TUI AG (TUI1) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. A very warm welcome here in Hanover from our TUI campus for our second quarter 2025 results presentation. My name is Nicola, and I'm Group Director, Investor Relations. And I'm here with our CEO, Sebastian Ebel; and our CFO, Mathias Kiep. We are very pleased to report a strong set of numbers, which exceed expectations. And with that, I have the pleasure of handing over to Sebastian and Mathias. And Sebastian, you go first.

Yes. Thank you very much. Happy to present the Q2 and, therefore, the H1 results to you. The agenda is like we do it in the past. I will give the operational and strategic highlights. Mathias will dive into the numbers from my side, the trading, outlook and a short summary. The Q2 is the weakest in our year's performance. We always say you can't win the year, but you can lose the year. And therefore, we are pleased what we have seen and what we can report on. Just -- and we will hear it quite often today, this quarter has a strong impact by the shift of Easter. Last year, Easter was in March. This year, it was in April, and that has 2 effects that the big Easter business moved into April and the booking, which is normally starting strongly after Easter also shifted into April and into -- especially into May now. We do see that global travel demand is robust despite all the geopolitical and macroeconomic uncertainties. And with these uncertainties, our focus is very much on margin protection and on cost reduction. And the one or the other worked with us at the Capital Markets Day in Madrid, we got a lot of positive feedback, and we are very thankful for this feedback. And we explained to you our strategy for creating the global curated leisure marketplace where we do see significant progress. And we also promised not only the improvements on cash flow and balance sheet, but also to give you the -- to define the shareholder return strategy at the end of the year, and that's what we will do. The most important part of our presentation today is that we can reconfirm our guidance for this year and for the medium or longer term, the 7% to 10% EBIT growth. If you look at the summary, we delivered EUR 3.7 billion revenue, plus 1.5%. As said, Eastern was a couple of weeks later in April and an underlying EBIT of EUR 207 million, which was mainly driven by the Easter holiday shift into Q3. Holiday Experiences remained very well on track, another strong growth quarter and a strong demand looking forward with our -- for our unique and differentiated products. The market on airlines, we had a good late market in '24, '25 with bookings up 2% and ASP 4% for us. It's very much important -- it's very important. You see it for summer as well that we keep the ASP increase of 4% to protect margin. Summer is on last year's level. Again, this is the effect on having a strong look on margins. And you see still here slightly lower minus 1%. What we have seen is what we had expected after the 1st of May, a strong increase in booking. That is what is coming, what we do see now and which makes us very confident for the rest of the year. And as said, it's important that we maintain the 4%. I will talk a little bit later also about dynamic because this is now with the implementation of the direct links to airlines and to hoteliers picking up a lot. In summary, we have seen an increase of EBIT versus last year if we adjust for Easter. And as said, we can reaffirm our full year '25 guidance, which, by the way, not every company can do. If we look into the details, you see a strong hotel result, slightly EUR 10 million or EUR 14 million down. This is not an operational. Operationally, the hotels do very well. It's revaluation effects only because you have seen the strong increase of the euro at least until a couple of days ago, and that has impacted this result. Operationally, it's very strong. You see it occupancy is -- has been very strong for this quarter without Easter and the rate is also 4% nicely. Cruise also doing very well. You should have in mind that we had the Relax naming and putting into service in March. This has always a cost effect and the benefits will come from April onwards. So therefore, it's a great result from TUI Cruises and from Marella. And the occupancy was on the same level. We had a Suez itinerary impact, but that has been minor. And again, the result is great. I'm really happy about what we do see in Musement. Of course, I know we know that this is a smaller business. We have seen a significant halving the losses in the first half year. Why is that positive? For 2 reasons: one, putting everything into one customer base now sees the first impact with the first product set, which is Musement, cross-selling, upselling, which works very well. And therefore, we are very confident about the Musement activity. We want to grow profitable. We don't want