (page 106) and on the TUI AG website.
Conflicts of interest arising
The Supervisory Board constantly monitored the occurrence of conflicts of interest in the current financial year and established that no
conflict of interest arise in financial year 2020.
Annual and Group audit of TUI AG and the TUI Group
The Supervisory Board reviewed whether the annual and Group audit as well as the further financial reports complied with the applicable
requirements. The annual audit of TUI AG prepared by the Executive Board in accordance with the rules of the German Commercial Code
(HGB), the combined management report of TUI AG and the TUI Group as well as the Group audit prepared on the basis of the International
Financial Reporting Standards (IFRS) for the financial year 2020 were audited by Deloitte GmbH Wirtschaftsprüfungsgesellschaft, Hanover,
and an unqualified audit certificate issued for each. The specified documents, the proposal of the Executive Board to utilise the net
profit available for distribution and the audit reports of the auditor were submitted to all members of the Supervisory Board in good
time. We dealt with them in depth at the Audit Committee meeting on 1 December 2020 and at our accounts meeting on 2 December 2020 at
which the Executive Board explained the financial statements to us in detail. At this meeting, the chairman of the Audit Committee and
the auditor reported on the outcome of their audits, the focal areas of which had been specified in advance with the Audit Committee for
the reporting year. Neither the auditor nor the Audit Committee identified any weaknesses of the early warning system and internal
control system. After our own review of the annual financial statements, the Group accounts and the combined management report, we had no
occasion to raise any objections and therefore agree with the Executive Board's assessment of the situation of TUI AG and the TUI Group.
At the recommendation of the Audit Committee, we approve the financial statements for financial year 2020; the annual accounts of TUI AG
are therefore approved.
Composition of Executive Board and Supervisory Board
The composition of the Executive Board and Supervisory Board as at 30 September 2020 can be found in the overviews on page 102 for the
Supervisory Board or page 104 for the Executive Board.
Supervisory Board
Ms Valerie Gooding and Janis Kong stood down from the Supervisory Board at the close of the Annual General Meeting 2020. At the same
Annual General Meeting, Ms Ingrid-Helen Arnold and Ms Maria Garaña Corces were elected as members of the Supervisory Board of TUI AG for
a term of four years. Further, Mr Ortwin Strubelt stood down from the Supervisory Board on 30 June 2020. Mr Stefan Heinemann was
appointed to the Supervisory Board by the court as representative of the employees on 21 July 2020.
Presiding Committee
Mr Ortwin Strubelt stood down from the Supervisory Board and thus also from the Presiding Committee on 30 June 2020. The Supervisory
Board elected Mr Michael Pönipp as the fourth employees' representative on the Presiding Committee.
Audit Committee
Ms Kong stood down from the Supervisory Board and thus also from the Audit Committee at the close of the Annual General Meeting 2020. The
Supervisory Board elected Mr Vladimir Lukin to the Audit Committee to fill the vacancy. After the departure of Mr Strubelt on 30 June
2020, the Supervisory Board elected Mr Frank Jakobi to fill the vacancy that had arisen on the Audit Committee.
Strategy Committee
After Ms Gooding stood down from the Supervisory Board and thus also the Strategy Committee at the close of the Annual General Meeting
2020, the Supervisory Board decided to consider a potential successor at a future point in time.
Executive Board
In financial year 2020, Ms Conix announced that she would not renew her service agreement, which expires on 14 July 2021. After intensive
discussions, the Supervisory Board decided to appoint Mr Sebastian Ebel as CFO with effect from 1 January 2021 and Mr Peter Krueger as a
new member of the Executive Board responsible for the areas of Strategy, M&A, Airlines and Joint Ventures with effect from 1 January
2021.
Dedication
The Supervisory Board would like to thank all employees of the TUI Group for their immense hard work that has carried TUI through a
financial year with unprecedented challenges. Given the huge uncertainties in 2020, their commitment and trust in the management and in
us is a remarkable achievement. Additionally, I would like to thank the German government in the name of the entire Supervisory Board for
their financial support and the corresponding fundamental trust in our business model.
Hanover, 9 December 2020
On behalf of the Supervisory Board
Dr Dieter Zetsche
Chairman of the Supervisory Board
Audit Committee report
Dear Shareholders,
as the Audit Committee, our task is to support the Supervisory Board in performing its monitoring function and we therefore dealt in the
financial year with issues relating in particular to the TUI Group's accounting and financial reporting, as required by statutory
provisions, the German Corporate Governance Code, the UK Corporate Governance Code and the rules of procedure of the Supervisory Board.
In addition to these core functions, we are responsible in particular for monitoring the effectiveness and proper functioning of internal
controls, the risk management system, the internal audit department and the legal compliance system.
Furthermore, the Audit Committee is responsible for selecting the external auditors. The selected auditors are required to be proposed by
the Supervisory Board to the Annual General Meeting for appointment. Following the appointment by the Annual General Meeting, the
Supervisory Board formally commissions the external auditor to audit the annual financial statements and the consolidated financial
statements, to review the half-year financial statements and any additional interim financial information that complies with the
requirements for the half-year financial report.
The Audit Committee was elected immediately after the 2016 Annual General Meeting from among the members of the Supervisory Board. The
election of the committee members is valid for the respective term of their Supervisory Board mandate. In the past financial year, Frank
Jakobi and Vladimir Lukin were elected as new members of the Audit Committee after Janis Carol Kong and Ortwin Strubelt resigned from the
Supervisory Board of TUI AG.
Thus, the Audit Committee currently consists of the following eight members of the Supervisory Board:
· Prof. Dr Edgar Ernst · Vladimir Lukin
(Vorsitzender)
· Coline Lucille
· Andreas Barczewski McConville
· Dr Dierk Hirschel · Michael Pönipp
· Frank Jakobi · Dr Dieter Zetsche
In the opinion of the Supervisory Board, both the Chairman of the Audit Committee and the other members of the Audit Committee meet the
criterion of independence. In addition to the Chairman of the Audit Committee, at least one other member is required to have expertise in
the field of accounting and experience in the use of accounting principles and internal control systems.
The Audit Committee meets regularly six times a year, and other meetings may be held on specific topics. These topic-related meetings
include a meeting at which the Executive Board explains the key content of the Pre-Close Trading Update, which is published shortly
before the balance sheet date, to the Audit Committee. The other meeting dates and agendas are based in particular on the Group's
reporting cycle and the agendas of the Supervisory Board.
The Chairman of the Audit Committee reports on the work and proposals of the Audit Committee at the subsequent Supervisory Board meeting.
Apart from the Audit Committee members, the meetings were also attended by the Chairman of the Executive Board and the Chief Financial
Officer as well as the heads of Group Financial Accounting & Reporting, Group Audit, Group Legal, Compliance & Board Office, Group
Treasury, Group Controlling and Group Investor Relations & Corporate Finance.
The external auditors were invited to attend the meetings on relevant topics. Additional members of the TUI Group's senior management,
operationally responsible TUI Group executives or external consultants were asked to attend as required.
In addition to the meetings of the Audit Committee, the Chairman of the Audit Committee also held individual discussions with the
Executive Board, senior managers or the responsible partners of the auditor where it was deemed necessary for the in-depth understanding
of individual topics and issues. The Chairman of the Audit Committee reported on the main results of these discussions at the following
meeting.
The members attended the meetings of the Audit Committee as shown in the table on page 13.
Reliability of financial reporting and monitoring of the accounting process
The preparation of the annual financial statements and annual report of a German stock corporation is the sole responsibility of the
Executive Board. Pursuant to Section 243 (2) HGB, the annual financial statements must be clear and concise and provide a realistic
overview of the economic situation of the company. This is equivalent to the requirements of the UK Corporate Governance Codex (UK CGC),
which requires annual accounts and annual reports to be accurate, balanced and understandable. Against this background, the Executive
Board is convinced - although the assessment was not transferred to the Audit Committee - that the annual report submitted meets the
requirements of both legal systems.
In order to also convince ourselves of the reliability of both the annual financial statements and the interim reporting, we requested
detailed information from the Executive Board on the business development and financial situation of the Group at the four Audit
Committee meetings held immediately prior to the publication of the respective financial statements. The relevant reports were discussed
at these meetings and the auditors reported in detail on material aspects of the financial statements and on the findings of the audit
and review.
In order to monitor accounting, we examined individual aspects intensively in great detail. Naturally, the economic development of TUI
due to the COVID-19 crisis was also a central topic at our meetings. In particular, we received detailed reports from TUI AG's Executive
Board on the measures taken to secure liquidity, especially with regard to government-backed financing, and on planned equity measures.
In addition, the accounting treatment of key balance sheet items, in particular goodwill, property, plant and equipment, advance payments
for tourism and other provisions, was also discussed. In doing so, we satisfied ourselves in consultation with the auditor that the
assumptions and estimates on which the accounting treatment was based were appropriate. In addition, the Audit Committee also considered
significant legal disputes and significant aspects arising from the operating business, in particular the impairment test of the Group's
assets against the background of the COVID-19 crisis.
In the period under review, we focused in particular on the following individual aspects:
Even before the outbreak of the COVID-19 crisis, TUI AG's Executive Board had initiated optimization processes with regard to the
structure of working capital and the associated cash flows. These measures also included the centralisation of finance functions. We were
regularly informed about these projects at our meetings. Due to the outbreak of the COVID-19 crisis, these processes were greatly
expanded and accompanied by measures for strict cost control. We also received reports on the corresponding measures.
The grounding of Boeing 737 Max aircraft in March 2019 still had an impact on TUI's earnings situation in the past financial year. At our
meetings, we were informed about the effects of the flight ban and the status of negotiations with Boeing on compensation for the damage
incurred.
In addition, the consistency of the reconciliation from profit before tax to the key figure 'underlying earnings' and the material
adjustments were discussed for all quarterly reports and for the annual financial statements.
We also gathered information about the corporate transactions of the financial year. This related in particular to the sale of
Hapag-Lloyd Kreuzfahrten to TUI Cruises in the Cruises Sector. Furthermore, we examined TUI's investing activities in airlines, hotels &
resorts, cruises and IT. We obtained information about the major investments within the Group divisions and the earnings contributions
from these investments and divestments.
In addition to these topics, against the background of the COVID-19 crisis, the going concern report prepared by the Company was
discussed in particular in order to verify the relevant going concern statements in the half-year report and the annual financial
statements. The Viability Statement in the annual financial statements was also a subject of discussion.
Since the introduction of mandatory reporting on Corporate Social Responsibility (CSR) in the management report, the Supervisory Board
has been responsible for reviewing the content of this information. The Supervisory Board decided to seek the support of TUI's Group
Audit department in the review of the disclosures. Accordingly, we have been informed about the results of the audit by Group Audit in
the financial year and are of the opinion that the information published in the CSR report is appropriate.
Our assessment of all aspects of accounting and financial reporting discussed is consistent with that of management and the auditors.
Effectiveness of internal controls and the risk management system
The Audit Committee recognises that a robust and effective system of internal control is critical to achieving reliable and consistent
business performance. To fulfil its legal obligation to examine the effectiveness of internal controls and the risk management system,
the Audit Committee is informed regularly about their current status and also about the further development of them.
The Group has continuously developed its internal control system on the basis of the COSO concept. In this context, the routine review of
key financial controls is performed by local management and monitored by the Executive Board. In the largest source markets, UK and
Germany, more widespread testing of additional internal controls is conducted.
The compliance function within the Group is split into the areas of finance, legal affairs and IT. This split plays an essential role in
identifying further control needs and in continuously improving existing controls. In addition, the auditors also report on any
weaknesses in the Group's accounting-related control system which they have identified and whose prompt remedial action is monitored by
management.
The Audit Committee regularly receives reports on the effectiveness of the risk management system, as described in the Risk Report
starting on page 33. The Risk Oversight Committee that has been set up is of crucial importance within the Group. We are convinced that
an appropriate risk management system is thus in place.
The Group Audit department ensures independent monitoring of the implemented processes and systems as well as the core projects and
reports directly to the Audit Committee at each regular meeting. In the period under review, the Audit Committee was not informed of any
audit findings that indicate significant weaknesses in the internal controls or the risk management system. In addition, regular
discussions are held between the Chairman of the Audit Committee and the Head of Group Audit for closer coordination. The annual audit
planning is agile. The Audit Committee received detailed reports on the methodology and took note of and approved them, together with the
audits for the coming financial year already defined in this context. The Audit Committee believes that the effectiveness of the Group
Audit department is ensured through this regular consultation.
In the course of our meetings, we were informed about the status of the implementation of the provisions of the European General Data
Protection Regulation (EU GDPR) in the individual businesses during the financial year. On the basis of this report, we are convinced
that the projects and measures initiated for this purpose throughout the Group are suitable for fulfilling the requirements of the EU
GDPR.
In addition to the usual reporting on the legal compliance system, we were informed about the introduction of the so-called Integrity
Passport in the TUI Group. In the financial year under review, TUI Group's legal compliance system was described in a newly issued Code
of Conduct and made available to employees in the form of the Integrity Passport. We had the Integrity Passport presented to us and
received a report on the status of the information provided by management to the employees.
Whistleblower systems for employees in the event of compliance violations
The TUI Group has set up a uniform whistleblower system through which employees can draw attention to possible violations of compliance
guidelines.
As part of the reporting on the legal compliance system, the key findings of the current financial year from the whistleblower system
were presented to us.
Examination of auditor independence and objectivity
For the 2020 financial year, the Audit Committee recommended to the Supervisory Board that it proposes Deloitte GmbH
Wirtschaftsprüfungsgesellschaft (Deloitte) to the Annual General Meeting as auditors. Following the commissioning of Deloitte as auditor
by the Annual General Meeting in February 2020, the Supervisory Board appointed Deloitte to audit the 2020 annual financial statements.
The Audit Committee had Deloitte explain to it in advance the audit plan for the annual financial statements as of 30 September 2020.
This plan covered the main focal points of the audit and the main companies to be audited from the Group's point of view. Based on this,
the Audit Committee firmly believes that the audit has taken into account the main financial risks to an appropriate degree and is
satisfied that the auditors are independent and objective in how they conduct their work.
On the basis of the regular reporting by the auditor, we have every confidence in the effectiveness of the external audit. Therefore, we
decided to recommend to the Supervisory Board that it proposes to the Annual General Meeting to elect Deloitte as the auditor for the
2021 financial year as well. Deloitte was selected as auditors in a public tender process in financial year 2016 and has been appointed
as auditor without interruption since the first election by the Annual General Meeting in 2017.
In order to ensure the independence of the auditor, any non-audit services to be provided by the auditors must be submitted to the Audit
Committee for approval before awarding the mandate. Depending on the amount involved, the Audit Committee makes use of the option of
delegating the approval to the company. The Audit Committee Chairman is only involved in the decision once a specified cost limit has
been reached. Insofar as the auditor has performed services that do not fall under the Group audit, the nature and extent of these have
been explained to the Audit Committee. This process complies with the company's existing guideline regarding the approval of non-audit
services and it takes into account the requirements from the AReG regulations on prohibited non-audit services and on limitations of the
scope of non-audit services. In financial year 2020, these non-audit services amounted to 18.6 % of the total auditor's fee, which
amounted to &euro 8,326.0 million.
I would like to take this opportunity to thank the Audit Committee members, the auditors and the management for their hard work over the
past financial year.
Hanover, 9 December 2020
Prof. Dr Edgar Ernst
Chairman of the Audit Committee
TUI Group Strategy
Overall strategy
TUI recorded a strong start to the financial year, breaking TUI's January booking records for the summer 2020 programme since the merger
of TUI AG and TUI Travel PLC.1 However, governmental measures taken in March to fight the spread of the COVID-19-pandemic forced an
immediate stop of most of our business activities, leading to a sharp increase in booking cancellations and customer refunds, ultimately
resulting in a liquidity squeeze for the business. Nevertheless, even during the COVID-19 crisis market fundamentals with underlying
customer demand remain intact. This was evident due to the strong return of holiday bookings in June and July, after some travel
restrictions were lifted.2 Due to the emergence of a second COVID-19 wave heading into the Winter 2020 programme, the number of European
destinations available for international travel are limited once again, including for example Greece and Portugal. Renewed governmental
health measures with corresponding restrictions impede resumption of business activities in most parts of the international tourism
sector, including hotels and cruises, resulting in low revenue potential.3 At the same time, a recovery of travel is predicted for the
financial year 2021.4 TUIs brand advantage, recognised for safety and service quality5, as well as its worldwide presence in our
international destinations should enable TUI to satisfy the strong underlying consumer demand.2 As soon as vaccinations, currently
submitted for approval, are available for administration to the necessary extent, travel restrictions are expected to be lifted
imminently. This would enable a substantial and fast recovery of our business. According to the German Federal Ministry of Health, it is
expected that first vaccinations will be available to the public towards the end of 2020, beginning of 2021. This should result in a more
relaxed state and resumption of normal everyday life in many parts of our society.
TUI's integrated business model continues to be considered a success factor for the long term and remains a core element of our strategy.
Our focus on end-to-end delivery of safe holidays across the entire customer journey, has benefitted the partial recommencement of
operations for Summer 2020. Destinations have recognised this strength of TUI's, as the governments of Greece and the Balearics have
selected TUI to implement pilot programs in Summer 2020 aimed at restarting tourism in their regions.
1 14 % growth in booking performance as of January 2020 compared to January 2019 booking progress
2 3.3 m bookings recorded since global travel bans were partially lifted (data from 1st of June to 1st of November)
3 2.4 m Summer 2020 bookings, compared to 12.7 m bookings for the previous summer (data as at 2 August 2020)
4 72 % increase of world tourist arrivals expected for 2021 compared to 2020
5 Awarded for accomplishment of highest health and safety standards amongst global hotel brands (10 November 2020) -
https://www.intertek.com/news/2020/11-10-intertek-cristal-awards-tui-group-best-global-hotel-brand/
Markets & Airlines: Accelerate realignment programme to emerge leaner, stronger,
more flexible and digital from the crisis
In the Markets & Airlines sector, we are focusing on improving our cost position while driving innovation speed and flexibility. This
shall be delivered by establishing more centralised processes and technology, the core elements of our Markets Transformation & Domaining
initiative. This should allow us to further expand our product offering beyond traditional packages into attractive growth segments like
accommodation only, seat only as well as dynamic package. The expansion runs parallel to efforts geared towards remaining competitive and
maintaining our leading positions in the traditional packaging market. Another focus point in the Airlines segment is the strengthening
of our competitiveness and positioning via careful management of our airline capacity.
The initiative expands the ecosystem for TUI as well as our customers and partners. Building on the extended ecosystem, our CRM systems
are set up to support digital up-6 and cross-selling7 and will focus on customer retention within the TUI world. Against the background
the pandemic's impact, the Transformation & Domaining initiative has increased in terms of relevance and pace. Through our global
realignment programme, we target to permanently reduce over &euro 300 m of fixed costs p. a., with a large proportion allocated to the
Markets & Airlines business. To achieve this, we are now accelerating our transformation by merging tasks and functions across the group,
as well as consolidating our global IT structures. In parallel, we are rightsizing8 our airlines and aircraft order book. These measures
have already commenced across all markets. For example, in TUI fly Germany, the target is to reduce the number of aircrafts by around 50
% from 39 in the next three years, as well as a consolidation of departure airports. For the Markets & Airlines segment, we are seeking
to divest and / or restructure non-profitable activities.
6 Up-selling: selling upgrades to a product (e. g. better flight class, room class, higher tier service, etc.)
7 Cross-selling: selling complementary or additional products from the TUI range
8 Adapting in-house capacity to fit needs of source market TOs and market environment
Hotels & Cruises: asset-right expansion and transformation, driving returns,
benefitting from vertical integration
With 433 hotels9 and 17 cruise vessels as at 30 September 2020, we have built a sizeable leisure hotel and cruise business. Our
integrated model allows us to leverage the distribution power in the Markets & Airlines business to drive customers into our own Hotels
and Cruises. In the future, our capital intensity will be reduced compared to our investment spending in recent years. We announced an
asset-right strategy in December 2019 and are executing on this initiative consistently - as exemplified by the continual increase of the
proportion of assets in our portfolio operated through management contracts or franchises. In our hotels business, combining the
rebalancing of our portfolio in favor of management and franchise contracts and leveraging our joint venture structures, gives us
optionality for asset-right growth. The customer relevant aspects - including sales, brand, hotel concepts and experience in the
destination - will still be controlled by TUI, regardless of the type of contract in place. In our cruise segment, we are leveraging our
joint ventures structures to grow while simultaneously reducing capital intensity. This is exemplified by the successful disposal of
Hapag-Lloyd Kreuzfahrten to the joint venture TUI Cruises. In addition, we are in the process of future proofing our UK cruise business
through repositioning and modernization of its fleet.10
9 Including third-party hotelier operations
10 Fleet modernisation via retirement of two oldest ships (Celebration and Dream) and leverage joint entity structure to drive synergies
TUI Musement platform: building scale in the "things to do" market and attracting
customers to join the TUI eco-system
In the tours and activities market, TUI has built - on the back of the Musement acquisition - a scalable platform with approximately 168
thousand products as at 30 September 2020. Our business model is based on a two-sided - holidaymaker and provider - open platform. On the
distribution side, TUI is focusing on growth in B2B distribution via strategic cooperations - as exemplified by the agreement with
Booking.com - as well as growth of offering for our own customer base. On the product side, TUI aims to expand its offering through
consolidation of products in the market in order to maintain its position as one of the largest product providers11 in the sizeable and
fast growing Tours & Activities market.
