TUI AG (TUI1) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the TUI AG Conference Call COVID-19 Update and FY '20 H1 Results. [Operator Instructions] Let me now turn the floor over to your host, Friedrich Joussen and Birgit Conix.

So thank you very much. Good morning, everybody. I hope you are well and healthy. This is important in these times. Thank you very much for joining in the Q1 -- Q2 results call, and I'm not a 100% sure that I understand who turns the pages. Are we turning the pages? Okay. Good. So we will be actually now turning to Page #4, please. Undoubtedly, COVID-19 is the greatest crisis for tourism and TUI which has ever happened. And we were just in Q1 in full steam ahead. As you know, we -- in January was the best booking month in the year, up 14%, customers; 17% revenues for summer bookings. And then suddenly, mid-end March, stop, no revenue. I mean, this is unprecedented. And I think no revenue until today, it's an interesting experience also for myself to run a company without revenue. We managed to secure liquidity very fast, you will see that in the slide, and reduce fixed cost. Also, we are thinking about the time after the crisis. We will be a company with more debt and also for -- significantly more debt and also a company with a little bit of uncertainty, we believe, on next year. The revenue might be -- or the demand might be on the levels of '19, but it might also not be on the levels, depending on the vaccine, depending on the perception, whatnot. We believe in 2022, we will have full demand and strong growth. We see traffic on our web pages, we see bookings, and I'll come to that in a minute, are very slow. So demand is there, but the crisis, the pandemic is not overcome. Now that's the reason why we said we need to be significantly changing our company. More lean, more agile, less capital, less investment and much more digital. We said we want to become a digital platform company anyway. And therefore, we have launched a program to save 30% of overheads. That will affect 8,000 roles. We launched the program in the company. We announced it this morning, and it's now progressing. And it will touch all parts of the business, but mainly markets and airlines as 80% of our overheads are actually in this area. Now, people continue to have a passion for holidays, and we are a very trusted brand with a long history. Therefore, there's no reason to assume that the market will be not there, that we will not have a prosperous market environment. I mean, that's very important because, without a market, everything would be very gloomy. Now this -- the market, I think, it's more a matter of time until we come back. Definitely, safety of our customers, employees are our main priorities. So we are very open to prepare for a responsible restart. We want to restart. We can see the demand, but we only can start and want to start when it is safe. Now turning to Page #5. What has happened? And as I said, when you turn to the -- when you watch the dark blue boxes at the bottom, we had an exceptional start in the summer, the strongest January in company history. So after the Thomas Cook collapse as well, it seemed to be an enormous record year. But then the COVID incident happened, actually not the COVID itself, that is something which started in China last quarter, but all borders closed, travel warning and all -- into all countries, no business within a couple of days. Liquidity squeeze by cost running, we could save money, and we will see that and also prepayments flowing out of the system. The positive working capital actually going back to customers. At least partly, we find solutions in order to mitigate, but at least partly. That is actually very special in our industry. So we reduced costs, and we acquired the liquidity and that is actually the KfW loan, you will see that in a minute, we talked about it. And the loan facility in the frame of our current RCF, it's actually a bridge loan of EUR 1.8 billion which is due in 2022. Birgit will talk about it in a minute. And now what we are doing is actually we are preparing for an integrated startup of our summer holidays. We have travel warnings largely in the countries until mid of June. There are strong indications that at least partly the destinations will open. And also, that actually source markets will be sending -- allowing us to send customers. We believe it could be in the order of magnitude late June and early July that we actually can resume business partially into areas which are safe and where we tested. We did the first test of our hotels, right now test runs in Majorca, they were very successful and travel and leisure travel can be safe. The second thing, as I said, is our restructuring, digitalization, realignment, restructuring program, which we have launched, which should give us a cost base advantage of 30% overhead. This is in the order of magnitude EUR 300 million, EUR 400 million yearly benefit, and that is something which should be achievable. We have identified the ballparks of our program, I'll come to that in a minute. Now could we have known better? That's the question. Why is so hectic? Why is actually -- we have the suspension of all travel, and suddenly, we need money and the RCF is partly not released, and then we go to KfW when we have all this turmoil, and then we need to be so under time pressure, could have been -- could we have seen it earlier. And I think the time line here shows, it would have been difficult to digest. I mean the China COVID was end of December, we had 13% up in booking. Then we had the financial year '20 Q1 results, 11th of February, we were up 14%. Again, revenue was 17% because prices were up 3%. So there's not an indication. Italy, that is actually North of Italy, we saw a little bit, 21st of Feb, but it's still 12% up and still 37,000 customers per day net growth. Even a week later, Tenerife closing this -- with the hotel you remember that still 28,000 net growth. By the way, this even is seasonality because we have that -- the first week in February is stronger than the second is stronger than the third. So we saw [ stronger ] stuff. And then we see the more or less the 13th to the 16th, that actually it all collapsed, and that's actually the ports closed. The borders closed within 3 days. That was the Friday and Saturday and Sunday, we came together as a team and actually said, "Okay, that's it. Let's see to it how we secure liquidity." And you see that this is actually a very, very immediate situation. And I think also unprecedented in the timing of the events. Now how do we see the situation and the suspensions. And on the next slide, I have put the stuff on. Largely until mid-June, we see those suspensions. Now at least in Germany, I can say, and I'm talking to the officials here a lot, there's an enormous pressure of opening borders. I mean, people don't accept that Europe is closed. And you have that in the neighboring countries, to France and to Switzerland and to Austria, but also to Denmark up in the north, there was even a legal case, which was won by customers, who said, "I want to travel to Denmark." And the court said you cannot suspend it as it's not reasonable. It needs to be adequate and reasonable. And we, I think, can prove now that we have actually prepared our travels in a way that it is safe. Now we also don't start from 0. For the summer season '20, we still have a booking level of 35%. Normal would be 59%. Now 59% is much better than 35%, but 35% is much better than nothing. So if we can reinvigorate the travel, and if we said, for example, just Majorca was possible, we would actually start rebooking customers from other places to Majorca, fill our planes and fly. As I said, we have done good testing and certification of our hotels in Majorca. So for example, that shouldn't be a problem. The same holds true for Greece, for Cyprus, for Croatia, for Bulgaria, for the Canaries. I mean, all of them have one thing in common, they don't have COVID infections. So that's not a -- it's not a good reason to assume that travel to there shouldn't be possible or shouldn't be safe. For winter, we opened the first and winter was actually in the U.K., we have now 8% up in volume and the average sales price on last year's level. So also last year was good in terms of the winter bookings. So no reason to assume it will be weak. And summer is the most promising thing. I mean, what's interesting and promising, I think, we have double -- more than double the volume we would expect. So more than double the volume of last year for this year. So it's small volumes, it's a couple of hundred thousands, but it shows that there will be catch-up effect. And at least from now, we cannot see that actually volumes will not be there. Prices are a little bit weaker than this year, but that's, again, very early days, and it's also related to partly discounts we give in order for early bookings in order to fill next year, but I would say, a very healthy situation for the future. And that indicates to me as soon as travel will be possible, customers will want to go. That said, we need to be making sure that actually we can provide safe and nonrisk travel that will be top of mind of our customers as well, and I come to that in a moment, how we do it, what we do. But before that, I hand over for a session of Birgit to actually take you through the financial impact as well as what we did in terms of cost and also the KfW facility.

