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Good morning, and welcome to today's TUI Group Q3 Results Call. My name is Seb, and I'll be the operator for your call today.

[Operator Instructions].

I now hand you over to Nicola Gehrt, Director of Investor Relations. Please go ahead.

Thanks, Seb, and good morning, ladies and gentlemen. A very warm welcome to our fourth quarter 2026 results presentation here from the TUI Group campus in Hanover on this wonderful summer stage.

My name is Nicola Gehrt, and I'm Group Director of Investor Relations, and I'm delighted to be joined for the presentation by our CEO, Sebastian Ebel, and our CFO, Mathias Kiep.

Today, we are pleased to present to you a resilient set of Q3 results, highlighting the strength of our business in this challenging geopolitical environment. Following the presentation, we will open the floor for the Q&A.

And with that, I have the pleasure of handing over to Sebastian.

Thank you, Nicola. And a very warm welcome also from my side and, of course, from Mathias with this beautiful picture of our hotel in Santorini.

When we, 12 months ago, presented our outlook, our guidance, we assumed record profits, and we had excellent 5 months until the war in and with Iran started, which had direct impacts, the 2 cruise ships stuck the repatriation cost for the Middle East, for the Far East, the fuel impact, but also for a time period, 3 months less bookings, especially, of course, Middle East, also Far East, but also to some of the Eastern Mediterranean countries.

And this, we do see in the second half of this year. The good development is that we now can see the business is coming back. It's normalizing, and we have seen strong weeks.

What we also see is that our transformation is well underway and supported the results which we can present today.

That said, Q3 revenues were roughly EUR 6 billion, more than 5% below last year. EBIT was down at EUR 86 million and positive, which was not the case a couple of years ago, but Matthias will go more into the details before.

If we look into the 9-month numbers, if we take out the direct one-offs, we are still above last year. If we take them into account, we are EUR 40 million down and with revenue 1.5% less.

So that's why we say a very resilient 9 months. And to just remind you, the 2 specific direct one-offs are EUR 60 million: the Iran war and the 2 ships, the repatriation, and, which is almost forgotten, the EUR 21 million Jamaica hurricane cost.

As I said, suffering from high fuel costs, the Eastern Mediterranean softness, and customer consumer caution. So having said that and seeing that the business is coming back, bookings are coming back considerably, we are able to confirm the guidance, EUR 1.1 billion to EUR 1.4 billion.

If we go into the details, hotel is stable. We had lower occupancy, mainly triggered by the Middle East impact, stable rates, slightly bigger offering.

And if we take the Jamaica impact out, we are almost on the same level. Cruise, very, very strong. If we hadn't had the 2 ships stuck in the Middle East, it would have been even up compared to last year.

Now we are slightly below. And we are in the first 9 months, we are significantly above. What is really amazing is that if we take the 2 ships out, occupancy is above last year, and prices are also very strong.

By the way, this is not only true for TUI Cruises, but it's also the same for the U.K. business, Marella.

TUI Amusement is strong despite fewer customers; we are able to sell more products to customers and especially our own-produced products where we have a higher margin.

If we go into the market and airline space, we lost EUR 65 million compared to last year, which is, in these circumstances, probably a resilient, at least from our point of view, resilient result with the impact we discussed almost on the same level as last year.

And occupancy is still at 91%, at a reasonable level; sales are growing. And we have seen that the U.K. is positive, but there is a decline in Germany because of the significant long-haul business, which was not there, was negative, and the Western region is slightly improving.

If we look at what has also happened with our main initiatives to build the TUI of tomorrow, we are more and more differentiating between the core value TUI products, the differentiated products with our strong brands with our airline, and the dynamic produced products.

This has worked extremely well in Germany with Atour. And therefore, on this infrastructure, we have launched Sun& Beach last week to give people the right answers if they want to have a differentiated TUI product or a dynamic package, a very price-attractive product there.

Also supported by the strengthening of our sales approach with our app. We now have integrated semantic search, which has a real shift in conversion. And we are rolling that out until the beginning of next calendar year to all the other markets.

So a very good development. We have built the connections to the LMMs, where we do see good conversion and a very attractive sales channel, including the integration into social media.

We just started with our loyalty program in the Nordics, so Scandinavia plus Finland. And recently, very recently, in the U.K. and Ireland, great success, and that should strengthen our TUI ecosystem to keep the customer with all the benefits they can achieve in our ecosystem and make them even more loyal customers.

One of the most important projects we have is the commercialization of our airline. And I'm just saying airline, not anymore airlines, because operationally, it's now one airline with all the efficiency gains we see now from the marketing and sales side; we will act as one commercial airline with a full impact on summer '27 when it comes to network, when it comes to sales activity.

And this is a major breakthrough because the right combination between seat-only third-party and own customer is adding a lot of value. When we look at Holiday Experiences, we had the successful start naming of Mein schiff Flow.

Outstanding NPS- I can't remember having seen that in any other business before: 95%. So customers are really, really happy with it. It's fully booked out.

Occupancy levels above 100% because of the beds for the kids. And what we brought into the market also, for the foreseeable future, is selling extremely strongly.

We believe in carbon neutrality and emission reduction. Therefore, we will start operation now with the 2 newbuild LNG ships, not with fossil LNG but with fracked LNG, but with bio-LNG out of biogas. And therefore, we can reduce the CO2 footprint to almost 100%, 95%.

It's also very, very important.

On the hotel side, yes, we have one or the other where we have invested in an asset. We will open a Robinson Club on Comfort next spring, and the year after in the Eastern part of Africa, Zanzibar, but the main growth comes from management hotels under the TUI Blue brand.

Now we have started business in cities, not for business travel but for tours. These are leisure hotels. We are starting with Civil and Lisbon. We will roll that out to all major cities as the brand is well recognized, and we can give value to the hotel and to ourselves.

So a lot of things of transformation in TUI. And therefore, we are looking forward to the remaining part of the year and to the coming year. After the Prosaic, Mathias, the numbers.

Thank you. Thank you very much, Sebastian, and a very good morning. Let me just summarize the quarter and then summarize the EBIT bridges for the 3 months and 9 months before I would then share, as usual, details on P&L, cash flow and net debt.

And thereafter, Sebastian will cover bookings, and we will talk about the resulting guidance once more.

Now, when I look at the quarter and the 9 months year-to-date, from my perspective, in summary, this is a very robust and resilient result despite a challenging market environment and despite the specific TUI challenges that Sebastian has just described, again, that you also know from our Q2 results.

This quarter, as a result, supports well our guidance of EUR 1.1 billion to EUR 1.4 billion profit. And I think what is important, and it's important to me, is that also the elements below EBIT, the financial profile, very much supports our journey.

And this is something which is in line with our initial expectations even prior to the situation in Iran, which I think is very pleasing.

Now, as you said, Sebastian, this is, again, a positive third quarter. It's also a positive 9 months. And at the same time, this result is probably not as well in line with 2024 for the quarter and is significantly better for the operational profit for the 9 months in 2024.

So I think that is good in order to put this into perspective. And in summary, as you see from the waterfall and holiday experiences slightly below the prior year.

If you take out the direct impact of the straight of Foremost on TUI Cruises, then that would be in line with the prior year broadly.

I think if you go through the segments, it's Cruises, as Sebastian described, continues to perform outstandingly well, both in the U.K. and in the German market.

Hotels is in line with the quarters before. So very strong and good results.

At the same time, the super profitability that we saw in the prior years. We currently don't see it because of the situation in Mexico, where we see market softness.

So it's not, let's say, a structural difference, but it's a bit of market headwind in one region and then amusement with this very continuous improvement.

And naturally, markets hit the most by the booking environment, at the same time, supporting extremely well our hotels and cruise amusement business.

Just anecdotally, if you look at the result in Turkey, what we call gateways to the market overall is down, and our revenue intake in the hotels in Turkey is actually up. So that is how well the vertical integration works.

The picture for the 9 months, as described, is even showing that without these direct costs that TUI has to carry this year, we would be up, again, a result of this very strong winter.

I think that is important because also the market prior to Iran was not very strong, was soft. And in this environment, we created actually a very good result.

Now, of course, with this direct impact and with the indirect impact on bookings, fuel price, et cetera, the geopolitical events had, we are below. But again, this is more than double the result that we had in 2024.

Now when we look at P&L, cash flow and balance sheet to conclude the quarter, I think I'm very pleased that everything below EBIT is in line with our expectations and our plans.

So we can effectively reconfirm everything that we saw for Q2; in particular, interest is expected to be at the lower end, and the Q3 interest expense in the 9 months more than supports this so far.

Then if you look at EPS, again, a positive EPS in the third quarter, which is something that is very important to our financial structure. And then on cash flow, again, we see a similar picture that is also reflected on the balance sheet.

Structurally, more investments offset by less lease and asset financing amortization, less pension costs, and less interest costs.

At the same time, what you then see on a net basis other than earnings is working capital, which is a natural result of the booking profile that we currently have. This is as of the 30th of June.

Naturally, the positive booking environment, as Sebastian will mention and conclude and summarize in a second, will have a positive impact on that.

At the same time, this is naturally behind last year, and that is something that we currently also see as a result on the balance sheet.

So if you go to the balance sheet structure, then net cash is lower, and that is a one-to-one reflection of what we see in the booking intake and the result of the working capital profile. So effectively, seasonality rather than structural impacts.

The other comment on the balance sheet is that the intake on the aircraft side is according to plan. So you see a bit more asset financing, a bit less leasing.

We take profit from the very supportive direct financing market there and our credit quality. At the same time, the Boeing delivery portfolio is something which is in line with plan and which is naturally impacting our balance sheet and the way you see it here for the third quarter.

I think that's overall, again, a very robust Q3, again, profitable for Q3 and the 9 months. And with that, very supportive of our full year guidance.

Thank you, Mathias. And trading and outlook. As said, we had quite a challenging month, March, April, May into June. We have seen now, over the last 4, 5, 6 weeks, a very different business for summer and winter.

If we look into hotels, we see a strong average daily rate. We have seen a slight increase in capacity, and occupancy is now 3% behind last year. Before, when we had the same number 3 months ago, it was significantly higher. So we are catching up here.

On cruise, occupancy, as said, is amazingly on the same level, same very high level. Also, rates are up, while we have 12% higher capacity. And amusement is in line with what we have seen before, very robust business.

When it comes to market and airlines, we have improved by 1% now to 6%. If we look into the last weeks, we have seen encouraging momentum. And the last week and this week, again, are better than weeks 4 and 5 weeks ago. So the momentum is gaining speed.

You have to see that in light of the fact that we voluntarily cut risk capacity because otherwise, we thought we would get into the significant price war we have seen in the market. So capacity and demand are now aligned by this decision to reduce risk capacity.

ASPs are holding up well, which has also been very important to offset inflation. And as I said, the last 4 weeks of trading have been very encouraging, with booked revenue up 7%.

That, I say, also surprised me because the weather, with the heat wave now lasting for 2 months, was not what I had expected. So that is a good development.

Winter started slowly, but we have seen the same momentum now also for winter. And it's still quite a long time; summer lasts until October, winter starts in November. So we are confident that we will see a good winter.

What we should have in mind when we look at these numbers, we always had a strong long-haul business. And the U.S. business is significantly down because of the political situation. Middle East is 0 because, with the package regulation, it has not been allowed to sell to it.

Also, the Far East has been significantly impacted because of the very high flight rates. And then we had some destinations like Egypt, Turkiye and Cyprus, where we traditionally have been strong, which were very much impacted during the 3 weeks in order intake.

This now has been normalized, and we are looking forward with optimism. And this clearly shows that we have seen, after the 14th of June when the first ceasefire was announced, a resilient and improved intake, and also the running week is doing extremely well.

So that's why we expect that the risk capacity and the demand are in line. Yes, of course, last minute, the margins are less, but they are supporting our guidance very much.

And that led to the clear message we can confirm the guidance, EBIT guidance. Matthias, some more details from your side.

Yes. Thank you. On the segments, we talked, and what I think, again, to highlight in this call is adjustments, net interest in line with what we guided as modeling assumptions in the last quarter.

Net investments, and that's something you also saw from Q3 and 9-month results, we reduced, so in line with the efforts to effectively bring in countermeasures against the developments in earnings.

We now see that we can reduce that to a level of EUR 810 million to EUR 830 million this year from a prior range of the lower end of EUR 860 million to EUR 900 million.

The rest of the guidance and the modeling assumptions remain unchanged. I think an important comment, because I get the question a lot, is on net debt.

I think naturally, we already talked about an increase in net debt this year because of the Boeing deliveries and adding more lease and asset financing liabilities on the balance sheet.

Now a question will be what is working capital doing at the end of the year. You have seen what the 9-month position is. That is naturally the peak.

So the impact will naturally per 30th of September lower than that and will be a product of what is now the last week's booking development, what's October, and what's the incoming winter.

So there's a bit of volatility, which is more than we usually would have at that point in time. And I think we have our own view on that. At the same time, on a net basis, we would say there's not like a material change in our corridors, but at the same time, there will be an increase in net debt versus last year.

I think that's something which I wanted to bring across in this call as well with a view to September. And with that, Sebastian, I think that's on the financial side for you to the summary.

Thank you, Mathias. As said, when we look at what we wanted to achieve, we are personally disappointed.

We are happy that we have seen in these extraordinary market circumstances and can present a resilient result, especially looking forward to the 12 months.

This resilient result was, of course, and will be, of course, the result of cautious capacity planning of more profit against growth and because of the transformation.

And therefore, seeing now that the transformation, which, by the way, includes significant cost reductions, will put us in a good position when business and demand return. Therefore, it's our commitment to deliver sustainable growth and improved shareholder returns.

Maybe the good thing is that with this unexpected event, we had to be more drastic in what we do when it came to cost, when it came to transformation, looking even more intensively at where we invest, how we even better steer into our own assets.

And what supports that is not only a great finance organization here, but also that we brought all the activities under one head, our new COO, Marco Ciomperlik, and that has helped us again to be even more focused on what we want to achieve.

So, bad environment, quite promising outlook. And I'm really happy to see all the changes, which are quite often triggered by AI, because this is the disruptive change in our business model and in tourism.

Thank you. And maybe some rain would also be nice.

Operator, we are ready for the Q&A.

[Operator Instructions]

Our first question comes from Jamie Rollo with Morgan Stanley.

Three questions, please, all on markets and airlines, I'm afraid.

So the last 4 weeks, obviously, pretty encouraging 7% growth in revenue, but you do describe a price war. So is it fair for us to assume all of that 7% is volume? And what are prices down maybe in the last 4 weeks to stimulate that volume?

Secondly, you've cut capacity another 1% or so. How much more could you take out for this season if pricing remains tough? And how are you thinking about capacity for the winter season and next summer?

Then finally, I think you normally give some figures for the winter season this time of the year, particularly for the U.K. But you also mentioned some structural reasons why it's going to be a tough season given the long-haul exposure has been curtailed.

So is there any flavor you can give on winter bookings? And is it also fair for us to assume that actually winter could be very difficult indeed given some of that long-haul program would have gone? Thank you.

Maybe I said something wrong. For our products, we don't see the price war. We see that at the end of the season, margin is normally lower.

But on top of that is nothing we can see because we are very much in line with demand. So if I said something wrong, please apologize that. And we don't see the necessity to take out any capacity anymore for summer unless there is some unhelpful event, which we actually hopefully will not see.

So there is, from that side, no pressure. The pressure all comes from the 3 months after the war has started.

If we look into the winter, I am also a finance person, but as Mathias is in charge of the finance, he said we should be very cautious on that, although I'm cautiously optimistic not only because of the recent bookings, but I think that the ones which were not traveling in summer may go into the shoulder months.

We have increased our footprint for November, February, and March. And therefore, I'm positive there. We haven't increased the risk capacity.

We have slightly less risk capacity, but we are flexible enough to react if there's bigger demand or less demand. And you are right. And that's also quite interesting to see some of the customers who went to the U.S. go to Canada, only a portion.

Some of the customers who didn't go to the Caribbean, Mexico has a weakness, go to Egypt. Others haven't gone long haul, but have gone on a ship.

So I assume that it will take a couple of months for long haul to recover, even if we assume that there hopefully will be some more peace in the Middle East.

Therefore, it has always been good that the risk capacity is except for the flights to the Caribbean, which are also very strong for us, is more a non-risk play where the impact on margin is less important.

So that's why a slower start for the winter, but encouraging if I look at where margins should come from when it comes to occupancy, not occupancy utilization of the aircraft.

And of course, we have optimized a lot. We took closed long haul in Belgium. We put this machine, the planes, into Amsterdam, a very slot-restricted airport, and with good success; that's the reason why we have seen a small improvement in Western Europe, hopefully more to come in the coming season.

So I look quite encouraged for the winter. And we will be very cautious about capacity.

Just maybe as a follow-up, given all the pressure in Markets and Airline, if we take the low end of your full year EBIT guidance of EUR 1.1 billion, that suggests Q4 Markets & Airline profit of under EUR 400 million, which would be a drop of around EUR 250 million year-on-year.

And that would be about 4x the profit drop you just reported. I'm just wondering, is that still a realistic scenario to be at the low end of the full year EBIT guidance?

I mean, as I'm sitting next to Nicola and Mathias, I'm actually very cautious about what I say, which is a little bit surprising when it's August, with some uncertainty from River Cruise, which has to stop operations due to fuel prices, the last open position.

Let's answer it that way. And hopefully, I'm not killed from right or left. I would be very disappointed with EUR 1.1 billion. Is it allowed to say? Maybe this answer helps a little bit.

Next question is from Kate Xiao with Bank of America.

Can I ask a quick follow-up on the guide? How about the high end of the range then? Do you still have the ambition to potentially get back to last year's EBIT level?

And if you were able to get there eventually, what would need to happen at this point?

Second question also on your capacity. I was wondering if you could elaborate a little bit more on your risk capacity cut: how much is dynamic through partners compared to owned?

And with the recent more positive momentum in booking trend, are these bookings going through your own capacity or dynamic?

Will you do the first one before I say something wrong?

Yes. Let me cover the guidance indeed. So I think when we compare to our Q2 position, we set out a corridor of 1.1 billion to 1.4 billion in Q2, and there was clarity about how the market return would be linked to how quickly the situation in the Middle East would be resolved.

