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Good morning, ladies and gentlemen, and welcome to the TUI AG Conference Call Regarding the First Quarter Results. [Operator Instructions] Let me now turn the floor over to your host, Mr. Friedrich Joussen and Mr. Sebastian Ebel.
So good morning, everybody. It will be a busy day today, Annual General Meeting, Q1 results, so I'm always a little bit confused of what presentation I should focus to. But with the help of all the team and also Sebastian is with me, so if the CFO is close to you, then nothing can go wrong. So let's go to Page #4, and we will do the presentation as usual and do some introductory remarks, and the closing and the important pieces come from Sebastian. But the first slide shows clearly, we operated in Q1 67% of capacity. We said 60% to 80%, so that is spot on. Actually, we also continued commercially, I would say, on the very strong quarter 4 result of last year, 2.3 million customers, and that is 4x what we had before when you look at revenue of 5x what was the year before. So very strong commercials and strong commercial pickup. 79% load factor actually says it is strong, but it is not where it should be in terms of a normal year, normal year would have been 85%, maybe even 90%. But it is actually regaining. And that is reflecting the EBITDA almost breakeven EBIT and also EBITDA, EUR 400 million round about better than Q1 in the crisis. Hotels & Resorts stayed positive. I think that is very strong. And a strong liquidity position, EUR 3.3 billion. Therefore, we are very comfortable handing back the first tranche of the government funding 1st of April. So I think this is all good news. But I mean this is, of course, all history. I will come to the future to the trading in a minute. Maybe turning the pages to the different sections of our business. Hotels & Resorts actually is now 8.6 million bed nights. A year ago, it was 5.2 million. A normal year would be 9.1 million. So we are close to normal operations. And I think that has been also the theme in Q4. Hotels & Resorts, even if not fed by the local markets, but our source markets, local business, very strong Caribbean, for example, Americas. So Hotels & Resorts, positive, and you will see that also when Sebastian talks about financials. Markets and Cruises, I would say, a little bit more difficult situation. Particularly when you look at Q2 right now, you see a little bit at lower sailing. Only 6 ships are now sailing. But the summer bookings are strong. The summer prices are strong. So we remain very positive on summer. But Markets & Airlines may be more important and more significant right now, 2.3 million customers. And normally here, we would see 3.6 million. So it's a little bit lower, but it's lower than Hotels & Resorts. Hotels & Resorts, almost normal. The markets need to still catch up. Maybe one last remark on that page is TUI Musement. TUI Musement, 10x the volume of the year before and higher 250,000 excursions, higher than precrisis. So TUI Musement is strong with growth. I mean even in difficult times when customers from source markets are only 2/3 is overachieving already the numbers of excursions sold, and that is the strong growth. So we always talked about, particularly when we talk about strategy and growth segments for the future, very attractive segments. And we are certain that this is actually the right horse to bet on. Now when you go to the next slide, and now we talk about future, and this is maybe even more interesting. You see the weekly booking profile for winter on the left side. And you see the Omicron valley, right? So in December, the net bookings actually went down. And the interesting thing now is that the net bookings of last week has been 94%. And when you look at the accumulated booking for winter, it is actually in the table on the right, you see the minus 42%, so this is 58%. So week over week over week, we add right now more and more and more customers. And you see the enormous dynamic development week over week. And just to give you an idea, the volumes are not small. Last week was actually 126,000 bookings for winter. So it is strong. And what's also strong is 15% average sales price. So the margins will be good. So therefore, as we have also tweak the capacity, also the load factors will be okay. So margins, price is good, load factor is good, catching up demand, that is the theme for winter. Now summer is more important because summer, the volumes are much bigger. So when you see the steady-state summer, it's actually minus 28%. That is the base we are starting now. So 72% base. So we are lagging behind 28% precrisis, but 22% higher prices. I have never seen, in all fairness, any -- I have never seen any market situation where we had 22% higher prices. You remember the early '20. Early '20, we said 14% higher volumes, 3% higher prices and we felt good. So 22% higher prices is a lot. And when we turn the pages right now, you see that actually also the bookings are now tremendously catching up. And we are now, last week, 100%. So spot on precrisis level when it comes to bookings. Now you could argue, of course, this is lower booking and so on and so on. But also absolute terms, and I just want to mention it because it is also absolute terms high numbers because we are talking last week, 275,000 customers, 100%. So I mean that says, we are catching on the 72%. We are building now enormous momentum. And you can imagine that also the 100% might not be the end of the -- the ceiling of development because you see the steep increase. And as I said, on the bases, now on the base, 22% higher prices, 100% last week. I would assume that we see a strong catch-up. And the demand is high. The spending -- the household savings are high and is driven by all markets, just to give you an idea, strongest market now is Netherlands, plus 70% up on precrisis. U.K., up 20% on precrisis. Germany is 20% down on precrisis, but packages are up 20% on precrisis. So overall it's a little bit slower because of Austria and Switzerland and all the effects. But -- so packages, which are the higher-margin business is up 20%. And even that Belgium is up 20% and even Nordics is catching up, it's still below 100%. But the mix is now moving up. And particularly, I have to say, now the last weeks have been an enormous rally of bookings, and