Thank you, Fritz, and a warm welcome also from my side, and I hope you are all healthy and safe. So on the first slide that I'm going to present on the COVID-19 financial impact. As you know, our business is seasonal with a corresponding very seasonal liquidity stream. And COVID-19 led to an immediate cease of global travel operations which led to an immediate liquidity need due to the customer refunds and the coverage of fixed costs, as you all well know. And as you can see from this illustrative graph on the left-hand side, at the end of March, we usually have quite high customer deposits on our balance sheet with a further steep increase during Q3. And it is -- and you know that we call as a typical seasonal tourism swing. And the suspension of all operations as of March 16 led to the fact that the positive seasonal swing did not materialize and moreover customers could request cash refunds for canceled holidays. So at the end of March, we had EUR 3.4 billion of customer deposits on our balance sheet and this situation led to an immediate liquidity need due to the typical working capital pattern as well as a fixed cost coverage against a standstill on our revenue. And to address the liquidity needs due to this working capital pattern, we took immediate action and secured the KfW bridge loan in a record time, and we also initiated other mitigating actions. Apart from, of course, the drastic cost reductions, we -- there were other mitigating actions like incentivizing customers to rebook to a later date. We opened for summer season 2021 much earlier than we usually do. And we worked with various European governments on a voucher refund mechanism to save liquidity in this crisis situation. And the current trend is that between 50% and 40% of customers are seeking a voucher credit or decide for a rebooking, which we consider a success and demonstrate that people are willing to go on travel with TUI as a trusted brand. Based on the current scenario, we estimate customer refunds per month to be estimated at a low to mid-single-digit EUR 100 million. And when travel resumes and that is what we tried to illustratively show because we do not have a date yet, we expect to see a recovery of working capital, and that is represented by these light blue dotted lines and their value, and this is a data point, obviously, that we do not have at the moment. So then moving to the next slide, please. Thank you. So during the suspension of all operations, we undertook significant pricing measured to limit cash outflows through an extreme reduction of costs and expenditures to an absolute minimum. From capital expenditures to marketing, salary costs, accommodation, rental and lease costs, all expenditures have been cut, of course, reflecting our strict cost discipline required during these very exceptional circumstances. So this has been a top priority for the business as a whole, so everybody was focused on that. And the overall fixed monthly cash cost base has been substantially reduced by around 70% on how we calculate fixed cost. And let me explain that, so advanced contracting to secure committed capacity for the seasons ahead is the base of our business, and thus, we typically see a high level of operational leverage. And in a normal year, circa 63% of our cash costs across the business are deemed to be fixed. So this translates in a normal year into a cash outflow in a range between EUR 700 million to EUR 1.4 billion per month. And of course, the latter during the peak season. We reduced this range substantially during the COVID-19 crisis, and we managed to reduce costs to an absolute minimum and expect our cash fixed cost base to be reduced to a minimum range of between EUR 250 million to EUR 300 million per month as long as our operations are suspended. Please note that this number excludes cost of payment obligations below EBIT for which an average run rate of circa EUR 50 million per month can be assumed. The largest cost base for the group is accommodation where we invoked the force majeure clause on hotel contracts. Incremental aircraft leases have been renegotiated with our lessors as has our rental lease agreements payments with landlords in our hotels and resorts business. Cruise ships have been laid off, saving around 60% of monthly cost, and we took the difficult but necessary decision to reduce staff costs worldwide from April onwards. So a short-time work, take a furlough unpaid leave or other staff cost-saving measures were applied across the group, whereas our business was and, of course, still is at a general pause. We have participated in government job retention schemes where available. And these substantial measures across the business have helped to deliver a 50% cost saving in salary costs in May with 90% of our employees participating in the above measures. So let's go to the next slide. TUI was the first company to, and Fritz already said it, to successfully obtain a KfW bridge loan as we applied immediately after the announcement of the program by the German state. And we received the approval for EUR 1.8 billion KfW bridge loan facility just 10 days post application. And we were able to apply with this level of speed as we had our financial scenarios proactively ready and could present a comprehensive liquidity picture during the weekend of 14th and 15th of March, which now seems a long time ago. We presented an exhaustive scenario analysis of the situation and the financial requirements, including a solid repayment plan under the agreed scenario. During the whole process, we were supported by our existing banking consortium, and I would like to thank all parties involved for this extraordinary and joint achievement. The EUR 1.8 billion support is an extension to the existing EUR 1.75 billion revolving credit facility, and you can see the details of both facilities on the right-hand side here of the slide. As already announced in our ad-hoc statements, under the terms of the loan the annual dividend will be suspended during the course of this credit line. And both covenants' net leverage ratio and interest cover relating to the existing and also increased RCF will be suspended for the next 18 months. So covenant testing will resume in September 2021. And finally, at this point in time, we have cash and available facilities of EUR 2.1 billion, and this is a reduction of EUR 1 billion since our last announcement which we did on the 27th of March as we needed to cover cash out for fixed costs, a certain amount of customer refunds and repayments as scheduled for financial maturities in the amount of EUR 450 million over the [ long term ]. So then moving to the next slide. As I mentioned earlier, we worked on liquidity enhancing measures, such as the earlier discussed fixed cost reduction and also the mix of voucher refund credit mechanism that we easily worked on other levers, and that's what you see here. So we immediately suspended investments and reduced our CapEx cash out. And we already discussed earlier that TUI would be more rigorous with CapEx going forward, and we are taking this very serious. You know that also from all of our last conversations. So we will reduce our investment with 50% to a level of maximum EUR 450 million this year from our earlier guidance range of EUR 750 million to EUR 900 million prior to the Hapag-Lloyd transaction. We expect some tax relief due to acceleration of refunds and deferral of payments and here also the partners are actually very supporting. The Hapag-Lloyd Cruises transaction will lead to a cash inflow of approximately EUR 600 million, as you know, and we will reduce the capital intensity of the business, including the sale and leaseback of assets. When the business restarts, we will see a significant working capital inflow, and that is very important to note throughout this cycle. And all these measures will contribute to the improvement of our financial profile going forward and with cash and available facilities as well as the liquidity enhancing measures, TUI has sufficient funds to cover the coming months. But of course, we remain proactive. As you have seen from the KfW bridge loan application and our fastest wins, we are equally proactive at this very moment. And we are currently evaluating a variety of options with the aim to best position TUI's balance sheet and liquidity through an extended period of disruption and post crisis. One thing is sure. We are strongly focused on rebuilding our solid balance sheet profile post crisis. And as I also said earlier, a prominent driver is the restart of our operations with a recovery in bookings, resulting in an immediate and substantial working capital inflow. So let me with this hand back over to Fritz now.

