2018
A N N U A L R E P O R T O F T H E T U I G R O U P
8
1
0
2
8
1
0
2
P
U
O
R
G
I
U
T
E
H
T
F
O
T
R
O
P
E
R
L
A
U
N
N
A
FINA NCIAL HIGHLIGHT S
€ million
Turnover
Underlying EBITA1
Hotels & Resorts
Cruises
Destination Experiences
Holiday Experiences
Northern Region
Central Region
Western Region
Markets & Airlines
All other segments
TUI Group
Discontinued operations
Total
EBITA 2, 4
Underlying EBITDA 4
EBITDA 4
EBITDAR4
Net profi t for the period
Earnings per share4
Equity ratio (30 Sept.) 3
Net capex and investments (30 Sept.)
Net cash (30 Sept.)4
Employees (30 Sept.)
€
%
2018
2017
Var. %
Var. % at
constant
currency
19,523.9
18,535.0
+ 5.3
+ 6.3
+ 38.7
+ 27.0
+ 33.6
+ 33.8
– 27.4
+ 25.0
+ 0.1
– 14.6
– 31.4
+ 10.9
–
+ 11.0
+ 10.4
425.7
324.0
44.7
794.4
254.1
89.1
109.3
452.5
– 99.9
1,147.0
–
1,147.0
1,060.2
1,563.9
1,498.5
2,219.9
780.2
1.18
27.8
827.0
123.6
69,546
356.5
255.6
35.1
647.2
345.8
71.5
109.2
526.5
– 71.6
1,102.1
– 1.2
1,100.9
1,026.5
1,541.7
1,490.9
2,240.9
910.9
1.36
24.9
1,071.9
583.0
66,577
+ 19.4
+ 26.8
+ 27.4
+ 22.7
– 26.5
+ 24.6
+ 0.1
– 14.1
– 39.5
+ 4.1
n. a.
+ 4.2
+ 3.3
+ 1.4
+ 0.5
– 0.9
– 14.3
– 13.2
+ 2.9
– 22.8
– 78.8
+ 4.5
Diff erences may occur due to rounding
This Annual Report of the TUI Group was prepared for the fi nancial year (F Y ) from 1 October 2017 to 30 September 2018.
The terms for previous years were renamed accordingly.
In F Y 2018 we have adjusted our segmental reporting to refl ect the growing strategic importance of the services delivered
in our destinations. Destination Experiences is now reported separately in the segmental structure, and within Holiday
Experiences together with Hotels & Resorts and Cruises. The further businesses of former Other Tourism and All other segments
have been combined into All other segments. There are no changes to the total numbers. The prior year’s reference fi gures
were restated accordingly.
1 In order to explain and evaluate the operating performance by the segments, EBITA adjusted for one-off eff ects (underlying
EBITA) is presented. Underlying EBITA has been adjusted for gains/losses on disposal of investments, restructuring costs
according to IA S 37, ancillary acquisition costs and conditional purchase price payments under purchase price allocations and
other expenses for and income from one-off items.
2 EBITA comprises earnings before interest, taxes and goodwill impairments. EBITA includes amortisation of other intangible
assets. It does not include the result from the measurement of interest hedges, and in the prior year did not include results
from container shipping operations.
3 Equity divided by balance sheet total in %, variance is given in percentage points.
4 Continuing operations
»We are on track because we have
undergone a transformation. This year,
in particular, has shown that the
realignment we launched in 2014 to focus
on the hotel, cruise and destination
business has now become TUI’s special
strength. Only five years ago, a similar
summer would have left its mark on TUI,
too. We have now become an integrated
hotel and cruise group. We develop,
we invest and we operate. And we
are increasingly becoming a digital and
platform organisation.«
Friedrich Joussen, CEO of TUI AG
2
TUI Group 2018 in figures
3 reasons to invest in TUI
Additional content
in the interactive
financial report 2018
HTML tables
annualreport2018.tuigroup.com
3
CONTE NT S
4
6
10
12
14
22
TUI Group 2018 in figures
Letter to our shareholders
Guidance
Group Executive Committee
Report of the Supervisory Board
Audit Committee Report
COMBINED
MANAGEMENT REPORT
28
32
40
56
60
82
100
103
108
TUI Group strategy
Corporate profile
Risk report
Overall assessment by the Executive Board
and report on expected developments
Business review
Non-financial Declaration
Annual financial statements of TUI AG
TUI share
Information required under takeover law
CORPORATE GOVERNANCE
112
115
Executive Board and Supervisory Board
Corporate Governance Report
CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES
152
152
153
154
156
158
159
259
260
268
Income statement
Earnings per share
Statement of comprehensive income
Financial position
Statement of changes in Group equity
Cash flow statement
Notes
Responsibility statement by management
Independent auditor’s report
Forward-looking statements
4
T UI GROUP 2018 IN FIGURE S
Financial
highlights
€ 19.5 BN
TURNOVER
€ 1.17
UNDERLYING EPS
€ 0.72
DIVIDEND PER SHARE
23.0 %
ROIC
€ 1,147 M
UNDERLYING EBITA
Markets &
Airlines
~150
AIRCRAFT
27 M
CUSTOMERS
21 million from European
source markets
5
16
CRUISE SHIPS
380
HOTELS
Holiday
Experiences
115
DESTINATIONS
6
L E T T E R T O O U R S H A R E H O L D E R S
LE T TER TO OUR
SHAREHOLDER S
Dear shareholders,
2018 was another growth year for TUI. We delivered on our promises in
a challenging market environment. Our operating result again delivered
double-digit growth for the fourth time in a row – it grew by nearly eleven
per cent at constant currency in the completed financial year.
The robust results delivered in 2018 are particularly gratifying given that
we were operating under exceptional circumstances last year. In the UK,
the exchange rate and purchasing power of sterling were adversely affected
by Brexit. Air traffic in Europe faced particular challenges. And in our Euro-
pean home markets, we experienced a record summer – with a summer
heatwave lasting right into the autumn. This brought its weight to bear on
results in our sector in the course of the financial year.
I would like to extend a special word of thanks to our customers who
chose to travel with TUI and its brands, and to you, our shareholders, for
your loyalty to TUI. Let me also thank all the employees who looked after
our guests and again created unforgettable moments during their holidays
in 2018. The Executive Board and the Supervisory Board will be proposing
another increase in the dividend to 0.72 euros for the completed year to
the Annual General Meeting.
We are on track because we have undergone a transformation. This year,
in particular, has shown that the realignment we launched in 2014 to focus
on the hotel, cruise and destination business has now become TUI’s special
strength. Only five years ago, a similar summer would have left its mark on
TUI, too, as the Group’s focus and earnings structure were too one-sided
and above all excessively geared to our classical tour operation business.
We have now become an integrated hotel and cruise group. We develop,
we invest and we operate. And we are increasingly becoming a digital and
platform organisation.
Today’s success is important. However, what do we need to do to stay
on track and keep growing? We used 2018 to define our position. Are we
fit for further growth? How are we going to further enhance the quality,
efficiency and strength of today’s businesses? And where do our strong
global TUI brand and the increasing digitalisation of our businesses create
L E T T E R T O O U R S H A R E H O L D E R S
7
new growth areas for the Group? Let me comment on some of the decisions
we took:
Our classical tour operation business is characterised by strong compe-
tition, seasonality and low margins in European source markets. That is
why we must identify synergies and enhance our efficiency. Since the
summer, we have clustered the Group’s worldwide tour operators and
airlines into Markets & Airlines, managed by an Executive Board member.
We have to learn more from one another, rapidly transfer successful models
from one market to another and harmonise non-customer-facing activities.
This transformation has begun and will enhance the efficiency and com-
petitiveness of our classical tour operation business. Where markets have
already achieved the required level of maturity, TUI is already fully digital.
TUI Nordic in Scandinavia is an example of that. We will not ignore the
social and cultural particularities of our markets and customers, but we
will be at the forefront of this transformation in other countries, too.
8
L E T T E R T O O U R S H A R E H O L D E R S
Today, 70 per cent of our operating result is delivered by holiday experi-
ences developed and designed by us: hotels, cruise ships, excursions and
activities in the holiday regions. This is where customers experience the
strength of the TUI brand. These holiday moments make holidays with
TUI so special and personal. We are growing and investing in this segment
so as to strengthen it. Despite the large variety of holiday experiences
offered by TUI Group, we want them to display a distinctive signature. This
includes our Group’s own hotel brands such as TUI Blue, Riu, Robinson,
TUI Magic Life, hotel concepts such as TUI Sensimar, TUI Sensatori and
TUI Family Life, global hotel purchasing with our partners, the cruise lines
and destination activities.
This is where we are seeking further growth. We know our customers very
well, we know when they travel where, and what services they appreciate,
be it holiday destinations, hotel rooms, cruise suites, excursions or activities.
If we put this knowledge to smart use, we can create great value added
for our customers – and for us, as we will be able to generate additional
turnover and earnings. We have paved the way for that growth through
our comprehensive digitalisation strategy and our investments in IT as
well as new technologies, which are increasingly paying off. Here, too, our
transformation as a digital company has progressed and opened up new
growth areas.
The destination activities market, in particular, is delivering extremely
strong growth, promising highly attractive returns and still typically features
many small, local providers. With more than 27 million customers – thereof
around 21 million guests from our European source markets, a highly
professional international team on the ground, a strong digital infrastructure
and networked customer systems, we are well placed to take a leading
international position in this market for tours and excursions and to deliver
very profitable growth. Usually, several months pass after a holiday booking
before our customers depart for their trip. That period offers us great
potential to submit personalised offerings for activities in the destination to
our customers – from the ‘Select your room’ option via special excursions
through to reservations for restaurants, sporting programmes and wellness
facilities.
Having identified the growth potential in this area, we made investments
in the completed year by purchasing two companies. By acquiring destina-
tion management from Hotelbeds Group, we doubled the footprint of
Destination Experiences from 23 to 49 countries. We now have a team on
the ground in almost every major destination in the world and are able to
L E T T E R T O O U R S H A R E H O L D E R S
9
develop new products and services for our customers. This summer, we
purchased the Milan-based technology start-up Musement. The Italian
company has developed a platform that already pools a great portfolio of
holiday experiences and offers its users customised excursions. Integrating
this approach into our business with 27 million has enormous potential.
We expect this acquisition, the further development of our digital plat-
form and the expansion of our offering to contribute substantially to our
future growth.
Dear shareholders, we are transforming our traditional portfolio, strength-
ening today’s successful and profitable business lines and investing in digital
platforms for our future growth. I hope that the year 2018 and the progress
achieved in the past few years have convinced you that TUI has been and
will remain a good investment. TUI is the world’s leading integrated tourism
group. Supported by a great team of 69,500 employees around the world,
the Executive Board is committed to ensuring that things stay that way.
Tourism is and remains one of the world’s biggest and most stably growing
industries. There is no reason and no indication to believe that demand
for travel will decline – on the contrary. We have identified potential in
many new markets, in particular in the countries of South East Asia, where
we are expanding our hotel portfolio and building TUI’s position.
I would be delighted to be able to welcome you personally to our Annual
General Meeting in Hanover. Birgit Conix, the successor to our long-standing
CFO Horst Baier, will take part for the first time. Let me use this oppor-
tunity to extend my sincerest thanks to Horst Baier once again. He was
our CFO throughout FY 2018. Horst Baier played a key role in designing
and delivering our successful transformation over the past few years. He
has always been a reliable advisor and partner to my Executive Board
colleagues and myself.
We are working to continue our successful performance in 2019. Thank
you very much for your support and loyalty.
Best regards,
Friedrich Joussen
CEO of TUI AG
10
G U I D A N C E
GUIDA NCE
K E Y
F I G U R E S
Outlook FY 20181
T U R N O V E R I N € B N
I N E XC E S S O F
3 %2, 3
E B I TA ( U N D E R LY I N G ) I N € M
AT L E A ST
+ 10 % 2
A DJ U ST M E N T S I N € M
~ 80 costs
N E T C A P E X A N D
I N V E ST M E N T S I N € B N
1.2
L E V E R A G E R AT I O
G U I D A N C E
A C H I E V E M E N T
Actual FY 2018
G U I D A N C E
Actual 2018 rebased
19.5 + 6.3 %2
19.52
1,147 + 10.9 %2 1,1874
87 costs
0.8
3.00(X) – 2.25(X)
2.7(X)
1 As published on 13 December 2017, unless otherwise stated
2 Variance year-on-year assuming constant foreign exchange rates are applied to the result
in the current and prior period and based on the current group structure
3 Excluding cost inflation relating to currency movements
4 The starting variable for the forecast is the rebased underlying EBITA . This rebased figure was
determined by increasing the underlying EBITA of F Y 2018 by the negative effect from the
revaluation of euro denominated loans in Turkey amounting to € 40 m, translated at actual rates
for the F Y 2018.
5 Including PDPs, excluding aircraft assets financed by debt or finance leases
K E Y
F I G U R E S
Outlook FY 20181
T U R N O V E R I N € B N
I N E XC E S S O F
3 %2, 3
E B I TA ( U N D E R LY I N G ) I N € M
AT L E A ST
+ 10 % 2
A DJ U ST M E N T S I N € M
~ 80 costs
N E T C A P E X A N D
I N V E ST M E N T S I N € B N
1.2
L E V E R A G E R AT I O
G U I D A N C E
A C H I E V E M E N T
G U I D A N C E
Actual FY 2018
Actual 2018 rebased
19.5 + 6.3 %2
19.52
1,147 + 10.9 %2 1,1874
87 costs
0.8
3.00(X) – 2.25(X)
2.7(X)
G U I D A N C E
11
G U I D A N C E
FY 2019
A P P R OX I M AT E LY
AT L E A ST
+ 3 %2, 3
+ 10 %2
~ 125 costs
~ 1.0 – 1.25
3.00(X) – 2.25(X)
12
G R O U P E X E C U T I V E C O M M I T T E E
GROUP E XECU TIVE
COMMIT TEE
DAVID BURLIN G
Member of the Executive Board;
CEO Markets & Airlines
DR HILKA SCHNEIDE R
Group Director Legal,
Compliance & Board Office
THOMAS ELLER BECK
Group Director Corporate &
External Affairs
FRI EDRICH JOUS SEN
CEO
Please refer to our website for CVs www.tuigroup.com/
en-en/about-us/about-tui-group/management
BIRGIT CON IX
Member of the
Executive Board
(from July 2018);
CFO
KEN TON JARVIS
CEO Aviation and
Business Improvement;
Director Markets
G R O U P E X E C U T I V E C O M M I T T E E
13
DR ELK E ELLER
Member of the Executive Board;
Human Resources, Personnel Director
SEBA ST IAN EBEL
Member of the Executive Board;
CEO Hotels & Resorts, Cruises,
Destination Experiences
ERIK FRIEMUTH
Group Chief Marketing Officer &
Managing Director TUI Hotels & Resorts
FRANK ROSENBERGER
Member of the Executive Board;
IT, Future Markets
PE TER K RUEGER
Group Director Strategy, M & A,
Investor Relations
HORST BAIER
Member of the Executive Board;
CFO (until September 2018)
ELIE BRUYNINCK X
CEO Western Region
HEN RIK HOMANN
Group Director Strategy (until June 2018)
14
R E P O R T O F T H E S U P E R V I S O R Y B O A R D
REPORT OF TH E
SUP ERVISORY BOARD
Ladies and Gentlemen,
After we completed the post-merger integration of TUI AG and
TUI Travel plc last year, we again demonstrated in the financial year
just completed that we – the Executive Board, the employees
and the Supervisory Board – have together created the right
strategic positioning for our organisation. We have established an
internationally operating, integrated tourism company with a
successful, sustainable business model.
Despite various challenges we faced at both national and inter-
national levels, we increased our underlying EBITA by more than
10 % year-on-year at constant currency. This has also enabled us
to clearly stand out from our main competitors, some of whom
had to lower their guidance in the completed financial year. We
again successfully mastered a number of special challenges, such as
the insolvencies of Air Berlin and its subsidiary Niki, the prolonged,
exceptional good weather in Europe this summer which limited
demand for travel, and also the weakening of the Turkish lira. This
confirms that we took the right decision in transforming TUI into
an integrated tourism company with a broad value-chain.
We will not rest on our laurels but consistently pursue our trans-
formation roadmap. After leveraging synergies from the merger
and the transformation of our business model, we will now focus
on selective investments mainly in the Hotels and Cruises segments
and efficiency enhancement. We will also make a priority of con-
tinued digitalisation, which opens up new opportunities for TUI at
all levels. Especially with our broad customer portfolio, the potential
of Artificial Intelligence offer high chances for optimisation.
At our meetings, we regularly discussed the strategic development
of our business model with the Executive Board. To implement
this, following comprehensive review and discussion, the Superviso-
ry Board approved a number of key acquisition projects, in par-
ticular the repurchase of incoming agencies from Hotelbeds Group,
enabling us to expand our offering in the Destination Experiences
segment from 23 to 49 countries. This segment was further re-
shaped with the acquisition of Musement, transforming the seg-
ment from offline to a fully digitalised business. We also approved
investments in a new generation of TUI Cruises ships and the
construction of a further expedition liner for the fleet operated by
Hapag-Lloyd Cruises.
Looking ahead to future challenges, another major priority of our
deliberations in the Supervisory Board was Brexit. Throughout the
year, we paid detailed attention to the various scenarios and the
resulting potential impacts on our business model as well as
measures to be derived.
As in this year, Corporate Governance will be another focus area next
year. The UK Corporate Governance Code was recently fundamen-
tally revised. Meanwhile, the commission in charge of the German
Code is also planning to carry out a major review from the middle
of next year.
Let me use this opportunity to thank Sir Michael Hodgkinson on
behalf of the entire Supervisory Board for his outstanding efforts
and commitment as a member of the TUI AG Supervisory Board.
Sir Michael Hodgkinson has rendered lasting services above all to the
merger of the two TUI companies and the subsequent integration
management. The same applies to our former CFO Horst Baier,
who stepped down from the Executive Board towards the end of
the financial year. He was instrumental in shaping our organisa-
tion’s successful course over a long period of time. We would like
to thank both of them and wish them all the best for their future.
After 14 years of active participation, Mrs Carmen Riu Güell will
resign her mandate at the end of the Annual General Meeting on
12 February 2019. She has made a very intensive contribution to
the strategy discussion, particularly in the restructuring of our hotel
business, and has set important accents. It will then be proposed to
the Annual General Meeting to elect Mr Joan Trian Riu to replace
her as member of the Supervisory Board. Mr Joan Trian Riu has
extensive knowledge and experience in the tourism business and
finance.
R E P O R T O F T H E S U P E R V I S O R Y B O A R D
15
15
6
10
9
1
16
17
19
18
13
12
8
11
7
20
14
2
3
4
5
The Supervisory Board of TUI AG at its meeting on 10 October 2018 in the Hanover head office
1 Angelika Gifford
2 Prof. Klaus Mangold (Chairman)
3 Frank Jakobi (Vice Chairman)
4 Valerie Frances Gooding
5 Carmen Riu Güell
6 Dr Dieter Zetsche
7 Carola Schwirn
8 Prof. Edgar Ernst
9 Janis Carol Kong
10 Alexey Mordashov
11 Anette Strempel
12 Ortwin Strubelt
13 Michael Pönipp
14 Andreas Barczewski
15 Peter Long (Vice Chairman)
16 Peter Bremme
17 Mag. Stefan Weinhofer
18 Coline Lucille Mc Conville
19 Dr Dierk Hirschel
20 Wolfgang Flintermann
16
R E P O R T O F T H E S U P E R V I S O R Y B O A R D
Cooperation between the Executive Board and the
Supervisory Board
In a stock corporation under German law, there is a mandatory
strict separation of the Executive Board and the Supervisory
Board. While the management of the company is the exclusive task
of the Executive Board, the Supervisory Board is in charge of
advising and overseeing the Executive Board. As the oversight
body, the Supervisory Board provided on-going advice and super-
vision for the Executive Board in managing the Company in FY 2018,
as required by the law, the Articles of Association and its own
Terms of Reference.
Its actions were guided by the principles of good and responsible
corporate governance. Our monitoring activities essentially served
to ensure that the management of business operations and the
management of the Group were lawful, orderly, fit for purpose and
commercially robust. The individual advisory and oversight tasks
of the Supervisory Board are set out in Terms of Reference. Ac-
cordingly, the Supervisory Board is, for instance, closely involved
in entrepreneurial planning processes and the discussion of strategic
projects and issues. Moreover, there is a defined list of specific
Executive Board decisions requiring the consent of the Supervisory
Board, some of which call for detailed review in advance and require
the analysis of complex facts and circumstances from a supervisory
and consultant perspective (own business judgement).
TUI AG falls within the scope of the German Industrial Co-Deter-
mination Act (MitbestG). Its Supervisory Board is therefore
composed of an equal number of shareholder representatives and
employee representatives. Employee representatives within the
meaning of the Act include a senior manager (section 5 (3) of the
German Works Council Constitution Act) and three trade union
representatives. All Supervisory Board members have the same
rights and obligations and they all have one vote in voting processes.
In the event of a tie, a second round of voting can take place
according to the Terms of Reference for the Supervisory Board,
in which case I as Chairman of the Supervisory Board have the
casting vote.
In written and verbal reports, the Executive Board provided us
with regular, timely and comprehensive information at our meetings
and outside our meetings. The reports encompassed all relevant
facts about strategic development, planning, business performance
and the position of the Group in the course of the year, the risk
situation, risk management and compliance, but also reports from
the capital markets (e. g. from analysts), media reports and reports
on current events (e. g. crises). The Executive Board discussed with
us all key transactions of relevance to the Company and the further
development of the Group. Any deviations in business performance
from the approved plans were explained in detail. The Supervisory
Board was involved in all decisions of fundamental relevance to
the Company in good time. We fully discussed and adopted all
resolutions in accordance with the law, the Articles of Association
and our Terms of Reference. We regularly prepare for these decision
based on documents provided by the Executive Board to the
Supervisory Board and its committees in advance. We were also
swiftly informed about any urgent topics arising in between the
regular meetings. As Chairman of the Supervisory Board, I was
also regularly informed by the Executive Board about current
business developments and key transactions in the Company
between Supervisory Board meetings.
Deliberations in the Supervisory Board and its
Committees
Prior to Supervisory Board meetings, the shareholder representa-
tives on the Supervisory Board and the employees’ representatives
met in separate meetings, which were regularly also attended by
Executive Board members.
Apart from the full Supervisory Board, a total of four commit-
tees were in place in the completed financial year: the Presiding
Committee, Audit Committee, Strategy Committee and Nomination
Committee. The Mediation Committee formed pursuant to sec-
tion 27 (3) of the Co-Determination Act did not have to meet. The
Chairman of each committee provides regular and comprehensive
reports about the work performed by the committee at the ordi-
nary Supervisory Board meetings.
In FY 2018, as in prior years, we again recorded a consistently high
meeting attendance despite a large number of meetings. Average
attendance was 92.8 % (previous year 93.8 %) at plenary meetings
and 85.3 % (previous year 97.6 %) at committee meetings. The
majority of Supervisory Board members attended significantly
more than half the Supervisory Board meetings and meetings of
the committees on which they sat in FY 2018. Members unable to
attend a meeting usually participated in the voting through proxies.
Preparation of all Supervisory Board members was greatly facilitated
by the practice of distributing documents in advance in the run-up
to the meetings and largely dispensing with handouts at meetings.
R E P O R T O F T H E S U P E R V I S O R Y B O A R D
17
Attendance at meetings of the Supervisory Board in F Y 2018
Attendance at meetings of the Supervisory Board 2018
Name
Prof. Klaus Mangold (Chairman)1
Frank Jakobi (Deputy Chairman)2
Sir Michael Hodgkinson (Deputy Chairman)2
Andreas Barczewski
Peter Bremme
Prof. Edgar Ernst
Wolfgang Flintermann
Angelika Gifford
Valerie Frances Gooding
Dr Dierk Hirschel
Janis Carol Kong
Peter Long (Deputy Chairman)2
Coline Lucille McConville
Alexey A. Mordashov
Michael Pönipp
Carmen Riu Güell
Carola Schwirn
Anette Strempel
Ortwin Strubelt
Stefan Weinhofer
Dr Dieter Zetsche
Attendance at meetings in %
Attendance at Committee meetings in %
(In brackets: number of meetings held)
1 Chairman of Committee
2 Deputy Chairman of Committee
Supervisory
Board
Presiding
Committee
Audit
Committee
Nomination
Committee
Strategy
Committee
9 (9)1
9 (9)2
4 (4)2
9 (9)
8 (9)
8 (9)
9 (9)
9 (9)
8 (9)
9 (9)
9 (9)
8 (9)2
9 (9)
4 (9)
9 (9)
6 (9)
9 (9)
9 (9)
8 (9)
9 (9)
5 (5)
92.8
85.3
10 (10)1
10 (10)
5 (5)
8 (10)
5 (10)
6 (10)
8 (10)
10 (10)
10 (10)
7 (7)
6 (7)
7 (7)1
7 (7)
7 (7)
7 (7)
7 (7)
7 (7)
5 (5)
3 (5)
4 (5)
3 (5)
5 (5)1
5 (5)
2 (2)1
2 (2)
0 (2)
2 (2)
84.7
98.2
75.0
83.3
Key topics discussed by the Supervisory Board
The Supervisory Board held nine meetings. In addition, two resolu-
tions were adopted by written circulation. The meetings focused
on the following issues:
1.
At its meeting on 17 October 2017, the Supervisory Board
considered current business performance. The discussions also
focused on Brexit. In this context, we talked in detail about
any measures to be adopted by the Group in the event of a
hard Brexit. Our deliberations also focused on the efficiency
programme at TUI fly, the situation of Air Berlin, the effects of
the EU Network and Information Security Directive and the
approval of the diversity concept for the Supervisory Board
and the Executive Board. In the framework of Executive Board
matters, we discussed the status of negotiations on the revised
service contracts reflecting the new remuneration structure
effective from FY 2018. The Supervisory Board furthermore
approved the budget for FY 2018.
