Hapag-Lloyd Aktiengesellschaft ($HLAG)

Ladies and gentlemen, welcome to the Hapag-Lloyd's Analyst and Investor Q1, 2026 Results Conference Call and live Webcast. I'm Morgan, Chorus call operator. Hapag-Lloyd today is presented to you by CEO, Rolf Habben Jansen and CFO, Mark Frese. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Rolf Habben Jansen. Please go ahead, sir.

Thank you very much, and thanks, everyone, for making the time to join us here today. We'd like to give you a quick rundown of Q1 and hopefully also a little bit insight into the future. Maybe if we start with what I would call the key developments of the first quarter, then I think it's fair to say that we definitely had an unsatisfactory start to the year. There are reasons for that. But nevertheless, if we look back at Q1, I think we would have hoped for a better quarter. If we look at the reasons behind it, one very big reason is definitely the adverse weather conditions that we've had in North and Southern Europe in January and February and a bit similar on the East Coast of the United States. As we are very heavily exposed to those markets much stronger than many others that hit us harder than most. We've seen a recovery in those flows in the course of the first quarter. So I think it's a bit of a one-off, but nevertheless, something we could have done without. And of course, we've also had the situation in the Middle East, which caused significant extra costs as from March, which we hope to recover through surcharges, et cetera, but of course, we'll see that only a little bit later. Despite that, I'd say, Q1 has been, again, a good quarter for Gemini. Yes, we saw that schedule reliability was down. But given the severity of the disruption that we've seen, I think our recovery has also been quite quick, and you will see again in the second quarter that we get back to where we were most of last year. On the Terminal side, we saw good throughput growth. And then, of course, we signed the merger agreement with ZIM and also worthwhile mentioning that the shareholders voted with overwhelming majority in favor of that just 2 weeks ago. In terms of our earnings outlook that remains unchanged. A little bit more about Q1 and the exposure that we've had and which caused our results to dip. I think main -- 2, 3 main things to call out. One is the weather, that I already mentioned. The other one is significant exposure to the Atlantic trade, which was very weak in the first quarter in particular. And also, we have -- as a consequence of that, we have had to take some capacity out because it was simply no more -- no longer possible to provide those services at a reasonable cost. Of course, we saw the cost going up then on the back of the conflict in the Middle East. I think the thing which is a little bit special about that is that whilst the conflict itself is geographically quite isolated and as such, does not impact global flows all that much, the effect it has on cost, of course, have a global effect because with the surge of energy prices, we have seen significantly higher costs hitting us. I think if we look at what we have today, then we definitely look at EUR 50 million, EUR 60 million extra costs every week. And of course, we try to pass that on, similar to when you go to the petrol station and you also have to pay a higher fuel price, but clearly, that puts pressure on our business. As far as the Middle East is concerned, we still have a number of ships stuck there, and we cannot go in and out of Strait at this moment in time. We do serve the Upper Gulf through a land bridge through Oman and to some extent, via Jeddah, but of course, those volumes are limited. Initially, we post all those bookings into the Upper Gulf, but at the moment, we've opened up again for that and we do provide services both, as I said, through Oman, but also through Jeddah. Having said that, this is a solution that is somewhat limited. If we switch over to ZIM, before I hand it over to Mark, I think we were pleased to see that the ZIM shareholders approved the merger agreement with Hapag-Lloyd with a very clear majority and at the moment, we are going through the process of filing all the regulatory approvals that we need. On the one hand, in Israel, of course, related to the Golden share, but we also have quite a lot of other jurisdictions where we need to file and those filings are being done as we speak. And based on what we can see right now, we would still anticipate to close that transaction in the fourth quarter of this year. And with that, let me hand it over to Mark, who will take us through the numbers.