Birgit, thank you very much. You see we have secured liquidity. We have a solid situation in terms of cost, things are in control. We are managing also liquidity outflow to customers on a daily basis. Now is the question what do we do next, right? And the one thing we are doing is, of course, we are trying to find ways in order to allow revenue in, again, because on a dominant basis, loans and bridge loans and debt doesn't replace revenues. And therefore, this is the utmost important. And we have, as I said, have good booking status. Still we have good forward bookings in next season. The question is when can we start. And here, we have worked on a 10-point plan together with actually all partners who have similar low COVID-19 infection levels or even lower, and I talk about Canaries, Balearics, Greece, Cyprus, Croatia and others. I think travel to these countries would be possible if allowed. I think demand would be high. I think we have a program in place, I'll come to that on the next page, which actually allows for safe travels. It's important to our customers. Equally, it's important for customers to travel. In the public, I see pressure building because there's not a good reason to close borders. And as I said, even the first court has ruled that closing borders is not appropriate. So -- and the destination, also, is very important, customers wanted destinations, wanted destinations, in many cases, tourism is the most important economic sector. In Greece, for example, 20% of GDP or 18% of GDP, of course, in summer, double because it's only half year season. So I'm not missing that summer is a huge issue for Europe as well. And I hear and I see that actually that is taking ground. And therefore, I'm quite hopeful that in June or beginning of July, we will be able to resume business. And we are prepared. That's what we say. As you see on the next page, the level of detail we have, this is actually the -- at holiday 2020, secure, safe travel during COVID-19. It is actually touching all touchpoints, addressing all touchpoints of our customer: flight and destination, hotels, cruises. It's exactly what we do. And we are even designing holidays for safe travel. For example, we have put our ships to -- cruise ships to actually northern Germany as soon as possible. We're offering 3 to 5 days cruises. So the North Sea is anyway very popular. There's 1,000 guests, 1,000 guests are the limit, which the German government has anyway agreed that 1,000 in a certain destination is possible. So we are even preparing designed holidays in order to be attractive. So it's not in our hand to open the holidays, but it is in our hand to be prepared. And together with our partners and destinations, we have now the program, and we are now negotiating thoroughly. Now this is actually #1 priority because it resolves a lot of problems. It resolves the problem of revenue, particularly, it also resolves the problem of liquidity because as soon as we open our business again, there will be liquidity inflow for positive working capital. By the way, even having closed summer and only for winter and next year summer, we have EUR 50 million inflows already today per month. So it's something as soon as the markets open, liquidity, I would assume, is not the issue. Now anyway, what will remain an issue is debt because we will have debt and the first thing that remains to be seen how much of the credit facilities we will be using. But debt will be an issue. And it needs to be repaid, that is very clear. And therefore, we have now put this three-pronged plan for the future of TUI. The first one is actually reducing costs. And how we do that is we accelerate the transformation project we have been planning anyway. We are more ruthless in merging tasks and organizations across the group and consolidate global IT structures. So it's not just taking off people and assuming it will be working. It is the challenge of reducing people and increasing quality. And one of the things, just to give you an illustrative example, we have 25 call centers in the world with EUR 100 million of cost. So it's not a good reason to assume that this is optimal. Quite to the contrary, if we wanted to outsource it to a third party, we could save tens of millions per year immediately. But of course, it's close to the customer, and we need to be careful. But it shows what kind of potentials are still untapped. And I have launched the program together with the colleagues this morning, 30% cost reduction in the order of magnitude EUR 300 million to EUR 400 million yearly cost benefits will affect 8,000 people. So this is, I would say, bread and butter. I mean, this is nothing to discuss about, it's just execute. I mean, it's not a risk that it will not happen or whatever. I mean this is relatively easy. So let me get into the middle column. In the middle column, we have historically or historically in the last phase of transformation, became product-centric. We invested more into cruise ships, into aircraft, into renewal of aircraft, into hotels. This is over. This is over. And for 2 reasons, actually for 3 reasons, if you like. The first one is that we have debt and the money is not easily available. The second is we have an oversupply, and we will have an oversupply foreseeable in the next year. And when you have oversupply of assets, investment into assets is not very good. So if you have undersupply, then you have good yields. If you have oversupply, you have better trade. So we will be more asset light, and we will be using many means, off balance sheet structures, selling and leasing back or managing back hotel assets looking at the structure of our airline size as well as ownership structures in terms of aviation. And also we will actually look at the clear fixing and divestment of nonprofitable businesses. So this is a little bit more. I mean, in the past, it could be we have been maybe not as strict as we could have been, but I'll tell you, now it will be either you fix it immediately or it will be a difficult time. So this is a little bit more, how do you say, it is more a strategic move. I want to finish -- I want to say 1 thing. This doesn't mean we will not content -- be content-centric, right? We just will not do bricks and mortars, right? So content-centric means control of product, control of brand, control of distribution, control of customers. This will stick. Differentiation, this will stick. What will not stick is actually investment