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Good morning, ladies and gentlemen, and welcome to the TUI AG conference call regarding the Q1 results 2019. [Operator Instructions] Let me now turn the floor over to your hosts, Mr. Friedrich Joussen and Ms. Birgit Conix.
So thank you very much, and good morning from Hanover. We will have our AGM later today, and therefore, we are all together here. We also had a press briefing this morning. So -- but now it's time for all of you, and thank you very much for dialing in. Most of you will have dialed in already last Thursday when we did our revision of guidance, and therefore, let me only briefly touch on that event again.Last Thursday, we announced that we would revise our guidance and we originally had said for this year, like for the last 4 years, we would do at least a 10%. And last Thursday, we revealed that we would be broadly in line with our record year of last year. And the reasons for that actually is -- are threefold. The first one is still a recap of the hot summer, which we had seen last year. This had direct influences in Q1 and you will be seeing that in a minute. That was -- October is still a summer month for most of our countries, so that's number one. And secondly, also the winter bookings, particularly in the Nordics, had been influenced. This was all planned. This was part of our plan. When we did our original guidance in December, we already had a very good visibility of Q1, so no surprise. The surprise is a little bit the summer bookings, which we saw coming in big times in January. January are the strongest booking weeks of the year, and therefore we had, at the end of January, saw a 34% [ advance that ] of summer bookings in. And what we saw is a second effect, first of all, late booking effect, so -- but demand is there, but we need to be putting discounts in to create the demand. But we also saw Turkey coming very big time. And that was also something we had planned for you. Remember that also last year, we talked about Turkey coming back and the margins kicking in, and that's what we see. But we also see something else that is actually, because Turkey is coming back, we see more supply in the market because the Spanish supply doesn't disappear. And together, this, an overcapacity in the aviation market. We see that yields in our yield business don't stack up. We see dynamic packages are taking advantage. There's a lot of oversupply in the market that creates a good number of bookings, but as I said it creates margin pressure. And here, my view is pretty clear and I come to that in a minute, consolidation will be coming. And we think about what our position potentially in consolidation should be.Now the last effect, which we have is, of course, the euro-pound ratio. That was something we had already also in the past. On top of that, came increasing dollar valuations. You know that dollar financing is particularly on our plans but also on fuel. So if your revenues are in pound, if your costs are euro and dollars, it's not the best time today.Now the summary, and that is pretty much -- when it comes to strategy, we will repeat our financial year '18, the record year this year. 70% of our business, which is the content business, Hotels, Cruises as well as Destination Management, and you can see that already in the first quarter in a couple of slides, is largely unaffected. We see the leisure travel business, the volume kick in, but weak markets -- margins in Markets & Airlines. And we see high volumes but low prices, competitive environment. The money are lost, already left the market. In Germany, you have Ryanair and easyJet both accepting losses of EUR 150 million -- EUR 140 million, EUR 150 million. That kind of environment is actually clearly indicating that consolidations will happen. And when demand is there, when the market is there, we made a choice, and we are resilient, we have a strong balance sheet, we have a strong strategic position. It's only 30% of our business, we will not give up on volume at this point in time. And we might be sacrificing margin a little bit short term, but so be it. That is important.That said, of course, competitive pressure will stay, and therefore, we had a clear revision also of our strategy. We looked at our strategy. What do we want to do? And largely, we said we will follow our strategy like we have done in the past, but we will increase the speed, increase actually the change of transformation. And this is particularly true for our Market & Airline part of the business. And you see here 3 things we are doing, and even intensified doing, business harmonization, so one platforming approaching, playing our scale game. Our leadership we had changed already 10 months ago. We put David Burling in place, so one CEO for all the markets in order to create the synergies. So that is actually something we will do even more.The second thing we are doing is we will control our sales. And what also we have done in the past, as you remember, from traditional distribution model to direct to online, to mobile, we will progress even faster in that direction. That not only gives us better cost position but also more control of our customer, more innovation. And this also enables