to grow just for the sake of growth. We want to grow profitable and that we do it through cross-selling and of own experience where we grow -- had grown 18%, and we will see a strong growth also for the coming quarters. If you look at Market & Airlines, this quarter, if you take the onetime effects out Easter and we again have the ETS effect, which we had in the first quarter, the benefit will come in the fourth quarter. We are on same level or maybe even operationally slightly better. This is important. And again, we invested significantly in retail. So this is a satisfying result. What is really excellent is the growth of the app. If someone uses the TUI app, there were just new releases. We will now bring every month new releases, and this will have a significant impact. This is really getting great. In this quarter, you haven't seen yet the big increase of the dynamic packages. That's what we see when we look forward. There is a significant increase, especially in the U.K., not 10% or 20%. It's even bigger. It's still driven by the Ryanair connection. And every month, we will put more and more airlines to the dynamic product and also the direct link for the hotels. This will make a huge shift. We did the first country in the Nordic, and it will also come in summer, and we have seen what we had expected, a significant growth. So that is the 2 sides of one coin. We want to be very careful on the wholesale to keep the margins and to grow with all what we bring now in the market on dynamic. And of course, retail is important. App sales are very important. And the 10% we achieved today is a significantly higher share in the U.K., and that's what we will also achieve in the other countries. Some iconic things, which are also bringing color to the sheer numbers. We have -- we were able to celebrate the 20th hotel in Asia. There's a very strong pipeline, which makes us very happy, which is a great success of the team. And it's not only China, it's Vietnam, it's Cambodia, it's Thailand, Sri Lanka and so on. The Global hotel fund, the vehicle to get more hotels into our ecosystem, acquired a hotel in Jamaica. The hotel fund, just to reiterate, we have a 10% ownership. And this hotel is run and operated and managed by Royalton, our 50% JV in -- out of Canada. We had the successful expansion of the Mein Schiff Relax. The next ship will come next year. And what is amazing is despite -- if you look at Mein Schiff 7, Relax, Flow capacity increase of 45%, the booking level is on the same level as the years before, and this is amazing. And you know we secured 2 slots for 2 new vessels; unfortunately, only for 31 and 33. But on the other hand, it's good that the yacht capacity is so limited. We are working on the ownership structure, and we are exploring partnership options as presented before. One also nice step, we extended our collaboration or we started our collaboration with Oman Air with a very successful activity with Qatar Airways doing very well. And this now we will do also with Oman Air. Other white label partners will follow. It's our product. We are the tour operator or the offering the sales is done with and through Oman Air. And with this, we get new customer segments in new areas and generate additional revenue. By the way, these are passenger numbers, which are not in the numbers we have given you before. App share 10%, 40% up. The U.K. now getting to 20%. So it's a great achievement. And again, I just saw yesterday the new release. It's getting really nice also the cross-selling, the location-based services, you can see now on the front page. So a lot of good stuff. And I have in my office the version, which will come month by month, and that is good. And by the way, it's the same for web, where we also can improve a lot what we have, and this will come. And the third one is the dynamic packaging. Sustainability is in our mind. It's not a fashion for us. And whatever the outside world think we stick to our SBTi targets, and we will deliver our SBTi targets. Why? It is sensible because the customer wants it. And second, the commercial business cases are very good. So we can deliver not the one or the only. It's not a contradiction to commercial sensibility. It's a proof. And a good example is the new Mein Schiff Relax is -- here, we said dual fuel engines. It's the same fuel. It's -- one is the traditional LNG and the other is the eLNG, which is produced out of biogas, so carbon-free, and this can be used there. And if you look, that's really interesting because I quite often get the questions, eLNG 3 years ago was 8x as expensive. 2 years, it was 4x expensive. This year, it's only 2x as expensive. So because of the oversupply of gas due to the reduction, it's getting also a commercial sound business case. And that's why we invest wherever it is sensible to achieve our targets. And after a lot of words to the numbers, Mathias.

