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Hello, and welcome to the TUI Group Full Year '21 Q1 Results Call. [Operator Instructions] I will now hand you over to your host, Friedrich Joussen, to begin today's conference. Thank you.
Thank you very much, operator, and good morning, everybody. This is a very special day because it's snowing in Germany and I think in a lot of other places in Europe. And it's the first time that actually we don't sit at all together, I sit in Düsseldorf and Sebastian in Braunschweig, and the Investor Relations team with Nicola and Mathias and -- sit in Hanover and probably in London. So you have a team sitting everywhere around. And hopefully, we still can do a good presentation, and therefore we are now -- I have to announce a little bit the slides I'm focusing on in my presentation. And maybe I could go to Page #4 of my presentation and my opening comments. The quarter has been a successful quarter in one respect. We secured the support package of EUR 1.8 billion, and I will focus on that in a moment. EUR 1.5 billion you see now in our liquidity, which is EUR 2.1 billion in early February and EUR 300 million we used to pay back our EUR 300 million senior bonds note. And therefore, we extend maturity until July '22. So when you focus on the third package, you will see it's more equity-related than it's debt-related. And I think that's very important because it doesn't only provide security, but also starts to focus on the balance sheet structure. Now when I look into the market, we now brought 2.5 million customers to their vacations. And what you can see is that is safe travel is possible when you look and when you put emphasis on the routes, our 7-day incidence rate averaged to 0.5 per 100,000 guests. So not 50, not 100, 0.5, so virtually nothing. I think it was 300, whatever, incidents on 2.5 million guests. So it is safe to do holidays and customers like it. So good holidays and safe holidays are possible. On top of that, we see right now the vaccination ready to start, particularly in the U.K., extremely successful. Maybe there are not so many advantages, that's at least the sentiment [ coming off ] the Brexit, but I think vaccination is one of it. And the vaccination program in the U.K. is extremely ambitious. And fortunately, that is also the country with our biggest booking profile today, more than half of our bookings actually are in the U.K. And to half -- more than half of 2.8 million summer bookings are in the U.K., and therefore it's a good coincidence for us that the vaccination program is so successful there. Capacity will be maintained at 80%, some flexibility to go up and down. I'll come to that in a minute. U.K. summer '21 load factor is already 42%. Again, it's our strongest market and also the market with the best vaccination program. That's all good. Global realignment program update is tracking to deliver the savings of more than EUR 400 million PA. We are -- I will focus on that in a minute as well. More than half of the program is already executed. And the savings, 1/2 of these savings will actually already hit this year, and it's also part of the better cash burn than expected is actually that we are going to control cost.So we believe that liquidity is bridged through summer '21. We are strongly positioned to actually take advantage of the market situation once actually the restrictions are lifted.So now talk -- on Page #5, briefly on the support package. The third package has 3 major components: WSF components, silent participation 1 and 2, one is convertible, one is nonconvertible. Both actually qualified for equity, therefore, it's largely equity. But we also have an additional component, RCF, with fresh bank money in. So 20% fresh bank money that shows confidence of the banks. I think that's good. But even more important on the equity raise, which we have thought was not possible just beginning of November. But then through the news of vaccination, the share price rose and we could do EUR 500 million equity raise. Rights issue, 98% plus. We actually have executed the rights. 2 million shares -- 2%, so 8.3 million shares. We're actually in the ramp and have been oversubscribed, and therefore, we achieved a very good price of EUR 3.85, which was closed on the trading price at that time. But even more, I think, also important that actually Unifirm actually increased their shareholding from 24.9% to 30.1%. Strong commitment to the company. Strong belief domestic markets is about to come back. And as I say, I mean, the subscription, the rights take-up, the oversubscribe of the ramp, the KfW fresh banking money as well as Unifirm, everything indicates that actually tourism will be coming back soon and the company will be strongly positioned. We used EUR 300 million to repay early the senior notes bond. And it would have been due in '21, but therefore, we saved some money. And the good thing is that now the -- including the extension of the RCF to '22, now the first maturity is actually now July '22, and that gives us time to restructure our balance sheet, to take care of this different measures available to manage maturity and balance sheet until that point in time. So liquidity is EUR 2.1 billion. I mean this is plenty to bridge into summer '21, and I think that's good. That actually it gives us that certainty. Now I have some anecdotal press coverage on vaccines. You have gathered all. It's not only BioNTech, Pfizer and AstraZeneca and Moderna. And now I mean, Johnson & Johnson, I mean, think about its single-shot vaccine, an enormous giant with strong production facilities. I mean now they have been strong anyway, but also the scarcity of supply in the other countries, I think it's a matter of time until managed a strong focus plus a strong supply coming up. So I think that's good. And particularly, when you look on the next slide, Slide #8, more than 11 million people have been vaccinated in the U.K., close to 20%. 