column #3 on the slide where we say more ancillary sales. So it will provide better sales capabilities to our customers because conversion and online is better than in retail and in mobile. We have good conversion rates because we can target customers very specifically. That's also where we put investments, ancillaries, excursions and activities. You will remember that we had the purchase of Destination Management of Hotelbeds Group, which gives us a reach of 49 countries. We acquired Musement, the technical platform, with 150,000 activities, facilitating registration and distribution and payment and ticketing and so on for actually activities in the world. So we will -- 2 buckets of cost savings: overhead and sales and 1 bucket of additional revenues because we cannot play around costs, that's very clear. We need to complement it with good, attractive gross margins.And last, but not least, we will even push a little bit harder on TUI 2022. We originally had that 1 million customers, EUR 1 billion of revenues in new markets in -- that was 2 years ago. We started the activity 1.5 years ago. We have been last year, on a run rate of 100,000 customers per year. So that still generates EUR 5 million of loss, but it is a small loss, a small risk with higher reward in the long term. And we are very, very confident that we can achieve 1 million customers in 2022. In fact, upside potential here, particularly to drive occupancy for our hotels.So far, to strategy, let's focus on Q1. Q1, you see a degradation of profits from EUR 37 million to EUR 84 million negative. As you know, it's typical for TUI operating and our business that actually we have seasonal business, so it's a seasonal negative. And you see -- but that was all planned. As I said, in December, we already knew that it will be happening and you see the Markets & Airlines piece in here negative, you see positive Holiday Experiences. And when I look right now into the specific segments, you see Holiday Experiences, Hotels & Resorts, are nicely shaping up the underlying trade in 27% up. You'll see in general terms that occupancy as well as revenue per beds are good. Interestingly, maybe that Riu occupancy goes from 85% to 82%. You say maybe it's not big, but that is the Spanish effect of the Riu hotels. But we are counteracting it with diversification through our Turkish hotels, right. So 83 -- 85% to 82% might not look big, but it is, of course, significant because their revenues equals margin more or less. But that said, still, as a result, on the balance, Turkey is more positive than the challenge in the hotel business in Spain. So hotels are intact. Cruises, I would say even more so. Underlying EBIT up 25%. Additional cruise stays in Cruises and Marella -- TUI Cruises and Marella, still very solid average daily rates. Hapag-Lloyd with very strong yield increases, more than 10%. So we're playing here the luxury game, and we are pushing even more for luxury perception and luxury positioning. So very good for profitability, by the way, as you can see on the bottom right.Holiday Experiences. Don't look too much on the underlying EBIT. I mean, this is, again, a business when the volume increases in the winter season, the losses increases, exactly according to plan if not a little bit better. I think the most important point is even in low season, we increased almost the volume double. So that's where we invest, that's where we actually see the future of our company. And last year, we increased profits to more than 20%. Also this year, that will happen again. So it's a very strong growth game.And then we come to Markets & Airlines. And here, you see in a difficult environment, we increased customers 1.2%. That's what I said. We will not sacrifice market share. We will actually -- yes, we have the margin pressure, which you see on the bottom right. Also online distribution, and particularly, at distribution, that's what I wanted to show you, is shaping up nicely. Last year, we had 200,000 customers via the app. We have, at the same time, 5.5 million active app users per year. So you see -- you can imagine and grasp that actually the growth of app bookings is actually on the doorsteps.So outlook. Fortunately, we have 70% in -- of our profit pool in content. And I mean, people who have not changed and are active more in Markets & Airlines. We'll have other challenges. And as I said, Holiday Experiences is shaping up very nicely. Markets is under quite some pressure and I believe that you will see some consolidation happening. You saw Germania in Germany leaving the business. I think it's a first incidence and it will happen also over the next year or 2. The prediction about how fast it will happen and so on I don't know, but I think it's not sustainable to have long-term positions there. People put like, as I said, Ryanair, easyJet and others minus EUR 300 million, minus EUR 400 million in just a market like Germany, that's not something which long term, it is a market share rev game in order to consolidate midterm.So that said, we are confident to repeat our record year. And I would like now, before we turn to questions, to Birgit to lead you through our income statement, cash flow as well as balance sheet. Thank you very much. Birgit?