Yes. Thank you, Rolf. Good morning also from my side, and thank you for joining us today. The first quarter, as already said, was particularly challenging with the weak market fundamentals and significant operational disruptions weighing on our financial performance. This effects were driven by sustained pressure on freight rates. The very severe weather conditions, Rolf alluded to already, and heightened geopolitical tensions, particularly for sure in the Middle East. Despite this, very unsatisfactory start to the year. We once again generated a positive free cash flow of USD 0.4 billion and maintained a resilient balance sheet, and for sure, this provides us with substantial flexibility both to fund strategic investments such as the planned ZIM acquisition, Rolf just talked about, and to navigate periods of growing market uncertainty. And with that, let me walk you through the individual components a little bit in more detail. Group revenue declined to USD 4.9 billion compared to USD 5.3 billion in the prior year quarter, driven exclusively by weaker performance in the Liner Shipping segment, while our growing Terminal & Infrastructure business continues to expand its global footprint and deliver improving results -- delivering improving results. Group EBITDA at USD 494 million came in below the very strong prior year figure, when we benefited from much higher freight rates in the Liner Shipping segment. Given the challenging market environment, it was not possible to differentiate ourselves from broader market dynamics in Q1 and that resulted in an EBIT loss of USD 157 million. When we jump to the Liner Shipping segment, and Liner Shipping revenue declined year-on-year to USD 4.8 billion that's reflecting softer freight rates, but only slightly lower volumes. As mentioned earlier, both the volume and cost trends were impacted by adverse weather conditions, particularly across Europe as well as softer North Atlantic demand due to prior year front-loading effects and service disruptions resulting from the Middle East situation. In this challenging environment, Liner EBIT dropped to negative USD 174 million. In Q1, '26, our average freight rate fell to -- or fell by 9.5% to USD 1,330 per TEU compared to the prior year quarter. The strongest rate erosion was recorded on the Asia to American trade due to the U.S. tariff-induced demand fluctuations we all have experienced. Transport volumes in Q1, '26 were only slightly below the very strong prior year quarter when we achieved volume growth of close to 9% due to the start of Gemini at that time. Volume performance was particularly damped on the Europe to American trade by severe weather conditions as well as generally softer exports out of Europe. This also affected the Asia to Europe trade as market volume on the backhaul trades from Europe to Asia continued to decline. And in addition, this trade includes Middle East relations which were particularly affected by the de facto closure of Strait of Hormuz and the booking stopped as talked about to the Upper Gulf regions that we forced to introduce in early March. In contrast, we were able to grow further and against the market trends on the North Pacific, supported by improved network coverage and our stronger scheduled reliability. Our unit cost increased by 8% in Q1 '26 due to around about USD 1,420 million per TEU, which was mainly the result of operational disruptions affecting our volume and cost performance. Handling and haulage as well as equipment costs increased reflecting higher terminal storage costs amid weather-related port congestion in January and February as well as the Middle East disruptions. In addition to higher energy surcharges imposed by vendors globally led to increased inter and transportation costs. Lower volumes resulting in weaker fixed cost absorption, particularly affecting vessel and voyage. A significant increase in bunker cost is expected in Q2, which will be covered by our emergency fuel surcharge and the regular marine fuel recovery mechanism. Our cost-saving initiatives are in full implementation and that will help to mitigate cost increases and improve efficiency. The transshipment situation has been optimized, particularly by reducing our exposure to third-party feeder costs. Looking now at the T&I performance. In our Terminal & Infrastructure segment, revenue increased strongly in Q1 to USD 168 million while EBITDA improved to USD 47 million, supported by higher volumes in Latin America. And in India, terminal throughput increased by more than 11% to USD 3.4 million TEU. Revenue growth was further supported by the full consolidation of J M Baxi following the increase of our stake to 51% now. In addition, European ports generated higher storage revenue due to longer dwell times. Completing the construction, the Damietta terminal in Egypt commenced operation in February, starting to serve as our new East Med hub. Let me now turn to cash flow. The operating cash flow for Q1 '26 amounted to USD 500 million, reflecting a strong cash conversion of around 100%. Capital expenditures were modest, including first installments for the vessel orders in the sub-5,000 TEU segment. That was, as you remember, announced in December '25. Further investments included vessel modernization and terminal investments. The net cash outflow from investments totaled to USD 95 million, supported by proceeds from interest, dividends and divestments. Free cash flow amounted to USD 405 million. Financing cash outflows were around about USD 650 million, primarily driven by debt and lease repayments as well as interest payments. In total, our cash balance declined slightly by roughly USD 200 million to USD 3.8 billion. Let me finally turn to our key balance sheet figures. We continue to have a robust balance sheet with ample liquidity, including our highly liquid fixed income investments and undrawn revolving credit facilities, our total liquidity reserve amounts to USD 6.9 billion at the end of the quarter. As already announced with the presentation of our full year results in March or late March, the Executive Board and Supervisory Board have proposed to the Annual General Meeting on 20 May, so coming up next week to pay out a dividend of EUR 3 per share or EUR 527 million in total for the last financial year. This proposal is in line with our dividend policy and balances the interest of all our stakeholders. And having said that, I will hand it back to Rolf now for a market update and the outlook.