we assume that will go on. Now let's talk about the sectors a little bit and sentiment. I mean potential sort, I talked about, Sebastian, I will just leave it there. Even in the difficult Q1 was profitable. I think that's not something to discuss about. Cruises, we've said, we have been cruising -- sailing with 14 ships. Now we are sailing with 6 ships because of the port restrictions and Omicron the ships and so on and so on. But when you look at the last bullet here, the bookings for summer are strong. Prices are good. And therefore, as restrictions ease, that will be -- it's not a matter of demand. And TUI Musement is -- I will talk about the distribution of our own captive channels, so our app in a minute. The secret of being 10x the volume a year ago, being 1.5x the volume of precrisis is actually also third party. You know that we talked about booking. You know we talked about Trivago and all the other partners, and that is coming to life right now. And as I said, it's the strongest growth pocket in our company. Okay. Let's talk a little bit, and I know that you sometimes like it and I like it as well, about the business itself. And you see our app, almost 70% of our customers use our app. And you'll see that we have, of course, [indiscernible] and so on. I think the things which are also the excursions, which are marketed, dynamic book, flow messaging, cross generally linking. So when you are on the website, the app will remember that you have looked on the website and so on. So all good stuff, the dynamic book flow means that each customer individually gets excursions and you saw the uptake. By the way, it is on a comparable basis, 7x the uptake to precrisis levels. So it's very strong. Right now, it's still ancillary selling. Soon, we're becoming a commendation-only future market, so stuff which is not packages, but which is alternative to our packages in different market. But what it's also doing, and this is the open nature of our new IT architecture. It has strong API interfaces. For example, we have actually now connected the Mobi software to our app. And what that really does is not only it gives you the Uber-like experience so that you know exactly when the bus is coming, and you see the map and the buses actually are arriving, so Uber-like experience. But also, Mobi is also artificial intelligence, intelligent route planning. So the question of how should the bus drive and what kind of route is actually optimal to say, of course, to win customers faster to their hotels. So Mobi, a very strong technology company. We just connect by our APIs. That's possible in the modern stack. I just -- I wanted to give you a little bit of a highlight here. Okay. So then actually something which we are also proud of, this is actually our sustainability agenda. Historically, we always have been focusing on the airlines and being atmosphere ranking and what -- and you name it and the youngest fleet and low consumption, also the 80% precrisis hotel certification. All the verticals are very important. But when you want to fulfill the UN sustainability targets and the European Green Agenda 2030, 2050, also, the region needs to be sustained. And I have personally, together with the Prime Minister, Mitsotakis, who launched roads as the co-lab for sustainable tourism. And what that really means is an open platform for all tourism. And we want to get this destination, sustainable destination. And it's a public-private partnership. And it's a role model for our global in development. It's all fact-based. I mean it's important that you have 2030, 2050 targets. We believe it's even more important to achieve progress short term in order to be able to hit the targets. And roads, when I opened it, I didn't know, but just for you to digest, 97% is actually of the GDP is actually tourism. So if we don't get it right in roads, then we have a big problem because it's the only thing which happens in roads. And therefore, it's not only TUI as the minister, and so it's also the Prime Minister being focused, and I think this is very important. Why did they pick TUI? Well, because we have a long-lasting relationship, because we invest in the destination, because we bring customers. So it's a lot of discretionable investment in customer spending. And that's, of course, very important that 97% of your GDP is actually tourism. So the tourism agenda is actually and the sustainability agenda is developing. That's what I wanted to highlight here. Now next one, which I think is also very important, we always talked about vertical integration and that we are focused on building own differentiated content. And you know that we have TUI Blue and Robinson and Metric Life. We see the brands, and we are proud about them. And we are very confident that we are doing the right things when you look at our profitability of these brands. And how they develop and how they grow, we think we do the right things. Now the issue a little bit with the strategy of differentiated content is that you have a challenge to grow fast. Because when you invest a lot and you do it all in your balance sheet, you cannot grow fast. And to unleash that strategic dynamic, I know that we talked about it, but it's for us very high on the agenda. We need to grow off-balance sheet. And in Cruises, we do that with joint ventures. In hotels, we do it with joint ventures. But even more important, we launched right now the first independent. It's an independent hotel but we are doing the advisory services to them. We are actually earning on GOP revenue. It is a very new model, but it is a model which is potentially growing very fast. The first fund is launched. 40% of equities in the fund right now. And since we have the fund, we get a lot of new opportunity as well. The opportunities come because people know that this is growth money. And therefore, we are convinced it's the right way to go. We have the full control, but we don't have the investment on the balance sheet. We think it's absolutely spot on order to achieve differentiation as well as have not all the investment on the balance sheet. So that's actually our -- this and then I think I'm done with my first section and now comes important numbers that actually show you very clearly how we performed. And that actually will do as Sebastian will guide you through the numbers.