Let me take you through our Q1 financials. And before I go to the income statement, we flagged in our annual report that we would be applying IFRS 15 and IFRS 9 from the 1st of October 2018, and in particular for IFRS 15, this has resulted in a change to our quarterly and full year comparative revenue and EBITA. There is a slide in the appendix outlining the key changes, if you want, and it is on Slide 23.So turning to the first quarter income statement. Fritz has just explained our turnover and underlying EBITA and the drivers for operational performance in the quarter and I would reiterate that the first quarter is not a significant quarter for us as a business. Adjustments were slightly higher than prior year, and the current year first quarter charge of EUR 22 million includes separately disclosed items of EUR 14 million and the purchase price allocation of EUR 8 million. Separately disclosed items relate mainly to settlements in the U.K. in relation to the closure of defined benefit pension schemes and associated costs. This purchase price allocation of EUR 8 million this quarter relates to the noncash amortization of intangibles, which we typically have every year. And we -- as you can see, we continued to guide to approximately EUR 125 million of adjustments in the full year and this is reflecting further planned restructuring costs, in particularly, in France and Germany, we mentioned that already during the full year results in order to deliver further efficiencies in these businesses.Then moving to net interest expense. It increased by just under EUR 2 million compared with prior year and this was mainly due to the Schuldschein issuance in the second half of fiscal year 2018. The chart also reflects a drawdown on our revolving credit facility for our seasonal working capital requirement as well as an increase in finance leases compared with prior year.As usual, income taxes were a credit this quarter due to the loss-making position before tax. We expect the full year 2019 underlying effective tax rates to remain at around 20%. And finally, minority interests, which relate mainly to Riu, reduced this quarter due to the non-repeat of hotel disposal gains as previously outlined by Fritz.The next slide shows the free cash flow in the first quarter as well as the development of net debt during the period. As usual, the first quarter cash flow and movement in net debt reflects the seasonality of the Markets & Airline business. Putting it really very simply, high volume of hotelier payments is typically made in the first quarter relating to holidays completed in the summer and prepayments for future seasons. And at the same time, it's not generally a key holiday period for customers nor a key booking period for future seasons, so the markets are not receiving high levels of cash income.In the first quarter of this year, the seasonal working capital outflow was higher than prior year due primarily to growth in capacity in the summer 2018, especially in Germany, where we had higher business volume due to additional aircraft following the bankruptcies of Air Berlin and Niki. And also, we equally grew volumes in some Central Europe markets, which is also reflected here. This means that there were higher supplier payments in respect of additional capacity during the first quarter.In addition, net CapEx and investments reflects firstly the phasing of expenditure from last fiscal year 2018; secondly, the continued reinvestment of disposal proceeds into Holiday Experiences; thirdly, our normalized expenditure; and last, a lower level of proceeds from disposals this year.And then in terms of net debt movement. So apart from the free cash flow impact, we also had new finance leases during the quarter relating to aircraft. So comparing the net debt position at the 31st of December '18 to the 31st of December '17, you can see significant increase and this is in line with what have been planned before and reflects the reinvestment of disposal proceeds since prior year as well as a higher level of finance leases, mainly relating to some of our 737 MAX deliveries.Now coming to the guidance. As already announced and discussed earlier by Fritz, we expect a repeat of our record underlying EBITA of the full year 2018 and therefore guide with broadly stable earnings development. All of our other guidance items remain broadly the same as we outlined in December and are shown here for completeness. So I will now hand back to Fritz to conclude.