11 List of number of activities by some of the biggest providers in the Tours & Activities market: Airbnb with 30k
(https://news.airbnb.com/airbnb-experiences-update/), GetYourGuide with 60k
(https://www.countervor9.de/vertrieb/paxconnect-macht-touren-von-get-your-guide-buchbar) and Viator with 200k
(https://www.viator.com/de-DE/support/about)
Our environment
For TUI Group, economic, environmental and social sustainability is a cornerstone of our strategy for continually enhancing the value of
our Company. This is the way we want to create the conditions for longterm economic success and assume responsibility for sustainable
business transformation in the tourism sector.
The goals we set ourselves in our sustainability strategy include 'Step lightly', where we aim to reduce the environmental impact of our
business operations and to fix goals for improvements in all Group areas.
In financial year 2020, TUI Group's total emissions decreased year-on-year in absolute terms, primarily due to the COVID-19 crisis.
Relative carbon emissions across our airlines increased by 4.0 % in the financial year 2020 to 67.8 g / rpk (previous year 65.2 g / rpk).
This has been caused by the grounding of our fleet due to the COVID-19 crisis. TUI continues to operate one of Europe's most
carbon-efficient airline fleet and continually seeks to deliver further improvements.
Our goal: We will operate the most carbon-efficient airlines in Europe and cut the carbon intensity of our operations by 10 % by 2020
(baseline year 2014, 67.56 g CO2 / PKM). Unfortunately with the grounding of the Boeing 737 Max and the deliveries that were scheduled,
this has significantly impacted progress against our aviation carbon target. Furthermore COVID-19 has had a negative impact on this
relative key performance indicator. Since our baseline year 2014, we improved carbon efficiency by 3.6 % up to 2019. However, as a result
of COVID-19 impacting flying operations in 2020 there was an increase of 0.4 % compared to 2014.
Details see page 77.
Our employees
COVID-19 poses exceptional challenges for TUI Group and above all our employees. Many of our employees, for instance, are on short-time
work benefit schemes or other state-supported programmes aimed at saving jobs. The contact and travel restrictions associated with the
pandemic have made new demands on our staff in their day-to-day local and cross-border cooperation. We have therefore had to enhance the
global alignment and networking of our markets, systems and employees. In the financial year under review, the focus was on establishing
appropriate central or international functions and teams. This will remain a key theme for our ongoing transformation. Communication, new
cooperation formats and leadership behaviour have gained in importance in recent months. Due to the rapid, successful shift to mobile
working in large parts of the Company, day-to-day cooperation has become more digital. The implementation of state-of-the-art, digital
strategies offers our employees flexibility in their work and creates digital and individual freedom. By implementing these measures
alongside other programmes, TUI Group is creating a work environment enabling our employees to remain fully and passionately committed to
our Company even in these difficult times.
Details see page 83.
corporate profile
Group structure
TUI AG parent company
TUI AG is TUI Group's parent company headquartered in Hanover and Berlin. It holds direct or, via its affiliates, indirect interests in
the principal Group companies conducting the Group's operating business in individual countries. Overall, TUI AG's group of consolidated
companies comprised 277 direct and indirect subsidiaries at the balance sheet date. A further 19 affiliated companies and 30 joint
ventures were included in TUI AG's consolidated financial statements on the basis of at equity measurement.
For details on principles and methods underlying the consolidated financial statements and TUI Group shareholdings see pages 154 and 244.
Organisation and management
TUI AG is a stock corporation under German law, whose basic principle is two-tiered management by two boards, the Executive Board and the
Supervisory Board. The Executive and Supervisory Boards cooperate closely in governing and monitoring the Company. The Executive Board is
responsible for the overall management of the Company.
The appointment and removal of Board members are based on Sections 84 et seq. of the German Stock Corporation Act in combination with
Section 31 of the German Co-Determination Act. Amendments to the Articles of Association are effected on the basis of the provisions of
Sections 179 et seq. of the German Stock Corporation Act in combination with Section 24 of TUI AG's Articles of Association.
Executive Board and Group Executive Committee
As at the balance sheet date, the Executive Board of TUI AG consisted of the CEO and five other Board members.
For details on Executive Board members see page 104.
A Group Executive Committee was set up in order to manage TUI Group strategically and operationally. As at 30 September 2020, the
Committee consisted of twelve members, who meet under the chairmanship of CEO Friedrich Joussen.
After the balance sheet date, the Supervisory Board resolved to reshuffle the Group's management with effect from 1 January 2021.
For details see: www.tuigroup.com/en-en/investors/corporate-governance
TUI Group reporting structure
TUI Group is a global integrated tourism group. Its core businesses, Holiday Experiences and Markets & Airlines, are clustered into the
segments Hotels & Resorts, Cruises and TUI Musement (previously Destination Experiences) as well as three regions: Northern, Central and
Western Regions. TUI Group also comprises All other segments.
With the exception of the following reclassifications, the Group's management structure is thus comparable year-on-year.
In February 2020, we agreed to sell Hapag-Lloyd Kreuzfahrten to the joint venture TUI Cruises. In July 2020, all necessary approvals
including merger clearance by the EU Commission had been fulfilled, and the transfer of title to the Hapag-Lloyd Kreuzfahrten vessels was
completed during that month. We have already received the major part of the purchase price for Hapag-Lloyd Kreuzfahrten; the remainder
will be paid within one year upon the completion of the ship transfers. Hapag-Lloyd Cruises is thus part of TUI Cruises, and will
continue to be managed under the existing traditional brand.
In the period under review, TUI changed the allocation of the items on the profit and loss statements of the aircraft leasing companies
who hold TUI Group's aircraft and lease them to the Group's airlines. Since the financial year under review, these items have been fully
allocated to the airlines using the corresponding aircraft (Northern Region, Central Region and Western Region). In the 2019 Annual
Report, only the result from intra-Group aircraft leasing had been allocated to the relevant airlines, while the other items were carried
in All other segments. The prior year's comparatives have been restated accordingly.
Holiday Experiences
Holiday Experiences comprises our hotel, cruise and destination activities.
Hotels & Resorts
The Hotels & Resorts segment comprises TUI Group's diversified portfolio of Group hotel brands and hotel companies. The segment includes
hotels majority-owned by TUI, joint ventures with local partners, stakes in companies giving TUI significant influence, and hotels
operated under management contracts.
In financial year 2020, Hotels & Resorts comprised a total of 355 hotels with 266,002 beds. 329 hotels, i. e. the majority, are in the
four- or five-star categories. 46 % were operated under management contracts, 42 % were owned by one of the hotel companies, 11 % were
leased and 1 % of the hotels were managed under franchise agreements.
Hotels & Resorts portfolio
Hotel 3 stars 4 stars 5 stars Total Beds Main
brand hotels sites
Riu 3 49 47 99 101,528 Spain,
Mexico,
Caribbea
n, Cape
Verde,
Portugal
,
Morocco
Robinson 1 17 7 25 15,321 Spain,
Greece,
Turkey,
Austria
Blue 3 12 18 33 30,610 Cuba,
Diamond Dom.
Rep.,
Jamaica,
Mexico,
Saint
Lucia
Other 19 112 67 198 118,543 Spain,
hotel Greece,
companies Turkey,
Egypt
Total 26 190 139 355 266,002
As at 30 September 2020
Riu is the largest hotel company in the portfolio of Hotels & Resorts in terms of the number of hotels. The Mallorca-based enterprise
primarily operates four- and five-star hotels in Spain, Mexico and the Caribbean. Its three product lines Riu Clubhotels, Riu Plaza (city
hotels) and Riu Palace (premium segment) target different customer groups.
Robinson operates mainly four- and five-star club hotels and is a leading German provider of club holidays. Most of its clubs are located
in Spain, Greece, Turkey, the Maldives and Austria.
Blue Diamond is a hotel chain in the Caribbean. The Hotels & Resorts segment comprises 33 resorts in the Caribbean and Mexico.
Other hotel companies include in particular the flagship brand TUI Blue and TUI Magic Life. TUI Blue is TUI Group's youngest hotel brand,
targeting an international audience. Its portfolio is being expanded by combining TUI Blue's existing offerings with those of the concept
brands TUI Sensimar and TUI Family Life. Including the hotels rebranded as TUI Blue hotels, the brand has 93 hotels in 19 countries. TUI
Magic Life is an all-inclusive brand, targeting an international audience seeking club holidays with different profiles in beachfront
locations.
Our hotels operated by third-party hoteliers include a total of 78 hotels belonging to our international concept brands. This brings the
total number of hotels belonging to TUI Group to 433.
Cruises
The Cruises segment consists of the joint venture TUI Cruises, our former subsidiary Hapag-Lloyd Kreuzfahrten, transferred to the joint
venture TUI Cruises in July 2020, and Marella Cruises. With their combined fleet of 17 vessels as at the reporting date, the three cruise
lines offer different service concepts to serve different target groups.
Cruise fleet by ownership structure
Owned Leases Total
TUI Cruises (Joint Venture) 7 - 7
Marella Cruises 4 1 5
Hapag-Lloyd Cruises (subsidiary 5 - 5
of TUI Cruises)
As at 30 September 2020
TUI Cruises is a joint venture in which TUI AG and the US shipping company Royal Caribbean Cruises Ltd. each hold a 50 % stake. With its
seven ships, TUI Cruises is top-ranked in the German-speaking premium volume market for cruises. The Berlitz Cruise Guide 2020, the most
important international reference guide for cruise ship ratings, rated four ships operated by TUI Cruises among the Top 5 liners in the
"Large ships" category.
The sale of Hapag-Lloyd Kreuzfahrten, previously a wholly owned TUI Group subsidiary, to the joint venture TUI Cruises was completed in
July 2020. The traditional Hapag-Lloyd Cruises brand will remain a leading provider of luxury and expedition cruises in German-speaking
markets under the new structure. At the reporting date, the fleet comprised two luxury liners in the 5-star-plus category, Europa and
Europa 2, as well as three expedition cruise ships, including Hanseatic inspiration, which joined the fleet in October 2019. A further
expedition cruise ship is under construction and is scheduled for delivery in 2021. She will replace the expedition vessel Bremen.
With a fleet of five ships, Marella Cruises offers voyages in different segments, including family and city cruises, in the British
market.
TUI Musement (previously Destination Experiences)
The TUI Musement segment delivers local services at our holiday destinations around the world. TUI Musement's business model is based on
an open online platform available to suppliers and customers alike. It gives our customers the option to book tours, activities and
excursions in the destinations directly and enables our partners and third-party providers to sell offerings. TUI also employs its own
staff in numerous holiday destinations.
Markets & Airlines
With our three regions - Northern, Central and Western - we have well-positioned sales and marketing structures offering our customers
attractive holiday experiences. Our sales activities are based on online and offline channels. The travel agencies include Group-owned
agencies as well as joint ventures and agencies operated by third parties. In order to offer our customers a wide choice of hotels, our
source market organisations have access to a large portfolio of TUI hotels. They also have access to third-party hotel bed capacity, some
of which has been contractually committed.
Our own flying capacity continues to play a key role in our business model. Thanks to a combination of Group-owned and third-party
capacity, we offer tailored travel programmes for each individual source market region and can respond flexibly to changes in customer
preferences. Balanced management of flight and hotel capacity enables us to develop destinations and optimise the margins of both service
providers.
Northern Region
The Northern Region segment comprises tour operator activities and airlines in the UK, Ireland and the Nordics. This segment also
includes the Canadian strategic venture Sunwing and the TUI Russia associate.
Central Region
The Central Region segment comprises the tour operators and airlines in Germany and the tour operator activities in Austria, Poland,
Switzerland and Italy.
Western Region
The Western Region segment comprises the tour operators and airlines in Belgium and the Netherlands and the tour operator activities in
France.
All other segments
"All other segments" includes our business activities for the new markets, TUI AG's corporate centre functions, the interim holdings, the
Group's real estate companies and the Group's key tourism functions.
Research and development
As a tourism service provider, the TUI Group does not engage in research and development activities comparable with manufacturing
companies. This sub-report is therefore not prepared.
Value-oriented Group management
Management system and key performance indicators
A standardised management system has been created to implement value-driven management across the Group as a whole and in its individual
business segments. The value-oriented management system is an integral part of consistent Group-wide controlling and planning processes.
Our key financial performance indicators for tracking our earnings position are revenue and, from 2020, underlying EBIT, an indicator
which is more common in the international sphere. Underlying EBITA, the indicator reported until financial year 2019, is no longer used
as a KPI.
In the current financial year, the adjusted EBIT is also adjusted for the earnings effect of IFRS 16 ("adjusted EBIT (IAS 17)") in the
context of internal reporting in order to facilitate comparability with the previous year. Accordingly, the adjusted EBIT (IAS 17)
represents the segment indicator as defined by IFRS 8.
We define the EBIT in underlying EBIT as earnings before interest, taxes and expenses for the measurement of the Group's interest hedges.
Unlike the previous KPI EBITA, EBIT by definition includes amortisation of goodwill.
Underlying EBIT has been adjusted for income and expense items which, due to their level and frequency, impact or distort the assessment
of operating profitability in the segments and the Group. These one-off items include gains on disposal of investments, major gains and
losses from the disposal of assets, and major restructuring and integration expenses. The indicator is additionally adjusted for all
effects from purchase price allocations, ancillary acquisition costs and conditional purchase price payments. The reconciliation to
underlying EBIT also adjusts for goodwill impairments.
To track the Group's financial position in financial year 2020, we identified net capital expenditure and financial investments as well
as TUI Group's net financial position as key performance indicators. In addition, we monitor the Group's leverage ratio as a further
indicator of financial stability.
Key management variables used for regular value analysis are Return On Invested Capital (ROIC) and Economic Value Added. ROIC is compared
with the weighted average cost of capital (WACC).
We regard specific carbon emissions (in g CO2 / pkm) from our aircraft fleet as a key non-financial performance indicator.
To track business performance in our segments in the course of the year, we also monitor other non-financial performance indicators, such
as the customer numbers in tour operation, capacity or passenger days, occupancy and average prices in Hotels & Resorts and Cruises.
Information on operating performance indicators is provided in the sections on Segmental performance (page 61), the section on
Environment (page 77) and and in the Report on Expected Developments (page 50).
Capital costs
The cost of capital is calculated as the weighted average cost of equity and debt capital (WACC). While the cost of equity reflects the
return expected by investors from TUI shares, the cost of debt capital is based on the average borrowing costs for TUI Group. The cost of
capital always shows pre-tax costs, i. e. costs before corporate and investor taxes. The expected return determined in this way
corresponds to the same tax level as the underlying EBIT included in ROIC. For financial year 2020, we apply a cost of capital of 7.74 %
for the Hotel & Resorts segment, 9.74 % for Marella Cruises, 8.39 % for TUI Musement and 11.75 % for the Markets & Airlines division.
ROIC and Economic Value Added
ROIC is calculated as the ratio of underlying earnings before interest and taxes (underlying EBIT) to average invested interest-bearing
capital (invested capital). By contrast, we used underlying EBITA as the key performance indicator for calculating Return on Invested
Capital (ROIC) until financial year 2019.
In the current financial year, the actual values in accordance with the provisions of IAS 17 are used to calculate ROIC in order to
facilitate comparability with the previous year.
Given its definition, this performance indicator is not influenced by any tax or financial factors and has been adjusted for one-off
effects. From a Group perspective, invested capital is derived from liabilities, comprising equity (including non-controlling interests)
and the balance of interest-bearing liabilities and interest-bearing assets with an adjustment for the seasonality of the Group's net
financial position. The cumulative amortisations of purchase price allocations are then added to the invested capital.
Apart from ROIC as a relative performance indicator, Economic Value Added is used as an absolute value-oriented performance indicator.
Economic Value Added is calculated as the product of ROIC less associated pre-tax capital costs (WACC) multiplied by interest-bearing
invested capital.
As a result of the business interruption caused by COVID-19 and the associated significant decline in earnings, the TUI Group's overall
ROIC is negative at - 42.51 %. With a group weighted cost of capital of 10.32 %, this yielded negative Economic Value Added of &euro 3.8
bn (previous year positive EVA of &euro 520.0 m).
Invested Capital
&euro million Notes 2020 2019
adjusted
Equity 218.1 4,165.6
Subscribed capital (24) 1,509.4 1,505.8
Capital reserves (25) 4,211.0 4,207.5
Revenue reserves (26) - 6,168.8 - 2,259.2
Non-controlling interest (28) 666.5 711.4
plus interest bearing financial 9,002.7 3,966.4
liability items
Pension provisions and similar (29) 1,015.0 1,068.0
obligations
Non-current financial liabilities (32), (41) 3,691.7 2,457.6
Current financial liabilities (32), (41) 577.3 224.6
Derivative financial instruments (41) 318.8 216.2
Lease liabilities (IFRS 16) 3,399.9 0.0
less financial assets 1,157.6 1,762.9
Derivative financial instruments (41) 96.4 347.8
Cash and cash equivalents (23) 1,233.1 1,741.5
Other financial assets1 328.2 173.6
Seasonal adjustment2 - 500.0 - 500.0
less overfunded pension plans 363.3 310.0
Invested Capital before addition 7,699.9 6,059.2
of effects from
purchase price allocation
Invested Capital excluding 6,059.2 4,901.7
purchase price allocation prior
year
? Invested capital before 6,879.6 5,480.5
addition of effects from purchase
price allocation3
Invested Capital before addition 7,699.9 6,059.2
of effects from purchase
price allocation
plus effects from purchase price 259.8 250.8
allocation
Invested Capital 7,959.7 6,310.0
Invested Capital prior year 6,310.0 5,245.3
? Invested Capital3 7,134.8 5,777.6
1 Includes mainly other financial assets, loan receivabels and other loans
2 Adjustment to net debt to reflect a seasonal average cash balance
3 Average value based at beginning and year-end
ROIC
&euro million 2020 2019
adjusted
Underlying EBIT (IAS 17) - 3,032.8 893.5
? Invested Capital* 7,134.8 5,777.6
ROIC (IAS 17) % - 42.51 15.47
Weighted average cost of capital (WACC)% 10.32 6.46
Value added (IAS 17) - 3,769.2 520.2
* Average value based on balance at beginning and year-end
Group performance indicators used in the Executive Board remuneration system
The TUI Group applies IFRS 16 as of 1 October 2019. The figures for the comparative prior-year period have not been adjusted. The target
values for the remuneration of the Executive Board were determined on the basis of the Group planning prepared in accordance with the
provisions of IAS 17. Accordingly, the actual values pursuant to the provisions of IAS 17 are also used to measure the achievement of
targets in the current financial year. Both target and actual values in the current year are therefore presented before the effect of the
first-time application of IFRS 16. A reconciliation to the adjusted EBIT in accordance with IFRS 16 is shown in the section "Group
Earnings".
JEV-relevant EBT at constant currency
Group earnings before interest and taxes (EBIT) on a constant currency basis, weighted at 75 %, are used to determine annual variable
remuneration (JEV) for the Executive Board. EBIT is quantified on a constant currency basis in order to avoid any distortion caused by
currency-driven translation effects when measuring actual management performance.
Group earnings before interest and taxes (EBIT IAS 17) on a constant currency basis developed as follows in the financial year under
review:
Reconciliation EBIT
&euro million 2020
EBIT (IFRS 16) - 2,927.4
Adjustment IAS 17 / IFRS 16 (IFRS 16-effect) - 35.3
EBIT (IAS 17) - 2,962.7
FX effects from translation to budget rates - 21.4
EBIT at budget rates (IAS 17) - 2,984.1
JEV-relevant cash flow before dividend
The second Group performance indicator reflected in JEV is the cash flow indicator cash flow before dividend, included in the calculation
with a weighting of 25 %. For this purpose, cash flow before dividend is determined using a simplified approach, based on the management
cash flow calculation. TUI Group EBIT, the indicator serving as the initial basis for calculations, is also shown on a constant currency
basis for this purpose.