Thank you, Sebastian, and good morning to everyone also from my side. If I may summarize in this part, in this section, as usual, on the half year before we then come with a view to the rest of the financial year booking statistics and then the view on the guidance. And I will hand over to Sebastian for that again. Now I'm very pleased with the quarterly development. As Sebastian said, we are up year-on-year if you exclude the impact for Easter. As you know, Easter and the 2 weeks that we had last year in March now moved to April, which is our third quarter. So this volume peak and this margin peak now moves from second quarter into our third quarter. And I think it's fair to say that our April operational view confirms this. So that's really pleasing. Structurally, let me highlight 2 things: as part of the Capital Markets Day, we could reconfirm that TUI Cruises will pay a dividend of at least the amount that they paid in 2019, so at least the EUR 170 million. And secondly, we could also reconfirm that our UK Pension Scheme is now fully funded and that these payments will stop with our first quarter. So going forward, 2026, we will have that benefit. On Marella, I'll summarize separately all the effects. Again, that is what we discussed at the Capital Markets Day, but I would like to take the opportunity to bring that all to you again. Now on the quarter, if I may, and then to P&L, cash flow and balance sheet for that. You can, here, very clearly see the impact Easter had that's pronounced in Markets & Airlines. This minus EUR 40 million consists of a minus EUR 30 million Easter and around minus EUR 10 million from translating into the new currency rates. If you take constant currencies, that is the EUR 10 million FX translation, then you're effectively flat for Markets & Airlines. And the rest is in line with what Sebastian said. If you look overall for the half year, we are now EUR 30 million up. If you adjust for Easter, it's around EUR 60 million. And with that, that's, of course, a great cornerstone towards our guidance for the full year. And with that highlights, P&L, cash flow and the balance sheet. On the P&L, I think, first of all, the revenue growth, that's really great, plus 8% for half year that shows leisure irrespective of what's going on in the world, this is highly prioritized. Our customers have paid 8% more to us than they did for holidays, and they have invested in more holidays with us, and we have generated more revenue. I think that's really great news for us and for the sector. Second part is EBIT. We talked about that. And if you move down, then you see net interest expense, which has improved in the quarter again, but then even more so for the half year. So a minus EUR 180 million compared to a minus roughly EUR 210 million of expenses that we had last year same time. And that benefit is something that we believe we can carry forward to the full year. And we have lowered our guidance from EUR 385 million to EUR 415 million in P&L interest to something, which is now EUR 355 million to EUR 385 million, so EUR 30 million lower. Where is this benefit coming from? It's primarily interest income because, one, interest rates have decreased much slower than this was anticipated and how the market looked at this a couple of months earlier. And secondly, also our cash management and the -- all the initiatives that we've been driving. Month by month, they're really paying off. And with that you have a bit more volume, but in particular, a better rates that yield a better interest income. And again, we see this EUR 30 million benefit coming through for the full year. Now with regard to cash flow, you see the same. So interest cash flow for half year around EUR 130 million compared to EUR 165 million a year before. Again, we lowered the guidance here. Two other points to highlight: one is working capital. For Q2, you see effectively the same working capital development than in the quarter before. We're very pleased with that. Again, we had a very good development already in Q1, so half year overall, also with the Easter shift is really in line with our plans, that's even ahead of that. So I'm really pleased with the working capital discipline in the company. Interest, we discussed, and then we need to look at net invest and lease payments. If you look at the half year numbers, they look high compared to the full year guidance, but we see a couple of phasing effects there where we had more payments and more projects in the first year. The net invest, as we discussed already in Q1, more to the high side, so at the upper end of the range, so at the EUR 680 million. We need to add Marella here. I'll come to that in a second because the predelivery payments will be triggered in the summer. And second, the lease and asset amortization that's in line with our plans and forecasts, as I just said, and we stick to this EUR 0.5 billion to EUR 0.6 billion, again, as discussed already in Q1 at the upper end of this range. Now balance sheet has slightly improved, which is good. So cash flow translates into this EUR 0.1 billion improvement. You may remember, we had a bigger improvement year-on-year as for the 30th of September. And then in the first quarter, we reflected the additional aircraft deliveries on balance sheet as we highlighted that here that kind of took that benefit away. And now we're moving back forward based on the Q1 balance sheet, which is, again, in line with our plans. The net debt should overall, therefore, improve slightly year-on-year because, again, that effect of the additional aircraft deliveries directly on balance sheet we've had in the first quarter, and we work against that. Now coming to Marella and then to capital allocation path. Marella, again, for those attending the Capital Markets Day, nothing new, but I just want to highlight 2 things. One is the ships are ordered, the shipyards have accepted and reconfirmed the slots. I think that's a really great achievement. And if you look at the performance of Marella, that's great to see the future perspective for the business. The deliveries will be '31, '33. So well in the future, you could say, unfortunately, from [ duration ] point, but at the same time, this gives us further time to prepare for this from a balance sheet perspective. And therefore, it's important to us that we confirm this focus on a robust balance sheet and a robust balance sheet makes sure that net leverage further decrease significantly below the 1x. This remains unchanged because that prepares the business for the refleeting option. And otherwise, it would have not been possible to do this, to be honest, and doesn't -- wouldn't have made sense. And at the same time, as Sebastian said, partnership structures, that's something we continue to evaluate on that basis. And I think we will do whatever is the best for the company. In terms of the capital allocation summary, again, that's something we shared at the Capital Markets Day, and we get this question a lot when is there a dividend communication, et cetera? Now we have had a very structured journey on this. And this is something I just wanted to reiterate. We said, first, we want to operationally bring the business to a level where it makes sense to look at dividends, that I think we have achieved with '24 record results. Now with half year, we can reconfirm our guidance for this year with 7% to 10% increase in profit. And on that basis, it's -- you could say this ticks the box on, okay, this is a sound basis to define a dividend or capital allocation strategy, capital return strategy. And then secondly, on the balance sheet, the leverage has already come down and came down to 0.8x with '24. Secondly, the rating agencies honored that. We received a BB from Fitch, Standard & Poor's, and Moody's also upgraded their ratings. So that's also something we wanted to achieve before we enter the internal discussions in terms of how will that strategy look like. And so we will start the internal discussions. And then as our earlier communication, have the discussion with you and communication in December. And on that basis, looking forward, I think, Sebastian, the basis is the booking intake. And if I may hand over back to you.