Thank you, Birgit. Very clear. Let me conclude on particularly the strategy, please. As we said, this year will be broadly in line, the EBIT will be broadly in line with last year. We have specific actions, which we took and are taking in order to be able to protect our market share and at the same time our cost position. And we believe that today's environment will trigger a market consolidation. And with our strategic and financial profile, we are in a position to be a beneficiary of that development. At the same time, we are in a good position that 70% of our underlying EBITA is in the experiences field, so not affected by the trend we see. 30% is actually in Markets & Airlines where, there, the competition is thickened. And the good thing is consumer demand is in the market, so the market is growing. People want to travel. The margin pressure is here, and as I said, it might trigger market changes and consolidation. Long term and midterm, our scale of business will be digitized, platformed and really be scaled again in the future. We will play CRM. We will play global scale of inventory as we have outlined, and these are our main investment aside the hotels and cruises. So we will transform the company another time after we have gone from operator to integrated tourism, now from integrated tourism to actually a digital platform business, which will be a main driver, of course, in the future. With that, I want to close and open for your questions.
[Operator Instructions] The first question comes from Jamie Rollo.
Jamie Rollo from Morgan Stanley. Three questions, please. Just one, Fritz, the number looks a bit odd in Hotels, up EUR 23 million, sales only up EUR 5 million. I know a lot of that is associates. Are there any one-off gains in that number that might reverse next year? And a sort of similar part of the same question, Hapag-Lloyd profit EUR 9 million. It never normally makes a profit in Q1, that can't be dry docks. Again, are there any one-off numbers in there? Secondly, on debt levels. Clearly, a very big increase, EUR 1 billion up on a December-to-December number. It looks like you've given us your gross financial position, Slide, what's this, 26. It looks like you're running very close to 3x gross adjusted leverage, which I think is the top end of your target. Is that correct? And is your year-end September '19 guidance for about EUR 1 billion increase year-on-year as you saw in December? And finally, Fritz, why are you confident that this late booking effect is just late booking? Are you not worried this is a drop in demand and you might not see those bookings come back later?
Okay. So I'll take question number 1 and 3 and I'll leave Birgit with the more difficult question on debt. So I mean, first of all, the hotels is not one-offs. So it is underlying. Last year, we had the one-offs as you can see in the chart. So this year is actually we added capacity, as you know, and that is the main effect. In the Cruises, we have -- it's mainly trading and you see -- when you go from EUR 533 to EUR 591, it is, the 2 -- that's, of course, enormous profitability. And I mean, we also see bookings in the future is going very well. We have 2 minor effects. One is actually the exit of HANSEATIC, which gave us a little bit of a gain, at the same time, we had more dry dock days, which is again something but both together are less than actually the operational effect, which you see. What is giving me the confidence? First of all, in -- what I -- we have been -- for last year, when you look at the shape of the margin curve for last year, Q1 was incredibly strong. I mean, also Q2 was, by the way, strong. Monarch had left, airberlin had left. Now that has been backfilled by capacity so in summer that was not a real advantage anymore. And then we had the hot summer. I mean, if you had asked me for last year's prognosis where we said double digit, I would have said in April more likely it will be around 16% or something. Because the bookings came in -- the yields was taken up very nicely and it was enormous, I mean, because also of scarcity of supply. I mean, in Turkey, it was still not -- the volume was still lower than it was here. Spain was [ taxed ] fully. It was an ideal situation for us as an integrated play. And therefore -- then the summer came, the hot summer came, and we lost per week, let's say, by what we had prognosted before, let's say, EUR 8 million on average, and that is something which, of course, led then to still be above 10. But already last year, the markets where minus 14% versus the year before because of the hot summer. Now -- we can look at now at difficult things if you exclude seasonalities, if you look at weather, if you look at regional distribution and so on and so on, we have done several simulations and it shows that the guidance we have been putting out is absolutely the right one and we are very confident to hit it. That said -- and 34% is not everything, but it is also not nothing. So it is already a good bookings status that we have a good basis to simulate our profile also into the future. That said...
Yes. Then to the last question or the first -- it was actually your first question, the answer is relatively simple. Because in hotels, we have no one-offs. This quarter, 2019, we had in the last quarter for fiscal year 2018, as you know, the Riu disposal gains. And for Hapag-Lloyd or the other Cruise business, we also do not have one-offs for the first quarter fiscal year 2019. And then on the debt leverage, we always guide for the full year and we do not do the quarterly updates. So for the full year, we definitely reconfirm our guidance from -- which is from 2.25 to 3x and we plan to be, yes, in the middle, let's say, like was the case in previous years.