Cash flow before dividend for JEV purposes developed as follows in the financial year under review:
Cash Flow before dividend
&euro million 2020
EBIT (IAS 17) - 2,962.7
FX effects from translation to budget rates - 21.4
EBIT at budget rates (IAS 17) - 2,984.1
plus amortisation / minus write-backs of other 963.3
intangible assets and plus depreciation / minus
write-backs of property, plant and equipment
plus Delta Working Capital - 1,260.5
plus other non-cash result items - 218.1
minus share of result of joint ventures and 193.3
assoiciates
plus dividends received by TUI AG from joint 7.1
ventures and assoiciates
minus paid net interest - 127.4
minus paid income taxes 56.1
minus pension contributions - 112.7
minus net capex and investments 149.3
Consolidation 0.3
Cash Flow before dividend - 3,333.4
Reconciliation cash flow before dividend to Cash Flow Statement
&euro million 2020
Cash inflow from operating activities - 2,771.9
plus cash inflow from investing activities 161.8
less interest paid - 251.9
less payments made for acquisition of minority - 1.6
interest
plus payments received for the issuance of 7.1
employee shares
less payments made for the purchase of own - 1.0
shares
less payments received from the sale of money - 16.6
markets fund shares
Cash Flow before dividend at actual rates - 2,874.1
(IFRS 16)
Adjustment IAS 17 / IFRS 16 (IFRS 16-effect) - 437.9
Effect from translation to budget rates - 21.4
Cash Flow before dividend - 3,333.4
Pro-forma underlying earnings per share
From financial year 2020, measurement of the Long Term Incentive Plan (LTIP) for the Executive Board is exclusively based on the average
development of pro forma underlying earnings per share from continuing operations (LTIP-relevant EPS).
The table below shows TUI Group's pro forma underlying earnings per share. The normalized Group tax rate for the year under review was
reduced to 0 % against the background of the considerable decline in earnings caused by COVID-19; in the previous year, 18 % was assumed.
In the prior year, the net interest expense used for the calculation was adjusted for interest portions received from the reversal of a
provision of &euro 35.0 m. The calculation is based on subscribed capital as at the balance sheet date.
Pro forma underlying earnings per share from continuing operations (LTIP-relevant EPS) developed as follows in the financial year under
review:
Pro forma underlying earnings per shares TUI Group
&euro million 2020 2019
adjusted
Underlying EBIT (IAS 17) - 3,032.8 893.5
less: Net interest expense (IAS 17, adjusted - 176.5 - 112.0
in prior year)
Underlying profit before tax (IAS 17) - 3,209.3 781.5
Income taxes (0 % assumed tax rate, 18 % in 0.0 140.7
prior year)
Underlying Group profit (IAS 17) - 3,209.3 640.8
Minority interest 9.4 115.7
Underlying Group profit attributable to TUI - 3,218.7 525.1
shareholders of TUI AG (IAS 17)
Numbers of shares at FY end (in million) 590.4 589.0
Underlying earnings per share (IAS 17; &euro) - 5.45 0.89
RISK REPORT
Successful management of existing and emerging risks is critical to the long-term success of our business and to the achievement of our
strategic objectives. In order to seize market opportunities and leverage the potential for success, risk must be accepted to a
reasonable degree. Risk management is therefore an integral component of the Group's Corporate Governance.
Risk Governance
Executive Board - Direct & assure
With oversight by the Supervisory Board, the Executive Board determines the strategic direction of the Group and agrees the nature and
extent of the risks it is willing to take to achieve its strategic objectives.
To ensure that the strategic direction chosen by the business represents the best of the strategic options open to it, the Executive
Board is supported by the Group Strategy function. This function exists to facilitate the Executive Board's assessment of the risk
landscape and development of potential strategies by which it can drive long-term shareholder value. As a standard procedure, the Group
Controlling function develops an in-depth fact base in a consistent format which outlines the market attractiveness, competitive position
and financial performance by division and market. These are then used to facilitate debate as to the level and type of risk that the
Executive Board finds appropriate in the pursuit of its strategic objectives. The strategy, once fully defined, considered and approved
by the Executive Board, is then incorporated into the Group's three-year roadmap and helps to communicate the risk appetite and
expectations of the organisation both internally and externally.
Ultimately, accountability for the Group's risk management rests with the Executive Board and therefore it has established and maintains
a risk management system to identify, assess, manage and monitor risks which could threaten the existence of the company or have a
significant impact on the achievement of its strategic objectives: these are referred to as the principal risks of the Group. This risk
management system includes an internally-published risk management policy which helps to reinforce the tone set from the top on risk, by
instilling an appropriate risk culture in the organization whereby employees are expected to be risk aware, control minded and 'do the
right thing'. The policy provides a formal structure for risk management to embed it in the fabric of the business. Each principal risk
has assigned to it a member of the Executive Committee as overall risk sponsor to ensure that there is clarity of responsibility and to
ensure that each of the principal risks are understood fully and managed effectively.
The Executive Board regularly reports to the Audit Committee of the Supervisory Board on the adherence to both the UK and German listing
requirements, the overall risk position of the Group, on the individual principal risks and their management, and on the performance and
effectiveness of the risk management system as a whole.
Risk Oversight Committee - Review & Communicate
On behalf of the Executive Board, the Risk Oversight Committee (the "ROC"), a subset of the Executive Committee, ensures that business
risks are identified, assessed, managed and monitored across the businesses and functions of the Group. Meeting on at least a quarterly
basis, the ROC's responsibilities include considering the principal risks to the Group's strategy and the risk appetite for each of those
risks, assessing the operational effectiveness of the mitigation in place to manage those risks and any action plans to further mitigate
them, as well as reviewing the bottom-up risk reporting from the businesses themselves to assess whether there are any heightened areas
of concern.
Senior executives from the Group's major businesses are required to attend the ROC on a rotational basis and present on the risk and
control framework in their business, so that the members of the ROC can ask questions on the processes in place, the risks present in
each business and any new or evolving risks which may be on their horizon, and also to seek confirmation that an appropriate risk culture
continues to be in place in each of the major businesses.
Chaired by the Chief Financial Officer, senior operational and finance management as well as all of the second lines of defense functions
are represented on the committee.
The ROC reports bi-annually to the Executive Board to ensure that it is kept abreast of changes in the risk landscape and developments in
the management of principal risks, and to facilitate regular quality discussions on risk management at the Executive Board meetings.
Group Risk Department - Support & report
The Executive Board has also established a Group Risk department to ensure that the risk management system functions effectively and that
the risk management policy is implemented appropriately across the Group. The department supports the risk management process by
providing guidance, support and challenge to management whilst acting as the central point for coordinating, monitoring and reporting on
risk across the Group. It also supports the ROC in fulfilling it's duties and the reporting to both the Executive and Supervisory Boards.
Additionally, Group Risk is responsible for the operation of the risk and control software that underpins the Group's risk reporting and
risk management process.
Businesses & functions - Identify & assess
Every business and function in the Group is required to adopt the Group Risk Management policy. In order to do this, each either has
their own risk committee or includes risk as a regular agenda item at their Board meetings to ensure that it receives the appropriate
senior management attention within their business. In addition, the businesses each appoint a Risk Champion, who promotes the risk
management policy within their business and ensures its effective application. The Risk Champions are in close contact with Group Risk
and are critical both in ensuring that the risk management system functions effectively, and in implementing a culture of continuous
awareness and improvement in risk management and reporting.
Risk Appetite
The Executive Board and Audit Committee, in conjunction with the Risk Oversight Committee has reviewed the Group's risk appetite. The
results of the review indicate the board's risk appetite across four risk types:
Strategic - a higher appetite, in order to to deliver superior returns to our shareholders. This is particular relevant due to the
COVID-19-pandemic, whereby the restructuring strategy must be delivered promptly.
Compliance - a lower risk appetite to exposure of compliance related risks including adhering to regulatory requirements, protecting
information in all forms as well as avoiding harm to customers, employees and all other stakeholders.
Financial - lower risk appetite with exposure to financial risks. The Group seeks to achieve financial stability and certainty in
particular during the pandemic as the scrutiny of costs and cash management has been heightened.
Operational - moderate level to all other operational risks where the board seeks to manage them responsibly to create unique holidays
for our customers but recognises as a matter of course we operate in a market environment characterised by macroeconomic and geopolitical
challenges.
Our principal risks are aligned to these risk types.
Risk Reporting
The Group Risk department applies a consistent risk reporting methodology across the Group. This is underpinned by risk and control
software which reinforces clarity of language, visibility of risks, mitigation and actions and accountability of ownership. Although the
process of risk identification, assessment and response is continuous and embedded within the day-to-day operations of the businesses and
functions, it is consolidated, reported and reviewed at varying levels throughout the Group on at least a quarterly basis.
Risk Identification: Management closest to the risks identify those that are relevant to the pursuit of the strategy within their
business area in the context of four risk types:
· Longer-term strategic and emerging threats;
· Medium-term challenges associated with business change
· Short-term risks triggered by changes in the external and regulatory environment; and
· Short-term risks in relation to internal operations and control.
A risk owner is assigned to each risk, who has the accountability and authority for ensuring that the risk is appropriately managed.
Risk Descriptions: The nature of the risk is articulated in line with best practice, stating the underlying concern the risk gives arise
to, identifying the possible causal factors that may result in the risk materializing and outlining the potential consequences should the
risk crystalise. This allows the businesses, functions and the Group to assess the interaction of risks and potential triggering events
and / or aggregated impacts before developing appropriate mitigation strategies for causes and / or consequences.
Risk Assessment: The methodology used is to initially assess the gross (or inherent) risk. This is essentially the downside, being the
product of the impact together with the likelihood of the risk materializing if there is no mitigation in place to manage or monitor the
risk. The key benefit of assessing the gross risk is that it highlights the potential risk exposure if mitigation were to fail completely
or not be in place at all. Both impact and likelihood are scored on a rating of 1 to 5 using the criteria shown below:
The next step in the risk reporting process is to assess and document the mitigation currently in place to reduce the likelihood of the
risk materializing and / or its impact if it does. Consideration of these then enables the current (or residual) risk score to be
assessed, which is essentially the reasonably foreseeable scenario. This measures the impact and likelihood of the risk with the
mitigation in place and effective. The key benefit of assessing the current risk score is that it provides an understanding of the
current level of risk faced today and the reliance on the mitigation in place.
Risk Response: If management are comfortable with the current risk score, the risk is accepted and no further action is required to
further reduce the risk. The mitigation continues to be operated and management monitor the risk, the mitigation and the risk landscape
to ensure that it remains at an acceptable level.
If management assesses that the current risk score is too high, an action plan will be drawn up with the objective of introducing new or
stronger mitigation that will further reduce the impact and / or likelihood of the risk to an acceptable level. This is known as the
target risk score and is the parameter by which management can ensure the risk is being managed in line with their overall risk appetite.
The risk owner will normally be the individual tasked with ensuring that this action plan is implemented within an agreed timetable.
Each business and function will continue to review their risk register on an ongoing basis through the mechanism appropriate for their
business e. g. local Risk Committee.
This bottom-up risk reporting is considered by the ROC alongside the Group's principal risks. New risks are added to the Group's
principal risk register if deemed to be of a significant nature so that the ongoing status and the progression of key action plans can be
managed in line with the Group's targets and expectations.
Ad hoc risk reporting
Whilst there is a formal process in place for reporting on risks on a quarterly basis, the process of risk identification, assessment and
response is continuous and therefore if required, risks can be reported to the Executive Board outside of the quarterly process, should
events dictate that this is necessary and appropriate. Ideally such ad hoc reporting is performed by the business or function which is
closest to the risk, but it can be performed by the Group Risk department if necessary.
Entity scoping
A robust exercise is conducted each year to determine the specific entities in the Group which need to be included within the risk and
control software and therefore be subject to the full rigour of the risk reporting process. The scoping exercise starts with the entities
included within the Group's consolidation system, and applies materiality thresholds to a combination of revenue, profit and asset
benchmarks. From the entities in the consolidation system, this identifies the levels at which these entities are operationally managed
and therefore need to be included in the risk and control software itself to facilitate completeness of bottom-up risk reporting across
the Group. This ensures that the risks are able to be captured appropriately at the level at which the risks are being managed.
Effectiveness of the Risk Managment System
The Executive Board regularly reports to the Audit Committee of the Supervisory Board on the performance, effectiveness and adherence to
listing requirements of the risk management system, supported by the ROC and the Group Risk department. Additionally, the Audit Committee
receives assurance from Group Audit through its audit plan over a selection of principal risks, processes and business transformation
initiatives most critical to the Group's continued success.
The conclusion from all of the above assurance work is that the risk management system has functioned effectively throughout the year and
there have been no significant failings or weaknesses identified. Of course there is always room for improvement, and the Risk Champions
and the Group Risk department continue to work together to enhance the risk management and reporting processes. Broadly this concerns
ensuring consistency of approach in assessing risk scores, clearer identification of mitigation currently in place as well as any action
plans to introduce further mitigation, and ensuring that risk identification has considered all four risk types.
Finally, in accordance with Section 317 (4) HGB (German Commercial Code), the auditor of TUI AG has reviewed the Group's early detection
system for risks in place as required by Section 91 (2) AktG (German Stock Corporation Act) to conclude, if the system can fulfill its
duties.
Principal Risks
The principal risks to the Group are either considered to be 'Active' or 'Monitored'.
Active principal risks are those that we have to actively manage in order to bring them into line with our overall risk appetite. We have
action plans in place to increase or strengthen mitigation around each of these risks and reduce the current risk score to the target
level indicated in the heat map diagram.
Monitored principal risks are those generally inherent to the tourism sector and faced by all businesses in the industry. For these, we
have controls, processes and procedures in place as a matter of course that serve to mitigate each risk to either minimize the likelihood
of the event occurring and / or minimize the impact if it does occur. These risks remain on our risk radar where we regularly monitor the
risk, the mitigation and the risk landscape to ensure that the risk score stays stable and in line with our risk appetite in each case.
In the heat map diagram, the assessment criteria used are shown on page 36.
Financial year 2020 Principal Risks
Several principal risks materialised simultaneously as a result of the COVID-19-pandemic, which has led to travel restrictions across the
world, both within the Markets as well as in destination countries. These include customer demand, input cost volatility, cashflow
profile, destination disruption and health & safety. All of these principal risks continue to remain heightened throughout the pandemic.
Measures taken in order to react to this crisis have also heightened the principal risk profile. Therefore the integration &
restructuring risk has increased, due to the volume and speed of the restructuring required; and the Talent & Leadership risk, due to the
cost saving measures related to our employees. Furthermore Growth Strategy is no longer a principal risk due to the change required in
the Group's strategy to focus on costs and consolidation rather than growth of our asset businesses such as Hotels and Cruises.
There is a material uncertainty as to when the TUI Group's travel activities can be fully resumed. If tourism operations cannot be fully
resumed in the long term, this might jeopardise the continuation of the Group's business operations, since the companies of the TUI Group
might then not be able to realise their assets and repay their liabilities in the ordinary course of business. This situation means that
TUI is threatened with insolvency in the first calendar quarter 2021 unless further measures are taken and implemented. Measures such as
the utilisation of government aid and the significant reduction of fixed costs, serve to minimise the impact of the COVID-19-pandemic on
the Group's liquidity. In order to continue to have sufficient financial resources even in the absence of an increase in new travel
bookings and the associated advance payments, TUI has agreed a further financing package of &euro 1.8 bn with Unifirm Ltd, a banking
consortium, KfW and the Economic Stabilization Fund (WSF). A corresponding term sheet was signed on 2 December 2020.
For further information please refer to the Viability Statement on page 47.
The support and stabilization package is described in detail in the chapter Going Concern Reporting in accordance with the UK Corporate
Governance Code in the Notes.
See chapter Going Concern Reporting in accordance with UK Corporate Governance Code, page 151.
During this period of travel suspension, the Executive Board continues to monitor the key risks, particularly those heightened risks such
as customer demand and those that impact the financial profile (i. e. cost volatility and cash flow) of the Group.
If the risk detail in the subsequent tables does not suggest otherwise, the risks shown below relate to all segments of the Group. The
risks listed are the principal risks to which we are exposed but are not exhaustive and will evolve over time due to the dynamic nature
of our business.
Active Principal Risks
Nature of Risk
1. IT DEVELOPMENT & STRATEGY
Our focus is on enhancing customer experience by providing engaging, intuitive, seamless and continuous customer service through delivery
of digital solutions, core platform capabilities, underlying technical infrastructure and IT services required to support the Group's
overall strategy for driving profitable topline growth.
Although the Group's strategy has ensured that we are more vertically integrated, which has reduced impact of disruption by pure digital
players, an ineffective IT strategy or technology development could impact on our ability to provide leading technology solutions in our
markets. This would therefore impact on our competitiveness, our ability to provide a superior customer experience as well as on quality
and operational efficiency. This would ultimately impact on our customer numbers, revenue and profitability.
Mitigating Factors
· Developed and communicated (in conjunction with Executives, Business & IT Leadership Teams) the Group's IT Strategy which is clearly
aligned to our overall business objectives and considers external factors such as the pace of technological change and internal factors
such as the underlying quality required throughout IT.
· Continuing to implement our online platform, moving from retail to online to mobile in order to enhance customer experience and drive
higher conversion rates.
· Progressing with the implementation of TRIPS, our new IT platform, which will be introduced to all of our Markets businesses.
· Implementing a SAP-based central customer platform to collate all information on our customers across their journey to provide a
single view of the customer alongside an eCRM platform which will support strategic marketing.
· Integration and development of Musement IT platform as technology driver for Customer Experience.
· Placing increased focus on ensuring continuity plans for critical IT systems are in place and regularly tested.
· Cascaded clear technology standards and associated delivery roadmaps which are linked to Group wide and individual market objectives.
· Adopting API, Big Data, and Cloud & DevOps architecture to drive improved speed, productivity and efficiency.
Nature of Risk
2. INTEGRATION & RESTRUCTURING
Our key principle for integration and restructuring is to consolidate where possible and to localize where needed, particularly
throughout our Group Platforms and the Markets & Airline businesses.
As a result, there are a number of harmonization projects underway across the Group to enable us to leverage synergies. Furthermore our
continuous review of our own businesses and competitors means that we have an active programme of acquisitions (e. g. the destination
management companies from Hotelbeds) and business disposals (e. g. Boomerang Reisen and Berge & Meer businesses) with associated
integration projects. In the light of COVID-19 we have downsized our acquisition programme and focus more strongly on disposal options.
There is an inherent risk with any large restructuring or integration programme in managing the complexities associated with further
integrating our business, and reducing overlapping activities in order to develop a leaner and more streamlined operating model.
If we are not successful in leveraging and optimizing the identified opportunities this could have a significant impact on our ability to
deliver the identified benefits in line with expectations and enhance shareholder value.
This risk has heightened due to the pandemic, as the Group has had to undertake structural solutions that go beyond the regular
standardization and harmonization processes.
Mitigating Factors
· The establishment of the Markets & Domain Transformation Board to oversee the standardization of processes across the Markets
businesses.
· Strong project management structures exist for all of the major restructuring, acquisition and disposal programs, which are underway
to ensure that they are managed effectively.
· Project reporting tool ensures enhanced visibility of the progress of major projects as a matter of routine.
· Regular reporting by the major projects to the Executive Board to ensure swift resolution of any issues or to enhance coordination
across the Group where required.
· Execution of structural solutions in a time with low business volume is an additional mitigating factor, as it significantly reduces
potential impact of disruptions related to the change.
Nature of Risk
3. CORPORATE SOCIAL RESPONSIBILITY
For the Group, economic, environmental and social sustainability is a fundamental management principle and a cornerstone of our strategy
for continually enhancing the value of our Company. This is the way we create the conditions for long-term economic success and assume
responsibility for sustainable transformation in the tourism sector.
Our focus is to reduce the environmental impact of our operations and promote responsible social policies and outcomes both directly
through our own business and indirectly via our influence over our supply chain partners, thereby creating positive change.
There is a risk that we are not successful in driving social and environmental improvements across our operations, that our suppliers do
not uphold our corporate and social responsibility standards and we fail to influence destinations to manage tourism more sustainably.
If we do not maximize our positive impact on destinations and minimize the negative impact to the extent that our stakeholders expect,
this could result in a decline in stakeholder confidence, reputational damage and reduction in demand for our products and services.