12 million jabs, so some have been receiving a second one. Until March, I recall everybody above 60; until May, everybody about 50, will be potentially vaccinated. I think this is very important because the main objective of vaccination was not to eliminate the virus, that will be not possible, but to hinder the overloads in the national health systems. And I think when you have vaccinated the vulnerable, when you have vaccinated the doctors and nurses and so on and so on, particularly in the U.K. that will happen fast. And we are just, I think, potentially seeing maybe mid-March, April and so on. That actually have been taken place. And then because we have more than half of the bookings in the U.K., that is definitely very helpful. So in the summer -- but it's not only the vaccines but also the antigen tests which are around, which are more and more the method of choice in our countries. So -- because you see after 10 minutes, results, so no latency and -- in the countries that's recognized the advantages, I think we took 2 components, the vaccination as well as the antigen test. These have been things not being around last year, but now around. And therefore, I believe that is a strong indication that this year summer holidays will happen. Now looking at the bookings. For the moment, that's Page #9. Bookings have been risen after the vaccination news. Factor of 2, up 70%. It should have been a factor of 4, so even double the volume you see here. But of course, you see, in light of the closed borders, still some short-term booking patterns. And I mean, it's promising that we saw this rise. And these are the daily bookings you see here. But of course, it's still some way to go. And when you look on the next slide, you see that the bookings 2.8 million, in this light bar on the top, compares to 4.9 million bookings in '19. So it's down 44%, but prices are up 20%. And this is -- all about half of the effect is trading up of people. So they book higher-quality holidays or more package, and the other one is actually a mix. So therefore, I think both effects are good because high average sales prices guarantee good margins. And now the short-term booking estimate of holiday report suggests that actually we'll see a lot of short-term bookings, but other reports as well. Therefore, I believe we will see a good summer. Now let's look at our model and how will we do in the summer, and this is actually a Page #11. And here, you see on our flying capacity, we have been proving that as soon as flying was possible, we had a lot of flexibility to fly and we flew very fast, making integrated decision so we could make marketing initiatives, immediately fly, open our hotels and so on. In the summer last year, that has been helping a lot. We have also still some flexibility on the 80% because we are using third-party capacity as well. So we can flex down, but we can also flex up if the demand is higher. So I think that's good. We have a guaranteed flying plus flexibility. On the hotel capacity, we have been proving that safety protocols have been in place. We have been proving that we over-indexed a lot for our owned hotels. So we can generally [ manage ] to our owned hotels. And that, I think, is very important. And with our diversified portfolio across Mediterranean, Caribbean, North Africa, Asia, wherever it opens, we can actually fly in customers into our hotels. Cruise capacity. Cruise has been -- we have been still selling in the winter. We were the only European cruise operator doing so. We have had a strong distribution, direct distribution to operator integration, that means high margins on holidays sold, rigorous hygiene and safety concept. And we believe that midterm, we will see even a more reduced global supply because there has been a lot of scrapping of old tonnage and also new tonnage has not been ordered. So we believe the market will come back very strongly. Operational highlights and anecdotes, which I just wanted to -- as last time, you see the demand is very strong. Winter program, I mean, when you look at the -- on the slides here, being at owned hotels in Fuerteventura, Zanzibar and Maldives, all very good in occupancies. When you look at the Fuerteventura hotels over New Year's, everything was booked. Three times as many bookings in January to the Maldives. I mean -- so the Maldives seem to be safe. I mean you have a lot of good underpinning evidence that actually demand is strong.And in airlines, I mean, we actually focused also on different business. I mean we did more than 160 cargo flights. Of course, it's not a long-term business. But it generated double-digit -- good double-digit revenue. And why not, I mean, contribution margins in mid-single digit. I mean, it's not so bad. In preparation, of course, for the MAX return on the way, we have now the pilots on training. So the MAX will come back and will be a very safe, hopefully, I think. So now talk about the global realignment program. That's, of course, what we announced. More than half of the realignment program is now executed. So you should expect this year something EUR 250 million of EUR 400 million, the EUR 400 million actually -- at least EUR 400 million PA was something from '23 onwards. And now we are more than, let's say, this year will be EUR 250-plus million, half of -- more than half of the program is executed. 5,000 FTEs reduced. Musement fully digital right now. I come to that in a minute, how that looks. TUI fly restructuring, particularly in Germany, halving the airline. Retail down in in the U.K., particularly in the U.K., but also in Germany, more than half of the program is executed. Headquarter and staff savings are realized. So as I said, you should expect EUR 250 million of the EUR 400 million, about 400 million, let's say, already this year. So good companies look through the crisis. We talked about we don't only want to save cost on the program, but also thinking digital first, digital acceleration, innovation. And here, one example is actually the integration of TUI Musement into the TUI app. So you book a journey, you have your document in your app. And when you open the app, you see the new load of software, every 6 weeks things are new. And you see now in the app integrated since March not only holiday countdown, but also personalized planner, destination content, which is one click away. I mean we know that customers come to Spain or Greece, for example, and therefore we can actually already sell -- start selling activities in destination, live transfer information. You see on the right of the screen shots, you see actually it's all integrated with maps and chat functions for our -- live chat functions for our reps and so on. So that is something -- even hotel check-in for our owned hotels, as possible for new -- for the third-party hotels is there to come. And here on the next slide, particularly when I think that the Musement, the tours and activity segment, is actually one of the most promising segments. We have more than 170,000 excursions active in more than 140 countries. We have a full recommendation engine or CRM-enabled, app-exclusive discount, dynamic merchandising. So you know everybody sees one-to-one. You know what we believe they are interested in book flow messaging, and so on and so on. And here, what's next in the pipeline is sharing content with your communities, rating, reviews and so on and so on. So not only we reduced in Musement the staff in destinations, but also we increased quality, and we believe that we are in a strong position to take advantage once the travel business actually will be revitalized. With that, I would like to pause for a moment. By the way, all of these are live screenshots. So I just took some screenshots of our app, so it is already live since January this year and the latest software drop in March. So with that, I would like to pause for a moment and actually Sebastian to [ bounce back ] to give you the opportunity to talk about our numbers.