So just on Hapag-Lloyd, your revenue fell by EUR 2 million? Your profit rose significantly rose by either EUR 8 million or EUR 9 million. I mean, how can that be top line-driven?
No, no. Jamie, it is less custom. As you know, we had the exit of HANSEATIC so we had less capacity but we had -- therefore, we had lower costs, but we had higher per diems and that is -- I mean, this is actually a fixed-cost game. So if you exited, you have -- your exit capacity you have virtually the same revenue then the margin is going, let's say, through the roof, but it's very much improving and that's what you see here.
Okay. And you're not guiding to net debt at September '19?
No, no. We will not -- excuse me, can you repeat that?
Are you -- can you guide to net debt for the financial year-end?
No, we don't -- no, we don't actually. Just looking at...
Because your leverage ratio, the 2.25 to 3x is gross, obviously including operating leases and pensions, so it's a very, very wide number. Is it fair to say net debt will be up about EUR 1 billion year-on-year like December was up EUR 1 billion year-on-year?
Yes, we don't actually guide on those numbers. But in terms of debt, we adhere to exactly the same policy and will be as we always, I mean, were these past years are very potent on it. So let's say, we will be in the middle of that range of guidance and that's all that we say apparently about that.
The next question comes from Johannes Braun.
Just 3 for me as well. Firstly, can you give us an update on the Corsair case and where you stand in terms of selling the airline? And then also more broadly on the French business, where we are there in terms of the restructuring? And then, secondly, coming back to the profit warning last week. Obviously, in your previous guidance, also fiscal '20 was covered because you said that you wanted to increase EBITA by 10% on a CAGR basis. Can you give us, as you stand today, give us -- can you give us some confidence that in fiscal '20 we're back on, let's say, a normal earnings growth path. And then, lastly, maybe I misunderstood but you said you had already 5.5 million app users and you have 23 million customers overall, so roughly 20% of your customers already use your apps. So I do not really understand why the -- why you only have 1% booking via the app as of now?
Okay. So that's -- is it -- first of all, Corsair, that's not a strategic asset and we are looking for a better owner. We cannot say more and don't want to say more right now. The second -- but that, nothing has changed. The French business is a difficult business, is a loss-leading business today and we are -- there, we are not just doing a little bit more of what we did in the past. A heavy restructuring in the business is going on. And we have also changed management in France, in the French TUI operator. We will actually align with close of the Belgian business and we will actually offshore into Morocco as well. And also, we will -- we have taken the approach of reshaping the brand. So one of the issues in France is actually higher sales cost, the highest in the group sales cost. So online will be of crucial importance. So we have actually rebranded only about a year ago and now we are building a brand awareness and perception. So it is -- this is one of the things that it's still -- I would call it, the dirty color, right? So I mean, here we -- I'm not very patient. This is one of the things where we lose value and we are not talking about sacrificing a little bit of margin. I mean, here we are talking, let's say, reshaping of the business and restructuring. Financial year '20. I mean, it's too early to say. I mean, we don't know where consolidation will be. And therefore, it's difficult to say as -- and the 70% of our business, I think nothing has changed. It is the 30% of our business where we don't know what's happening this year and it will be difficult to say what's happening next year. We are not irrational people. We will not be indefinitely putting money in. But it's very clear this year we said it's better to be flat on profit. It's not the worst thing that can happen that you repeat a record year. And we are on a strong position in order to give that market share for the time being in the upcoming consolidation, not to sacrifice on market share today. But that needs to be tactically looked at each and every season. Long term or midterm, I'm very, very confident that the digitization benefits will kick in and you saw this 89%. This is winter. This is winter, the least quarter and you have 86-over percent volume growth in activities. That is a profitability, which will be shown as part of our Source Markets and it's helping to build revenue growth, which is, of course, as you know, much more sustainable than just cost measures. But of course, we will come back in time in order to talk '20 more specific. Then the 5.5 million active users, that was is not off 25 million or 26 million, that is off 21 million. And this is just active users in a year. So we are not talking downloads, we are not talking whatever. This is active users. And of course, this is mainly for -- this is mainly to get in touch or have -- to get you to, I guess, holiday countdowns and get you in touch with this potentially upselling and excursion. To book a holiday, so that means the full package on mobile is something which is very new and this is not in an impulse purchase, this is really things. And usually, people investigate and then they buy online in some of the countries and some of the countries like Germany, even they do it in the retail, they want to see somebody, right? So I mean, 200,000 purchases, average purchase for a vacation, EUR 900, if you have a family of 4, EUR 3,600, it is something which is a very new trend, but we see it's topic coming up now. And therefore, I'm pretty sure, we will see growth there and distribution costs in the app are 0. So each and every percentage points we have there is better conversion, it's lower cost. So I think it's very strategic.