2.
3.
At its extraordinary meeting on 15 November 2017, the Super-
visory Board addressed in detail the negotiations of the new
service contracts for the Executive Board members applicable
from FY 2018. These extensive deliberations focused on key
conditions and the definition of performance indicators.
At its meeting on 12 December 2017, the Supervisory Board
discussed in detail the annual financial statements of TUI Group
and TUI AG, each having received an unqualified audit opinion
from the auditors, the Combined Management Report for TUI
Group and TUI AG, the Report by the Supervisory Board, the
Corporate Governance Report and the Remuneration Report.
The discussions were also attended by representatives of the
auditors. The Audit Committee had already considered these
reports the previous day. Following its own review, the Super-
visory Board endorsed the findings of the auditors. We then
approved the financial statements prepared by the Executive
Board and the Combined Management Report for TUI AG and
the Group. The annual financial statements for 2018 were
18
R E P O R T O F T H E S U P E R V I S O R Y B O A R D
thereby adopted. Moreover, the Supervisory Board approved
the Report by the Supervisory Board, the Corporate Govern-
ance Report and the Remuneration Report. It also adopted
the invitation to the ordinary AGM 2018 and the proposals for
resolutions to be submitted to the AGM. Alongside the HR and
Social Report, we received a number of other reports, including
on the results of the TUIgether 2017 employee survey and
on the situation at Air Berlin and TUI fly. In the framework of
Executive Board matters, we adopted the core elements of the
remuneration system for the service contracts for the Execu-
tive Board members applicable from FY 2018, fixed the quota
for female representation on the Executive Board and confirmed
the appointment of Frank Rosenberger, currently a deputy
member, as an ordinary member of the Executive Board with
effect from 1 January 2018. The Supervisory Board also heard a
status report on the expansion of capacity at TUI Cruises GmbH.
4.
5.
6.
7.
8.
On 12 February 2018, the Supervisory Board mainly discussed
TUI AG’s interim statements and report for the quarter ending
31 December 2017 and prepared the 2018 Annual General
Meeting. The Supervisory Board was also given a report on the
sales process for an investment and updates on the revision of
the UK Corporate Governance Code and on business perfor-
mance in source market Germany. We adopted resolutions
on transactions requiring the Supervisory Board’s consent,
approving the expansion of capacity for TUI Cruises GmbH and
the potential issue of a corporate bond for aircraft financing
purposes.
At its meeting on 13 February 2018, the Supervisory Board
elected Peter Long as its new second Deputy Chairman, as Sir
Michael Hodgkinson had stepped down from the Supervisory
Board that day upon the close of the 2018 AGM. We also elected
new members for the Supervisory Board committees.
At the extraordinary Supervisory Board meeting on 13 March 2018,
held in the form of a conference call, we intensively debated
and approved the acquisition of Destination Management from
Hotelbeds Group. We also appointed Birgit Conix as an Executive
Board member. From FY 2019, she will take over as CFO.
On 28 March 2018, we approved the application submitted
by Sebastian Ebel to release him temporarily from his duties
for a sabbatical from 16 April 2018 up to and including
15 June 2018.
On 8 May 2018, we debated TUI AG’s interim report for the
second quarter ending on 31 March 2017 and the half-year
financial report. We also resolved to adjust the remuneration
for Dr Elke Eller and fixed the targets for the performance-
related remuneration component for Birgit Conix. The Super-
visory Board subsequently heard a report on the development
of senior executives in the light of succession planning for the
Executive Board, including personnel development for the top
management level. We were then briefed about the approach
to Brexit moving forward, the status of negotiations around
Corsair, the IT security structure, and the Security, Health &
Safety organisation. We discussed on-going developments
regarding the issue of a corporate bond for aircraft financing
purposes. We also adopted resolutions on transactions requiring
the Supervisory Board’s consent, including the issue of employ-
ee shares, the expansion of capacity at Hapag-Lloyd Cruises
GmbH, and an alternative financing instrument for aircraft
financing. We furthermore approved the Group Manual for
equity trading by persons with limited trading authorisation.
9.
At its extraordinary meeting on 22 May 2018, which was held
as a conference call, the Supervisory Board discussed approval
of a change in the business allocation plan for the Executive
Board in order to align the Group’s organisational structure
with its strategy.
10. On 28 August 2018 (by written circulation), the Supervisory
Board approved the increase in the Company’s capital stock for
the issue of employee shares under the oneShare employee
share programme for FY 2018.
11. During a three-day strategy offsite meeting on 11 and 12 Sep-
tember 2018, we scrutinised the key trends in the tourism
market, the business opportunities in China and South East
Asia, the focus for strategic development, prospects for market
consolidation and Brexit-related challenges. However, we also
devoted detailed discussion to our future strategic orientation
in the online market resulting from the acquisition of an estab-
lished online platform. At the meeting, the Supervisory Board
engaged deeply in very constructive and open dialogue about
tackling the challenges of the future together with the members
of the Executive Board, including the managers in charge of
the topics presented.
Following this deliberation of strategic topics, on 13 Septem-
ber 2018 the Supervisory Board comprehensively debated the
consolidated five-year plan and Executive Board matters. We
were also given reports on information security and on progress
with the creation of a single purchasing platform. The meeting
likewise focused on the status of negotiations on the disposal
of Corsair. We concluded by adopting a resolution on a trans-
action requiring our consent in connection with the acquisition
of Musement S.p.A.
R E P O R T O F T H E S U P E R V I S O R Y B O A R D
19
Meetings of the Presiding Committee
The Presiding Committee takes the lead on various Executive
Board issues (including succession planning, new appointments,
terms and conditions of service contracts, remuneration, proposals
for the remuneration system). It also prepares the meetings of the
Supervisory Board. Alongside the members of the committee,
Dr Dieter Zetsche has been a regular guest attending the meetings
of the Presiding Committee since his election as a member of
TUI AG’s Supervisory Board. In the period under review, the
Presiding Committee held ten meetings.
Members of the Presiding Committee
• Prof. Klaus Mangold
( Chairman)
• Peter Bremme
• Carmen Riu Güell
• Sir Michael Hodgkinson
(until 13 February 2018)
• Frank Jakobi
• Peter Long
(from 13 February 2018)
• Alexey Mordashov
• Anette Strempel
• Ortwin Strubelt
1.
2.
3.
4.
At its meeting on 17 October 2017, the Presiding Committee
discussed Executive Board issues, including deliberations on
various topics related to Executive Board remuneration for the
completed financial year and the current financial year as well
as the business allocation plan for the Executive Board. The
committee also discussed the preliminary findings from the
TUIgether employee survey and follow-up measures.
At its extraordinary meeting on 3 November 2017, the Presiding
Committee considered the status of the negotiations about
the new service contracts for the members of the Executive
Board in connection with the revision of the remuneration
system. We adopted resolutions on variable annual pay for
FY 2018 and discussed a review of the appropriateness of
Executive Board remuneration and pensions carried out by an
external remuneration consultant. We also discussed the
succession for the CFO.
At its extraordinary meeting on 27 November 2017, after further
deliberation, the Presiding Committee recommended the
appointment of Dr Dieter Zetsche as a member of TUI AG’s
Supervisory Board and again discussed the succession for
the CFO.
On 12 December 2017, the Presiding Committee discussed
Executive Board matters. In that context, it again discussed
the status of negotiations on the new service contracts for the
Executive Board members and the search for a successor to the
CFO. It also adopted resolutions to confirm the appointment of
5.
6.
7.
8.
9.
Frank Rosenberger as an ordinary Executive Board member
and the fixing of a female quota for Executive Board members.
On 12 February 2018, the Presiding Committee considered and
confirmed the performance indicators for the annual bonus
for FY 2018 and addressed ongoing succession planning for
the CFO. It furthermore discussed the future composition of
the Supervisory Board and its committees.
At its extraordinary meeting on 28 February 2018, the Commit-
tee auditioned candidates selected as potential successors to
the CFO. A specific recommendation for the Supervisory Board
members was then adopted.
At the extraordinary meeting of the Presiding Committee held
as a conference call on 23 March 2018, the Committee carefully
considered a resolution on a sabbatical for Sebastian Ebel.
On 7 May 2018, we discussed the report on senior executive
development and Executive Board matters, which included
in particular the contractual conditions for Dr Elke Eller and
for the CFO. We also discussed the current CFO’s plan for
stepping down.
At the extraordinary Presiding Committee meeting on
16 May 2018, held as a conference call, the Presiding Commit-
tee dealt in detail with changes in the business allocation plan
for the Executive Board.
10. On 11 September 2018, the Presiding Committee discussed
the termination agreement for the CFO and the appointment
of his successor.
A U D I T C O M M I T T E E
Members of the Audit Committee:
• Prof. Edgar Ernst
( Chairman)
• Andreas Barczewski
• Dr Dierk Hirschel
• Janis Kong
• Prof. Klaus Mangold
• Coline McConville
• Michael Pönipp
• Ortwin Strubelt
The Audit Committee held seven ordinary meetings in the financial
year under review. For the tasks and the advisory and resolution-
related issues discussed by the Audit Committee, we refer to the
comprehensive report on page 22.
N O M I N AT I O N C O M M I T T E E
The Nomination Committee proposes suitable shareholder candi-
dates to the Supervisory Board for its election proposals to the
Annual General Meeting or appointment by the district court.
20
R E P O R T O F T H E S U P E R V I S O R Y B O A R D
Members of the Nomination Committee, which held two meetings:
5.
• Prof. Klaus Mangold
• Peter Long
( Chairman)
• Carmen Riu Güell
• Sir Michael Hodgkinson
(until 13 February 2018)
(from 13 February 2018)
• Alexey Mordashov
1.
2.
At its meeting on 17 October 2017, the Nomination Committee
discussed the future composition of the Supervisory Board,
representation for the shareholders on the committees and
the diversity concept for the Supervisory Board.
At its extraordinary meeting on 27 November 2017, the Nomi-
nation Committee adopted a resolution to recommend to the
2018 AGM that Dr Dietsche Zetsche be elected to TUI AG’s
Supervisory Board.
S T R AT E G Y C O M M I T T E E
The Strategy Committee was established on 9 February 2016 by
resolution of the Supervisory Board. Its task is to advise the
Executive Board in developing and implementing the corporate
strategy. The Committee met six times in the financial year under
review. Apart from Committee members, the meetings of the
Strategy Committee have been regularly attended by Dr Dieter
Zetsche since his election to TUI AG’s Supervisory Board.
The members of the Strategy Committee, which met five times, are:
• Peter Long (Chairman)
• Angelika Gifford
• Valerie Gooding
• Frank Jakobi
• Prof. Klaus Mangold
• Alexey Mordashov
1.
2.
3.
4.
At its meeting on 18 October 2017, the Committee dealt
extensively with the Group’s aviation strategy and business
development in South East Asia.
At its meeting on 11 December 2017, the Committee again
discussed the aviation strategy and business performance in
South East Asia. We also defined performance indicators as a
basis for the Group’s strategy.
On 12 February 2018 we deliberated on the airline strategy
and business development in South East Asia, which was an
overall focus of this year’s work by the Strategy Committee.
Moreover, the Strategy Committee heard a report on the sta-
tus of the online strategy in different source markets. We also
discussed relevant key indicators.
At its extraordinary meeting on 5 March 2018, the Committee
discussed the strategic importance of the acquisition of
Destination Management from Hotelbeds Group and prepared
a corresponding draft resolution for the Supervisory Board
plenary meeting.
From 8 to 12 May 2018, the Committee went on a trip to the
People’s Republic of China to explore opportunities for strategic
expansion in source market China. To that end, we engaged in
dialogue with Chinese companies to benefit from experience
and to discuss fundamental orientation with a view to strategic
partnerships.
C O R P O R AT E G O V E R N A N C E
Due to the primary quotation of the TUI AG share on the London
Stock Exchange and the constitution of the Company as a German
stock corporation, the Supervisory Board naturally grants regular
and very careful consideration to the recommendations around
German and British corporate governance. Apart from the manda-
tory observance of the rules of the German Stock Corporation Act
(AktG), German Industrial Co-Determination Act (MitbestG), the
Listing Rules and the Disclosure and Transparency Rules, TUI AG
had announced in the framework of the merger that the Company
was going to observe both the German Corporate Governance
Code (DCGK) and – as far as practicable – the UK Corporate
Governance Code (UK GCG).
For the DCGK – conceptually founded, inter alia, on the German
Stock Corporation Act – we issued an unqualified declaration of
compliance for 2018 pursuant to section 161 of the German Stock
Corporation Act, together with the Executive Board. By contrast,
there are some deviations from the UK CGC due for the most
part to the different concepts underlying a one-tier management
system for a public listed company in the UK (one-tier board) and
the two-tier management system comprised of Executive Board and
Supervisory Board in a stock corporation based on German law.
More detailed information on corporate governance, the declaration
of compliance for 2018 pursuant to section 161 of the German
Stock Corporation Act and the declaration on the UK CGC is provided
in the Corporate Governance Report in the present Annual Report,
prepared by the Executive Board and the Supervisory Board (from
page 112), as well as on TUI AG’s website.
Conflicts of interest
In the period under review, the Supervisory Board continuously
monitored for conflicts of interest and found that no conflict of
interest occurred in FY 2018.
Audit of the annual and consolidated financial
statements of TUI AG and the Group
The Supervisory Board reviewed the annual and consolidated
financial statements and the financial reporting to establish whether
they were in line with applicable requirements. Deloitte GmbH
Wirtschaftsprüfungsgesellschaft, Hanover, audited the annual
financial statements of TUI AG prepared in accordance with the
provisions of the German Commercial Code (HGB), as well as the
combined management report of TUI AG and TUI Group, and the
R E P O R T O F T H E S U P E R V I S O R Y B O A R D
21
consolidated financial statements for FY 2018 prepared in accord-
ance with the provisions of the International Financial Reporting
Standards (IFRS), and issued their unqualified audit certificate.
The above documents, the Executive Board’s proposal for the use
of the net profit available for distribution and the audit reports by
the auditors had been submitted in good time to all members of
the Supervisory Board. They were discussed in detail at the Audit
Committee meeting on 11 December 2018 and the Supervisory
Board meeting on 12 December 2018, convened to discuss the
annual financial statements, where the Executive Board provided
comprehensive explanations of these statements. At those
meetings, the Chairman of the Audit Committee and the auditors
reported on the audit findings, having determined the key audit
areas for the financial year under review beforehand with the
Audit Committee. Neither the auditors nor the Audit Committee
identified any weaknesses in the early risk detection and internal
control system. On the basis of our own review of the annual
financial statements of TUI AG and TUI Group and the combined
management report, we did not have any grounds for objections
and therefore concur with the Executive Board’s evaluation of the
situation of TUI AG and TUI Group. Upon the recommendation of
the Audit Committee, we approve the annual financial statements
for FY 2018; the annual financial statements of TUI AG are thereby
adopted. We comprehensively discussed the proposal for the
appropriation of profits with the Executive Board and approved
the proposal in the light of the current and expected future financial
position of the Group.
Composition of the Executive Board and
Supervisory Board
The composition of the Executive Board and Supervisory Board as
at 30 September 2018 is presented in the tables on pages 112 for
the Supervisory Board and page 114 for the Executive Board.
S U P E R V I S O R Y B O A R D
Upon the close of the 2018 AGM, the second Deputy Chairman of
the Supervisory Board, Sir Michael Hodgkinson, stepped down
from the Supervisory Board. At the same AGM, Dr Dieter Zetsche
was elected to serve on TUI AG’s Supervisory Board for the next
five years.
The Supervisory Board elected Peter Long as its new second
Deputy Chairman.
P R E S I D I N G C O M M I T T E E
Sir Michael Hodgkinson stepped down from the Supervisory Board
and thus also the Presiding Committee with effect from the close
of the 2018 AGM. The Supervisory Board elected Peter Long as the
fourth shareholder representative on the Presiding Committee.
N O M I N AT I O N C O M M I T T E E
Sir Michael Hodgkinson also stepped down from the Nomination
Committee from the close of the 2018 AGM. The Supervisory
Board elected Peter Long as his successor on the Nomination
Committee.
E X E C U T I V E B O A R D
At the meeting on 13 March 2018, Birgit Conix was appointed to
the Executive Board with effect from 15 July 2018 for a period of
three years.
Horst Baier stepped down from the Executive Board with effect
from the close of 30 September 2018. He is succeeded by Birgit
Conix.
Word of thanks
The Supervisory Board expressly thanks all employees of TUI
Group for their day-to-day dedication, which has again contributed
to a very successful financial year.
Hanover, 12 December 2018
On behalf of the Supervisory Board:
Prof. Klaus Mangold
Chairman of the Supervisory Board
22
A U D I T C O M M I T T E E R E P O R T
AUDIT COMMIT TEE REPORT
Dear Shareholders,
as the Audit Committee, it is our job to assist the Supervisory
Board in carrying out its monitoring function during the financial
year, particularly in relation to accounting and financial reporting
for the TUI Group, as required by legal regulations, the German
Corporate Governance Code as well as the UK Corporate Governance
Code and the Supervisory Board Terms of Reference.
In addition to these core functions, we are responsible in particular
for monitoring the effectiveness and proper functioning of internal
controls, the risk management system, the internal audit depart-
ment and the legal compliance system.
Furthermore, the Audit Committee is responsible for selecting
external auditors. The selected auditors are then required to be
put forward by the Supervisory Board to the Annual General
Meeting for appointment. Following the appointment by the Annual
General Meeting, the Supervisory Board formally commissions the
external auditors with the task of auditing the annual financial
statements and consolidated financial statements and reviewing
the half-year financial statements as well as possible additional
interim financial information, which comply with the requirements
for half-year financial statements.
The Audit Committee was elected by the Supervisory Board directly
after the annual general meeting 2016 and currently consists of
the following eight Supervisory Board members:
• Prof. Edgar Ernst ( Chairman)
• Andreas Barczewski
• Dr Dierk Hirschl
• Janis Carol Kong
• Prof. Klaus Mangold
• Coline Lucille McConville
• Michael Pönipp
• Ortwin Strubelt
The membership of the Audit Committee members corresponds
to the duration of their appointment to the Supervisory Board.
There are no personnel changes to report in the composition of
this committee since the last election.
Both the Chairman of the Audit Committee and the remaining
members of the Audit Committee are seen by the Supervisory
Board as meeting the criterion of being independent. In addition to
the Chairman of the Audit Committee, at least one other member is
required to have expertise in the field of accounting and experience
in the use of accounting principles and internal control systems.
The Audit Committee has six regular meetings a year and additional
topic-specific meetings may also be convened. These topic-specific
meetings include one meeting in which the Executive Board explains
to the Audit Committee the key content of the pre-close trading
updates published shortly before the reporting date of the annual
financial statements. The remaining meeting dates and agendas
are geared in particular towards the Group’s reporting cycle and
the agendas of the Supervisory Board.
The Chairman of the Audit Committee reports on the work of the
Audit Committee and its proposals in the Supervisory Board
meeting that follows each Audit Committee meeting.
Apart from the Audit Committee members, the meetings have
been attended by the Chairman of the Executive Board, the CFO
and depending on the topics covered the Directors Group Financial
Accounting & Reporting, Group Audit, Group Legal, Group Com-
pliance & Risk and Group Treasury & Insurance.
The external auditors have also been invited to meetings on relevant
topics. Wherever required, additional members of TUI Group senior
management and operational management have been asked to
attend Audit Committee meetings, as have external consultants.
Where it was deemed necessary to go into further detail on specific
topics or cases, the Chairman of the Audit Committee held – in
addition to Audit Committee meetings – individual meetings with
the relevant Executive Board, senior management or auditor rep-
resentatives. The Chairman of the Audit Committee reported on
the key findings and conclusions from these meetings in the next
Audit Committee meeting.
The members took part in the Audit Committee meetings as shown
in the table on page 17.
Implementation of the European General Data
Protection Regulation
Since 25 May 2018, the European General Data Protection Regu-
lation (EU GDPR) is in place. Even though we are convinced that
data protection, especially of customer data, has always been a
high-priority matter within TUI, the new EU GDPR implemented
A U D I T C O M M I T T E E R E P O R T
23
new and extended regulations that need to be taken into account.
In our meetings we regularly received reports on the status of the
implementation in the single business units.
Based upon this , we can report, that the implementation according
to the specific national regulations was finished on time and that
we are convinced that TUI took appropriate measures to comply
with the EU GDPR rules.
Moreover, we discussed the results from a tax inspection for the
Riu group, which led to additional taxes in this financial year. The
Spanish tax authorities questioned the allocation of taxable profits
to the companies involved in the sales organisation of the Riu group
in different countries. We received a report on details of this issue
and on the next steps to be taken. Additionally, we required a con-
firmation that there are no other similar organisational structures
within the Riu group.
Each quarterly reporting we asked for a report on the risks from
guarantee and advance payment mechanisms related to Group and
third-party hotels in Turkey and North Africa and on the counter-
measures being undertaken, even though the bookings showed a
noticeable recovery for these destinations in this financial year.
Besides, we gathered information about corporate transactions of
the financial year. Furthermore, we also examined TUI’s investing
activity in the following areas: Airlines, Hotels & Resorts, Cruises
and IT. We obtained explanations of the key investments within
the Group divisions and the earnings contributions from these
investments.
The Audit Committee also discussed the going concern and viability
statement analysis prepared by the company to support the
statements made in the half-year report and the ARA.
Starting with FY 2018, the management report must contain infor-
mation on corporate social responsibility (CSR). TUI started to
publish the respective information already in FY 2017. The respon-
sibility for the review of the content lies with the Supervisory
Board. The Supervisory Board decided to take support from the
Group Audit department of TUI. Accordingly, we asked Group Audit
to inform us about the findings of their evaluation during this finan-
cial year and we are convinced that the content of the CSR report
is suitable and fair.
In addition, the consistency of the reconciliation from profit before
tax to the key figure ‘underlying earnings’ and the material adjust-
ments were discussed for all quarterly reports and for the annual
financial statements.
Our evaluation of all discussed aspects of accounting and financial
reporting is in line with that of both management and the Group
auditors.
Reliability of financial reporting and monitoring of
accounting process
The Executive Board of a German stock corporation (Aktien-
gesellschaft) alone is responsible for preparing its Annual Report &
Accounts (ARA). Section 243(2) of the German Commercial Code
(HGB) requires the ARA to be clearly structured and to give a realistic
overview of the company’s financial situation. This is equivalent to
the requirement of the UK Corporate Governance Code (UK CGC)
for the ARA to be fair, balanced and understandable. Even though
the evaluation of this requirement has not been transferred to the
Audit Committee, the Executive Board is comfortable that the
submitted ARA satisfies the requirements of both legal systems.
In order to be sure ourselves of the reliability of both the annual
financial statements and interim reporting, we have requested
that the Executive Board informs us in detail about the Group’s
business performance and its financial situation. This was done in
the four Audit Committee meetings that took place directly before
the financial statements in question were published. In these
meetings, the relevant reports were discussed and the auditors
also reported in detail on key aspects of the financial statements
and on the findings of their audit or review.
In order to monitor accounting, we examined individual aspects in
great detail. In addition, the accounting treatment of key balance
sheet items were reviewed, in particular goodwill, advance payments
for tourism services and other provisions. In consultation with the
auditors, we made certain that the assumptions and estimates
underlying the balance sheet were appropriate. In addition, any
material legal disputes and key accounting issues arising from the
operating businesses were assessed by the Audit Committee.
In the period under review, we focused above all on the following
individual subjects:
As the transfer of the existing local brands to the uniform TUI
brand in the course of the ‘OneTUI’ project is completed, we asked
the management to inform us about the costs and benefits of the
project during this financial year. Based on these information we
estimate the costs as appropriate and justified by the sustainable
benefits from a uniform international brand.
24
A U D I T C O M M I T T E E R E P O R T
Effectiveness of internal controls and the risk
management system
Whistleblower systems for employees in the event of
compliance breaches
The Audit Committee recognises that a robust and effective system
of internal control is critical to achieving reliable and consistent
business performance. To fulfil its legal obligation to examine the
effectiveness of internal controls and the risk management system,
the Audit Committee is informed regularly about their current
status and also about the further development of them.
The Group has continued to evolve its internal control framework
which is underpinned by the COSO concept. Regular testing by
management of the key financial controls is now a matter of
routine in the larger businesses, and in our two largest source
markets (UK and Germany) more widespread testing of internal
controls is conducted.
Within the Group, the compliance function is further broken down
into three areas: Finance, Legal and IT. These teams play a crucial
role in improving controls across the Group and identifying areas
where more focus is required. The Group auditors also report to
us on any weaknesses they find in the internal control system of
individual Group companies, and management tracks these items
to ensure that they are addressed on a timely basis.
As stated from page 40 of the risk report, the Audit Committee
receives regular reports on the performance and effectiveness of
the risk management system. The Risk Oversight Committee is an
important management committee within the Group and we are
satisfied that there is appropriate, active management of risk
throughout the Group.
The Group Audit department ensures the independent monitoring
of implemented processes and systems as well as of core projects
and reports directly to the Audit Committee in each regular meeting.
In the period under review, the Audit Committee was not provided
with any audit findings indicating material weaknesses in internal
controls or the risk management system. As well as this, talks are
held regularly between the Chairman of the Audit Committee and
the Director of Group Audit for the purposes of closer consultation.
The audits planned by the Group Audit department for the following
year were presented to the Audit Committee in detail, discussed
and approved. The Audit Committee feels that the effectiveness of
the Group Audit department is ensured through this regular
consultation.