Mitigating Factors
· Developed and launched in 2015 the 'Better Holidays, Better World' 2020 sustainability strategy which includes specific targets for
key sustainability indicators.
· Established a dedicated sustainability department to work closely with the business and other stakeholders.
· Operating one of the most carbon efficient airlines in Europe with continued investment in new, more efficient aircraft and cruise
ships.
· Implemented an environmental management system with all TUI airlines having achieved ISO 14001 certification.
· Increased measures to influence accommodation suppliers to achieve third-party sustainability certification recognised by the Global
Sustainable Tourism Council (GSTC).
· TUI Care Foundation expanded to focus on the achievement of it's 2020 target for charitable donations and sustainability projects,
with particular emphasis on maximizing the economic benefits of tourism in destinations.
Nature of Risk
4. INFORMATION SECURITY
Our responsibility is to protect the confidentiality, integrity and availability of the data we have to provide to our customers,
employees, suppliers and service delivery teams.
This is a dynamic risk due to increased global cyber-crime activity and regulations (e. g. EU GDPR). At the same time our consolidation
under the TUI brand and our increasing dependence on online sales and customer care channels (web / mobile) increases our exposure and
susceptibility to cyber-attacks and hacks.
If we do not ensure we have the appropriate level of security controls in place across the Group, this could have a significant negative
impact on our key stakeholders, associated reputational damage and potential for financial implications.
Mitigating Factors
· Continued commitment from the Executive Board in support of key initiatives to ensure all existing and future IT systems are secure
by design, that exposure to vulnerability is managed effectively, user access is sufficiently controlled and colleagues are made aware
of information security risks through appropriate training.
· Launch of a company-wide Information Security awareness campaign to promote secure behaviors amongst our colleagues. Overall goal is
to make information security part of everyone's job.
· Continuous review and testing of all external devices and ongoing monitoring of logs in order to identify any potential threats as
and when they arise.
· Continuous improvement through lessons learned from real or simulated cyber incidents.
Nature of Risk
5. BREXIT
Our main concern is whether or not all of our airlines will continue to have access to EU airspace as now. If we were unable to continue
to fly intra-EU routes, such as from Germany to Spain, this would have a significant operational and financial impact on the Group.
Other areas of uncertainty include the status of our UK employees working in the EU and vice versa and the potential for customer visa
requirements for holidays from the UK to the EU.
Mitigating Factors
· The Executive Board has established a Brexit Steering Committee to monitor developments as the political negotiations take place,
assess any impacts on the Group's business model and coordinate suitable mitigation strategies to be taken ahead of the exit from the
European Union in 2020.
· In addition we continue to lobby relevant UK and EU decision makers to stress the continued importance of a liberalised and
deregulated aviation market across Europe to protect consumer choice in both regions.
Monitored Principal Risks
Nature of Risk
A. DESTINATION DISRUPTION
Providers of holiday and travel services are exposed to the inherent risk of incidents affecting some countries or destinations within
their operations. This can include natural catastrophes such as hurricanes or tsunamis; outbreaks of disease such as the ongoing
COVID-19-pandemic; political volatility as has been seen in Egypt, Turkey and Greece in recent years; the implications of war in
countries close to our markets and destinations; and terrorist events such as the tragic incident in Tunisia in 2015.
There is the risk that if such an event occurs, impacting one or more of our destinations that we could potentially suffer significant
operational disruption and costs in our businesses. We may possibly be required to repatriate our customers and / or the event could lead
to a significant decline in demand for holidays to the affected destinations over an extended period of time.
This risk has heightened due to COVID-19 whereby the Group is experiencing more destination disruption due to constant changes in travel
advice and corridors.
Mitigating Factors
· Whilst we are unable to prevent such events from occurring, we have well defined crisis management procedures and emergency response
plans, which are implemented when an event of this nature occurs, with the focus being on the welfare of our customers.
· Where the appropriate course of action is to bring customers home immediately, our significant fleet of aircraft allows us to do this
smoothly and efficiently, as demonstrated this year in March 2020 when all customers had to be repatriated due to COVID-19.
· Our policy is to follow foreign office advice in each of our markets with regards to non-essential travel. This serves to minimize
the exposure of our customers to turbulent regions.
· Due to our presence in all key holiday regions, when a specific destination has been impacted by an external event, we are able to
offer alternative destinations to our customers and to remix our destination portfolio away from the affected area in future seasons if
necessary.
· We always assume some level of destination disruption each year when setting financial plans and targets, so that we are able to cope
with a 'normal' level of disruption without it jeopardizing achievement of our targets.
Nature of Risk
B. TALENT & LEADERSHIP DEVELOPMENT
Our success depends on the ability to attract, retain and develop our talent to ensure that we equip our employees to deliver our
strategy as well as to also become our future leaders.
There is a risk that we are unable to attract and retain key talent, build future leadership capability and maintain the commitment and
trust of our employees.
Challenges in managing and maintaining our talent pipeline in order to deliver against our strategy, drive competitiveness and maximize
on our operating performance, may impact on our ability to future proof the Group and the associated potential for negative impact on
shareholder confidence.
Due to the pandemic this risk has increased this year as a result of the cost saving measures related to our employees.
Mitigating Factors
· Driving high performance and engagement through our performance review, development plans and career planning process.
· Building our pipeline of leadership talent including through our International Graduate Leadership Programme which attracts, develops
and retains high quality graduates to become our future senior Commercial Leaders.
· Establishing and maintaining online professional academies to provide our employees with learning offerings in specific functional
areas.
· A strategically aligned leadership programme for high performing management at all levels.
Nature of Risk
C. CUSTOMER DEMAND
Spending on travel and tourism is discretionary and price sensitive as well as competitive. The economic outlook remains uncertain with
different markets at different points in the economic cycle. Furthermore, in recent years there has been an emergence of successful
substitute business models such as web-based travel and hotel portals which allow end users to combine the individual elements of a
holiday trip on their own and book them separately.
There is the risk that these external factors within our industry will impact on the spending power as well as the desire to travel of
our customers. This could impact our short-term growth rates and lead to margin erosion.
This risk has heightened due to customer demand being significantly impacted by the pandemic.
Mitigating Factors
· Our market position as a globally operating tourism group, our brand and our integrated business model enables us to respond robustly
to competitive threats.
· The Group is characterised by the continuous development of new holiday experiences, developing new concepts and services which match
the needs and preferences of our customers. Our strong and lasting relationships with our key hotel partners further reinforces our
ability to develop new concepts exclusive to the Group.
· Many customers prioritize their spending on holidays above other discretionary items.
· Leveraging our scale to keep costs down and prices competitive.
· Having a range of markets so that we are not over exposed to one particular economic cycle.
· Promoting the benefits of travelling with a globally operating tour operator to increase customer confidence and peace of mind.
Nature of Risk
D. INPUT COST VOLATILITY
A significant proportion of operating expenses are in non-local currency and / or relate to aircraft and cruise fuel which therefore
exposes the business to fluctuations in both exchange rates and fuel prices.
There is the risk that if we do not manage adequately the volatility of exchange rates, fuel prices and other input costs, then this
could result in increased costs and lead to margin erosion, impacting on our ability to achieve profit targets. As a result of the
pandemic there is also a risk that there will be no lines available to put in place hedges to manage the volatility of future seasons.
There is also the risk that if our hedging policy is too rigid, we may find ourselves unable to respond to competitive pricing pressures
during the season without it having a direct detrimental impact on our market position and / or profitability.
Furthermore, changes in macroeconomic conditions, such as those currently being experienced as a result of the pandemic can have an
impact on exchange rates which, particularly for the GBP / &euro rate has a direct impact on the translation of non-euro market results
into euros, the reporting currency of our Group.
Mitigating Factors
· An established Hedging Committee that monitors the Group's hedging position.
· Ensuring that the appropriate derivative financial instruments are used to provide hedging cover for the underlying transactions
involving fuel and foreign currency.
· Maintaining an appropriate hedging policy to ensure that this hedging cover is taken out ahead of the markets' customer booking
profiles. This provides a degree of certainty over input costs when planning pricing and capacity, whilst also allowing some
flexibility in prices so as to be able to respond to competitive pressures if necessary.
· Tracking the foreign exchange and fuel markets to ensure the most up-to-date market intelligence and the ongoing appropriateness of
our hedging policies.
· Expressing our key profit growth target in constant currency terms so that short term performance can be assessed without the
distortion caused by exchange rate fluctuations.
Further information on currency and fuel hedges can be found in the Notes to the consolidated financial statements in the Financial
instruments section.
Nature of Risk
E. CASH FLOW PROFILE
Tourism is an inherently seasonal business with the majority of profits earned in the European summer months. Cash flows are similarly
seasonal with the cash high occurring in the summer as advance payments and final balances are received from customers, with the cash low
occurring in the winter as liabilities have to be settled with many suppliers after the end of the summer season.
There is the risk that if we do not adequately manage cash balances through the winter low period this could impact on the Group's
liquidity and ability to settle liabilities as they fall due whilst ensuring that financial covenants are maintained.
Due to the COVID-19-pandemic the Group has experienced increasing challenges to the cashflow profile. This is due to operational activity
being significantly reduced during the summer months, which is the time when the majority of cash balances are received from customers.
We are also experiencing a significantly shorter booking profile whereby customers are booking very close to departure and therefore cash
deposits are received later than previous booking patterns.
Mitigating Factors
· The Executive Board has further intensified their review of the Group's cash flow position during this crisis period.
· Due to the travel restrictions triggered by the COVID-19-pandemic, the TUI Group had a liquidity requirement in financial year 2020
that was significantly higher than the cash inflows resulting from current operations and the existing unused credit lines. In order to
close these liquidity gaps, additional credit lines totaling &euro 2.85 bn were granted in addition to the cost-cutting and payment
deferral measures initiated within the Group and regional support measures in various countries. In order to continue to have
sufficient financial resources even in the absence of an increase in new travel bookings and the associated advance payments, TUI has
agreed a third financing package with Economic Stabilization Fund, KfW, TUIs anchor shareholder and further financing partners.
· Our focus on holiday experiences is helping to reduce the seasonality risk, as hotels, cruises and destination experiences have a
more evenly distributed profit and cash profile across the year.
· As our business is spread across a number of markets, there are some counter-cyclical features e. g. winter is a more important
season for the Nordic and Canadian markets. Some brands, such as the UK ski brand Crystal Ski, have a different seasonality profile
which helps to counter-balance the overall profile.
· The business regularly produces both short term and long term cash forecasts during the year, which the Treasury department use to
manage cash resources effectively. We continue to maintain high-quality relationships with the Group's key financiers. Some of the
Group's credit lines are subject to compliance with certain financial targets (covenants). The review of these covenants is suspended
until September 2021. Testing will be based on the four most recent reported quarters prior to September 2021. We expect our results
for these quarters to continue to be impacted by the COVID-19-pandemic. As a result, we may not meet our financial targets. We
therefore aim to suspend the covenants ('covenant holiday') for the test period ending on 30 September 2021 and beyond.
· Regularly reviewing ways how we can raise additional finance from the capital markets, should it be required, and how we can continue
to improve our Free Cash Flow position. Please refer to the Viability Statement on page 47 for further details on the measures taken
this year.
Nature of Risk
F. LEGAL & REGULATORY COMPLIANCE
Most providers of holiday and travel services operate across a number of economies and jurisdictions, which therefore exposes them to a
range of legal, tax and other regulatory laws which must be complied with.
As we are operating from multiple source markets and providing holidays in more than 115 destinations, we are exposed to a range of laws
and regulations with which we must comply or else risk incurring fines or other sanctions from regulatory bodies.
Mitigating Factors
· Communication and strong tone from the top concerning compliance with laws and regulations.
· Regular reporting in different bodies (Group Executive Committee, Audit Committee, Group Works Council) in order to guarantee
appropriate monitoring, supervision and implementation of action plans and to strengthen the Integrity & Compliance culture across the
Group.
· Embedded legal and tax expertise in all major businesses responsible for maintaining high quality relationships with the relevant
regulators and authorities.
· Ongoing implementation and review of Compliance Management System conducted by the Group Integrity & Compliance department to monitor
compliance with regulations and provide expert advice to local teams on specific compliance areas.
Nature of Risk
G. HEALTH & SAFETY
For all providers of holiday and travel services, ensuring the health and safety of customers is of paramount importance.
There is the risk of accidents or incidents occurring causing illness, injury or death to customers or colleagues whilst on a TUI
holiday. This could result in reputational damage to the business and / or financial liabilities through legal action being taken by the
affected parties.
Mitigating Factors
· An established Security Health & Safety function across the Group in order to ensure there is appropriate focus on health and safety
processes as part of the normal course of business.
· The function ensures standardization as well as compliance with best practice standards.
· Appropriate insurance policies are in place for when incidents do occur.
Nature of Risk
H. SUPPLIER RELIANCE
Providers of holiday and travel services are exposed to the inherent risk of failure in their key suppliers, particularly for hotels,
aircraft and cruise ships. This is heightened by the industry convention of paying hoteliers in advance ('prepayments') to secure a level
of room allocation for the season as well as in areas where a single supplier is used to provide a product or service.
There is the risk that we are unable to continue with our core operations in the event of a major service failure from our key suppliers.
This is more apparent during the pandemic, whereby suppliers are also experiencing limited operational activity.
Mitigating Factors
· Using reputable and financially stable suppliers, particularly in areas where a single supplier is used to provide a service.
· Regular monitoring of supplier performance against agreed terms and conditions.
· Strong working relationships with all key suppliers.
· Owned and joint venture partner hotels form a substantial part of our program which reduces our inherent risk in this area.
· A robust prepayment authorization process is established and embedded to both limit the level of prepayments made and ensure that
they are only paid to trusted, credit-worthy counterparties.
· Prepayments are monitored on a timely and sufficiently granular basis to manage our financial exposure to justifiable levels.
Nature of Risk
I. JOINT VENTURE PARTNERSHIPS
It is common for tourism groups to use joint venture partnerships in some of their operations in order to reduce the risk of new
ventures, to gain access to their expertise of the local market as well as to strengthen the balance sheet position in line with our less
capital intensive "asset-right" strategy (e. g. Hapag-Lloyd transaction with TUI Cruises). There are three significant joint ventures
within the Group - Riu, TUI Cruises and Sunwing.
For details on our strategy please refer to page 23.
There is the risk that if we do not maintain good relations with our key partners that the ventures' objectives may not remain consistent
with that of the Group which could lead to operational difficulties and jeopardize the achievement of financial targets.
Mitigating Factors
· Good working relationships exist with all of our main joint venture partners and they are fully aligned with and committed to the
growth strategy of the Group.
Viability Statement
In accordance with Rule 31 of the UK Corporate Governance Code, the Executive Board assesses the Company's future prospects for a period
exceeding the twelve months required by the going concern premise. The Executive Board reviews the business development annually and on a
rolling basis based on a three-year strategic plan. The current three-year plan was adopted in October 2020 and covers the period until
30 September 2023. A three-year horizon is considered appropriate for a fast moving competitive environment such as tourism.
In the 2020 financial year, the travel restrictions triggered by the COVID-19-pandemic had a highly negative impact on the Group's
earnings and liquidity performance from the end of the second quarter onwards. This initially forced the TUI Group to discontinue its
entire travel programme. Despite a certain resumption of business from May 2020, the travel business was subject to permanent
restrictions, in particular due to different and changing travel restrictions in source markets and destinations. Due to increasing
COVID-19 infection figures, these travel restrictions were again extended to almost all destinations relevant for the TUI Group in autumn
2020.
Due to the reasons described above, the TUI Group had a liquidity requirement in financial year 2020 that was significantly higher than
the cash inflows resulting from current operations and the existing unused credit lines despite the initiated savings measures. In order
to close these liquidity gaps, additional credit lines totaling &euro 2.85 bn were granted in addition to the cost-cutting and payment
deferral measures initiated within the Group and regional support measures in various countries. These additional credit lines were made
available via KfW Bank using the existing revolving credit lines of &euro 1.8 bn and &euro 1.05 bn as part of two stabilization packages
with the support of the German government. In addition, the Economic Stabilization Fund (WSF) subscribed to a warrant bond in the amount
of &euro 150 m in October 2020. The financing commitments of &euro 1.8 bn available as of 30 September 2020 were fully utilized as of the
balance sheet date.
The TUI Group is currently still affected by the negative financial impact of the COVID-19-pandemic. At the time of publication of this
report (10 December 2020) it is not foreseeable when these travel restrictions will be lifted again and when we will be able to resume
our travel programme in full. In particular, it is not possible at this point in time to reliably predict how quickly a nationwide
vaccination against the corona virus can be carried out and when drugs will be available for the treatment of COVID-19 disease. Also a
change in booking behavior cannot be excluded at this time.
Taking into account the financing lines still available and the low expected cash inflows in the winter season 2020 / 21 due to the
pandemic, there is a risk that the TUI Group will probably no longer have sufficient financial resources to continue its business
operations without further support measures or the sale of non-current assets in the short term if there is no increase in new travel
bookings and the associated customer advance payments in the first calendar quarter 2021. Overall, there is a risk that the TUI Group
will not be able to continue its business operations without further external support measures and to realize its assets and service its
liabilities in the normal course of business.
In order to continue to have sufficient financial resources even in the absence of an increase in new travel bookings and the associated
advance payments, TUI has agreed a further financing package of &euro 1.8 bn with Unifirm Ltd, a banking consortium, KfW and the Economic
Stabilization Fund (WSF). A corresponding termsheet was signed on 2 December 2020. The corresponding contracts for the individual
components of the term sheet had not yet been signed at the time of publication of this report. The continuation of the company's
operations is therefore particularly dependent on TUI's ability to successfully implement the measures introduced in the financing
package.
The financing package is described in detail in the chapter Going Concern Reporting in accordance with the UK Corporate Governance Code
in the Notes.
See chapter Going Concern Reporting in accordance with the UK Corporate Governance Code, page 151.
These measures initiated to strengthen liquidity depend in particular on the approval of the Extraordinary General Meeting and the
approval of these measures by the EU. The Executive Board of TUI AG assumes that all necessary approvals and authorizations will be
granted and that the planned financing measures can be implemented in good time.
We also assume that we will not be able to meet the financial targets as of 30 September 2021 from the existing and increased RCF. TUI's
solvency is therefore at risk if a further suspension of compliance with the covenants for the test period ending on 30 September 2021
and beyond is not achieved. In addition, the KfW loans (both tranches) and the initial Revolving Credit Facility in the total amount of
&euro 4.6 bn must be refinanced in the financial year 2022. Due to the uncertainty regarding future business development, there is a risk
that refinancing on the banking and capital markets may not be possible and that further government support measures may be necessary.
The Executive Board believes that the successful implementation of the measures described above is likely to be possible. Due to the
dependence of the TUI Group's solvency on the additional financing measures, the fact that certain conditions still have to be met for
the successful implementation of the financing measures, risks with regard to the refinancing of the external loans as well as the
uncertainty regarding the future development due to the COVID-19-pandemic, there are significant doubts about the TUI Group's ability to
continue its business operations. Insofar, this is a significant uncertainty regarding the continuation of the Group's business
activities.
The Executive Board has made a well-founded assessment of the main risks to the Group, taking into account future events that would
jeopardize the business model, future results, solvency or liquidity. A sensitivity analysis is used to determine the potential impact of
the main risks, whereby they may occur individually or collectively. The scenario used for the going concern assumption assumes that the
various Group divisions can successively resume their programmes during the course of the calendar year 2021. While business activity is
expected to be severely restricted in the first and second quarters, travel activity is expected to pick up in the summer of financial
year 2021 without reaching the pre-crisis level of financial year 2019. In particular, it is difficult to predict when travel activity
will resume in financial year 2021.
Taking into account the current situation of the Group, the main risks and the above-mentioned sensitivity analysis, the Executive Board
has a reasonable expectation that the Group will be able to continue operations and meet the obligations arising within the three-year
period under review.
Key features of the internal control and risk management system in relation
to the (Group) accounting process (sections 289 (4) and 315 (4) of the German
Commercial Code HGB)
1. Definition and elements of the internal control and risk management system
in the TUI Group
The TUI Group's internal control system comprises all the principles, processes and measures that are applied to secure effective,
efficient and accurate accounting which is compliant with the necessary legal requirements.
The internationally recognised framework of COSO (Committee of Sponsoring Organizations of the Treadway Commission) forms the conceptual
basis for TUI Group's internal control system, consisting of internal controls and the internal monitoring system. The Executive Board of
TUI AG, in exercising its function of managing business operations, has entrusted responsibility for the internal control system in the
TUI Group to specific Group functions.