The next question comes from David Holmes.
Yes, just a couple of questions. First one is on the -- you've talked about the likelihood of consolidation and the benefits that might bring. Just wondering if you could clarify your willingness to participate in that consolidation? And then the second one is just on the cost savings that you referenced in the presentation this morning. I wondered if there's any quantification around that or how quickly we might be able to see those come through.
Sorry, the second one I didn't get.
Cost savings.
Cost savings.
The cost savings you referenced this morning, just any quantification around them and how quickly they might come through.
Yes, yes, yes. Okay, sorry, I just was -- consolidation, I mean, when you see somebody like Germania leaving the business or last year, Monarch or airberlin, we always look is this capacity backfilled or no? And I think in airberlin and Monarch, we saw it backfilling. In Germania, we didn't see that and we don't see that right now. As I said in Germany, you have this, let's say, accumulated -- of all the players accumulative per year, EUR 300 million, EUR 400 million loss. I mean, it seems to be that capacity is little bit reducing. Are we participating or not is difficult to say. I mean, we are actively standing on the sideline, with active attention standing on the sidelines. It's not like -- it's not our prime strategic direction, so it is a tactical judgment if we gain more benefits or not. But if you ask me today, not very likely that we will be in that field. That said, we watch actively in that field. Where we do play consolidation game, big time, I mean, is Destination Experiences. And here, I said the margins are usually 300,000 players in the market, growth is very strong, margins are very high. And very few digital platforms in the world. And we just purchased one and we will be see -- we will play -- we are #1 in the market of experiences, excursions in the world and we will be actively -- driving active consolidation in that field. Cost, I mean, you will see some of the cost measures come through this year. But particularly in overhead, we will not win the game. We need to do it. It's absolutely necessary, but we will not be winning the game here. You think about, only 3% of revenue is actually overhead. And so it is -- you cannot win the game on overhead costs. Of course, we need to do it particularly to be more agile, to get into modern IT systems and so on. On sales, it's different because sale costs are still 10% today. And every mobile activation, we do -- we save cost versus retail. Every -- online, every mobile versus online, we save cost. So we put a lot of effort into driving online and more mobile adoption. So that's a different game.
The next question comes from James Ainley.
Three questions from me as well, please. First one is can you talk about what capacity growth you are now building in for the summer? And then what ASP increase you need to hold margins from here? And secondly, on the business harmonization, what pieces still need to be harmonized? I suppose, especially when you think about the airline, what is there to do? And just coming back on the previous question, kind of what is the size of the benefit that could come from that? And then the third question is to what extent do you think you can push down this weaker consumer pricing down to hotel partners in Spain either this year or next year?