Thank you, Mathias. And maybe one thing I would like to add what you said. The Easter effect, which was negative in March, we have seen positively in April with a very good April. So one thing is to talk about the negative effect. Important is that we have seen the positive effect in April. If we look at Holiday Experiences to the hotel, area, the capacity is the same as last year. Occupancy is even up by 1% and the daily rate is plus 8%. To answer the question, it has gone backwards a little bit. That is pure translation because the dollar rates, which are very significant and important for us, have become due to the strong euro, slightly lower. And that's why nothing to do operational. It's very strong. Hotels are full. Rates are great. On the cruise side, capacity increased 23%, huge increase, occupancy at the same level. So it means that practically the hotels -- not the hotels, the cruise ships are almost sold out. And even with a daily rate of plus 2%, which like-for-like is even bigger because we have more ships in lower yield itineraries. TUI Musement, significant growth, high single digit or small double digit, we will see. Important here, again, is also to protect profits. We're investing less in new customers, and we are investing more because that is almost for free in cross-selling out of our customer base. We have built and selling own activities, which have a higher margin. So this is a very nice picture. When we look at Market and Airlines, winter ended how we had anticipated at plus 2% on bookings. Again, important has been the ASP to cover the cost increases, so that was in line with what we had expected. When you look at summer bookings, this is from 4th of May, they would see -- look different and more positive when we would take the numbers today. So what we had anticipated that after the 1st of May, Labor Day, bookings would accelerate. That apparently is the case. And therefore, you may remember from last time, minus 2% in the U.K., now 0 or if I look at it today, it's a significant positive. And if you look into it, we had the strategy on the wholesale, we wanted to protect the margin. We even decreased the risk capacity to make sure that we get the margin we need and the growth is on the dynamic. And if we look at the latest dynamic, it's a significant 2-digit numbers, more than 10% or more than 20%. And looking forward now, and we will bring, as said, in the coming month, the main driver was Ryanair and easyJet, we will bring more and more airlines month by month and which is also very important, we bring in more direct connect to hoteliers. So our product portfolio will fuel the growth and the margin on dynamic packaging is very nice. ASP, Germany has now also improved. Again, in Germany, we put a lot of effort in keeping a margin that is very important. And as the risk capacity is slightly less, we feel comfortable as well. So we have sold roughly 60%, which is the good message. The challenging message is it's still 40% to sell. The good thing is that we are on the same level as last year. So the starting point is good, and we should manage it, especially because the ASP is 4%, and this is what we want to keep. There is a very strong focus on dynamic growth, getting more into more to the customer on margin production and on cost reduction. We think now with rolling out global platforms, it's now the right time. I mean, we have always been cost conscious, but now it's the time to take the synergies or the benefits of the platforms we have built, and that is a nice effect for the future. We will report on that in the next -- or over the next quarter to give you a full picture, but it will be significant. And again, the focus is on ASP because we are in a higher cost environment. And although inflation is slowing down, but again, there are also currency effects, which we have to overcome. So a solid statement with a good outlook with a dynamic packaging with more products and new customers and a strong focus on securing margin. So having said so, we can reconfirm the revenue and the EBIT guidance, and we are looking forward and working hard to achieve what is needed for that. As said, in Holiday Experiences, the bookings are very good. And we feel also comfortable on Market and Airlines, but still 40% to go, but we feel comfortable to confirm -- reconfirm the guidance and not only short term, but also middle term -- medium term. Do you want to say a few words on the other? I think you did so.