The elements of the internal monitoring system in the TUI Group comprise both measures integrated into processes and measures performed
independently. Besides manual process controls, e. g. the 'four-eyes principle', another key element of the process-related measures are
automated IT process controls. Process-related monitoring is also secured by bodies such as the Risk Oversight Committee of TUI AG and
by specific Group functions.
The Supervisory Board of TUI AG, in particular its Audit Committee, as well as the Group Auditing department at TUI AG are incorporated
into the TUI Group's internal monitoring system through their audit activities performed independently from business processes. On the
basis of section 107 (3) of the German Stock Corporation Act, the Audit Committee of TUI AG deals primarily with the auditing of the
annual financial statements, monitoring the accounting process and the effectiveness of the internal control and risk management system.
In the Audit Committee Report the reliability of the financial reporting and the monitoring of the financial accounting process as well
as the effectiveness of the internal control and risk management system are described.
Audit Committee Report see from page 22.
The Group's auditors have oversight of the TUI Group's control environment. The audit of the consolidated financial statements by the
Group auditor and the audit of the individual financial statements of Group companies included in the consolidated financial statements,
in particular, constitute a key non-process-
related monitoring measure with regard to Group accounting.
In relation to Group accounting, the risk management system, introduced as an Enterprise Risk Management System (ERM System) as a
component of the internal control system, also addresses the risk of misstatements in Group bookkeeping and external reporting. Apart
from operational risk management, which includes the transfer of risks to insurance companies by creating cover for damage and liability
risks and also hedging transactions to limit foreign currency and fuel price risks, the TUI Group's risk management system embraces the
systematic early detection, management and monitoring of risks across the Group. A more detailed explanation of the risk management
system is provided in the section on the Risk Governance Framework in the Risk Report.
2. Use of IT systems
Bookkeeping transactions are captured in the individual financial statements of TUI AG and of the subsidiaries of TUI AG, through local
accounting systems such as SAP or Oracle. As part of the process of preparing their individual financial statements, subsidiaries
complete standardized reporting packages in the Group's Oracle Hyperion Financial Management 11.1.2.4 (HFM) reporting system. HFM is used
as the uniform reporting and consolidation system throughout the Group so that no additional interfaces exist for the preparation of the
consolidated financial statements.
Nearly all consolidation processes used to prepare the consolidated financial statements of TUI AG, e. g. capital consolidation, assets
and liabilities consolidation and expenses and income elimination including at equity measurement, are generated and fully documented in
HFM. Virtually all elements of TUI AG's consolidated financial statements, including the disclosures in the Notes, are developed from and
validated by the HFM consolidation system. HFM also provides various modules for evaluation purposes in order to prepare complementary
information to explain TUI AG's consolidated financial statements.
The HFM reporting and consolidation system has an in-built workflow process whereby when businesses promote their data within the system,
to signal that their reporting package is complete, they are then locked out from making any further changes to that data. This ensures
data integrity within the system and also facilitates a strong audit trail enabling changes to a reporting package to be identified. This
feature of the HFM system has been checked and validated by the TUI AG Group Audit department on several occasions since the system was
introduced.
At their own discretion, TUI AG's Group auditors select certain individual financial statements from the financial statements entered in
the HFM reporting and consolidation system by the Group companies, which are then reviewed for the purposes of auditing the consolidated
financial statements.
3. Specific risks related to (Group) Accounting
Specific risks related to (Group) accounting may arise, for example, from unusual or complex business transactions, in particular at
critical times towards the end of the financial year. Business transactions not routinely processed also entail special risks. The
discretion necessarily granted to employees for the recognition and measurement of assets and liabilities may result in further (Group)
accounting-related risks. The outsourcing and transfer of accounting-specific tasks to service companies may also give rise to specific
risks. Accounting-related risks from derivative financial instruments are outlined in the Notes to the consolidated financial statements.
4. Key regulation and control activities to ensure proper and reliable (Group)
Accounting
The internal control measures aimed at securing proper and reliable (Group) accounting ensure that business transactions are fully
recorded in a timely manner in accordance with legal requirements and the Articles of Association. This also ensures that assets and
liabilities are properly recognised, measured and presented in the financial statements and the consolidated financial statements. The
control operations also ensure that bookkeeping records provide reliable and comprehensive information.
Controls implemented to secure proper and reliable accounting include, for instance, analysis of facts and developments on the basis of
specific indicators. Separation of administrative, execution, settlement and authorisation functions and the implementation of these
functions by different persons reduces the potential for fraudulent operations. Organisational measures also aim to capture any corporate
or Groupwide restructuring or changes in sector business operations rapidly and appropriately in (Group) accounting. They also ensure,
for instance, that bookkeeping transactions are correctly recognised in the period in which they occur in the event of changes in the IT
systems used by the accounting departments of Group companies. The internal control system likewise ensures that changes in the TUI
Group's economic or legal environment are mapped and that new or amended accounting standards are correctly applied.
The TUI Group's accounting policies together with the International Financial Reporting Standards (IFRS) in compliance with EU
legislation, govern the uniform accounting and measurement principles for the German and foreign companies included in TUI's consolidated
financial statements. They include general accounting principles and methods, policies concerning the statement of financial position,
income statement, notes, management report and cash flow statement.
The TUI Group's accounting policies also govern specific formal requirements for the consolidated financial statements. Besides defining
the group of consolidated companies, they include detailed guidance on the reporting of financial information by those companies via the
group reporting system HFM on a monthly, quarterly and year end basis. TUI's accounting policies also include, for instance, specific
instructions on the initiating, reconciling, accounting for and settlement of transactions between group companies or determination of
the fair value of certain assets, especially goodwill. At Group level, specific controls to ensure proper and reliable (Group) accounting
include the analysis and, where necessary, correction of the individual financial statements submitted by the Group companies, taking
account of the reports prepared by the auditors and meetings to discuss the financial statements which involve both the auditors and
local management. Any further content that requires adjusting can be isolated and processed downstream. The control mechanisms already
established in the HFM consolidation system minimize the risk of processing erroneous financial statements. Certain parameters are
determined at Group level and have to be applied by Group companies. This includes parameters applicable to the measurement of pension
provisions or other provisions and the interest rates to be applied when cash flow models are used to calculate the fair value of certain
assets. The central implementation of impairment tests for goodwill recognised in the financial statements secures the application of
uniform and standardized evaluation criteria.
5. Disclaimer
With the organisational, control and monitoring structures established by the TUI Group, the internal control and risk management system
enables company-specific facts to be captured, processed and recognised in full and properly presented in the Group's accounts.
However, it lies in the very nature of the matter that discretionary decision-making, faulty checks, criminal acts and other
circumstances, in particular, cannot be ruled out and will restrict the efficiency and reliability of the internal control and risk
management systems, so that even Group-wide application of the systems cannot guarantee with absolute certainty the accurate, complete
and timely recording of facts in the Group's accounts.
Any statements made relate exclusively to TUI AG and to subsidiaries according to IFRS 10 included in TUI AG's consolidated financial
statements.
OVERALL ASSESSMENT BY THE EXECUTIVE BOARD
AND REPORT ON EXPECTED DEVELOPMENTS
Actual business performance 2020 compared with our forecast
Following a strong start in the first five months of financial year 2020, the travel restrictions due to the COVID-19-pandemic that began
in mid-March caused an almost complete standstill of business operations, which significantly impacted the development of TUI Group's
earnings in the full year. The Group therefore missed all of its leading KPIs in financial year 2020 by a wide margin.
In view of the significant uncertainties in the assessment of future developments, the Executive Board of TUI AG withdrew its guidance
for financial year 2020 on 15 March 2020.
TUI Group's revenue (IAS 17) declined by 58.2 % year-on-year at constant currency. The Group had expected to deliver mid to high
single-digit revenue growth.
TUI Group's underlying EBIT (IAS 17) declined by &euro 3,928.5 m at constant currency to an operating loss of &euro 3,035.0 m in
financial year 2020. The Group had expected to deliver an operating profit (underlying EBIT (IAS 17)) of &euro 950 m to &euro 1,050 m.
The earnings decline compared with our original guidance affected all segments.
Including a gain on disposal from the sale of the German specialist tour operator businesses, we had expected net adjustments of &euro 70
m to &euro 90 m for the period under review. In actual fact, the Group carried net adjustments of &euro 69.6 m. This amount includes the
gain on disposal from the sale of Hapag-Lloyd Kreuzfahrten to TUI Cruises of &euro 476 m, which had not been included in our original
guidance, and unscheduled restructuring expenses and impairments against the backdrop of our business performance, impacted by COVID-19.
Due to the negative development of earnings, the performance of ROIC (IAS 17) and Economic Value Added (IAS 17) also fell significantly
short of expectations. In our original guidance, we had expected ROIC to decline slightly and Economic Value Added to remain stable.
At &euro - 149.3 m, the Group's net capital expenditure and financial investments were below the target value of around &euro 750 m to
&euro 900 m. One of the main reasons was the divestment of Hapag-Lloyd Kreuzfahrten to TUI Cruises, which had not been included in our
guidance. Moreover, investments were cancelled or postponed due to the change in our business performance.
At &euro 6.4 bn, the Group's net debt carried at the end of financial year 2020 also significantly exceeded the expected level of &euro
1.8 bn to &euro 2.1 bn. This was primarily attributable to substantial net cash outflows since the outbreak of the pandemic in March
2020, which had to be refinanced by borrowing.
Apart from the travel restrictions triggered by the COVID-19-pandemic, the grounding of the Boeing 737 Max and the associated delays in
delivery of this efficient aircraft type were an additional reason why we were unable to meet our relative target of reducing specific
CO2 emissions by 10 % by 2020. For this reason, the target of a slightly positive development as forecast in the previous year could not
be achieved.
Expected changes in the economic framework
Development of World Output
Var. in % 2021 2020
World + 5.2 - 4.4
Eurozone + 5.2 - 8.3
Germany + 4.2 - 6.0
France + 6.0 - 9.8
UK + 5.9 - 9.8
US + 3.1 - 4.3
Russia + 2.8 - 4.1
Japan + 2.3 - 5.3
China + 8.2 + 1.9
India + 8.8 - 10.3
Source: Projections of International Monetary Fund (IMF), World Economic Outlook, October 2020
Macroeconomic situation
The International Monetary Fund expects global economic growth to shrink by 4.4 % in calendar year 2020 due to the impact of the
COVID-19-pandemic. For 2021, the experts expect a recovery in global GDP with global growth projected to rebound to 5.2 %. (IMF, World
Economic Outlook, October 2020)
Market trend in tourism
Varying scenarios are in place for a recovery of the tourism sector. UNWTO expects demand for domestic travel to recover faster than
demand for travel abroad. The Organisation also expects the recovery of the global travel industry to start at the end of 2020 or in
early 2021. (UNWTO, World Tourism Barometer, August / September 2020)
Medium-term scenarios for the period between 2021 and 2024 suggest an overall strong recovery in calendar year 2021, assuming a reversal
in the evolution of the pandemic, a substantial increase in travellers' trust and the lifting of most travel restrictions by mid-2021.
According to the experts, it will take between 2.5 and 4 years for international tourist arrivals to return to 2019 levels. (UNWTO, World
Tourism Barometer, August / September 2020)
Effects on TUI Group
As a global tourism provider, TUI Group depends on the development of the political and legal framework and consumer demand in the large
source markets in which we operate with our hotel, cruise and tour operator brands. Our budget is based on the assumptions used as a
basis by the IMF to predict the future development of the global economy and UNWTO's long-term forecast.
In the completed financial year 2020, the travel restrictions due to the COVID-19-pandemic that began in mid-March led to a suspension of
our worldwide tourism activities. TUI Group currently remains impacted by the negative financial effects of the COVID-19-pandemic, which
has recently been exacerbated following new lockdowns proclaimed in TUI Group's core markets as well as quarantine and other travel
restrictions in Germany and abroad. Although there has been much more positive news about the development of effective vaccines and
improved tests in the past few weeks, these external challenges are expected to continue into financial year 2021.
The spread of the pandemic, the measures to curb the virus, in particular regarding travel restrictions, and the short-term effects of
the pandemic on customer confidence are very hard to predict. On 15 March 2020, the Executive Board of TUI AG withdrew its guidance for
financial year 2020 in view of the significant uncertainties relating to future developments and still feels unable to announce specific
guidance in light of the ongoing situation.
Expected development of Group earnings
TUI Group
The translation of the income statements of foreign subsidiaries in our consolidated financial statements is based on average monthly
exchange rates. TUI Group generates a considerable proportion of consolidated revenue and large earnings and cash flow contributions in
non-euro currencies, in particular pound sterling. Taking account of the seasonality in tourism, the value of these currencies against
the euro in the course of the year therefore strongly impacts the financial indicators carried in TUI AG's consolidated financial
statements.
Our key financial performance indicators for our earnings position in financial year 2021 are revenue and underlying EBIT.
Definition of underlying EBIT in Value-oriented Group management on page 29.
Key performance indicators used for regular value analysis are Return On Invested Capital (ROIC) and Economic Value Added. ROIC for a
given segment is shown against the segment-specific cost of capital.
Below, we present TUI Group's expected development in financial year 2021 at constant currency for financial year 2020.
Revenue
For financial year 2021, we expect TUI Group's revenue (IFRS 16) to grow year-on-year.
Underlying EBIT
For financial year 2021, we expect TUI Group's underlying EBIT (IFRS 16) to recover alongside an increase in revenue.
Adjustments
Due to the non-repeat of the positive gain on disposal included in the prior year's results, we expect net negative adjustments for
financial year 2021, compared with net positive adjustments carried in financial year 2020.
ROIC and Economic Value Added
Due to the expected improvement in our operating result, ROIC (IFRS 16) and Economic Value Added (IFRS 16) are also expected to improve
year-on-year, depending on the development of TUI Group's capital costs.
Expected development of financial position
To develop the Group's financial position in financial year 2021, we have defined the Group's net capital expenditure and investments and
its net financial position as key performance indicators.
Net capex and investments
Due to TUI Group's large divestments carried out in financial year 2020, we expect a year-on-year increase in net capex and investments
for financial year 2021.
Net financial position
For financial year 2021, we expect an decrease in the Group's net debt.
Sustainable development
Climate protection and emissions
We have identified specific carbon emissions (in g CO2 / PKM) of our aircraft fleet as the key non-financial performance indicator. In
financial year 2020, the COVID-19 crisis and the grounding of the Boeing 737 Max with the associated delay in delivery of the efficient
aircraft type resulted in an increase in specific CO2 emissions. For financial year 2021, we expect a decline in specific CO2 emissions
as against financial year 2020.
Overall Executive Board assessment of TUI Group's current situation and
expected development
TUI Group currently continues to be impacted by the negative financial effects of the COVID-19-pandemic. The further development of the
pandemic, the measures launched to curb the virus, in particular regarding travel restrictions, and the short-term impact of the pandemic
on customers' trust are difficult to forecast. TUI AG's Executive Board still feels unable to deliver specific guidance in the light of
the substantial uncertainties for the assessment of our future performance.
At the date of preparation of the Management Report (9 December 2020), the business development continued to be impacted by the travel
restrictions, as expected. For financial year 2021, we nevertheless expect TUI Group's underlying EBIT to recover year-on-year at
constant currency.
Outlook for TUI AG
The future business performance of TUI AG is essentially subject to the same factors as those impacting TUI Group. Due to the business
ties between TUI AG and its Group companies, the outlook, opportunities and risks presented for TUI Group are largely mirrored by
expectations for TUI AG. The comments made for TUI Group therefore also apply to TUI AG.
Opportunity Report
TUI Group's opportunity management follows the Group strategy for Tourism as our core business. Responsibility for systematically
identifying and taking up opportunities rests with the operational management of the Hotels & Resorts, Cruises and TUI Musement segments
as well as our source markets. Market scenarios and critical success factors for the individual sectors are analysed and assessed in the
framework of the Group-wide planning and control process. The core task of the Group's Executive Board is to secure profitable growth for
TUI Group again by optimising the shareholding portfolio and developing the Group structure over the long term.
Opportunities arising from macro trends
In particular the introduction of faster tests and effective vaccines would facilitate a significant and swift recovery of our business.
Faster or stronger than expected recovery in demand in the travel market would have a positive effect on TUI Group and its segments.
Moreover, changes in the competitive environment could create opportunities for TUI Group in individual markets.
Corporate strategy opportunities
Opportunities arise from the implementation of our global realignment programme. We are reviewing our activities, each business unit and
each Group company worldwide in order to identify synergies and be leaner, faster and more efficient. We see opportunities in the further
adjustment of our structure and our presence in the markets and destinations.
Further opportunities arise from accelerating the Group's transformation into a digital platform business. We will expand hotel-only and
flight-only products and broaden our dynamic packaging opportunities. Benefits will emerge from the transformation of our digital
platform in Destination Experiences progressing faster than expected.
Operational opportunities
We intend to operate as an asset-light organisation and see opportunities in the implementation of our asset-right strategy in our Hotels
& Resorts and Cruises businesses. We will right-size and restructure our airlines and our order book. We are reviewing unprofitable
activities and will divest them, if necessary.
In order to control costs, we will leverage synergies in areas such as hotel purchasing and tap further potential in our global IT
structures. Opportunities result from a permanent reduction in our overhead costs across the Group beyond the scheduled extent.
BUSINESS REVIEW
Macroeconomic, industry and market framework
Macroeconomic development
Development of World Output
Var. in % 2020 * 2019
World - 4.4 + 2.8
Eurozone - 8.3 + 1.3
Germany - 6.0 + 0.6
France - 9.8 + 1.5
UK - 9.8 + 1.5
US - 4.3 + 2.2
Russia - 4.1 + 1.3
Japan - 5.3 + 0.7
China + 1.9 + 6.1
India - 10.3 + 4.2
* Projection
Source: International Monetary Fund (IMF), World Economic Outlook, October 2020
In calendar year 2020, the global economy is in a deep recession due to the COVID-19-pandemic. The International Monetary Fund (IMF,
World Economic Outlook, October 2020) projects global economic output to contract by 4.4 %. As a result of unprecedented financial
assistance and fiscal policy support, the experts expect the advanced economies to cope with the impacts of the pandemic better than
initially feared. In this case, the economic downturn in the first half of 2020 should be partially offset in the second half of 2020.
Key exchange rates and commodity prices
TUI Group companies operate on a worldwide scale. This presents financial risks for TUI Group arising from changes in exchange rates and
commodity prices. The essential financial transaction risks from operations concern euros and US dollars. They mainly result from foreign
exchange items in the individual Group companies, for instance jet fuel and bunker oil or ship handling, or from sourcing transactions by
hotels. The parity of sterling against the euro affects the translation of results generated in the UK market in TUI's consolidated
financial statements. Following the UK vote for Brexit, the currency fluctuations continued, impacting the translation of results from
our UK business. Changes in commodity prices above all affect TUI Group when procuring fuels such as aircraft fuel and bunker oil.
In Tourism, most risks relating to changes in exchange rates and price risks from fuel sourcing are hedged by derivatives. Information on
hedging strategies and risk management as well as financial transactions and the scope of such transactions at the balance sheet date is
provided in the sections Financial Position and Risk Report in the Management Report and the section Financial Instruments in the Notes
to the consolidated financial statements.
Financial Position see page 68, Risk Report see page 33, and Financial Instruments see Notes page 214.
Industry overview
TUI Group is a global tourism provider. The development of the international tourism market has an impact on all business areas of the
Group.
The key indicators to measure the size of the tourism sector include the number of international tourist arrivals. According to the
United Nations World Tourism Organization (UNWTO), the number of international tourist arrivals totalled around 1.5 bn in 2019, up by
around 4 % year-on-year.
This growth was driven by a number of factors: the relatively stable global economy, a growing middle class in the emerging economies,
technological progress and low travel costs as well as easing of visa requirements.
Europe remained the largest and most mature tourism market in the world, accounting for around 51 % of international tourist arrivals in
both 2018 and 2019. In terms of this indicator, Southern Europe and European countries bordering the Mediterranean were among the world's
largest tourism destinations. Asia-Pacific is the second largest tourism market, with a market share of nearly 25 % in 2019 and
year-on-year growth of around 5 %, followed by the Americas with 15 % of international tourist arrivals and year-on-year growth of 2 %.