The legal compliance system was examined via checklists and, for
the first time, also by a self-assessment of the entities. The group-
wide, uniformly implemented system was presented to us and
we received a report about the conducted risk analysis and the
measures derived from it. In addition to the core elements of the
internal control and risk management system, the Group’s hedging
policy was part of the reporting to us during the year.
Whistleblower systems have been set up across the Group to
enable employees to draw attention to potential breaches of
compliance guidelines.
Reporting on the legal compliance system included information
about the group-wide standardisation of these whistleblower
systems and we were also shown the main findings during the
current financial year from this system.
Examination of auditor independence and objectivity
For FY 2018, the Audit Committee recommended to the Supervi-
sory Board that it proposes Deloitte GmbH Wirtschaftsprüfungs-
gesellschaft (Deloitte) to the Annual General Meeting as auditors.
Following the commissioning of Deloitte as auditors by the Annual
General Meeting in February 2018, the Supervisory Board ap-
pointed Deloitte with the task of auditing the 2018 annual financial
statements and reviewing the half-year financial statements as per
31 March 2018.
The Chairman of the Audit Committee discussed with Deloitte in
advance the audit plan for the annual financial statements as at
30 September 2018, including the key areas of focus for the audit
and the main companies to be audited from the Group’s perspective.
Based on this, the Audit Committee firmly believes that the audit
has taken into account the main financial risks to an appropriate
degree and is satisfied that the auditors are independent and
objective in how they conduct their work.
The audit fees were discussed with the auditors and we are
convinced that the amount of these costs is reasonable. Based on
the regular reporting by the auditors, we have every confidence in
the effectiveness of the external audit. Therefore, we decided to
recommend to the Supervisory Board that it propose to the Annual
General Meeting to elect Deloitte as auditors for the FY 2019 as
well. In a tender process in the FY 2016, Deloitte was selected as
auditors and continued to be auditor since the first election by the
Annual General Meeting in 2017.
In order to ensure the independence of the auditors, any non-audit
services to be performed by the auditors must be submitted to the
Audit Committee for approval before commissioning. Depending on
the amount involved, the Audit Committee makes use of the option
of delegating the approval to the company. The Audit Committee
Chairman is only involved in the decision once a specified cost limit
has been reached. Insofar as the auditor has performed services
that do not fall under the Group audit, the nature and extent of
these have been explained to the Audit Committee. This process
complies with the company’s existing guideline regarding the
A U D I T C O M M I T T E E R E P O R T
25
approval of non-audit services and it takes into account the require-
ments from the AReG regulations on prohibited non-audit services
and on limitations of the scope of non-audit services. In FY 2018,
these non-audit services accounted for 7 % of the auditor’s over-
all fee of € 9,8 million.
I would like to take this opportunity to thank the Audit Committee
members, the auditors and the management for their hard work
over the past financial year.
Hanover, 11 December 2018
Prof. Edgar Ernst
Chairman of the Audit Committee
Far away from the beaten track: the polar regions
are an unrivalled natural spectacle. TUI’s expedition vessels
offer holiday makers a voyage of the third kind.
»
R E A D M O R E A B O U T T H E W O N D E R S O F T H E A N TA R C T I C
I N O U R M A G A Z I N E A R T I C L E ‘ C U T T I N G I C E ’ .
COMBINED
MA NAGE ME NT REPORT*
28 TUI Group strategy
32 Corporate profile
32 How we do it – Group structure
35 Value-oriented Group management
40 Risk report
56
Overall assessment by the Executive Board
and report on expected developments
60 Business review
60 Macroeconomic industry and market framework
Segmental performance
Financial position of the Group
63 Group earnings
67
73 Net assets
75
82 Non-financial Declaration
100 Annual financial statements of TUI AG
103 TUI share
108
Information required under takeover law
* The present combined Management Report has been drawn up for
both the TUI Group and TUI AG. It was prepared in accordance with
sections 289, 289 (a), 315 and 315 (a) of the German Commercial Code
(HGB) and German Accounting Standards (DR S) numbers 17 and 20.
The combined Management Report also includes the
RemunerationReport, the Corporate Governance Report
and the Financial Highlights.
28
C O M B I N E D M A N A G E M E N T R E P O R T » T U I G r o Up S T r AT e G y
T UI GROUP S TR ATEGY
1 21 m Markets & Airlines customers plus a further 2 m for Cruise and from our JVs in Canada and Russia = 23 m
2 4 m customers direct and via 3rd party channels to our Hotels & Resort and Cruise brands
3 This number includes group hotels and 3rd party concept hotels as at end of F Y 2018
4 As at end of F Y 2018
5 This number relates to Markets & Airlines and All other segments
~150 TUI Aircraft, 3rd party flyingOwned/managed/JVROIC FY18: 14%Owned/JVROIC FY18: 23%3803HotelsOwn, 3rd party committed & non-committed 164Ships3rd party distribution3rd party distributionGrowth, diversification ROIC FY18: 80%5GROUP PLATFORMSOwned/JVROIC FY18: 26%115Destinations3rd party distributionCustomer, knowledge, service & fulfillmentIntegrateddistributionIntegrateddistributionIntegrateddistribution23m customers14m customers2HOLIDAY EXPERIENCES – ~70% EBITADigitalisation, efficiency, diversificationMarkets & Airlines – ~30% EBITARestOwn & Committed C O M B I N E D M A N A G E M E N T R E P O R T » T U I G r o Up S T r AT e G y
29
Strategy & Business Model
The leisure travel market has consistently outperformed world
output growth over the last decade. This market is also projected
to remain very attractive in the future. However, the traditional tour
operator and package holiday market remains highly competitive.
Online Travel Agencies have started to combine hotel and flight
offerings by providing customers with dynamic packaging. In
addition, airline operators now provide holiday accommodation as
an add-on to de-risk their own flight capacity, supported by
increasingly sourcing hotels directly. Meanwhile it is increasingly
likely that there will be new market entrants, for example in the
form of global tech companies.
Against this background, TUI has strategically moved away from the
traditional tour operator model and developed into an integrated
provider of Holiday Experiences. We have invested in our own
product offerings, enabling us to create unique holidays for our
customers, which is a key differentiation factor from our competi-
tors. A TUI customer could be inspired by TUI, and book with TUI,
and then experience a TUI flight, TUI transfer in destination, TUI
hotel / cruise and TUI activity, as part of our end to end integrated
product offering. This means our customers receive a holistic and
seamless experience, while TUI receives more accurate information
about what our customers truly want, helping our aim to further
facilitate individualised offerings. From an end to end customer
journey perspective, around 70 % of our underlying EBITA comes
from our own and committed differentiated products.
H O L I D AY E X P E R I E N C E S
TUI operates 380 hotels and 16 cruise ships globally through owner-
ship, JVs, management contracts, leases or franchise, and maintains
a strong position in the growing tours & activities market with our
150 k excursion and activity offerings. Our differentiated hotel and
club brand portfolio, our uniquely positioned German and UK
cruise brands, and our global tours, activities and services destination
business is well diversified to mitigate content cluster risks.
Details see from page 32
Our strong and in the future fully digitalised risk management tools
within distribution and purchasing, allow us to optimise occupancy
and yield. 23 m customers come through our Markets & Airlines,
including joint ventures in Canada and Russia, complemented by 4 m
customers sold either directly by Holiday Experiences, or via third
parties. An optimised and in the future fully dynamic allocation of
around 100 m bed nights and approx. € 5 bn third party hotel
beds purchasing volume globally, will further contribute to our yield
maximisation. As part of our divisional strategy, we continue to
invest into the growth and diversification of our hotel and cruise
portfolio, leading to a more seasonally robust business mix deliver-
ing superior margins. Looking ahead, building a new Southeast Asia
hotel cluster is a strategic priority. In addition we have a strong
pipeline of new ship deliveries in the coming years.
The global and pre-dominantly offline, fast growing tours and
activities market, worth over € 150 bn is highly fragmented with
over 300 k providers and therefore offers a strong growth and
consolidation opportunity for TUI Group. By acquiring the Hotelbeds
Destination Management business and the technology platform
specialist Musement, TUI has built a leading and fully digitalised
Destination Experiences business. From FY 2019 onwards we
operate in 49 countries with over 150 k excursions and activities in
destinations in our inventory for our own and third party customers.
This set up allows us to offer our 27 m customers excursions and
activities, in particular even prior to the customers’ arrival in the
destination. The trust in our brand and our strong fulfillment capa-
bilities allow us to fulfill our customers’ expectations from order
intake to payment.
30
C O M B I N E D M A N A G E M E N T R E P O R T » T U I G r o Up S T r AT e G y
Our employees
Qualified and engaged employees are a major pre-
requisite for TUI’s long-term success. We are
aiming to be an attractive employer, encouraging
our employees to engage with passion and
personality. One of the key elements of our global
HR strategy, therefore, is to attract and promote
people with talent and to retain them by offering
attractive employment conditions. In 2018, our
engagement index* is 76, one point below previous
year’s value. Our goal is to achieve a colleague
engagement score of over 80 by 2020 in order to
be among the Top 25 global companies.
At the same time, digital transformation creates
technical, cultural and organisational challenges
for our employees. However, digitalisation also
creates opportunities for personalised lifestyles
and work design. We are seeking to actively address
these requirements and the permanent change
taking place in the world of work so as to shape the
future together.
* The Engagement Index comprises the individual commitment
and the team commitment of our employees. Individual
commitment means not only overall satisfaction, but also
the willingness for recommendation, the pride to work for
a company as well as the belief in its future viability.
M A R K E T S & A I R L I N E S
TUI operates a customer centric and diversified distribution and
fulfillment business across Europe. We combine leveraging our
strong market and customer knowledge, driving customer satis-
faction and retention, with service and fulfillment. Packaging and
purchasing is increasingly driven through our digital platforms and
our own airlines, supported by third party flights, facilitate the link
between customer demand and our own, as well as third party
committed and non-committed hotel and cruise offerings.
Enhancing efficiency by harmonising these regional market organi-
sations, which include our airlines as well, is a key strategic priority.
In addition, we intend to diversify our existing market footprint
further. Through our fully digital LTE platform, we are pursuing a
low risk entry strategy, simultaneously improving our position to
yield our Holiday Experiences’ risk capacity through additional new
source market demand.
G R O U P P L AT F O R M S
Our Group platform initiatives, in particular around IT and digitalised
customer relationship management, will enable us to enhance our
Group yields further. By individualising our offerings and identifying
the next best activity for our customers, enabled by our integrated
content management and distribution business model, we enhance
customer satisfaction and drive our ancillary yields, a win-win
opportunity. As an example, our select your room initiative, allows
our customers to book their preferred and specific hotel room, which
moves our offering from room category pricing to individualised
room pricing.
It is the integrated and double diversified nature of our business,
which sets us apart from the competition. Our integrated business
model proves to be robust, offering flexibility to react to external
challenges, either in one of our Markets & Airlines or destinations.
C O M B I N E D M A N A G E M E N T R E P O R T » T U I G r o Up S T r AT e G y
31
Capital Allocation
Our environment
We will continue to operate within a clearly defined and disciplined
capital allocation framework. Our strong cash generation allows us
to invest, pay dividends and strengthen the balance sheet. Since
the merger, we have generated around € 2 bn of disposal proceeds,
which we have reinvested primarily into our higher margin, lower
seasonality and better quality Holiday Experiences business, with
a ROIC hurdle rate for growth investments of at least 15 % on av-
erage. We also invest via ring-fenced joint ventures, make use of
highly efficient asset finance and other finance instruments, as well
as more ‘asset light’ hotel management contracts, to optimise the
cash flow available to shareholders.
Finally, we have a clear financial policy to ensure balance sheet
stability, targeting a leverage ratio of 3.0 times to 2.25 times and
coverage ratio of 5.75 times to 6.75 times.
Summary
Looking ahead, we continue to expect to deliver superior annual
earnings growth with improved seasonality, strong cash conversion
and strong ROIC performance. This will be driven by benefits of
our digitalisation efforts, efficiency measures and differentiation
strategy through the disciplined expansion of own hotel and
cruise, plus destination experience content.
Please refer to the Guidance section from page 56 for further details.
For TUI Group, economic, environmental and
social sustainability is a fundamental management
principle and a cornerstone of our strategy for
continually enhancing the value of our Company.
This is the way we create the conditions for long-
term economic success and assume responsibility
for sustainable development in the tourism sector.
The goals we set ourselves in our ‘Better Holidays,
Better World‘ sustainability strategy include ‘Step
lightly’, where we aim to reduce the environmental
impact of our business operations and to fix clear,
ambitious goals for improvements in all Group areas.
Greenhouse gas emissions and the impact of
these emissions on climate change pose one of the
major global challenges for the tourism sector.
In FY 2018, TUI Group’s total emissions increased
year-on-year in absolute terms, primarily due to
the growth in Airlines & Aviation. At 66.7 g CO2 / pkm,
specific carbon emissions of our airlines were flat
year-on-year. This means that we already operate
one of Europe’s most carbon-efficient airlines and
continually seek to deliver further improvements.
Our goal: We will operate the most carbon-efficient
airlines in Europe and cut the carbon intensity of
our operations by 10 % by 2020 (baseline year 2014).
32
C O M B I N E D M A N A G E M E N T R E P O R T » C o r p o r AT e p r o f Il e
CORPOR ATE PROFILE
How we do it – Group structure
H O L I D A Y E X P E R I E N C E S
M A R K E T S & A I R L I N E S
Hotels & Resorts
Cruises
Destination Experiences
Northern Region
Central Region
Western Region
O T H E R
S E G M E N T S
TUI AG parent company
TUI AG is TUI Group’s parent company headquartered in Hanover
and Berlin. It holds direct or, via its affiliates, indirect interests in
the principal Group companies conducting the Group’s operating
business in individual countries. Overall, TUI AG’s group of consol-
idated companies comprised 285 direct and indirect subsidiaries
at the balance sheet date. A further 17 affiliated companies and
27 joint ventures were included in TUI AG’s consolidated financial
statements on the basis of at equity measurement.
E X E C U T I V E B O A R D A N D G R O U P E X E C U T I V E C O M M I T T E E
As at the balance sheet date, the Executive Board of TUI AG consist-
ed of the CEO and five other Board members.
For details on Executive Board members see page 114
A Group Executive Committee was set up in order to manage TUI
Group strategically and operationally. As at 30 September 2018,
the Committee consisted of twelve members who meet under the
chairmanship of CEO Friedrich Joussen.
For further details on principles and methods of consolidation and
TUI Group shareholdings see pages 161 and 251.
TUI Group structure
O R G A N I S AT I O N A N D M A N A G E M E N T
TUI AG is a stock corporation under German law, whose basic prin-
ciple is dual management by two boards, the Executive Board and
the Supervisory Board. The Executive and Supervisory Boards
cooperate closely in governing and monitoring the Company. The
Executive Board is responsible for the overall management of
the Company.
The appointment and removal of Board members is based on
sections 84 et seq. of the German Stock Corporation Act in com-
bination with section 31 of the German Co-Determination Act.
Amendments to the Articles of Association are effected on the
basis of the provisions of sections 179 et seq. of the German Stock
Corporation Act in combination with section 24 of TUI AG’s Articles
of Association.
Since the merger between TUI AG and TUI Travel PLC in Decem-
ber 2014, TUI Group has been a world market leader in tourism. Its
core businesses, Holiday Experiences and Markets & Airlines, are
clustered into the segments Hotels & Resorts, Cruises and Desti-
nation Experiences as well as three regions: Northern, Central and
Western Regions. TUI Group also comprises All other segments.
In FY 2018 we have adjusted our segmental reporting to reflect the
growing strategic importance of the services delivered in our des-
tinations. Destination Experiences is now reported separately in the
segmental structure, and within Holiday Experiences together with
Hotels & Resorts and Cruises. The further businesses of former
Other Tourism and All other segments have been combined into
All other segments. There are no changes to the total numbers.
The prior year’s reference figures were restated accordingly.
H O L I D AY E X P E R I E N C E S
Holiday Experiences comprises our hotel, cruise and destination
activities.
C O M B I N E D M A N A G E M E N T R E P O R T » C o r p o r AT e p r o f Il e
33
H O T E L S & R E S O R T S
The Hotels & Resorts segment comprises TUI Group’s diversified
portfolio of Group hotel brands and hotel companies. The segment
includes ownership in hotels, joint ventures with local partners,
stakes in companies giving TUI a significant influence, and hotels
operated under management contracts.
In FY 2018, Hotels & Resorts comprised a total of 330 hotels with
241,207 beds. 306 TUI Hotels & Resorts, i. e. the majority, are in
the four- or five-star category. 45 % were operated under manage-
ment contracts, 40 % were owned by one of the hotel companies,
13 % were leased and 2 % of the hotels were managed under fran-
chise agreements.
In addition there are also 50 concept hotels operated by third
party hoteliers under the TUI concept brands, TUI Sensatori, TUI
Sensimar and TUI Family Life, making a total of 380 Group hotels,
incuding third party.
Hotels & Resorts financing structure
%
Hotels & Resorts beds per region
%
2 (3)
Franchise
13 (13)
Lease
40 (39)
Ownership
(29) 29
Caribbean
(23) 22
Eastern
Mediterranean
%
8 (8)
Other
countries
19 (18)
North Africa /
Egypt
22 (22)
Western
Mediterranean
3 stars
4 stars
5 stars
Total hotels
Beds
Main sites
3
–
2
19
24
–
46
18
10
117
191
32
41
6
14
54
115
18
90
24
26
190
330
Spain, Mexico, Caribbean,
Cape Verde, Portugal, Morocco
Spain, Greece, Turkey, Austria
Cuba, Dom. Rep., Jamaica,
Mexico, Saint Lucia
Spain, Greece, Turkey, Egypt
82,638
14,403
27,016
117,150
241,207
50
11,696*
Spain, Greece, Italy
(45) 45
Management
%
In brackets: previous year
Categories of Hotels & Resorts
Hotel brand
Riu
Robinson
Blue Diamond
Other hotel companies
Total
TUI Sensatori, TUI Sensimar,
TUI Family – third party concept
hotels
* rooms
As at 30 September 2018
Riu is the largest hotel company in the portfolio of Hotels & Resorts.
The Majorca-based enterprise has a high proportion of regular
customers and stands for professionalism and excellent service.
Most of the hotels are in the premium and comfort segments and
they are predominantly located in Spain, Mexico and the Caribbean.
Robinson, the leading provider in the German-speaking premium
club holiday segment, is characterised by its professional sport,
entertainment and event portfolio. Moreover, the clubs offer high-
quality hotel amenities, excellent service and spacious architec-
ture. Most of the hotels are located in Spain, Greece, Turkey, the
Maldives and Austria. The facilities are also aspirational in terms
of promoting sustainable development and signing up to specific
environmental standards.
34
C O M B I N E D M A N A G E M E N T R E P O R T » C o r p o r AT e p r o f Il e
Blue Diamond is a fast growing resort chain in the Caribbean
with a unique approach of tailoring hotels to meet the highest
expectations. 26 Blue Diamond resorts are shown in the segment.
Other hotel companies include in particular the Group’s other core
brands TUI Blue and TUI Magic Life, as well as our exclusive hotel
concepts TUI Sensimar, TUI Sensatori and TUI Family Life. They
provide holidays in top locations in our destinations and meet high
performance, quality and environmental standards.
D E S T I N AT I O N E X P E R I E N C E S
The Destination Experiences segment delivers local services in the
worldwide holiday destinations. TUI employs people in 49 countries
to ensure these services and is among the top providers of tours,
activities and excursions in the destinations. Thanks to the acqui-
sition of the technology start-up Musement in October 2018,
TUI now has an online platform that gives small and medium-sized
companies the opportunity to offer their services in the holiday
destinations following quality checks.
C R U I S E S
The Cruises segment consists of the joint venture TUI Cruises,
Marella Cruises and Hapag-Lloyd Cruises. With their combined fleet
of 16 vessels, the three cruise lines offer different service concepts
to serve different target groups.
Cruise fleet by ownership structure
Owned
Finance
Lease
Operating
Lease
Total
6
3
3
–
2
–
–
1
1
6
6
4
TUI Cruises
(Joint Venture)
Marella Cruises
Hapag-Lloyd Cruises
As at 30 September 2018
Hamburg-based TUI Cruises is a joint venture formed in 2008
between TUI AG and the US shipping company Royal Caribbean
Cruises Ltd., in which each partner holds a 50 % stake. With six
ships so far, TUI Cruises is top-ranked in the German-speaking
premium market for cruises. The Berlitz Cruise Guide, the most
important international reference guide for cruise ship ratings, rated
Mein Schiff 3, Mein Schiff 4, Mein Schiff 5 and Mein Schiff 6 among
the world’s five best liners in the category ‘Large Ships’.
Marella Cruises, operated under the brand Thomson Cruises until
October 2017, offers voyages for different segments in the British
market with a fleet of six cruise liners.
Hapag-Lloyd Cruises is based in Hamburg, and it holds a position
of leadership in the German-language market with its fleet of four
liners in the luxury and expedition cruise segments. Its flagships
Europa and Europa 2 were again awarded the top rating – the
5-stars-plus category – by the Berlitz Cruise Guide. Its expedition
liners include Hanseatic and Bremen. Hanseatic nature and Han-
seatic inspiration will complement the luxury expedition segment
from 2019.
M A R K E T S & A I R L I N E S ( F O R M E R LY S A L E S & M A R K E T I N G )
With our three regions Northern, Central and Western Region, we
have well positioned sales and marketing structures providing more
than 23 m customers (including via our JVs in Canada and Russia)
a year with exceptional holiday experiences. Our sales activities
are based on online and offline channels that also benefit from
TUI’s strong market position. The travel agencies include Group-
owned agencies as well as joint ventures and agencies operated
by third parties. Thanks to our direct customer access, we are able
to build close relationships with our guests, and in future this will
allow us to gear their entire holiday experience even more closely to
their personal wishes and preferences, giving us a crucial advantage
over our competitors. In order to offer our customers a wide choice
of hotels, our Markets & Airlines organisations have access to the
exclusive portfolio of TUI hotels.
They also have access to third-party bed capacity, some of which
have been contractually committed. Our own flight capacity con-
tinues to play a key role in our integrated business model. A combi-
nation of owned and third-party flying capacity enables us to offer
tailor-made travel programmes for each individual source market
region and to respond flexibly to changes in customer preferences.
Thanks to the balanced management of flight and hotel capacity,
we are able to develop high-profile destinations and optimise the
margins of both service providers. In FY 2018, we continued to
deliver our internal efficiency enhancement programme at one Avi-
ation, delivering further economies of scale. In the financial year un-
der review, we continued our path towards a modern, fuel- efficient
fleet. In 2018, the first Boeing 737 Max jets were delivered. TUI
Group has ordered a total of 68 planes of this type, considered to
be the state of the art in this category of aircraft. They are sched-
uled for delivery by 2023. Overall, there are more than 150 aircraft in
the TUI fleet.
N O R T H E R N R E G I O N
The Northern Region segment comprises tour operator activities
and airlines in the UK, Ireland and the Nordics. In addition, the
Canadian strategic venture Sunwing and the joint venture TUI Russia
have been included within this segment.
C O M B I N E D M A N A G E M E N T R E P O R T » C o r p o r AT e p r o f Il e
35
C E N T R A L R E G I O N
The Central Region segment comprises the tour operator activities
and airlines in Germany and the tour operator activities in Austria,
Switzerland and Poland.
A L L O T H E R S E G M E N T S
The category ‘All other segments’ includes our business activities
for the new markets, the French airline Corsair, the corporate centre
functions of TUI AG and the interim holdings, as well as the Group’s
real estate companies.
W E S T E R N R E G I O N
The tour operator activities and airlines in Belgium, the Netherlands
and the tour operator activities in France are included within the
segment Western Region.
Research and development
As a tourism service provider, the TUI Group does not engage in
research and development activities comparable with manufacturing
companies. This sub-report is therefore not prepared.
Value-oriented Group management
Management system and key performance indicators
A standardised management system has been created to implement
value-driven management across the Group as a whole and in its
individual business segments. The value-oriented management
system is an integral part of consistent Group-wide planning and
controlling processes.
Our key financial performance indicators for the development of the
earnings position are turnover and the Group’s underlying earnings
before interest, taxes and expenses for the measurement of interest
hedges and amortisation of goodwill (underlying EBITA). EBITA
and underlying EBITA do not include measurement effects from
interest hedges. In the prior year it did not include earnings effects
from container shipping. Underlying EBITA has been adjusted
for gains on disposal of investments, restructuring expenses ac-
cording to IAS 37, all effects of purchase price allocations, ancillary
acquisition costs and conditional purchase price payments as well as
other expenses for and income from one-off items. One-off items
carried as adjustments are income and expense items impacting or
distorting the assessment of the operating profitability of the
segments and the Group due to their level and frequency. These
one-off items include in particular major restructuring and inte-
gration expenses not meeting the criteria of IAS 37, major expenses
for litigation, gains and losses from the sale of aircraft and other
material business transactions of a one-off nature.
For the development of the Group’s financial position in FY 2018, we
have identified TUI Group’s net capital expenditure and investments
and net financial position as key performance indicators.
Instead of the net financial position, we will report the Group’s
leverage ratio as the key performance indicator for its financial
position from FY 2019.
Key management variables used for regular value analysis are
Return On Invested Capital (ROIC) and Economic Value Added.
ROIC is compared with the segment-specific cost of capital.
We regard specific CO2 emissions (in g CO2 / PKM) of our aircraft
fleet as a key non-financial performance indicator.
In order to track business performance in our segments in the
course of the year, we also monitor other secondary non-financial
performance indicators, such as customer numbers in Markets &
Airlines, and capacity or passenger days, occupancy and average
prices in Hotels & Resorts and Cruises.
Information on operating performance indicators is provided in the
sections ‘Segmental performance’ on page 67 and ‘The environment’
on page 86.