Yes. I think on -- as you say, we covered the elements. If you think also on the components, as you said, Cruises with the additional capacity that will be a building block going forward. Hotels, you looked at the KPIs, very strong building block for the coming quarters. And now we have Easter in Q3 and all these effects where the summer will be important for Markets & Airlines. So I think taking a step back on the components towards the 7% to 10%, that is why we can reconfirm our target today.

Perfect. Summary, as Mathias said, we can confirm the focus is on accelerating and profitable growth, improving profitability, a strong eye on the margins, to strengthen balance sheet and a strong focus on cash flow. We're now getting closer to where we can commercialize the benefits of what we have built into the system.

Thank you, Sebastian, Mathias. I think, Sami, we are now available for Q&A.

[Operator Instructions] Our first question comes from Othmane Bricha from Bank of America.

First, on M+A summer bookings. Can you comment on competition in Germany and what you're seeing and how much that impacts your bookings? And also, you've mentioned that bookings today on M+A would look better if taken today versus early May. Would you be able to tell us what booking volumes would look like now? And then second, on revaluation effects on both Hotels and the other segments, can you please quantify those?

As said, the booking pattern is later. And because of the Easter shift and it's not only the Easter shift, it's the closeness to the Labor Day, which had an impact. And this now is 10 days. If we would see that for a longer term, we would be very happy. We have not anticipated that, but let's see. And therefore, to give a 10 days impact is maybe too short-minded, but it has been a significant impact. And on the Hotel side, as said, without the revaluation effect, the operating result would have been higher than the year before.

And on the other segments?

Yes. On the other segments, we have this translation effect. And I think this balance sheet impact that Sebastian mentioned that we had in Q1, positive and now a bit negative. That's primarily in the Hotel segment.

Our next question comes from Andrew Lobbenberg from Barclays.

Can you talk -- I mean, I know you were asked about it, I think, slightly in the previous question about competition within Germany. But what are the dynamics in the German market that arise from the disappearance of FTI? And the second question would be -- and sorry, I wasn't at the Capital Markets Day, but can you help me understand how does the growth in dynamic packaging play out on the mix effect and, hence, on the average selling price?

If you look at Germany, we have been very careful because there were reasons why FTI went into insolvency. The reason was quite often a 3-digit million euro loss per year. And in a way, this market segment where they had been was never a very attractive one, as said, FTI with high losses. So margin protection means for us that we don't go into segments where we can hardly earn money. And we will do so more purely on the dynamic packaging, and that is now to come. And in a way, it's the similar thing in the U.K. In the U.K., again, we had to implement the technology to offer that. We see a significant growth in dynamic. It will come in the next quarters, in the next year, and that will slightly change the picture. And we have seen small effects in the summer, as I said, minus 2% now plus -- 0 plus. And this is mainly because of the success of the dynamic product. And looking forward in the future, I think it's important to have a wholesale package where we really make significant profit because of the product uniqueness and the rest will come from dynamic, and that will be a growing and significant part and should not stop by 10% or 20% or 30%.

Our next question comes from Richard Clarke from Bernstein.