Thanks, Mark. Yes, I think that brings us to market. As always, starting a little bit with supply and demand projections. As you can see on the chart on the left-hand side, we still expect to see decent growth in 2026. I think when looking at this picture, it's really important to understand that the growth in the last couple of years on the dominant leg has been significantly higher than what we have seen on the nondominant legs. And that means that the additional capacity that is required is actually more than what we just see when you look at overall market growth. When we look at '24, we saw overall market growth of 6%, yet the dominant legs grew with 10%. In '25, we saw a growth of 5%, yet the dominant legs grew with 8%. And also this year, we see again that the dominant legs grow faster than nondominant legs. In the first quarter, I think market was up about 4%, so I think that planning with a 3% growth for the full year is certainly not odd. And again, when you want to look at the supply-demand balance, please also look at the distinction between dominant and the nondominant legs because I suspect that once we are further into the year, we will actually see that the dominant legs grow faster than the additional supply that comes into the market. And then we have to see what's going to happen next year. The market is holding up reasonably well. I mean, of course, we have a single-digit percentage of the market that is currently down a lot, everything in the upper Gulf. But we see that the remaining market remains actually fairly strong. And if we also look at forward bookings and when we look at futures markets, when we look at talking to customers, then I think there is an expectation that we will have a fairly normal peak season. So as such, I think the outlook for this year is actually, despite all the uncertainty that there is not only bleak. We've seen spot rates go up a bit. We see now a bit more momentum going into May, but of course, there, the truth will always be -- or the important moment will always be end of June and July when we head into peak season. Right now, I think the signs are that we will have a fairly normal peak season, but of course, that remains to be seen. In the context of all of this, we have confirmed our outlook, but I think we do that, of course, always to point out that there is still uncertainty. I would say, though, that the uncertainty this year is definitely higher than we have seen in previous years. And as such, that's also a reason why we still have a fairly wide range and why it's actually not that easy to determine where we are going to land. I think when we look in the short end, we definitely see somewhat better volumes. At the moment, we also see a bit of recovery on the Atlantic trade, but it will be decided what is going to happen during a peak season because that's where we'll still need to have a further uptake on the rates as the additional bunker costs still weigh very heavily on our P&L. Before we go to questions, maybe a quick wrap-up and priorities for the remainder of the year. I think we've already commented on the first quarter. I think Gemini has demonstrated strong resilience, and we'll continue to build on that. We do expect to see elevated transport costs mainly driven by higher energy costs for the remainder of this year. We'll continue, as Mark said, on focusing on getting our unit cost down. We had a really good trend in Q3 and Q4. And because of the bad weather, in particular, that's been thrown a bit off track in Q1, but we need to get back on the also on that. And then, of course, for us, also important to complete the ZIM transaction as that will also help us strategically as we look ahead in the upcoming couple of years. I think that brings us to the end of our introduction. And with that, I'll happily hand it over to the operator to take questions -- to take your questions.

[Operator Instructions] And the first question comes from Lars Heindorff from Nordea.