36
C O M B I N E D M A N A G E M E N T R E P O R T » C o r p o r AT e p r o f Il e
Cost of capital (WACC)
Cost of capital (WACC)
%
Risk-free interest rate
Risk adjustment
Market risk premium
Beta factor1
Cost of equity after taxes
Cost of debt capital before taxes
Tax shield
Cost of debt capital after taxes
Share of equity2
Share of debt capital2
WACC after taxes
Cost of equity before taxes
Cost of debt capital before taxes
Share of equity2
Share of debt capital2
WACC before taxes
Hotels
Cruises
Markets &
Airlines3
TUI Group
2018
1.00
6.00
6.50
0.92
7.00
2.55
0.64
1.91
83.26
16.74
6.15
8.93
2.55
83.26
16.74
7.86
2018
1.00
6.48
6.50
1.00
7.48
2.55
0.05
2.50
71.58
28.42
6.06
7.60
2.55
71.58
28.42
6.16
2018
1.00
6.47
6.50
0.99
7.47
3.66
0.84
2.82
63.89
36.11
5.79
9.17
3.66
63.89
36.11
7.18
2018
1.00
5.72
6.50
0.88
6.72
3.66
0.74
2.92
62.32
37.68
5.29
8.01
3.66
62.32
37.68
6.37
1 Segment beta based on peer group, group beta based on Capital IQ data base.
2 Segment share based on peer group, group share based on Capital IQ data base.
3 Due to insufficient statistical significance of Thomas Cook Group plc and H.I.S. Co., Ltd. shown in the standard procedure of beta regression
(average of 60 monthly data points over 5 years), we have performed an alternative beta regression based on average of 104 weekly data points over two years.
The alternative beta regression shows statistical significance for all peer companies.
The cost of capital is calculated as the weighted average cost of
equity and debt capital (WACC). While the cost of equity reflects
the return expected by investors from TUI shares, the cost of debt
capital is based on the average borrowing costs of the TUI Group.
The cost of capital always shows pre-tax costs, i. e. costs before
corporate and investor taxes. The expected return determined in
this way is subjected to the same tax level as the underlying earnings
included in ROIC.
segment. Given its definition, this performance indicator is not
influenced by any tax or financial factors and has been adjusted
for one-off items. From a Group perspective, invested capital is
derived from liabilities, comprising equity (including non-controlling
interests) and the balance of interest-bearing liabilities and interest-
bearing assets and an adjustment to reflect the seasonal change in
the Group’s net financial position. The cumulative amortisations of
purchase price allocations are then added to invested capital.
ROIC and Economic Value Added
ROIC is calculated as the ratio of underlying earnings before interest,
taxes and amortisation of goodwill (underlying EBITA) to the average
invested interest-bearing capital (invested capital) for the relevant
Apart from ROIC as a relative performance indicator, Economic
Value Added is used as an absolute value-oriented performance
indicator. Economic Value Added is calculated as the product of
ROIC less associated capital costs multiplied by invested interest-
bearing capital.
C O M B I N E D M A N A G E M E N T R E P O R T » C o r p o r AT e p r o f Il e
37
Invested Capital
€ million
Equity
Subscribed capital
Capital reserves
Revenue reserves
Non-controlling interest
plus interest bearing financial liability items
Pension provisions and similar obigations
Non-current financial liabilities
Current financial liabilities
Derivative financial instruments
less financial assets
Financial assets available for sale
Derivative financial instruments
Cash and cash equivalents
Other financial assets
= Invested Capital before addition of effects from purchase price allocation
Invested Capital excluding effects from purchase price allocation prior year
Seasonal adjustment1
Ø Invested capital before addition of effects from purchase price allocation2
Invested Capital before addition of effects from purchase price allocation
plus effects from purchase price allocation
= Invested Capital
Invested Capital prior year
Seasonal adjustment1
Ø Invested Capital2
ROIC
€ million
Underlying EBITA
Ø Invested Capital2
ROIC
Weighted average cost of capital (WACC)
Value added
1 Adjustment to net debt to reflect a seasonal average cash balance
2 Average value based on balance at beginning and year-end
For TUI Group, ROIC was 23.04 %, down by 0.57 percentage points
year-on-year. With the cost of capital at 6.37 %, this yielded positive
Economic Value Added of € 829.9 m (previous year € 787.0 m).
Notes
2018
2017
(23)
(24)
(25)
(27)
(28)
(30), (36)
(30), (36)
(36)
(36)
(36)
(21), (36)
4,333.6
1,502.9
4,200.5
– 2,005.3
635.5
3,516.2
994.8
2,250.7
192.2
78.5
3,390.1
54.3
525.0
2,548.0
262.8
4,459.7
3,837.2
500.0
4,648.2
4,459.7
342.0
4,801.7
4,154.7
500.0
4,978.2
3,533.7
1,501.6
4,195.0
– 2,756.9
594.0
3,328.2
1,127.4
1,761.2
171.9
267.7
3,024.7
69.5
295.3
2,516.1
143.8
3,837.2
3,880.1
500.0
4,358.7
3,837.2
317.5
4,154.7
4,180.6
500.0
4,667.7
Notes
2018
2017
1,147.0
4,978.2
23.04
6.37
829.9
1,102.1
4,667.7
23.61
6.75
787.0
%
%
38
C O M B I N E D M A N A G E M E N T R E P O R T » C o r p o r AT e p r o f Il e
Group indicators used in the remuneration
system for the Executive Board
The cash flow to the firm used to calculate JEV was as follows in
the financial year under review:
J E V - R E L E V A N T G R O U P R E S U LT AT C O N S TA N T C U R R E N C Y
When determining the Executive Board’s annual performance-
based remuneration (JEV), the Group’s EBT (earnings before taxes)
on a constant currency basis is applied with a weighting of 50 %.
Using this indicator means that the net financial result is included
in calculations of JEV. It is adjusted for foreign exchange effects so
that actual management performance can be measured without
distortion from the impact of currency translation.
EBT on a constant currency basis was as follows in the financial
year under review:
Reconciliation EBT
€ million
Earnings before income taxes
F X effects from translation to budget rates
EBT at budget rates
2018
971.5
88.0
1,059.5
J E V - R E L E V A N T R E T U R N O N I N V E S T E D C A P I TA L ( R O I C )
The Group performance indicator ROIC is applied to JEV with a
weighting of 25 %. TUI Group’s ROIC for the calculation of JEV is
derived from the ratio of the Group’s EBITA to the average invested
interest-bearing capital for the financial year. TUI Group’s ROIC used
to calculate JEV was as follows in the financial year under review:
ROIC JEV
€ million
EBITA
Ø Invested capital excl. purchase price allocation*
ROIC JE V
%
* Average value based on balance at beginning and year-end
2018
1,060.2
4,648.4
22.81
J E V - R E L E V A N T C A S H F L O W
The third Group performance indicator included in the calculation
of JEV is the cash flow component ‘Cash flow to the firm’ with a
weighting of 25 %. For this purpose, the cash flow to the firm is
calculated using a simplified approach based on the management
cash flow calculation, which covers the liquidity parameters directly
controlled by the Executive Board (depreciation / amortisation,
working capital, income from investments and dividends, net in-
vestments) on the basis of TUI Group’s EBITA, adjusted for foreign
exchange effects.
Cash Flow to the firm
€ million
EBITA
Effect from translation to budget rates
EBITA at budget rates
Amortisation (+) / write-backs (–) of other intangible
assets and depreciation (+) / write-backs (–) of property,
plant and equipment
Delta Working Capital
Share of result of joint ventures and assoiciates
Dividends from joint ventures and assoiciates
Net capex and investments
Cash Flow to the firm
2018
1,060.2
96.9
1,157.1
438.3
66.4
– 297.7
222.7
– 827.0
759.7
Reconciliation of change in working capital according to
cash flow to the firm
€ million
30 Sep 2018
30 Sep 2017
Non-current assets
less cash and cash equivalents
less non-current liabilities
plus current financial liabilities
less current other provisions
less net tax receivables
less / plus net current derivative
financial instruments
less interest bearing receivables
plus current accrued interest
Working capital according to
balance sheet
Change in working capital acc. to
balance sheet
Exchange rate differences
Change in working capital acc.
to cash flow to the firm
4,929.7
– 2,548.0
– 6,506.8
192.2
– 348.3
– 27.6
– 376.1
– 55.5
25.6
4,317.9
– 2,516.1
– 6,152.1
171.9
– 349.9
– 33.4
1.8
– 49.2
28.6
– 4,714.8
– 4,580.5
134.3
– 67.9
66.4
U N D E R LY I N G E A R N I N G S P E R S H A R E
When determining the long-term remuneration of the Executive
Board (Long Term Incentive Plan – LTIP), the average development
of underlying earnings per share from continuing operations
(LTIP-relevant EPS) is applied with a weighting of 50 %.
C O M B I N E D M A N A G E M E N T R E P O R T » C o r p o r AT e p r o f Il e
39
The table below shows TUI Group’s underlying earnings per share.
The net interest expense used for the calculation was adjusted
for interest portions of the reversal of a provision of € 31.2 m
recognised in the financial year under review. A normalised Group
tax rate of 20 % was assumed for the calculation. An adjustment
was carried for non-controlling interests to reflect the normalised
tax rate used in determining underlying earnings per share in the
financial year under review. The calculation is based on subscribed
capital at the balance sheet date. Underlying earnings per share from
continuing operations (LTIP-relevant EPS) developed as follows
in the financial year under review:
Pro forma underlying earnings per share TUI Group
€ million
2018
2017
EBITA (underlying)
less: Net interest expense (adjusted)
Underlying profit before tax
Income taxes (20 % assumed tax rate)
Underlying Group profit
Minority interest (adjusted)
Underlying Group profit attributable
to TUI shareholders of TUI AG
Number of shares at FY end No. million
Underlying earnings per share
1,147.0
– 119.9
1,027.1
205.4
821.7
134.8
686.9
587.9
1.17
1,102.1
– 119.2
982.9
196.6
786.3
116.6
669.7
587.0
1.14
40
C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
RISK REPORT
Successful management of existing and emerging risks is critical to
the long-term success of our business and to the achievement of
our strategic objectives. In order to seize market opportunities
and leverage the potential for success, risk must be accepted to
a reasonable degree. Risk management is therefore an integral
component of the Group’s Corporate Governance.
The current financial year has seen further maturity of the risk
management system with the introduction of an aligned opera-
tional controls testing process in addition to regular testing of
key financial controls occurring across all of our larger businesses.
Further cohesion between all risk & control functions is being
implemented to support an integrated assurance process between
all of the second lines of defense departments. Our risk govern-
ance framework is set out below:
Risk Governance
TUI Group Risk Management Roles & Responsibilities
E X E C U T I V E B O A R D
Direct & Assure
• Overall responsibility for
• Approve risk policy including risk appetite
• Review the effectiveness of the
risk management
and set tone at the top
risk management system
• Determine strategic approach
• Agree how principal risks are managed,
to risk
mitigated and monitored
R I S K O V E R S I G H T C O M M I T T E E ( R O C )
Review & Communicate
• Formulate risk strategy and policy
• Discuss and propose risk appetite
• Summarise principal risks
• Ensure effective monitoring
• Report back to Executive Board
G R O U P R I S K D E PA R T M E N T
Support & Report
B U S I N E S S E S & F U N C T I O N S
Identify & Assess
• Understand key risks
• Review key risks and mitigation
• Manage and monitor risks
• Report on risk status
R I S K C H A M P I O N C O M M U N I T Y
C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
41
E X E C U T I V E B O A R D – D I R E C T & A S S U R E
With oversight by the Supervisory Board, the Executive Board
determines the strategic direction of the Group and agrees the
nature and extent of the risks it is willing to take to achieve its
strategic objectives.
To ensure that the strategic direction chosen by the business rep-
resents the best of the strategic options open to it, the Executive
Board is supported by the Group Strategy function. This function
exists to facilitate the Executive Board’s assessment of the risk
landscape and development of potential strategies by which it can
drive long-term shareholder value. On an annual basis the Group
Strategy function develops an in-depth fact base in a consistent
format which outlines the market attractiveness, competitive
position and financial performance by division and market. These
are then used to facilitate debate as to the level and type of risk
that the Executive Board finds appropriate in the pursuit of its
strategic objectives. The strategy, once fully defined, considered
and approved by the Executive Board, is then incorporated into
the Group’s three-year roadmap and helps to communicate the
risk appetite and expectations of the organisation both internally
and externally.
Ultimately, accountability for the Group’s risk management rests
with the Executive Board and therefore it has established and
maintains a risk management system to identify, assess, manage
and monitor risks which could threaten the existence of the
company or have a significant impact on the achievement of its
strategic objectives: these are referred to as the principal risks of
the Group. This risk management system includes an internally-
published risk management policy which helps to reinforce the
tone set from the top on risk, by instilling an appropriate risk culture
in the organisation whereby employees are expected to be risk
aware, control minded and ‘do the right thing’. The policy provides
a formal structure for risk management to embed it in the fabric of
the business. Each principal risk has assigned to it a member of the
Executive Committee as overall risk sponsor to ensure that there
is clarity of responsibility and to ensure that each of the principal
risks are understood fully and managed effectively.
The Executive Board regularly reports to the Audit Committee of
the Supervisory Board on the adherence to both the UK and
German listing requirements, the overall risk position of the
Group, on the individual principal risks and their management, and
on the performance and effectiveness of the risk management
system as a whole.
R I S K O V E R S I G H T C O M M I T T E E – R E V I E W & C O M M U N I C AT E
On behalf of the Executive Board, the Risk Oversight Committee
(the ROC), a subset of the Executive Committee, ensures that
business risks are identified, assessed, managed and monitored
across the businesses and functions of the Group. Meeting on at
least a quarterly basis, the ROC’s responsibilities include considering
the principal risks to the Group’s strategy and the risk appetite for
each of those risks, assessing the operational effectiveness of the
controls in place to manage those risks and any action plans to
further improve controls, as well as reviewing the bottom-up risk
reporting from the businesses themselves to assess whether there
are any heightened areas of concern.
Senior executives from the Group’s major businesses are required
to attend the ROC on a rotational basis and present on the risk and
control framework in their business, so that the members of the
ROC can ask questions on the processes in place, the risks present
in each business and any new or evolving risks which may be on
their horizon, and also to seek confirmation that an appropriate risk
culture continues to be in place in each of the major businesses.
Chaired by the Chief Financial Officer, other members of the
Committee include the CEO Aviation, the directors of Strategy,
Financial Accounting, Treasury & Insurance and Group HR. In addi-
tion to these, all of the second lines of defense functions including
Risk, Financial Control, Legal Compliance, IT Security and Health &
Safety are represented on the committee. The director of Group
Audit attends as an independent member and therefore is without
voting rights.
The ROC reports bi-annually to the Executive Board to ensure that
it is kept abreast of changes in the risk landscape and developments
in the management of principal risks, and to facilitate regular quality
discussions on risk management at the Executive Board meetings.
G R O U P R I S K D E PA R T M E N T – S U P P O R T & R E P O R T
The Executive Board has also established a Group Risk department
to ensure that the risk management system functions effectively
and that the risk management policy is implemented appropriately
across the Group. The department supports the risk management
process by providing guidance, support and challenge to manage-
ment whilst acting as the central point for coordinating, monitoring
and reporting on risk across the Group. It also supports the ROC in
fulfilling it’s duties and the reporting to both the Executive and
Supervisory Boards. Additionally, Group Risk is responsible for the
operation of the risk and control software that underpins the
Group’s risk reporting and risk management process.
B U S I N E S S E S & F U N C T I O N S – I D E N T I F Y & A S S E S S
Every business and function in the Group is required to adopt the
Group Risk Management policy. In order to do this, each either has
their own Risk Committee or includes risk as a regular agenda item
at their Board meetings to ensure that it receives the appropriate
senior management attention within their business. In addition,
the businesses each appoint a Risk Champion, who promotes the
risk management policy within their business and ensures its ef-
fective application. The Risk Champions are in close contact with
Group Risk and are critical both in ensuring that the risk manage-
ment system functions effectively, and in implementing a culture
of continuous improvement in risk management and reporting.
42
Risk Reporting
The Group Risk department applies a consistent risk reporting
methodology across the Group. This is underpinned by a risk and
control software which reinforces clarity of language, visibility of
risks, controls and actions and accountability of ownership. Although
the process of risk identification, assessment and response is con-
tinuous and embedded within the day-to-day operations of the
businesses and functions, it is consolidated, reported and reviewed
at varying levels throughout the Group on at least a quarterly basis.
Risk Identification: Management closest to the risks identify the
risks relevant to the pursuit of the strategy within their business
area in the context of four risk types:
• Longer-term strategic and emerging threats;
• Medium-term challenges associated with business change
• Short-term risks triggered by changes in the external and regu-
latory environment; and
• Short-term risks in relation to internal operations and control.
C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
A risk owner is assigned to each risk, who has the accountability and
authority for ensuring that the risk is appropriately managed.
Risk Descriptions: The nature of the risk is articulated in line with
best practice, stating the underlying concern the risk gives arise to,
identifying the possible causal factors that may result in the risk
materializing and outlining the potential consequences should the
risk crystallise. This allows the businesses, functions and the
Group to assess the interaction of risks and potential triggering
events and / or aggregated impacts before developing appropriate
mitigation strategies for causes and / or consequences.
Risk Assessment: The methodology used is to initially assess the
gross (or inherent) risk. This is essentially the worst case scenario,
being the product of the impact together with the likelihood of the
risk materializing if there are no controls in place to manage, mitigate
or monitor the risk. The key benefit of assessing the gross risk is
that it highlights the potential risk exposure if controls were to fail
completely or not be in place at all. Both impact and likelihood are
scored on a rating of 1 to 5 using the criteria shown on the right:
C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
43
Impact Assessment
I N S I G N I F I C A N T
M I N O R
M O D E R AT E
M A J O R
C ATA ST R O P H I C
Q U A N T I TAT I V E
< 3 % EBITA*
(< € 35 m)
3 – < 5 % EBITA*
( 35 – < € 60 m)
5 – < 10 % EBITA*
(60 – < € 120 m)
10 – < 15 % EBITA*
(120 – < € 180 m)
≥ 15 % EBITA*
( ≥ € 180 m)
Q U A L I TAT I V E
Minimal impact on
Limited impact on
Short term impact on
Medium term impact on Detrimental impact on
• Global reputation
• Programme delivery
• Technology reliability
• Health & Safety
• Global reputation
• Programme delivery
• Technology reliability
• Health & Safety
• Global reputation
• Programme delivery
• Technology reliability
• Health & Safety
• Global reputation
• Programme delivery
• Technology reliability
• Health & Safety
• Global reputation
• Programme delivery
• Technology reliability
• Health & Safety
standards
standards
standards
standards
standards
* Budgeted underlying EBITA for the financial year ended 30 September 2018
Likelihood Assessment
R A R E
< 10 % Chance
U N L I K E LY
10 – < 30 % Chance
P O S S I B L E
30 – < 60 % Chance
L I K E LY
60 – < 80 % Chance
A L M O ST C E R TA I N
≥ 80 % Chance
The next step in the risk reporting process is to assess and document
the controls that are currently in place to reduce the likelihood of
the risk materializing and / or its impact if it does. Consideration of
these then enables the current (or residual) risk score to be assessed,
which is essentially the reasonably foreseeable scenario. This
measures the impact and likelihood of the risk with the implemented
controls in operation. The key benefit of assessing the current risk
score is that it provides an understanding of the current level of
risk faced today and the reliance on the controls currently in place.
Risk Response: If management are comfortable with the current
risk score, the risk is accepted and no further action is required to
further reduce the risk. The controls in place continue to be operated
and management monitor the risk, the controls and the risk land-
scape to ensure that they stay in line with management’s tolerance
of the risk.
If management assesses that the current risk score is too high, an
action plan will be drawn up with the objective of introducing new
or stronger controls that will further reduce the impact and / or
likelihood of the risk to an acceptable, tolerable and justifiable level.
This is known as the target risk score and is the parameter by
which management can ensure the risk is being managed in line
with their overall risk appetite. The risk owner will normally be the
individual tasked with ensuring that this action plan is implemented
within an agreed timetable.
Each business and function will continue to review their risk register
on an ongoing basis through the mechanism appropriate for their
business e. g. local Risk Committee.
This bottom-up risk reporting is considered by the ROC alongside
the Group’s principal risks. New risks are added to the Group’s
principal risk register if deemed to be of a significant nature so
that the ongoing status and the progression of key action plans
can be managed in line with the Group’s targets and expectations.
A D H O C R I S K R E P O R T I N G
Whilst there is a formal process in place for reporting on risks on a
quarterly basis, the process of risk identification, assessment and
response is continuous and therefore if required, risks can be
reported to the Executive Board outside of the quarterly process,
should events dictate that this is necessary and appropriate.
Ideally such ad hoc reporting is performed by the business or
function which is closest to the risk, but it can be performed by the
Group Risk department if necessary.
44
C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
Principal Risk Heat Map
G
I
6
1
4
5
E
F
T
C
A
P
M
I
Ris
H
ig
k
S
c
h
o
r
e
B
6
1
C
5
2
A
D
2
3
4
H
3
L
o
Ris
w
k S
c
o
re
LIK ELIHOOD
AC TIVE R IS KS
CURR ENT
RIS K PO SI TIO N
TARGET
RISK POSITION
Integration & Restructuring Opportunities
IT Development & Strategy
1
2 Growth Strategy
3
4 Corporate & Social Responsibility
5
Information Security
Impact of Brexit
6
MONITOR ED R ISKS
CUR REN T RIS K POSI T ION
A Destination Disruptions
B Macroeconomic Risks
C Competition & Consumer Preferences
D Input Cost Volatility
E Seasonal Cash Flow Profile
F Legal & Regulatory Compliance
G Health & Safety
H Supply Chain Risk
I Joint Venture Partnerships
CURR ENT
RIS K POS IT I ON
TARG ET
RISK POSITION
This shows the current level of
risk faced today after taking in to
account the controls that are in
place and which are operating as
intended.
This shows the target level of
risk deemed to be an acceptable,
tolerable and justifiable risk pos ition
after further actions have been
implemented to mitigate the risk.
E N T I T Y S C O P I N G
A robust exercise is conducted each year to determine the specific
entities in the Group which need to be included within the risk and
control software and therefore be subject to the full rigor of the
risk reporting process. The scoping exercise starts with the enti-
ties included within the Group’s consolidation system, and applies
materiality thresholds to a combination of revenue, profit and
asset benchmarks. From the entities this identifies, the common
business management level at which those entities are managed
is identified to dictate the entities which need to be included in
the risk and control software itself to facilitate completeness of
bottom-up risk reporting across the Group. This ensures that the
risks and controls are able to be captured appropriately at the
level at which the risks are being managed.
E F F E C T I V E N E S S O F T H E R I S K M A N A G E M E N T S Y S T E M
The Executive Board regularly reports to the Audit Committee of
the Supervisory Board on the performance, effectiveness and
adherence to listing requirements of the risk management system,
supported by the ROC and the Group Risk department. Addition-
ally, the Audit Committee receives assurance from Group Audit
through its audit plan over a selection of principal risks and
business transformation initiatives most critical to the Group’s
continued success.
The conclusion from all of the above assurance work is that the
risk management system has functioned effectively throughout
the year and there have been no significant failings or weaknesses
identified. Of course there is always room for improvement, and
the Risk Champions and the Group Risk department continue to
work together to enhance the risk management and reporting pro-
cesses. Broadly this concerns ensuring consistency of approach in
assessing risk scores, clearer identification of controls currently in
place as well as any action plans to introduce further controls, and
ensuring that risk identification has considered all four risk types.
Finally, in accordance with Section 317 (4) HGB (German Commer-
cial Code), the auditor of TUI AG has reviewed the Group’s early
detection system for risks in place as required by Section 91 (2)
AktG (German Stock Corporation Act) to conclude, if the system
can fulfill its duties.
Principal Risks
The principal risks to the Group are either considered to be ‘Active’
or ‘Monitored’.
Active principal risks are those that we have to actively manage in
order to bring them into line with our overall risk appetite. We have
action plans in place to increase controls around each of these
risks and reduce the current risk score to the target level indicated
in the heat map diagram.
C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
45
Monitored principal risks are generally inherent to the tourism
sector faced by all businesses in the industry. For these, we have
controls, processes and procedures in place as a matter of course
that serve to mitigate each risk to either minimize the likelihood of
the event occurring and / or minimize the impact if it does occur.
These risks remain on our risk radar where we regularly monitor
the risk, the controls and the risk landscape to ensure that the risk
score stays stable and in line with our risk appetite in each case.
In the heat map diagram, the assessment criteria used are shown
on page 43. Note that the quantitative impact assessment is based
on the budgeted underlying EBITA for the financial year ended
30 September 2018.
for aviation to protect consumer choice with the relevant UK and
EU ministers and officials, and are in regular exchange with rele-
vant regulatory authorities. We are currently developing scenarios
and mitigating strategies for various outcomes, including a ‘hard
Brexit’, depending on the political negotiations, with a focus to
alleviate any potential impacts from Brexit for the Group. Our Brexit
Steering Committee continues to monitor external developments
and coordinates measures to be taken ahead of March 2019, when
the UK will be formally exiting the European Union. Beyond weekly
meetings an the level of different internal Brexit work-streams, the
topic is also regularly (bi-weekly / monthly) discussed in the TUI
Group Executive Committee (GEC), and the Supervisory Board has
been updated quarterly in 2018.
F Y 2018 Principal Risks
With the UK government formally triggering Article 50 of the Treaty
on European Union of Lisbon on 29th March 2017, Brexit continues
to remain an active principal risk. Brexit has an impact both on
existing principal risks (e. g. Macroeconomic and Input Cost Volatility,
particularly for the UK market through the uncertainty it has intro-
duced to prospects for future growth rates in the UK economy and
the depreciation of sterling since the referendum result in 2016) as
well as its own class of principal risk due to the direct potential
impact it could have on specific areas of our business model.