Three questions, if I may. Just if you look at your booking position being down 1% for the summer at the 4th of May, and you're talking of dynamic being very strongly with the Ryanair partnership, so is it fair to say that your risk capacity bookings are down year-on-year? And maybe what is the level of that negative trends on the risk capacity? And I guess, if we've got a later booking window and you're holding risk capacity into that later period, how should we think about the sort of ASP evolution from here? You're up 4% so far. Is that number likely to come down given this pushback in the booking window? And then thirdly, slight change of direction, but Marella, you call it a refleeting. I guess we got the information on the new ships, just the phasing out, like which 2 of the 5 ships are you going to phase out and in which years? And then I know it ages off, but what happens beyond 2033? Are you going to keep the other 3 ships going? They're going to be getting towards sort of 30 years and more in age?

You're right when your assessment on wholesale and dynamic. We thought that it would be good if we reduce the risk capacity and take the benefit from the dynamic. So this not happened because we sell now less of capacity, which we had on the same level as last year. We voluntarily reduced the wholesale capacity, the risk capacity to make sure that in a competitive market, we will not lose out and to replace it by risk capacity. And as said, we are in the middle of the process and adding the dynamic content and the benefit is still to come. On the later booking profile, again, it relates to the question you had. We do the utmost to keep the ASP and the reason -- that was the reason why we reduced the risk capacity. So we are confident that we can have the ASP as we have it now. And Marella refleeting, are you intending to grow the fleet? It's a very interesting question. Probably -- not probably, it's definitely not the right time to answer. In a way, we were nicely surprised by the success of Marella also this year. And of course, the ships in '31, '33 will be again older. On the other hand, what is the right capacity, we will decide then. From today's perspective, there are 2 options. You could take them out and give it to other lower end markets or you could keep it refurbished in the market. This is something we have to decide 2 years, 2.5 years in advance, so that means in '28, '29. Today, the conservative view would be take them out and replace them. The 2 ships, the more positive view would be to keep them in the market because the market is still growing. Let's see. It's a positive momentum, and it's good that we can decide later.

Sorry, just a point of clarification there. You said that your risk capacity is now actually running down for the summer, not flat?

It's slightly down on what we had compared to last year, yes.

Our next question comes from Cristian Nedelcu from UBS.

Can I please ask on Hotels? I think the RIU occupancy in Q2 was down 4% year-over-year. All the other hotels have occupancy up 1%. So I'm guessing it's maybe not that much Easter. So what is really driving this discrepancy? And what are your expectations for RIU occupancy in the second half of the year? The second one, just going back at the guidance on hotels pricing and occupancy back in February. Q2 came weaker than expected. Also the H2 was revised down today. Could you help us a bit with more details what drove these downward revisions? Was it FX? Occupancy was also revised down. So any more details there? And the last one, if I may. One of your tour operator peers in the U.K. called out a bit weaker demand from -- a bit weaker demand for Spain as some U.K. tourists are avoiding the area due to protests. Do you see this trend in your hotels numbers, in your hotels bookings at all?

So maybe that was a misunderstood standing. We didn't revise the hotel numbers. We see a very strong year. It will be a record year again. So it's all going extremely well. The RIU occupancy has 2 effects because the business was doing so well that we kept hotels longer open because you have a cash breakeven of 50%. So to keeping hotels longer open even in the season where there is less demand is good to have. The ASP, which 8% is strong. Yes, it's lower than the quarter before, but it's mainly a translation of -- not only it's exclusively a translation of dollar into euro; otherwise, the -- in the same currency, the rates would be higher. So the expectation is very, very positive on the second half to it. And concerning Spain, the good thing in our model is in operating, if one market is less strong, you move to another market. I wouldn't expect a significant weakening of the Spanish market. I would more expect something on the same level because Majorca is fully booked. It's very difficult to grow. And what we do see is that other destinations like Egypt, like Cape Verde, like Tunisia, Bulgaria, small destinations are doing very, very well. So that has nothing to do with the protest. If there would be a decline, and I don't see it yet, but if so, it would be more because the islands are to get new bed stock is not easy. And of course, when people look for the best deals, it may be a good alternative to go to other destinations. So nothing, which really is of concern. And I think it has definitely nothing to do with the protests.

Could I add one small follow-up? I guess on -- can you comment a bit more what you're seeing in your Caribbean hotels having roughly 50% of RIU beds are there? Have you seen any weakness in occupancy or in pricing in your bookings or in your results over the last months?