Okay, okay. Capacity, capacity growth, we have -- we shared a little bit the profile in our countries and in the countries a little bit different. We know that in Spain -- in U.K., you know there will be almost flat capacity. We will gain a little bit of market share with the risk capacity in the market and we will sacrifice a little bit on sales price. The same, by the way, is also true for Germany. In the Nordics, we have gone a little bit of a different approach. Here, we are -- we have done the following. We know the very high gearing of one of our competitors. Actually, 2 of our competitors have enormous risk capacity in the market so -- and they are also not able to take capacity loss because it's their own flying and high bundling, so we have been a little bit more careful. So it's market-by-market a little bit different. In terms of business harmonization, there are 2 things are coming to mind. One is airline, and in the airline piece, with the 737, we harmonized absolutely the fleet. So the fleet will be -- we can then exchange the fleet cross-border. And that is, of course, very different to actually our position as before. And also IT, so all IT systems in aviation will be one within foreseeable future, short-term future. And the second one where we see harmonization is all of our CRM and all of our app development. So everything which is mobile. Contrary to online, online is very related and we -- it would have taken a lot of effort to harmonize all online because it's so much integrated into the booking systems. With mobile, we have taken a different approach. Mobile is just one actually, end of story. So the more mobile we get, the more harmonized we will be. And on the hotel purchasing, of course, we have renegotiated. We are renegotiating all the prices and with these partners. And also they come to us to renegotiate because, again, here, in Spain, everybody -- the Spanish spring, if you like, for the last -- and summer, for the last years, will not repeat very fast if Turkey is as strong as it is right now. So we will sacrifice a little bit of the margin. We also pushed down the prices in these, our partners, in Spain. And the same time, we have the corresponding building, nice building of margins in Turkey, right? So for us, it's a wash, if you like, and you will see -- or you have seen already in the first quarter the increase of trading the benefits in our Hotel division.
And just to be clear on that hotel piece, are you able to push down some of that this -- for this summer? Or is this more about next summer?
Yes -- no, no, no, this summer, I mean. We don't sit in the high booking season. We see the margins don't kicking in and sitting and wait and just do something for '20. No, no, absolutely. This summer.
And just coming back to the capacity point, so you're saying broadly flat capacity but -- and what kind of price -- to have held margins this year, what sort of price increase would you have needed?
I mean, this is -- we can't -- we, of course, had seen margin pressure versus the year before in Q1 and we will see in Q2 because the world was okay, margin was taking up. And as I said, end of Q2 last year, I would have said, if you had asked me 15% or 16%, the profit increase would be more likely than 10%, okay? But then can we use margin pressure? I mean, when you sit there and then the business is not building and what more or less it's some of the summer weeks, we thought whatever price we do, we don't get the volumes, yes? So it was more like people in Stockholm said why should I leave 25 degrees and go to Mallorca with 40 degrees, right? So you can imagine that it was one of the most -- I have not seen that before. Therefore, this summer, margins, no matter what will be different to the '18 margin, by their simulation, when you look at '17, '16, '15, '14, I mean, we have all these -- we have all seasonalities in our systems. And so the comparatives will be significantly weaker and we have never a summer in the last 10 years like we had last year. So therefore, that will be definitely more relaxed towards the end of the season.
Your next question comes from Adrian Pehl.
Actually 2 questions from my side. First of all, on the Northern Region performance, actually, netting out the hedging gain that you showed for A&M, I think that was mostly attributable to Northern Region. So I was rather wondering you were talking about a lot of restructuring in Western and also some restructuring in Germany. I mean, isn't there any need to do also bit more here in the U.K.? And shouldn't that alter the, let's say, one-offs you have in your guidance for this year? And secondly, just in terms of clarification, you talked about airline consolidation and you were referring to Germania basically. So I was just wondering myself is that, what you said, is also attributable to your potential consolidation around from Thomas Cook and Condor. I mean given that it might not necessarily come in one piece to the market, would you still be a bit more passive in terms of consolidation? Or would you look at that more actively compared to Germania, for example?