The main concern related to Brexit continues to be whether our
airlines will continue to have access to EU airspace. We will contin-
ue to address the importance of there being a special agreement
Active Principal Risks
With the EU GDPR regulation being enforced in May 2018, whereby
any data breaches may result in a significant financial penalty, the
gross score of the Information Security principal risk has increased.
Our mitigation strategy including making information security part
of everyone’s job continues to focus on managing the likelihood of
this risk materializing.
As the brand change program has been successfully implemented
in all markets, the related risk is no longer considered principal to
the Group.
If the risk detail in the subsequent tables does not suggest other-
wise, the risks shown below relate to all segments of the Group.
The risks listed are the principal risks to which we are exposed but
are not exhaustive and will evolve over time due to the dynamic
nature of our business.
Nature of Risk
Mitigating Factors
1 . I T D E V E L O P M E N T & S T R AT E G Y
Our focus is on enhancing customer experience by providing
engaging, intuitive, seamless and continuous customer service
through delivery of leading digital solutions, core platform capabil-
ities, underlying technical infrastructure and IT services required
to support the Group’s overall strategy for driving profitable top-
line growth.
• Developed and communicated (in conjunction with Executives,
Business & IT Leadership Teams) the Group’s IT Strategy which is
clearly aligned to our overall business objectives and considers
external factors such as the pace of technology change and inter-
nal factors such as the underlying quality required throughout IT.
• Continuing to implement our online platform in order to enhance
If we are ineffective in our IT strategy or technology development
this could impact on our ability to provide leading technology solu-
tions in our markets and therefore impacting on our competitive-
ness, our ability to provide a superior customer experience and
associated impact on quality and operational efficiency. This would
ultimately impact on our customer numbers, revenue and prof-
itability.
customer experience and drive higher conversion rates.
• Implementing a SAP-based central customer platform to collate
all information on our customers across their journey to provide
a single view of the customer alongside an eCRM platform
which will support strategic marketing.
• Placing increased focus on ensuring continuity plans for critical
IT systems are in place and regularly tested.
• Cascaded clear technology standards and associated delivery
roadmaps which are linked to Group wide and individual market
objectives.
• Adopting API, Big Data and Cloud architecture to drive improved
speed, productivity and efficiency.
46
C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
2 . G R O W T H S T R AT E G Y
We have set ourselves a target of achieving at least 10 % growth in
underlying EBITA CAGR (see page 57). This will be driven by growth
in our hotel and cruises content, the destination experiences sector
as well as top line and efficiency improvements.
Additionally our in-house aviation allows us to introduce extra
flexibility into our packages and to utilise our flight capacity in con-
junction with own hotel capacity to build high profile destinations.
Asset utilisation of aircraft, cruise ships and hotels is critical to our
financial success particularly when in a growth phase.
There is a risk that we could be unsuccessful in maximising oppor-
tunities to execute our expansion strategy. This could mean that
we fail to achieve some of the initiatives we have embarked upon,
which could result in us falling short against the overall growth
targets we have set for the business.
• Using Blockchain technology to manage hotel bed allocation in
all markets to be ahead of the competition.
• The Executive Board is very focussed on the strategy and mindful
of the risks, so there is strong direction and commitment from
the top. The remuneration scheme in place for the Executive
Board is designed to create incentives for the Group’s sustained
growth and robust financial performance (see from page 128).
• The Group Tourism Board plays an important role in coordinating,
executing and monitoring the various growth initiatives.
• There are a number of initiatives underway to achieve growth
which reduces the risk through diversification.
• Each of the businesses tasked with achieving an element of the
growth strategy are still required to maintain sound financial
discipline. The Group’s investment criteria and authorisation
processes must still be adhered to as we are not prepared to be
reckless in the pursuit of growth.
• We continue to maintain strong relationships with the providers
of aircraft finance.
• Monitoring the overall market conditions continues to occur
so that plans can be adapted or contingency plans invoked if
required.
3 . I N T E G R AT I O N & R E S T R U C T U R I N G O P P O R T U N I T I E S
Our key strategic rationale for the Group is to act ’as one’ wherever
it makes sense to do so particularly through our Group Platforms,
whilst maintaining local differences where the benefit of that
differentiation is greater than that of harmonisation.
• Strong project management structures exist for all of the major
restructuring, acquisition and disposal programs, which are
underway to ensure that they are managed effectively.
• Project reporting tool ensures enhanced visibility of the pro-
gress of major projects as a matter of routine.
• Regular reporting by the major projects to the Executive Board
to ensure swift resolution of any issues or to enhance coordina-
tion across the Group where required.
There are a number of restructuring projects underway across the
Group as a result to enable us to achieve these opportunities. Fur-
thermore our continuous review of our own businesses and com-
petitors means that we have an active programme of acquisitions
(e. g. the destination management companies from Hotelbeds this
year) and previously business disposals (e. g. Travelopia in F Y 2017)
with associated integration projects.
There is an inherent risk with any large restructuring or integration
programme that we face challenges in managing the complexities
associated with further integrating our business, and reducing
overlapping activities in order to develop a more lean and stream-
lined operating model.
If we are not successful in leveraging and optimizing the identified
opportunities this could have a significant impact on our ability to
deliver the identified benefits in line with expectations and enhance
shareholder value.
Nature of RiskMitigating Factors C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
47
• Developed and launched in 2015 the ’Better Holidays, Better
World’ 2020 sustainability strategy framework which includes
specific targets for key sustainability indicators.
• Established a dedicated sustainability department to work
closely with the business and other stakeholders to implement
the sustainability strategy.
• Operating one of the most carbon efficient airlines in Europe
with continued investment in new, more efficient aircraft (e. g.
Boeing 787 Dreamliner & 737 Max) and cruise ships (e. g. the
new Mein Schiff 1 & 2).
• Implemented an environmental management system with five
of our airlines having achieved ISO 14001 certification.
• Increased measures to influence accommodation suppliers to
achieve third party sustainability certification recognized by the
Global Sustainable Tourism Council (GSTC).
• TUI Care Foundation expanded to focus on the achievement of
2020 target for charitable donations and sustainability projects,
with particular emphasis empowering young people, protecting
the natural environment and maximizing the economic benefits
of tourism in destinations.
4 . C O R P O R AT E & S O C I A L R E S P O N S I B I L I T Y
For the Group, economic, environmental and social sustainability is
a fundamental management principle and a cornerstone of our
strategy for continually enhancing the value of our Company. This
is the way we create the conditions for long-term economic success
and assume responsibility for sustainable development in the
tourism sector.
Our focus is to reduce the environmental impact of our holidays
and promote responsible social policies and outcomes both directly
through our own business and indirectly via our influence over our
supply chain partners, thereby creating positive change for people
and communities and being a pioneer of sustainable tourism
across the world.
There is a risk that we are not successful in driving forecast social
and environmental improvements across our operations, that our
suppliers do not uphold our corporate and social responsibility
standards and we fail to influence destinations to manage tourism
more sustainably.
If we do not maximize our positive impact on destinations and
minimize the negative impact to the extent that our stakeholders
expect, this could result in a decline in stakeholder confidence,
reputational damage, reduction in demand for our products and
services and loss of competitive advantage.
Furthermore, if the Group falls short of achieving its sustainable
development targets and at the same time the objectives of the
UN Paris Climate Change Agreement (December 2015) are not
met, this could lead to sustained long-term damage to some of the
Group’s current and future destinations, which could also have a
material adverse effect on demand for our products and services.
Nature of RiskMitigating Factors 48
C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
5 . I N F O R M AT I O N S E C U R I T Y
Our responsibility is to protect the confidentiality, integrity and
availability of the data we have to provide to our customers,
employees, suppliers and service delivery teams.
This is a dynamic risk due to increased global cyber-crime activity
and new regulations (e. g. EU GDPR). At the same time our consol-
idation under the TUI brand and our increasing dependence on
online sales and customer care channels (web / mobile) increases
our exposure and susceptibility to cyber-attacks and hacks.
• Continued commitment from the Executive Board in support of
key initiatives to ensure all existing and future IT systems are
secure by design, that exposure to vulnerability is managed
effectively, user access is sufficiently controlled and colleagues
are made aware of information security risks through appropri-
ate training.
• Launch of a company-wide Information Security awareness
campaign to promote secure behaviors amongst our colleagues.
Overall goal is to make information security part of everyone’s
job.
If we do not ensure we have the appropriate level of security
controls in place across the Group, this could have a significant
negative impact on our key stakeholders, associated reputational
damage and potential for financial implications.
• Continuous review and testing of all external devices and ongoing
monitoring of logs in order to identify any potential threats as
and when they arise.
• Continuous improvement through lessons learned from real or
simulated cyber incidents.
6 . B R E X I T
Our main concern is whether or not all of our airlines will continue
to have access to EU airspace as now. If we were unable to continue
to fly intra-EU routes, such as from Germany to Spain, this would
have a significant operational and financial impact on the Group.
Other areas of uncertainty include the status of our UK employees
working in the EU and vice versa and the potential for customer
visa requirements for holidays from the UK to the EU.
• The Executive Board has established a Brexit Steering Committee
to monitor developments as the political negotiations take
place, assess any impacts on the Group’s business model and
coordinate suitable mitigation strategies to be taken ahead of
March 2019, when the UK will be formally exiting the European
Union.
• In addition we continue to lobby relevant UK and EU ministers,
officials and regulators to stress the continued importance of a
liberalized and deregulated aviation market across Europe to
protect consumer choice in both regions.
Nature of RiskMitigating Factors C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
49
Monitored Principal Risks
A . D E S T I N AT I O N D I S R U P T I O N
Providers of holiday and travel services are exposed to the inher-
ent risk of incidents affecting some countries or destinations
within their operations. This can include natural catastrophes such
as hurricanes or tsunamis; outbreaks of disease such as Ebola;
political volatility as has been seen in Egypt and Greece in recent
years; the implications of war in countries close to our markets and
destinations; and terrorist events such as the tragic incident in
Tunisia in 2015.
There is the risk that if such an event occurs, impacting one or
more of our destinations that we could potentially suffer signifi-
cant operational disruption and costs in our businesses. We may
possibly be required to repatriate our customers and / or the event
could lead to a significant decline in demand for holidays to the
affected destinations over an extended period of time.
B . M A C R O E C O N O M I C
Spending on travel and tourism is discretionary and price sensitive.
The economic outlook remains uncertain with different markets at
different points in the economic cycle. Furthermore, terrorist inci-
dents in markets can influence the overall demand for overseas
travel. Customers are also waiting longer to book their trips in order
to assess their financial situation.
There is the risk that fluctuations in macroeconomic conditions in
our markets will impact on the spending power of our customers,
which could impact our short-term growth rates and lead to
margin erosion.
• Whilst we are unable to prevent such events from occurring, we
have well defined crisis management procedures and emergency
response plans, which are implemented when an event of this
nature occurs, with the focus being on the welfare of our cus-
tomers.
• Where the appropriate course of action is to bring customers
home immediately, our significant fleet of aircraft allows us to
do this smoothly and efficiently.
• Our policy is to follow foreign office advice in each of our markets
with regards to non-essential travel. This serves to minimize the
exposure of our customers to turbulent regions.
• Due to our presence in all key holiday regions, when a specific
destination has been impacted by an external event, we are
able to offer alternative destinations to our customers and to
remix our destination portfolio away from the affected area in
future seasons if necessary.
• We always assume some level of destination disruption each
year when setting financial plans and targets, so that we are
able to cope with a ‘normal’ level of disruption without it jeop-
ardizing achievement of our targets.
• Many customers prioritize their spending on holidays above
other discretionary items.
• Creating unique and differentiated holiday products which
match the needs of our customers.
• Leveraging our scale to keep costs down and prices competitive.
• Having a range of markets so that we are not over exposed to
one particular economic cycle.
• Promoting the benefits of travelling with a recognized and leading
tour operator to increase customer confidence and peace of mind.
Nature of RiskMitigating Factors 50
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C . C O M P E T I T I O N & C U S TO M E R P R E F E R E N C E S
The tourism industry is fast-paced and competitive with the emer-
gence of new market participants operating new business models,
combined with customer tastes and preferences evolving all the time.
• Our outstanding market position as a leading tourism group,
the strength of our brand and our integrated business model
enables us to respond robustly to competitive threats.
In recent years there has been an emergence of successful substi-
tute business models such as web-based travel and hotel portals
which allow end users to combine the individual elements of a
holiday trip on their own and book them separately.
Customer tastes and preferences have evolved in recent years as
well, with more booking their holidays online and via mobiles and
tablets, and booking closer to the time of travel.
There is the risk that if we do not respond adequately to such
business model disruption or if our products and services fail to
meet changing customer demands and preferences, that our turn-
over, market share and profitability will suffer as a result.
• The Group is characterized by the continuous development of
unique and exclusive holiday experiences, developing new
concepts and services which match the needs and preferences
of our customers.
• Our integrated business model offers end-to-end customer
services, from consultation and booking of holidays via flights
with the Group’s own airlines through to Group-owned or oper-
ated hotels, resorts and cruise ships. Integration thus facilitates
the development and marketing of individual, tailored holiday
offerings for customers which is difficult for competitors to
replicate.
• Building strong and lasting relationships with our key hotel
partners, which further reinforces our ability to develop new
concepts exclusive to the Group.
• Focusing on being online throughout the whole of the customer
journey – from inspiration, to booking, to the holiday itself, as
well as returning and sharing experiences through social media.
D. I N P U T C O S T V O L AT I L I T Y
A significant proportion of operating expenses are in non-local
currency and / or relate to aircraft fuel which therefore exposes
the business to fluctuations in both exchange rates and fuel prices.
• Ensuring that the appropriate derivative financial instruments
are used to provide hedging cover for the underlying transactions
involving fuel and foreign currency.
There is the risk that if we do not manage adequately the volatility
of exchange rates, fuel prices and other input costs, then this could
result in increased costs and lead to margin erosion, impacting on
our ability to achieve profit targets.
There is also the risk that if our hedging policy is too rigid, we may
find ourselves unable to respond to competitive pricing pressures
during the season without it having a direct detrimental impact on
our market position and / or profitability.
Furthermore, changes in macroeconomic conditions can have an
impact on exchange rates which, particularly for the £ / € rate and
this year for the TRY / € rate, has a direct impact on the translation
of non-euro market results into euros, the reporting currency of
our Group.
• Maintaining an appropriate hedging policy to ensure that this
hedging cover is taken out ahead of the markets’ customer
booking profiles. This provides a degree of certainty over input
costs when planning pricing and capacity, whilst also allowing
some flexibility in prices so as to be able to respond to compet-
itive pressures if necessary.
• Tracking the foreign exchange and fuel markets to ensure the
most up-to-date market intelligence and the ongoing appropri-
ateness of our hedging policies.
• Expressing our key profit growth target in constant currency
terms so that short term performance can be assessed without
the distortion caused by exchange rate fluctuations.
Further information on currency and fuel hedges can be found in the
Notes to the consolidated financial statements in the financial instru-
ments section.
Nature of RiskMitigating Factors
C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
51
E . S E A S O N A L C A S H F L O W P R O F I L E
Tourism is an inherently seasonal business with the majority of
profits earned in the European summer months. Cash flows are
similarly seasonal with the cash high occurring in the summer as
advance payments and final balances are received from customers,
with the cash low occurring in the winter as liabilities have to be
settled with many suppliers after the end of the summer season.
There is the risk that if we do not adequately manage cash bal-
ances through the winter low period this could impact on the
Group’s liquidity and ability to settle liabilities as they fall due
whilst ensuring that financial covenants are maintained.
F. L E G A L & R E G U L ATO R Y C O M P L I A N C E
Most providers of holiday and travel services operate across a
number of economies and jurisdictions, which therefore exposes
them to a range of legal, tax and other regulatory laws which must
be complied with.
As we are operating from multiple source markets and providing
holidays in more than 115 destinations, we are exposed to a range
of laws and regulations with which we must comply or else risk
incurring fines or other sanctions from regulatory bodies.
• Our focus on holiday experiences is helping to reduce the
seasonality risk, as hotels, cruises and destination experiences
have a more evenly distributed profit and cash profile across
the year. This is highlighted by the fact that the Group made an
underlying operating profit for the second successive year over
the nine months to 30 June.
• As our business is spread across a number of markets, there are
some counter-cyclical features e. g. winter is a more important
season for the Nordic and Canadian markets. Some brands,
such as the UK ski brand Crystal Ski, have a different seasonality
profile which helps to counter-balance the overall profile.
• The business regularly produces both short term and long term
cash forecasts during the year, which the Treasury department
use to manage cash resources effectively.
• We have implemented a financial policy which has led to an im-
provement in our credit rating and makes it easier to maintain
financing facilities at suitable levels.
• Existing financing facilities are considered to be more than
sufficient for our requirements and provide ample headroom.
• We continue to maintain high-quality relationships with the
Group’s key financiers and monitor compliance with the cove-
nants contained within our financing facilities.
• Raising additional finance from the Capital Markets, should it be
required, remains an option.
• Communication and strong tone from the top concerning com-
pliance with laws and regulations.
• Legal Compliance Committee established to ensure appropriate
oversight, monitoring and action plans and to further drive the
compliance culture across the Group.
• Embedded legal and tax expertise in all major businesses
responsible for maintaining high quality relationships with the
relevant regulators and authorities.
• Ongoing implementation and review of Compliance Manage-
ment System conducted by the Group Legal Compliance de-
partment to monitor compliance with regulations and provide
expert advice to local teams on specific compliance areas.
Nature of RiskMitigating Factors 52
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G . H E A LT H & S A F E T Y
For all providers of holiday and travel services, ensuring the health
and safety of customers is of paramount importance. This is
especially so for us as we are one of world’s leading tourism group
selling holidays to over 27 m customers per annum.
There is the risk of accidents or incidents occurring causing
illness, injury or death to customers or colleagues whilst on a TUI
holiday. This could result in reputational damage to the business
and / or financial liabilities through legal action being taken by the
affected parties.
H . S U P P L I E R R E L I A N C E
Providers of holiday and travel services are exposed to the inher-
ent risk of failure in their key suppliers, particularly hotels. This is
further heightened by the industry convention of paying in advance
(‘prepayments’) to secure a level of room allocation for the season.
There is the risk that we do not adequately manage our financial
exposure should demand drop either for individual hotels and / or
for the destination in which the hotels are located and to which the
Group still has a level of prepayment outstanding which could result
in financial losses.
I . J O I N T V E N T U R E PA R T N E R S H I P S
It is common for tourism groups to use joint venture partnerships
in some of their operations in order to reduce the risk of new
ventures or to gain access to additional expertise. There are three
significant joint ventures within the Group – Riu, TUI Cruises and
Sunwing.
There is the risk that if we do not maintain good relations with our
key partners that the ventures’ objectives may not remain consistent
with that of the Group which could lead to operational difficulties
and jeopardize the achievement of financial targets.
• Health and safety functions are established in all businesses in
order to ensure there is appropriate focus on health and safety
processes as part of the normal course of business.
• Ongoing monitoring is conducted by the Group Security, Health &
Safety function to ensure compliance with minimum standards.
• Appropriate insurance policies are in place for when incidents
do occur.
• Owned and joint venture partner hotels form a substantial part
of our program which reduces our inherent risk in this area.
• A robust prepayment authorisation process is established
and embedded to both limit the level of prepayments made
and ensure that they are only paid to trusted, credit-worthy
counterparties.
• Where prepayments are made to external hoteliers, this is to
secure access to unique and differentiated product for which
demand is inherently higher and more resilient to external
events than for commodity product.
• Prepayments are monitored on a timely and sufficiently granular
basis to manage our financial exposure to justifiable levels.
• Good working relationships exist with all of our main joint venture
partners and they are fully aligned with and committed to the
growth strategy of the Group.
Nature of RiskMitigating Factors C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
53
Viability Statement
In accordance with provision C2.2 of the 2016 revision of the UK
Corporate Governance Code, the Executive Board has assessed
the prospect of the Company over a longer period than the twelve
months required by the ’Going Concern’ provision. The Executive
Board considers annually and on a rolling-basis a three year
strategic plan for the business, the latest was approved in Octo-
ber 2018 and covers the period to 30 September 2021. A three
year horizon is considered appropriate for a fast-moving competi-
tive environment such as tourism.
It is also noted that the Group’s current € 1,535.0 m revolving credit
limit, which expires in July 2022, is used to manage the seasonality of
the Group’s cash flows and is reviewed on a timely basis. The three
year plan considers cash flows as well as the financial covenants
which the credit facility requires compliance with.
Key assumptions underpinning the three year plan and the associ-
ated cash flow forecast is that aircraft and cruise ship finance will
continue to be readily available, and that the terms of the UK leaving
the EU are such that all of our airlines continue to have access to
EU airspace as now.
The Executive Board has conducted a robust assessment of the
principal risks facing the company, including those that would
threaten its business model, future performance, solvency or
liquidity. Sensitivity analysis is applied to the cash flow to model
the potential effects should certain principal risks actually occur,
individually or in unison. This includes modelling the effects on the
cash flow of significant disruption to a major destination in the
summer season.
Taking account of the company’s current position, principal risks
and the aforementioned sensitivity analysis, the Executive Board
has a reasonable expectation that the company will be able to
continue in operation and meet its liabilities as they fall due over
the three year period of the assessment.
Key features of the internal control and risk
management system in relation to the (Group)
accounting process (sections 289 (4) and 315 (2)
no 5 of the German Commercial Code HGB)
1 . D E F I N I T I O N A N D E L E M E N T S O F T H E I N T E R N A L
C O N T R O L A N D R I S K M A N A G E M E N T S Y S T E M I N
T H E T U I G R O U P
The TUI Group’s internal control system comprises all the principles,
processes and measures that are applied to secure effective,
efficient and accurate accounting which is compliant with the
necessary legal requirements.
The internationally recognised framework of COSO (Committee of
Sponsoring Organizations of the Treadway Commission) forms the
conceptual basis for TUI Group’s internal control system, consisting
of internal controls and the internal monitoring system. The Exec-
utive Board of TUI AG, in exercising its function of managing business
operations, has entrusted responsibility for the internal control
system in the TUI Group to specific Group functions.
The elements of the internal monitoring system in the TUI Group
comprise both measures integrated into processes and measures
performed independently. Besides manual process controls, e. g.
the ‘four-eyes principle’, another key element of the process-related
measures are automated IT process controls. Process-related
monitoring is also secured by bodies such as the Risk Oversight
Committee of TUI AG and by specific Group functions.
The Supervisory Board of TUI AG, in particular its Audit Committee,
as well as the Group Auditing department at TUI AG are incorpo-
rated into the TUI Group’s internal monitoring system through
their audit activities performed independently from business
processes. On the basis of section 107 (3) of the German Stock
Corporation Act, the Audit Committee of TUI AG deals primarily
with the auditing of the annual financial statements, monitoring
the accounting process and the effectiveness of the internal control
and risk management system. In the Audit Committee Report the
reliability of the financial reporting and the monitoring of the
financial accounting process as well as the effectiveness of the
internal control and risk management system are described.
Audit Committee Report see from page 22
The Group’s auditors have oversight of the TUI Group’s control
environment. The audit of the consolidated financial statements
by the Group auditor and the audit of the individual financial
statements of Group companies included in the consolidated
financial statements, in particular, constitute a key non-process-
related monitoring measure with regard to Group accounting.
In relation to Group accounting, the risk management system, in-
troduced as an Enterprise Risk Management System (ERM System)
as a component of the internal control system, also addresses the
risk of misstatements in Group bookkeeping and external reporting.
Apart from operational risk management, which includes the
transfer of risks to insurance companies by creating cover for
damage and liability risks and also hedging transactions to limit
foreign currency and fuel price risks, the TUI Group’s risk manage-
ment system embraces the systematic early detection, manage-
ment and monitoring of risks across the Group. A more detailed
explanation of the risk management system is provided in the
section on the Risk Governance Framework in the Risk Report.
54
C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
2 . U S E O F I T S Y S T E M S
Bookkeeping transactions are captured in the individual financial
statements of TUI AG and of the subsidiaries of TUI AG, through
local accounting systems such as SAP or Oracle. As part of the
process of preparing their individual financial statements, subsidi-
aries complete standardized reporting packages in the Group’s
Oracle Hyperion Financial Management 11.1.2.4 (HFM) reporting
system. HFM is used as the uniform reporting and consolidation
system throughout the Group so that no additional interfaces
exist for the preparation of the consolidated financial statements.
4 . K E Y R E G U L AT I O N A N D C O N T R O L A C T I V I T I E S T O
E N S U R E P R O P E R A N D R E L I A B L E ( G R O U P ) A C C O U N T I N G
The internal control measures aimed at securing proper and reliable
Group accounting ensure that business transactions are fully
recorded in a timely manner in accordance with legal requirements
and the Articles of Association. This also ensures that assets and
liabilities are properly recognised, measured and presented in the
financial statements and the consolidated financial statements. The
control operations also ensure that bookkeeping records provide
reliable and comprehensive information.
Nearly all consolidation processes used to prepare the consolidated
financial statements of TUI AG, e. g. capital consolidation, assets
and liabilities consolidation and expenses and income elimination
including at equity measurement, are generated and fully docu-
mented in HFM. All elements of TUI AG’s consolidated financial
statements, including the disclosures in the Notes, are developed
from the HFM consolidation system. HFM also provides various
modules for evaluation purposes in order to prepare complementary
information to explain TUI AG’s consolidated financial statements.
The HFM reporting and consolidation system has an in-built work-
flow process whereby when businesses promote their data within
the system, to signal that their reporting package is complete, they
are then locked out from making any further changes to that data.
This ensures data integrity within the system and also facilitates a
strong audit trail enabling changes to a reporting package to be
identified. This feature of the HFM system has been checked and
validated by the TUI AG Group Audit department on several occa-
sions since the system was introduced.