Thank you, Fritz, and a very warm welcome also from my side, looking out the window, 0.5 meters snow in Northern Germany is very unusual. Let me guide you on the following pages through the Q1 results of the financial year 2021. I'm starting with our revenue development during the first quarter. We generated around EUR 0.5 billion of revenue, with October being the strongest month. This is roughly 12% of what we achieved last year due to the ongoing travel restrictions forcing the cancellation of the majority of our winter program. Underlying EBITDA stood at minus EUR 480 million, while underlying EBIT came in at minus EUR 699 million, demonstrating the strong discipline on cost, while using every operational opportunity to offer holidays to those customers who wanted to travel. All in all, these measures helped to reduce our average monthly EBITDA loss to EUR 160 million and to EUR 230 million on EBIT level. Coming to the adjustment line with a total of minus EUR 22 million, these are mainly related to the global realignment program, so our cost-cutting program, as well as the normal purchase price allocation. Last but not least, the interest development, as you all know, the increase by EUR 57 million to EUR 109 million minus is predominantly driven by the greater revolver credit drawings and the higher interest rate on the senior notes compared to the previous year. Let me remind you that the overall assumptions for the interest results are unchanged for financial year '21 of between minus EUR 400 million and minus EUR 450 million. I would now like to come to our underlying EBITDA bridge. The deviation of the segment demonstrates limited operations possible due to the COVID-19 government and those travel restrictions. We continue to focus on cost discipline as we successfully do since the beginning of the crisis, trying to capture margins wherever possible. Therefore, we managed to limit the average monthly EBITDA (sic) [ EBIT ] loss to EUR 230 million in the quarter. Looking now at the development of the single segments. The Hotel & Resorts results decreased by EUR 132 million, with 116 hotels opened at the end of the quarter versus 229 hotels opened in Q1 last year, reflecting the usual winter seasonality and limited operations from travel restrictions. The most popular destinations for our winter program were the Caribbean, the Canaries, Eastern Mediterranean, Maldives, Zanzibar and North Africa. Occupancy rate declined 34% to 43% across our operating portfolio, and average daily rate declined by 12% to EUR 60. Our Greek hotels, which ran an extended program into October, delivered occupancy rates of 67%, demonstrating the strength of our integrated business. Our Caribbean hotels saw occupancy rates of 57%, largely driven by an increase in our third-party distribution as well as reduced travel restriction from our North American markets. Cruises is EUR 149 million below last year's level, with TUI Cruises and Hapag-Lloyd cruises operating 5 ships, offering itineraries to the Baltic Sea and Canary Islands. Hapag-Lloyd is, as you know, now a part of TUI Cruises. Average daily rate of the operated fleet was EUR 118, down 18% versus prior, reflecting the shorter average duration and more local routes at -- of Blue Cruises. Occupancy of our operated fleet were 35% and reflecting a more subdued environment for departures as a result of travel restrictions as well as adherence to COVID-19 government safety advice, cutting the numbers of passengers on board. Marella Cruises remained suspended throughout the first quarter, in line with the U.K. government travel advice. TUI Cruises was the only cruise operating -- operator to continuously sail throughout the winter. And we are pretty proud of this that we were able to offer this and that we had safe cruise itineraries.TUI Musement is down EUR 24 million on prior year with 75,000 excursions and activities sold, down 95% versus prior year, reflecting the limited operations during the quarter. Underlying loss in Markets & Airlines increased by EUR 255 million, reflecting the limited capacity operated over the period. This includes EUR 10 million net cost impact from hedging ineffectiveness, partly offset by the nonrepeat of Boeing 737 MAX costs of EUR 45 million in the prior year and strict cost discipline across all markets. All markets experienced a strong increase in direct online distribution as retail shops remained closed, an effect which we expect to stay also post-crisis to a certain extent. Which is also interesting that the share of nonpaid traffic also increased significantly, which led us to believe that cost of distribution in future could be significantly, well, lower. To give you 2 examples: online sales in Northern Region amounted to 76%, up 11 percentage points year-over-year. And also Central Region increased online sales by 16% to 37%, and as said, a very high share of nonpaid traffic. I would now like to move into the cash flow chart. And there, I would like to come right away to the working capital movement, the Q1 outflow of around EUR 400 million, which mainly reflects the settlement of outstanding supplier payments, in particular, to agreed deferral schemes as well as customer refunds arising from canceled holidays. And as I mentioned before, and just as a reminder, for fiscal year '21, we assume the working capital position to recover in line with operational booking normalization. Moving on to net investments, which is an inflow of EUR 47 million. As announced at our full year '20 results, we are looking at all kind of financing initiatives to support our liquidity, net CapEx for our ongoing IT and digitalization initiatives, as well as some maintenance for aircraft and hotels was more than offset by the sale and leaseback of spare parts and aircraft and divestment proceeds. Also here, our assumptions for net investments for financial year '21 are unchanged compared to what we stated in December. Here, we expect an inflow of up to EUR 250 million, including divestments and PDPs. Finally, I would like to draw your attention on the free cash flow after dividends, which stood at minus EUR 798 million. This is certainly better than expectations, and it was supported by our self-help measures, like the sale of receivables, [ fittings ] and other cash items as well as by the already mentioned measures above. Excluding the positive effect from these executed initiatives, the cash outflow in Q1 would have matched the EUR 400 million -- EUR 350 million to EUR 400 million assumed cash flow for Q3 communicated early December, being at the lower end of the range. Moving now on to the balance