A couple of them, if I may. The first one on the bunker side. We've heard from some of your competitors that not only there's been an increase in the actual bunker price, which, of course, affects your cost, but also that there's been other costs associated with this, for example, conducting bunker bunkering places where you normally don't do and so forth. So I just want to sort of try to get a get a better feeling for the expected growth into the second quarter. I mean how much of that growth in the bunker cards will be just purely price related and how much will be kind of other costs, if I can put it that way? That's the first one. And then the second one is on the reliability. You had a slide in the beginning where you showed the decline. I know you talked about bad weather and so forth, but none of your competitors have seen a similar development in the decline in the reliability here during the first quarter. Just trying to get a sense of is this sort of deliberate choice in the Gemini or what is the reason for this? And last but not least, which is the difference in the growth volumes between you and your partner, Gemini Maersk, which reported a very strong volume growth in the quarter. Just trying to get a sort of a sense for why those big differences.

Yes. Maybe, let's try to take -- maybe start with the last one on the growth. I think we saw that. If you go to Q1 last year, we had the opposite effect, where we grew a lot and Merck did not grow a lot. If you compare where we came from and you look 2 years back, then the growth rates over the 24-month period has actually been fairly comparable. So I expect those things to get closer together again as we move forward. And I think there's -- it may have something to do with the way we look at things and the way because we also changed a little bit the way we moved out of the previous alliance last year and first quarter and into this one. So that will have probably something to do with it. The second factor is that we are more exposed to some of those Northern European markets where we had disruptions and the same for the Atlantic. So that really explains some of it as well, but I expect that to be temporary. In terms of reliability, Yes, you are right. We had a dip. I think I saw actually also a dip with others, even if it was -- if that dip was maybe a little bit less, but it also was from a much lower level. I think what was unfortunate for us is that we were particularly hit hard by the port closure in [indiscernible], which is something that we have not seen for the last 30 years. And in the first quarter, we were closed for effectively 9 days. So that's probably the single biggest effect. I also see now that we are getting back to where we were in terms of schedule reliability, so the recovery has been good. You will also start seeing that in the statistics when you look at those even if they are typically a 2 months rolling figure. So before we will be back up again to the 90 will probably be May or June. And then in terms of bunker, the main effect you see is definitely price. We do not see significant availability issues at this point in time. But you are right that sometimes there's a little bit less choice in fuel rates that you can take. So you can't always take the most efficient one. That also has an effect. But when you look at the overall increase of cost, then the vast majority of that is price. And vast majority means I think when we -- I don't know the exact numbers off the top of my head, but it's probably over 90% of the effect is price.

And the next question comes from Cristian Nedelcu from UBS.

I have 3, if I can. The first one on the Asia-Europe trade lane. The spot rates did not increase much since the start of the Middle East conflict, and this implies that on the spot rates, we are not really passing through the incremental fuel cost. Could you tell us a bit roughly what is your volume split for spot versus contract on this trade lane? And to what extent are you seeing some of the clients, especially the forwarders trying to dilute the contracted volumes or put more pressure on the agreed contracted rates in this environment? The second one is on ZIM. I think there were some articles in the local press that the Israel Shipping and Port Administration may be opposing the deal. In this context, would you consider making any additional concessions to complete the deal or any more color that you could provide there? And the last one is a bit of general question, but at an industry level, roughly, where do you think is the cash breakeven for the average ocean carrier? I'm trying to think, is this the level of rates that we need to see to trigger more scrapping and more capacity rationalization. So do we need to get to that rate where most players are cash breakeven to become more rational?