We've seen the very positive impact from the peace treaty at the time.

We've seen the very positive impact whenever the situation came down. There's another element, which is fuel prices, where there was a question: would they come back quickly, which they did in one window, but did not really stabilize on that level.

So I think if you take a step back, those impacts we not only see in Markets & Airlines, as a lot of questions are, but it's also something on the related activities in the hotels, Turkey, on the footprint that we have there, Cyprus with the cruise.

So there are a lot of ingredients that we had when we set out the guidance in Q2. Now we are 3 months further advanced. And I think what a very good picture is, and how we look at this, is that naturally, we have narrowed the corridor.

So I think, as Sebastian said, given the volatility around us, you can't exclude the lower end or the upper end because otherwise, we would have done that.

But at the same time, naturally, with the trajectory that we have, you come in a narrower corridor. But at the same time, this is unfortunately not the time to specify this further.

Yes. Thank you, Mathias. On the risk capacity, as I said, at least I and some other colleagues didn't expect that the business now would come back as it came back.

And maybe we could have been less price-focused when we would have known that the business would come back as it is, because our own flying, our own risk hotel capacity is sold as it should be sold.

So whatever now comes is the majority, the huge majority is on dynamic capacity, and it's mainly to destinations like Turkiye, some Greece, some Egypt.

Therefore, the impact is on margin and fixed cost coverage, but it's not on getting a better load factor because this opportunity is limited. And therefore, if destinations keep stable, the risk is limited, but also the opportunity is limited; the opportunity comes from a dynamic part and from a few countries.

Our next question is from Leo Carrington with Citi.

I also have 3. Just one on trading and a couple of strategic. On trading, in terms of the Markets & Airlines business, do you get a sense of why the bookings originating in the U.K. are still lagging Germany?

And then separately, on the TUI Fly platform, is this an ambition: a platform mostly for the winter months? Or would you expect some of your summer capacity to be on there in 2027?

And then lastly, I was interested to see you highlight the TUI Blue Hotel. I mean, not necessarily about that property, but in general, I'd be interested to know how you perceive the future of, let's say, nonurban leisure destinations given the trends for travelers to look for cooler locations and atypical summer destinations.

Germany, our German business has always had a significantly higher share of dynamic packaged product.

And as the market has gone in 2 directions: one, the differentiated higher-end product on the one hand and the price-sensitive dynamic package product, this has worked extremely well in a very difficult market has worked well with the TUI brand for the differentiated product with our own hotel product, own flying and a tour for the dynamic packaged very price-sensitive products because it's when I say it worked well, if you take the long haul out, the rest is extremely stable and doing well.

And long haul, I think it's very clear that there is no business to the Middle East; there is no business.

The approach in the U.K. was different. We brought everything into the TUI brand, and we had to learn from consumer intelligence that were a little bit, in some areas, we lost the trust of the consumer set with TUI: I want to have a TUI flight. I want to have a TUI hotel.

Maybe I want to have less dynamic packages with other airlines over long-tail hotels. And that was the reason why we where we introduced Sun deals to make very clear this is this kind of product, and this is the other kind of product.

Therefore, whenever the dynamic is stronger than the differentiated product, we will benefit from both segments.

And when you cut capacity, as we did in the U.K., but also in Germany, but mainly in the U.K., then the focus is on that. You are not getting the customers who then go to the beach or holidays or other great companies who offer a dynamic, and we want to get our fair share from this as well because one thing is clear: we want to grow.

Blue Hotel, I didn't know that we have a hotel in Blue Hotel, but apparently, we have one. We are growing in this area as well. We very much believe in the city leisure destinations. We are going to open the third hotel in New York.

What is interesting, people always think a leisure hotel in the city is the same as a business hotel. It's a very different distribution. It's a very different product.

As much as business travel is at the moment not an easy business, leisure is growing significantly because the second, third trip per year goes quite often into a city. And there, we will benefit because we know how to distribute this product.

Therefore, the Rio hotels in London are doing very well, and Toronto is doing very well. And Dublin is doing well. And that's why we also have the focus on that. And one side effect: we are now opening the first hotel in Lisbon; maybe there will be a second, hopefully soon.

It helps build our brand in this destination where TUI is not known as we are in England or in Germany.

So, with getting customers in the hotels, we will also be able to sell the connected trip product and so on. And so it's part of the integrated model. And that is slightly different from a year ago.

Today, we look even more at how we can get the benefits from the vertical integration. So whenever we go to a destination with the TUI Blue Hotel or Rio Hotel, it will be a leisure hotel where we have our own agency where flying could happen. So very strong focus on vertical integration.

Changing customer preferences, not the consumer change; climate change is quite interesting. I was in Türkiye last week. The weather was cooler than here in Hanover, which was almost the case the whole time.

It was dry, and here it was humid, and it was windy, and here, there was no wind. So I was quite surprised that the customer was there is by far better than what I've seen in Germany.

So the feedback is very positive. And that's why we haven't seen that this has a major impact on our business at all. Although the wildfires didn't do it because they were not all in non-touristic areas; in the touristic areas, we have had, up to now, hopefully, they will stay less than the years before.

The change has been how the hotels have to be equipped. In the past, it was air conditioning in your room. Now it's about air conditioning also in the dining facilities and the sports facilities.

By the way, for the longer shoulder season, we also need heating. So this has been a change. So no real impact. And if you talk about the boom to Nordics, yes, it's a 50% increase from 100,000 to 150,000. That is nice, but it's not game-changing.

That's interesting. And on the Reef platform, just summer...

Yes. I think, and that's also what we learned from our dear competitors, that sometimes to sell not the last 5 bets with a loss, but selling a seat only with a profit is the better part.

And you know that we only, or you may know that we only had 5% for a 3% seat only. And it was more a tool to get the lowest price to sell them, and not like we do now when I had to book for Lanzarote in the spring vacation; I had to pay EUR 1,000 for a seat only.

This part of the business we missed. So in the end, we don't want to change the benefits from synergies from the vertical integration.

But to have, let's say, 10% less distressed sales and have 10% higher value seat-only products. That is the strategy, and some of our dear competitors have proven that this is a good way forward. And we haven't had the tools.

We couldn't really sell single seats; we couldn't sell from the destination, and that is all now changing.

Next question comes from Andre Juillard from Deutsche Bank.

Three, if I may. First one about source market and destinations. Could you give us some more color about the recent trend you've been registering in your main source market in terms of volumes and pricing?

In terms of destination, could you also give us some more color about where you still have some capacity? And which trend do you register at the moment?

Second question also about pricing and volume. You were giving some more color about the fact that there was no pricing war.

But could you also give us some more information about the trend you register in the market and airlines and hotels, where you see some capacity available and where you feel pricing is sustainable?

And last one about the fiscal year '26 guidance. You were mentioning that you would be disappointed if you were ending the year in the low range of 1.1 to 1.4.

What would allow you to be in the upper end of this guidance in the actual environment and 6 weeks before the end of the fiscal year?

I mean, I don't want to add something to the guidance unless Mathias wants to say something more about that. As I said, it was a personal comment from my side.

What we do see is that the late markets very much go into Turkiye. As I said, like Spain is well booked, quite often sold out. Volumes are because they had a very slow start, which is available in Turkiye and Egypt.

And when I talk about pricing, what hit us this year was the 3-month period, March, April, May, and part of June, where we had to stimulate the market. You could argue that we do too much. But in hindsight, you're always more.

Now the whole system has really stabilized despite the fact that the long haul is very small. And that was one of the reasons why a price number wouldn't help, because it's very much influenced by the different mix.

Long haul is normally 2x more expensive, or at least 2x more expensive than the trip to Majorca. But what we do see today with the latest sales pricing is as it was 1 year ago.

What we missed out on was the 3.5 months since the war started and the special effect, which hit the 2 ships; the disruption cost bringing customers home and having a special. I mean, we are the market leader in Cyprus.

So therefore, Cyprus, the hit of Cyprus is huge. There were weeks with 98% down in the first weeks. This was not possible to catch up again. If you look at source markets, the bigger markets have seen more impact, but that was more because we put the capacity out.

The Eastern European markets have been doing better. We started in Romania. We are quite surprised, as a new entry in Romania, Spain, and Latin America is still very small volumes, but doing well.

So in the end, the volumes less were from U.K., Germany, and maybe a little bit Belgium. So that was the main impact.

Our next question is from Karan Puri from JPMorgan.

One question from my end on holiday experiences, please, hotels and resorts in particular.

Given that current trading has improved, especially on the occupancy front, is it fair to assume that we see EBIT return to growth in Q4?

Tracking some of the RevPAR data looks like Turkey and Egypt have more or less, I mean, more than recovered actually. And I guess, Mexico and Jamaica should be less of an overhang. Any color on this would be really helpful.

Maybe, Mathias, you want to say a few words. What I said was that the impact of the 3.5 very difficult months after the war started was, of course, more or will be more in July than in October.

October is also a summer month. So as the improvement steps in more in the latter months of the quarter or in October, we will see the occupancy moving in the right direction. How far, we will see.

Yes. I think that's a fair comment. I mean, you saw in Q3, as Sebastian said, we were in hotels slightly below the prior year.

Now there's a bit of a catch-up that we should expect for Q4 that should support the development. But at the same time, we don't expect a step change in the result development. So I think that is, I would say, the broad corridor that we look at.

The next question is from Ricardo Chinchilla with Deutsche Bank.

My first question would be on the AI opportunity. You described AI as potentially disruptive for tourism. What's the largest value pool today: lower consumer acquisition costs, higher conversion, greater cross-selling, or labor productivity?

Going into the normalized power of the business, I was hoping if you could give us, if you could quantify the incremental savings identified since the second quarter update and how much of these benefits should be visible in fiscal '27?

If geopolitical conditions normalize, how much of the 27 profit growth would come from the recovery versus the help sales initiatives already going underway?

Last question for me is that recent booking momentum appears to be disproportionately weighted towards dynamic inventory. Should we think about the current booking recovery as more supportive for revenue than for margin recovery?

So the first answer is very easy, all. And we wouldn't have had the result we are showing in the third quarter.

If we hadn't had all the positive impacts of lower costs, also very much triggered by AI. And of course, a game changer to customer service, a game changer in terms of yield in how you do the production.

Looking forward, for me, the biggest game changer is in distribution because through the LMMs, you will search directly unless you go to the producer.

And the good thing is with TUI, we have very strong producers in Rio, the Robin, the TUI Blue, the TUI fly, and so on. And 2 years ago, a year ago, we had 45% differentiated product, and we are on the way to 60%, 65% this year, and the target will be 80%.

And I see black and white: the market, the consumer going to the ecosystem of a big, strong brand, or they go to the LMMs to search for something and then will be redirected to it. And that will reduce customer or the acquisition cost for new customers. And that's why we put so much effort into linking to the LMMs.

On the other hand, to have a product proposition, which is a TUI product position, which you as a customer would book directly, because it will be less easy to sell an undifferentiated product in the future because of LMMs. And the later trading recovery, let's see.

Next question is from Cristian Nedelcu from UBS.

Three, if I may. The first one is a bit related to one of the previous questions. So if we take a step back on the cost-cutting program, where are we right now?

Could you tell us a bit in terms of whether we're 30% into getting those benefits or 50% into it? And we're trying to visualize a little bit next year: what is the type of incremental year-over-year benefit from cost-cutting that we could see?

And secondly, we discussed working capital, and we're seeing some of your competitors being more aggressive by asking for lower deposits.

Could you talk a little bit about that? Have you made any changes there in terms of the deposits and when the prepayments are made? And to what extent is that one of the reasons the working capital has been a bit weaker?

Yes. Cristian, on the working capital side, I think we generally don't do working capital-driven incentives.

What we give to the teams is that they can support their market activities. And if there is a need for adjustments, then we can discuss this. But there's no general push to generate working capital or to use working capital as a key lever to generate bookings the other way.

We also see from a consumer side that this is not ranked as a key priority. These are other factors. And otherwise, we would also not see the bookings return. So if that was the #1 question.

And we didn't do the promotion saying no prepayment. We are in the normal.

So I think that is something that we can always discuss. So we would always be open, but we wouldn't like structural changes in the market for us that we currently don't see.

So the working capital is more a result of our product bookings rather than we want to take it as a big lever.

On the cost-cutting program, if we take a step back, our plans that we shared with you at the end of 2025 were to achieve around 1/3 this year, another 1/3 next year, and then have that kind of fully implemented during the course of 2028.

I think Sebastian's spirit is that we currently see how we can further accelerate this. At the same time, I would say, to bring another 1/3 next year is already a good result. And of course, you can always do more. But from a general direction, I think that corridor is currently prevailing.

The next question is from Jurgen Kolb from Kepler Cheuvreux.

Two questions. One, maybe in terms of the average trip time, what have you seen from your guests? Are they maybe cutting --So a quick comment on maybe the average trip time by customers.

Have you seen any material changes recently, which may speak to customers going for another shorter trip maybe sometime in October or so? Comments here, maybe.

And on the cost savings program that has just been asked, maybe from a wider perspective, the transformation process that is ongoing, have you learned anything new where you would say we need to strengthen that particular transformation part of the whole equation stronger.

Is AI, for example, becoming an even stronger element? Where do you think you have to do more in the years even after '27, '28 from what you've learned and what you've seen currently?

On average trips, I remember, hopefully, you're right that after COVID, it went from 10 to 11 days. Now we are back where we had been, maybe even slightly less.

I mean, it's very much influenced by less long haul, where people tend to stay longer than on medium, short haul. So if I take this effect out, it's now very stable, slightly below after COVID, but COVID was a 1-day increase.

Could that suggest a second trip? I think the second trip depends more depending on your personal possibilities. And what we have seen is that families, they have less money; the elderly generation who had good jobs have the money, and they go for the second and third trip.

Transformation process: the biggest change is AI. And the biggest change is in IT. I mean, you hardly need Java developers anymore. You need an AI manager.

And that is not only a significant source of efficiency gain, it's also an efficient cost gain. It's also a big thing in efficiency gain that you can increase development speed by a factor.

So this is for a traditional company, quite tough work, but we have a great CIO, and that's why we are making good progress. Global platforms.

I mean, we have been talking about that for 3, 4 years. And now we are implementing and accelerating to make sure that we have them also; then finally in Spain and the small countries it is important.

So to speed up is very important. And distribution, that's what I said, is the biggest change to accept that there are new sales channels which we hadn't seen 2 years ago, which are driving the business, and that the ecosystem, building the ecosystem also with partners in retail, is absolutely key because that will be the most important sales channel in the future.

And there, some of our competitors, the airline competitors, had a big advantage when you offer your big seat-only company and then you offer the latter.

You do it to an existing customer base. And that we didn't do, and that's why the move into the seat-only business, into the commercializing nation of the airline.

So what have we learned? To be more radical, to be more drastic, to accept the change.

And therefore, I said, I think in the press call before, the only good thing or the big good thing of having this crisis now was that we had to do and we need to do things and had to do and need to do things even quicker and to be more radical than before.

This concludes the Q&A session. So I'll hand back to Sebastian for any closing comments.

Thank you. I was just wondering what you could do to help us to get to the different range of our guidance. Please book and go on vacation. Every customer is welcome.

Now I think we went through a challenging time, which was not easy for us. We have 10,000 customers abroad, and the only focus is to get them home. That has been a very tough experience to set the capacity right to not panic, but to do good offers; that was a huge turn.

As I said, maybe we could assume the strong comeback of the market earlier, but I think it was not really foreseeable. So we are happy that we managed this crisis.

I think we are all very happy, and I'm very grateful to the team for putting more speed into the transformation to make sure that when the market comes back, we hopefully benefit maybe even more than others.

It has been a tough learning. We do see that the business is normalizing despite all the uncertainty in the world. I don't know where we would stand if there hadn't been the war between Russia and Ukraine, if there hadn't been the Iranian war, or what would happen if the Hispanics were not scared to go on vacation to Mexico.

I don't know if they come back to the U.S., but we have to cope with it. And that's one of the tasks that we see that we can do our own work. We can get better in what we do, and that always helps us to be more resilient when it comes to these crises.

And there is huge growth potential as the market is generally a growth market. So the work is tough, but with some optimism we have, we think we will get some benefits out of that.

Thank you for being with us, and it's always interesting what you write and a lot of learnings. Mathias?

Thanks a lot. Thank you.

Good morning, everyone, and welcome to the TUI Group Full Year '26 Q2 and H1 Results Analyst and Investor Conference. My name is Seb, and I'll be the operator for your call today. [Operator Instructions]. I will now hand you over to Nicola Gehrt, Group Director of Investor Relations. Please go ahead.

Good morning, ladies and gentlemen. A very warm welcome to our second quarter results presentation here at the TUI campus and Hannover. My name is Nicola and I'm Group Director Investor Relations. And I'm delighted to be joined for the presentation by our CEO, Sebastian Ebel; as well as our CFO, Mathias Kiep.

We are pleased to present a strong set of half year results as well as Q2 results, highlighting the strong progress we have made on the transformation whilst absorbing the impact of the Iran war and the Jamaican hurricane.

We will also share our ambitions for the outlook of this financial year, which remains to be a challenging market environment. Following the presentation, as always, we will open the floor for Q&A.

And with that, I have the pleasure to hand over to Sebastian.

Thank you. Nicola, I couldn't have done the summary better than you. A very warm welcome from rainy Hannover. Rain should mean good bookings. So we hope and pray for similar weather for the coming weeks. The agenda will be very similar to what you are used to it. I will do a summary of the operational and strategic highlights. Mathias will go into the financial details and then trading and outlook in a short summary.

We had a strong Q2 and a wonderful H1, and it would have been even better if we wouldn't have had the impact of the Iran war and the Jamaica hurricane, I always say, as someone took away the cream on the cake but that's how it is. Why we were able to see this development. The transformation is gaining momentum. The vertical integration is even doing better. The diff products are loved by the customers.

And maybe that is the biggest change to before AI is disruptive and it helps us a lot in creating efficiency, streamlining processes, getting better processes, but also changing the distribution landscape, very, very exciting.