I mean, we were very active with Germania. We were the first ones who took actually -- took slots, for example, in Nuremberg. We have less than 1 week, after Germania, we put our airplanes into there and removed it from the very crowded Düsseldorf-Mallorca or Düsseldorf-Canaries slots. The question is, as you say, is would we actively look into consolidation with Condor or with Thomas Cook, today, we don't. If we did, we had to announce it. So we're absolutely not active today in that respect. In terms of regional performance, yes, you are right, the hedging gain is U.K. But that said, when you look at the minus 86, you see the challenges in all the countries and maybe even except Germany. Germany is better. But that said, on absolute levels, Germany has not been in the past where the others were. So benefits of reshaping the business are now counteracted with the trading. But you are right, I mean, the challenges are in all the markets. I mean, they are on margins like 3%, some are higher. You know the Nordics are still higher; Belgium, higher. But the tasking is in all the markets. I mean, if you haven't -- if you have margin pressure, you better get going with cost savings and I have a clear understanding with David that this is a main task and it needs to be done.
But you're not like intending to set up a, let's say, specific restructuring program also for the U.K. So you think it's more like a market problem, obviously, in terms of return -- from the destinations return, right?
I mean, it's a market-by-market thing. But I mean when it comes to operational performance, that's strategic, of course, and harmonization. I mean, I always said we harmonized brands, we want to harmonize our team, we are progressing faster. I mean, it's less room for if my market doesn't work. I can tell you. I mean, this works in markets because we have a very strong financial position. We have a good strategic position, 70% in Hotels, Cruises and Destination Experiences. It doesn't make it better than the 30%. And when we -- the best insurance for the future is good cost positions and I'm -- and here, this kind of stress, if you like, in the margin for me is an additional incentive in order to progress faster.
And the last question comes from Alex Brignall.
It's Alex from Redburn. Just one briefly on the net debt position and how to bridge through it and how to just roll through to the full year, I know you talked to it a little bit. Within there, on the working capital, how much of that -- or what can we attribute that being giving the difference against last year and how much of that -- how should that then roll through to the end of the year, just thinking about the overall growth in the net debt position?
Okay. So on the net debt position, you already clearly -- you see an increase in net debt. You see that in the first quarter. You can, I mean, roughly imagine that this is the amount with which the net debt will increase for the full year, but we don't guide on net debt as I just alluded to. In terms of working capital, this is a special project that we already started. We'll do that with the full global finance leadership team, and free cash flow is something that will be really high on our agenda in '19 but also in 2020 and the years to come. So there will be increased focus on free cash flow.
Okay. But for the full year, is there anything within the change in Q1, which unwinds for the full year? Or is that the nature of the booking curve and how it looks different historically?
Yes. So the first quarter is a very unusual -- I mean, it's a very unusual quarter if you compare to other quarters. The first quarter is always subject to a lot of seasonality and that is also what we see this time. So the difference in working capital is attributable to this effect of the first quarter. If you look historically, apparently always the first quarter is some -- I mean, it's a bit difficult to judge. There is not a lot of income from the tour operator because it's a very -- it's a low quarter. But then on the other hand, it has high payments. Therefore, the hotel payment -- hotelier payments from the summer bookings and also -- and when that volume increases, these payments are higher like we see now. And also -- it's also a prepayment quarter for the hotels when they actually need funds to renovate, et cetera. So it's kind of an odd quarter, if that may answer your question. It doesn't give any guidance of what the full year will look like.
So I think there are no questions anymore. I think let me close. Fortunately, we have actually started our strategy and execute our strategy of content-centric 5 years ago. 70% of our profit pool is not affected in short-term trends. In the 30%, there is this -- there's a lot of capacity, there is demand, but there is today pressure on prices and margin. And my prognosis is that it will stay for a while. And we will be -- or we should be in a position and behind a position to play in a consolidating market an active role. We have, therefore, said we sacrifice a little bit, rational, a little bit on prices and margin and therefore revised our guidance to be broadly stable with the record year of last year. At the same time, we will progress reshaping the market investments, reshaping IT and digitization, which will drive our future business and future profit growth. The market is intact. So more people want to travel and people are -- the market growth is there. So we're not in a structural decline. Quite to the contrary, we see that it's a very good growth in customer numbers and that is a very healthy sign. Therefore, I'm alert for -- or I have a high attention to short-term execution now, but it is nothing to worry about. Thank you very much, and see you soon. Bye.