At their own discretion, TUI AG’s Group auditors select certain
individual financial statements from the financial statements
entered in the HFM reporting and consolidation system by the Group
companies, which are then reviewed for the purposes of auditing
the consolidated financial statements.
3 . S P E C I F I C R I S K S R E L AT E D T O G R O U P A C C O U N T I N G
Specific risks related to Group accounting may arise, for example,
from unusual or complex business transactions, in particular at
critical times towards the end of the financial year. Business trans-
actions not routinely processed also entail special risks. The dis-
cretion necessarily granted to employees for the recognition and
measurement of assets and liabilities may result in further Group
accounting-related risks. The outsourcing and transfer of accounting-
specific tasks to service companies may also give rise to specific risks.
Accounting-related risks from derivative financial instruments are
outlined in the Notes to the consolidated financial statements.
Controls implemented to secure proper and reliable accounting
include, for instance, analysis of facts and developments on the
basis of specific indicators. Separation of administrative, execution,
settlement and authorisation functions and the implementation of
these functions by different persons reduces the potential for
fraudulent operations. Organisational measures also aim to capture
any corporate or Groupwide restructuring or changes in sector
business operations rapidly and appropriately in Group accounting.
They also ensure, for instance, that bookkeeping transactions are
correctly recognised in the period in which they occur in the event
of changes in the IT systems used by the accounting departments of
Group companies. The internal control system likewise ensures
that changes in the TUI Group’s economic or legal environment
are mapped and that new or amended accounting standards are
correctly applied.
The TUI Group’s accounting policies together with the International
Financial Reporting Standards (IFRS) in compliance with EU
legislation, govern the uniform accounting and measurement
principles for the German and foreign companies included in TUI’s
consolidated financial statements. They include general accounting
principles and methods, policies concerning the statement of financial
position, income statement, notes, management report and cash
flow statement.
The TUI Group’s accounting policies also govern specific formal
requirements for the consolidated financial statements. Besides
defining the group of consolidated companies, they include de-
tailed guidance on the reporting of financial information by those
companies via the group reporting system HFM on a monthly,
quarterly and year end basis. TUI’s accounting policies also include,
for instance, specific instructions on the initiating, reconciling,
accounting for and settlement of transactions between group
companies or determination of the fair value of certain assets,
especially goodwill.
C O M B I N E D M A N A G E M E N T R E P O R T » rI S K r e p o r T
55
At Group level, specific controls to ensure proper and reliable Group
accounting include the analysis and, where necessary, correction
of the individual financial statements submitted by the Group
companies, taking account of the reports prepared by the auditors
and meetings to discuss the financial statements which involve
both the auditors and local management. Any further content that
requires adjusting can be isolated and processed downstream.
The control mechanisms already established in the HFM consoli-
dation system minimize the risk of processing erroneous financial
statements. Certain parameters are determined at Group level
and have to be applied by Group companies. This includes param-
eters applicable to the meas-urement of pension provisions or
other provisions and the interest rates to be applied when cash
flow models are used to calculate the fair value of certain assets.
The central implementation of impairment tests for goodwill
recognized in the financial statements secures the application of
uniform and standardized evaluation criteria.
5 . D I S C L A I M E R
With the organisational, control and monitoring structures estab-
lished by the TUI Group, the internal control and risk management
system enables company-specific facts to be captured, processed
and recognized in full and properly presented in the Group’s
accounts.
However, it lies in the very nature of the matter that discretionary
decision-making, faulty checks, criminal acts and other circum-
stances, in particular, cannot be ruled out and will restrict the effi-
ciency and reliability of the internal control and risk management
systems, so that even Group-wide application of the systems cannot
guarantee with absolute certainty the accurate, complete and timely
recording of facts in the Group’s accounts.
Any statements made relate exclusively to TUI AG and to subsidiaries
according to IFRS 10 included in TUI AG’s consolidated financial
statements.
56
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OVER ALL A SSE SSME NT BY THE
E XECU TIVE BOARD A ND REPORT
ON E XPEC TED DE VELOPME NT S
Actual business performance 2018 compared with
our forecast
Expected changes in the economic framework
Expected development of world output
Var. %
World
Eurozone
Germany
France
UK
US
Russia
Japan
China
India
2019
+ 3.7
+ 1.9
+ 1.9
+ 1.6
+ 1.5
+ 2.5
+ 1.8
+ 0.9
+ 6.2
+ 7.4
2018
+ 3.7
+ 2.0
+ 1.9
+ 1.6
+ 1.4
+ 2.9
+ 1.7
+ 1.1
+ 6.6
+ 7.3
Source: International Monetary Fund (IMF ), World Economic Outlook, October 2018
M A C R O E C O N O M I C S I T U AT I O N
The steady expansion of the world economy continued in calendar
year 2018. The International Monetary Fund expects world output
to grow by 3.7 % in 2018, flat year-on-year. For 2019, the IMF
expects the global economy to again grow by 3.7 % (IMF, World
Economic Outlook, October 2018).
M A R K E T T R E N D I N T O U R I S M
UNWTO expects international tourism to continue growing globally
during this decade. For the period from 2010 to 2020, average
weighted growth of around 3.8 % per annum has been forecast
(source: UNWTO, Tourism Highlights, 2018 edition). In the first six
months of 2018, international arrivals grew by 6.1 %. UNWTO expects
growth of 4 % to 5 % for the full calendar year 2018 (source: UNWTO,
World Tourism Barometer, October 2018).
Our business performance in FY 2018 matched our overall expec-
tations.
At year-on-year growth of 6.3% on a constant currency basis, TUI
Group’s turnover exceeded expectations. We delivered consistently
high occupancy rates and yields on a further expansion of our hotel
and cruise portfolio. At the same time, the number of customers
booking their holiday with us rose in all key source markets this
summer, despite the prolonged phase of hot weather in Northern
Europe.
In FY 2018 we delivered double-digit growth in our underlying
EBITA on a constant currency basis for the fourth consecutive time
since the merger. In the financial year under review, TUI Group’s
underlying EBITA improved by 4.1 % to € 1,147.0 m. On a constant
currency basis for the reporting period and the prior year reference
period, this equates to an improvement of 10.9 %. We have thus
outperformed the guidance we communicated for FY 2017, which
envisaged an increase in our operating result of at least 10 % on a
constant currency basis.
The one-off charges adjusted for in our underlying EBITA were
slightly higher than expected at €86.8m in the financial year under
review. Overall the Group’s EBITA thus improved by 3.3 % to
€ 1,060.2 m.
TUI Group’s ROIC decreased by 0.57 percentage points to 23.04 %
in FY 2017 while our plan assumed a slight increase. With the cost
of capital at 6.37 %, this yields positive Economic Value Added of
€ 829.9 m (previous year € 787.0 m), in line with expectations.
The Group’s net capex and financial investments remained below the
target of around € 1.2 bn at € 827.0 m. This was primarily attributable
to delays in larger hotel projects.
The net liquidity of € 123.6 m reported as at year-end 2018 devel-
oped slightly better than assumed in our most recent guidance,
which had still expected a slight net debt. This was mainly due to
the Group’s lower net capex and financial investments.
C O M B I N E D M A N A G E M E N T R E P O R T » o Ve r A l l A S S e S S M e N T B y T H e e X e C U T I Ve B o A r D A N D r e p o r T o N e X p e C Te D D e Ve l o p M e N T S
57
E F F E C T S O N T U I G R O U P
As one of world’s leading tourism group, TUI Group depends on
patterns in consumer demand in the large source markets in which
we operate with our hotel, cruise and tour operator brands. Our
budget is based on the assumptions used as a basis by the IMF to
predict the future development of the global economy.
ments. The comments on the expected development of our Group
in FY 2019 provided below are based on an assumption of constant
currencies for the completed FY 2018.
The key financial performance indicators for our earnings position in
FY 2019 are Group turnover and underlying EBITA.
Apart from trends in consumer sentiment, political stability in the
destinations is a further crucial factor affecting demand for holiday
products. In our view, our business model is sufficiently flexible to
compensate for the currently identifiable challenges.
The expected turnover growth assumed for our source markets in
our budget for FY 2019 is in line with UNWTO’s long-term forecast.
Our strategic focus is to deliver further efficiency enhancements
through the harmonisation of our three regional business segments,
which are now operated under the unified TUI brand in all three
regions.
Expected development of Group turnover and earnings
T U I G R O U P
The translation of the income statements of foreign subsidiaries in
our consolidated financial statements is based on average monthly
exchange rates. TUI Group generates a considerable proportion of
consolidated turnover and large earnings and cash flow contributions
in non-euro currencies, in particular £, $ and SEK. Taking account
of the seasonality in tourism, the value of these currencies against
the euro in the course of the year therefore strongly impacts the
financial indicators carried in TUI AG’s consolidated financial state-
Definition of underlying EBITA see Value-oriented Group management
on page 35
For a meaningful comparison at constant currency between expect-
ed earnings and our performance in the completed financial year,
the reference figure for underlying EBITA in FY 2018 has been
modified. The starting point for the forecast is the rebased under-
lying EBITA. This rebased figure was determined by the underlying
EBITA of the FY 2018 increased to account for the negative effect
of the revaluation of euro-denominated loans in Turkey amounting
to € 40 m, translated at actual exchange rates in FY 2018.
Key management variables used for regular value analysis are
Return On Invested Capital (ROIC) and Economic Value Added.
ROIC is shown against the segment-specific cost of capital.
Future development depends on demand in our source markets
and customer segments, input costs and the potential impact of
exogenous events beyond our control such as strikes, terror attacks
or natural disasters. Whilst these may influence results in the indi-
vidual segments, we believe our balanced portfolio of markets and
destinations still leaves us well placed to deliver the targets outlined
below in FY 2019.
Expected development of Group turnover and underlying EBITA
€ million
Turnover
Underlying EBITA
Adjustments
2018
19,524
1,147
87
F X
effects3
2018
rebased3
20191
40
19,524
1,187
around 3 % growth2
at least 10 % growth
approx. € 125 m costs
1 Variance year-on-year assuming constant foreign exchange rates are applied to the result in the current and prior period and based on the current group structure;
guidance relates to continuing operations. For underlying EBITA the expected growth refers to the F Y 2018 rebased number.
2 Excluding cost inflation relating to currency movements
3 Rebased to take into account € 40 m impact of revaluation of € loan balances in Turkey in F Y 2018
58
C O M B I N E D M A N A G E M E N T R E P O R T » o Ve r A l l A S S e S S M e N T B y T H e e X e C U T I Ve B o A r D A N D r e p o r T o N e X p e C Te D D e Ve l o p M e N T S
T U R N O V E R
We expect turnover to grow by around 3 % in FY 2019 on a constant
currency basis, excluding cost inflation relating to currency move-
ments.
U N D E R LY I N G E B I TA
TUI Group’s underlying EBITA in FY 2019 is expected to grow by at
least 10 % versus the rebased prior-year value at constant currency.
In order to determine the rebased previous year‘s value, the actual
value for the previous year was increased by the effect of the
revaluation of euro-denominated loans of Turkish hotel companies.
A D J U S T M E N T S
In order to deliver further business harmonisation and efficiency in
Markets & Airlines, we expect an elevated level of adjustments in
FY 2019 of approximately € 125 m.
Details on Goals and Strategies from page 28
Details on Risks in Risk Report from page 40
R O I C A N D E C O N O M I C V A L U E A D D E D
We expect ROIC to reduce slightly in FY 2019. Due to the higher
invested capital, Economic Value Added is expected to rise further,
depending on the development of TUI Group’s capital costs.
an offline business in 23 countries to a fully digitalised business in
49 countries. We are also developing our customised TUI Tours
portfolio. Taking account of the related additional expenses re-
quired to expand the digital platforms, we expect this segment to
deliver growth in underlying EBITA of more than 10 % in FY 2019.
M A R K E T S & A I R L I N E S
In our Markets & Airlines, we are focusing on the harmonisation of
business workflows, in particular for processes, overheads and avi-
ation, as well as the delivery of benefits from digitalisation. We
expect the challenging market environment to continue. Its impact
will primarily be felt in the first half of FY 2019. In FY 2019, we expect
the Markets & Airlines to deliver growth in underlying EBITA which
is broadly in line with Group guidance.
Expected development of financial position
For the development of the Group’s financial position in FY 2019, we
have defined the Group’s net capital expenditure and investments
and its leverage ratio as key performance indicators.
Expected development of Group financial position
Development in the segments in F Y 2019
H O T E L S & R E S O R T S
In the Hotels & Resorts segment, we will continue to expand our
portfolio of holiday destinations with a series of planned hotel
openings in FY 2019 and beyond. We are thus on track to have
opened around 60 additional hotels between the merger and the
end of FY 2019. Overall, we expect the segment to deliver growth
in underlying EBITA versus the rebased prior-year value at a level
below the guidance for the Group of at least 10 % for FY 2019. In
order to determine the rebased previous year’s value, the actual
value for the previous year was increased by the effect of the re-
valuation of euro-denominated loans of Turkish hotel companies.
C R U I S E S
In FY 2019, we will launch three ships for our cruise brands. Bookings
for the new ships and the existing fleet continue to perform well.
Overall, we therefore expect this segment to deliver growth in
underlying EBITA of more than 10 % in FY 2019.
D E S T I N AT I O N E X P E R I E N C E S
With the acquisition of Destination Management and Musement,
we have expanded our Destination Experiences segment from
Expected development vs. PY
F Y 2018
FY 2019
around
€ 1.0 – 1.2 bn
3.00(x) – 2.25(x)
827.0
2.7
Net capex and investments
Leverage Ratio
N E T C A P E X A N D I N V E S T M E N T S
In the light of investment decisions already taken and projects in the
pipeline, we expect TUI Group’s net capex and financial investments
to total around € 1.0 − 1.2 bn in FY 2019. This includes expected
down payments on aircraft orders (excluding aircraft assets financed
by debt or finance leases) and proceeds from the sale of fixed assets.
Capex mainly relates to the launch of new production and booking
systems for our markets, maintenance and expansion of our hotel
portfolio and the acquisition of two cruise ships.
L E V E R A G E R AT I O
For FY 2019, we are aiming to deliver a leverage ratio of 3.00(x) to
2.25(x).
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59
Sustainable development
Opportunity Report
C L I M AT E P R O T E C T I O N A N D E M I S S I O N S
We have identified specific CO2 emissions (in g CO2 / PKM) of our
aircraft fleet as a key non-financial performance indicator. These
emissions are to be reduced by 10 % by 2020. We also aim to reduce
the carbon intensity of our global operations by 10 % by 2020
(against the baseline of 2014).
Overall Executive Board assessment of TUI Group’s
current situation and expected development
At the date of preparation of the Management Report (11 Decem-
ber 2018), we uphold our positive assessment of TUI Group’s
economic situation and guidance for FY 2019. With its finance profile,
strong brand and services portfolio, TUI Group is well positioned in
the market. In the first few weeks of the new FY 2019, overall
business performance was slightly below previous year’s level and
has matched expectations.
TUI Group’s underlying EBITA is to grow by at least 10 % in FY 2019
on a constant currency basis compared with the rebased prior-year
level. In order to determine the rebased previous year‘s value, the
actual value for the previous year was increased by the effect of the
revaluation of euro-denominated loans of Turkish hotel companies.
Based on our growth strategy, we reiterate our guidance of at least
10 % CAGR in underlying EBITA for the three years to FY 2020.* Our
long-term target for TUI Group’s gross capex amounts 3.5 % of
consolidated turnover.
* Based on constant currency growth, three year CAGR from FY 2017 base to FY 2020
Guidance for TUI AG
The future business performance of TUI AG is essentially subject
to the same factors as those impacting TUI Group. Due to the
business ties between TUI AG and its Group companies, the guidance,
opportunities and risks presented for TUI Group are largely mirrored
by expectations for TUI AG. The comments made for TUI Group
therefore also apply to TUI AG.
TUI Group’s opportunity management follows the Group strategy for
core business Tourism. Responsibility for systematically identifying
and taking up opportunities rests with the operational management
of the Hotels & Resorts, Cruises and Destination Experiences
segments as well as our source markets. Market scenarios and critical
success factors for the individual sectors are analysed and assessed
in the framework of the Group-wide planning and control process.
The core task of the Group’s Executive Board is to secure profitable
growth for TUI Group by optimising the shareholding portfolio and
developing the Group structure over the long term.
Overall, TUI Group is well positioned to benefit from opportunities
resulting from the main trends in its markets.
O P P O R T U N I T I E S F R O M T H E D E V E L O P M E N T O F T H E
O V E R A L L F R A M E W O R K
Should the economy perform better than expected, TUI Group
and its segments would benefit from the resulting increase in
demand in the travel market. Moreover, changes in the competitive
environment could create opportunities for TUI Group in individual
markets.
C O R P O R AT E S T R AT E G Y
We see opportunities for further organic growth in particular by
expanding our hotel portfolio, cruise business and the offering of
our Destination Experiences segment. As market leader, we also
intend to benefit in the long term from demographic change and
the resulting expected increase in demand for high-quality travel
at an attractive price / performance ratio.
O P E R AT I O N A L O P P O R T U N I T I E S
We intend to improve our competitive position further by offering
unique product and further expanding controlled distribution in
the source markets, in particular online distribution and via mobile
devices. We also see operational opportunities arising from stronger
integration of our Destination Experiences segment and tour oper-
ation business.
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BUSINE SS RE VIE W
Macroeconomic industry and market framework
Macroeconomic development
Key exchange rates and commodity prices
World Output
Var. %
World
Eurozone
Germany
France
UK
US
Russia
Japan
China
India
Exchange rate US Dollar
$ / €
2018
+ 3.7
+ 2.0
+ 1.9
+ 1.6
+ 1.4
+ 2.9
+ 1.7
+ 1.1
+ 6.6
+ 7.3
1.30
1.20
1.10
1.00
2017
+ 3.7
+ 2.4
+ 2.5
+ 2.3
+ 1.7
+ 2.2
+ 1.5
+ 1.7
+ 6.9
+ 6.7
2016 / 17
2017 / 18
Source: International Monetary Fund (IMF), World Economic Outlook, October 2018
In calendar year 2018, the global upswing in economic activity
achieved the previous year’s level. In its outlook (IMF, World
Economic Outlook, October 2018), the International Monetary
Fund projects global growth of 3.7 % again for 2018. The outlook
had been revised downwards in the course of the year and now
reflects the growing downside risks, in particular the trade
conflicts between the world’s two largest economies, the United
States and China.
Exchange rate Sterling
£ / €
0.95
0.90
0.85
0.80
2016 / 17
2017 / 18
The exchange rate charts are presented on the basis of the indirect quotation format
customary in the foreign exchange market. If the exchange rate falls, the foreign
currency is appreciating against the euro. By contrast, if the exchange rate rises, the
foreign currency is depreciating against the euro.
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61
Oil price
Brent ($ / Barrel)
Market environment and competition in Tourism
85
75
65
55
45
2016 / 17
2017 / 18
TUI Group companies operate on a worldwide scale. This presents
financial risks for TUI Group arising from changes in exchange
rates and commodity prices. The essential financial transaction
risks from operations concern euros and US dollars. They mainly
result from foreign exchange items in the individual Group compa-
nies, for instance aircraft fuel and bunker oil invoices, ship handling
costs or products and services sourced by hotels. The parity of
sterling against the euro affects the translation of results generated
in the UK market in TUI’s consolidated financial statements.
Following the UK vote for Brexit, the currency fluctuations continued,
impacting the translation of results from our UK business.
At the beginning of the financial year under review, the exchange
rate of sterling against the euro stood at 0.88 £ / €. After slight
fluctuations in the course of the year, it returned to roughly the
same level, marking 0.89 £ / € as at 30 September 2018. At 1.16 $ / €
at year-end, the US dollar also returned to roughly the level
recorded at the beginning of the financial year, when the rate was
1.17 $ / €.
Changes in commodity prices above all affect TUI Group when pro-
curing fuels such as aircraft fuel and bunker oil. The price of Brent
oil stood at $ 82.72 per barrel as at 30 September 2018, up by
around 47.4 % year-on-year.
In Tourism, most risks relating to changes in exchange rates and
price risks from fuel sourcing are hedged by derivatives. Informa-
tion on hedging strategies and risk management as well as financial
transactions and the scope of such transactions at the balance
sheet date is provided in the sections Financial Position and Risk
Report in the Management Report and the section Financial
Instruments in the Notes to the consolidated financial statements.
Financial Position see page 75, Risk Report see page 50 and Financial
Instruments see Notes page 225
Since the merger between TUI AG and TUI Travel PLC in Decem-
ber 2014, TUI Group has been one of the world’s leading leisure
tourism business. The development of the international leisure
tourism market impacts all businesses in TUI Group.
T O U R I S M R E M A I N S A S TA B L E G R O W T H S E C T O R
According to the United Nations World Tourism Organization
(UNWTO), tourism comprises the activities of persons travelling to
and staying in places outside their usual environment for not more
than one consecutive year for leisure, business and other purposes.
The key tourism indicators to measure market size are the number
of international tourist arrivals and international tourism receipts.
In 2017, international tourism receipts amounted to $ 1,340 bn.
International arrivals grew to 1.32 bn, an increase of 7.0 %, the
strongest growth since the financial crisis in 2009. International
tourism arrivals are expected to grow by around 3.8 per cent per
annum on average between 2010 and 2020. The tourism industry
thus remains one of the most important sectors in the global
economy: in terms of tourism exports (international tourism receipts
plus passenger transport services), tourism ranks third worldwide
(UNWTO Tourism Highlights, Edition 2018).
Change of international tourist arrivals
vs. prior year
Var. %
World
Europe
Asia and the Pacific
Americas
Africa
Middle East
2018*
+ 6.1
+ 6.8
+ 7.4
+ 3.3
+ 4.0
+ 4.6
2017
+ 7.0
+ 8.4
+ 5.6
+ 4.8
+ 8.6
+ 4.6
Source: UNW TO World Tourism Barometer, October 2018
* Period January till June
In the first half of calendar year 2018, the growth trend continued,
with international tourist arrivals growing by 6.1 % worldwide
during that period. Travel for holidays, recreation and other forms
of leisure accounted for just over half of all international tourist
arrivals (UNWTO, World Tourism Barometer, October 2018).
Segmental performance see from page 67
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International tourist arrivals and receipts
WORLD
1,340
1,323
519
671
390
323
68
58
ASIA AND
THE PACIFIC
EUROPE
326
209
MIDDLE EAST
AMERIC AS
AFRICA
37
63
international tourism receipts (in bn $)
international tourist arrivals (in million)
Source: UNWTO, Tourism Highlights, Edition 2018
Europe remained the largest and most mature tourism market in
the world, accounting for 51 % of international tourist arrivals and
39 % of tourism receipts in 2017. Both indicators thus grew by 8 %.
Five European countries − France, Spain, Italy, the United Kingdom
and Germany − figured in the top ten international tourism desti-
nations in 2017. Three of our main source markets – Germany, the
UK and France – were in the top five of all source markets world-
wide measured by international tourism receipts. The source
markets display different levels of concentration. While the British
market is characterised by two main players, TUI Travel and
Thomas Cook, the German and French markets are more heavily
fragmented.
H O T E L M A R K E T
The total worldwide hotel market for business and leisure travel
was worth € 476 bn in 2017 (at constant currency). From 2017 to
2023, average annual growth (CAGR) is expected to amount to 3 %
at constant 2017 prices (Euromonitor International Travel, Octo-
ber 2018). The hotel market is divided between business and lei-
sure travel. A number of characteristics differentiate leisure travel
hotels from business hotels, including longer average lengths of
stay for guests in leisure hotels. Locations, amenities and service
requirements also differ. From a demand perspective, the leisure
hotel market in Europe is divided into several smaller submarkets
which cater to the individual needs and preferences of tourists.
These submarkets include premium, comfort, budget, family /
apartment, and club or resort-style hotels. Hotel companies may
offer a variety of hotels for different submarkets, often defined by
price range, star ratings, exclusivity, or available facilities.
The upper end of the leisure hotel market is characterised by a
high degree of sophistication and specialisation, with the assets
managed by large international companies and investors. There
are also many small, often family-run businesses, particularly in
Europe, not quite so upscale and with fewer financial resources.
Most family-owned and -operated businesses are not branded.
Given the variety of models for owning and operating leisure
hotels and the fragmented competition landscape which, at least
in Europe, is not dominated by large hotel chains, conditions differ
greatly between locations.
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63
C R U I S E M A R K E T
The global cruise industry will generate estimated revenues of
around $ 45.6 bn in 2018, an increase of 4.6 % year-on-year. The
global estimate suggests that altogether around 26 million guests
will have undertaken an ocean cruise in calendar year 2018. The
North American market (United States, Caribbean, Canada, Mexico)
is by far the largest and most mature cruise market in the world,
with approximately 14 million guests and a strong penetration rate
of 3.7 % of the total population taking a cruise in 2017.
occasional customers. At global turnover of € 150 bn and annual
growth of 7 %, the segment is one of the most attractive tourism
areas. With the acquisition of the Italian tech start-up Musement in
FY 2019 and of the Destination Management of Hotelbeds in the
FY 2018, TUI Group has strengthened its position in the excursions,
tours and activities business in the destinations. In future, the
combination of a single customer platform and cutting- edge
technology will enable the Group to present tailored offerings to
its customers both before and during their holiday.