into bricks because if you have oversupply in bricks, earning money from bricks will be not that easy. We stay asset-light because selectively, we might be wanting to own bricks still. Cape Verde is a typical example. When you have 100% of 5-Star hotels or what, I mean, then it's difficult not to own the bricks. But other than that, we will be seeing that we actually get assets that are more asset-light, much more asset-light than we are today. And I could do the same thing with ships. We talked about Marella anyway. We showed what we did with Hapag-Lloyd Cruises, a deal which we'll be closing in June, by the way. So I mean, it is what we will do. The third reason -- the first reason was debt. The second reason was actually overcapacity because of uncertain demand. The third reason is on the right side, when you want to become a digital platform company, that's what we said, articulated before, assets don't fit. And so as we accelerate our journey now to become more digital. We actually -- will actually -- we can directly, we can invest less. What does it mean more digital and online strategy? People have been using online purchase means in the crisis when they had to stay home. Will they shift back? Maybe not. People are okay with using online services in destinations. We see that we have actually accelerated our online strategy there. So all touchpoints across the value chain. And the last thing, which is actually the first bullet on this right column, is that we increase accommodation-only, flight-only and dynamic packaging. When you have an oversupply, this kind of pre-available goods, which are also shorter booking cycles, will be important. We have good experience in our GDN. So we have very good experience in our overland business in Germany, where we have 1 million customers. So we will actually accelerate our economy. Flight only, we have also good experience with third-party flying, offering our flights to third-party customers. We have good experience as well. We will have another P&L fostering it, and we will actually also think about the future of package, and this future of package needs to be more flexible, more dynamic, more customer friendly, and all of that is the digital backbone of our systems, as we have announced them anyway. The difference is we execute faster and more euro for legacy IT structure. And that is actually 100% focused to the future, 0 focus for legacy. That is the difference. With that said, I would actually come through the half year results and you see that on the Page, 5 months, we're still okay, not only okay, it was good, plus 6% revenue, plus 21% EBIT. And then more or less, everything stopped in March, and that's what you see. And maybe when we go to the bridge next slide, you see a lot of moving parts back and forth. The only big thing, which I want to highlight are the minus EUR 470 million on the right side. And the blue box explains what it is. The minus EUR 470 million is mainly loss of contribution, EUR 242 million. This is actually the missing business. There is no business, no contribution, okay? You should be seeing this repeating over the next months. A little bit less because we have been saving costs. At the same time, volumes are a little bit bigger. So we always said, our costs are around about of EUR 250 million or whatever, and this is the EUR 250 million, right? So that is the missing contribution. This is actually what will be repeating. Then you see a second -- so but why do we not see the EUR 470 million for the next month is, because you see, for example, hedge ineffectiveness. That is actually we bought, of course, for the travel we sold, we bought fuel future. So hedges for our fuel for $60 per barrel. And now it's $30 and of course this needs to be accounted for, and that's what you see here. The EUR 146 million are actually taking care of the ineffective hedges until June. And therefore, it will not repeat. And also it might even reverse a little bit if the oil price comes up or whatever, but the big step, the big -- let's say, the big step is done here. And that's part of the EUR 470 million. And then you see smaller numbers. Repatriation costs, of course, will not repeat. The celebration impairment, so we drydocked the ship -- I would say, we took the ship out of the water because there will not be any business anymore, EUR 19 million. But this, of course, book, then you have the MAX costs are very minor because they don't fly and will not repeat because particularly when they don't fly, there will be 0. So therefore, more or less what you can say, it's EUR 240 million, will repeat in some form or shape, EUR 146 million will not repeat in some form or shape. And that's a pretty good indication, I think, for the future months if you don't take into account the payouts to customers. Payouts to customers are difficult to judge. In some of the countries, we have the vouchers, in some of the countries, we don't have the vouchers. Even if you don't have the vouchers, in some countries, you have state guarantees. In some countries, you don't have state guarantees. This makes a huge difference. Also what makes a big difference is if the ministry say there will be no summer vacation or if they say there will be summer vacation because if you can redeem the voucher soon, everybody accepts the voucher soon. So Birgit talked about it, it will be something low to mid-hundreds millions. But as we said, it's just working capital. So as soon as the business comes back and even if it comes back -- something comes back, now as it didn't come -- or it doesn't come back for summer at all, we still have EUR 50 million inflows. So you can imagine what happens if the business for the summer at some form or shape will be resuming. Now that said, we have a couple of more slides. This is actually one more slide. And I thought we had also another waterfall, but this is more or less what I explained, the EUR 470 million. Now you see a little bit of segmental reports in all fairness. I will not review -- it's meaningless. I mean, if you have -- at a time like this, who takes care of what or who cares about these numbers. The numbers are actually distorted as you can see everywhere because you had months of no operation. And that actually is not very meaningful. If you have questions, we are very willing to answer them in a later stage of the conversation. With that, Birgit, I think you would like to -- you will take the people through the P&L, right?