Thank you very much, Fritz, and a very warm welcome to everyone who has joined on the webcast today. Let me guide you through the quarter 1 results of the financial year '22 on the following pages. So starting with the income statement. We delivered group revenue of EUR 2.4 billion in the first quarter, which is up EUR 1.9 billion on the prior year, reflecting the more open travel environment, enabled by the successful rollout of vaccination during calendar year '21. As Fritz mentioned, we operated 67% of our '18, '19 winter capacity in Q1, which was in line with our expectations. October delivered around half of this capacity, benefiting from good summer momentum, which unfortunately eased off in November and December due to Omicron-related concerns. But we certainly now see this momentum returning in our bookings in the most recent weeks, and we can see this every day. Q1 underlying EBITDA was almost breakeven at a EUR 65 million loss, a significant improvement of EUR 392 million versus prior year. Q1 underlying EBIT loss reduced to EUR 274 million, improving by a similar quantum to EBITDA, with Hotels & Resorts delivering a second quarterly positive underlying EBIT since the start of the pandemic. Adjustments this quarter, not too much to flag here. We have a EUR 21 million gain included this quarter relating to the sale of North Hotel hotels, which is partly offset by ongoing cost relating to the global realignment program of around EUR 10 million. Our full year assumptions for adjustments remain an expense of between EUR 90 million to EUR 100 million, of which around EUR 70 million were related to the global realignment program, therefore, no change to December. Q1 net interest expenses increased year-on-year despite lower cash interest, which you will see on the next page. This is primarily due to a positive one-off accounting effects in the prior year relating to the revaluation of the senior notes. Our full year assumptions for net interest range of between EUR 380 million to EUR 425 million is based on our expectations of a more normalized business this summer where we would anticipate lower drawings of our facilities as a result. Lastly, group results after minorities was a loss of EUR 384 million, a clear improvement of almost EUR 400 million on the prior year, which is a solid step in the right direction. On my next slide, I want to touch on some segmental highlights, especially given we have seen an excellent performance delivered by Hotels & Resorts. So Hotels & Resorts underlying EBIT of EUR 61 million is not only an improvement of EUR 157 million versus prior year, but is almost in line with full year '19 Q1 results of EUR 69 million. The segment delivered its second consecutive positive quarterly EBIT development, which I'm very pleased about. And for me, a good start of our Hotels & Resorts to our new financial year. Overall, average occupancy was 64%, up 21 percentage points year-on-year. And average daily rate increased by 20% to EUR 72. Mexico did really well, delivering occupancy of 85%. Occupancy in the Caribbean was 76%, and across the Canaries, the average 79%. This pattern was reflected in the REOs result in particular, with strong performance in their core Caribbean and Spanish markets. Moving to Cruise. You'll see here that our Cruise segments delivered a EUR 67 million improvement year-on-year across the 3 brands with TUI Cruises and Hapag-Lloyd delivering 67 of this improvement, which reflects the wider resumption of operations in the first half of the quarter. The quarterly result was held back from late November due to Omicron and increasing incidence rates. This resulted in a number of amended bookings delaying to a later departure date and the early curtailment of 3 of our ships, which, of course, then impacted the results you see here. As already flagged by Fritz, it's likely that Cruise will see a more challenging environment in Q2. Although since a couple of days, we have now, within TUI Cruises, 10 out of 12 ships in operations. On TUI Musement. Here, we sold 1.1 million excursions in the quarter, an increase of 1 million versus prior year, generating a EUR 20 million improvement in underlying EBIT. Very simply, this illustrates the return of activities in our destinations and the broader range of offerings, and I'm convinced of the future growth in this segment. What we see here are the first steps in resuming our growth plans. We have invested in the digital acceleration and the integration of Musement, so this leaves us very well positioned as the summer returns to normalized levels. On to Markets & Airlines division. As already covered, we certainly saw a more open travel environment this quarter, with October seeing good momentum for both bookings and departures. The latter end of the quarter, however, saw a level of amendments due to Omicron concerns, which saw a number of customers delaying departure to a later period. A total of 2.3 million customers departed in the quarter, and I'm pleased to share that we have achieved a load factor of 79%, which is only a few percentage points behind full year '19 Q1 of 85%. Combined across the segment, underlying EBIT was improved by EUR 164 million to EUR 259 million loss, reflecting the 67% capacity operated over the period, a vast improvement on the previous year, which saw our operations largely suspended due to tether restrictions. The results includes EUR 34 million net cost impact from hedging ineffectiveness, this is a noncash item as well as savings delivered by our global realignment program across all markets. You can see here the similar pattern in underlying EBIT performance to Q4 with our European markets continuing the [indiscernible] from September -- from summer '21, which saw a higher level of confidence in departures. Comparatively, higher to Central and Western, Northern region saw a loss of EUR 172 million. This primarily reflects the higher operational leverage for the U.K. business, with U.K. departure volumes, although improving, still limited on overall sentiments around testing requirements and changing restrictions. As you all know, testing on entry and day 2 PCR testing was only removed on December 7. Overall, this was a mixed result for the segment, but it serves to illustrate more than ever the benefit of our business model where we are diversified in our source markets. Ultimately, we are not solely reliant on