By contrast, the European cruise markets recorded approximately
6.8 million passengers, with penetration rates varying significantly
from country to country, but considerably lower overall. Germany,
the United Kingdom & Ireland and France are among the five larg-
est cruise markets in Europe. Germany is Europe’s largest cruise
market, with 2.1 million passengers in 2018. At 2.7 %, its penetra-
tion rate was lower than in the United Kingdom & Ireland. The
United Kingdom & Ireland is the second largest cruise market in
Europe, with approximately 2.0 million cruise passengers and
Europe’s strongest penetration rate of 3.0 % in 2018. (Cruise
Market Watch Website, www.cruisemarketwatch.com/market-share,
October 2018; CLIA, Cruise Industry Ocean Source Market Report –
Australia, 2018)
D E S T I N AT I O N E X P E R I E N C E S
The market for tours and activities in the destinations remains
highly fragmented on the supplier side. More than 90 % of the
around 300,000 companies are small providers with annual reve-
nues of less than € 1 m, almost exclusively providing services to
Brand
S T R O N G T U I M A S T E R B R A N D
Our brand with the ‘smile’ – the smiling logo formed by the three
letters of our brand name TUI – stands for a consistent customer
experience, digital presence and competitive strength. The red
smile is as well known as the logo of other leading brands. In order
to further leverage the appeal and strength of our core brand and
tap the associated growth potential, we have created a global
branding and consistent brand experience in recent years. In 2018,
TUI played in the Champions League of global brands in almost all
markets. TUI is among the best-known travel brands in core Euro-
pean countries. The rollout of the TUI brand in the framework of
the local rebranding in the past few years has been very successful.
In FY 2018, the UK was the last source market to undergo rebranding
to TUI when the large local tour operator Thomson was replaced
by TUI – here, too, TUI already achieves an aided brand awareness
level of 80 %.
Group earnings
Comments on the consolidated income statement
TUI Group’s earnings position continued to show a positive devel-
opment in FY 2018. The operating result (underlying EBITA) of TUI
Group’s continuing operations improved by 4.1 % to € 1,147.0 m in
the period under review, or by 10.9 % year-on-year on a constant
currency basis. This growth was driven in particular by the continued
good operating performance in the Holiday Experiences segment.
64
C O M B I N E D M A N A G E M E N T R E P O R T » B U S I N e S S r e V I e w
Income Statement of the TUI Group
for the period from 1 Oct 2017 to 30 Sep 2018
€ million
2018
2017
Turnover
Cost of sales
Gross profit
Administrative expenses
Other income
Other expenses
Financial income
Financial expenses
Share of result of joint ventures and associates
Earnings before income taxes
Income taxes
Result from continuing operations
Result from discontinued operations
Group profit
Group profit attributable to shareholders of TUI AG
Group profit attributable to non-controlling interest
T U R N O V E R A N D C O S T O F S A L E S
Turnover
€ million
Hotels & Resorts
Cruises
Destination
Experiences
Holiday Experiences
Northern Region
Central Region
Western Region
Markets & Airlines
All other segments
TUI Group
TUI Group at constant
currency
Discontinued operations
Total
2018
606.8
901.9
303.5
1,812.2
6,854.9
6,563.7
3,577.6
16,996.2
715.5
19,523.9
19,701.5
–
19,523.9
2017
restated
679.0
815.0
202.5
1,696.5
6,601.5
6,039.5
3,502.2
16,143.2
695.3
18,535.0
18,535.0
829.0
19,364.0
Var. %
– 10.6
+ 10.7
+ 49.9
+ 6.8
+ 3.8
+ 8.7
+ 2.2
+ 5.3
+ 2.9
+ 5.3
+ 6.3
n. a.
+ 0.8
In FY 2018, turnover by TUI Group climbed by 5.3 % to € 19.5 bn.
On a constant currency basis, turnover grew by 6.3 %. Alongside a
year-on-year increase in customer numbers of 4.7 % in the source
markets, capacity increases in the Cruises segment, higher average
prices in the Hotels & Resorts segment and higher prices in the UK
contributed to the turnover growth. Turnover is presented alongside
the cost of sales, which was up 6.1 % in the period under review.
19,523.9
17,542.4
1,981.5
1,289.9
67.4
3.5
83.8
165.5
297.7
971.5
191.3
780.2
38.7
818.9
732.5
86.4
18,535.0
16,535.5
1,999.5
1,255.8
12.5
1.9
229.3
156.2
252.3
1,079.7
168.8
910.9
– 149.5
761.4
644.8
116.6
Var. %
+ 5.3
+ 6.1
– 0.9
+ 2.7
+ 439.2
+ 84.2
– 63.5
+ 6.0
+ 18.0
– 10.0
+ 13.3
– 14.3
n. a.
+ 7.6
+ 13.6
– 25.9
G R O S S P R O F I T
Gross profit, i. e. the difference between turnover and the cost of
sales, was flat year-on-year at around € 2.0 bn.
A D M I N I S T R AT I V E E X P E N S E S
Administrative expenses rose by € 34.1 m year-on-year to
€ 1,289.9 m, above all due to higher personnel and IT costs.
F I N A N C I A L R E S U LT
The financial result declined by € 154.8 m to € – 81.7 m. The de-
crease was essentially due to the profit of € 172.4 m generated in
the prior year from the disposal of the remaining stake in Hapag-
Lloyd AG.
S H A R E O F R E S U LT S O F J O I N T V E N T U R E S A N D A S S O C I AT E S
The result from joint ventures and associates comprises the pro-
portionate net profit for the year of these companies measured at
equity and where appropriate impairments of goodwill for these
companies. In the period under review, the at equity result totalled
€ 297.7 m. The significant increase of € 45.4 m mainly resulted from
a higher profit contribution by TUI Cruises.
R E S U LT F R O M C O N T I N U I N G O P E R AT I O N S
The result from continuing operations declined by € 130.7 m to
€ 780.2 m in FY 2018.
C O M B I N E D M A N A G E M E N T R E P O R T » B U S I N e S S r e V I e w
65
R E S U LT F R O M D I S C O N T I N U I N G O P E R AT I O N S
The sale of Hotelbeds Group in 2016 had included a turnover guar-
antee for the benefit of the buyer. On the basis of the turnover
generated by Hotelbeds Group with TUI Group in prior periods,
the other liability formed for the sale of Hotelbeds Group was
revalued and reduced by € 41.4 m. The other items refer to the
Specialist Group sold in FY 2017.
G R O U P P R O F I T
Group profit increased by € 57.5 m year-on-year to € 818.9 m in
FY 2018.
S H A R E I N G R O U P P R O F I T AT T R I B U TA B L E T O T U I A G
S H A R E H O L D E R S
The share in Group profit attributable to the TUI AG shareholders
increased from € 644.8 m in the prior year to € 732.5 m in FY 2018.
Alongside a sound operating performance, the increase is accounted
for by the profit share attributable to Travelopia in the prior year.
N O N - C O N T R O L L I N G I N T E R E S T S
Non-controlling interests in Group profit for the year totalled
€ 86.4 m. They mainly related to RIUSA II Group.
E A R N I N G S P E R S H A R E
The interest in Group profit for the year attributable to TUI AG
shareholders after deduction of non-controlling interests totalled
€ 732.5 m in FY 2018 (previous year € 644.8 m). Basic earnings per
share therefore amounted to € 1.25 (previous year € 1.10) in
FY 2018.
A LT E R N AT I V E P E R F O R M A N C E I N D I C AT O R S
Key indicators used to manage the TUI Group are EBITA and
underlying EBITA. EBITA comprises earnings before interest, taxes
and goodwill impairments. EBITA includes amortisation of other
intangible assets. It does not include the result from the measure-
ment of interest hedges, and in the prior year did not include
results from container shipping operations.
The table below shows the reconciliation of earnings before tax
from continuing operations to underlying EBITA.
Reconciliation to underlying earnings (continuing operations)
€ million
Earnings before income taxes
plus: Profit on sale of financial investment in Container Shipping
plus: Net Interest expense
plus: Expense from the measurement of interest hedges
EBITA
Adjustments:
less: Gain on disposals
plus: Restructuring expense
plus: Expense from purchase price allocation
plus: Expense (prior year income) from other one-off items
Underlying EBITA
2018
971.5
–
82.3
6.4
1,060.2
– 2.1
34.9
31.8
22.2
1,147.0
2017
Var. %
1,079.7
– 172.4
113.5
5.7
1,026.5
– 2.2
23.1
29.2
25.5
1,102.1
– 10.0
n. a.
– 27.5
+ 12.3
+ 3.3
+ 4.5
+ 51.1
+ 8.9
– 12.9
+ 4.1
66
C O M B I N E D M A N A G E M E N T R E P O R T » B U S I N e S S r e V I e w
The reported earnings (EBITA) of TUI Group rose by € 33.7 m to
€ 1,060.2 m due to a sound operating performance in FY 2018.
EBITA
€ million
Hotels & Resorts
Cruises
Destination
Experiences
Holiday Experiences
Northern Region
Central Region
Western Region
Markets & Airlines
All other segments
TUI Group
TUI Group at constant
currency
Discontinued operations
Total
2018
2017
restated
Var. %
425.6
324.0
43.1
792.7
221.2
72.5
85.1
378.8
– 111.3
1,060.2
1,133.4
38.7
1,098.9
353.7
255.6
32.6
641.9
309.6
67.3
79.4
456.3
– 71.7
1,026.5
1,026.5
– 22.1
1,004.4
+ 20.3
+ 26.8
+ 32.6
+ 23.5
– 28.6
+ 7.7
+ 7.2
– 17.0
– 55.4
+ 3.3
+ 10.4
n. a.
+ 9.4
In order to explain and evaluate the operating performance of the
segments, earnings adjusted for special one-off effects (under-
lying EBITA) are presented below. Underlying EBITA has been ad-
justed for gains on disposal of financial investments, restructuring
expenses according to IAS 37, all effects from purchase price allo-
cations, ancillary acquisition costs and conditional purchase price
payments and other expenses for and income from one-off items.
One-off items carried here include adjustments for income and
expense items that reflect amounts and frequencies of occurrence
rendering an evaluation of the operating profitability of the seg-
ments and the Group more difficult or causing distortions. These
items include in particular major restructuring and integration
expenses not meeting the criteria of IAS 37, material expenses for
litigation, gains and losses from the sale of aircraft and other
material business transactions with a one-off character.
TUI Group’s underlying EBITA improved by € 44.9 m to € 1,147.0 m
in FY 2018.
Underlying EBITA
€ million
Hotels & Resorts
Cruises
Destination
Experiences
Holiday Experiences
Northern Region
Central Region
Western Region
Markets & Airlines
All other segments
TUI Group
TUI Group at constant
currency
Discontinued operations
Total
2018
2017
restated
Var. %
425.7
324.0
44.7
794.4
254.1
89.1
109.3
452.5
– 99.9
1,147.0
1,221.7
–
1,147.0
356.5
255.6
35.1
647.2
345.8
71.5
109.2
526.5
– 71.6
1,102.1
1,102.1
– 1.2
1,100.9
+ 19.4
+ 26.8
+ 27.4
+ 22.7
– 26.5
+ 24.6
+ 0.1
– 14.1
– 39.5
+ 4.1
+ 10.9
n. a.
+ 4.2
In FY 2018, adjustments worth € 12.5 m were carried for the reduc-
tion in pension obligations in the UK and the sale of aircraft assets.
On the other hand, expenses of € 31.8 m were incurred for purchase
price allocations, and other underlying expenses amounted to
€ 67.5 m. They mainly related to the following items and circum-
stances:
G A I N S O N D I S P O S A L
In FY 2018, gains on disposal of financial assets worth € 2 m had to
be adjusted for. They related in particular to the measurement of
a stake in the framework of the takeover of Destination Management
from Hotelbeds Group.
R E S T R U C T U R I N G C O S T S
In FY 2018, restructuring costs of € 35 m had to be adjusted for.
They included an amount of around € 13 m for the realignment of the
aviation business in the Nordics. Adjustments also included expenses
worth around € 9 m for restructurings at TUI fly in Germany and
around € 10 m for the integration of Transat in France.
E X P E N S E S F O R P U R C H A S E P R I C E A L L O C AT I O N S
Expenses for purchase price allocations related in particular to
scheduled amortisation of intangible assets from acquisitions
made in previous years.
O N E - O F F I T E M S
Net expenses for one-off items of € 22 m included in particular an
amount of € 6 m relating to IT projects in Northern and Western
Regions. Further expenses worth € 15 m related to reorganisation
schemes in regions and destination agencies.
C O M B I N E D M A N A G E M E N T R E P O R T » B U S I N e S S r e V I e w
67
O T H E R S E G M E N T I N D I C AT O R S
Reconciliation to EBITDAR (continuing operations)
€ million
2018
2017
Var. %
EBITA
Amortisation (+) / write-backs (–) of other intangible assets and
depreciation (+) / write-backs (–) of property, plant and equipment
EBITDA
Long-term rental, leasing and leasing expenses
EBITDAR
EBITDA and underlying EBITDA
1,060.2
1,026.5
438.3
1,498.5
721.4
2,219.9
464.4
1,490.9
750.0
2,240.9
+ 3.3
– 5.6
+ 0.5
– 3.8
– 0.9
€ million
Hotels & Resorts
Cruises
Destination Experiences
Holiday Experiences
Northern Region
Central Region
Western Region
Markets & Airlines
All other segments
TUI Group
Discontinued operations
Total
EBITDA
Underlying EBITDA*
2018
2017
restated
Var. %
2018
2017
restated
Var. %
524.3
398.3
52.1
974.7
281.7
95.3
107.8
484.8
39.0
1,498.5
38.7
1,537.2
484.5
312.9
40.4
837.8
378.6
87.6
102.0
568.2
84.9
1,490.9
– 22.1
1,468.8
+ 8.2
+ 27.3
+ 29.0
+ 16.3
– 25.6
+ 8.8
+ 5.7
– 14.7
– 54.1
+ 0.5
n. a.
+ 4.7
524.5
398.3
53.6
976.4
302.8
109.8
127.6
540.2
47.3
1,563.9
–
1,563.9
485.2
312.9
42.9
841.0
402.7
89.8
126.8
619.3
81.4
1,541.7
– 1.2
1,540.5
+ 8.1
+ 27.3
+ 24.9
+ 16.1
– 24.8
+ 22.3
+ 0.6
– 12.8
– 41.9
+ 1.4
n. a.
+ 1.5
* Adjustments according to reconciliation from page 65, excluding amortisation and write-backs.
Segmental performance
Outlook
In FY 2018 we delivered the fourth consecutive year of double
digit growth of underlying EBITA at constant currency rates since
the merger, with a continued strong ROIC performance. TUI’s
sustained strong performance in a challenging market environment
demonstrates its successful transformation as an integrated
provider of holiday experiences, with strong strategic positioning
and diversification across destinations and markets. Looking ahead,
we expect growth to continue the benefits of our digitalisation
efforts, efficiency measures and differentiation strategy through
the disciplined expansion of our own hotel, cruise and destination
experience content.
In Hotels & Resorts, our diversified portfolio means we will continue
to benefit from growth in demand for Turkey and North Africa,
with a normalisation in demand for Spain, including the Canaries.
Demand also remains strong for our year round destinations such as
Mexico and Cape Verde. We will continue to develop our portfolio
of destinations, with a strong pipeline of own hotel openings for
FY 2019 and beyond, and we remain on track to open approximately
60 additional hotels since merger by the end of FY 2019.
We will also launch three ships for our cruise brands in FY 2019.
Bookings for the new ships and the existing fleet are progressing
well, with a continued strong yield performance. Two ships exited
our fleets (Marella Spirit and Hapag-Lloyd Cruises’ Hanseatic) in
Autumn 2018. Five further new builds are on order for TUI Cruises
68
C O M B I N E D M A N A G E M E N T R E P O R T » B U S I N e S S r e V I e w
and Hapag-Lloyd Cruises, for delivery between FY 2020 and FY 2026,
as we continue to build on our leadership position in the German-
speaking cruise market.
Holiday Experiences
Holiday Experiences
We are re-shaping our Destination Experiences business based on
the recent acquisitions of Destination Management and Musement,
from an off-line to fully digitalised business in 49 countries. We are
also developing our tailored TUI Tours offer. In order to achieve
these strategic goals, some additional investment into the digital
platform (as operating cost) will be required in FY 2019.
€ million
2018
2017
Var. %
Turnover
Underlying EBITA
Underlying EBITA at
constant currency
1,812.2
794.4
1,696.5
647.2
+ 6.8
+ 22.7
866.0
647.2
+ 33.8
In Markets & Airlines, we are focussed on delivering business
harmonisation, especially in terms of business processes, overheads
and aviation, and the benefits of digitalisation. We expect the
challenging market environment to continue, and that this will
be evident in our Q1 / Q2 FY 2019 results. This reinforces the
importance of TUI’s transformation away from the traditional
tour operator space, to become an integrated provider of holiday
experiences, and which helps to mitigate continued market
challenges. Currently Winter 2018 / 19 bookings are down 1 % and
average selling prices are down 2 % versus prior year, with 60 % of
the programme sold, 2 percentage points behind prior year*. As
outlined above, the programme to North Africa and Turkey has
been expanded, offset by a reduction in the programme to the
Canaries. Flight capacity from Nordics has been proactively reduced,
with the planned closure of three airport bases as we continue to
drive efficiency in our airlines, and also following the prolonged hot
weather this Summer which has continued to subdue demand. We
have also reduced our flight capacity from Germany, as we continue
to improve our flight plan efficiency following the bankruptcies of
Air Berlin and Niki. Bookings for next Summer 2019 are at a very
early stage. Only the UK is more than 20 % booked, and at this
stage bookings are up 5 % with average selling price down 1 %.
* These statistics are up to 2 December 2018, shown on a constant currency basis
and relate to all customers whether risk or non-risk
Disclosures on outlook are regularly published on TUI’s website in
the framework of TUI Group’s quarterly reporting.
See www.tuigroup.com/en-en/investors
Hotels & Resorts
€ million
Total turnover
Turnover
Underlying EBITA
Underlying EBITA at
constant currency
Capacity hotels total1
in ’000
Riu
Robinson
Blue Diamond
Occupancy rate hotels
total2 in %,
variance in % points
Riu
Robinson
Blue Diamond
Average revenue per
bed hotels total3 in €
Riu
Robinson
Blue Diamond
2018
1,389.7
606.8
425.7
2017
restated
1,366.2
679.0
356.5
Var. %
+ 1.7
– 10.6
+ 19.4
494.5
356.5
+ 38.7
39,428
17,503
3,095
3,638
39,163
17,942
3,115
2,859
83
89
71
80
65
64
93
127
79
90
66
83
63
64
91
112
+ 0.7
– 2.4
– 0.6
+ 27.3
+ 4
– 1
+ 5
– 3
+ 2.0
+ 0.2
+ 2.6
+ 12.8
Turnover measures include fully consolidated companies, all other KPIs incl.
companies measured at equity.
1 Group owned or leased hotel beds multiplied by opening days per quarter
2 Occupied beds divided by capacity
3 Arrangement revenue divided by occupied beds
4 Previous year’s total capacity now includes Blue Diamond
• Our leading leisure hotel and club brands delivered another strong
performance in FY 2018, with € 138 m increase in underlying
EBITA at constant currency (including € 43 m net gains on hotel
disposals by Riu). Occupancy rate increased to 83 % and average
rate per bed by 2 %. ROIC increased for the fourth successive
year to 14.5 % (versus Hotels & Resorts WACC of 7.86 %),
demonstrating the attractiveness of our portfolio of hotel and
club brands across multiple destinations, the benefit of having
high levels of our own distribution, and our disciplined approach
to investment.
C O M B I N E D M A N A G E M E N T R E P O R T » B U S I N e S S r e V I e w
• The underlying EBITA result at FY 2018 exchange rates includes
an adverse foreign exchange impact of € 69 m, € 40 m of which
is the non-cash impact from the revaluation of Euro loan balances
within Turkish hotel entities, as a result of the weaker Turkish Lira.
• The Hotels & Resorts portfolio strategy continued to pay off in
FY 2018. The increase in earnings was driven by a rebalance in
demand for Turkey and North Africa, as well as strong demand
for Greece and continued high demand for the Caribbean. Spain
remains one of our key destinations, but with more normal levels
of demand following a couple of years of very high performance.
• The industry-leading occupancy rate demonstrates the strength
and popularity of our portfolio of brands and destinations, as
well as the success of the integrated model with a significant
proportion of rooms distributed directly by us, either through
our Markets or by the hotels themselves.
• We continued to deliver our growth strategy in Hotels & Resorts,
having opened a total of 44 new hotels since merger. Hotels
and clubs were opened in Zanzibar, Mexico, Maldives, Thailand,
Dominican Republic, Tunisia, Egypt, Greece and Cyprus. We also
continued to streamline our portfolio, with several repositionings
and the disposal of properties by Riu generating € 43 m net
gain on disposal.
• Our key brands continued to perform very well. Riu delivered
another strong earnings and ROIC performance in FY 2018, with
a very high occupancy rate of 89 % and sustained average rate
per bed, as well as the benefit of the disposal gains outlined
above. Robinson delivered growth in earnings, with improved
performance in its Turkish and North African hotels partly offset
by the planned closure of certain clubs for renovation. Blue
Diamond earnings increased as a result of hotel openings in the
Caribbean, with a continued high level of occupancy despite
these new openings.
• Underlying EBITA at constant currency in our other hotel brands
grew significantly, driven by a stronger performance in our
Turkish and North African hotels.
Cruises
€ million
Turnover1
Underlying EBITA
Underlying EBITA at
constant currency
Occupany in %,
variance in % points
TUI Cruises
Marella Cruises2
Hapag-Lloyd Cruises
Passenger days in ’000
TUI Cruises
Marella Cruises2
Hapag-Lloyd Cruises
Average daily rates3 in €
TUI Cruises
Marella Cruises2, 4 in £
Hapag-Lloyd Cruises
2018
901.9
324.0
324.6
100.8
100.9
78.3
5,194
2,953
352
178
141
615
2017
815.0
255.6
255.6
101.9
101.7
76.7
4,483
2,720
349
173
131
594
69
Var. %
+ 10.7
+ 26.8
+ 27.0
– 1.1
– 0.8
+ 1.6
+ 15.9
+ 8.6
+ 0.9
+ 2.9
+ 7.6
+ 3.5
1 No turnover is carried for TUI Cruises as the joint venture is consolidated at equity
2 Rebranded from Thomson Cruises in October 2017.
3 Per day and passenger
4 Inclusive of transfers, flights and hotels due to the integrated nature of
Marella Cruises.
• Our leading German and UK cruise brands delivered another year
of strong growth in FY 2018, with € 69 m growth in underlying
EBITA at constant currency. This was driven by new ship launches
in Germany and UK, with continued high occupancy and average
daily rates across the fleets. Overall, the segment delivered a
record ROIC performance of 22.8 % (versus Cruises WACC of
6.16 %), reflecting the return on equity in the high-performing TUI
Cruises as well as strong performances by our Marella Cruises
and Hapag- Lloyd Cruises subsidiaries.
• TUI Cruises (our joint venture with Royal Caribbean in the German
speaking market) benefitted from the first Winter 2017 / 18 of
operations for Mein Schiff 6 and launched the New Mein
Schiff 1 in May 2018. The fleet also benefitted from fewer dry
dock days in FY 2018. Average daily rate increased versus prior
year, driven by the sustained growth in demand for cruise in
Germany (which remains a market with relatively low rates of
cruise penetration), and in particular high demand for our
German language, premium all-inclusive product.
• Marella Cruises (our UK cruise brand) delivered the first Winter
of operations for the Marella Discovery 2 and launched Marella
Explorer (previously Mein Schiff 1 in TUI Cruises) in May. The
older style Marella Majesty exited the fleet in October 2017.
Average daily rate increased versus prior year, as we continue to
deliver our modernisation programme and expansion in line
with the UK cruise market.
70
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• Hapag-Lloyd Cruises (our luxury and expedition brand) delivered
a strong performance and an increase in earnings, with increased
occupancy and average daily rate and a good operational perfor-
mance offsetting the higher number of dry dock days.
Destination Experiences
€ million
Total turnover
Turnover
Underlying EBITA
Underlying EBITA at
constant currency
2018
594.1
303.5
44.7
46.9
2017
444.8
202.5
35.1
Var. %
+ 33.6
+ 49.9
+ 27.4
35.1
+ 33.6
• Our tours, activities and service provider in destination delivered
a significant increase in underlying EBITA in FY 2018. This
was driven by higher customer volumes in Turkey, Greece and
North Africa, efficiencies in Spain, Portugal and Greece, and
the inclusion of earnings of Destination Management following
completion of the acquisition from Hotelbeds in August 2018.
• Excluding the acquisition of Destination Management, underlying
EBITA at constant currency grew by 20 % in FY 2018.
• The acquisition of technology start-up Musement, a leading
online platform for tours and activities in destination, was also
completed in October 2018. Together with the Destination
Management acquisition, this will enable us to grow our Desti-
nation Experiences as a fully digitalised provider with destination
product offerings in 49 countries.
Markets & Airlines (formerly Sales & Marketing)
Markets & Airlines
€ million
2018
2017
Var. %
Turnover
Underlying EBITA
Underlying EBITA at
constant currency
Net Promoter Score
(NPS)1 in %,
variance in % points
Direct distribution2 in %,
variance in % points
Online distribution3 in %,
variance in % points
Customers in ’000
16,996.2
452.5
16,143.2
526.5
449.8
526.5
50
74
50
73
48
21,127
46
20,183
+ 5.3
– 14.1
– 14.6
–
+ 1
+ 2
+ 4.7
1 NPS is measured in customer satisfaction questionnaires completed post-holiday.
It is based on the question ‘On a scale of 0 to 10 where 10 is extremely likely
and 0 ist not at all likely, how likely is it that you would recommend the brand to
a friend, colleague or relative?” and is calculated by taking the percentage of
promoters (9s and 10s) less the percentage of detractors (0s through 6s).
2 Share of sales via own channels (retail and online)
3 Share of online sales
• Markets & Airlines are leaders in packaged distribution and
fulfillment, leveraging their strong market and customer knowl-
edge. Against a backdrop of significant and unforseen external
challenges – namely, the Summer heatwave and airline disrup-
tion – several of our major source markets delivered significant
growth in earnings, offset by currency inflation in the UK. Overall
Markets & Airlines delivered 4.7 % increase in customer volumes
with another year of increased direct and online distribution. Net
promoter scores remain high at 50, demonstrating the strength
of our customer offer and focus on their holiday experience.