sheet. The financial position increased by roughly EUR 800 million from year-end and stood at EUR 7.2 billion at December 2020. The increase mainly reflects the negative cash flow, which we have discussed on the previous page. The increase in net debt reflects the drawings under the second stabilization package from the German government, which you can see in the liabilities to banks and the bond with warrant lines. This was slightly offset by a reduction in these liabilities, around EUR 400 million being undrawn under KfW package 1 and 2. Coming to the liquidity management during the quarter and beyond, pro forma cash and available facilities as at 4th of February '21, including third support package, would amount to EUR 2.1 billion. Please keep in mind that this number already assumes a redemption of the EUR 300 million senior notes. The monthly cash outflow in the first quarter was with EUR 300 million per month, slightly better than expected due to the already mentioned financing initiatives we successfully executed in December. Looking ahead, our assumption for Q2 is for the working capital development to correlate with vaccine program rollout and lifting of travel restrictions, with a significant upside anticipated should travel restriction be lifted ahead of Easter, which this year is early April. We still anticipate net cash fixed cost outflow to be in the range of EUR 250 million per month, a range you are already familiar with. Our assumption for Q3 is for working capital to recover in line with operational restart and booking normalization. In the case of lifted restriction, net cost and -- net cost could potentially move towards operational breakeven. I would like to finalize my section highlighting again my priorities, driving the recovery and returning to a healthy balance sheet. First, most important to manage liquidity. The execution of the third support package was of utmost importance to bridge liquidity to summer. We will continue with a very disciplined CapEx management, and we will work on further divestment opportunities for sale and manage back of possibilities. Since we had initiated this program, it moves very well. Second, driving revenues and earnings. The most important thing is, of course, that we are returning to profitability. That's why we also think that we are in a head-start position. As we never stopped operating, I think that will help us whenever the demand and the opportunities are there. We will optimize capacity in line with demand, operate our business with less fixed capacity and will further execute on our global realignment cost-cutting program. And of course, we will continue with our strict cost management for asset TUI, that means reducing costs while improving quality through digitalization. Our big advantage is that this goes hand in hand, we can further reduce costs while improving the service to the customer. At the same time, here, we have made a big step forward. And last not least, we need to optimize the financing. Our focus will be on an asset-right strategy for airlines, for hotels and also for cruise, manage the COVID-incurred debt and the related interest costs. Furthermore, we will evaluate continuously our capital markets options in the best interest of our company. This will allow us reinstalling solid and healthy balance sheet structures and returning to a gross leverage ratio target of less than 3x. With this, I would like to hand back to Fritz, and thank you very much for your attention.
Sebastian, thanks a lot. Page #36 (sic) [ Page #24 ] very short conclusion among everybody. Our position, I believe, is strong. We will be a beneficiary beyond the crisis. Integrated business model, so big tickets are of customers, 21 million customer spending close to EUR 900 each. Strong brand position in our markets. And also strengthened position from further consolidation. We have not even seen the Thomas Cook consolidation in our numbers. So we believe that is still to come. Other 2 operators, other participants in the market already leaving or significantly weakened. And on the other hand, we believe tourism is contracted to business, that is something which will be coming back very fast and unchanged, that we have strong demand. And TUI then to be leaner and more agile, more digital, less cost. And therefore, we believe the transformed TUI will be a key beneficiary driving to profitable growth beyond the crisis. Now 37, Slide 37 says '21 will be a year of transition. I mean, that's very clear. Fortunately, we see the high vaccination in the U.K., where we have the biggest booking position. We will use the year to look through the crisis, to drive digitalization, to deliver the realignment program, at least the commitments of EUR 400 million and maybe even a little bit more. And drive digital acceleration that -- in an integrated structure, taking full advantage of our scale. And therefore, we believe in '22, demand will be there. Again, very healthy again. And with the new competitive positioning, leaner cost -- lower costs, leaner structure, more digital, we will actually take the advantage of profitable growth with less capital and more digital as we have been before. That said, I would like to close it here or stop here. And now Sebastian and also Mathias and Nicola, Hazel, the investor team in Hanover and, of course, myself, we are here to answer your questions. And I would like to open the floor.
[Operator Instructions] The first question is coming from the line of Jamie Rollo from Morgan Stanley.
First one is, could you please quantify the financing initiatives to help liquidity in December and January? I mean I can see there's about EUR 120 million of disposal proceeds in Q1. But could you talk about whether there's anything also in January? And also talk a bit more about the receivables or factoring both again for January and December, please? Secondly, just on working capital for the current quarter. I appreciate your bookings are up 70% from December. But could you talk a bit about what the Q2 working capital movement is to date year-on-year rather than versus December? And also, could you break out the EUR 1.7 billion customer deposits by quarter? Because I think it only counts for holidays up to early March, so I'm wondering what the risk is if Easter doesn't happen? And then finally, just on liquidity. You're saying the company is bridged through the summer. What does that mean? Does that mean you're confident in the liquidity position, but that you need Easter to go ahead and you need summer to be at 80% of normal levels? And what happens if those don't happen? What's the fallback option?