(UNWTO World Tourism Barometer, January 2020)
The COVID-19-pandemic has had a particularly serious impact on the travel and tourism sector. Travel restrictions were imposed in
numerous markets across the globe; aircraft were grounded and hotels closed. For the first half of calendar year 2020, UNWTO reports a
decline in international tourist arrivals of 65 % versus the prior year. In June 2020 for example, international arrivals dropped by 93 %
(UNWTO, World Tourism Barometer, August / September 2020).
Change of international tourist arrivals vs. prior year in %
Var. in % 2020* 2019 *
World - 65.3 + 3.5
Europe - 66.5 + 3.9
Asia and the Pacific - 72.2 + 3.6
Americas - 55.2 + 1.6
Afrika - 57.1 + 5.4
Middle East - 56.9 + 2.1
Source: UNWTO World Tourism Barometer, August / September 2020
* Period January till June
Travel intermediary market
A travel intermediary operates between a provider of tourism services, such as an airline or a hotel, and final customers, typically
delivering distribution or related services. The global market for leisure travel intermediary sales encompassed in 2019 a value of ca.
&euro 720 bn, on a constant 2020 price and fixed foreign exchange rate basis.
While the intermediary leisure market is expected to sustain a serious adverse effect in 2020, the current forecast predicts a 1 % CAGR
over the period of 2019 - 2024, on a constant 2020 price and fixed exchange rate basis (Euromonitor International Limited, Travel 2021
edition).
Travel intermediaries include tour operators and online travel agencies (OTAs), whose business models vary substantially. Traditional
tour operators offer their customers a package product (comprising e. g. flight, hotel and transfers), usually through a combination of
offline (i. e. travel agencies) and online channels. In order to secure flight and hotel capacity in advance, a tour operator usually
commits to a certain share of required capacity. Tour operators thus take the risk to fill the committed capacity; however, they can
expect the supplier to offer them a favourable rate and the opportunity to secure acccommodation on an exclusive basis. Contrary to that
approach, OTAs typically do not commit to taking contingents. Their offering to suppliers is a digital distribution platform with broad
customer reach. Major OTAs but also dynamic packaging * are gaining relevance.
* dynamic packaging of travel services such as flight, transfer, hotel and catering to a package tour
Airline market
Global airline sales totalled around &euro 670 bn in 2019 (at constant 2020 prices and at constant currency).
The airline industry has been particularly hard hit by the COVID-19 crisis, as airlines around the world had to ground their aircraft and
cancel flights due to global travel bans. IATA estimates that the global airline industry will be exposed to losses of around USD300 bn
in 2020 alone (IATA, COVID-19 Updated Impact Assessment, April 2020). Recovery scenarios vary; however, the first positive signs emerged
in Summer 2020. With key European destinations reopening for visitors, flight capacity slowly started to ramp up, although travel
restrictions increased again in Autumn / Winter 2020 / 21 due to new travel warnings and lockdowns.
However, the five-year outlook (2019 - 2024) shows a positive trend despite COVID-19: the global airline market is expected to grow by
ca. 2 % (on constant 2020 price and fixed exchange rate basis). (Euromonitor International Limited, Travel 2021 edition).
The airline market comprises three main groups of carriers:
· Full-service carriers, which operate a hub-based network, aiming to offer customers global connectivity.
· Low-cost carriers, which are structured so as to be cost-optimised and offer their customers a reduced flight product a low prices.
From a network perspective, they focus on clear point-to-point connections, often built around more cost-effective secondary airports.
· Charter airlines, which conclude contracts with travel agencies or tour operators to carry an agreed number of passengers throughout
the year. Responsibility to fill the available seats with passengers lies with the tour operator.
The European airline market is characterised by fierce competition and overcapacity, resulting in pressure on yields. Despite several
insolvencies, the market has not seen a significant reduction in flight capacity. Instead, capacity has typically been absorbed by
existing players.
Hotel market
Global hotel value sales reached ca. &euro 560 bn in 2019, on constant 2020 price and fixed exchange rate basis. COVID-19 exerted
pressure on the hotel market similar to its effect on the airline industry, leading the value of global hotel sales to drop to
approximately &euro 310 bn in 2020. Nevertheless, recovery signs are visible: after the sharp decline in 2020, global hotel sales are
expected to show double-digit growth for the following three-year period (2021- 2024). For the overarching five-year time period of 2019
- 2024 and factoring in the initial drop as well as the strong rebound, global hotel value sales are expected to grow at a CAGR of 0.4 %,
on constant 2020 price and fixed exchange rate basis. (Euromonitor International Limited, Travel 2021 edition).
The hotel market comprises business and leisure hotels. Leisure hotels feature a number of characteristics distinguishing them from
business hotels, including longer average lengths of stay, different locations, room features or service offerings. From a demand
perspective, the leisure hotel market in Europe comprises several smaller sub-markets catering to customers' individual needs and
preferences. The sub-markets comprise premium, comfort and budget hotels as well as family / apartment hotels and club or resort hotels.
Hotel companies may offer a variety of hotels for different market segments, often defined by price segment, star rating, exclusivity or
available facilities.
In Europe, in particular, there are many small, often family-run hotels, which are less upscale and have fewer financial resources. Most
family-owned hotels are not branded.
Given the large number of ownership and operating models for leisure hotels and the fragmented competitive landscape which, at least in
Europe, is not dominated by large hotel chains, the competitive environment differs greatly between locations. Despite this strong
fragmentation, a structural change can be observed in the European hotel industry, as in nearly all regions in the world. The share of
hotel chains is increasing.
Cruise market
Global cruise value sales reached ca. &euro 64 bn in 2019, on a constant 2020 price and fixed exchange rate basis. The negative effects
of COVID-19 were also particularly severe for cruises, as the value of cruise sales in the global market is estimated to face a reduction
of approximately 60 % in 2020. After the initial shock, a strong double-digit growth rate is expected for the three year period between
2021- 2024. Overarchingly, on a five year outlook, global cruise value sales are expected to recover close to 2019 levels by 2024.
(Euromonitor International Limited, Travel 2021 edition).
An estimated 26.8 m passengers undertook an ocean cruise in calendar year 2019. At around 14.5 m passengers, the North American market
remains the largest cruise market in the world, followed by Europe with around 6.9 m passengers (Cruise Market Watch, Market Share, 2018
and own estimates). The most frequently visited destinations were the Caribbean with a share of 34.4 % of all cruise passengers and the
Mediterranean with 17.3 % of passengers (CLIA, 2019 Cruise Trends & Industry Outlook)
Destination experiences markets
The market for tours and activities is a rapidly growing tourism segment. The market is highly fragmented on the supplier side and is
predominantly operated offline. However, due to growing consolidation and digitalisation, the market is undergoing change.
Pre-COVID-19, the forecasted market growth on a five year outlook varied between 3 % - 7 % (Company estimate based on Phocuswright &
Euromonitor), depending on the underlying definition of this market. Based on Euromonitor, the current outlook for the period 2019 -
2024, factoring in the effects of COVID-19, is growth at a CAGR of approximately 1 %, on a constant 2020 price and fixed exchange rate
basis.
Strong TUI master brand
Our brand with the red "smile" - the smiling logo formed by the three letters of our brand name TUI - stands for TUI's ambition to
provide a consistent customer experience, digital presence and competitive strength. In order to further leverage the appeal and strength
of our core brand and tap the associated growth potential, we have created global branding and a consistent brand experience in recent
years. TUI is now one of the best-known hotel brands in our core European markets.
We offer licences or franchising options allowing third parties to use some of our travel agency and hotel brands. We are convinced that
this is a cost-efficient way to boost the effect of our marketing activities and increase our revenue.
We believe that protecting our brand portfolio is key to our business. We therefore protect our key brands in order to optimise the
consolidation and development of our business interests in each of our markets. In this regard, our Internet domain names are a key
component of our branding and online distribution of our products. We therefore monitor both our core brand TUI for the registration of
confusable third-party brands and for third-party Internet domain registrations.
Group earnings
Comments on the consolidated income statement
In financial year 2020, the development of TUI Group's revenue and earnings was significantly impacted by the suspension of most of TUI's
tour operator, aviation, hotel and cruise businesses caused by the global travel restrictions imposed from mid-March 2020 to curb the
spread of COVID-19. Underlying EBIT (IAS 17) from TUI Group's declined by &euro 3,926.3 m to &euro - 3,032.8 m in the financial year
under review, or by &euro 3,928.5 m year-on-year on a constant currency basis.
Income Statement of TUI Group for the period from 1 Oct 2019
to 30 Sep 2020
&euro million 2020 2019 Var. in %
adjusted
Revenue 7,943.7 18,928.1 - 58.0
Cost of sales 9,926.1 17,489.4 - 43.2
Gross loss / profit - 1,982.4 1,438.7 n. a.
Administrative expenses 1,017.3 987.1 + 3.1
Other income 574.4 21.3 n. a.
Other expenses 15.2 22.5 - 32.4
Impairment of goodwill 68.1 - n. a.
Impairment of financial assets 180.6 4.5 n. a.
Financial income 35.3 119.7 - 70.5
Financial expenses 321.7 171.4 + 87.7
Share of result of joint ventures - 193.3 297.5 n. a.
and associates
Impairment of net investments in 34.5 - n. a.
joint ventures and associates
Earnings before income taxes - 3,203.3 691.6 n. a.
Income taxes (expense (+), income - 64.2 159.6 n. a.
(-))
Group loss / profit - 3,139.1 532.1 n. a.
Group loss / profit attributable - 3,148.4 416.4 n. a.
to shareholders of TUI AG
Group profit attributable to 9.4 115.7 - 91.9
non-controlling interest
Revenue and cost of sales
Revenue
&euro million 2020 2019 Var. in %
adjusted
Hotels & Resorts 402.4 660.0 - 39.0
Cruises 472.6 965.8 - 51.1
TUI Musement 306.3 856.2 - 64.2
Holiday Experiences 1,181.3 2,482.0 - 52.4
Northern Region 2,462.0 6,355.2 - 61.3
Central Region 2,859.6 6,416.9 - 55.4
Western Region 1,345.9 3,237.2 - 58.4
Markets & Airlines 6,667.5 16,009.3 - 58.4
All other segments 94.9 436.7 - 78.3
TUI Group (IFRS 16) 7,943.7 18,928.1 - 58.0
FX effect - 44.7
Adjustment IAS 17 / IFRS 16 (IFRS 9.1
16-Effect)
TUI Group (IAS 17, at constant 7,908.2 18,928.1 - 58.2
currency)
In financial year 2020, TUI Group's revenue declined by 58.0 % to &euro 7,943.7 m due to the COVID-19-pandemic. On a constant currency
basis, revenue decreased by 58.2 %. Customer numbers were 61.8 % down year-on-year. Revenue is presented alongside the cost of sales in
the income statement, which declined 43.2 % in the period under review.
Gross loss / profit
The difference between revenue and the cost of sales declined by &euro 3,421.1 m year-on-year to a gross loss of &euro 1,982.4 m.
Administrative expenses
Administrative expenses rose by &euro 30.2 m year-on-year to &euro 1,017.3 m.
Other income and other expenses
In financial year 2020, other income mainly resulted from the divestment of the German specialist tour operators and of Hapag-Lloyd
Kreuzfahrten. In the prior year, other income had mainly resulted from the sale of aircraft assets and buildings.
Other expenses included losses from the sale of aircraft assets and expenses incurred in connection with the disposal of Group companies
in financial year 2020. In the prior year, this item had included a loss of &euro 12.0 m from the sale of Corsair S. A.
Financial result
The financial result declined by &euro 234.6 m to &euro - 286.3 m. This was primarily attributable to lower interest income. Moreover,
the prior year's result had included income from the reversal of hedges no longer required. In the period under review, financial
expenses rose by &euro 150.3 m, above all due to higher interest expenses resulting from the use of credit facilities, the change in the
recognition of interest expenses from leases in accordance with IFRS 16 and from expenses for changes in exchange rates for lease
liabilities.
Share of result of joint ventures and associates
The share of result from joint ventures and associates of &euro - 193.3 m comprises the proportionate net profit for the year of these
companies. The decline in the share of result is driven by adverse operational impacts caused by the COVID-19-pandemic. In addition, the
impairment test for the joint ventures and associates as at 30 September 2020, triggered by the development of the pandemic, resulted in
impairment charges in Hotels & Resorts and Central Region.
Earnings before income taxes
The earnings before income taxes declined &euro 3,894.9 m to a loss of &euro 3,203.3 m in financial year 2020.
Group loss
The Group loss for financial year 2020 totalled &euro 3,139.1 m, compared with a Group profit of &euro 532.1 m
for financial year 2019.
Share in Group profit attributable to TUI AG shareholders
The share in Group profit attributable to TUI AG shareholders amounted to &euro - 3,148.4 m in financial year 2020.
Non-controlling interests
Non-controlling interests in Group profit for the year totalled &euro 9.4 m. They mainly related to RIUSA II Group.
Earnings per share
The interest in the Group result for the year attributable to TUI AG shareholders resulted in basic earnings per share of &euro - 5.34
(previous year &euro 0.71 ) in financial year 2020.
Alternative Performance indicators
From financial year 2020, the Group has used the indicator 'underlying EBIT', which is more common in the international sphere, for
management purposes, so that underlying EBITA is no longer used as a financial KPI. We define the EBIT in underlying EBIT as earnings
before interest, income taxes and expenses for the measurement of the Group's interest hedges. Unlike the previous KPI EBITA, EBIT by
definition includes goodwill impairments.
Underlying EBIT is adjusted by income and expense items impacting or distorting the assessment of the operating profitability of the
segments and the Group due to their level and frequency. These items include gains on disposal from investments, major gains and losses
from the sale of assets and major restructuring and integration expenses. In addition, adjustments are carried for all effects from
purchase price allocations, ancillary acquisition costs and conditional purchase price payments. Adjustments made in the reconciliation
to underlying EBIT include goodwill impairments.
TUI Group transitioned to IFRS 16 from 1 October 2019. The prior year's numbers were not restated. In order to enhance year-on-year
comparability, internal reporting in the course of the financial year uses underlying EBIT and underlying EBITDA in line with the
provisions of IAS 17. Accordingly, the numbers for both the completed and the previous financial year are presented prior to the effect
of the initial application of IFRS 16. The table below provides a reconciliation to underlying EBIT according to IFRS 16:
Reconciliation to underlying EBIT (IAS 17) of TUI Group
&euro million 2020 2019 Var. in %
adjusted
Earnings before income - 3,203.3 691.6 n. a.
taxes
plus: Net interest 281.7 74.1 280.4
expense (excluding
expense / income
from measurement of
interest hedges)
less / plus: Expense - 5.9 2.9 n. a.
(income) from
measurement of
interest hedges
EBIT (IFRS 16, - 2,927.4 768.7 n. a.
previous year IAS 17)
Adjustments:
less / plus: - 119.1 86.1
Separately disclosed
items
plus: Expense from 49.5 38.8
purchase price
allocation
Underlying EBIT (IFRS - 2,997.0 893.5 n. a.
16)
Adjustments IAS 17 / - 35.8 - n. a.
IFRS 16 (IFRS 16
impact)
Underlying EBIT (IAS - 3,032.8 893.5 n. a.
17)
TUI Group's EBIT (IFRS 16) declined by &euro 3,696.1 m to &euro - 2,927.4 m in financial year 2020.
EBIT (IFRS 16)
&euro million 2020 2019 Var. in %
adjusted
Hotels & Resorts - 463.7 442.8 n. a.
Cruises 153.3 366.0 - 58.1
TUI Musement - 146.1 34.7 n. a.
Holiday Experiences - 456.4 843.5 n. a.
Northern Region - 1,036.1 37.1 n. a.
Central Region - 720.8 61.2 n. a.
Western Region - 533.9 - 44.6 n. a.
Markets & Airlines - 2,290.7 53.7 n. a.
All other segments - 180.3 - 128.6 - 40.2
TUI Group - 2,927.4 768.7 n. a.
TUI Group's underlying EBIT adjusted for one-off effects (underlying EBIT (IAS 17)) declined by &euro 3,926.3 m to &euro 3,032.8 m in
financial year 2020.
Underlying EBIT (IAS 17)
&euro million 2020 2019 Var. in %
adjusted
Hotels & Resorts - 399.6 451.8 n. a.
Cruises - 322.8 366.0 n. a.
TUI Musement - 114.6 55.7 n. a.
Holiday Experiences - 837.0 873.5 n. a.
Northern Region - 975.1 58.5 n. a.
Central Region - 619.8 101.9 n. a.
Western Region - 440.8 - 28.6 n. a.
Markets & Airlines - 2,035.7 131.8 n. a.
All other segments - 160.2 - 111.8 - 43.3
TUI Group - 3,032.8 893.5 n. a.
In financial year 2020, net income was adjusted by &euro 119.1 m for one-off effects.
For details on the one-off effects please refer to the Notes to the segment data.
One-off effects please see page 171.
Other segment indicators
Reconciliation to EBITDA (IAS 17)
&euro million 2020 2019 Var. in %
adjusted
EBIT (IAS 17) - 2,962.7 768.7 n. a.
Amortisation (+) / write-backs (-) 894.2 508.8 75.7
of other intangible assets and
depreciation (+) / write-backs (-)
of property, plant and equipment
(IAS 17)
Impairment of goodwill (IAS 17) 67.9 - n. a.
EBITDA (IAS 17) - 2,000.5 1,277.5 n. a.
EBITDA (IAS 17)
&euro million 2020 2019 Var. in %
adjusted
Hotels & Resorts - 195.4 554.3 n. a.
Cruises 392.8 457.6 - 14.2
TUI Musement - 109.9 62.2 n. a.
Holiday Experiences 87.4 1,074.1 - 91.9
Northern Region - 877.0 163.1 n. a.
Central Region - 648.2 109.2 n. a.
Western Region - 425.5 7.9 n. a.
Markets & Airlines - 1,950.7 280.2 n. a.
All other segments - 137.2 - 76.9 - 78.4
TUI Group - 2,000.5 1,277.5 n. a.
Underlying EBITDA (IAS 17)
&euro million 2020 2019 Var. in %
adjusted
Hotels & Resorts - 195.1 563.3 n. a.
Cruises - 82.9 457.6 n. a.
TUI Musement - 93.9 71.2 n. a.
Holiday Experiences - 371.8 1,092.1 n. a.
Northern Region - 828.4 163.8 n. a.
Central Region - 546.9 146.7 n. a.
Western Region - 369.2 18.1 n. a.
Markets & Airlines - 1,744.5 328.7 n. a.
All other segments - 126.3 - 61.3 - 106.0
TUI Group - 2,242.6 1,359.5 n. a.
Segmental performance*
Cautionary note on COVID-19
The COVID-19 crisis, which broke out in our key source markets and destinations in Europe at the end of the second quarter of financial
year 2020, had severe impacts on the tourism sector and TUI Group in the period under review. Due to the crisis, we temporarily almost
completely suspended our worldwide tourism activities, including flights, cruises and hotel operations, for several weeks. From mid-May
2020, we partially restarted our hotel operations. From mid-June 2020, we partially relaunched our air travel programmes to re-opened
destinations. Our Cruises segment partially restarted its operations in July 2020.
As our business operations were significantly restricted, the key performance indicators as at 30 September 2020 shown in the sections
below are of limited, if any, comparability and do not allow any conclusions to be drawn about the sustained development.
Holiday Experiences
Holiday Experiences
&euro million 2020 2019 Var. in %
adjusted
Revenue (IAS 17) 1,181.3 2,482.0 - 52.4
Underlying EBIT (IAS 17) - 837.0 873.5 n. a.
Underlying EBIT (IAS 17, at constant - 823.3 873.5 n. a.
currency)
* on IAS17 and constant currency basis
Hotels & Resorts
&euro million 2020 2019 Var. in %
adjusted
Total revenue (IAS 17) 751.4 1,511.8 - 50.3
Revenue (IAS 17) 402.4 660.0 - 39.0
Underlying EBIT (IAS 17) - 399.6 451.8 n. a.
Underlying EBIT (IAS 17, at constant - 379.7 451.8 n. a.
currency)
Capacity hotels total 1 ('000) 24,013 42,094 - 43.0
Riu 11,144 18,057 - 38.3
Robinson 2,083 3,333 - 37.5
Blue Diamond 2,543 4,379 - 41.9
Occupancy rate hotels total 2 (in %, 66 82 - 16
variance in % points)
Riu 72 88 - 16
Robinson 62 73 - 11
Blue Diamond 70 77 - 7
Average revenue per bed hotels total 71 66 + 7.7
3 (in &euro)
Riu 67 64 + 4.8
Robinson 100 93 + 7.3
Blue Diamond 122 118 + 3.4
Turnover measures include fully consolidated companies, all other KPIs incl. companies measured at equity.