And having said that, unfortunately, the second half year, like March, March, as said, [ EUR 50 million ] to EUR 50 million because of the Middle East impact. This will also impact -- or has been impacted and will impact our second half year results. Therefore, we had to change the guidance in April, and we want to reconfirm it.

You could rightly ask why is the range from EUR 1.1 billion and EUR 1.4 billion, a significant one because the visibility is not as much as we are used to it from the beginning.

If you look some highlights on the achievements, we further streamlined the organization. We now have beneath me a COO function, who makes sure not only to get all the cost and efficiency synergies but also make sure that the sales organization, make sure that the very, very good load factors, occupancies of cruise ships of hotels will further be improved.

And on the other hand, the unique hotel products, cruise products, amusement products are very important for the sales organization.

On the hotel side, we further expand our business in an asset-right model. we have now built a very strong River Cruises business, another ship. It helps us to strengthen the TUI ecosystem because a customer who was yesterday traveling to Majorca, tomorrow wants to go to a Christmas cruise in Germany. So we try to offer TUI-branded products in different segments.

The functional-led target operating model is now established and which means that we align processes all over the market, which means higher productivity, but it means also a higher speed if you implement something once like AI, it's there for all the markets. You don't have to do it market-by-market, less cost but higher capacity. What -- the higher speed.

Therefore, especially in the Markets + Airlines, we operational excellence efficiency is important. Also in this market environment, we looked at capacity, Nordics was a longer term, but overall, we were less -- we were more risk adverse and reducing risk capacity.

The commercialization of the airline, which is a big, big project, and we expect huge benefits are now in the status of being implemented. The first markets where we have implemented is Belgium and the Netherlands, you may recall that this was a market which gave us a headache. And we do see that with a strong airline team, giving them the commercial responsibility that has led to significant improvements.

And this will be rolled out beginning of next -- in next fiscal year. This model will work in all the markets. So we will have then a commercial responsible airline management, of course, capturing all the synergies. But over -- beside the benefits of the synergies also to get the benefits from getting direct into the market.

We are expanding our business. The example here in Romania. We also have had a soft launch in Italy. We will do the one or the other market more in East Europe, but also outside Europe. We have not only now rolled out, and this is now for a year, the one app with more and more functionality, increasing the number of customers. But what is new, the OneWeb is at the moment, gradually going live.

It started with the U.K. -- with Ireland then U.K., now the Nordic country, Belgium, Holland and Germany will be the last country in January, February '27. And the most disruptive part of the sector of the business of, I would say, in the world at the moment is AI.

And we understand AI not as one additional tool, but a way of how we work. It is not only linked to IT, but it's also linked to how we create better processes. And better customer experience and what is important, how we get into new, more cost-effective distribution channels, a very exciting topic, which is important for everyone in TUI.

A short look about why the March was impacted so much. We had 2 ships, which we couldn't get out of the region for now 10 weeks. They will be back into commercial service 15th and 17th of May. This was a significant cost for the second quarter, but also for the third quarter. We had to bring customers home from the Gulf region, but what was even more costly from the long-haul Eastern countries, which went through the UAA, hub, the Maldives, Thailand and so on.

And we also had impact on our hotel business in the Middle East, but also in the far east. We are really proud not only that the 2 ships left safely the Gulf, but that we had own repatriation flights to the Dubai-Saudi border to bring customers home safely, very quickly. And that really boost the brand not only awareness, but trust and loyalty.

I never got so many positive letters from -- or e-mails from customers, but it was a significant cost, and it will take until the end of the year. I assume until the Middle East and the Far East were back to normal situation. So the impact was EUR 40 million plus in the Q2. And in Cruise, we see because back to commercial business middle of May, another EUR 20 million.

And what has changed in Market and Airlines is customer sentiment, first from East to Western Med. The long-haul East, Middle East is almost 0, so very, very low bookings. And what we also see, and maybe this is related to the discussion on kerosene that people book very late. So if you see later on that we still need to book a significant amount to get back to the last year's numbers. We see, for example, that May is on the same level as last year. And this is a clear trend of the last-minute bookings.

If you go into the details, the hotel business, despite Jamaica and despite the impact in the Middle East with our own hotels almost on the same level as last year. Without the Jamaica, the occupancy would be on the same level or slightly above, and the rates would have been gone up.

The problem was with Jamaica, as the hotels had to close for minimum 2-month, maximum till for 6 months for renovation or restructuring even when we were able to open the one or the other, we had to do it with lower yield. That will normalize in the summer.

Cruise, outstandingly strong. If we would haven't had the impact of EUR 20 million in the second quarter, we would have seen even a stronger quarter than last year despite the same capacity, and the half year was outstanding. And we haven't seen any slowdown even in the last days. The demand is huge. And what I found really amazing is as we didn't expect to get the ships out when we got them out, we had canceled the cruise until the end of May.

So then we were able to open bookings again earlier for the cruise from 15th and 17th of May onwards. And they are almost as booked as before. So there was a rush on this capacity.

TUI Musement doing well. What is also nice to see is despite a stable passenger numbers, they are able to sell more to existing, but what is even nicer to gain more new customers. And this is important for our TUI ecosystem. So a good development on a very good on HEX.

If we look for Markets and Airlines, actually, it's -- the first time for a longer time when we do see a significant improvement of the result, less losses in winter. And we wouldn't -- if we wouldn't have had the impact of Iran, then the results would have improved even stronger. So we are a little bit frustrated about this.

The benefit came in all markets, especially in the Northern region and in the Western region. Germany is influenced by some one-offs last year. And this is, on a stable passenger number, dynamic is growing. The differentiated product sales are growing. App sales are growing, and we were even able to increase the load factor of our airline. So a good development and this is a result of the transformation.

What is also important that we're talking about AI, not only as a tool to streamline processes to improve processes. But like in TUI Musement, that is, of course, for me, an eye-opening project within a couple of week the axel-based transfer planning was newly made through an AI agent 3, 4 weeks. And it's so much reducing the cost of the number of people who have to work there, but also the load factor of our buses have gone up by 5%. So this is a quite significant example what we do see in a lot of areas of the company.

When it comes to products, we have now implemented also in the U.K., that was the last market or the last major market, TUI Tours. So this is where the customer individually can do his trip, his round trip and that we do by -- powered by Google and Google content and which had, of course, on a small basis, but a good start in all the markets.

We are also proud that we are now also on ChatGPT. We do see that Gemini probably is the most advanced LMM, at least that's what I would say as a user. And you will find a TUI there, and we are convinced through the great collaboration. I was with Google last week that you will have the TUI booking way to be integrated there in the LMM.

So if you would ask for a nice hotel in Majorca with this and this benefit, you would not only see like today. This is offered by TUI, but then you could, in a seamless process book this package or this hotel of ours and further LMM integrations are underway. We want to play a leading role there. And it will help us and bring us forward a lot.

We have also introduced our reward program. We started in Finland 6, 7 weeks ago. It went very well. The other Nordic markets followed and we will have all the major markets on the system on this reward scheme until the end of the year. It's not a system like we have -- some airlines have it, you collect points and then you get 100 points, a rebate of EUR 1. It's about value recognition status treats.

So we want to recognize with our own enhancement, customer -- loyal customers which can mean the free coffee on the aircraft or a longer stay in late checkout in the hotel. So not only on the booking process but also when it comes to benefits in the -- during the travel. And the good thing is these are things which doesn't cost us a lot of money but gives a lot of recognition to the customer.

Mathias? After a lot of pros, the numbers.

Thank you, Sebastian. And I can only reconfirm the numbers that you showed. So a very good morning from my side, and I'll have the bridges, the summary and then P&L, cash flow and balance sheet as in every quarter. So allow me a brief summary before I go into these details. And first of all, the numbers that we present today, they're in line with our preliminary numbers that we showed end of April. And this reconfirms the very strong quarter and Sebastian already showed you some of the details. This is effectively the strongest H1 we've had.

And now this is also the 14th consecutive quarter of underlying EBIT growth, which shows all initiatives and measures that we've implemented, how they translate into earnings and that's something which is -- we are really proud of when we look at this picture.

So revenue in line with the last year, slightly up on a constant currency basis that is particularly true coming from the euro to pound conversion rates, the underlying EBIT up significantly, and this is post the impact of the Iran war, I think this is very important because we were on road show with some of you talked to some of you when the war outbroke and I think we always said it's important for us that we can consume these costs directly in a quarter, and that doesn't change kind of the shape of earnings that we have.

And I think that's a very good proof of, one, we had it in the first quarter with Jamaica, now second quarter, a bit of Jamaica, but in particular, the lost revenues and cost of bringing home customers from the Iran war. So all of these direct impacts have been really consumed in a good way. And then net debt is in line with prior year. That we will come to that in a second ,is driven by the working capital of the missing bookings for the summer in comparison to the year before. So that's not structural, but it's, of course, reflecting what's the intake as of now.

Now let me come to the bridges and then go to these details. I think Sebastian, mentioned already in Holiday Experiences, more or less flat. And if you then look into the details, Cruises flat despite the fact that 2 ships were blocked and the cost of bringing customers home are also sitting there. That's a fantastic result in hotels.

We still have a bit of a Jamaica impact and then a very strong performance in Markets and Airlines. And as indicated here, the plus EUR 30 million would have been plus EUR 50 million, if we did not have these costs for bringing customers home and a bit of valuation impact directly linked to the Middle East scenario.

A similar picture then for H1. So Holiday Experiences in line broadly with prior year and then a strong improvement in markets. And I think if you take this picture and we'll come to that later, this already also explains in terms of why we had to adjust our guidance going forward because that what we were expecting that there's an even stronger push from Holiday Experiences this year. There's challenges.

Q1, we talked about Jamaica. We talked about Mexico in particular, for RIU and our midnight operations in the Caribbean cruises a strong benefit, but some of the benefits consumed by the lost revenues in Middle East. That's something we'll also see in the third quarter. So overall, despite all the trajectory we have.

This is effectively only almost flat, a bit up and then a strong performance in markets, but we have summer bookings, which are not on the level that we were expecting when we set the guidance, that's why we needed to adjust it and we'll come to that later.

Now P&L, cash flow and balance sheet, what is there to highlight? I think it's very good to see that the improvement in operational result, our EBIT is up this EUR 40 million. But you also see that the group result after minorities has improved by EUR 70 million. So the discipline in all the other elements of the P&L continues, and we have an even bigger improvement of our seasonal loss in the winter compared to the operational improvement.

And with that benefits on the interest side, we also expect now that we come out for the full year at the lower end of our interest cost towards the EUR 325 million, that's a positive adjustment based on the results of winter.

Same on cash flow. I think structural, this follows what you've seen in the first quarter. So more investment, but offset by less payment for pension and less payments for lease amortization, that's exactly the structural changes that we've implemented in 2025.

And interest, I already mentioned, we're going also there towards the lower element. So cash flow follows P&L. And the same is on the investments, because we have some optimizations on the lease, on the delivery portfolio with Boeing, and that help us to slightly reduce what we see there, and that's why we'll go towards the lower end.

What is impacting cash flow then on a net basis, if you take this all together, then it's the working capital and that is solely coming from less customer prepayments compared to 1 year ago. And that is effectively the summer bookings position translating into less customer deposits as of today. So I think albeit this is, of course, a picture we would not like to see, and it has an impact on our balance sheet.

At the same time, it's not structural, and that's the positive thing about it. So whenever the market normalizes again, I think the crisis is now for much longer than a lot of people expected, then this should come back. And in particular, for the winter, where it's really important for us that this come backs, I think there is enough time to recover.

And that's what you also see then if you look at the developments, the -- let's say, flat net debt compared to prior year, and we did have a better position as of Q1. It's solely coming on a net basis from this cash and bank deposits line, which is then less liquidity compared to 1 year ago, which is the less working capital position coming from customer payments. There is a bit of movements from lease liabilities but this is in line with what we've planned for.

This is effectively the Boeing delivery portfolio coming on balance sheet over time. So that's also something we'll see it in the guidance later. These impacts together, we expect that despite a slight improvement, our net debt will slightly go up because we need to reflect the working capital effect in our plannings this could still change depending on how the recovery in the summer is, Sebastian just talked about it.

But at the same time, as of today, that's what we expect. And again, the good thing is this is, from my point of view, not structural. And with that, I think outlook, Sebastian, maybe trading, and then we come to some of the details.

Thank you. As we said before, we do see, in general, a shift from East Med to West Med that we see a softer Mexico, and we very much see a very strong late booking pattern. That impacts all the different activities, maybe with the exception of -- not maybe, definitely with the exception of cruise. We have a slightly higher capacity on hotels and resorts. We have a very good development on daily rate, but we are still behind when it comes to occupancy.

Again, here, it's not short-term, it's medium and longer-term. And we do see that this will get smaller.

On Cruise, all parameters are very good. The occupancy is still 2% less, but that is just because the ships came back into service earlier and there is some catch-up effect. So I wouldn't be surprised if we manage to come there on the same level as last year.

By the way, it's not only TUI Cruise is performing extremely well, but also Marella is performing extremely well. TUI Musement, I said, what is good that the experience is sold, we do see a mid-single-digit growth, which means we sell more to existing customers, and we sell more to new customers, which are important to bring into the TUI ecosystem.

When we look into the Markets and Airline, we do see at the moment that booked revenue is 7% lower, that is roughly also the pax number. If we look, for example, into the next month in May, we are on last year's level, which means that the short-term bookings make up a lot of the shortage and therefore, it's the interesting and important question, will we do see that throughout the year.

Nevertheless, we were very cautious. We reduced risk capacity between 4% and 5% to be on the safe side and mainly with third-party assets, so the impact on our own is less. We are, again, very much focusing on further cost reduction efficiency through the transformation. And we also are benefiting on one hand, from a very good hedging position the summer closer to 90%, still winter above 60%.

But of course, the remaining 10%, 15% means an incremental cost, which we have to offset by other cost measures. So not an easy situation, but why we are confident, not because we have seen a short-term booking pattern, not why we can still have great utilization of our own hotel assets -- hotels or cruise or aircraft. But if we compare the holiday intention with a year ago, it's on the same level.

So what -- the difference is that the impact on Middle East leads to people booking later and a shift from Eastern to Western Mediterranean. So if the market intelligence is right, we should see the volumes -- the still missing volumes coming back in summer.

We also asked maybe that was my fear while people go less on flight holidays, but more stay in the country for overland travel. But also that is what we don't see, and we will not see, especially when the weather stays as it is. So there's a lot of good reasons to fight for every customer, and there are a lot of good reasons to be cautious, and that's why we reduced capacity.

And when the question I got quite often is what does it mean on pricing and so on. We do see a very stable Western Mediterranean market with strong and good prices. And then the interesting question will be when will the offers from the Eastern countries will kick in so that they are also attractive offers for very price-conscious customers.

So by having said that, we changed and we confirmed the guidance of April for the range between EUR 1.1 billion to EUR 1.4 billion the range. I know it's still high, but it's very, very difficult to foresee the future. We are happy to see a good May, but the question is what will be the trend? And if things come down or will stay as they are. Would you do that?

And indeed, I think as another step on top of the April as Sebastian just said, reconfirmation of the guidance when we go through our segments. I think the -- what we can provide you and what we are working with is, of course, the building blocks that we still have and that can help to narrow down your expectations. So on the hotel side, I think given the Jamaica impact and given the difficulties we had with the Mexican market and the important winter business, in particular for RIU, we only expect guidance now slightly below prior year.

And that is a change and that is one element that has left us with the decision to adjust our full year guidance. On Cruises, we still expect the business to grow. We've seen the strong benefits operational and from the capacity increase in the first quarter. Marella continues also to perform strong every quarter. But we had from Marella, as you may recall, a very positive one-off in Q4 last year.

That's something which is then, of course, offsetting all the benefits that we still see there. In addition, as Sebastian mentioned it, we will see the new capacity coming and also the kind of the one now that the ship are operating again in the German business that's according to our expectations or a bit more. So the slight growth despite the Middle East impact we will still continue to see. In Musement, there's not a lot of change, it was just mentioned what we see in maybe a bit less bookings for the summer.

I mean, please bear in mind that that's for the overall portfolio. So what is steered then towards Musement is also likely less, and there has been a quite strong cost management over the first 6 months. There are some elements where we can delay projects in order to make sure that the growth from the EUR 67 million going forward in 2026 can prevail.

And then the question is on Markets & Airlines. There, we had a very strong first 6 months. I think the benefits of the transformation is they are really clear. At the same time, with that environment for the summer and the impact of Iran has on consumer confidence, and that is something now we are in the middle of May. May is, I think, stable, as you said, Sebastian, so that is okay.

But at the same time, of course, it's not great environment. And so we need to adjust our expectations for markets despite all the progress that has been made there. So we expect that the result for markets will be below prior year.

And I think if you take these components together, that's how we look at our guidance, then you can have your own kind of -- you can narrow your own expectations and view on the range that we have provided for the full year.

And then on the next page, we've just summarized what are the impacts on the modeling assumptions. I've covered them all. And on that basis, I would hand back to you, Sebastian,for the summary.

The summary. So besides having a great first half, we do see the challenge in the second half. We think we are extremely well prepared especially the transformation in Market and the Airlines will help us during this more challenging times and will definitely improve our situation in the coming months and years.

We have a strong hotel pipeline, some more capacity in cruises and a lot of great projects in -- with AI, so by saying that and building very much on AI accelerating and the strategic building pillars, we feel very much well prepared for all the challenges will come.

And as soon as the market is smoothened, we will also not only be able to compensate the negatives but benefit from all the changes. So we look forward to the impact of what we are transforming and changing and doing.

Thank you, Sebastian. Thank you, Mathias. Josef, we are now available for Q&A. May I hand over to you?

[Operator Instructions] First question on the line is from Jamie Rollo with Morgan Stanley.

What I'd love to ask the story behind you getting the 2 ships out of the Strait of Hormuz. But sadly, I think I'm limited to some more boring questions. First on Markets and Airline, the 7% decline in booked summer revenues, that's obviously the same as it was in the update last month. Other companies have seen a better trading in recent weeks. I'm wondering whether you've seen any sign of things getting a little bit better or whether it's been consistently sort of down 7% throughout the more recent period?

And also, you hinted at pricing being better. So what's the volume and pricing breakdown within the minus 7%?