Yes, let me try and answer them one by one. I mean if we start with Asia, Europe, I think you are right. So far, spot rates have not been up or lost would say though that the demand at the moment on Asia, Europe is very strong, so I would be very surprised if those spot rates are not going to trend up over the upcoming couple of weeks as we see significant overbooking and as such, there is certainly not a lot of downward pressure on pricing. If anything, there is upward pressure, which probably a little bit later than we would have liked, but I think you will start seeing that. In terms of the ZIM approval process, I mean, we're working with the regulators and trying to provide the information and the data that they are asking for. If I look a little bit more in detail in what we have been doing, we've been filing. We've been receiving questions. We've been responding to those, and now we are in dialogue, which is a very normal process. I see also sometimes things in the press, but in the end, the only thing we can do is work with the regulators and try to convince them of the fact that we believe that this is actually for all parties a very, very good deal. And then the last point on the industry, what is the cash breakeven? I think that's unfortunately really impossible to say because this depends completely on what kind of fleet you have, what your split is between owned and charters, and what your trade exposure is, so that's too early to say. But it's very clear that when you look today at the results in the Liner business over the last couple of quarters actually that nobody gets anywhere near to recovering its cost of capital. So longer term, one should expect that there is going to be upward pressure also because with the order books being the size that they have, lots of people have lots of investments and CapEx coming up.

[Operator Instructions] And the next question comes from Marco Limite from Barclays.

I've got a question on the Red Sea. As some of your peers are talking about possible interest in the Red Sea in short term despite what's going on in the Middle East. Just wondering what is your view about return to the Red Sea? Do you think we need to see the Iran situation to be completely, let's say, sorted from a political perspective before thinking about in the Red Sea? Or you are also considering just canal crossing with some escorts capacity? And on that, how easy is it to get escorting capacity how organized is that sort of capacity? Is it easy, let's say, to have visibility on it and to book it in advance? Is there a sort of priority mechanism where you can book it? So sorry for being long, but yes, a few questions on the Red Sea. The second question is on the fuel pass-through. Just to be very clear, do you think that you have been able to fully pass through the higher fuel costs so far? And do you have an expectation that you will continue to be able to fully pass it through in the next months? Or you have seen some pushbacks on that? And then if I may, just another one. I've noticed that you have made a change in the disclosure. When I look at the revenue per trailing, you are now saying that revenues will be booked based on orders after reaching the port of loading. So why have you done that change in disclosure? And what does it mean in terms of accounting?

Okay. The last question is probably best if Mark takes it or one of the guys from Investor Relations. If I take the first two on the Red Sea, I think it's still difficult to judge when that is going to open. I personally see a difficult going through the Red Sea as long as the Iran conflict is still ongoing and just reading the news flow on that, that is certainly not -- that conflict is certainly not concluded just yet. In terms of escort, we were prepared to go through the Red Sea under close protection earlier on in the year, but then it turned out that at that point in time also because of everything that happened, there was not sufficient capacity available to allow us to go through in a planned and orderly fashion. We need to see how that develops as we move forward. Right now, there is certainly not enough capacity to guide all the ships through. So that's why for now, we still find it difficult to put a real time stamp to when we are potentially going to go back through Red Sea. And keep in mind that once we do that, we will also try to do it in an orderly fashion. We will not go back with all the services at once because then the terminals in the Mediterranean and in North Europe, in particular, and to a lesser extent, in the U.S., will collapse. That we will try to avoid. And as such, it will be a gradual process over multiple months. In terms of the fuel I think roughly 50% of our business runs under contract. All of those contracts have fuel clauses. So that means that there will be an automatic adjustment. And I expect that for that 50%, we will be able to recover the additional fuel cost in full. How much we will be able to recover in the short-term market remains to be seen because in the end, the short-term market is typically an all-in rate. As we are starting to move into peak season and as demand is holding up fairly well, I think our chance is to recover the full amount of that cost certainly over the next 2 quarters is pretty good. What happens after that is difficult to judge. I think in terms of the revenue recognition, then I will probably hand it over Mark to you or one of the team from IR, yes.

Yes. Thank you, Rolf, very briefly on the revenue recognition. I think it's pretty clear after the IFRS 15 standard, it was important that we fully implement that and change our view how we look at that. So we are coming from -- we went to a shipment-based revenue recognition that was necessary or systems were changed to that one. and we were going from an end of voyage to start of shipment view, and that is the change we have seen and fully executed end of the year. So what you are seeing now end of quarter has that new structure. And yes, there might be a bit of adoption we have seen in Q1, but from now on, it will be a stable structure according to the IFRS 15 revenue recognition standard.