1 Group owned or leased hotel beds multiplied by opening days
2 Occupied beds divided by capacity
3 Arrangement revenue divided by occupied beds
· Our Hotels & Resorts segment made an underlying EBIT loss of &euro 380 m, down &euro 832 m at constant currency against prior year,
reflecting lost contribution attributable to COVID-19 suspension of operations during the third quarter and partial reopening's in our
peak fourth quarter. The loss includes impairment charges of &euro 78 m across the portfolio mainly as a result of COVID-19 related
WACC increases, triggered under IAS 36.
· As at 30 September, 40 % of our 355 group hotels were operating (previous year: 354 group hotels), reflecting the reduced Summer
2020 capacity operated by our Markets & Airlines business. Destinations which were able to reopen during early summer included Germany,
Austria, Spain, Greece, Cyprus, Turkey, Portugal, Croatia, Bulgaria, Egypt, Tunisia, Morocco as well some long-haul destinations such
as Mexico, Jamaica and Vietnam.
· Our model of diversified locations allowed us to serve domestic customers in destination as well as customers from our core European
markets, whilst our high level of direct distribution enabled us to funnel a significant proportion of our Markets & Airlines customers
to our owned content. This did not however fully compensate for the impact of volatile travel restrictions in August and September to
our key destinations such as Spain, Greece and Turkey, which dampened bookings again after a promising restart in July.
· Available bed nights decreased by 43 % reflecting the drivers above. Full year average occupancy rate (based on open hotels) was down
16 % pts to 66 % (previous year: 82 %). Average rate per bed increased by 8 % to &euro 71 as a result of mix (previous year: &euro 66).
· Occupancy at Riu declined 16 % pts versus prior year to 72 % (previous year: 88 %), reflecting the fluctuating travel restrictions
across Spain, Balearics, the Canaries and the Caribbean. Average rate increased by 5 % to &euro 67 (previous year: &euro 64) as a
result of mix. Riu was benefitting from their year-round destination portfolio which had already delivered a profitable first half.
· Robinson occupancy declined 11 % pts versus prior year to 62 % (previous year: 73 %) with average rate up 7 % to &euro 100 (previous
year: &euro 93), again as a result of mix. The development reflected the impact of business suspension and travel restrictions
throughout the Summer period.
· Blue Diamond occupancy declined 7 % pts versus prior year to 70 % (previous year: 77 %) with average rate up 3 % including FX to
&euro 122 (previous year: &euro 118). Six properties reopened from mid-July, hosting mainly US guests, with blanket quarantine
requirement imposed by the Canadian government limiting demand from the region.
· Our Other hotel brands saw a full-year underlying EBIT loss reflecting the drivers above.
· In line with our asset-light growth strategy shared at our financial year 2019 full-year results, we repositioned 32 hotels within
the group portfolio into our new flagship leisure brand TUI Blue and opened four new hotels under the brand. Including 46 hotels
operated by our third-party concepts hotel partners, TUI Blue is now firmly established across 93 locations (previous year: 12).
Cruises
&euro million 2020 2019 Var. in %
adjusted
Revenue (IAS 17)1 472.6 965.8 - 51.1
Underlying EBIT (IAS 17) - 322.8 366.0 n. a.
Underlying EBIT (IAS 17, at constant - 327.0 366.0 n. a.
currency)
Occupancy (in %, variance in %
points)
TUI Cruises 88 101 - 13
Marella Cruises 96 100 - 4
Hapag-Lloyd Cruises 70 79 - 9
Passenger days ('000)
TUI Cruises 2,965 6,137 - 51.7
Marella Cruises 1,366 3,298 - 58.6
Hapag-Lloyd Cruises 214 332 - 35.6
Average daily rates 2 (in &euro)
TUI Cruises 141 174 - 19.0
Marella Cruises3 (in GBP) 146 149 - 1.7
Hapag-Lloyd Cruises 601 641 - 6.4
1 No revenue is carried for TUI Cruises as the joint venture is consolidated at equity
2 Per day and passenger
3 Inclusive of transfers, flights and hotels due to the integrated nature of Marella Cruises, in GBP
· Repatriation of cruise passengers and crew began in mid-March and operations were suspended across our three Cruise brands throughout
the third quarter. TUI Cruises and Hapag-Lloyd Cruises resumed partial operations from Germany at the end of July, operating a reduced
fleet with European itineraries. This was made possible by Germany's decision to permit cross-border travel in EU states and Schengen
Area from mid-June, underlining the advantage of our diversified markets. In combination with already comprehensive hygiene measures on
board our fleet, extensive COVID-19 preventative protocols have been introduced as part of our mandatory safety measures. COVID-19
testing is now included within our German cruise packages and a negative result is compulsory for customers and crew prior to
departure.
· Cruise full-year loss of &euro 327 m represents an underlying EBIT reduction of &euro 693 m versus prior year at constant currency,
with our UK brand Marella most notably impacted by UK travel restrictions preventing a restart of operations. The loss includes an
impairment charge of &euro 150 m, as a result of COVID-19 related WACC increases, triggered under IAS 36.
· TUI Cruises' (our joint venture with Royal Caribbean in the German speaking market) average daily rate of &euro 141 was down 19 %
versus prior year (previous year: &euro 174) reflecting the late marketing of replacement Cruise itineraries and shorter 'Blue Cruises'
within European waters. Occupancy of 88.1 % achieved for the full year reflects adherence to COVID-19 government safety advice capping
volume permitted on board during the second half (previous year: 100.7 %). Three out of the seven-ship fleet resumed operations in the
fourth quarter.
· Hapag-Lloyd Cruises (our luxury and expedition brand) average daily rate of &euro 601 was down 6 % versus prior year (previous year:
&euro 641). Occupancy of 70.2 % declined by 9 % pts versus prior year (previous year: 78.9 %) with three out of the five-ship fleet
resuming operations in the fourth quarter.
· Marella Cruises (our UK cruise brand) remained fully suspended throughout the second half of the financial year in line with UK
government travel advice. As a result, passenger days operated for the year were down 59 % versus prior year.
TUI Musement (formerly Destination Experiences)
&euro million 2020 2019 Var. in %
adjusted
Total revenue (IAS 17) 461.3 1,231.4 - 62.5
Revenue (IAS 17) 306.3 856.2 - 64.2
Underlying EBIT (IAS - 114.6 55.7 n. a.
17)
Underlying EBIT (IAS - 116.6 55.7 n. a.
17, at constant
currency)
· TUI Musement loss of &euro 117 m is an underlying EBIT reduction of &euro 172 m versus prior year reflecting
COVID-19 business standstill for the majority of the third quarter, with a small volume generated from the partial restart of Markets &
Airlines operations during the final quarter.
· 2.6 m excursions and activities were sold in the year, down 73 % versus prior year.
· The effects of COVID-19 alongside changes in both guest behaviour and expectations have led us to significantly accelerate and
enhance our digitilisation transformation at TUI Musement. We are prioritising the development of a 'Digital First' service model as
well as advancing our platform transformation projects.
· Around 1,000 front and back office roles will be affected by the above acceleration and our wider Global Realignment Programme and
will consist of roles which will either not be recruited for in the upcoming seasons or reduced.
Markets & Airlines
Markets & Airlines
&euro million 2020 2019 Var. in %
adjusted
Revenue (IAS 17) 6,676.6 16,009.3 - 58.4
Underlying EBIT (IAS 17) - 2,035.7 131.8 n. a.
Underlying EBIT (IAS 17, at - 2,050.9 131.8 n. a.
constant currency)
Direct distribution mix 1, 3 (in %, 73 74 - 1
variance in % points)
Online distribution mix 2, 3 (in %, 49 48 + 1
variance in % points)
Customers ('000) 8,057 21,075 - 61.8
1 Share of sales via own channels (retail and online)
2 Share of online sales
3 Previous year's number includes Berge & Meer and Boomerang guests
· Our Markets & Airlines business made a full year underlying EBIT loss of &euro 2,051 m, a reduction of &euro 2,183 m year-on-year at
constant currency, reflecting the suspension of operations from mid-March, in line with government advice to mitigate the spread of
COVID-19 and partial resumption of operations during peak Summer.
· Our integrated and diversified model enabled us to be the first tour operator to successfully restart operations from Germany in
mid-June, followed by the rest of our European markets including the UK in July.
· Approximately 25 % of financial year 2019 Q4 capacity was operated in the final quarter of this year, with 2.3 m customers
holidaying with us between June and October.
· The majority of our restart capacity was to short and medium haul destinations such as Greece, Turkey, the Canaries, the Balearics
and Spanish mainland, Portugal and Cyprus, with only a small long-haul programme such as Dominican Republic and Jamaica.
· Full-year customer volume declined 62 % to 8.1 m versus prior year (previous year: 21.1 m) reflecting the drivers above.
· As part of our Global Realignment Programme, we reviewed every activity, business unit and group companies worldwide to identify
synergies and where we can be leaner, faster and more efficient. Following the review, we announced initiatives in each of the regions,
affecting TUI UK (Northern Region), TUI fly (Central Region) and TUI France (Western Region).
Northern Region
&euro million 2020 2019 Var. in %
adjusted
Revenue (IAS 17) 2,466.6 6,355.2 n. a.
Underlying EBIT (IAS 17) - 975.1 58.5 n. a.
Underlying EBIT (IAS 17, at constant - 984.4 58.5 n. a.
currency)
Direct distribution mix 1 (in %, 91 94 - 3
variance in % points)
Online distribution mix 2 (in %, 67 67 -
variance in % points)
Customers ('000) 2,438 7,428 - 67.2
1 Share of sales via own channels (retail and online)
2 Share of online sales
Northern Region comprises UK, Nordics and the joint venture in Canada as well as the associated company in Russia.
· Northern Region underlying EBIT loss of &euro 984 m, down &euro 1,043 m on prior year.
· Full-year customer volume declined 67 % to 2.4 m versus prior year (previous year: 7.4 m).
· Global Realignment Programme - with 70 % of all TUI UK bookings already completed online, we announced the closure of 166 high
street stores, reducing our brick and mortar retail estate to around 350 stores. Of the 900 roles impacted, 70 % are being moved into
new homeworking sales and services roles. We also intend to protect roles based in the UK by closing third party overseas customer
service centres.
Central Region
&euro million 2020 2019 Var. in %
adjusted
Revenue (IAS 17) 2,861.5 6,416.9 - 55.4
Underlying EBIT (IAS 17) - 619.8 101.9 n. a.
Underlying EBIT (IAS 17, at constant - 620.8 101.9 n. a.
currency)
Direct distribution mix 1, 3 (in %, 54 53 + 1
variance in % points)
Online distribution mix 2, 3 (in %, 26 23 + 3
variance in % points)
Customers ('000) 3,230 7,830 - 58.7
1 Share of sales via own channels (retail and online)
2 Share of online sales
3 Previous year's number includes Berge & Meer and Boomerang guests
Central Region comprises Germany and Austria (operated as one market), Switzerland and Poland.
· Central Region underlying EBIT loss of &euro 621 m, down &euro 723 m versus prior year.
· Full-year customer volume declined 59 % to 3.2 m versus prior year (previous year: 7.8 m).
· Global Realignment Programme - A progressive restructuring plan to right-size TUI fly Germany has been agreed. We plan to reduce the
current TUI fly fleet of 39 aircraft (as at June 2020) by 50 % by financial year 2024 and reduce the number of operating bases to
five, with expected headcount reductions across flight crew, technical and administrative staff.
Western Region
&euro million 2020 2019 Var. in %
adjusted
Revenue (IAS 17) 1,348.5 3,237.2 - 58.3
Underlying EBIT (IAS 17) - 440.8 - 28.6 n. a.
Underlying EBIT (IAS 17, at constant - 445.7 - 28.6 n. a.
currency)
Direct distribution mix 1 (in %, 79 76 + 3
variance in % points)
Online distribution mix 2 (in %, 60 57 + 3
variance in % points)
Customers ('000) 2,388 5,816 - 58.9
1 Share of sales via own channels (retail and online)
2 Share of online sales
Western Region comprises Belgium, Netherlands and France.
· Western Region underlying EBIT loss of &euro 446 m, down &euro 417 m versus prior year.
· Full-year customer volume declined 59 % to 2.4 m versus prior year (previous year: 5.8 m).
· Global Realignment Programme - we are restructuring and repositioning TUI France to focus on our core club brands such as Marmara,
Lookea and Nouvelle Frontieres. We plan to sell or close some owned travel agencies, keeping third party retail as our key distribution
channel, creating a significantly leaner organisation. The plan anticipates a total headcount reduction of between 500 to 600 roles
assuming all owned retail shops are sold which supports a path to break-even levels from financial year 2021 onwards.
All other segments
&euro million 2020 2019 Var. in %
adjusted
Revenue (IAS 17) 94.9 436.7 - 78.3
Underlying EBIT (IAS 17) - 160.2 - 111.8 - 43.3
Underlying EBIT (IAS 17, at constant - 160.8 - 111.8 - 43.8
currency)
· The result for All other segments declined by &euro 49 m versus prior year, with EBIT loss limited by the immediate reduction of
personnel and material costs levels during the second half of the financial year.
Net assets
Development of the Group's asset structure
&euro million 30 Sep 30 Sep 2019 Var. in %
2020 adjusted
Fixed assets 11,345.1 11,038.1 2.8
Non-current receivables 1,302.7 909.8 43.2
Non-current assets 12,647.8 11,947.9 5.9
Inventories 73.2 114.7 - 36.2
Current receivables 1,329.9 2,364.0 - 43.7
Cash and cash 1,233.1 1,741.5 - 29.2
equivalents
Assets held for sale 57.2 50.0 14.4
Current assets 2,693.4 4,270.2 - 36.9
Assets 15,341.1 16,218.1 - 5.4
Equity 218.1 4,165.6 - 94.8
Liabilities 15,123.0 12,052.5 25.5
Equity and liabilities 15,341.1 16,218.1 - 5.4
The Group's balance sheet total decreased by 5.4 % year-on-year to &euro 15.3 bn.
Vertical structural indicators
Non-current financial assets accounted for 82.4 % of total assets, compared with 73.7 % in the previous year. The capitalisation ratio
(ratio of fixed assets to total assets) increased from 68.1 % to 74.0 %.
Current assets accounted for 17.6 % of total assets, compared with 26.3 % in the previous year. The Group's cash and cash equivalents
decreased by &euro 508.4 m to &euro 1,233.1 m. They thus accounted for 8.0 % of total assets, as against 10.7 % in the previous year.
Horizontal structural indicators
At the balance sheet date, the ratio of equity to non-current assets was 1.7 %, as against 34.9 % in the previous year. This was
attributable to the decline in Group equity driven by the suspension of our business operations due to COVID-19. The ratio of equity to
fixed assets was 1.9 % (previous year 37.7 %). The ratio of equity plus non-current financial liabilities to fixed assets was 34.5 %,
compared with 60.0 % in the previous year.
Development of the Group's non-current assets
Structure of the Group's non-current assets
&euro million 30 Sep 2020 30 Sep 2019 Var. in %
adjusted
Goodwill 2,914.5 3,009.2 - 3.1
Other intangible assets 553.5 710.7 - 22.1
Property, plant and 3,462.5 5,810.7 - 40.4
equipment
Right of use assets 3,227.9 0.0
Investments in joint 1,186.7 1,507.6 - 21.3
ventures and associates
Fixed assets 11,345.1 11,038.2 2.8
Receivables and assets 1,003.1 707.7 41.7
Deferred tax claims 299.6 202.0 48.3
Non-current receivables 1,302.7 909.7 43.2
Non-current assets 12,647.8 11,947.9 5.9
Goodwill
Goodwill decreased by 3.1 % to &euro 2,914.5 m. The decline in the carrying amount is essentially due to impairments resulting from the
travel restrictions caused by COVID-19.
For details, please refer to the section Goodwill in the Notes from page 179.
Property, plant and equipment
Property, plant and equipment totalled &euro 3,462.5 m at the balance sheet date, down by &euro 2,348.2 m year-on-year. One of the key
reasons for this decline is the reclassification of leased assets of &euro 1,451.6 m that had been classified as finance leases according
to IAS 17 to right-of-use assets when transitioning to IFRS 16 in financial year 2020. In addition, the property, plant and equipment of
Hapag-Lloyd Kreuzfahrten GmbH was reclassified to the balance sheet item 'Assets held for sale' following the agreement on the sale of
the company to the joint venture TUI Cruises GmbH, before the divestment was completed in early June 2020. In addition, impairment tests
of the carrying amounts due to the travel restrictions caused by COVID-19 resulted in impairments in hotels, aircraft and cruise ships.
Development of property, plant and equipment
&euro million 30 Sep 2020 30 Sep 2019 Var. in %
adjusted
Hotels incl. land 1,613.8 1,646.6 - 2.0
Other buildings and 185.1 225.0 - 17.7
land
Aircraft 239.4 1,592.6 - 85.0
Cruise ships 438.3 1,258.3 - 65.2
Other plant, operating 393.9 433.8 - 9.2
and office equipment
Assets under 220.6 173.1 27.4
construction
Payments on accounts 371.4 481.3 - 22.8
Total 3,462.5 5,810.7 - 40.4
Right-of-use assets
In financial year 2020, TUI transitioned to the amended standard on leases (IFRS 16). As a lessee, TUI recognises right-of-use assets and
lease liabilities in the statement of financial position in accordance with IFRS 16. As a lessor, TUI leases moveable assets such as
aircraft, vehicles and cruise ships, and immoveable property such as hotel buildings and land, office buildings and travel agencies. Due
to the initial application of IFRS 16, right-of-use assets of &euro 3,831.6 m were recorded as at 1 October 2019. This amount includes
&euro 1,451.6 m for assets previously capitalised as finance leases plus capitalised maintenance services reclassified from property,
plant and equipment to right-of-use assets.
Companies measured at equity
Nineteen associated companies and 30 joint ventures were measured at equity. At &euro 1,186.7 m, their value decreased by 21.3 %
year-on-year as at the balance sheet date.
Development of the Group's current assets
Structure of the Group's current assets
&euro million 30 Sep 2020 30 Sep 2019 Var. in %
adjusted
Inventories 73.2 114.7 - 36.2
Trade accounts receivable 590.2 1,211.3 - 51.3
and other financial assets1
Other non-financial assets2 668.8 997.0 - 32.9
Current tax assets 70.9 155.7 - 54.5
Cash and cash equivalents 1,233.1 1,741.5 - 29.2
Assets held for sale 57.2 50.0 14.4
Current assets 2,693.4 4,270.2 - 36.9
1 Incl. receivables from derivative financial instruments
2 Incl. touristic prepayments
Current assets
Current assets decreased by 36.9 % to &euro 2,693.4 m. This was mainly attributable to the decline in business activities caused by
COVID-19.
Financial position of the Group
Principles and goals of financial management
Principles
TUI Group's financial management is centrally operated by TUI AG, which acts as the Group's internal bank. Financial management covers
all Group companies in which TUI AG directly or indirectly holds an interest of more than 50 %. It is based on policies covering all cash
flow-oriented aspects of the Group's business activities. In the course of establishing a cross-border organisation, TUI AG has
outsourced some of its treasury activities to First Choice Holidays Finance Ltd, a British Group company. However, the treasury
activities are carried out on a coordinated and centralised basis.
Goals
TUI's financial management goals include ensuring sufficient liquidity for TUI AG and its subsidiaries and limiting financial risks from
fluctuations in currencies, commodity prices and interest rates as well as default risks associated with treasury activities.
Liquidity safeguards
The Group's liquidity safeguards consist of two components:
· In the course of the annual Group planning process, TUI draws up a multi-annual financial budget, from which long-term financing and
refinancing requirements are derived. This information and financial market observation to identify refinancing opportunities create a
basis for decision-making, enabling appropriate financing instruments for long-term corporate funding to be adopted at an early stage.
· TUI uses syndicated credit facilities and bilateral bank lines as well as its liquid funds to secure sufficient short-term cash
reserves. Through intra-Group cash pooling, excess cash of individual Group companies is used to finance the cash requirements of other
Group companies. A monthly rolling liquidity planning system is the basis for arrangements with banks. The reporting frequency was
increased to weekly reporting in the wake of the COVID-19 situation.
Limiting financial risks
The Group companies operate on a worldwide scale. This gives rise to financial risks for TUI Group, mainly from changes in exchange
rates, commodity prices and interest rates.
The key operating financial transaction risks relate to the euro, US dollar, pound sterling and Swedish krona and to changing fuel
prices. They mainly result from cost items in foreign currencies held by individual Group companies, e. g. hotel procurement, aircraft
fuel and bunker oil invoices or ship handling costs.