Second question is still on Markets and Airline. Obviously, a very good second quarter margin performance. I think it's 150 basis points better excluding the Iran hit. But actually, your direct distribution and online mix were no better. In fact, I think a bit worse in the second quarter and dynamic packages only 100,000 extra passengers. So is that all operating efficiencies driving that performance? And can we sort of assume those continue into the second half of the year?

And then finally, just on the full year guidance, what assumptions sit behind the bottom and top of the EUR 1.1 billion to EUR 1.4 billion range? I assume that's pretty well all in Markets and Airline, given that's where the sort of operating leverage sits? And also what's behind the net debt target for flat in terms of the working capital position at September?

First, Jamie, your questions are never boring. That is a general remark. Second to your questions, we took capacity out, especially capacity, fixed capacity, which we had, for example, leased in when it came to planes, hotel allotments to be prepared if the market gets or stays challenging so that we don't have to discount just to get things filled. And that is the reason why we are in the situation where we are.

For us, it has been important that we are able to fill capacity for the foreseeable future and to take some time to keep volumes open when we know how the customer sentiment will be. And at the moment, this works well. And therefore, volume and prices are very much in line. And we see for the first time that price increases we still have in the Western Mediterranean are offset by the other destinations. So the inflation effect, which we had in recent years is not there anymore.

On the direct distribution online, we are increasing the share of app. If you look month-by-month, there is a positive momentum. And yes, we are working hard to get especially the app share higher. So on direct, the app share is now at 25%, which is almost 5% higher than the year before.

And this means a significant reduction in distribution cost. So that's what we do. And the last question at the moment has vanished from my screen, who can help me with the third question?

I think there were 2 questions on guidance, the upper and lower end, what are the drivers from our side and net debt. And if you want, I can just cover.

Yes.

I think on the upper and lower end for the guidance, I think if you look at the components, and that's what I guided you through, indeed, markets is one of the key elements to move. On the opportunity side, there are also some elements in the hotel side. There are some new hotels coming live to the -- and if they perform better than expectation, I think there's probably some upsides, the same. I think we have quite a footprint in Turkiye. So if the market recovers nicely over the summer, we should see benefits there.

So I think there -- I would say, in general, there is ability to get to the upper end. There's also some risk if this crisis prolongs for longer. And those things what we saw that people still have a high intention to book that doesn't materialize. We are prepared for this. At the same time, this is the way we build that.

And on net debt, if you take the midpoint from the guidance, just exemplary, then naturally, we have lower earnings than we had last year. At the same time, we currently have a negative working capital development that will recover over the summer naturally. But at the same time, there could be an impact or not.

And then you have a bit of impact from the lease portfolio coming from the Boeing deliveries. And all this together would result in the slight increase of net debt compared to what we saw last year.

Okay. So just back on the second question on the margins then. So that margin improvement is all coming through the distribution line as your GP1 margins are holding flat but it's really below that line, you're seeing that benefit?

I mean the margin overall is improving. And there's a mixture. There is not 1 big or 2 big things. It's all the measures here and their, efficiency, cost reduction, less HR cost, less IT cost. So it's a mixture of all, but also we have seen for the first time the distribution costs are lowering in the recent months.

And that's what I mean that the transformation is not a single thing. It's working on a lot of areas. And as we were low on margin that helps us now to bring the margin in a better direction. There is a lot to be achieved in the future.

Next question is from Andrew Lobbenberg with Barclays.

Can I ask some obvious question. Can you talk about the difference in the booked revenue between the U.K., which I think was down 10% in Germany that was down 3%. What's driving that? Second question would be on Cruise. And I appreciate it's early days, but are you seeing any impact on Hantavirus impacting consumer attitudes?

Okay. As you may know, our fleet in the U.K. is significantly bigger than in Germany. So in Germany, more than half is on dynamic flights with third party. In the U.K., it's very different. And by taking out risk capacity, the impact naturally was significantly bigger in the U.K. You could argue it's a very cautious approach. It is.

On the other hand, due to our dynamic capabilities, if the market is as strong as the market intelligence say, we are very much able to bring a good TUI product with the TUI hotel to the customer.

Second, we have seen no impact. I called yesterday the management of our 2 cruise companies, people feel safe. People also are able to get a good judgment. You may know that the highest risk to die in a hospital is by the bacterias, the hotel bacterias. So cruise is a very safe place.

But of course, the media interest has been high, but this has not impacted, although it was all over, probably not only in the U.K. but as well in Germany and other countries. Our business, the last days were extremely strong in bookings and people are very resilient to these news.

Can I just come back on that U.K. versus Germany? So you're saying it's because the U.K. took out a lot of chartered air capacity. Is that right?

One of the main driver is less risk capacity, yes, to protect price.

Next question is from Karan Puri from JPMorgan.

I've got 2 questions on your strategic update that you shared in the release. The first 1 is on the TUI loyalty program. Just given the phased out -- phased rollout through 2027, just wondering what sort of customer enrollment and engagement targets you've set for the first, I would say, 12 to 18 months, maybe. And at what scale does the program actually become accretive to margins through reduced acquisition costs and higher direct bookings shares? That's the first one.

The second one, just on the TUI Tours and the Gemini partnership. Now again, that's given that the AI-powered in destination planning service with Google is now live, what is the early evidence or is there any early evidence of uplift in ancillary spend or increased experiences per customer? Is that something that you can share with us as well? That's it for my end.

The loyalty program now was quicker than we had planned due to the acceptance by the customer rolled out in all 4 Nordic countries, and it will be rolled out to all other major countries in this year. As I said, it's a program which recognize loyalty status, and it's not based on getting selecting points to reduce price.

The first numbers in the Nordic countries have been very strong, but it's too early to give a very clear indication. But we were positively surprised.

Second, of course, the main reason is it should increase loyalty, and customers coming back and staying in the TUI network to create an even better TUI ecosystem to buy less new customers. And this would have a huge impact. If we would have 10% less -- and this is probably a very good number. If we would have 10% less customers to be bought in 2 or 3 years and that would have a -- you know about our distribution cost would make a significant difference.

And by the way, also to do more up sales -- upgrade sales would also be good. But it's a little bit early to give an honest feedback. What we wanted to avoid is that we add up cost to it just by giving rebates and these things all about recognition and recognition, which has a significant value for the customer, but limited cost for us as the free coffee on an airplane or the late checkout in a hotel.

Understood. And on the other one, sorry, the TUI Tours as well.

Yes. Sorry. The tourist business is a huge business all over the world. We haven't been in there or we have been tiny, tiny, tiny. And this has been now introduced. I could say we are growing by a couple of hundred percent from EUR 1 million to EUR 3 million to EUR 6 million. So it's still a longer way until it's really EUR 500 million, EUR 800 million business, which is clearly the target. So again, there, the first start was good.

Of course, the system still needs more content, more functionality, but it's great. It's built on -- globally on the same IT technology. So we are not like in the past doing something here in to this country and something else in another country. So -- and of course, there are markets where the tourist business is more important than another market. So we are very confident that we have a great product and that we have a lot of customers who are interested in.

And what we also did when you look at the organizational changes we did in TUI, one to have a COO role to get the vertical integration, but also getting cost synergies. In the past, we had 2 tours people responsible for it in Markets and Airlines and in the destination because many of these tours are produced in the destinations. So we have now brought it together to not only to lower cost, but to accelerate product development and functionality.

With River cruise, it's easier to just add one ship and then you know you have the revenue and the profit of one ship.

Our next question is from [ Jack Baber ] from Bank of America.

I'm standing in for Kate this morning. Three questions, if that's okay. You mentioned ASP partially mitigating higher costs on Slide 21. I was just wondering how much are your ASPs up at the moment? And what has customer feedback been?

Second question, would you be able to comment on the mix implications on margins from shifting from East to West in the Med. Is it right to assume the East has stronger margins? Could you perhaps quantify the impact and expectations moving forward?

And finally, just expanding on the reduced U.K. bookings linked to the chartered capacity. Is this a reflection of a weakening U.K. consumer? And how do you view U.K. demand for the rest of the year?

Okay. If you -- and I would like to almost answer the question in one. You are right that Eastern margins are higher than Western historically. What you do see is at the moment as the demand for the Western European is strong, they are very stable and sometimes even better margins.

On the effect on the Eastern Med is -- and one of the question could be why do you have less or anticipate less results or may anticipate. It's the missing volume from, for example, from Turkiye. And it's not so much that we lose margin there because it's with only very limited on flying. We do a lot with SunExpress with Corendon. So we are very dynamic there. So it's not in the -- and now also the hoteliers are giving more and more attractive offers. So not that we lose margin. It's about the volumes.

And there, it's the exciting question, will the volumes come? And if you see where TUI has its strength -- it's in -- we are overproportionately strong in Turkiye, the U.K. and that is also the reason why we took more capacity out and why we do see still a weaker booking pattern at Cypress.

For German, Cypress is -- I've never been there for vacation. The U.K., it's extremely strong in the decline in Cyprus or for Cypress was huge, and it has slightly recovered, but it's still slow. So margins are stable, but it's just the volume shift or the not yet volume. And this, in a way, brought us to, with a very different mix of passengers and prices on average, going very much similar.

Our next question is from Andre Juillard from Deutsche Bank.

First one is about airlines and cruise lines. You secured and covered kerosene and oil for the ships. But could you quantify the potential negative impact you could have from higher oil price in the second part of the year and next year?

Secondly, do you have a quantification also of the elasticity of the demand regarding the prices improvement we could have on airlines, especially. And regarding still airlines, could you give us some more color about your capability to rebalance the capacity from East to West, because I guess that you do not have an unlimited slots in all destinations such as Spain, Canary Island and so on. So how far can you go on this rebalancing?

And last question, if I may, about the general environment, considering that the actual environment is tough and putting pressure on all players, do you expect a shift from small tour operators clients to bigger players as you?

Yes, do you want to talk about hedging maybe? And I do the rest?

Yes, of course. Thank you. I think we -- what we can share as today is the hedge volume. And to give you a bit more transparency. So when we look at these numbers that was in the presentation, the 63%, That is the average for the group. And some of our Airline business are fully hedged for the summer. So it is 85%. And then there's some share in our business, which is dynamic and which is not hedged and does not need to hedge in that level. So that brings down the average.

So I would say for the summer, we are generally fine. We've talked about the capacity cuts. But naturally, if we were to get a hit for the last, let's say, 5% to 10% and we don't want to cancel it because it impacts the full value chain, and we have to consume at these prices that would bring us -- would have an impact on profitability, but that's why we have a range in our guidance.

Going forward, we have some 62% that we published for the winter. You have the same ranges there. So some airlines are much higher than the more dynamic regions. And I think that's a bit too early to see what could be the impact because capacity plans, pricing discussions, and there are also a lot of other effects on this that we need to look at and would want to look at.

And maybe I'll start with the third question about rebalancing. As I said, Turkiye, we almost fly with third party airline. So when we have less customers, it's not our risk. The only destination where we had to and we did rebalance or the 2 ones were Cypress and Egypt.

Egypt has been growing unbelievably strong. This has now normalized. So it's not like in Turkiye, where we're well below last year when it comes to booking there, it's more that the strong growth is now limited. So the main shift was from Cyprus, a few in Greece and a few in Egypt to Spain and that we have done. So we don't need any other shift anymore.

By the way, we also had to secure beds, which we manage, which was not easy. It's always difficult to talk about our competitors, and I don't want to do that. For us, it's important to be strong, to get stronger, to let the customer know that we are well hedged, that we take care of them even in cases which we didn't foresee like in the Middle East, and I never got so many positive feedback letters like for this event.

So I would assume strong brands always benefit from a crisis, but it's always important that we are as strong as we can be.

The second question on price elasticity. When we talk about airline commercialization, it has to do in optimizing the network. It has to do with optimizing all kind of cost position, but also to act when it comes to pricing or on special -- on products as an airline. So for example, our seat-only share is very, very small.

And compared to other successful airlines, the share is there by far higher. So the price elasticity on the seat-only doesn't hurt us at the moment. But in general, we didn't benefit from it. And therefore, what we do see is by commercializing the airline, we will more act as an airline, and we will more also be able at the upper end to get customers on seat only, so to benefit there from the price demand curve, especially in the lates when it comes to seat only because it's different to package.

Normally, the lates prices on seat-only are high, and we are, at the moment, not benefiting from that. But that is an implementation. That's why Holland and Belgium are doing as the first country better, and we would expect for the same for the next year in the U.K.

We'll take our last question from Cristian Nedelcu from UBS.

Two questions, if I may. The first one, anecdotally, we are hearing about some of the U.K. tour operators or OTAs competing on payment terms. Could you elaborate what you're seeing on your side? And I'm trying to think, would you consider adjusting the payment terms at all? And how could that impact the working capital at the end of the year?

And secondly, just on the CapEx plan. I think you flagged at the lower end of the guidance for this year. How much flexibility is there to reduce that even further for this year? And to what extent could you give us some color around the CapEx plans for next year? Is that similar in size with what we're seeing this year? Or lower? Or any color there would help?

If we would change something, but we're probably not the forum to talk here about this. I would -- I mean, for me, it's the last escape if you start for us to do something on payment terms, and I would do my utmost to not agree to that, if that maybe gives an answer to you.

What we -- I mean, we have built our own payment platform, which we now rolled out also to other markets. We have now direct debiting in the system. What is the other pay as you -- [ pay now later. ] So these are things we are implementing.

So I would be very hesitating and I would do the utmost to avoid anything because if you start to manage a company for cash, then it's difficult to get, we say, in Germany to get the ghost into the bottle again. I don't know if that makes sense in English. Does it?

And then maybe on the CapEx plans for next year, I mean, naturally, we're giving guidance at the end of the year with a view then towards 2027. What are the elements that we already know today and that is 2 components: one, a lot of the hotel projects, and that's something we discussed already with the view to '26, they're online and they will be kind of executed the same on the Boeing delivery portfolio and the attached CapEx to that.

And the rest, we will naturally go through in very much detail. And with a view of where do we see a direct benefit and which are elements that provide opportunity, and we will have that discussion internally.

Yes. So we will be very careful about investments next year. But you should also have in mind we had and still have a significant disadvantage in our fleet. We have now 60 in the summer out of 100, 737 MAX, which is a by far better aircraft. And we don't have the MAX 10 yet. So we don't have a cost competitive product to the A321neo. So we need this competitive disadvantage to put into an advantage and that's why we are rolling over the fleet with seeing great benefits, but still another year to go.

It's very helpful. Can I add a very short 1 on cruises. Just reading for the press release today, I think you mentioned excluding the changes in itinerary with the vessels that were trapped in Hormuz. I think the bookings are up 1%, if I understood well. While I think you mentioned capacity going forwards is up 6%.

Am I reading this correctly, it feels a bit that bookings should -- if capacity grows by 6%, bookings should also grow in a more meaningful way, but I'm not sure if I'm comparing apples to apples?

No, no. I mean at the moment, we are almost on last year's level, minus 2% was 3 weeks ago. We sell everything. And the occupancy cannot go up further. We had in summer last year, 108%. So maybe we even had too many kids on board. So this is -- the demand is still significantly higher than the capacity we have. We just had the issue that we had to fill 2 ships in May on very, very short notice, and that worked surprisingly well.

So also, if we look at the bookings for next year, they are not lower than the year before than even better compared and even with a higher capacity. So it's very solid and also in the luxury area where we probably had the biggest -- I mean, not in absolute term, it's a smaller business, but where we still had a few points of occupancy left to sell. We have seen now in the last couple of months that we also sell there the capacity we have. So a very amazing market.

But just on the numbers to make sure that it's clear. I mean, if you mathematically have empty ships, then your occupancy goes down because there's 0 for the rest of the portfolio. If you exclude them, then as Sebastian said, the occupancy actually goes up 1% for the summer despite the fact and that is our H2, despite the fact that new capacity comes in, it's going to be crystallised in June, right.

20th of June.

Yes. So I think that shows how strong the business is. Cruise is really absolutely the strongest performing unit that we have.

This concludes the Q&A session. I'll now hand back to Sebastian for closing comments.

So first, thank you for your questions and for the good discussion. We had a very good first half year. Transformation is the main reason behind it. Unfortunately, we have the Middle East impact in -- not only in March for the second half, but for the remaining part of this year. And we are very happy that we have a successful transformation because then it would hit us very much more.

We have made some adjustment on the strategy because of AI to getting even leaner with a lot of things we can change, getting better distribution by implementing, bringing our own AI agents into LMMs and social media.

And thirdly, we very much believe in differentiated product, of course, differentiation, which are recognized by the customer and he pays for it. And by having these main cornerstones, we feel very well positioned for the coming periods. Short-term, the business will be challenging. We hope that we are so good that we manage the short-term bookings in a way that we can fill our capacity.

We have been more risk adverse than we would have been thought before, but I think it's important to be careful, cautious. And if the market is better, what market intelligence implies, then we will be able to react with dynamic products. So have been really hard weeks, but I think it's worth working hard.

Thank you.

Thank you so much, and good morning, ladies and gentlemen. It's my pleasure to welcome you to our first quarter 2026 results presentation here at the Congress Center in Hannover, where we will be holding our AGM later this morning. My name is Nicola, and I'm Group Director, Investor Relations at TUI, and I'm delighted to be joined for the presentation by our CEO, Sebastian Ebel; and our CFO, Mathias Kiep.

We look forward to sharing with you the details of a very positive start to the new financial year, along with an update on current trading and the reconfirmation of our outlook. In the interest of time, we will keep the presentation brief before we open the floor for your questions. We kindly ask you for your understanding that due to the AGM, we will need to limit the session for 1 hour. And with that, I have the pleasure to handing over to Sebastian.

Thank you, Nicola. A very warm welcome from all of us here in Hannover. The sun is shining the first time since a couple of weeks, but the snow is still outside, but we hope now for warmer weather. You know the agenda, it's very similar as you are -- as you know it. I will do a short introduction about the last quarter. We are very happy about the results. Last year, first quarter was good. This year, it's even better. We have seen an increase in EBIT of EUR 26 million despite the cost of the Melissa hurricane of Jamaica. I will talk about this later on.