one market to determine our return to profitability. So to sum up our underlying EBIT performance, I will briefly run through our usual bridge. Starting on the left, where prior year Q1 reported a loss of EUR 776 million. All segments delivered improvements year-on-year with only hedging ineffectiveness of EUR 34 million as a material one-off cost to flag in the quarter. Q1 capacity and its result was broadly in line with expectations resulting in Q1 EBIT loss of EUR 274 million. For the second quarter, where we experienced some headwind on bookings from the Omicron discussions, we may see Cruise and our Market & Airline business likely to deliver a weaker quarter. However, we see some good trends since the new year, which gives a reason to -- for early optimism as we head into summer, and the positive trend is accelerating day by day. Moving over to our cash flow slide for Q1. As you can see on our slide, overall Q1 cash flow was driven by lower seasonal working capital outflow compared to '19 and the proceeds from the capital increase in November. Now looking into the details, starting from the reported EBITDA of minus EUR 55 million. We saw, as expected, a Q1 working capital outflow of EUR 937 million, which was significantly less than usual due to lower summer '21 business volume. The outflow was driven by the normal seasonal supplier payments and seasonal decrease in customer deposits. And just as a reminder to everyone, the level of working capital outflow we have recorded in a more normalized environment for Q1 '20 and full year '19 amounted to roughly EUR 1.4 billion. The outflow of cash interest improved to EUR 93 million due to savings from lower RCF drawings and further year-on-year savings in context of interest and fees from the repaid senior notes. This was partly offset by coupon payments for the convertible bonds issued in April, June last year, all of which led to a total operating cash flow of minus EUR 1.1 billion. The low cash out for CapEx of EUR 53 million is in line with prior year and underpins our continuous strict CapEx management, prior year benefiting from divestment proceeds and sale leaseback financing. Our current assumption for full year '21 net investments remain the same. Here, we expect an overall cash outflow of between EUR 120 million to EUR 280 million. Breaking this down, we expect cash -- CapEx outflow to be in the range of between EUR 300 million to EUR 350 million, which we expect to be mitigating by positive inflows of between EUR 70 million to EUR 180 million through some smaller divestments and positive net predelivery payments for aircraft. To assist you as before, we have included a modeling assumption table in the appendix of this presentation. That brings me to the total cash flow of EUR 59 million, which was driven by the net inflow from financing of EUR 1.1 billion capital increase in November, in addition to the increased RCF drawings, partly offset by principal lease payments. And on to the liquidity position, let me run through our cash and facilities as of 3rd of February. We are pleased to report a strong liquidity position of EUR 3.3 billion, reflecting strict cost discipline that expected lower working capital swing due to reduced summer '21 volumes as well as the proceeds from the recent capital increase. The outflow for the month of December and January was very much in line with expectations, with Omicron having a less of an impact than initially anticipated and strong cash inflow in the recent days. With this strong liquidity position, we are well prepared for the remainder of the winter season and also in a very comfortable position to make the first step in [indiscernible] the impact roughly EUR 700 million of government support early in April. On to our net position. The Q1 net debt stood at around EUR 5 billion, in line with the year-end net debt position. The in-line position reflects cash proceeds of EUR 1.1 billion from our recent capital increase, offset by operations and working capital outflow of roughly EUR 1 billion. The latter of which as previously outlined being much lower than what is seasonally typical for our first quarter. Additionally, on the bottom left of the slide, we have again provided the drawings of the site and participations as well as under the RCF as of both balance sheet date on the 3rd of February. To the bottom right of the slide, we have provided the split of our financial liabilities with the full details on lease liabilities and liabilities to banks, which I know most of you find helpful. So to finalize my section, I would like to reiterate my ongoing priorities as CFO. It is important to me that we continue with our strict cash and cash tax discipline, manage the working capital to flow back and further execute on the asset-right strategy. And today, you have heard further evidence of this with the initiation of the Hotel Fund. We will continue to drive operating effectiveness. This means, where possible, we will work on optimizing our fixed capacities. Our global realignment program is on track to deliver another further 25% of our target this year. Our digitization, we see the good progress of TUI Musement, and we will continue to accelerate our digitalization plans and growth aspirations through dynamic packaging. And lastly, but certainly not least, we will continue to work hard on optimizing our financing structures. We will seek further delever opportunities using organic cash proceeds from routine portfolio optimization and the continuation of our asset-right strategy, all with a target to reduce debt and to further improve our credit rating. And you may well have seen our -- on our AGM agenda, the new capital authorizations, which we will ask our shareholders to approve today. And to say it clear, these are inventory resolutions. We are convinced that the availability of options and the flexibility to act quickly on opportunistically upon market opportunities are value for all stakeholders in these volatile times. I'm pleased to say that we have made good progress over the last month and that we will continue on this path. To conclude, it's our collective ambition and target to return the company to a solid and healthy balance sheet. TUI is well positioned. And I look forward to updating you as well as we deliver on our ambitions in the upcoming periods. With this, I will hand over back to Fritz for the closing remarks.