Yes. So let's then go through the income statement. As here I did -- during the first quarter as well, I will focus on the year-on-year comparison with pro forma IAS 17 figures for the first half is because the IFRS 16 numbers for comparability purposes. So here, you can see, obviously, the turnover year-on-year was flat, reflecting the lost revenue from the travel suspension in March and the underlying EBIT decreased by EUR 527 million, mainly as a result of lost contribution and costs arising from the COVID-19 travel suspension, and Fritz just talked about that. The adjustments are significantly better year-on-year as we booked EUR 91 million gain on disposal from the sale of our German specialist businesses, Berge & Meer and Boomerang, which closed in October 2019. As a result of the positive adjustments, reported EBIT is down by EUR 432 million compared to last year. And group results after minorities are down by EUR 505 million, translating to an underlying EPS of minus EUR 1.31. Referring to the reported figures under IFRS 16 and as flagged during our IFRS 16 call in December last year, both depreciation and interest charges are higher as a result of IFRS 16. Okay. So then we move to the cash flow slide. And as you know, before the COVID-19 crisis, we launched a dedicated program on cash flow with a target to generate positive free cash flows for dividends, and we were very well on the way to deliver. And you can still see the impact in the first half of 2020. Unfortunately, now due to COVID-19, the situation will be different, but at least you will see that we were very well underway. Managing cash flow and liquidity is our #1 priority, and you will equally see from this chart, how quickly we actively address the cash items in our limit. So group's underlying EBITDA reflects the impact from the COVID-19 travel suspension, and we more than offset the decline in operating cash flow by a reduction in our net investments as we cut all major projects during the current period of travel suspension. This leads to a free cash flow of minus EUR 1.4 billion, slightly ahead of prior year. Please note that the disposal proceeds from the sale of the German specialist businesses during Q1 are equally included. Free cash flow after dividends ended at minus EUR 1.7 billion, up EUR 170 million versus previous year. And this includes dividend payments for '19 as the payout was mid-February before the COVID-19 crisis. Please note that the cash flow from financing has increased because we have drawn down from our RCF to help fund our seasonal working capital requirements. As you can see from the IFRS 16 column of the cash flow statement, the higher operating cash flow is offset by a lower cash flow from financing due to increased payments for finance lease liabilities. So the total cash flow, as you can see here, is the same under IFRS 16 and pro forma IAS 17. And one final comment here again. This year's net CapEx and investments will be reduced to circa EUR 440 million, a reduction of at least 50% compared to previous guidance. Asset and debt financing is expected to amount to around EUR 400 million. Please note that these numbers are clearly the effects from the Hapag-Lloyd Cruises transaction. Then moving to the next slide, the movement in net debt. So the first half closing net debt based on pro forma IAS 17 numbers increased to around EUR 2.65 billion, in line with the usual seasonal swing and driven by the discussed development of free cash flow in the first quarter. Referring to the last line of the table, you can see, compared to the previous year that our seasonal swing in net debt has improved by EUR 348 million, which is predominantly due to Hapag-Lloyd Cruises now being reported as a disposal group. Regarding the other elements of the movement in net debt of prior company cash flow, asset financing increased according to plan with roughly 2/3 related to committed aircraft re-leasing of new Dreamliners and the remainder related to cruise ship financing of around EUR 120 million. As expected and due to the first-time adoption of IFRS 16 and associated lease liabilities, net debt is higher based on reported IFRS 16 figures. And then lastly, on the next slide, I'd like to remind you of our withdrawn guidance. And on the 15th of March, we withdrew the group's full year '20 financial guidance based on the current unpredictable situation. And as you will all understand, we also refrain from issuing a new guidance as uncertainties continue to exist. And as already mentioned, we need to raise dividend payments for the term of the KfW credit line. So with that, I would like to hand over to Fritz again.