And this improvement is based on a positive HEX trading momentum, but also an improvement in Market and Airlines. And we have seen strong demand in Holiday Experiences business and we have seen the right demand for our risk capacity, which we use -- which we wanted to fill as much as possible with the right margin. And you remember that the main target for the retail is also for the sales activities to fill our assets. And by having this positive momentum, we can reaffirm the guidance -- the EBIT guidance for '26 of 7% to 10% growth. And we also see this growth for the coming years.

If we go into the details, first quarter in Holiday Experiences, we were able to improve the result by EUR 18 million despite the one-off impacts in hotels. The Jamaica, you remember, Melissa, who was affecting the business in Jamaica, we had to close hotels the Riu hotels, the Royalton hotels for the whole time the first quarter, and you will see it later, we also had to cancel a significant amount of flights from the U.K. to Jamaica. Nevertheless, we have -- if we take the one-offs out in Hotels & Resorts, we would have seen a EUR 6 million improvement and without that, we are EUR 19 million below.

And exclusive of Jamaica, you see that the occupancy even in winter grew by 1% and the average daily rate grew by 5%. Cruise is very strong. We have seen a significant improvement in result despite a significant higher capacity of 16%. Occupancy were up by 3%, almost reaching 100% and having the same daily rate, an outstanding result. And also Musement and winter is not so important, has seen a slight improvement. When we look at Market and Airlines, we also have seen a EUR 10 million improvement versus prior year. This includes a negative impact of Jamaica, EUR 6 million. As I said, we had to cancel flights to the island, and this had a EUR 6 million impact.

For us, it has been important and it is important and will be important that we have the right risk capacity because with the right risk capacity, we can protect our margin. And the growth today in the future should come from dynamic packaging. And that we did that quite well in this quarter is shown by the load factor, which went up by 1%. And what we see is also the first benefit of our cost reduction program. Some special items we have seen and initiatives we have seen in the first quarter. We are really proud that we announce our market entry and open our network in Romania on Thursday, I will be there. And it will be after [indiscernible] which we opened 2 years ago. It's doing very well.

It will be the second in the market which we opened. We had a prelaunch a couple of days ago. We see quite promising demand and good margin. And again, it will help us to fill our assets in Europe, but also outside Europe. We also are increasing our River Cruise fleet. The second Nile ship had been launched, and we have now -- we operate now successfully 6 vessels. We have put a lot of effort in improving further development in our app. We, as you may recall, we are bringing forward activities on the same global IT platform.

The app was the first platform, which we not only harmonized, it's the same one. And now we do see day by day the benefit of doing so. If you look at the app today, the AI application is really a success story. And we have seen a significant conversion growth and uplift in bookings through the app. And the app is the most efficient way to book and to keep customers and to increase retention, and we are very happy. And the potential for us is huge if we compare us with best of breed. We also signed a partnership agreement with Jet2 on the Musement activity platform.

We are very thankful for the trust Jet2 gave to us to integrate the Musement platform after Booking.com, easyJet and lastminute.com, it's the fourth big wholesale partner. We don't take it for granted. It's a big obligation for us like for Booking, like for easyJet, like for lastminute to deliver outstanding products to the Jet2 customers. We are growing on the hotel side. We have a strong pipeline. As you know, we opened 5 hotels in Africa. We opened 1 hotel in Vietnam.

So these are -- especially these are the 2 regions where we are growing, and we want to grow further. Sustainability is key of our DNA. It's not a trend which may have faded away a little bit. For us, it's very important for our customers for the climate, and it's commercially a sound business case, and that was recognized by achieving the A rating of the CDP. And Mathias, if you like to go into the numbers.

Thank you very much, Sebastian, and a very good morning also from my side. Thank you for joining the call. As always, I want to give an overview about the performance, then the EBIT bridge and then details to P&L, cash flow and the balance sheet. And Sebastian, as you said, we are very pleased with the first quarter results and this first step into the new fiscal year. And -- if you look at this, it's really great that we not only have an operational improvement of the numbers, EUR 77 million, the highest underlying EBIT that we've ever seen in this quarter, but also another progress and step improvement in our balance sheet and the underlying financial profile.

Net debt improved another EUR 0.5 billion year-on-year. This includes EUR 0.2 billion FX impact, but the underlying decrease, EUR 0.3 billion is coming from all the measures that we undertook over the last 12 months. And as elements of this progress, I would like to highlight: one, we've now also taken the final cruise ship from Marella into ownership. And as you may have seen and recall, we have also repaid early the outstanding remaining amount of the old convertible 2028. And as you said, Sebastian today is the AGM where we will return to dividend payments. That is, for all of us, a very important and great moment.

So for the details, as I said, EBIT bridge, P&L, cash flow and balance sheet. Now as you saw in the front section, there's really a strong underlying development in all segments. In the hotels, please remember the impact that Jamaica has. Second, that we had a positive one-off last year of around EUR 15 million. We also called that out. And against that, we have the results in this quarter. So overall, an operationally positive development and a negative impact through these one-offs or the not repeat of one-offs.

Then you see the very strong development in Cruise. And I think it's really great to say not only the capacity addition and the earnings that come from that in TUI Cruises, but also the constant improvement in Marella and in the operational development of TUI Cruises. So alone, the rate increases in Marella for the winter, we talk about 5% again. I think with the ships that we have and with the concept, that's really a fantastic achievement.

Musement, really good development, strong cost control. And then as Sebastian mentioned, even despite the impact that we also see there in Jamaica with the long-haul business, a very strong operational development, and it's so important to manage the capacity, one; and second, to make sure that we continue to deliver in our own assets and business in holiday experiences. And with the EUR 77 million, a really strong start into the year, EUR 26 million more than we had the year before.

Now to the P&L, two things to highlight. One, it's the first underlying result, which is positive pre-minorities in this quarter. In tourism, you normally have a negative result, also operationally in the winter. So this is even more so very pleasing to see. Also as a result, our loss per share halved effectively for that quarter year-on-year. And one contributor to that is another improvement in the interest expense that comes from all the measures that we did, in particular, the lease portfolio restructuring and taking the ships and ownership. So that's another EUR 10 million improvement that helps us to reaffirm our guidance of EUR 325 million to EUR 350 million.

On this number, please remember that most of our payments dates for financial instruments are more in the second quarter, so it's quarter 2, quarter 4. So we can't take this times 4. There's a higher interest payout in Q4 and Q4 compared to Q1. And -- with that to cash flow and cash flow is in line with expectations.

The very important element is that the structural savings that we worked on and that we achieved interest payments, the fall away of the regular contributions to the U.K. pension scheme and a reduction in the lease and asset financing repayments, that helps to offset the higher investments that we wanted to see in the hotel segment and that we need to do in context of the Boeing delivery portfolio. And all in all, a EUR 50 million improvement in the first quarter on the cash flow side.

Coming to the balance sheet. And as I said, the EUR 0.5 billion improvement is driven by the improvement that you see in the lease portfolio, aircraft and ships in particular, and includes also EUR 0.2 billion FX movement. Now this strong performance and the strong advantage, we will not see this coming and going through the rest of the year because we will see more aircraft being delivered. I think this year, Sebastian, we talk about up to 15, maybe a bit more of planes coming from Boeing.

So that will -- because they directly move on balance sheet, impact that. But overall, we continue to see a further improvement of net debt in the full fiscal year. And concluding from my side, because we got the question a lot about the mechanics for the dividend payments. So today is the AGM. We put that to road show. Shareholders are expected to approve the dividend payment. And then tomorrow, we will pay into the system. So our shares go ex dividend. And then on the 13th, there will be the payment date from the system to shareholders.

And with that, back to Sebastian on the way forward, how our bookings and the guidance look like.

Thank you, Mathias. So a good start into the new year. How does the future look like? What do we expect? If you look into Hotels & Resorts, we do see that the available bed nights will significantly grow in the second quarter, but also for the full half year. The occupancy for the second quarter is on the same level like we have seen last year. This includes -- that excludes the Jamaica effect. We are with 4% below last year when it comes for the second half year. That is not a concern to us because we are still in the ramp-up phase when it comes to Jamaica.

But also, what we do see, by the way, this is also very valid for Markets + Airline. We see a late booking trend. The available -- the average daily rate increase is about 3%, which is a healthy number also to cope with the cost inflation. On Cruise, the outstanding picture remains. What we do see is that the capacity growth is getting smaller, but it's still significant. Occupancy is 4%, respective 3% in the second half up. And you should recall that the ships are 100% full. So this will further reduce to 0. But what we now can do is to optimize the price because we are so well ahead in being booked the ships.

Musement, we expect a mid-single-digit growth for experiences. And this in a market which we do see is a very good result and shows that Musement is doing an excellent job. When it comes to Markets + Airline, and I would like to start to reiterate again, we slightly reduced our risk capacity, it's all about to sell the risk capacity, flight, hotel owned assets with -- in a way that we protect margin. The growth should come through the dynamic products. And by having said so, we will see a winter on the same number as last year, especially when we take into account the last-minute business.

What we do see is -- I just look, for example, for the number of yesterday, we see that after the strong winter we had where the footfall was significantly down for retail, we see that the weather has normalized in the last 4, 5, 6 days, and therefore, the business has immediately picked up significantly. And for summer, we are slightly below last year. Also there, we are very confident that it will move into the same level as last year. And the focus is on protecting margin and the focus is on filling our risk capacity to fill our aircraft and our hotels.

We are well hedged, as you can see, and the hedge position gives us an opportunity with today rates. And by having said so, we can reconfirm the guidance, the increase in EBIT by 7% to 10%. And as I said, a good start in the first quarter. We are confident for the second quarter, and we also expect a good summer. There's one chart left, the summary. And just to repeat, both sectors support each other.

The vertical integration is -- makes our business model strong and resilient. The marketplace benefits from the exclusive products and the Holiday Experiences benefit from the strong sales. And together, we protect revenue and margin. And as I said, this should bring us to the ambitious growth guidance we have given. And therefore, we also could reiterate not only the dividend proposal for today, but also for the coming years, 10% to 20% of the underlying EPS.

Thank you, Sebastian. Thank you, Mathias. We are now available for Q&A.

[Operator Instructions] Our first question comes from Karan Puri from JPMorgan.

I've got two quick ones. One on the summer trading that you just mentioned. So tracking at minus 2%, how confident are you to hit your 2% to 4% top line growth guidance in that context? If you could take that one first, and then I'll move to the second one.

As I explained, we are confident that we will achieve last year's level.

And on the revenue -- and I think you also asked about the revenue guidance, 2% to 4%. I mean if you look at Q1, there is -- on constant currency, there's a 1% improvement. Now we will also see increase of sales from our Holiday Experiences segment that also needs to be factored into this revenue guidance. And that's why we're overall reiterating our guidance also on the sales side this morning.

And what I would like to remind you, the strong growth in TUI Cruises, you don't see in the TUI AG numbers, not in our numbers because the revenue is not consolidated. So this significant impact is not impacting TUI. So this is outside the consolidated TUI revenue number.

Yes. Understood. And second question was actually on your partnership with Mindtrip and other LMMs. Is it possible to maybe share some early indications of progress made with these partnerships? Anything on the distribution unit economics will really be helpful here.

Yes. So distribution is changing. We very much believe in retail. That's key, and it's commercially a sound case because the margins and because of the early sales are strong. We're seeing and expect a very significant change from web to app and to LMMs and social media. And we put a lot of effort and investments into creating an outstanding app. We have releases every 2 weeks. It's really improving a lot, and we do see that in the numbers -- growth numbers in the significant improved conversion.

So every 2 weeks, you will see new applications, including AI applications and new ways of search. We have started collaborations with LMMs and Mindtrip. We have started to sell to ChatGPT. So I'm really proud that we're there on the [indiscernible], on the lane to overtake. And at the moment, we do see that we get the first numbers of traffic. It's still low. It's still more that people get information, but they can book with us as well. And we really want to use this channel as good as possible.

The next question comes from Andrew Lobbenberg from Barclays.

Can you just help us understand these hotel KPIs with and without the Jamaica impact? I mean, are you able to tell us what the occupancy is in Q1 and Q2, perhaps with Jamaica included, so we can see the sequential trend through to the second half? Because I'm seeing some investors concerned about what that means for the hotel trend, but that's not quite understanding how you're presenting those KPIs.

And then just the second question would come down to the reduced interest costs and the impact of bringing assets back on to the balance sheet. Can you just explain whether these gains are one-off or whether they are sustainable? Are they onetime things as you bring the assets on balance sheet? Or are they all enduring improvements to the interest cost?

I think we have stated that the Jamaica effect was EUR 15 million on the Hotel's side, and that should be reduced to 5% to 10% in the second quarter, which means that a significant part of the 4% is based on the Jamaica effect. And there, we would expect till the end of the second quarter, this should be very much normalized to it. And that's why we feel confident about the occupancy for the hotel business in general.

Yes, and on the interest results, so what you see for Q1 versus last year is really a structural improvement. And we had last year and -- a better interest environment with regard to interest income. And also, we had a smaller one-off during the year that we also published that was in H2. And that's why the guidance, the lower end is in line with what you saw as a full result in last year. But the improvement, that's what we worked on is really structural. So it's replacing leases from the past that are not with regard to market terms that we can get today with more attractive instruments or with cash proceeds.

The next question comes from Leo Carrington from Citi.

If I could ask two questions, please, both really about your demand. Firstly, in terms of the demand against your risk capacity adjustments, can you give a bit more color of what these -- what the shape of these adjustments was? Is it certain destinations, certain dates or across the board? I'd be interested to know how you're planning for this year? And then secondly, in terms of how we should understand consumer preferences, what's your view on the differing trends between the hotels which is perhaps more competitive, later booking trends versus cruise, which seems to remain very strong. Is it the product? Is it demographics? I'd be interested.

As you have seen, the occupancy in Markets + Airlines in the first quarter was up 1%. This, you can put into -- relation to the slightly lower number of customers. What we have taken out and capacity is not our own flying, not our own hotels. It's third-party commitments. We had full chargers, allotments, guarantees and that we have reduced significantly because we also believe that this capacity is available dynamically. And we wanted -- just wanted to make sure that our risk capacity, the ones which we produce ourselves, we can fill for a decent margin. So it's all about third-party capacity.

We haven't seen a negative impact on the hotel business, except the Jamaica business. And this is not a surprise. All the hotels, the Riu hotels, and the Royalton were closed. The Riu hotel started to get opened in January. The Royalton hotels will be opened just before Eastern because they use the time for renovations. So this is an impact which we couldn't avoid, we do see that the business is healthy. Of course, there are markets which are stronger than others. What helps is the international sales organization we have, if one market is less good, the other one is better.

When it comes to consumer preference, one thing is clear for us. That's why we invest so much in international sales activities. We want to make sure that if one market is weaker, we can get the customer from somewhere else. Therefore, the share of international customers in our own assets is growing, and that gives us the confidence to really see, again, outstanding numbers there. If you look at the overall demand, the one group which is buying later are the families and also this is understandable to see.

Can I just ask a follow-up on that first point on the risk capacity? Do you get the sense that this -- the allotment say in the hotel capacity that you've not taken on this year has gone to other tour operators? Or is it possible that you could actually fill it dynamically later in the season?

Yes. That is very clearly the concept. It doesn't mean that we don't have a great relationship to the hotel. It's sometimes also the wish of the hotel. It's the wish of ourselves because then it's up to the hotel -- hotelier to know what is the best price he want to offer to get the volumes. And this uncertainty, what is the right price we take away if we still work with the hotelier on a very exclusive basis, but having a risk capacity, which is mainly -- is not there anymore, but the capacity we use is by getting dynamic rates. So the model is in the longer tail changing to dynamic. And this is something which we will see huge benefits in the future.

The next question comes from Andre Juillard from Deutsche Bank.

Two questions, if I may. First one on the source market. Could you give us some more color about the trend you are seeing in the U.K. and in Germany, which are your 2 first markets? And in terms of destination on the other side, you are mentioning that Greece, Balearics, Turkey and Egypt are very strong. Could you also give us some more color about the trend you are seeing if you have some new destination emerging? And also what is the most profitable one or the one on which you see the strongest operating leverage?

I will not give you the details which one is the most profitable one. I do apologize for that. Egypt is very, very strong. Bulgaria and Tunisia, so the lower cost countries are strong. Greece and Spain are stable. Turkiye is suffering at the moment because of high inflation and low currency devaluation. So -- and it's more a family destination. If you look at our clusters, we do see strong demand for Sansiba. We also see good demand for the Middle East. For Asia, we see less good demand for the U.S.

And if you look into the main markets in Europe, the Eastern European market, and that's why we are so happy to move into Romania. Germany and the U.K. are stable, but with significant competition. Germany, as I said, will see a catch-up because we had since the week before Christmas, minus 5, minus 10, minus 50, 0.5 meter snow and the footfall was really 1/3 of what we had seen before. So that's why we expect that Germany will be stable or will see a slight growth. And I would say that the U.K. market is -- the sun and beach market is -- especially mid-haul is strong. On the long haul, there might be some more weakness, but that's what we have to wait for.

Do you see anything specific on the source market and destinations that was not anticipated or something which is really scary or anything special?

I mean we are happy about the strength to Egypt because we benefit from us. Turkiye is a concern, but I mean, that's the good thing if you are more and more going to dynamic, if you can bring clients from A to B that a lower demand in one destination is -- needs some replanning but didn't kill profitability. So that's good. I mean maybe it will be interesting to see how the demand to North America will develop, but we don't fly to it. It's very small. It's not relevant for us.

It's nice to have, and it clearly has an impact on the revenue numbers, but it's from a profit point of view very, very small. I think we have flight per week to Melbourne in California. That's all. So there is no -- and one hotel in Miami, the Riu Hotel. So the exposure is very, very minimal. But of course, it has an impact on the revenue side.

The next question comes from Kate Xiao from Bank of America.

First, I want to ask about your river cruises product, which you kind of highlighted as part of your Markets + Airlines on one of the slides. Can you talk to us about the market opportunity there? It looks like you guys are adding capacity. And what's your sense of the latest demand and pricing trends? Is it healthy? Is it stronger or weaker than ocean cruise market? That was the first question.