Yes. Thank you, Jamie. I will try to set a scene a little bit and then maybe ask particularly on your first questions a little bit more detail, maybe Sebastian or the Mathias and the investor team in Hanover. I mean, as you know, we have right now, early February, we have a liquidity position of EUR 2.1 billion, right? And as you know, our fixed costs or our cash cost on the cost side is EUR 250 million, maybe a little above, but we don't have hedge ineffectiveness. So at this time, because the price for fuel has come up, so it is, let's say, EUR 250 million. And then, of course, the remainder on the cash burn is either working capital inflow or outflow. And for Q1, you saw an outflow, I think, of around about EUR 400 million. Now the question is, now not so much -- of course, you can generate the inflow now with summer bookings. And at a certain point in time, that there'll be more inflow than -- then there will be more inflow, and then at a certain point in time, you will have an inflow to cover your fixed costs and then you become cash positive. And of course, it's important to get prepayments in, but it's, of course also important to deliver holidays. Now when you deliver holidays, first of all, you get the remaining payment. And secondly, you don't need to pay out to customers anymore because you cancel holidays. And of course, in February and March, the volumes are very small. And the likelihood that we actually get a good prepayment in is not so bad, then you have a look at somehow season Easter. It's not that big, but it is bigger than, of course, in February. But I think the big point is actually coming in, let's say, June onwards, yes? And here, my view is as long as the big market, U.K., is fine because of our huge booking position, it will be fine. And of course, in Germany it is also important, but the booking position is only about 30. So therefore, I think it's important now to see how that works. And of course, then it's also the question on summer. With the 20% ASP up, it's important that we get the cost equation right. And here, we still stand at 80%, but we have also significant scope to scale down if we want so. But I believe we will not have to, because I believe, potentially in March and April, you'll see a lot of removal of restrictions because of the vaccination program and the rapid testing. And I believe then the bookings will come in strongly. Saving rate of households are up on record levels. We have, just in Germany, up from 11% to 17%, I think. I mean, this is a record level. People want to go on indication, no reason to assume that's different, right? So this is the situation how I see it. But maybe on the other questions, can I ask Sebastian maybe you, or Mathias, to take that question?
Yes. Thank you very much. On the customer deposits, the EUR 1.9 million, the majority is -- by far, the majority is in the second half of our fiscal year. So it's a very small portion for Q2. And there, in the second half, the majority is in Q4, which supports our working capital position. We do not expect a significant impact, therefore, in quarter 2. We are executing the program, which we had initiated to optimize our asset structure. We do expect that we will see first successes rather soon. Of course, it's always depending that we get the right prices, that we don't pay under stress. So it's not so easy to predict if it's March or April, but we will see the first positive impact here. Last question, the cash in -- for Q1, it was around EUR 250 million, which we were able to cash in receivable and one aircraft and aircraft engine.
So EUR 250 million in Q1, so there was nothing in January. It was all in the December month, is it?
Correct.
The next question is coming from the line of James Rowland Clark from Barclays.
Just on the cash burn, you're guiding to EUR 250 million, EUR 300 million of net fixed cost in Q2, breakeven in Q3, but that all excludes working capital. You just talked there about sale and leasebacks helping your cash in December. Could you help us to sort of quantify what that might mean in this quarter and in Q3? So sort of any guidance around the sale and leaseback cash inflow potential.Secondly, on price increases -- or sorry, the price is up 20% on ASPs. You said earlier that's a mix of holidays, the mix but also just the way that customers are booking at the moment. Are you seeing any pricing power versus your peers? And is the competitive environment helping you to push price at the moment? And as a follow-up as well would be, as bookings come in from other regions like Germany and Nordics, should we expect pricing to normalize in the summer? And actually, those are my 2 questions.
Okay. So Jim, I'll take the second one. And on the cash burn, I will ask Sebastian. So on the pricing, as you said, half of it is mix and half of it is up-trading. And none of it is pricing power, right? I mean it's not like we increase prices and these things. That's not the case right now. What I would expect anyhow, you know that for differentiated products, there will be some scarcity in the summer because -- and therefore, I would expect that we don't need to have a lot of discount. Actually, I have to say that some -- for example, of the Robinson Club, we just removed the early booking discounts because we see that these products are already filling up for the summer. So it's -- usually, we have quite some discounts, but here, we don't. And the reason for that is that somehow people think that some of the Robinson Clubs might not be bookable, therefore, some of the other Robinson Clubs, when you look at Greece and so on, we just removed all discounts. So I would say for differentiated products, I would assume that there will be some scarcity. And if we then have some pricing power, it remains to be seen. But for the time being, that's not the case. For the time being, it's just mix. So more package and -- but also up-trading of customers to higher-quality products after a year of no vacation or little vacation, demand is actually in that respect. Sebastian, do you want to take the cash burn, and that was also the working capital, I think, and thank you.
Thank you. Unfortunately, we keep no guidance on quarterly sales on leaseback proceeds because it's very difficult to judge when we have the exact date of finalization. What we can confirm that is our expectations for net investment and sale on lease are part of this, that we keep our expectations of up to EUR 250 million.
Our next question is coming from the line of James Ainley from Citi.
Three questions, please. Just coming back on the question about summer capacity. I think you said 50% of your hotel capacity is fixed. What's the equivalent number for your flying capacity, please? And at what point are you going to have to commit to additional capacity as we move towards the summer? Second, actually [ consensus ] today is pointing to a contraction in the Spanish tourist hotel base. Just interested to hear to what extent you've seen any contraction in your supply base and distress amongst your hotel partners? Some qualitative comments would be helpful there. And then the third question is you obviously talked about rebuilding the balance sheet. But how should we think about the time frame for that recap? I mean do you think that the KfW and the relationship banks might be open to extending their facilities beyond July 2022? Or do you think it needs to be done prior to that?