Thank you, Birgit. That’s easy -- because now the slide is actually the first slide again, right? In summary, big crisis, short-term liquidity management, reducing fixed cost. It's not too difficult. That's what we did. And we have now decent liquidity for some time. And we will relaunch the business hopefully soon. Now as soon as the business will be relaunched, we will actually go from liquidity to P&L and manage P&L. And that means profitability up, investments down, costs down, agility up, quality up, so cost down and quality up. This will be the digitalization project, 30% cost down [ at thousand support ] and focused. And as I said, I mean, we had a very strong January, the strongest in company history. And the reason for that because customers want to go on vacation. There's no reason to assume that will change. We had a good discussion on business travel. Business travel might be different. People might be used to online working at home office or what and will not travel, but all indications I see that people want to go on vacation and just viewing a movie of a destination is not good enough. So the market will be there. Traffic on the website is good. Future bookings are good. So as soon as we are allowed to do business, we will have good business. But TUI will become leaner, less capital-intense and more digital. And I think that's good. At every crisis, there's a chance. Thank you very much. We are open for your question.

[Operator Instructions] The first question comes from Jamie Rollo from Morgan Stanley.

I hope everyone is well. Three questions, please. And maybe I'll ask them separately. First, on the liquidity, it looks quite tight, that EUR 2 billion, given you seem to be hinting at maybe EUR 1 billion customer deposit outflow, and there could be, I guess, another EUR 1 billion on the trade payables plus the cash burn each month. So I'm just wondering, you seem to be relying on the markets reopening. So the question is, what happens if markets don't reopen and your operations remain suspended for a bit longer? How many months liquidity do you think you have, please?

Yes. I can already sort of reply to that, Jamie. Thanks for your question. And I understand your question, of course, because nobody knows when travel will resume. But at this point in time, as we said, I mean, customers are willing to travel, but it's uncertain as to when that happens. What we can tell you is that as we demonstrated also, and it started during the weekend when the COVID-19 crisis have started is that we are on top of things, and we were the first to go to KfW, we had our scenario planning ready. We could never have gone so quickly if we didn't have our scenario planning ready before that because that normally takes a while. So then we have also the successful execution, of course, of requesting the KfW bridge loan. And then TUI is obviously very important also to Germany. So I would like to point that out as well. So this time, and I'll go quickly through the levers of liquidity. But this time, again, we are proactive. We have our scenarios ready. Only when the travel resumes, that is a big unknown, of course. But we do have options, alternatives, and what I can tell you and that is what you have done because I looked at your analysis, but we have a fixed cost run rate, which is about EUR 250 million to EUR 300 million a month. Then you can think of customer refunds in the same order of magnitude as what I just mentioned on the fixed cost run rate. Then we also expect the Hapag-Lloyd positive and not to forget during the month of -- I mean, in the next month. And then the bookings for summer '21, we see them already as really open, and then we think of other items like sale and leaseback, just to think of that and other items, as we mentioned. So what I can say is that we are proactive, and we do everything that is in our remit, and we can currently announce a EUR 2.1 billion liquidity, which is probably more than you would have imagined when we talked 2 months ago. So with that, maybe if you want...

Yes. I mean Jamie, it's good. I would have said -- you are the first and you have 3 questions. And I think it's an important question. I mean liquidity is at top of mind and this is not only CFO that taught me, every day, me personally, looking what we pay. In the first month, you saw a liquidity drain which is much bigger with -- so the past which has gone because we had to solve some financial instruments. Operationally, it was much less and the savings only kicked in right now. So as Birgit said, let's assume for a moment, EUR 250 million cash trend from fixed cost, so my personal view is, we will be on top of things. We have now a 50% repay rate. And my view is as soon as we see a little bit light at the end of tunnel, it will be not a problem because -- and also cash will be flowing in. And as Birgit said, the EUR 650 million from Hapag-Lloyd are to come in June. That doesn't say liquidity will be lasting and it is obvious, there we also look at parallel, of course, planned for the worst, hope for the best. We are looking at our options. We will see the options. The options will be more probable than in the first round. That's also clear. Regarding the first round, the banks could have gone away, the KfW was not there. So I'm positively in a positive mood. But of course, it is day-to-day management and liquidity is #1, #2 and #3 priority.

Okay. And then, just on the second question, which you touched on on other options to increase liquidity, could you -- on the sale and leaseback idea, could you please quantify the value of the 100% owned assets the company has that are not encumbered by debt already? So what is the quantum of assets that you could raise money against, please? And as an alternative to that, are you considering equity as an option rather than just simply adding more debt?

Okay. Yes. I mean Jamie, first of all, we don't disclose. But of course, we have levers. They are not huge, but they are significant. I mean -- but we don't disclose yet, what is an option, what is in our hands. And the other one, the equity, I mean, today, it does -- it's not -- if possible, it's not the right thing to do. I mean because the equity markets for us at the current share price levels are not efficient and very dilutive. So -- and also, not accessible, by the way, in the time we need. That said, this is our foresight for next half year, I would say. Of course, we are looking at all options, but if possible, we will do something else. And I think there are enough other options, which I'm absolutely clear are possible.

Okay. And then finally, you mentioned Hapag-Lloyd. How certain is that deal to go through? Has the joint venture raised the debt? And does TUI we need to inject more cash into that JV?

No. Certain, no. No equity injection. Certain, yes.