And the second question on your Musement partnerships. You're highlighting kind of new partnerships with Jet2 on top of existing partnerships. Can you help us understand the long-term market opportunity with these partnerships? And how is the economics looking compared to kind of your own traffic? And also over the long term, what's your margin goal for this business? Obviously, you guys are ramping up profitability. What do you think is the long-term realistic margin goal theoretically?

So on cruise and river cruise, the demand is big. I mean there's one major difference for a new ship, the profit is EUR 60 million, EUR 70 million for a river ship with maximum 200 passengers compared to 3,000, 4,000 is limited. But nevertheless, it's a great product. You get access to customers to bring into the TUI ecosystem, and therefore, we like it. So strong demand. The good thing is, and you may have heard a lot of orders, but the restricting factors are the slots in the harbors, in the city harbors.

And that protects very much the margin, and we are very happy to own slots, and therefore, it's a very stable business. Can it scale to 10 ships, 12 ships? Yes, but it's still 10 ships with 200 passengers and which is just half the size of an ocean cruise ship. So it's nice -- it brings -- it's profitable, but it's good, especially good for the TUI customer ecosystem. On the partnerships, yes, you're right. It's 1 out of 4, and there are smaller ones as well. And I think it's great if our partners can sell more to their customers, profitable, and it's good for us as a producer.

We have 2 focuses -- or we have a lot of focus, but 2 main focus on growth. One is through the wholesale partnerships. Second, on the own products because our business model or it could be, but we have decided not to do is not to sell the long -- I mean, we also sell the long tail, but that's not where we've spent the marketing money for. We spent the marketing money to sell the own products where the margin is not 10%, not 12%, but it's 30%, 40%. The catamarans, electric bicycles, or whatsoever, the special entries into coliseum and other things to really where we have created with our own buses, for example, own products because there, we have the big customer base. We can fill them from the first day onwards and they bring us good margin.

So if we say 7 -- or 5% or 7% growth, it's mainly on own products and less focus on the long tail that comes along with the customers we have gained. And we hope, of course, if the customer who lives in Berlin wants to buy a theater ticket in Berlin, they also use our app. But there, the margin is EUR 2 or EUR 3, very limited. When this customer, for example, buys a transfer at Mallorca Airport, the benefit is EUR 20 or EUR 30 or EUR 40. So that is -- it's not scale. It's really -- of course, it's also scale, but its scale more from B2B, and it's more really incremental significant margin through own products.

[Operator Instructions] The next question comes from Richard Clarke from Bernstein.

Three, if I may. Just want to kind of loop back on the philosophy around the shift to dynamic packaging, and I think you say it's around sort of preserving margin. If we were to look next year into sort of 2027, I guess with -- you'd expect lower lease costs on planes, lower fuel costs with the weak dollar. And so the profitability of flying is probably going to increase for you. Could that possibly lead to a lean back into risk capacity? Or is the direction of travel always going to be towards more dynamic packaging irrespective of what the cost environment is?

And then second question, just on cruise. I guess, pricing up 1%. You said in your prepared remarks, you see some opportunities to push a bit harder on price maybe beyond the current capacity growth. I guess you must be selling cruises more than a year out. So what is the pricing looking on that? Is there some expectations maybe into 2027 that we can start seeing cruise prices up sort of mid-single digits. And then lastly, a very quick one, but do you get any sense that you're losing any demand because of the World Cup in the summer of this year? So any sort of U.K. or German customers traveling over to the U.S. for the World Cup rather than maybe taking a TUI holiday?

Thank you for the question. It's maybe an aspect I didn't get. We are in the middle of the transformation in Markets + Airlines. And the transformation is on the Market side and on the Airline side. On the Market side, it's especially to connect NDC airlines. To give you an example, last week, we -- or on the weekend, we integrated Finnair NDC into the Nordic system. And by getting this contract, we have seen a significant uplift for lower distribution cost. Of course, Finland is a small market.

But with this thing to get more and more carriers on the lowest price tariffs, which we haven't had yet. This will help us to get the content and to get the content for the best price. The second part of the transformation is Airline. And in the Airline, we had 5 airlines or 6 airlines which were run separately. We brought the airlines together as one airline, two AOC and U.K. because not being part of the Europe and the European airlines. We have seen by bringing it together on the operational side, a huge cost improvement.

If you look at our denied boarding compensation, it's 1/3 of what it had been because now the Belgian -- if there is an AOG in Germany, the Belgian airline that can fly and so on. What is still missing is the one commercial piece. So if you are a Spanish customer, you don't find a Spanish website where you find the flights to Frankfurt and to London. That's -- we are just doing it at the moment, as I speak, to bring this into the market. And we lose 20% or 30% of the demand because we haven't run the airline like an airline.

And by commercializing the airline, and -- we will see despite the operational benefits, which we really realized this year, we will see the commercial benefits from next year onwards with a significant impact for the summer. On price in cruise, if we would -- I mean, when we increased the demand in the last 24 months and not the demand, the demand as well, but the capacity by 45%, 45% increase TUI Cruises demand. And I must say I was skeptical about not selling the volume, but price. But it was selling by far better than we had anticipated.

And if we would have known that strong demand, we could probably have risen the price by 3%, 4% more. Fortunately, we are very well sold. So what we do now on the pricing side has an impact, but because the volume is small, the impact is limited. So the big impact will be in the coming years where we are good sold above the years before, but still a quite significant volume to be sold.

And the last question -- the World Cup, I don't know. The effect had been strong 15 years ago, or I would say, 16 years ago. It has become slower -- smaller and smaller year-by-year. It -- one reason is 16 years ago, there were hardly big TV screens in a hotel or in your hotel room and you haven't had the live transmission. Today, it's very different. People can watch the game they want to watch on an iPad or on the computer. And therefore, I would say, yes, there is an impact, but this impact is small.

The next question comes from Cristian Nedelcu from UBS.

The first one maybe on the Markets + Airlines, the splitting capacity dynamic versus risk capacity. I think it used to be 15% dynamic and 85% risk, I don't think it changed that much. But could you tell us how do we think about this year? We think about low single-digit declines in risk capacity and 8% growth in dynamic capacity? Or what's the range of outcomes for this year? And the second one, could we go a bit in more detail through the EBIT bridge in Markets + Airlines year-over-year?

You have the forecast or the outlook for strong growth versus the EUR 200 million EBIT last year. Can we talk about the moving parts? Because we have the cost cutting 30% of the EUR 250 million that helps. But in the same time, we do have some wage inflation. We do have some inflation, I would guess, in your overhead and distribution costs. Your book revenues for the summer are down 2%.

Now I'm making an assumption here. If the overall revenues are down 2% year-over-year, there's EUR 400 million lower revenues in the tour operator. How much are you cutting from your capacity cost year-over-year on accommodation airline and so on? Could you tell us a bit more the moving parts there? And what gives you confidence that you can indeed grow the EBIT in a strong way year-over-year?

First, our main profit, and therefore, I'm always a little bit puzzled by so many questions comes to Markets + Airlines. The main driver for us is the Holiday Experiences business and the distribution makes sure that our assets are filled well. When you look at the dynamic share or the decrease in the risk capacity, it's not on our own assets, it's on third-party assets. So it has no impact on our own assets. And therefore, in the first quarter, for example, the load factor on our airline has even increased by 1%. If you ask about the split, we are not talking about a 2-digit percentage. It's a small or medium big 1-digit percentage.

Towards 20%, maybe.

Yes, towards 20%. The future growth will come, of course, from dynamic packaging. And we -- due to the cost measures, we want to and will reduce the overhead distribution, IT cost in relation to the revenues.

We have no further questions. So I'll hand the call back to the management team for any closing comments.

Good. So we have had a good start. We are confident about the future for this year. Therefore, we could reconfirm the guidance. And we will benefit from all the measures we have taken, right capacity, a better cost structure, higher efficiency. And we are middle in the process of transformation to prepare the company for growth. And therefore, we are very confident with the guidance we have given.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

Good morning, ladies and gentlemen. A very warm welcome to our 2025 results presentation here in pleasantly mild London. My name is Nicola, and I'm Group Director of Investor Relations, and I'm here with our CEO, Sebastian Ebel; and our CFO, Mathias Kiep.

We look forward to present a financial year with record results, and we will give an update on our strategic progress. We will also unveil our new dividend policy and give an update on current trading as well as on our outlook, expectations for the next year. And as always, after the presentation, we will open the floor for your questions.

And with that, I have the pleasure to hand over to Sebastian.

Thank you, Nicola. And it's not only pleasantly mild, it's also sunny outside.

Definitely.

So, a very warm welcome from all of us. We are happy to present our results this time again from London. You are familiar with the agenda. I will talk about the operational highlights to give an update on the strategy, and Mathias will go into the details of the numbers and the trading outlook, and I will summarize our presentation at the end.

It was an excellent year for us, a record performance with a strong increase in EBIT. The integrated strategy delivered these strong results. The distribution made sure that our assets are full. And we used also the time to accelerate our M&A transformation. We put a lot of effort into it, and I will talk a little bit more in details about that.

And now we can monetize the M&A transformation to show you the way to the 3% EBIT margin we want to achieve. We have very clear growth targets for '26, supported by a positive trading momentum. And that convinced us and we were convinced to start with a dividend policy. We know that our shareholders for a long time haven't seen dividends, and it's more than fair and the basis we have led with a good result to start immediately with a dividend and to give you some more information on the dividend policy.

If you look into the results, very, very strong Hotels & Resorts business, strong increase. We had not a real increase in bed nights that will slightly change next year because of closure of renovation. We had an outstanding occupancy all over the year, 84%, and we had an increase in the daily rate.

Outstanding Cruise result. And not only TUI Cruises, but also Marella. We are extremely happy about the development of Marella. And therefore, we could not only in the fourth quarter, but in total, achieve a significant improvement. We had a significant growth, and we will see more growth this year of the available pax days, 100% occupancy and an increase in the daily rate.

A good development also from Musement. And if you remember where Musement, which is a marketplace for experiences, was at a couple of years ago and where it is today, it's a great development. And we put more efforts in selling the right products into the customer base than acquiring new customers, which would cost us in the beginning investment and money. What we do is, we focus on own products, building their own product base and grow with this. So, a very good development. Holiday Experiences, EUR 191 million versus prior year.

A different picture on Markets & Airlines, where we had a roughly EUR 100 million decrease in results. As said, we invested heavily into the transformation, IT investment, marketing investment. We had some extraordinary impacts, some provisions we had to make. We had the peak of IT investment. For the first time, we will see reduced IT investments in this year.

As said, a lot of investment into transforming the business. This impacted all major markets, and we think we are now over the negative development, and we can see a positive development. And again, it is so important that we have the strong distribution to fill our assets.

And by the way, if I look at Marella, it's a U.K. business with two operator and flights. So the picture is two coins and the two sides of the same method. And I will talk about the transformation a little bit later.

And what drives the superior Holiday Experiences' performance? We have now a customer base of 35 million. This now for the first time, includes our unique customers in Cruise, in Hotels. And this customer base, we use for all the marketing activities to make sure that our 463 hotels are full. Our Cruise ships have a great occupancy and the Tours & Activities business is improving.

And if you look at the numbers, if you -- fourth quarter hotel occupancy, 88%. This is significantly higher than what you see with others. The return on Cruise is with 22% and 17%, very, very high and attractive if you compare it. And the take-up rate, Musement owned products, that means 30% of our market customers buy a Musement product is very high, and it's very important because there, the distribution costs are low or not existing. So, this funnel model drives the great result in holiday experiences, and we try to broaden the funnel to support the growth in Holiday Experiences.

On the other side, it's very, very important to have our own products, because with our own products, we achieve great customer satisfaction, which is superior and at the top end of products and a very high retention rate. Customers who come back, you don't need to buy in the market again. And to have a retention rate of 40 years, we calculate on 2 years. If you were to do it on 3 or 4 years, it would be significantly higher. It's important, and they come again to us, because we have curated products they trust in. So, this is the driver for our superior Holiday Experience performance.

If I look at our strategy, the market is growing. It's growing stronger outside Europe, but also Europe is a resilient market. There are areas in Europe where growth is significantly higher like Eastern Europe. You know we are in Poland. We went last year into Czech, doing very well. Now we have the soft launch at the moment in Romania. And there is significant growth in Southern Europe. We grow nicely in Spain, now in Portugal, but also have started to enter the Italian market, all on the same platform we had. And the good thing is that the demand is especially there for unique brand-led leisure products. So, strong brands with great product quality lead the market and the profitability.

TUI, you have seen that before. We have now the fourth consecutive year with significant profit growth, and we want to deliver this also in this year. And time is running so quickly. We are now in the third month of the year, time is flying by. And this is not only the ambition for this year, but for the foreseeable future.

Today, more than 80% of the profit come from Holiday Experiences and only 15% from Markets & Airline. And this gives us two opportunities to grow nicely and solid in the asset-light model with Holiday Experiences and to take the big opportunities on Market & Airlines, because if we compare with best of breed, there is a lot what we can achieve and what we can win in the market.

And therefore, we want to deliver not only growth, but profitable growth in Hotels & Resorts and Cruises and in TUI Musement and in Market & Airlines. And this is based on what we call the TUI ecosystem, what we have built for all our customers, our database to get better marketing, to have higher customer retention and to lower significant distribution costs. This is also supported by what we do with AI. We have seen and we do see AI as a disruptive technology, which supports us in producing better products, new products, which we can distribute on global platforms.

You may recall that TUI was a company where we had own production, Markets & Airlines, per country. We had five Airlines. We took a lot of effort, a lot of investment to bring this together, and now it's the time to get the benefits from it. This is only possible if we have a performance orientated organization. This has been a big, big task to get the organization aligned with the new org design we have.

And last point, sustainability was not something which was on work with TUI. We very much believe it. It's important for the customer, but we also see the commercial benefits, and that's why it's as important on the agenda than it has been before.

If I look at the Hotel division, 18 new hotels, the return, excellent, the CSAT, so the customer satisfaction or the NPS are outstandingly good. We have 70 hotels in the pipeline, mainly management. Again, when sometimes we got the question, why is our revenue not growing bigger, because we get the management fee, not the revenue, especially growth in Asia. It has now got a momentum, and we are really proud of what the team there has achieved. But it's not only Asia, it's also Africa and in other areas.

We have very distinct, with proven brands. We put effort in building upper luxury brands. We have the global mass market or mainstream brands, and we have strong regional brands. And we are less strong on the price consciousness market. There is something where we can catch up. 70 new hotels in the pipeline and with a big momentum there. And by the way, a lot of these hotels are building new distribution facilities, which also supports the future growth.

We have talked about the Oman partnership. This is going according to plan. We have started to not wait to build up the business when the hotels are there, but started to promote the country. By the way, it's in a great country. I could recommend -- I can only recommend to go there. And it's very strategic for us. We have had the proven cluster in the Caribbean. We have it in Cape Verde. We built it in Zanzibar, and now Oman and maybe others to come.

If we look at Cruises, 18 ships, great return on investment, very, very strong NPS. So, the product is loved and what we deliver is great. There is one ship, which came into the market last March, where we see now an incremental Summer effect. And there is one ship also from Fincantieri coming in early Summer next year '26, which will support our growth. And also because we never talked about it so much, Hapag-Lloyd is doing very well. They had some impact when there was the rerouting. There is no routing this year, hopefully. And that's why they also have significantly improved.

And you know that we have two ships on order, '31, '33. And we are very, very happy that we also have options which we can decide on in the coming months. And it's a great business and with a great prospect, and Mathias will show it later.

If we do see that we have overall a 45% capacity increase if I look at 2 years and the load factor is 5% ahead, only give me one conclusion we could have sold for higher prices. But that's a luxury problem.

TUI Musement, as I said, the transfer part is not growing and that the growth comes with third party. But there are two areas where we are growing: one, enhancing our multi-day offering. We are just at the start. We talked about new products. We just brought this product into the German market. I got the figures from last week. It's accelerating. The U.K. market will follow soon. We have high expectations about the growth we can achieve there. So, it's the production facility for multi-day Tours offering a huge market also in Southern Europe.

And of course, the offering and experiences. Yes, Sun & Beach is dominant, but we are increasing city footprint. For the first time, I could book the Heathrow Express yesterday and I haven't booked theater or restaurants yet, but the offering goes into the city. The focus is on own experiences because that's where the value is in the TUI collection offers, and it's about up and cross-selling. And that's why we think about significant growth also in the midterm.

If we look at the market, and it was a -- maybe it was a painful process when you do local production, local organizations, you centralize, you bring together one selling platform, one buying platform. It was a huge investment with things to overcome with time delays. At the end of '26, we will have every country on the same selling platform, and we do see the first markets when look -- when it comes to efficiency, marketing efficiency, a huge increase. You do things once and not five or six times. And that is why we can talk about efficiency and cost optimization.

And it's the same with the Airline side. We had five airlines, which was not the good setup. Now we have -- we are only talking about one airline with a commonality in all aspects. Before we had five different hand luggage rules and so on. Now it's one. All the things where you would say you should have done it before, but it was quite a challenging thing to bring everything onto one system.

Operationally, it has helped us a lot. I would say, if I look at reliability, I look at it every day, the reliability and therefore, the denied boarding compensation is at historical low in the first weeks of this year. So a lot of benefits. And now it's about the commercialization to make sure that we lead the airline as you would lead a commercial independent airline without giving up the synergies we get from the market. So, that's why you see the two wheels combined for net, but business in it means. And we have the clear target to increase the underlying EBIT margin, and we expect to get a good step forward this year.

What are the building blocks, the levers? And these are examples, but the main -- the most important ones. Of course, the Risk Right. A good example was Nordic, which we turned around, has been profitable for the -- since a longer time last year, and we see a good development. This year, we had to define the Risk Right capacity and the growth should more and more come from Dynamic.

You know the Ryanair case, which really -- which went live last December, but took momentum in Summer, which is now rolled out to other destination. We have a lot of NDC carriers, which we bring into our ecosystem even before. Now Christmas should have a significant impact on our -- positive impact on our business. Others were ahead of it.

Product Differentiation. It's key. We want to increase, and we are in the process of increase from 45% to 60%. We do a big step forward, because we do see this is the reason to buy with TUI and these differentiated products give us higher margin.