Okay. Thank you, Sebastian. I have one more slide and then we turn to your questions. But it's an important slide, I think. The lower part of the slide says 3x cost leverage. Of course, you can move that ratio by moving debt down, and that's what we want to do, but also to move cash conversion up and profitability up. And we think we have done our homework in the crisis to be significantly up on EBIT long term, right, so on midterm. So this is by growth, and this is by efficiency and the pockets of the future growth of profitability as you see above. So where did we do our homework? I talked about the expansion of our tools activity segment already today stronger than precrisis even with lower customers. Digitalization, mass individualization, 21 million customers, app as the distribution channel of activities are more relevant, more differentiating, more growth in the customer base, so cross-selling, up-selling of activities, of room upgrades and so on and so on. We see very promising first results. One of the reasons that actually, our tourist activity segment is so strong is also the new distribution channel, which we have here. And then I talked about the asset-right financing structure. So growth in hotel segment, growth in cruising by new tonnage and so on, and Sebastian talked to you about it, the financing and joint ventures of balance sheet. Very important. The first step is done in terms of the hotels, and that will be a strong growth profit as well. And last not least, the best predictions you can do is a cost saving. We promised EUR 400 million '23 onwards. Last year, we realized EUR 240 million. This year, we will do 90%, so EUR 340 million, at least all actions closed this year. So we finished realignment 1 year earlier than promised. So these are the pockets which we believe will create sustainable growth and sustainable, also profitable growth and cash conversion, which is equally important than just managing that down. That said, I would like to open the floor to your questions.
[Operator Instructions]And the first question comes from Jamie Rollo from Morgan Stanley.
I have 3 questions, please. First, on the summer average selling price increase of 22%. What is -- can you quantify the mix benefit within that given your packages are up on your flight [indiscernible] down? And clearly, there's a very big difference in average selling prices between packages and seat only. And also, what are your margins on those bookings? Because you're showing us that you're paying 20% higher rates. For example, on the Riu hotel portfolio, you've got higher fuel costs. So could you just confirm the margins are up for the summer as well? Secondly, I appreciate it's too difficult to give full year guidance, but we're nearly halfway through the second quarter, and you talked a bit about Cruise and Markets & Airlines being worse than the first quarter. Could you perhaps give us some steer on Q2 losses? I mean consensus, for example, had a similar loss to the first quarter around EUR 300 million. Is that fair? And then finally, you mentioned, and I think, Fritz, in an interview this morning, you're expecting the German state to convert. And you've got the EUR 1.7 billion authority you're looking for the AGM for potential share issue, which I think, Sebastian, you described as inventory resolution. But just really that EUR 1.7 billion share authority issue, how many shares do you think the company might end up converting to repay some of this state aid and debt?
Okay. Jamie, I won a bet because I said the first one will be Jamie Rollo, and it will be 3 questions. Okay. So that actually gives me EUR 20 of my colleagues around the table. 22% is all mix, right? It's all mix. And it is a mix of destinations, enormously more long haul, enormously more [indiscernible]. So destinations where the margins are very good. Slightly longer holidays, slightly more 5-star and 4-star bookings. 22% is a lot. And the margins as the destinations which are particularly popular is now long haul, to the Caribbean and [indiscernible]. I mean these are by far the highest-margin destinations we have. So therefore, it is mix, but also the margins are significantly up. That said, maybe Sebastian will talk about hedging position in a minute. We talked about should we do a full year guidance. In all fairness, we decided not to do it yet. And in all fairness, when you look at the booking position right now and just the development over the last weeks, which of the booking pattern should we have guided to this with Omicron being prevalent in December and, obviously, 100% potentially even in the next weeks going above 100% for summer in terms of the booking patterns, we would have liked to do something, but it should have been also meaningful. And therefore, what I see right now is extremely strong. But that said, if we can keep that a little bit a couple of weeks, maybe a couple of months, the big booking months, as we see right now, I think that we are more potentially in a better position to do that. With the conversion I just said this morning because I cannot imagine that state has the opportunity to convert at EUR 1 and doesn't do it. Therefore, I think, it will happen. I have no particular information on when it will happen or how it will happen. I also know from all discussions I have that the state is potentially not a long-term investor. That's also clear. So -- but that's also nothing I know, but just I assume. But that said, Sebastian, particularly on the capital and also on the hedging position and the Q2, things on Q2. Yes.
Thank you, Jamie, for the question on the Q2. As we said, the first quarter was impacted by the Omicron valley, as Fritz described is, which impacted significantly December, but also January. And the Q2 is normally the weakest quarter we have in losses between EUR 200 million to EUR 300 million in normal years. And we do see the impact of Omicron in the second quarter. We also see a catch-up. So it's very difficult how these 2 effects will be, but we do expect that the Q2 will be weaker than the Q1 due to early Omicron booking impact. On Cruise, we have now with TUI Cruises and Hapag-Lloyd, as said, 10 ships again in operations. There is a -- there were very, very few bookings for -- from mid of November till almost now. We have seen also now a strong impact, and we have strong forward bookings. So it's really exciting to see. And I'm really curious to see how strong the catch-up effect will be. And this is not yet clearly to predict. On the hedging position, we haven't had the lines, which we would have had before, that's why we hedged later than normally. For the winter, we are well hedged. And for summer, we have hedged the booking position. And there are 2 effects which offset almost, which is the stronger pound and euro as we had anticipated and the higher fuel price. So that's why we think we can cope with that on today's level. And on the capital measures, I actually don't know if the inventory decisions, if that is a real English word, but we couldn't find a better one. And a lot of the decisions will depend on when is the right occasion, how is -- strong is the business and the operating cash flow. And that's why we cannot give any guidance on that. The focus very much now is to really get the strongest cash flow generation we can do.