It's raised the debt, is it already?

Sorry. You know that -- yes. TUI, of course, is fine with liquidity.

And it's raised the debt to fund the Hapag-Lloyd acquisition, has it?

Yes.

Yes.

And the next question comes from Jaafar Mestari from Exane.

3 quick questions, please. The first one is just on cash burn since April. So EUR 2.1 billion liquidity today is about EUR 1 billion lower than at end of March. And even if we exclude the debt repayment, it still looks like EUR 700 million of cash over 6 weeks. Could you maybe just break that down for us between operating cash burn, financing and working capital, just so we can see what gets better from here? And second question on consumer behavior for the rest of 2020, maybe even '21. What sort of destination mix and product mix do you think you need to deploy? And did you assume demand will be very much the same? It's just going to be an uncertainty on volumes? Or are you adding, remixing different destinations, closer to home domestic trips, short trips, et cetera? And then my last question would be on the long-term capital structure. As you said, you may have enough loans and bridge loans and debt for now. But I guess there's an entirely separate question, which is what is the long-term sustainable capital structure for a business like TUI? So what sort of level of leverage? And what sort of debt versus equity mix would you feel comfortable with over the long term when this is repaired?

Birgit, do you want to start?

Yes. I'll start with the last question. And of course, currently, it's a bit early to talk about that because we do not know when travel resumes. And as I said before, we have various scenarios. Of course, adding substantial debt is -- and depending on when travel resumes, because this is a really big factor when travel resumes, and we did that modeling as well, the working capital inflow is really very substantial. But suppose in a worst-case scenario, you would have to add more debt. Of course, we need to think of solution for a healthy balance sheet that speaks for itself. So -- and there, we will -- and we are looking at a variety of options. And it's really way too early to talk about that. And also, obviously, you need more data points -- when does travel resume is already one of them, but I do understand your question. Then on the cash burn so far, so we have a portion of, let's say, around, let’s say, EUR 350 million to EUR 400 million of commercial paper also and the laterals are included and the rest of it as we said, taking down fixed costs substantially and also with the customer refunds. There you will start seeing the repayment, then it dips towards the rate before also for your models, what I just mentioned it, same order of magnitude as the fixed cost run rate, that is what you can take. So actually demonstrates that we were really very focused on cash. And as Fritz also said, it's also in our daily cash flow. So we really have a cash power in place where we discussed everything that comes in and out. So I think that's the key to the perspective.

Yes. Part of it -- maybe a couple of remarks on my side. I mean, the first one, the repayment of customers and also the payment of hotels, both are part of the other, let's say, same order of magnitude. And I can tell you, we are sticky on this because you know it's also very clear. The longer -- we actually keep our cash together, the more likely is that, it will be kept in the system. And also for -- with our hotel partners, like with all other partners we are agreeing payment schemes that we pay a part, and everything else will be paid once the business is resuming. And everybody needs to suffer a little bit. If you -- if the revenue is gone, then the revenue is gone. And being part of the TUI family has significant advantages for them because we will restart the business together with them. So we will take an appropriate contribution from their side in order to be part of our family. In terms of traveling, I think, what we are preparing for is very clear, we will -- we are preparing for destinations where we can control safety best. And that is areas where COVID infections are low, areas where we have limited connections to the general public, if you like, islands are good. We will be very careful with excursions and mingling up customers with locals and so on, but that's also accepted from their side. So coming back, it will be also south of Europe, we need to have and we want to have medical service close by. So we will not eliminate the risk of infection, but we will mitigate the risk of infection, right? So nobody can eliminate it, but mitigation. So what do we do if things happen? And we have concepts in place, but that's, of course, in Europe, easier than in places outside Europe. So it will be Euro Scoot, it will be -- as that cruises will be limited in terms of load factor. And maybe even Germany first, so that we are starting from here and do shorter cruises and so on. So it will be a little bit more close by. One thing is also clear, we will be opening hotels in Mexico soon for Mexican and American customers. I mean that's very clear. So these hotels will also open, and the offers will be there. I just believe that the long-haul flying will be something for the summer. It's not -- maybe not the right thing. Now it is anyway bigger in winter. So therefore, we are now pushing a lot for local and for European. Hope that helps.

I guess my question on the cash burn was more backward looking. I just meant really, it looks like EUR 1 billion lower liquidity over the last 6 weeks, EUR 300 million is the debt repayment. Could you maybe give us some color on the other EUR 700 million that you've consumed over 6 weeks, please?

Lower liquidity, Birgit will take that.

It's a mix. It's actually a mix of things. So I would say, on the operational cash out, let's say, it's really in the run rate that we just mentioned. So that is already one thing. And then the rest also, for instance, customer refunds and also some insurance covers, et cetera, that we had to cover. So it's actually fully in line with [ Italian ] model.

I mean I think if I understand your question correctly, you think, is it really as low as we think going forward based on the experience in the past. I mean first of all, when we started the business, then the cost structure was not there, in losses. So it was not EUR 250 million to EUR 300 million. So the first 2 weeks, you see more. Then you have the commercial papers, which actually had to be returned. Then you see a little bit of reserve cash as well. Yes, so cash collaterals for actually travel, but this is full season effect. So it's not repeating. And that actually brings us to the amount. We have now a daily projection of actually what the cash payments are and I can assure you, I personally sit in the call every day. And it's not the first time I manage the company for cash. And when you manage a company for cash, you don't care so much about the P&L effect. We are managing the company for cash, and we will be doing that for the next 2 or 3 months, however long it takes, until we have a full restart in the system.