So the summer is safe. When we look at the forward bookings, if we look at the rates, it is safe. What we -- and now this is speculation. It's not something we can report on. If there would be less demand from the U.S., that's probably the question you wanted to ask. What we do see that there is strong demand from Canada because they now choose different destinations. By the way, there is a market like Argentina, which always have been big for the Caribbean, which completely lost out the last 3, 4, 5 years due to the economical crisis of Argentina. Now Argentina, the improved situation on the economy means people are traveling from Argentina. So that's why it's a very stable business that there might be, might be, I'm not saying that it will happen, a shift in where the customers will come from. And of course, what I always saw and that might also happen, the long haul was always more challenging if the dollar was very strong. And we almost thought about parity. Now we had 1 day at $1.20. Now I think we are back to $1.11, $1.12. So this will help, which will probably bring more European customers to the Caribbean if there are beds. The problem always was that prices were high and there were no beds. So that's why this combination also, we think medium term, the good occupancy and the good rates will stay. And as I said, the impact you saw on the rate is purely on the exchange rate dollar to euro.

[Operator Instructions] Our next question comes from Jaina Mistry from Jefferies.

I wanted to ask about EBIT for the full year. Now if you look at H1, underlying EBIT grew 14%. Q2 ex Eastern currency was broadly flat. And you've maintained the guidance for 7% to 10%. Just are you assuming kind of flat to low single-digit EBIT growth in H2? And why is the run rate so much lower than Q1? My second question then is, could you quantify the currency impact for the full year if spot stays where it is on EBIT? And then third question, just related to Andrew's question. When you think about growth in dynamic packages, is that EBIT margin accretive? And how should we think about it on an EBIT per passenger basis versus wholesale?

Second quarter was up if you take into account the Easter shift. And by the way, as I said, we had some one-offs we last year had in the second half like the ETS. So that's why also the Q2 operationally was up. Mathias can maybe give you more details. And I mean, let's see what the second half brings. I mean, why -- I mean, we are in the world, which has higher uncertainty. And I think it's right to be cautious and to see the outcome. Maybe, Mathias, you can add something, but I will ask the third question first. The margin on dynamic is depending, is there a lot of supply on the airline, air seat side or less demand. What you do see is that, at the moment, there is a lot of capacity available. And therefore, every day earlier, we can connect an airline, we are very happy to have so. That doesn't mean that it's the same every 12 months. There can be a peak summer month where it's more challenging to get capacity for a reasonable price. But overall, it's significantly margin accretive. And that should also answer the question on EBIT by pax. At the moment and especially in the shoulder month, it is a very attractive product. And maybe, Mathias, you answer or you can add something on the first part and especially on the second question.

Yes. So thank you. Thanks for the questions. I mean, if you compare why our expectations for the second quarter compared to our expectations for the first quarter, I think, as Sebastian just said, on the first quarter -- on the first half year, sorry, we are really like-for-like up. And this, of course, contributes well towards our guidance. And I think that's a key cornerstone. At the same time, the key quarters will be Q3 and Q4 in our second half of the year. And now in terms of what are the effects that we are going to see, one is the shift of Easter. We have already adjusted for that because we, like-for-like, talk about the improvement. Second is what is happening then in Q3 and Q4 by segment. On Cruises, we will see the additional capacity in TUI Cruises coming through. That will be clearly a benefit. In Q3 last year, we had the Suez impact. That will be clearly a benefit not having it again. At the same time, fourth quarter was very strong for Cruises last year, and that's something where we don't expect that this will be a massive further improvement, in particular, for the U.K. business. If you think about Hotels, then I think the available bed nights, they are just flat because they're not additional projects coming to life over the next 6 months. So we see growth. We see the rates. We see the business developing well. At the same time, the overall capacity does not move in the next quarter. And then we see Markets and Airlines. Musement, and Musement will be, I think, this recovery and further growth of the business, we will continue to see. So I think that's a bit the cornerstones of our guidance going forward. And then FX impact, we've seen the translation impact throughout the full first half of the year. So it's a EUR 25 million now that we see, if you would calculate our numbers today at constant currency of last year.

Are you seeing a transactional impact from the weaker dollar on fuel purchases?