And sorry, just a follow-up. In terms of Q2, something between the normal EUR 300 million loss, but I assume not as bad as the EUR 600 million loss a year ago, somewhere in between?
If I would agree on that, I would give a guidance which I don't want to do. But it will be less than last year's quarter 2.
The next question comes from James Ainley from Citi.
Just wanted to follow up on that question on the new share authority. Assuming the [indiscernible] participation is converting, can you just confirm how many shares it would convert into currently and therefore, kind of how many shares left over in the authorization?Second, when you think about the new hotel funds you're raising, could you sort of sketch out the economics of the fund? And I guess what I'm trying to understand is how much equity you have put in and what profit contribution could be from that fund once it hits maturity, please?
So the sign participation, the conversion is for EUR 1, so it's 420 million shares. And this is what you can deduct from the authorization. But as said, these are inventory decisions, no concrete plans on that. The Hotel Fund, and this is very important, is independent of TUI. The Hotel Fund can invest in any property. The facilitator is HansaInvest. Of course, it's our interest to manage these hotels, but it could also be that these are other hotels. And if you look at comparable hotel companies and official data, normally, the income is 3% of the revenues, 10% of the GOP, so without any capital deployed. So this is why we are doing it. It's an independent body from TUI. And we will manage the hotels, and that gives us acceleration of building our hotel brand network.
The next question comes from Richard Clarke from Bernstein.
Just starting on the balance sheet. Obviously, you made a disposal in the quarter of Nord Hotels, not an asset you've talked much about before. Is there much else of that kind of asset that you can sell? Any other disposal plans to come? And then the second question, you've obviously seen a shift from flight-only towards packages. Has that been TUI-led? Have you been pushing that? Or have consumers actually been wanting to book more packages and maybe the reasons behind that shift? And then thirdly, on Cruise. I think on your guidance on summer close to normality is a Markets & Airlines comment. So maybe you can just talk to me about where the -- how you see the Cruise recovery come, when that can return back to normality in your view?
Okay. So flight-only is also -- I mean, first of all, we sell whatever we can sell, right? So we are not in the business to educate our customers. But the mix itself is, of course, when you do less overland, when your long haul is more prevalent, then you have more packages, right? And also sometimes, when you look, we see the first scarcities coming up, right? So scarcity means, of course, that you cannot book independent, right? So when you look, for example, summer bookings, when you look, for example, the first high season now will be the Easter weeks. Easter weeks, the destinations will be full. That's also good for margins, by the way, and good for the late pricing. So it's not that we necessarily want to -- I mean, it's good for us. But it is customer-led, it's [indiscernible] led and it's destination-led. What was your -- the other question was?
More left to sell.
I mean there's more left -- no.
On the assets.
No. That was not to sell. I mean the third question was our Cruise recovery. Cruise recovery, maybe Q2, the selling if there's more to sell. But the Cruise recovery is a little bit, I would say, common sense. People would actually go on cruising right now. But of course, when the infection rate, your low limits, your access to harbors, to limit actually your Cruise operation, then, of course, it is volatile. We believe that the summer will be much better because last year, it was also much better. And when you look at the booking patterns right now, bookings for summer, particularly for Q4, for this financial year, but also, yes, Q4, Q3 starting, but particularly Q4 is on precrisis level. And prices are, if at all, higher than precrisis. So therefore, we assume that demand will be there. And also that if we can do the sailings, that the sailings will be done, and it will be very attractive. That's what we assume, particularly in summer when the infections are less influential. And you have heard Denmark, you have heard U.K. And also even Germany, very conservative. But there's, right now, opening of everything before easter is thinkable. So I mean therefore, my personal view is it is not unlikely that this will be on precrisis or close to precrisis levels. On [indiscernible] so I think, I mean maybe you can take that question.
Yes. First, we sold North Hotel into Group Hotel, which is one of our joint venture companies, which is very good fit with our strategy. So we keep 50% of the after-tax profits. Do we have similar opportunities? It is part of our normal business that we sell the one or the other asset that we have done in all the years. We had discussed Marella. There would be significant synergies to bring this into the TUI Cruises joint venture. For the time being, we have to see when we have there the right moment. Cruise should recover first. And the good thing is that due to the ownership of 3 out of the 4 ships, the Marella is generating a good cash flow. So we can wait until we can achieve the full value of Marella. And so there is a few things which we will do. Marella would be the biggest project.
The next question comes from Kiranjot Grewal from Bank of America.