The next question comes from James Ainley from Citigroup.

Three questions from me as well, please. First, on your commentary about shifting to more asset-light, how you particularly thinking about the structure of the airline and provision of aircraft-only [Audio Gap] context to this [Audio Gap] fully outsourced? Second question is, could you give us a breakdown of the percentage of customers, whose holidays are canceled? What percentage except credit notes or vouchers, what percentage was booked [ or funds ]? And what level of discount you're giving today?

Yes. I shall answer. Third one?

And then the third one is, just can you update us on the status of the compensation from Boeing, please.

Okay. With Boeing, we are in good negotiation. No further status, but I'm pretty sure, I'm pretty hopeful that it will resolve, yes, and not in so far future. And the asset of the airlines, not having an airline is not an option. It needs to be more intelligent. The airline is an essential facility, but something is also clear. We need to rightsize the airline. We have -- it's having appropriate size and an appropriate structure and so the corporate asset structure. We have been thinking about that quite a while. Now as we don't fly, it may be a good opportunity to focus a little bit more on that. And the last one was 50%. 50% return rate of not-not. You also asked what is the incentive for our voucher. This is different in different countries. I would say, on average 15%, maybe 10%, 15%. But also, please remember, 10%, 15% is not fixed. I mean, at the end of the day, in U.K., we give 15% online discount, right? I mean at the end of the day, don't put discounts on discounts on the discounts, right? So it will be a little bit smarter than that. But we are -- we have face value, I think in the U.K., 15% on average and Germany, I think is EUR 100 for full paying member of the travel group, so in a family is parents with children. Anyway, we are playing around a little bit and at the end of the day, the more important point that the conversion of the redemption of the voucher is good.

Did you say 50, 5-0 percent of people take cash -- demand cash refunds?

Yes, yes, yes.

And the next question comes from Richard Clarke from Bernstein.

Three, if I may. Just want to -- just reflect on your comments of being a leaner organization going forward and cutting 30% of your cost, what would you expect to be the sort of top line ambitions here? Would you still be looking to transport 21 million customers? Or does that number come down, sort of roughly in line with that 30% as well? Second question on your comment around disposals and the disposing of nonprofitable entities, I mean, I guess there's some probably pretty big chunk of your company like the U.K. and Germany that can go quite close to that, how big do those ambitions of disposals be? What are we talking about there? And then third question, just coming back to cash needs again. Obviously, you've got some support from the German government. Are there any discussions going on with Spain or Turkey or the U.K. in terms of support that they might be able to provide, given the importance of tourism to those countries?

Let me try to focus. I mean lean organization, of course, top line will be back, I mean, maybe not next year, but the year thereafter. If there's a vaccine, it will be growing fast. I mean, we are talking about a more lean and digital execution of executive tasks, we will be doing in the higher quality with less cost. So when we talk about the savings, it is savings on existing revenues. Now that said, maybe not next year, it will come back. Therefore, we have a little bit more bigger or little bit of flexibility in the system. But long term, it's just value increase or margin increase, if you like. How big is the ambition for disposal? I mean U.K. where did you see the -- of nonperforming assets and you thought, U.K., that's interesting. No, I think we are talking here, France, and we are talking here other parts of the business. We have a Spanish business, we have a nice business in destination experience. We have Harbor Handling business and so on. I mean we look at a lot of businesses, but not the core business, right? And the German government -- I mean, we have local schemes to support labor. These are all local. We have local schemes to support working capital. These are local -- there will be European law, but the countries have actually implemented very different things. But on the KfW loan, this excludes, as to my understanding, third country support. So even if it was available, it's very clear that these kind of facility -- is a global facility. By the way, that was one of the big issues that this is supporting our global activity and not only German activity. And it was one of the big successes of negotiation initially to achieve that. And you can see with other companies, other airlines that this is quite -- can be quite a distraction, if you don't achieve that, because you have one company and how can you make sure that the money flows the base and you cannot hurt as -- you cannot plant the money. The money is the money, right? And at the end of the day, it's difficult when you look at prepayments from German customers to a certain hotel, how you want to do that, if certain money is only granted to secure certain parts of the business. So the KfW facility is a facility, which is a global facility, but it excludes the like government scheme in other countries. Does that answer your question or...

Yes. That's clear.

The next question comes from Adrian Pehl from Commerzbank.

Also good to hear that your safe and healthy. So a couple of questions. First of all, on your presentation on Page 12, actually, where you outlined potential destination that might open up anytime soon. I was just wondering that portfolio that you mentioned there, would be already sufficient to make you satisfied for the summer season, i.e. if Spain, Mainland does not open up, Italy or Turkey, is that still enough for you to have a decent business for this year's summer? My second question is coming back to KfW a little bit. I mean, obviously, and in spite of the fact that you are quite confident on Hapag-Lloyd cruises sale, I'm just trying to get my head around, why the amount has not been like EUR 3 billion, for example, since liquidity still obviously appears to be tight? What are the prerequisites for a higher amount? And can you get additional money, if you find out finally, it's probably not enough? And a question on actually sale and leaseback measures that you just announced. I mean it's probably kind of a chicken and egg problem, isn't it? Because otherwise, if markets do not open up, then actually the sale part of the sale leaseback is probably a bit difficult in terms of pricing that you might get. So any comments on that? And very lastly, you obviously got new shareholders since April, I must say, Mr. [ Shati ]. I was just wondering and curious to hear your thoughts, if you had already some contact through him? Does he have any ideas strategically? Or what's the situation there?