The Group has entered into derivative hedges in various foreign currencies in order to limit its exposure to risks from changes in
exchange rates. Changes in commodity prices affect TUI Group, in particular, in procuring fuels such as aircraft fuel and bunker oil.
Most of these price risks related to fuel procurement are hedged by derivative instruments. Where price increases can be passed on to
customers due to contractual agreements, this is also reflected in our hedging behaviour.
With the onset of the COVID-19-pandemic, TUI had to cease flight and holiday operations for a number of weeks during the period since
mid-March 2020, and since operations resumed in June 2020 has operated at a much lower capacity. As a direct result, TUI became
significantly over-hedged from both a currency and a fuel perspective. This had an adverse financial effect on TUI due to the prospective
termination of the application on hedge accounting. TUI has taken a number of actions to mitigate the effects of over-hedging, including
the termination of over-hedged currency and fuel positions, and pausing any further hedging of currency and fuel for future requirements.
Furthermore, the significantly increase of TUI's credit risk has impacted the effectiveness of the remaining hedges regarding their
application of hedge accounting. In that course, further hedge accounting applications of fuel, interest rates and currency derivative
instruments had to be terminated.
In order to control risks related to changes in interest rates arising on funding in international money and capital markets and
investments of liquid funds, derivative interest hedges are used on a case-by-case basis as part of the Group's interest management
system.
In order to limit default risks from settlement payments for derivatives as well as money market investments with banks and investments
in money market funds, TUI AG and First Choice Holidays Finance Ltd have defined credit rating criteria for the selection of their
counterparties. Trading and transaction limits are allocated to these counterparties on the basis of the credit ratings of the major
rating agencies. The credit ratings and the corresponding limits are regularly reviewed. In the event of fair value changes in
derivatives or rating changes, new business with these counterparties may temporarily be suspended until the limits can be adequately
applied again.
The use of derivative hedges is based on underlying transactions; the derivatives are not used for speculation purposes.
More detailed information on hedging strategies and risk management as well as financial transactions and the scope of such transactions
at the balance sheet date is provided in the Risk Report and the section Financial instruments in the Notes to the consolidated financial
statements.
See from page 33 or 214.
Capital structure
Capital structure of the Group
&euro million 30 Sep 2020 30 Sep 2019 Var. in %
adjusted
Non-current assets 12,647.8 11,947.9 + 5.9
Current assets 2,693.4 4,270.2 - 36.9
Assets 15,341.1 16,218.1 - 5.4
Subscribed capital 1,509.4 1,505.8 + 0.2
Capital reserves 4,211.0 4,207.5 + 0.1
Revenue reserves - 6,168.8 - 2,259.2 - 173.1
Non-controlling interest 666.5 711.4 - 6.3
Equity 218.1 4,165.6 - 94.8
Non-current provisions 1,895.7 1,810.6 + 4.7
Current provisions 421.6 394.3 + 6.9
Provisions 2,317.3 2,204.9 + 5.1
Non-current financial 3,691.7 2,457.6 + 50.2
liabilities
Current financial liabilities 577.3 224.6 + 157.0
Financial liabilities (IFRS 4,269.0 2,682.2 + 59.2
16)
Non-current lease liabilities 2,712.6 - n. a.
Current lease liabilities 687.3 - n. a.
Lease liabilities 3,399.9 - n. a.
Other non-current liabilities 503.7 472.6 + 6.6
Other current liabilities 4,608.6 6,589.5 - 30.1
Other liabilities 5,112.3 7,062.1 - 27.6
Debt related to assets held 24.5 103.1 - 76.2
for sale
Liabilities 15,341.1 16,218.1 - 5.4
Capital ratios
&euro million 30 Sep 2020 30 Sep 2019 Var. in %
adjusted
Non-current capital 9,021.8 8,906.5 + 1.3
Non-current capital in 58.8 54.9 + 3.9 *
relation to balance sheet
total%
Equity ratio% 1.4 25.7 - 24.3 *
Equity and non-current 3,909.8 6,623.2 - 41.0
financial liabilities
Equity and non-current 25.5 40.8 - 15.4 *
financial liabilities in
relation to
balance sheet total%
* percentage points
Overall, non-current capital increased by 1.3 % to &euro 9,021.8 m. It accounted for 58.8 % (previous year 54.9 %) of the balance sheet
total.
The equity ratio was 1.4 % (previous year 25.7 %). Equity and non-current financial liabilities accounted for 25.5 % (previous year 40.8
%) of the balance sheet total.
Equity
Subscribed capital and the capital reserves rose slightly year-on-year. The increase was driven by the issuance of employee shares.
Revenue reserves declined by &euro 3.9 bn to &euro - 6.2 bn in the financial year under review. Non-controlling interests accounted for
&euro 666.5 m of equity.
Provisions
Provisions mainly comprise provisions for pension obligations, tax provisions and provisions for typical operating risks classified as
current or non-current, depending on expected occurrence. At the balance sheet date, they accounted for a total of &euro 2,317.3 m, up by
&euro 112.4 m year-on-year.
Financial and lease liabilities
Composition of financial liabilities and lease liabilities
&euro million 30 Sep 30 Sep 2019 Var. in %
2020 adjusted
Bonds 298.9 297.8 + 0.4
Liabilites to banks 3,953.7 870.0 + 354.4
Liabilites from finance leases - 1,495.2 n. a.
*
Other financial liabilities 16.4 19.2 - 14.6
Financial liabilities 4,269.0 2,682.2 + 59.2
Lease liabilities 3,399.9 - n. a.
* Financial liabilities include liabilities from finance leases for the last time as of 30 Sep 2019
Structural changes in financial and lease liabilities
Due to TUI Group's transition to IFRS 16 as of 1 October 2019, TUI no longer has to differentiate between finance and operating leases as
a lessee. In this context, lease liabilities are presented and explained separately in the statement of financial position and are
therefore no longer carried in financial liabilities.
Excluding the lease liabilities included in the previous year, non-current financial liabilities increased by &euro 3,082.0 m versus 30
September 2019 to &euro 4,269.0 m. The increase results almost entirely from an increase in liabilities to banks of &euro 3,083.7 m.
For more detailed information, please refer to the Notes to the consolidated financial statements.
See chapter Financial and lease liabilities, page 207.
Overview of TUI's listed bonds
The table below lists the maturities, nominal volumes and annual interest coupon of the listed bond issued in 2016 with a nominal value
of &euro 300.0 m and a 5-year term.
Listed bonds
Capital Issuance Maturity Amount Amount Interest
measures initial outstanding rate
&euro &euro % p. a.
million million
Senior October October 300.0 300.0 2.125
Notes 2016 2021
2016*
* From 1 October 2020, the interest rate is 9.5 % p. a.
The utilisation under the concluded KfW-credit line of &euro 1.05 bn in August 2020 as part of the state aid programme was subject to the
suspension of a covenant in the &euro 300 m Senior Notes due in 2021, which limits TUI's potential additional financial indebtedness. In
the course of a voting under German Act on Debt Securities amongst the bearers of the Senior Notes, this suspension was granted. With
this resolution becoming effective, the annual interest coupon of the Senior Notes increased to 9.5 % starting 1 October 2020.
Furthermore, there is the obligation of a 2.0 % quarterly interest payment starting 1 April 2021. Furthermore, TUI AG has the obligation
to prepay such portion of the Senior Notes in case that TUI AG incurs certain additional financing, provided that such additional
proceeds exceed &euro 150 m in the aggregate.
Bond with warrants issued to Economic Stabilisation Fund (WSF)
On 1 October 2020, an unlisted bond with warrants totalling &euro 150.0 m was issued to the Economic Stabilisation Fund (WSF). The bond
has a term of six years and carries an interest coupon of 9.5 % p. a. The attached warrants have a term of ten years and authorise the
holders to subscribe to around 58.7 m shares in TUI AG at a price of around &euro 2.56 per share.
Please refer to the section Significant events after balance sheet date, page 238.
Syndicated credit facility of TUI AG
TUI AG's syndicated credit facility previously totalling &euro 1.75 bn (including a tranche of &euro 215 m for bank guarantees) was
increased by &euro 1.8 bn to &euro 3.55 bn in April 2020 due to the impact of the COVID-19-pandemic. In August 2020, this facility was
increased by a further &euro 1.05 bn to &euro 4.6 bn. This second increase was subject to two conditions: the holders of TUI AG's senior
notes worth &euro 300.0 m would have to grant their consent to amendments to certain terms and conditions of the notes, and TUI AG had to
issue a bond with warrants totalling &euro 150.0 m to the Economic Stabilisation Fund (WSF). The second of these two conditions was
fulfilled in October 2020.
The interest rate for cash drawdowns is variable and depends on the short-term interest level (EURIBOR or LIBOR) plus a margin determined
by TUI's credit rating. The differentiated term of this syndicated credit facility is explained in the chapter Going concern reporting
according to UK Corporate Governance Code in the annual financial statements.
See chapter Going concern reporting according to UK Corporate Governance Code, page 151.
At the balance sheet date, amounts totalling &euro 3,315.9 m had been drawn from this credit line. In addition, this credit line was
utilised by &euro 106.8 m through issued bank guarantees.
Bank credits and lease liabilities
Liabilities to banks in the Cruises segment declined due to the divestment of Hapag-Lloyd Kreuzfahrten. For more detailed information
please refer to the chapter Divestments in the Notes to the consolidated financial statements.
See chapter Divestments, page 155.
The obligations from lease liabilities essentially relate to aircraft funding and hotel leases. For more detailed information, in
particular on the remaining terms, please refer to the section Financial and lease liabilities in the Notes to the consolidated financial
statements.
See section Financial and lease liabilities, page 207.
Other liabilities
The combined figure for other liabilities mainly includes trade payables and advance payments received from tourists and at &euro 5,112.3
m was &euro 1,949.8 m lower than in the previous year.
Bilateral guarantee facilities of TUI AG with insurance companies and banks
TUI AG has concluded several bilateral guarantee facilities with various insurance companies with a total volume of &euro 85.4 m. These
guarantee facilities are required for the delivery of tourism services in order to ensure that Group companies are able to meet, in
particular, the requirements of European oversight and regulatory authorities on the provision of guarantees and warranties. The
guarantees issued usually have a term of up to 18 months. They give rise to a commission in the form of a fixed percentage of the maximum
guarantee amount. At the balance sheet date, these guarantee facilities had been fully drawn.
TUI AG also concluded bilateral guarantee facilities with a total volume of &euro 35.2 m with banks to provide bank guarantees in the
framework of ordinary business operations. Some of the guarantees have a term of several years. The guarantees granted give rise to a
commission in the form of a fixed percentage of the maximum guarantee amount. At the balance sheet date, an amount of &euro 28.3 m from
these guarantee facilities had been used.
Obligations from financing agreements
The Schuldschein worth &euro 425.0 m issued in 2018, the senior notes worth &euro 300.0 m issued in 2016, the bond with warrants worth
&euro 150.0 m issued in October 2020 and the credit and guarantee facilities of TUI AG contain a number of obligations.
Under its syndicated credit facility worth &euro 4.6 bn, TUI AG has a duty to comply with certain financial covenants (as defined in the
contract). These require (a) compliance with an EBITDAR-to-net interest expense ratio measuring TUI Group's relative charge from the
interest result and the lease and rental expenses; and (b) compliance with a net debt-to-EBITDA ratio, calculating TUI Group's relative
charge from financial liabilities. The EBITDAR-to-net interest expense ratio must have a coverage multiple of at least 1.5; net debt must
not exceed 3.0 times EBITDA. The financial covenants are determined every six months, but the banks have consented to currently suspend
this financial covenant obligation. Testings of these covenants will be resumed in September 2021. The testings will be carried out on
the basis of the four quarters last reported prior to September 2021. We expect that our results will continue to be impacted by the
COVID-19 pandemic during these reporting periods, so that we may not be able to comply with these financial covenants. We are therefore
seeking to achieve a suspension of these covenants for the testing period ending on
30 September 2021 and beyond in the framework of the syndicated credit facility.
The Schuldschein worth &euro 425.0 m, the senior notes worth &euro 300.0 m, the bond with warrants worth &euro 150.0 m issued in October
2020 and the credit and guarantee facilities of TUI AG also contain additional contractual clauses typical of financing instruments of
this type. In that course, inter alia, TUI's scope for pledging or selling assets, acquiring other companies or shareholdings, or
effecting mergers is restricted.
Non-compliance with these obligations awards the lenders the right to call in the facilities or terminate the financing schemes for
immediate repayment.
Ratings by Standard & Poor's and Moody's
TUI AG ratings
2015 2016 2017 2018 2019 2020 Outlook
Standard BB- BB- BB BB BB CCC+ negative
& Poor's
Moody's Ba3 Ba2 Ba2 Ba2 Ba2 Caa1 negative
In particular due to the COVID-19-pandemic and the associated impacts on cash flow generation and the increase in debt, Standard & Poor's
successively downgraded the TUI rating to "CCC+ (negative outlook)". Moody's likewise successively lowered TUI's rating to "Caa1
(negative outlook)".
TUI AG's senior notes worth &euro 300.0 m have been assigned a "CCC+" rating by Standard & Poor's and a "Caa1" rating by Moody's. TUI
AG's syndicated credit facility is assigned a "CCC+" rating by Standard & Poor's.
Financial stability targets
TUI considers an enhanced credit rating to be a prerequisite for the further development of the business. In response to the structural
improvements resulting from the merger between TUI AG and TUI Travel, the operating performance observed over the past few years, and the
strengthening of the business model despite a challenging environment, both Standard & Poor's and Moody's upgraded their ratings for TUI
to the BB or Ba ranges in 2014. In particular due to effects of the COVID-19-pandemic, these ratings have been lowered to CCC+ and Caa1,
respectively. We consider a return to the B range to be essential, not only in order to benefit from financing terms, but also to regain
access to the debt capital markets even in difficult macroeconomic situations. As an indicator of financial stability, we have defined a
leverage ratio along the following basic lines.
Leverage ratio = (gross financial liabilities + lease liabilities + obligations from defined-benefit pension plans) / reported EBITDA.
This basic definition is subject to specific amendments in order to reflect current circumstances. Following a leverage ratio of 3.0x for
financial year 2019*, the impact of COVID-19 and its cause for a negative EBITDA in financial year 2020 resulted in a negative leverage
ratio with limited value. We expect our operating result to recover and our balance sheet structures to stabilise after the
COVID-19-pandemic ends and therefore aim to deliver a leverage ratio of less than 3.0x again.
* The calculation of the leverage ratio for financial year 2019 was based on a slight modification, as IFRS 16 had not yet been applied.
See section Capital management, page 235.
Interest and financing environment
In the period under review, short-term interest rates remained at an extremely low level compared with historical rates. In some currency
areas, the interest rate remained negative throughout the year. Moreover, due to the COVID-19-pandemic, some central banks lowered their
short-term interest rates in order to stimulate the economy, with corresponding impacts on yields for money market investments but also
on reference interest rates for floating-rate debt.
Quoted credit margins (based on CDS levels) for corporates in the sub-investment grade area initially rose substantially in spring 2020
and subsequently returned towards their initial levels by the end of the completed financial year. Credit margins for TUI AG reached new
highs with the spread of the COVID-19-pandemic and remain at very high levels on a long-standing comparison. Even against the backdrop of
the difficult capital market environment, no refinancing options were available.
Liquidity analysis
At the balance sheet date, TUI AG, the parent company of TUI Group, held cash and cash equivalents worth &euro 343.3 m.
Restrictions on the transfer of liquid funds
At the balance sheet date, there were restrictions worth around &euro 0.3 bn on the transfer of liquid funds within the Group that might
significantly impact the Group's liquidity, such as restrictions on capital movements and restrictions due to credit agreements
concluded.
Change of control
Significant agreements taking effect in the event of a change of control due to a takeover bid are outlined in the chapter on Information
required under takeover law.
See chapter Information required under takeover law, page 94.
Cash flow statement
Summary cash flow statement
&euro million 2020 2019
revised
Net cash out- / inflow from operating - 2,771.9 + 1,114.9
activities
Net cash in- / outflow from investing + 161.8 - 1,141.4
activities
Net cash in- / outflow from financing + 2,112.5 - 763.8
activities
Change in cash and cash equivalents with - 497.6 - 790.3
cash effects
The cash flow statement shows the flow of cash and cash equivalents on the basis of a separate presentation of cash inflows and outflows
from operating, investing and financing activities. The effects of changes in the group of consolidated companies and of foreign currency
translation are eliminated.
TUI Group's cash flow statement is presented including the Hapag-Lloyd Kreuzfahrten disposal group. Due to the adoption of IFRS 16, all
leases are recognised as right-of-use assets and lease liabilities in the statement of financial position. As a result, since financial
year 2020 most payments for lease agreements have no longer been carried as cash outflows from operating activities, but as interest
payments and repayments of lease liabilities in cash outflows from financing activities since financial year 2020.
In the period under review, cash and cash equivalents decreased by &euro 514.6 m to &euro 1,233.1 m.
Cash inflow / outflow from operating activities
In the period under review, the cash outflow from operating activities totalled &euro 2,771.9 m (previous year inflow of &euro 1,114.5
m). The year-on-year decrease was primarily attributable to the restriction of travel operations due to the COVID-19-pandemic.
Cash inflow / outflow from investing activities
In the completed financial year, the cash inflow from investing activities totalled &euro 161.8 m (previous year outflow of &euro 1,141.4
m). This includes a cash outflow for capital expenditure on property, plant and equipment and intangibles of &euro 587.0 m (previous year
&euro 987.0 m). The Group recorded a cash inflow of &euro 109.9 m (previous year &euro 182.0 m) from the divestment of property, plant
and equipment and intangible assets. The total amount includes a cash inflow of &euro 689.3 m in connection with the sale of interests in
consolidated companies, including &euro 646.0 m for the divestment of Hapag-Lloyd Kreuzfahrten. The Group also recorded a cash inflow of
&euro 62.5 m from the sale of interests in two associated companies.
Cash inflow / outflow from financing activities
The cash inflow from financing activities totalled &euro 2,112.5 m (previous year outflow of &euro 763.7 m). In the current financial
year, TUI AG recorded a cash inflow of &euro 3,302.4 m from its syndicated credit facility after deduction of borrowing costs. Other TUI
Group companies took out loans worth &euro 70.0 m. A cash outflow of &euro 693.8 m related to the redemption of financial liabilities,
including &euro 612.4 m for lease liabilities. In the period under review, a cash outflow of &euro 251.9 m related to interest payments
(previous year &euro 117.9 m). Dividends for TUI AG shareholders totalled &euro 318.1 m, while dividends for minority shareholders
amounted to &euro 0.6 m.
Change in cash and cash equivalents
&euro million 2020 2019
Cash and cash equivalents at the + 1,747.6 + 2,548.0
beginning of period
Changes due to changes in exchange - 17.0 - 10.1
rates
Cash changes - 497.6 - 790.3
Cash and cash equivalents at the + 1,233.1 + 1,747.6
end of period
Cash and cash equivalents comprise all liquid assets, i. e. cash in hand, bank balances and cheques.
The detailed cash flow statement and additional explanations are provided in the consolidated financial statements and in the section
Notes to the cash flow statement in the Notes to the consolidated financial statements.
See page 146 and 237.
Analysis of investments
The development of fixed assets, including property, plant and equipment, intangible assets as well as shareholdings and other
investments is presented in the section on Net assets in the Management Report. Additional explanatory information is provided in the
Notes to the consolidated financial statements.
Additions to property, plant and equipment
The table below lists the cash investments in intangible assets and capital expenditure on property, plant and equipment. This indicator
does not include financing transactions such as the taking out of loans and finance leases.
Net capex and investments
&euro million 2020 2019 Var. in
adjusted %
Cash gross capex
Hotels & Resorts 327.2 343.1 - 4.6
Cruises 48.8 253.1 - 80.7
TUI Musement 12.8 21.2 - 39.6
Holiday Experiences 388.8 617.3 - 37.0
Northern Region 35.7 56.8 - 37.1
Central Region 14.6 33.7 - 56.7
Western Region 15.6 33.9 - 54.0
Markets & Airlines * 85.1 175.5 - 51.5
All other segments 61.4 77.3 - 20.6
(END) Dow Jones Newswires
December 10, 2020 01:04 ET (06:04 GMT)
Tui (LSE:TUI)
Historical Stock Chart
From Jun 2024 to Jul 2024
Tui (LSE:TUI)
Historical Stock Chart
From Jul 2023 to Jul 2024