I mean, like many of the other competitors, we had -- we took the opportunity to hedge further out, actually, by the way, the same for the euro. But the short-term impact is very limited because our currency policy is to hedge in advance. And yes, we have an impact of the remaining 10%, 15%, but all the other was hedged because we don't want to speculate with the currency and with the dollar. So the benefit will be at the outer year and the next years if we would assume that the $65 per barrel or the 1.18 would be the lower end or the upper end when it comes to the euro to see.

Our next question comes from Conroy Gaynor from Bloomberg Intelligence.

Perhaps, first of all, could you -- it still seems like we're in a stubborn environment for cost inflation. Could you perhaps comment on where you're seeing that inflation going forward over the next 6 to 12 months? Is this related to specific components such as wages or maintenance? Or is it related to specific regions? And then the second one would be on the U.K. I know we spoke a little bit about the German dynamic. But perhaps if you could talk about the -- how you're seeing the U.K. consumer and competitive dynamics shape up this summer and perhaps how that ties into some of the booking trends you're seeing there?

Cost inflation. So what we do see is if you take the currency effects out, it's now stabilizing, I would say, looking forward, 2%, 2.5%. So we don't need the big ASPs. And that is just -- and, of course, there are countries, which are very interesting to look at high inflation. In Turkey, the currency not devaluating the same. So this is a challenge. On the other hand, you have outside the EU, which are benefiting from the -- or no, we are benefiting from the strong euro. So I think the impact we had seen before is not there anymore. If you look at other cost types, the airline cost, the metal costs are fixed, which is good because they actually are rising. If you look at maintenance, a lot we do in-house on our own. So overall, I think it's -- I mean, every percentage is a challenge, but it's a very different and normal challenge compared to what we had to do. The U.K. consumer trend, I think this is a trend almost everywhere. When it comes to unique products like the RIU, like the TUI Cruises, like the Robinson Club, there is a good wholesale contract drives a lot of profits into it. When it comes more to the long-tail product and when it comes more to access to airline seats, the dynamic in today's environment is a very attractive product. And that's what we do see in all the other markets. I don't think that the U.K. is so different to the Germany, but there is [indiscernible] effect, a catch-up effect there. And U.K. customers have to fly. I mean, when they go to Europe and they want to go to the Mediterranean. And therefore, I think in today's world, dynamic packaging is a very attractive market segment as the wholesale is as long as it is linked to exclusive products. And we are getting this balance more and more right. There were reasons why TUI in the U.K. was less profitable than our big competitors. And for the first time, I have the confidence that we are able to catch up and the capability to do dynamic. By the way, it's even more important in the Nordic market where this is a very dynamic market is so important. So it will become more important, but that's why we said curated marketplace. We want to offer our customer -- not we want, we are offering our customers products, which are unique, which are exclusive, which are strong. By the way, it's not only hotel, it's also service or transport or experiences.

We currently have no further questions. I'd like to hand back to Sebastian Ebel, Chief Executive, for some closing remarks.

Thank you. So it was a good start to the first half year. As Mathias said, quarter 3 and quarter 4 makes the difference. We have taken a lot of good steps to achieve the guidance. We have -- on the Hotel side, on the Cruise side, on the Musement side, we can see -- I shouldn't say we are almost there. You are there when you are there, but it seems to be that we don't have to do a lot. I mean, everyone has to do a lot, but slightly less on Market and Airlines. We have to do -- we have to take in another 40%, which is on the same level as last year, but it's still to do and important for us to get the margins with the risk capacity, but we are very cautious and to grow the dynamic. And with the dynamic, it's great, as I said, a significant 2-digit growth, but it's more to come. We are just rolling out the technology. Ryanair in December was the first. I now think we do have done 300,000 packages. And now British Airways all the other airlines need to come. And what is also important, not using wholesale contracts only, but also having direct connect to the hotels is very important. So this, in a combination, keeps us despite all what we do see geopolitically and pressure keeps us very confident that we can achieve our guidance. Is it too conservative? Is it too aggressive? It's -- I would say it's not aggressive. We are confident, and the rest we will see. So thank you very much for being with us. Maybe the one or the other have the opportunity to use our app for summer vacation, would be very happy to get a feedback. And thank you very much.

Thank you.