Customer Lifetime Value Management. It's something where we put a lot of effort in to bring customers into the same database to define the methodology, how we not play with the customer, but how we use the opportunities and we are -- and to optimize distribution costs.

Airline Growth and Airline Commercialization. One thing was very clear that we have a network and a -- network which gives us a lot of opportunities to improve. We had a fleet which were due to all the delays, not optimal. Like last year, we had, again, a significant cost on not having the Boeing as we wanted to have. There is now the clear expectation that for this year, we can add the promised amount of aircraft. But again, last year was not what we had anticipated to get. Airline optimization, very important point.

Operational Excellence, and this is now where I'm really getting excited. We put a lot of efforts into the system to push direct sales to get free traffic to make the customer buy more often. And for the first time, we not only can tick mark that we have taken the actions into place, but it started to be commercial beneficial. And it's very clear. If you have a 10%, 15% share of app, you see how big the opportunity is looking forward to decrease the distribution profit.

What helps us a lot, and I will put some more information -- give some more information later is AI. AI is a game changer when it comes to production, when it comes to product quality, when it comes to how we sell products. And this only works well when we take the opportunities of global platforms also into the cost arena. And therefore, we are now able to deliver and to talk about cost improvements.

The cost improvements will hit us for the first time this year '26. Last year, again, we had some extraordinary still like the Boeing effect, but we have had all the investments for the first time, we can reduce IT investment and to harvest what we have done. One thing is clear, we will stay and we need to get even a more IT-led company. And the earlier and the quicker and the more drastic we change, the better it is for us.

We have -- the plan is EUR 250 million cost reduction, 60% on overhead cost reduction, so where we -- you can count, I've saved this or that. 40% operational excellence. These are things which we also can, of course, count and measure like the optimization in marketing, online marketing cost, of course, we can count, but there are thesis which we have to prove that we are on a good way there. We have these two buckets, and we want to have this realized in the next 3 years, and we try to even bring it forward to be prepared whatever happened in the market.

AI is changing it, a lot, the world, but it's also changing a lot the travel business, moving into Agentic search, improving how we produce the content and to have better content to improve the customer experiences, which is amazing in Nordic. You have customers who want to talk to an AI agent and not to a personal agent anymore because they rely more, trust more the AI answer, hyper-personalization with all the data we have. It's a huge amount, but to get the right conclusion, AI helps a lot, and it further reduces cost.

And therefore, TUI is changing into an AI-powered organization. And we want to be in all front doors with all the LMMs. We have made you programs. We now sometimes wait for the LMMs to connect us, because they have to do some more homework than they had thought. But the Mindtrip example is something to see and to show how ready we are, and we will benefit from our strong brands and the unique products.

What does it mean? Concrete? We are working with main key partners where there are big communities like in social media, like selling platforms, but all LMMs and Mindtrip is a good example of how this could look like. That's a huge opportunity to move away from being very much dependent on Google and others to more spread to others and to get into new segments. We have not been strong in the Generation Z, which is using this very much, and that gives us huge opportunities. But it's tough and a lot to do.

AI for our customers, how the customer search on our app, what he gets as content, what he gets not only when it comes to pictures, videos, translation, trip planning, a lot of enhancements we deliver 2 weeks -- by 2 weeks. I remember times when there was a release once in 3 months and in -- yes, per quarter, then per month. Now we are releasing every week something a new, including voice, chat agents and so on.

And customers, our customers love it. It only works if we get the support and the excitement I have, the management team have with our colleagues. So, we spent a lot of effort to bring this new world to our colleagues so that they are all excited and they are, because we have seen the huge demand of, for example, Microsoft Copilot, and we, of course, support that very much.

What do we see when distribution is changing? And we do see that there is a split of customers which go more and more brand specific. Therefore, differentiation is so important and the exclusivity is so important. And on the other hand, customers who go through LMMs, and sometimes they come from one side to another. Therefore, to have the TUI AI concierge agent who supports the customer is so important, and it's about a partnership, but it's also about optimizing the search, how we search the optimization of engines who answers. This only works if we have an end-to-end view on customer data -- on our customer data. And it only works, I think that is still underestimated if the data -- not the data, the content the customer sees is trustworthy and can be verified, one of the benefits of the direct contact to suppliers we have.

I would recommend that you look at Mindtrip that has been the first showcase and it has been -- not it has been -- it is a successful -- not showcase anymore, a successful case.

As I said, sustainability is in our hearts. We have made good progress last year. Of course, it gets always more challenging in the next year, but we are well on track to deliver our 2030 targets. So overall, strategy is very clear, growth on the assets filled outstanding well through our markets and monetizing the investments we have made in Market & Airline.

And now to the hard numbers. Mathias?

Thank you, Sebastian. Very good morning from my side. Thank you for joining the call.

And how does '25 look in detail? We've already published our numbers mid of November, where we upgraded our guidance and for the full year '25. And so, let me just share a couple of key items for P&L, cash flow and of course, the balance sheet. Then as Sebastian said, we have announced a new dividend policy going forward. I'll come to that in a minute before I come to trading and outlook, short term and midterm, how does this strategy translate into building blocks for our future growth.

Highlights '25, very clearly, revenue growth, again, 4% plus. This shows the high commitment of our customers, the high priority of spending for holidays. Underlying EBIT, as we announced in November, increased by 12.6% on constant currency rates and 9% on actual rates. Our net debt, as a result, improved by EUR 0.3 billion down to EUR 1.3 billion, and the leverage came down again towards 0.6x, which is one of the lowest rates the company ever had and the lowest rate that the company had over the last decade. So that's something we want to continue going forward.

And while we think we expect the business to grow another 7% to 10% as a result of the strategy, which just been explained, there are clear building blocks to get there. We think it's also now time to start with the dividend policy and already start with paying this for '25 on the back of the strong results. And we think this 10% to 20% going forward thereafter, that's a very good balance of investing into future growth, deleveraging the business going forward and having an attractive capital return for our shareholders.

Now in detail, what is the summary for '25 P&L, cash flow and balance sheet. Again, you see here the footprint of our '25 result, strong contribution from Hotels, from Cruises and from Musement. Musement is also very attractive in terms of scaling into all products and also being more efficient in how to deliver the service to our customers.

You see Markets & Airlines. It's with the decrease. I mean, this is very important to put into this context of investing into the transformation and making sure we get the benefits going forward, and we are in a competitive situation. We've talked about the Boeing delays. We also talked about the one-offs that we saw EUR 20 million alone from covering maintenance related to the re-fleeting already in '25. So I think that's how we would like to put this into context, strong cost discipline in our central operations and then the result of EUR 1,413 at actual rates and EUR 1,459 at constant currency.

Now details to P&L. What is of interest? I think there's two elements. One is EPS, the key number for the dividend policy going forward, improved by 25% year-on-year reported and more than 30% on an underlying basis. This is really a strong result and is absolutely key for us that we translate our operational growth also in growth on a per share basis.

Second is, and that's something we will see on the cash side. This has supported really well is the strong improvement on the interest side, well beyond our expectations that we had 12 months ago, a lot of optimization work, and we'll come to that. This is a cornerstone of our new dividend policy, because we see that all the investment into financial discipline, they track to gain traction. And on the back of that, we get really competitive terms, and that's really supportive to our interest result.

On the cash side, very solid and robust performance, again, a key pillar for the future dividend policy and for starting to pay this already for 2025. When you look at this, strong improvements in the dividend received, more than EUR 200 million more than in the year before. That's as we discussed, in particular, coming from TUI Cruises, and it's very important for us that the strong performance in Cruises also translates into cash payments to us as a shareholder.

Second is the strong improvements on financial costs. So interest result went down, but also pension costs started to decrease. You may remember that we have been able to fund the U.K. pension schemes, and we expect '26 that we don't have further payments into that. These are key pillars to also fund our future investments. Because more investments that we need, one for, to grow our Hotel business further, really strong profits, the second on the delivery of the Boeing portfolio, that's something where we need some funding for and structurally, we worked hard to get this from these two items, plus, and that's the other point you see here investments and lease and asset financing amortization. This is in line within guidance.

But we expect that in particular, lease and asset financing, all the investments that we did structurally in '25 will pay out -- pay off in '26. And on that basis, we'll have a strong improvement of that number, which is then the final pillar to look at our increased investment for '26 and going forward.

Now on resulting balance sheet, as I said, improvement by EUR 0.3 billion. What is important and what is great for the further structure of the balance sheet is that some improvements we did also in November. We paid back the remaining outstanding amount of the older convertible, that's EUR 120 million repayment that we did out of existing cash resources that will help our gross debt, something which is important for the rating agencies, but also, of course, something which is important for interest result. And interest result, we need to manage because a year ago, we still had a higher interest income level, and that's something that we need to work against.

Second point is that because of the Schuldscheindarlehen that we did earlier this year and the agreement that we did with TUI Cruises on the refleeting and the access to the U.K. market, we ended both finance leases that we had for Marella and now both ships are in ownership, which will remove the debt amortization in the future and gives us full operational flexibilities on these two ships. And so, no indebtedness on the fleet of Marella anymore, which is also structurally a very strong improvement compared to some years ago.

Now looking forward, financial strategy, it's not only dividend policy, but it's also deleverage target. As I said, this is something which is equally important to us. And from the 0.6x, while this is historically really strong, we still want to reduce this further. And on the midterm, we want to go below 0.5x, because we think the continuously deleverage something that's really helpful for the structure of the business. And as I just explained, this also helps us to fund further investments.

Now moving forward in terms of capital allocation, I think there are three steps to look at. One is what have we delivered. And '25 record results, very strong cash flow, good results from this high financial discipline. We can start and we started to really optimize our terms, our balance sheet. And that's something we will continue to work on. This is the right basis to look at the next phase for the company's development.

And what is it? It's one, it's investments, because we have seen the strong yield, Sebastian, you mentioned this. And I think one is on the results '25, but also if you look at the strategic pillars, what is there is super attractive. A lot of investors come to us and say, can't you do more. But I think we need to find a balance. So, more investments at the same time, deleverage and capital allocation to shareholders, but there will be more investments into Hotels also in '26.

At the same time, we have seen a delay in the Boeing portfolio, which has been operationally really a challenge, one less efficient aircraft, but also renewals when you don't want to do them and all of this. So, this seems to have improved a lot. So, we expect now in '26, around 20 deliveries, which is a significant step up from '25 and all the related investments will also be reflected in our guidance, which is now towards EUR 900 million -- EUR 860 million to EUR 900 million for investments net in 2026.

And on the back of that, we have come forward with a dividend policy. We always said we will communicate this in December 2025. What was unclear, and we had a lot of discussions with our Board on this is when to start effectively with this dividend payments. Would it start with '26 for '26? Or would it already start in '26 for '25? And we have decided to bring forward to the AGM in February the proposal of a starter dividend of EUR 0.10 for 2025 on the back of the strong results, the solid cash flow structure and the improvements on the balance sheet that we have achieved.

And we think this is a very good balance overall also with this corridor of 10% to 20% going forward of underlying EPS payments of investing into further growth, deleveraging the company going forward, making sure we continue to be in a strong way and dialogue with our rating agencies and financing partners and then have the right capital allocation to our shareholders.

We have summarized that on the next chart, but the more important thing is going forward, what is directly ahead of us and what's ahead in the midterm.

And let me come to trading and the respective details of guidance now. Sebastian already mentioned it, we have a good trajectory on the Hotel side, on the Cruise side and the Musement. And I think if you look at the trading stats, the KPIs for the next 6 months, effectively, each single KPI is higher than it was a year before. So, the strong track record that we saw in '25, all the investments that we've done, the yield really attractive, and we expect that this trend continues.

If you look at the Hotels, for the first time since quite some time, we also see net additions. That's something to look forward on the portfolio. You see a slight reduction in occupancy. This is a bit of the ramp-up, which is super normal. You've mentioned the 88%.

Jamaica.

Yes. It's also Jamaica, but effectively, this vertical integration, this is what really drives this, and this shows how strong the model works, combination of having a two-operator with the Airline plus the Hotel footprint.

Same on Cruises. And another year with 13% increase of capacity, which you don't see in your occupancies even goes up. This is a really strong, strong sector.

And then, on Musement, the same. We continuously see the scaling into own products and really good development on the transfer side, both key cornerstones of the profitability of the business.

In Markets & Airlines, we see a solid winter. I think the trading pattern remains unchanged. At the same time, the early signs and signals for the Summer are also, I would say, sound and encouraging. At the same time, Summer, we will publish not now, but when we have more tangible data with Q1, which is mid of February.

At the same time, again, what is important, because a lot of investors and partners have asked us to change this, we now will report revenues going forward to make us more comparable with other players in the sector.

Now how does this translate into our guidance? As we said, we expect the business to grow another 7% to 10% in profitability in 2026. What are the pillars, before we come to the modeling assumptions on the other P&L and cash flow items? It's growth in Hotels, it's growth in Cruises. And if you consider the investments that we've done, the pipeline in Cruise, the pipeline in Hotel side that we just looked at and also the trajectory of both businesses over the last 24 months, 36 months, I think this is a clear cornerstone where we already see the KPIs today that will deliver that growth slight. It's also in context of the really strong and high absolute amounts that you already see here. So that's something where we look really -- we're really pleased with.

Musement, we expect that the trajectory that we saw in '24, in '25 continues. And again, the KPIs are supporting another year of additional growth there.

In Markets & Airlines, Sebastian explained how we look at this. We have a market where customers continue to prioritize holidays. This is still a #1 investment and something to spend for, for everyone, and I personally can only share this view.

And secondly, for us, it's key to deliver this in the most efficient way to our customer possible. So, a lot of focus on costs, a lot of focus on initiatives, and that's why we expect this business segment to deliver strong growth in 2026.

In detail to the rest of the P&L, what I would like to highlight is interest. As I said, the benchmark is 2025. We had a higher income environment at the start of the year. That's something where we work against. At the same time, we've done a lot of optimization measures, which should help us so that broadly in line with 2025, we expect 2026 and which is significantly below historic levels.

We see investments, I talked about that going towards EUR 860 million to EUR 900 million. And at the same time, offsetting this, we see a strong improvement in lease and asset financing. As I said, at the same time, we expect that we don't have to continue to fund the U.K. pensions, which already stopped in Q4 2025.

And as a result, we expect another slight improvement, our net debt aside, and this should all help us to move constantly towards this target of moving net debt leverage towards below 0.5x.

And midterm, I think this is important to us, because we've seen a very strong '25, 2x, we increased our guidance. We have seen on the back of that, the ability and opportunity to start paying dividends now. And we have a strong guidance, and we expect profits of 7% to 10% increase in 2026, and we expect further growth to happen. And this is how the strategy that Sebastian explained will also translate into numbers.

You see further growth in hotels alone the investments, the increased investments will yield. You have the protection and the -- from a vertical integration and the ability to have strong occupancies in all of these investments.

We have a ship pipeline, another ship in TUI Cruises in '26. We'll see the annualization of this in '27. And then again, new ships, '31, '33 and with the expansion in the U.K. market, the opportunities there.

Then in Musement, we see this digital growth, which really works in a way and plus all the initiatives to do this in the most efficient way versus our customers. So that's the sector we're really pleased with the development and we expect profits to not only continue to grow '26, but also beyond.

And then, there's Markets & Airlines transformation, and we have really said set this profit target of 3% and look forward to the initiatives to contribute towards that. And on that basis, we think we have a package which is '25 delivered capital allocation defined and building blocks for growth beyond '26 and in '26.

And with that, Sebastian, back to you.

Thank you, Mathias. Short summary from my side. In the middle, what we call the Unique Synergy Fly Wheel of TUI, it's not to business Market & Airline and Holiday Experience, it's the same coin with two methods. The one are the distribution, strong distribution sector. The other one is the lighthouse products, the differentiated unique products and both areas support each other. The broad customer base that supports the asset utilization and the differentiation improves the margin and the customer satisfaction.

And with both of this, we are confident to give you the outlook, grow further. The EBIT, not only for next year, but to see it for the longer-term future. And as our shareholders had to be very patient, and I think, it's more than fair that we start to pay a dividend for '25 and that we become very -- well, lastly, very reliable on what we want to do for the future. So, you see us as always carefully optimistic.

Thank you, Sebastian and Mathias. We are now available for Q&A.

[Operator Instructions] Our first question comes from Jamie Rollo from Morgan Stanley. Jamie, your line is now open.

Three questions, please. All of them on Markets & Airline actually. I appreciate it's only 15% of your profit. But if you could, first of all, just talk a bit about current trading. It looks like that 1% is quite a big slowdown from the 4% September figure if we add up the volume and ASP back then. I appreciate you're no longer giving the breakdown of that 1%, but could you talk about why it slowed? And also whether the ASP increases you're getting, if that's sufficient to cover cost inflation?

Secondly, on the guidance for the full year, if my math is right, you need a minimum 30% EBIT growth in Markets & Airline to hit the group profit increase. And it sounds like it's going to be second half weighted given Jamaica and the Easter shift. Just really wondering about the confidence level in that given so little has been sold for the Summer at this stage.

And then finally, just on the strategy in Markets & Airline. Thanks for the bridge on Slide 18. That's very helpful. But it looks like you're getting hardly any margin benefit this year from the first three of those factors, the own products, the airline, commercialization or the operational excellence, all the growth is from overhead costs. So, do you think the strategy is working? Because what you outlined at the CMD was more about revenue growth and you're only doing about 11% growth in Dynamic Packages. So, just really wondering about your strategy overall in M&A.

I'll answer, Mathias, the first questions. Yes, you are right, there is a Jamaica effect, and we very much believe that we can cope with it very well. We would not have needed it, but it is as it is.

You're right, there has been only in the markets, not on all the others, there you have seen a strong momentum. And you could, I mean, logically say, Marella is a U.K.-dominated company, and therefore, the revenue is there U.K.-based. What was important for us to make sure that we keep the margin at a good level in Winter. You remember that last Winter, we had a very, very strong second quarter. And therefore, we said volume is less important than the margin because we can cover our risk capacity.

There is an interesting development on inflation. I mean, you may recall that it was difficult for us in the last years to cover the inflation in the ASP. What we do see is that the -- like in other sectors of consumer spend, the inflation has normalized. We even see that sometimes, yes, there is still a 2% or 3% increase, but we also see that there is 0 increase, that we can buy some products, beds or especially on the Airline side cheaper than we did before. So therefore, for Winter, it was very much steering towards margin and the inflation and what we get from the customer are very much more in line what we have seen before.