Okay. I'll try and maybe -- to start and maybe Sebastian, you kick in. On the summer capacity, when we talk about -- the good thing is, as we always said, for our owned hotel, we of course have the obligations for third-party hotels. We have been avoiding obligations as much as possible. And that was also successful. Because at the end of the day, everybody will be open and win customers. And we will be the first in line to win customers because we can commit flying early and we can make integrated decisions, right? That has been proving to be quite successful when we restarted the business also last year. The flying capacity is actually is -- of the 80%, let's say, of the capacity, which we communicated for some of, I would say, 2/3 around, are somehow fixed, yes? Now that means we can reduce it, but also we can increase for that -- for -- how can we increase, we either prolong lease contracts for our [ NGs ] or we actually purchase in the market. We assume that, particularly because the business the of market will come late, there will be a lot of scarce capacity if we didn't meet capacity. But if the summer would be 80%, it would be already very good. I mean we -- as I said, we have some flex downwards and -- anyway and you talked about the hotel.Hotel partners contraction, I have not noticed, yes? I mean it -- the partners seem to be in the market largely. There is not a huge solvency base and these things. Quite to the contrary, I think when I look into the market, many of the hotel investors are looking through the crisis, right? So even the prices for hotels are almost stable, yes? Or let's say, not 100% stable but, let's say, not so much discounts, yes? And then, of course, on '22, it's difficult to comment. I mean -- and Sebastian has talked about, I think the [ factor 3 ], I think, '23 Sebastian, right? But what's your view on that?
Yes. Maybe if I just can add on the hotel side. So the -- especially the Greek and the Spanish hotel, we expect a strong summer. Therefore, prices are stable for summer. And what we also see that the asset prices, as we are looking to dispose, are very strong. So expectations are high. On the refinancing, yes, if you look at our maturity, summer '22. This is very important for us. And therefore, we have started to find a good way forward. It's one of the main efforts we have at the moment, and we are very confident that we will get good solutions with all partners. Also there, we see a very strong support from our banking partners from -- on the banking partners but also from the state.
Okay. So your real intention is to do it sooner rather than later?
I think there are always windows of opportunities. And I think it's our obligation to be prepared for the first attractive window of opportunity. And especially when the business will restart, there will be a lot of good options. You have seen what [ Webjet ] has done, you have seen what Lufthansa has done, so there will be good opportunities.
The next question is coming from the line of Cristian Nedelcu from UBS.
Three, if I may? First of all, on your Q3 guidance, you're talking about net cost [Technical Difficulty]
I think he's now gone, right?
Cristian, we cannot hear you. I think it will be best for Cristian to dial in again. [Operator Instructions] The next question is coming from the line of Stuart Gordon.
First one, just between the receivables financing that you've talked about, it looks as if there's much lower payments on accounts, and also there's a considerable number of your current bookings are legacy vouchers. Both of you are confident of the liquidity through the summer, how confident are you of that liquidity through year-end as the working capital unwinds in the fourth quarter? Secondly, can you talk about your philosophy towards this summer and your 80% assumption? Obviously, you've talked a lot about the vaccination programs, but it would appear as if you're making an assumption that travel restrictions are largely going to be fully removed before vaccinations are fully rolled out at the end of the summer months. And just to pick up on the point you made about scaling down. Obviously, you're 80%, you're way above what Ryanair and easyJet are talking about. Is it fair to say that on that scaling down, you're kind of gearing yourselves up for maybe what they're talking about 50% to 70%, but have you -- for want of a better word, your fingers are crossed that it's closer to the 80%?
Okay. I'll try to the second one, and the receivables and the vouchers, help me -- need some help. I mean on the -- when you look at our philosophy, the first one is actually the stated intent of vaccination program is not to eliminate the COVID incidents, right, and it's not to eliminate the virus. The stated intent of vaccination program is to help with the load in the national health systems, the hospitals and the [ strongly ] ill. I mean -- and for young people, there's no reasons to reduce their freedom and restrict their freedom of travel, even if they are not vaccinated. I mean that's very clear. So therefore, it's not that we need 100% vaccination or 75% vaccination, which even the European Union has set for the end of third quarter, but -- so the third quarter meaning September. But the intent is to protect the vulnerable and to protect the hospital staff and so on. And that is something which I think will happen in the U.K. in March. So therefore, we expect a strong summer, right? The philosophy is 80%. And -- but we can still make choices. So we would be able to also scale down, but we also would be able to scale up, yes, definitely to leverage 50% to 70%, which you quoted from Ryanair and easyJet. But here, I think, please keep in mind that Ryanair and easyJet are not just packaged to our operators. I mean they are also having a significant part of their business, which is not leisure, and that part of the business will be much later, yes?We know that teleconferencing and Teams meetings and Zoom meetings and so on are efficient, you save a lot of commuting times. At least in business level, I would assume that, that actually will let the business travel -- hit the business travel much harder than leisure, and their mix is very different to ours, yes? So -- and therefore, I believe that the numbers of the communicated numbers of the Ryanair and easyJet are not comparable to ours. Sebastian, [indiscernible]...