Just a question for me. Firstly, on the pricing. Do you think this -- the price rises are sustainable? I know it's being driven by mix, but do you think it's a one-off just using cash [indiscernible] COVID lockdown? Or do you think there could be a fundamental sort of change from going forward? And on the Marella point, on the sale, obviously, we've been talking about returning cash to the government or paying down those facilities. I mean how are you balancing potential getting the right price from Marella and also paying down [indiscernible] facilities?
Maybe I'll take the first one. The second, I think, on the strategy on particular balance sheet, Sebastian, I think. But pricing, it's not so stable. I mean 22% pricing until the end of the season, this would be paradise. I mean having a starting point where we have significant bookings now 20%, 30%, above 30% on summer business, accumulate 20% up on pricing has never happened to me and I have never seen it. Also the additional bookings, which I mean we talked last -- even last time you talked, we were 25% or 23% up or whatever, I mean, it's now for quite some time, 22%, 23% up. So it's so much longer than I expected. But of course, at the end of the season, it will be lower because 22% up in prices would be enormous profitability. So -- but it says the longer we can keep the prices up, the better it is. And also, one thing that should be mentioned, we see right now, one market trend, which I also have not seen before, that elasticity is relatively small. Meaning if people don't book right now for summer, it's usually not the price. If people don't book for summer now, then it's usually uncertainty. So therefore, we keep margin up, prices up because we don't believe that lower prices would increase demand right now, right? We have a late booking pattern. We keep our nerve a little bit. We keep the prices up and play the price curve. So I believe the mix right now, when you look at the mix, where people travel, how people travel, we will keep quite some part of the 22%. Will it be 22% by the end of the season? No. But Sebastian, you have a good view on these things as well. If we had 22%, we would be happy.
Yes. And I mean the interesting thing, as Fritz said, that the price level we do see at the moment supports what we have seen before. This is quite unusual. And maybe there will be also some scarcity. But you never know. It's very difficult.
Winter is more end of season now, and this year 15% up. So maybe it's also interesting. I mean let's see, or let's say, mid-season is 15% up. Let's see.
And the weak January was the pickup in February also supports strong prices, which is also in [indiscernible] Marella, as Fritz said, we anticipate a good full recovery for the second half of the summer. And I think it's very important that we do see this recovery to formulate a view of what a fair price would be because we are not under pressure to sell something because of the need of cash. And as I said, the situation of Marella is 3 owned ship, one leased-in ship from TUI Cruises. So the company with decent low occupancy is cash generating. So therefore, the interest which we may would need to pay is easily offset by the positive cash flow. So it's really the question of optimizing the value for you as shareholders.
The next question comes from Alex Brignall from Redburn.
I'll do 3. Why not? On bookings, a couple of points on that. On the U.K., could you tell us how booked the U.K. is kind of relative to that 24% that the whole [indiscernible] And then on the sort of broader booking environment, obviously, January is a very heavy booking month. But if the volumes stay as they are now, how would that then compare to a normal seasonal pattern? So I guess my point is, what happens in February, March, April? Do the normal bookings go down a bit? How would that sort of work? On the Hotel Fund, could you tell us how that ties in with the plan you talked about previously on increased franchising and growing the brand in that way? And how are the 2 are related, if they are? And then my third question, I think, online, and how is that impacting your sort of gross margin after commissions and distribution costs?
So in the bookings is we are ahead, right? So in the bookings in a normal year in the U.K., we would be around -- just below 40%, and now we are mid-40s. So the booking up in the U.K. is the only market where we are cumulative ahead. And since this week, we are also, and the net adds ahead. So -- and also because it's such a big portion of our booking profile, it's also pricing. You can judge a big part of the 22% price is actually part of the U.K. And as we have now more than half of the fleet or let's say, half of the fleet of our aircraft in the U.K. and particularly more or less, let's say, 80% of long-haul aircraft in the U.K., the U.K. will be an enormous driver of full summer profile. Now that said, I said, Netherlands is amazingly high now, 70% above precrisis level in terms of net adds. But at the same time, of course, the total amount of bookings in the Netherlands is still relatively small, lower than comparable precrisis. But the U.K. is very strong. So that said, what was the other questions?
What happens to February, April normally?
You don't expect that. Yes. Usually, you have enormous booking peak right now and usually comparables come down. Therefore, our comparables, therefore, the 100% will be overachieved at certain weeks from now. I would have expected the cutover point for summer bookings later in February than it was in the 1st week of February was a little bit of a surprise to me. But it will, of course, stay up. But it's not only the comparables, but also the total booking. I mean last -- as I said last January, it was 275,000 bookings per week. So it's not only relative high, but also absolute high in that respect. And then Hotel Fund?
Yes, maybe. The Hotel Fund owns the hotel. So the independent fund owns the property of the hotel. We would manage with our core brands these hotels. So Robinson, Metric Life, TUI Blue, these would be the brands for the hotels we manage. So it's not a franchise.
Okay. So the franchising plan is completely as a totally separate independent strategy to this?
Yes. You referred to the growth we have for -- especially for TUI Blue where we increased from 10 to above 100 and where we want to grow and accelerate the growth through franchise and management. This year, the Hotel Fund independent of TUI owns the property, we would manage the hotel.
And then just the online question margins from online versus off-line.