And I apologize for taking too much time. But if I can just follow up on the escort capacity. It's just quite unclear to me how does that work? Because if everyone, let's say, wants to go back with escort capacity, and there's no capacity, who is going to, in a way to, take that capacity? So are you confident that you as a Gemini alliance overall, you have been a first mover before Iran and therefore, you have, let's say, secured that capacity ahead of the others? Or is this something yet to be, let's say, negotiated, so it's all up in air?

I think it's fair to say that right now, there's not a lot of clarity on how that will exactly work. There's lots of discussion going on. But right now, we do not have a lot of visibility on that.

Then the next question comes from Danielle Ward from JPMorgan.

I just have one question on the ZIM transaction. You have the USD 2.5 billion of bridge funding. I was wondering if you have any plans to come to the market to refinance that at any point in the near future or down the line?

Mark, it would best if you guys take that.

No. Thank you, Danielle. Nothing planned to come to the market on that one, not needed.

[Operator Instructions] The next question comes -- is a follow-up question from Lars Heindorff from Nordea.

A more general question about the market. I think it's obvious to both there's a lot of capacity coming in next year and also in '28. So just wanted to hear your take on, I mean, what will be the offsetting factors to all that supplier, which looks like it will be a structural supply for at least for a couple of years, will it be disciplined? Will it be slow steaming? Will it be scrapping? Or will it be a combination of those 3 and maybe, I don't know which 1 is most important? That's the first part. And another second is on the capacity plans for the rest of the year. As far as I can see capacity growth here in the first quarter with the nominal capacity that you have at hand was almost flat, up 1%. What do you expect here in the rest of the year and particularly and maybe in light of your huge utilization and any sort of considerations about conducting further slow steaming, if the prices will stay up at these levels here?

Yes. Maybe the second one first. I think you should expect that our capacity remains fairly flat throughout 2026. In your second question, what will drive supply and demand. Yes, you are right. I mean the order book is quite significant. I think the biggest unknown, which has actually been -- which has developed very favorably at least for the industry over the last couple of years is the growth on the dominant legs because that's what drives the capacity need, not the overall market growth. And that's what I pointed out earlier that in '24 and '25, we saw 10% and 8% on that, which was even if there was a lot of additional supply coming in, that actually meant that there was not a lot of oversupply created. I expect that this year, the growth of the dominant legs will be higher then the additional supply that comes into the market. So then we need to see what does that mean also for next year, but I think that's a big mitigating factor. And then your other point, I mean scrapping will go up. We can all debate about how quickly that will happen and how much of that will go up, but scrapping will definitely go up. And if oil prices stay the way they are today, then also slow steaming will play a role. So I think you have to look at those 3 factors, the growth on the dominant legs, which people typically don't look at because we only look at overall market growth, and then we see this discrepancy. The second one is scrapping where it will always depend on our things in the market, but scrapping will go up. That's for sure. And then your third point on slow steaming. I mean, if the fuel price remains at the levels where it is today for a longer period of time, then the economics between sailing faster or slower change. And that means that one should then expect that the average speed at which the vessels sail will go still somewhat down.

And just a follow-up on the slow steaming. How much low can you go? And what kind of capacity will that tie up if you slow the speed by, let's say, 1 or 2 knots?

I think you are right. I think that's probably the margin that you have. It's 1 or 2 knots. And I think that would -- typically, if you would have an Asia Europe loop of, say, 12 ships, then you would typically have to add 1 ship. And in some other cases, you will not have to add something because you just further streamline the rotation, but that's a little bit the way to look at it.

And we have one more follow-up question from Cristian Nedelcu from UBS.