Yes. If I may add to the 80%, this is 80% of a consolidated market. You know that Thomas Cook is out, which had 20% to 10% market share, depending from market. A lot of small operators in Germany have vanished retail with own offers have vanished. So probably, if you look at the overall market capacity, we increased significantly. That's what we do see market share and it would mean market, 65%, 70%. On the vouchers and working capital. I mean what is quite interesting, if I look at customer deposits at the moment, less than EUR 2 billion. At the high end in '19, we had up to EUR 5 billion. So that shows how much of the positive impact could be. Out of that EUR 400 million are the vouchers. The vouchers aren't normally vouchers for customer prepayments. So 20%, 30% of the overall build size. So that means that there is not -- the first EUR 400 million are without cash. It will be a constant flow. And what we do see now is that the people who ask for a voucher when they rebook is getting a very small portion. So that's why that this is a number which will be distributed month-by-month and will be reasonably low.
The next question is coming from the line of Mark Fortescue from Stifel.
Just 2 things left from me, please, one on vouchers as well and one on asset ownership. Just on the vouchers, could I come back to what you just said about vouchers and credit notes? Maybe of the 2.8 million of passengers booked for summer, can you give a feel for how many of those are booked -- are new bookings and how many are with vouchers credit notes? And maybe just help us give a feel for how the cash inflows associated with those bookings might lag given the voucher mix? And then on asset ownership, your asset-right strategy, maybe not a detailed response to the Q1 stage, but would it be fair to say you're sort of prioritizing those assets -- cruise, Marella first; Hotel, second; and aircraft third in terms of potential changes to asset ownership? And just on that subject, do you think there's any sort of compromise to the benefits you've talked about today of being integrated, having your own aircraft seats, your own hotel bed and your own crews there?
Okay. So on the asset structures, I mean, there is not a lot of change because of the crisis now. I mean we always said, in some areas, you need the asset ownership, and to have control in others, you don't, yes? And when you look right now, for example, cruises, it's very efficient to organize it in joint ventures. We saw that before the crisis, it was not that good. Not a good reason to have Marella on the balance sheet, for example. Or on the hotels. Some of the hotels if you put them, for example, in hotel funds, you don't need the full investment on your balance sheet and when you want to scale. Even if you were not in need of liquidity, when you want to scale, you can have the full control of the brand of distribution of -- you can, of course, have the risk of filling the hotel. But at the end, the real estate business has so much money out right now, doing good real estate businesses with the terminal value and so on and so on, that in these cases, not taking advantage of it would be potentially right. And maybe last, on aircraft. Here, we always have seen an oversupply in the last years, and a reduction would have been very advisable already last year or the year before. But a reduction of an airline size, particularly in Germany, which is where they have a strong oversupply since airberlin more or less didn't exit when it was -- when insolvent. I mean a reduction of supply is incredibly difficult and very expensive because you have all kinds of labor action and you have discussions and so on. Now as we don't have any business right now and we have the opportunity to discuss this [ Boeing ] order book, we have taken the advantage of just reducing it to what we call the strategic capacity. And the strategic capacity or the winter capacity is capacity which we can fill. Because at the end of the day, it is not so important, I mean -- and when you go to Cape Verde and you have -- you are the only one connecting Cape Verde because it's an infrastructure you need for the hotel, which you have on Cape Verde, that is something you want to do. But when you have an oversupply in Mallorca, nobody wants to go to Mallorca if you can avoid it, right, because it's so much oversupply and you have EUR 19 per ticket, which everybody knows is marginal costing and marginal cost pricing. And that is, of course, something you don't want to do. So the reduction in capacity and the cost saving in that respect is something which is good. And by the way, last not least, I think it's important on the hotel front that we don't sell and lease back. This would be a pure financing, but then you still have it on the balance sheet and not good effect, it's mainly a [ manage ] back. Or actually even more, it's a vehicle to grow and we are talking here about strong growth but with limited equity contribution in that respect. Okay. So on the vouchers -- and maybe I know that Sebastian -- and Sebastian has a strong view on that as well. Sebastian?
Yes. Thank you. As said, the customer prepayments are more than 90% for the second half of the year, which is giving us a positive impact for our cash flow. And the EUR 400 million vouchers are related to these bookings. So that means that the impact will be in the second half of our half year, and will be limited also because these vouchers came from prepayments of our customers. So of the 30%, 25%, 20%, 25%, 30%, so even a customer who have now a voucher normally has to pay 70% or 75% of his remaining bill for his summer booking. And therefore, it's a very manageable process from the working capital point of view.
Could you maybe just give a feel for the quantum of outstanding vouchers that haven't been rebooked then?
Maybe we should come back with the answer. I would say it's a very, very, very small number.
We have to come back. But I think it was between EUR 100 million and EUR 200 million, but I'm equally not sure. Maybe, Mathias, do you know from the top of your head?
Yes. It's roughly EUR 200 million, which are immediately due; and then another EUR 250 million, which are kind of long-term vouchers over the guarantee scheme in place. So it's come down versus year-end already.
We now have Cristian Nedelcu from UBS back.
Apologies, my line dropped earlier. Could I kindly ask you, in terms of your indications for Q3 that you may be moving towards cash breakeven, could you give us a color what revenue do you need to be cash breakeven in Q3 and Q4? Is it as simple as taking a 16% gross margin and offsetting that against the EUR 250 million, EUR 300 million cost per month you're saying? Or any color you could give us there? And secondly, touristic prepayments, I think in December these are at around EUR 650 million. It's roughly half of what they were a year ago. How do you see this line evolving going forward? Do you think it will further go down? Or do you think as bookings restart, you will have to make more prepayments to the hotels, some more cash outflows there? Any color you could help us, please?