Can you -- so how the online margin is, yes? Sebastian, you got the question.
I mean this is really now very exciting. The online margins, which were historically lower than retail margins, it's now at closing. And what is also very interesting, the more we sell through the TUI app, the lower distribution cost we have because with the app, we don't have any distribution costs. So that is really -- online is not online. So there are good trends. Of course, we have just started the journey. And we put a lot of efforts to accelerate the journey. The good thing is that we are still at a starting point, so the benefits can be huge.
But one thing is also -- I want to mention one thing. Strategically, it's not our target to reduce online sales cost. I mean strategically, we want to get cut over to the online proposition. And this is particularly true in Germany. In Germany, for example, we had the strongest sales, online sales Sunday in the company history last Sunday. And one of the reasons is we spent a little bit of online sales. I mean we gain market share, we are the only -- with the traditional 2 operators, the only player with a significant off-line, online presence. So we are driving our online in order to significantly have more control. The ultimate goal, as Sebastian says, online is not the end state. The end state is mobile. And that's the reason why the app, which is now used for ancillaries, will be and will become also the strongest growing session for our holiday experiences as well, so the packages as well. Because conversion is good, attention is good, sales costs are very good. But as I said, strategically, we are still -- nothing changed that we want to become more and more an online company, and particularly, the biggest in the development areas are in Germany where retail was always so big and scattered distribution landscape with 10s of 2 operators.
That's really helpful. Sebastian, your comment about online versus retail. When you said retail, were you talking about your own stores? Because typically, there's been achieved margin but the margin before distribution is the cost of paying third parties like in Germany. So I guess my question is, the online move, if it reduces your use of third parties as they're not completely the same.
The customer buys the product where he wants to buy the product. In our own retail, we have a good margin. And as I said, also the margins now online are coming closer to the retail margins, which is, I think, a quite normal way. We have seen that in England that the margins you can compare. This is the same part that we see in Germany.
I mean the ticket size online usually is smaller than in retail because you are one click ahead of competition. So the ticket size is smaller, distribution costs are a little bit smaller. But as Sebastian says, this is now converging, if you like.
And the last question comes from Cristian Nedelcu from UBS.
Three questions, if I may. The first one on the second half of this year. I mean you used to generate EBIT of around EUR 1.2 billion in the second half pre-COVID. You're talking now about summer capacity broadly aligned with 2019. So can you talk a bit about the moving parts in that EBIT? Can you achieve the EUR 1.2 billion in the second half, or which are the moving parts? Secondly, in terms of Q2, could you give us a bit of a steer around working capital, cash contribution in Q2, maybe referring to past Q2 levels or how we should think about it? And lastly, the authorization, the 1.6 billion, 1.7 billion shares authorizations, if need be, could you talk us a bit through the process? How did you get to this number? I mean why is a 1 billion new shares, authorization or 2 billion? Or how did you get to the number? And in that regard, I mean, you did mention that the 700 million reducing the state RCF in April, that's the first step. So do you have any visibility on the time line for further reductions in the state RCF? Is anything already agreed with the German state?
I mean it's a good try, but we cannot give guidance, right? I mean -- so as I said, it's difficult to prognose right now when you are 72% on normal level, your cash velocity is 100%. So we -- and then 22% up in price. It's difficult to do these kind of prognosis. And that's the reason why we are -- consciously we said we don't give any guidance now. We'll think about it during next time. And now it's not that we are against guidance, but it should be meaningful. So if I said 1.2 billion was right, that would actually contrast everything I said before. Cash generation, maybe, Sebastian, can you take that or -- on Q2?
Yes. We would also not give a guidance. I think it will be -- I mean, it depends on profitability. I said something about that. And how strong the bookings will be, there, we are positive. But you have to do your own calculation.
We are amazingly aligned. So -- and then how did we get to the authorizations, more or less, we've got the standard.
Legal framework.
It is the legal framework, which, which together with the Supervisory Board and talks to investors and also in the best interest of the company, we have flexibility. And if when this occur, we do the right things. We want to achieve the 3x leverage. That's our main objective and to do the right things, we have then, what did you say, inventory approvals...
Yes.
So inventory approvals. And then, of course, the supervisory Board together with the [indiscernible], we will make a plan, and we will, of course, communicate as soon as we have.
So the numbers are [ technique ]. That is the legal framework that was not calculated from something which we would like to have or what we need. It's just what you normally do, and this is given by the legal framework in Germany.
Understood. Just on my second question on the Q2 working capital. Can you make any -- I understand that it's difficult, but can you make any comments related to the usual Q2 working capital movement in cash? So would you expect you are saying bookings are strong over the last weeks? Or should there be a much stronger cash inflow from working capital than the usual Q2? Or can -- any color you could provide there?
I'm only booking spring cash.
Yes, yes, yes. I mean that will be strong. I mean there will be strong bookings. Of course, in usually, you have a strong January bookings as well. So therefore -- but it will be a strong cash inflow vassals with the position we are in right now. I mean that's very clear.
There are no further questions.
Thanks a lot. Have a great day.
Thank you. Bye-bye.
Bye-bye.