I have a few if you allow me. How should we think about the second quarter profitability and the moving parts there? I think usually seasonality-wise the volumes are higher quarter-on-quarter. Could you comment on other moving parts? And do we have a clear framework that says that Q2 will have positive EBIT? The second one, just coming back on the prior question, the slow steaming. Just could you give us a rough indication. If we do slow down from 16 knots, we go down by 1 knot, does the reduction of the fuel consumption, is that proportional to that? Or is it asymmetric so that the fuel consumption goes down by more or by less? And the last one on CapEx, just if you think that your -- if you can talk a bit more about the '26 and '27 CapEx plans and maybe also around the flexibility and your ability to adjust that CapEx envelope? What is the range there in the context that if we got a very difficult market next year, what is the sort of minimum CapEx that you could see?

Okay. Well, maybe -- I mean, as you know, we don't provide outlook in terms of profitability by quarter. I think when you look at the factors that will influence the second quarter, then you are right, one of them will be volume that quarter-on-quarter, I would expect to be better. Of course, we see also rates being better, but there, we still have to see what does the bunker costs and additional costs that we face in other categories do against that, and how much of that do we actually then fully recover. In terms of slow steaming, if you go from 16 to 15 knots, then you do, I mean, fuel consumption curve is a bit like in your car. The faster you drive, the more fuel you consume, and that's not a linear curve. I would not know exactly what the build delta is between 16 and 15 knots, or 15 and 4 knots, but it is certainly more than the delta between -- with the speed. And I think in terms of CapEx, probably, Mark, you guys are better and I think it's probably better for you guys to comment on that, but we definitely have a fair bit of flexibility on that. front. Having said that, our liquidity is also still pretty strong, but Mark, you may want to add a few words to that.

I think key question from the side was how far we could go down in a very serious situation. That is what I understood. And for sure, if you know what our depreciation is and times when it's needed, there is, for sure, a potential to reduce even further, if it's really needed, that is not planned. So we are not talking about what we are planning for because we are not seeing that situation coming but overall, you have to think along these lines to keep our ships on the needed level and being able to perform our volume plans. That's more or less what it is.

And the next question comes from Chloe Fu from Citi.

I have 2 questions. The first one is if you can share some color on the Transpacific contract negotiation and also the latest booking trends in -- where are you seeing weaknesses or trends? And my second question is around the ZIM deal. Obviously, there has been some voices opposing the deal how likely do you think the deal will pass regulatory approvals given the political uncertainties? And if it doesn't, will you consider other ways to acquire capacity to maintain your position as a top 5 operator as we see that you're a bit short of order books if the deal does not go through?

Yes, let me try and take 2 questions. One, I think on the TP contract season, if you take look at the TP contract rates, if you exclude the fuel component, they were a bit down compared to previous year. If we look at market and demand at the moment is quite strong. So I mean, that's why I said earlier, I'm fairly optimistic about the peak season. I think we're going to see some of that. As far as ZIM is concerned, I mean, we are still optimistic and expect the deal to close in the fourth quarter. I think when you just look at the data and look at effect and look at the solution that we've put on the table, then that is, in principle, a very good solution for all parties. But of course, especially in times as we have them today, we know that there are also emotional and political elements that can play a role. Those are much more difficult to predict. But right now, we have no indication other than what we announced earlier that we expect to close in the fourth quarter.

And we do have one more follow-up question from Marco Limite from Barclays.

I wanted to ask to what extent you think that the alliances have, let's say, improved versus a few years ago when it comes to managing capacity. So do you think that alliances are now more relevant than before in planning capacity in planning, capacity management and so on?

No, I don't see that. I think what we see when you look at the large East-West trades is that -- there are a number of alliances that work together, but you see also more independent services. So I would say that if you would compare it to a couple of years ago, then a somewhat larger percentage was controlled by the alliances. They've always had the possibility to blank sailings or to adjust services, which is also what they have today. And the only thing that's really changed is that we see a little bit more independence or so -- or stand-alone services. So I think if anything, that ability is probably a little bit less today than it was a couple of years back.

Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Rolf Habben Jansen for any closing remarks.

Not much to add. Thank you very much for your questions. We really appreciate it. And hopefully, that was informative for you as well and hope to hear and see you again soon. Thank you very much.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.