I mean, Cristian, listen, you have 2 major sources of the cash inflow, yes, one is the prepayment and one is the final payments when customers really go, right? And therefore, it's not that easy. I mean the big booking -- usually, the big cash inflow you'll find -- working capital inflow, the biggest one, is actually January, February in a normal year, yes, because then this is the high season, end of January, February, March, this is the high season for actually booking of the summer months. Now as soon as it's clear that summer will be happening, the cash inflow will be happening. And that is actually when you see -- today, we still have, on balance, I would say -- or last year, we had a huge outflow of working capital. And that come into the system again. And we are talking not little money. We are talking about big money, let's say, EUR 1 billion or so, right? So that actually is what we have less in the system right now. And in the normal course of business, this flows in. And that also answers a little bit your second question where you say that the prepayments are now half of that -- actually, of course, will not be half as soon as the business starts. I mean as soon as the business starts, the prepayments flow in. And therefore, it is something which will happen. But of course, the certainty that it will be possible will have to increase. And that is something we believe will happen as soon as it's clear. And when the borders open, sentiment can change very fast as we all know.
I think the question was on hotel prepayment. We have -- there, we have changed our philosophy completely. We are not in a position anymore to offer prepayments to hoteliers. And it's also not necessary at the moment. That may change in in 1 or 2 years again when demand is very high. Today, we can convince the hotelier to work with us because we are the best choice of filling a hotel with a decent occupancy. And that helps us at the moment a lot to get good contracts, by the assurance that we will fill the hotel if there is a customer demand.
Okay. Okay, then I misunderstood your question. Okay.
And on the revenue needed to breakeven on your cost side excluding working capital, any color you could give us there for Q3?
I think that's what I said. I said -- I mean you cannot exclude working capital because that's the first thing that flows in. But as soon -- I mean, the difference between the short-term cost and short-term and you look on the liquidity, when you look on the liquidity, it's -- the difference is actually a working capital.
The next question is coming from the line of Alex Brignall from Redburn.
I just have 2. The first one is on airline capacity. You alluded to the [ routes ] earlier a little bit, but a lot of tour operator airline capacity is very specific by route. So you had a huge amount of competition with Thomas Cook before they exited. It's very early in the year to know exactly the plans of the operators on specific routes. But is there anything that you can tell us about what route-specific, city pass-specific competition is looking like and people response to some of that would be fantastic?The second question is on package, you talked about the package impact on pricing. Clearly, there's 2 components, one is better packages and one is small packages than previously. It seems from the data, particularly in the U.K., that the mix of people taking package holidays is going up. It kind of compounds what most -- a lot of people have been saying. Could you just talk about how COVID has affected people's demand for package holidays specifically?
Sure. I think when you look at the demand changes, yes, the most indifferent as I see it right now is the destination, because it's not as something in the Mediterranean opens, people want to go into the sun, yes? You have anyhow a change of demand, and one is around safety and security, yes? So does somebody believe that we take safety serious. And of course, then when you say it's our hotels and we make sure that the policies are lived up to and so on, that is something which people like. By the way, on the cruising, we also have seen that people like that we did very strong procedures. I mean we measure temperature. I mean when you look the customer feedback, that was something last year which was very positive thing. And the second thing is flexibility, yes? So when I book something right now, travel should not be possible, do I have complexities or is it something too easy to deal with. And both of these actually indicate that packages become more popular because it's easier to understand hygiene concept, it's easier to understand who do I have an obligation with and how did I book.On the airline, I think it's a little bit of a scattered approach. I would say, in the U.K., there, you don't have a charter market and so on and so on, you just have -- Thomas Cook disappeared, the margins would be good. Last year, in '20, we would have hired a lot of that lease capacity because of the shortage of supply at that season because Thomas Cook disappeared. We would have said a lot of shortage of supply, MAX had not been available and so on and so on. Now we reduced the order book. So we will see, I think, some shortage if the normal summer happens. In Germany, it was very different. I mean you had all this oversupply and so on and so on. So here, we reduced dramatically. And that will be effective already this summer, yes? We will have halved the airline. And that is actually, I think, the first time, at least I'm in the company, that we will have potentially less capacity than we potentially could fly, hopefully, in the summer. But that also says, we put ourselves just on the strategic capacity because we don't want to run into the risk of oversupply. And that actually will generate good margins. And if we generate any more, we believe together that lease and the market will not be a problem to be -- to prolong a couple of lease contracts will not be a problem. So therefore, it's a little bit of a mixed bag, if you like.
We have now run out of time for further questions. I will now hand you back to your host to conclude today's conference. Thank you.
Thank you very much, and -- everybody, thank you very much for staying tuned. I think the good thing is we have seen less cash burn in Q1 than expected. The vaccination program is running well, particularly in our most important market in the U.K., where we have more than half of the prebookings for summer. Now we are waiting. I think the ambition also in the European countries to vaccinate faster will be high. And with that -- and the national health system being protected, I believe we will see opening up borders and potentially a good summer. The demand is there. And also that we have achieved, as I said, more than 50% of our program already today, more digital, more...
Maybe then I would like also to thank you. You see that we are confident for the summer that we have brought TUI into a good position on the cost side, but also for further revenue increases. And we are looking forward to the future. Thank you.
The call has now ended. Thank you for joining the call today.
Okay. Thanks. Bye-bye.