For the Summer, we need the cost reduction, and we put a lot of effort into achieving this cost reduction. Nicola gave me the advice not to be too bullish because that would increase too many expectations. But what we do see is very encouraged what we do see. But we also see that there is market pressure. I would not be right to say that. So, it's very much important that the cost reduction can not only offset anything what is in the market, but can get into a positive increase in Market & Airlines. And I'm not sure if the 30% are rightly calculated, but we want to be -- see a significant growth in Market & Airlines as well.

And is the strategy working? One thing is, this is -- and you know it, because you're so much in the detail. On the revenue growth, the TUI Cruises revenue growth is not a TUI growth, because we just get the results into it. The joint ventures on the Hotel side: The Atlantica or TUI BLUE Hotels, we get the result, but we don't get the revenue.

So, if we would add up the customer revenue increases, it would be a very different picture than the consolidated numbers. Because the U.K. last year has increased the share, the sales into Rio significantly, but this is not a revenue increase only slightly, because it's in the consolidation. It's not 1 plus 1, it's 1 plus 1 is equals 1.2. So therefore, it's something which doesn't really reflect from a customer perspective, the revenue growth. And that would be my answer to the question, Mathias. Was it right?

I think -- As Always.

Our next question comes from Andrew Lobbenberg from Barclays.

Can you explain what changed with the decision to take the new boats into the TUI Cruises rather than this time last year when you were expressing confidence that you would keep them at Marella. Can you explain what happened to the Marella fleet as it ages and perhaps explain how you expect to serve the U.K. market on the cruising side?

And then, a second question would be around the growth in Dynamic. I mean, it's growing 11%. Therefore, the non-Dynamic is shrinking, I guess, about 10%. How did the economics work? How strong are the economics on Dynamic? And what does that tell us about the economics of non-Dynamic? And how should we expect the share of Dynamic to evolve going forward?

So, with the Cruise part, the synergies we do see on the new builds with TUI Cruises are huge. We always said when we put something into the joint venture, the 50% should add more value to us than keeping the 100%. And you may recall that the new two ships are on the same series like the TUI Cruises: Mein Schiff Flow and Mein Schiff Relax.

So a lot of synergies also with the Royal Caribbean on operating these ships. By the way, we have three options, which have a high value. There are no building slots available till '30 something. So we are very happy to also have three options.

And the question is absolutely right. What does it mean for Marella? Marella is performing outstandingly well. You've seen all the prices they have received. We believe that there is even room for more tonnage in the U.K. or put it also into North Europe, including the Nordic countries. And this is -- by the way, we have the Board meeting with the Royal Caribbean later today in London. There are opportunities which we will explore.

But it was important for us that we have the right vehicle where we get all the synergies. And one thing is also clear, it would have been a significant stretch to our balance sheet and financing, and we wanted to be very much on the safe side. But the rationale is 50% should be more valuable than 100%.

Dynamic, non-Dynamic, that's a good question as well. We very much believe in the non-Dynamic -- in the Dynamic, in the risk-free product. And we also believe in the wholesale product.

The question is, what is the risk right we have. In the past, we have had sometimes too much risk capacity that we have now have found a good solution. That is a definition that we -- of the risk capacity, which we think we can sell well and the growth should come from Dynamic. It's not an or, it's an end. And it was very clear that the focus is on selling the risk capacity, even if that lowers the Dynamic of the selling of the non-Dynamic. Now we have Risk Right, we do see significant more opportunities to grow there.

And of course, we had also to do some technology homework. We haven't had all the carriers, the third-party carriers. We haven't had too many NDC connections. We have now connected British Airways. Others will come even before Christmas. So, we had to do -- to lay the foundation with significant IT divestments on Dynamic. And I would say that the growth should come from -- in TUI from Dynamic, which means that it would equally translate into growth into growth with Dynamic.

Can I just ask, I mean, on the U.K. on -- I mean, the existing Marella fleet is older than the TUI Cruises fleet. How long can it go? Or is there a time when you refurb the old vessels and they can just keep going into the future? Or are there technology or environmental issues that put a defined time line -- time -- lifetime on them?

We very much believe with all the investment, and we are refurbishing. And we are doing a lot of sustainability investment. But compared to cash flow, it's a very nice picture, so that they can stay in service until the '30, '35. There are now -- and I don't want to elaborate too much because this is just brainstorming what I said.

There is also a life for refurbished tonnage, and we do see as the new build slots are very, very limited or you can't get any at the moment for the next 10 years or 7, 8 years, but I would say, 10 years, it could make sense to have also some reasonable investments there. And that's what I said. That's something we have to develop.

For the time being, we had assumed that having new ships, which are double the size of Marella, we will see significantly improvements even with our 50% share with our development in Cruise, there might be opportunities which we haven't seen half a year ago, because if we have seen Mathias showing 5% higher occupancy in our load factor or booking in TUI Cruises, I mean, with 45% higher capacity, it clearly shows that we sold too cheap, but it's more than a luxury problem. So, there is something to do with us, but more on the opportunity side than on the risk side. Really like what they have achieved is really amazing.

[Operator Instructions] Our next question comes from Kate Xiao from Bank of America.

I have a few questions on AI. In your presentation, you mentioned that your products are open to all LLMs. I wonder what that means. Are your products kind of bookable directly on the kind of AI agent level? Or is it through your own apps? I think through by your example, it looks like it's kind of more through your own app. Then I wonder if there's scope to kind of integrate further, hence, bookable directly at the AI agent level.

And then the other question is, are you seeing increased demand right now already from the AI front? Can you quantify the benefits you have seen so far? And finally, on the cost front, any numbers we can share by implementing AI, say, what would the contribution be in your Markets & Airline business to that 3% EBIT margin target?

As said, we believe that AI is changing the tourism, how we distribute. And our own brands are very, very important because we want to get as many of our customers direct on our app into our product. And that's why we have increased and changed the split of performance marketing into brand marketing. And apparently, it works well. Maybe we -- most likely, we have been under-invested in brand. So, we -- marketing, so therefore, we shift.

If you look at LMMs, it's really exciting. For the first time, TUI is ready and the LLMs are not ready. And why are we ready? You have seen it with Mindtrip. It's working. We do see it where we use it internally and the LMMs are still optimizing what they do. It was interesting what ChatGPT or the owners said what they have to do first before they start with the sales shops.

For us, it's important to be directly bookable so that the customer says, I want to go 2 weeks to Mayoka with this and that. And then he gets the TUI offers and then he's in the TUI ecosystem to book it. Technically, it is possible. We are waiting to get connected.

And you could argue, but that is then open for many. I mean, there is a first-mover advantage, but our advantage is we have the Robinson Club, others don't have. We have the TUI BLUE, others don't have. We have the service component, which is very, very important, especially in our customer segment with also customers at the -- with different age pattern. So, we very much believe that this exclusive content, differentiated content is a difference.

When you talk about where can we use AI to have lower cost, one, to increase the conversion rate in the app. That's something we have started to see. And a good example is for us when it comes to service. I mean, people calling -- asking a question. Today, a big, big share is done by AI. And then you could ask, what does it mean, because we got the question before on the workforce. In these areas, we work with a lot of service companies. And there, we were able to reduce that a lot.

The next step will be content production. A lot of things will be automized with better quality, pricing. We still have a lot to do to improve our pricing. Maybe others are superior there. AI is supporting that a lot. So it's both things to get better outcome, better content, better prices and on the other side, to decrease -- to improve processes and to decrease cost for that IT development is a great example.

I remember 2 years ago, we had thousands of external people. Today, we have maybe 30 or 50. And we really lowered -- almost vanished the number of external people and we do it with us. And I would say, today, it is -- you have the factor of 5 if you develop something with AI systems in IT, and there's even more to come. This is a way, and it needs education. It needs a very clear target. But the organization is really, really excited about it. And it's for us the opportunity to maybe overtake the one or the other, and that's why we put so much effort into it. And it sounds by far easier than it is.

Right, Nicola?

Right, as always.

Our next question comes from Karan Puri from JPMorgan.

I have two questions, if that's okay. The first one is on the balance sheet and cash generation. Just wondering with leverage not too far from your midterm target and with cash generation picking up nicely as well. Wondering if the 10% to 20% dividend payout ratio is more so a floor with potential for an increase if you continue to delever. That's question one. Maybe we can start with that and I'll come back to question two after.

Yes, exactly. But they say cash flow breakeven at some point at the start of the next phase, very clearly. So as I said, one is we need to bring leverage further down, and this is below 0.5x. As of today, 0.6x. At the same time, when we look at leverage, what will be, of course, what we need to consume at the same time is the order book of Boeing, which is peaking '26 and '27. So, this is something where we expect that we can, of course, work on leverage, but at the same time, something that we still need to consume.

And this is some -- so I think on the back of that, we've decided to propose a starter dividend and we are -- have defined this 10% to 20% of underlying EPS as a dividend strategy going forward. Again, it's to be defined in each year where we are. But at the same time, I think we really balance with that deleveraging, consuming of investments and good basis for shareholder returns. That's the idea behind it.

Perfect. The second question is actually on the newly announced EUR 250 million cost savings. Despite this sort of incremental EUR 250 million, you've kept the midterm EBIT guidance unchanged. What is the best way to think about this? Does this imply that the underlying momentum across the other buckets of Dynamic Packaging, Airline Commercialization, et cetera, is tracking a bit behind? Or it's you just being conservative? What -- how should we think about this, please?

It's important to achieve what we have promised. And -- I mean, we haven't had in mind the Jamaica incident, which was a significant hit. We want to make -- to do as much as possible to fulfill what we promise to the market. If times are great, like last year, we are able to overachieve. There might be times where they are even getting more challenging because the economy is the war and so on. I think reliability is a very high value for us. And I mean, it's better to fulfill with a very high certainty what we promised or what we outlined, what we are achieving then to add up all the opportunities we have.

Our next question comes from Leo Carrington from Citi.

If I could ask two related questions, please. In terms of the travel environment in Europe, how would you frame that right now? You referenced the competitive nature of the environment. Is that pure competitive tension? Or is that in the context of some kind of caution from consumers? And obviously, there was the later profile of bookings over the Summer. And then looking forward, for the ASP growth you've referenced for Winter and Summer, is this mostly like-for-like pricing? Or is there mix or duration effects that are also moving this metric?

I mean we are lucky that, for example, in the Hotel business, whatever is the impact from Europeans or U.K. customers, it doesn't hit us, because we -- I was on Lanzarote last week, absolutely packed. I've never seen so many French people, so many Spanish people, and I've never seen so many Asian people. So, we benefit from the global distribution we have built up. On Cruise, it's the product. And therefore, it is very much sold out.

If I look at the European or if I look at Musement, they have now a lot international customers, which are not Central European ones. But also the European market is not homogeneous. If I look, there's strong growth in Eastern Europe. So you know about our successful Polish business who went -- they went into Czech, doing very well. At the moment, they go into Romania, soft launch, a real launch in February. Spain, which was always a challenge for us. Outgoing Spain, for the first time turned positive, and it's growing significant in Portugal, Latin America. So it's important these markets outside the core markets. Because, if I look at Germany, if I look at the U.K., I would say at least there is no tailwind.

And with the political uncertainty, and I know it, of course, better in Germany than in the U.K., there might be even effects. We are -- and looking at Germany, we are maybe less impacted, because we are in the customer segment, which has a higher income and the lower segment, and that's why we had the one or the other insolvency, which the company who were at the lower end, they suffer more.

For us, it's important to be as resilient and to have the broadest distribution we have to make sure that the Cruise, the Hotels, the Musement products are having the highest possible occupancy.

And if you look into the seasons, we had a good start, but we quite often had a good start. And even if you are now 10% or whatever percentage up, you can lose that in a week, in turn of the year season. So that's why it's so difficult to give a good and solid outlook. But we -- the resiliency we got is making sure that we can fill our assets. And at the end, if it's 10% or minus or 10% on Markets & Airlines, it's very important, and we need the growth, and we are envisaging the growth, but we can -- could lose the game on the Holiday Experience. And as we don't do that and we win there, it's so important that we get from markets -- the customers into our assets. And this works well, and it works even better now than it worked a month ago or a year ago.

[Operator Instructions] Our next question comes from Richard Clarke from Bernstein.

Just starting on Cruise. Are you seeing any benefit in Europe from maybe less capacity some of the other Cruise companies have redirected capacity to the Caribbean? Is that helping yields? Are you thinking about your planning for where you're going to run your Cruises based on that? And maybe in that context, why are you only seeing prices flat, particularly where you've got new ships, why are prices not growing in the Cruise business?

Second question, I think this year or next year, I guess, you're saying the bigger contributor to the 7% to 10% will be the Markets & Airlines business. How should we think about -- I know, you've got a useful slide at Slide 42, but just the shape of that 7% to 10%, would you expect beyond '26 that we would see the Hotels and the Cruise business being the majority contributor to that 7% to 10%?

And then thirdly, I know you sort of explained the dividend sizing. But in the past, you used to at least be able to return the TUI Cruise dividend back as a dividend. It looks like your dividend is going to be below the TUI Cruise dividend to you. So, just wondering why at least that isn't being able to pass back to TUI shareholders.

On Cruise. I don't know if we benefit from less capacity. What I know is that the value proposition of TUI Cruises, Hapag-Lloyd and Marella is superior. TUI Cruises new ships, the well-being approach, the all-inclusive approach, amazingly great product. Hapag-Lloyd, the same.

Marella, and that for me has been the biggest surprise, and therefore, I'm so really grateful to the management and the team there. If you look at the prices they win at the food concept. It seems to be that they do a lot of things right.

And then the right question is, why are prices not better. And that is a question we put to the management there. To be fair, no one and especially not me anticipated that the demand would be stronger than the capacity increase. So there is something more to be done on the prices.

On the other hand, and we know it from markets very often, the customers you don't get in the beginning, you have to pay a lot to get them late. And therefore, we are really grateful to the capacity there.

Do you want to say a few -- and maybe last before Mathias goes into the detail, I think it's very clear, and that's why we always stress so much the business model, having strong distribution, which fills our assets. Yes, we want to have a significant increase in Market & Airline profitability, but the majority, I would -- I mean, I couldn't assume that this would be the other way around.

Yes. And maybe just on the dividend. To be fair, I think we developed the dividend looking forward. Again, as I said, balancing deleverage targets, investment and consumption of the investments -- and please do not forget that the Aircraft delivered by Boeing directly move on balance sheet if they are leased or asset financed and that the CapEx is primarily related then to the adjacent engines, et cetera, maintenance events that we need to move through CapEx.

And then thirdly, to have a decent returns to shareholders and to have a good dividend yield in line with as what we get as comments from investors and business partners. I think in the past, the dividend policy was really on different pillars, and that's why I think it's not really comparable.

Just a few words on the guidance growth. I think the 7% to 10%, if you -- I think they have 2 elements indeed. One is what are the building blocks in terms of investments that you can already see today that, in particular in HEX will then deliver a certain earnings growth going forward. And that's one element.

The other element is the benefits from Markets & Airlines. And naturally, I mean, there's a kind of overall improvement that we expect. But also if you go to the regions, and Sebastian, you mentioned the success that we had in Nordics. We reduced capacity there to the right capacity. We have an issue in the Belgium, Netherlands model, which is similar. I think that's something you need to put into context. But what is for the guidance, very important, this is more back-ended very naturally. So, this is more towards the Summer where we expect then the profit growth in that area.

Our next question comes from Andre Juillard from Deutsche Bank.

Two questions, if I may. First one about the German market and the reinvestment plan, which has been presented by the government. Could you give us some more color about your feeling on the one consequences of this reinvestment plan and the trend that we could see and potential good news that we could see in the consumer and the travel and leisure sector.

Second question about the booking trend. You are relatively cautious on the Winter, partly because of the negative base effect. But what do you see in terms of trends on the last booking? And do you see any significant evolution on upgrades or downgrades in terms of segmentation of the bookings?

You mean the investments of the -- increased investment of the government?

Yes. And the consequence it could have on the consumer side.

How should I phrase it politically correct? I think, Germany is in a very difficult situation, and we would need significant more rigid changes. And at the moment, we try to have a debt-related investment program, which may work or may not work. At least it will not change the sentiment as long as not main questions are solved. So, I don't see any positive impact to any business in Germany.

And coming back to your booking trends question. As I said, it's very difficult to predict. On Winter, we said margin is very important and another 1 or 2 volume with lower margin doesn't help us, because the risk capacity is set right.

We had strong Black Friday 2 weeks, which personally surprised me a little bit. But of course, as I said, whatever we have today, it is important, but the main important season is the change of the year -- a season, and then we will know. I think, it's very important to protect margin and where we cannot protect the margin to make sure that the cost element is more than what the market would see. So, the prediction is more difficult than it has been in recent years. And it's important that we are cautious that we are not going into a risk strategy, but in a well-balanced strategy.

And is it a late booking pattern? What we do see, I don't see that too many things has changed. There have been change that some of the consumer segments like the families, which is luckily not so much the TUI business with two or three kids, they don't have the money too much anymore to spend in travel. They are more a segmented oriented change or Egypt because there's a great price value for the customer is growing significantly and other countries are losing. So it's important to be resilient, to be dynamic, to change quickly and to live with these changes.

We currently have no further questions. So I'd like to hand back to Sebastian Ebel for any further remarks.

Team, and I always say thank you to the whole team is working very hard. Transformation is not easy, and it only works if our people work with us, if we get the right products to the customer. And as we do see that day-by-day, we see progress, we are confident about TUI's future. We have huge opportunities. We have significant risk, which we have to manage. And therefore, I very much believe investment in TUI is a great thing, because we not only work hard, that's a lot of people doing, but we are seeing that we can give great offers to our customers and to support trends we do see in the market. So, thank you for being with us and asking your questions and challenging us. Mathias?

Thank you so much.

Thank you so much. And the only thing remains, have a good festive season ahead of you.

And go with TUI. We still have some seats available.

Excellent.

Thank you.

Thank you. Bye-bye.

As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.