• We are focused on delivering further efficiency improvements
through the harmonisation of our three regional businesses, as
well as the benefits of digitalisation. Having successfully delivered
the TUI rebranding in all of Markets & Airlines, we now have one
leadership covering all regions, and have identified further
potential for harmonisation in business processes and overheads.
In addition, we will continue to expand the synergies from One
Aviation.
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71
Northern Region
Central Region
€ million
2018
2017
Var. %
€ million
2018
2017
Var. %
Turnover
Underlying EBITA
Underlying EBITA at
constant currency
Direct distribution1 in %,
variance in % points
Online distribution2 in %,
variance in % points
Customers in ’000
6,854.9
254.1
6,601.5
345.8
+ 3.8
– 26.5
251.1
345.8
– 27.4
93
66
7,566
92
63
7,389
+ 1
+ 3
+ 2.4
Turnover
Underlying EBITA
Underlying EBITA at
constant currency
Direct distribution1 in %,
variance in % points
Online distribution2 in %,
variance in % points
Customers in ’000
6,563.7
89.1
6,039.5
71.5
89.4
50
22
7,707
71.5
49
19
7,151
+ 8.7
+ 24.6
+ 25.0
+ 1
+ 3
+ 7.8
1 Share of sales via own channels (retails and online)
2 Share of online sales
1 Share of sales via own channels (retails and online)
2 Share of online sales
Northern Region comprises UK, Nordics and joint ventures in
Canada and Russia.
Central Region comprises Germany and Austria (operated as one
source market), Switzerland and Poland.
• In the UK, the TUI rebrand was delivered successfully in FY 2018,
as well as another year of growth in revenues and customer
volumes (up 2.3 %). Despite a further increase in average selling
price, margins reduced as a result of currency inflation due to
the weaker Pound Sterling. In addition, the Summer heatwave
and French air traffic control strikes had a negative impact on
margin. Going forward, the UK is well positioned as a clear market
leader for package holidays, with a high net promoter score for its
unique holidays, high level of direct and online distribution, and
strong degree of business efficiency and integration.
• Nordics delivered an increase in revenues, customer volumes
(up 2.6 %) and earnings in FY 2018, driven by a strong Winter
performance. Summer trading started well, however the pro-
longed heatwave led to an adverse impact on yield and customer
volumes, resulting in a more subdued performance in the second
half of the year. At the end of the year, as part of the drive for
greater efficiency in aviation, the business announced plans to
move short-haul air operations to external airlines at three bases
in Scandanavia.
• Underlying EBITA at constant currency rates in Canada increased
in FY 2018 as the business continues to deliver growth, with high
levels of sales of Group hotels such as Blue Diamond and Riu. In
Russia, TUI’s equity participation was reduced in FY 2019 to 10 %.
• Germany and Austria delivered 2.9 % increase in customer
volumes in FY 2018, driven in particular by strong demand for
Turkey, North Africa and Greece. We delivered good progress on
our strategy of increasing the proportion of holidays sold direct
and online, to 50 % and 22 % respectively. The result also bene-
fitted from the non-repeat of last year’s sickness event in TUI fly
which was largely offset by the impact of the Niki bankruptcy this
year. However, as seen in our other source markets, the strong
demand in Winter and at the start of the Summer become more
subdued as a result of the heatwave. In addition, there was a
significant increase in capacity on leisure routes this Summer
due to aircraft redeployment following the Air Berlin bankruptcy
which impacted margins, especially to Spain.
• Switzerland and Poland continued to deliver good performances,
with an increase in customer volumes and earnings.
• The Central Region result has been impacted over the past two
years by the insolvencies of Air Berlin and Niki, to whom TUI fly
(our German airline) wet leased a number of aircraft. As a result,
earnings were adversely impacted in FY 2017 and FY 2018.
Following the insolvencies, TUI fly took back some of the aircraft
and crew (previously operated under wet lease to Air Berlin and
Niki), with the remainder being wet leased out under a new
(albeit less profitable) agreement.
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Western Region
€ million
2018
2017
Var. %
Turnover
Underlying EBITA
Underlying EBITA at
constant currency
Direct distribution1 in %,
variance in % points
Online distribution2 in %,
variance in % points
Customers in ’000
3,577.6
109.3
3,502.2
109.2
109.3
109.2
73
55
5,854
71
54
5,643
1 Share of sales via own channels (retails and online)
2 Share of online sales
+ 2.2
+ 0.1
+ 0.1
+ 2
+ 1
+ 3.7
Western Region comprises Belgium, Netherlands and France.
• Our market leaders in Belgium and Netherlands continued to
grow customer volumes, by 6.8 % in total, with good margins
overall and increasing levels of direct and online distribution.
Similar to other markets, there was a relatively high level of
airline disruption during the early Summer.
• France’s performance was disappointing in FY 2018. The trading
environment was very difficult, particularly as a result of the
Summer heatwave which impacted on demand, due to the large
number of domestic alternatives and overcapacity in the market.
The result has benefitted from the delivery of further cost
synergies from the Transat integration, however, this was not
enough to offset the challenging trading environment. In addition,
further investment was required to launch the TUI brand in the
French market at the start of the year.
All other segments
All other segments
€ million
Turnover
Underlying EBITA
Underlying EBITA at
constant currency
2018
715.5
– 99.9
– 94.1
2017
restated
695.3
– 71.6
Var. %
+ 2.9
– 39.5
– 71.6
– 31.4
This segment comprises the business operations for new markets,
the scheduled French airline Corsair, and the central corporate
functions and interim holdings of TUI Group and the Group’s real
estate companies. The increase in operating loss was driven by
Corsair, partly as the result of a planned airline maintenance
event at the start of the year, and partly due to an aircraft towing
incident in Q4.
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73
Net assets
Development of the Group’s asset structure
Development of the Group’s non-current assets
€ million
30 Sep 2018
30 Sep 2017
Var. %
Structure of the Group’s non-current assets
9,918.6
9,067.0
+ 9.4
€ million
30 Sep 2018
30 Sep 2017
Var. %
Fixed assets
Non-current
receivables
Non-current assets
Inventories
Current receivables
Cash and cash
equivalents
Assets held for sale
Current assets
Assets
Equity
Liabilities
Equity and liabilities
763.5
10,682.1
118.5
2,257.7
2,548.0
5.5
4,929.7
15,611.8
4,333.6
11,278.2
15,611.8
800.6
9,867.6
110.2
1,682.0
2,516.1
9.6
4,317.9
14,185.5
3,533.7
10,651.8
14,185.5
– 4.6
+ 8.3
+ 7.5
+ 34.2
+ 1.3
– 42.7
+ 14.2
+ 10.1
+ 22.6
+ 5.9
+ 10.1
The Group’s balance sheet total increased by 10.1 % as against
30 September 2017 to € 15.6 bn.
Vertical structural indicators
Non-current assets accounted for 68.4 % of total assets, compared
with 69.6 % in the previous year. The capitalisation ratio (ratio of
fixed assets to total assets) decreased from 63.9 % to 63.5 %.
Current assets accounted for 31.6 % of total assets, compared with
30.4 % in the previous year. The Group’s cash and cash equivalents
increased by € 31.9 m year-on-year to € 2,548.0 m. They thus ac-
counted for 16.3 % of total assets, as against 17.7 % in the previous
year.
Horizontal structural indicators
At the balance sheet date, the ratio of equity to non-current as-
sets was 40.6 %, as against 35.8 % in the previous year. The ratio of
equity to fixed assets was 43.7 % (previous year 39.0 %). The ratio
of equity plus non-current financial liabilities to fixed assets was
66.4 %, compared with 58.4 % in the previous year.
Goodwill
2,958.6
2,889.5
Other intangible
assets
Property, plant and
equipment
Companies measured
at equity
Financial assets
available for sale
Fixed assets
Receivables and
assets
Deferred tax claims
Non-current receivables
Non-current assets
+ 2.4
+ 4.0
569.9
548.1
4,899.2
4,253.7
+ 15.2
1,436.6
1,306.2
+ 10.0
54.3
9,918.6
537.8
225.7
763.5
10,682.1
69.5
9,067.0
476.9
323.7
800.6
9,867.6
– 21.9
+ 9.4
+ 12.8
– 30.3
– 4.6
+ 8.3
G O O D W I L L
Goodwill rose by € 69.1 m to € 2,958.6 m. The increase in the carrying
amount is essentially due to the acquisition of the Destination
Management business. An opposite effect was driven by the trans-
lation of goodwill not managed in TUI Group’s functional currency
into euros. In the period under review, no adjustments were required
as a result of impairment tests.
P R O P E R T Y, P L A N T A N D E Q U I P M E N T
Property, plant and equipment increased to € 4,899.2 m in the fi-
nancial year under review, primarily driven by the acquisition of
the cruise ship Marella Explorer, investments in hotel facilities,
down payments on aircraft orders and the delivery of aircraft.
Property, plant and equipment also comprised leased assets in
which Group companies held economic ownership. At the balance
sheet date, these finance leases had a carrying amount of
€ 1,290.2 m, up 11.4 % year-on-year.
74
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Development of property, plant and equipment
€ million
30 Sep 2018
30 Sep 2017
Var. %
Real estate with hotels
Other land
Aircraft
Ships
Machinery and fixtures
Assets under
construction, payments
on accounts
Total
1,262.8
194.1
1,415.1
995.2
407.9
1,040.8
165.1
1,207.2
860.1
361.2
624.1
4,899.2
619.3
4,253.7
+ 21.3
+ 17.6
+ 17.2
+ 15.7
+ 12.9
+ 0.8
+ 15.2
C O M PA N I E S M E A S U R E D AT E Q U I T Y
Seventeen associated companies and 27 joint ventures were
measured at equity. At € 1,436.6 m, their value increased by 10.0 %
year-on-year as at the balance sheet date.
Development of the Group’s current assets
Structure of the Group’s current assets
€ million
30 Sep 2018
30 Sep 2017
Var. %
Inventories
Trade accounts
receivable and
other assets*
Current tax assets
Current receivables
Cash and cash
equivalents
Assets held for sale
Current assets
118.5
110.2
+ 7.5
2,143.9
113.8
2,257.7
2,548.0
5.5
4,929.7
1,583.3
98.7
1,682.0
2,516.1
9.6
4,317.9
+ 35.4
+ 15.3
+ 34.2
+ 1.3
– 42.7
+ 14.2
* incl. receivables from derivative financial instruments and touristic prepayments
C U R R E N T R E C E I V A B L E S
Current receivables comprise trade accounts receivable and other
receivables, current income tax assets and claims from derivative
financial instruments. At € 2,257.7 m, current receivables increased
by 34.2 % year-on-year.
C A S H A N D C A S H E Q U I V A L E N T S
At € 2,548.0 m, cash and cash equivalents increased by 1.3 % year-
on-year.
Unrecognised assets
In the course of their business operations, Group companies used
assets of which they were not the economic owner according to
the IASB rules. Most of these assets were aircraft, hotel complexes
or ships for which operating leases, i. e. rental, lease or charter
agreements, were concluded at terms and conditions customary in
the sector.
Operating rental, lease and charter contracts
€ million
30 Sep 2018
30 Sep 2017
Var. %
Aircraft
Hotel complexes
Travel agencies
Administrative buildings
Ships, Yachts and
motor boats
Other
Total
1,547.1
675.2
212.3
244.0
1.0
131.3
2,810.9
1,461.1
728.4
217.1
233.8
29.2
107.8
2,777.4
+ 5.9
– 7.3
– 2.2
+ 4.4
– 96.6
+ 21.8
+ 1.2
Further explanations as well as the structure of the remaining
terms of the financial liabilities from operating rental, lease and
charter agreements are provided in the section Other financial lia-
bilities in the Notes to the consolidated financial statements.
Information on other intangible, unrecognised assets in terms of
brands, customer and supplier relationships and organisational
and process benefits is provided in the section TUI Group Corpo-
rate Profile; relationships with investors and capital markets are
outlined in the section TUI Share.
TUI Group Corporate Profile see page 32; TUI Share from page 103
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75
Financial position of the Group
Principles and goals of financial management
P R I N C I P L E S
TUI Group’s financial management is centrally operated by TUI AG,
which acts as the Group’s internal bank. Financial management
covers all Group companies in which TUI AG directly or indirectly
holds an interest of more than 50 %. It is based on policies covering
all cash flow-oriented aspects of the Group’s business activities. In
the framework of a cross-national division of tasks within the organ-
isation, TUI AG has outsourced some of its operational financial
activities to First Choice Holidays Finance Ltd, a British Group
company. However, these financial activities are carried out on a
coordinated and centralised basis.
G O A L S
TUI’s financial management goals include ensuring sufficient
liquidity for TUI AG and its subsidiaries and limiting financial risks
from fluctuations in currencies, commodity prices and interest
rates as well as default risk of treasury activities.
L I Q U I D I T Y S A F E G U A R D S
The Group’s liquidity safeguards consist of two components:
• In the course of the annual Group planning process, TUI draws
up a multi-annual finance budget, from which long-term financ-
ing and refinancing requirements are derived. This information
and financial market observation to identify refinancing oppor-
tunities create a basis for decision-making, enabling appropriate
financing instruments for the long-term funding of the Company
to be adopted at an early stage.
• TUI uses syndicated credit facilities and bilateral bank loans as
well as its liquid funds to secure sufficient short-term cash
reserves. Through intra-Group cash pooling, the cash surpluses
of individual Group companies are used to finance the cash
requirements of other Group companies. Planning of bank
transactions is based on a monthly rolling liquidity planning
system.
L I M I T I N G F I N A N C I A L R I S K S
The Group companies operate on a worldwide scale. This gives rise
to financial risks for TUI Group, mainly from changes in exchange
rates, commodity prices and interest rates.
The key operating financial transaction risks relate to the euro, US
dollar and pound sterling and changing fuel prices. They mainly
result from cost items in foreign currencies held by individual
Group companies, e. g. hotel sourcing, aircraft fuel and bunker oil
invoices or ship handling costs.
The Group has entered into derivative hedges in various foreign
currencies in order to limit its exposure to risks from changes in
exchange rates for the hedged items. Changes in commodity prices
affect TUI Group, in particular in procuring fuels such as aircraft
fuel and bunker oil. These price risks related to fuel procurement
are largely hedged with the aid of derivative instruments. Where
price increases can be passed on to customers due to contractual
agreements, this is also reflected in our hedging behaviour. In
order to control risks related to changes in interest rates arising on
liquidity procurement in the international money and capital mar-
kets and investments of liquid funds, the Group uses derivative
interest hedges on a case-by-case basis as part of its interest
management system.
In order to limit default risks from settlement payments for
derivatives as well as money market investments with banks and
investments in money market funds, TUI AG and First Choice
Holidays Finance Ltd. have defined credit rating criteria for the
selection of their counterparties. Trading and transaction limits
are fixed on the basis of the credit ratings granted by the main
rating agencies. The credit ratings and the corresponding limits are
regularly reviewed. In the event of fair value changes in derivatives
or rating changes, new business with these counterparties may
temporarily be suspended until the limits can be adequately
utilised again. The limits are fixed in consultation between the
CFO and the Treasury Department.
The use of derivative hedges is based on underlying transactions;
the derivatives are not used for speculation purposes.
More detailed information on hedging strategies and risk manage-
ment as well as financial transactions and the scope of such trans-
actions at the balance sheet date is provided in the Risk Report
and the section Financial instruments in the Notes to the consoli-
dated financial statements.
See from page 50 and 225
76
C O M B I N E D M A N A G E M E N T R E P O R T » B U S I N e S S r e V I e w
Capital structure
Capital structure of the Group
€ million
30 Sep 2018
30 Sep 2017
Var. %
10,682.1
4,929.7
15,611.8
1,502.9
4,200.5
– 2,005.3
635.5
4,333.6
1,730.3
380.9
2,111.2
9,867.6
4,317.9
14,185.5
1,501.6
4,195.0
– 2,756.9
594.0
3,533.7
1,896.1
382.6
2,278.7
+ 8.3
+ 14.2
+ 10.1
+ 0.1
+ 0.1
+ 27.3
+ 7.0
+ 22.6
– 8.7
– 0.4
– 7.4
2,250.7
1,761.2
+ 27.8
192.2
2,442.9
171.9
1,933.1
+ 11.8
+ 26.4
409.5
459.8
– 10.9
6,314.6
6,724.1
15,611.8
5,980.2
6,440.0
14,185.5
+ 5.6
+ 4.4
+ 10.1
Non-current assets
Current assets
Assets
Subscribed capital
Capital reserves
Revenue reserves
Non-controlling
interest
Equity
Non-current
provisions
Current provisions
Provisions
Non-current financial
liabilities
Current financial
liabilities
Financial liabilities
Other non-current
liabilities
Other current
liabilities
Other liabilities
Equity and liabilities
Capital ratios
€ million
30 Sep 2018
30 Sep 2017
Var. %
Non-current capital
Non-current capital
in relation to balance
sheet total
Equity ratio
Equity and non-current
financial liabilities
Equity and non-current
financial liabilities
in relation to balance
sheet total
%
%
%
* Percentage points
8,724.1
7,650.8
+ 14.0
55.9
27.8
53.9
24.9
+ 2.0*
+ 2.9*
6,584.3
5,294.9
+ 24.4
42.2
37.3
+ 4.9*
Overall, non-current capital increased by 14.0 % to € 8,724.1 m. As
a proportion of the balance sheet total, it amounted to 55.9 %
(previous year 53.9 %).
The equity ratio was 27.8 % (previous year 24.9 %). Equity and
non-current financial liabilities accounted for 42.2 % (previous year
37.3 %) of the balance sheet total at the reporting date.
E Q U I T Y
Subscribed capital and the capital reserves rose slightly year-
on-year. The increase of 0.1 % each was driven by the issue of
employee shares. Revenue reserves rose by € 751.6 m to €– 2,005.3 m.
Non-controlling interests accounted for € 635.5 m of equity.
P R O V I S I O N S
Provisions mainly comprise provisions for pension obligations, for
maintenance and other typical operating risks classified as current
or non-current, depending on expected occurrence. At the balance
sheet date, they accounted for a total of € 2,111.2 m, down by
€ 167.5 m or 7.4 % year-on-year.
F I N A N C I A L L I A B I L I T I E S
Composition of liabilities
€ million
30 Sep 2018
30 Sep 2017
Var. %
Bonds
Liabilites to banks
Liabilites from finance
leases
Other financial liabilities
Financial liabilities
296.8
780.5
1,342.7
22.9
2,442.9
295.8
381.3
1,226.5
29.5
1,933.1
+ 0.3
+ 104.7
+ 9.5
– 22.4
+ 26.4
S T R U C T U R A L C H A N G E S I N F I N A N C I A L L I A B I L I T I E S
The Group’s financial liabilities increased by a total of € 509.8 m to
€ 2,442.9 m. The structure of liabilities was affected by a slight rise
in liabilities from finance leases and an increase in financial liabilities
from the issue of a Schuldschein.
O V E R V I E W O F T U I ’ S L I S T E D B O N D
The table below lists the maturities, nominal volumes and annual
interest coupon of listed bonds from 2016 with a nominal value of
€ 300.0 m and a 5-year period to maturity.
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77
Listed bonds
Capital measures
Issuance
Maturity
Amount
initial
€ million
Amount
outstanding
€ million
Interest rate
% p. a.
Senior Notes 2016
October 2016
October 2021
300.0
300.0
2.125
B A N K L O A N S A N D O T H E R L I A B I L I T I E S F R O M
F I N A N C E L E A S E S
Apart from the bonds worth € 300.0 m for the purposes of general
corporate financing, TUI AG issued a Schuldschein worth a total of
€ 425.0 m in July 2018. A fixed interest rate was agreed for three
tranches with tenors of 5, 7 and 10 years. Two other tranches with
tenors of 5 and 7 years will carry a floating interest rate based on
6-month EURIBOR plus a fixed margin. The resulting interest rate
risks are hedged by interest rate transactions with the same terms.
At an average tenor of nearly 6.5 years for the Schuldschein, the
interest costs amount to around 1.75 % p. a.
Moreover, the Hotels & Resorts and Cruises segments took out
separate bank loans, primarily in order to finance investments by
these companies. Most liabilities from finance lease contracts are
attributable to aircraft as well as one cruise ship. More detailed
information, in particular on the remaining terms, is provided
under Financial liabilities in the Notes to the consolidated financial
statements.
O T H E R L I A B I L I T I E S
Other liabilities totalled € 6,724.1 m, up by € 284.1 m or 4.4 % year-
on-year.
See section on Financial liabilities in the Notes, page 217
It carries a floating interest rate which depends on the short-term
interest rate level (EURIBOR or LIBOR) and TUI’s credit rating plus
a margin. At the balance sheet date, an amount of € 102.4 m from
this credit facility had been taken up in the form of bank guarantees.
B I L AT E R A L G U A R A N T E E F A C I L I T I E S O F T U I A G W I T H
I N S U R A N C E C O M PA N I E S A N D B A N K S
TUI AG has concluded several bilateral guarantee facilities with
various insurance companies with a total volume of £ 85.0 m and
€ 130.0 m. These guarantee facilities are required for the delivery
of tourism services in order to ensure that Group companies are
able to meet, in particular, the requirements of European over-
sight and regulatory authorities on the provision of guarantees
and warranties. The guarantees issued usually have a term of 12 to
18 months. They give rise to a commission in the form of a fixed
percentage of the maximum guarantee amount. At the balance
sheet date, an amount of £ 27.3 m and € 30.0 m from these guarantee
facilities had been used.
TUI AG also concluded bilateral guarantee facilities with a total
volume of € 42.5 m with banks to provide bank guarantees in the
framework of ordinary business operations. Some of the guarantees
have a term of several years. The guarantees granted give rise to a
commission in the form of a fixed percentage of the maximum
guarantee amount. At the balance sheet date, an amount of
€ 15.8 m from these guarantee facilities had been used.
Off-balance sheet financial instruments and
key credit facilities
Obligations from financing agreements
O P E R AT I N G L E A S E S
The development of operating rental, leasing and charter contracts
is presented in the section Net assets in the Management Report.
See page 74
More detailed explanations and information on the structure of
the remaining terms of the associated financial liabilities are pro-
vided in the section Other financial liabilities in the Notes to the
consolidated financial statements. There were no contingent liabil-
ities related to special-purpose vehicles.
S Y N D I C AT E D C R E D I T F A C I L I T I E S O F T U I A G
TUI AG signed a syndicated credit facility worth € 1.75 bn in Sep-
tember 2014. This syndicated credit facility is available for general
corporate financing purposes (in particular in the winter months).
The Schuldschein worth € 425.0 m from 2018, the bond worth
€ 300.0 m from 2016 and the credit and guarantee facilities of
TUI AG contain a number of obligations. TUI AG has a duty to com-
ply with certain financial covenants (as defined in the respective
contracts) from its syndicated credit facility worth € 1.75 bn and a
number of bilateral guarantee lines. These require (a) compliance
with a underlying EBITDAR-to-net interest expense ratio measur-
ing TUI Group’s relative charge from the interest result and the
lease and rental expenses; and (b) compliance with a net debt- to-
underlying EBITDA ratio, calculating TUI Group’s relative charge
from financial liabilities. The underlying EBITDAR-to-net interest
expense ratio must have a coverage multiple of at least 1.5; net
debt must not exceed 3.0 times underlying EBITDA. The financial
covenants are determined every six months. They restrict, inter
alia, TUI’s scope for encumbering or selling assets, acquiring other
companies or shareholdings, or effecting mergers.
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The Schuldschein worth € 425.0 m, the bond worth € 300.0 m and
the credit and guarantee facilities of TUI AG also contain additional
contractual clauses typical of financing instruments of this type.
Non-compliance with these obligations awards the lenders the
right to call in the facilities or terminate the financing schemes for
immediate repayment.
Ratings by Standard & Poor’s and Moody’s
TUI AG ratings
Standard & Poor’s
Moody’s
2013
2014
B
B3
B+
B2
2015
BB–
Ba3
2016
BB–
Ba2
2017
BB
Ba2
2018
Outlook
BB
Ba2
stable
positive
In the light of improved metrics and continuous operating im-
provements as well as resilience against geopolitical events,
Moody’s upgraded the corporate rating of ‘Ba2’ with a ‘positive
outlook’ in February 2018.
TUI AG’s bond worth € 300.0 m has been assigned a ‘BB’ rating by
Standard & Poor’s and a ‘Ba2’ rating by Moody’s. TUI AG’s syndi-
cated credit facility worth € 1.75 bn is assigned a ‘BB’ rating by
Standard & Poor’s.
long-term leasing and rental expenses). These basic definitions
are subject to specific adjustments in order to reflect current
circumstances. For the completed financial year, the leverage ratio
was 2.7(x), while the coverage ratio was 6.7(x). We aim to achieve a
leverage ratio between 3.00(x) and 2.25(x) and a coverage ratio
between 5.75(x) and 6.75(x) for FY 2019.
See (37) Capital management in the Notes on page 239
Financial stability targets
TUI considers a stable credit rating to be a prerequisite for the
further development of the business. In response to the structural
improvements resulting from the merger between TUI AG and
TUI Travel and the operating performance observed over the past
few years, combined with a strengthening business model despite
a challenging environment, Moody’s upgraded their TUI ratings
with a ‘positive outlook’. We are seeking further improvements in
the rating so as to ensure better access to the debt capital markets
even in difficult macroeconomic situations, apart from achieving
better financing terms and conditions. The financial stability ratios
we have defined are leverage ratio and coverage ratio, based on
the following basic definitions:
Leverage ratio = (gross financial liabilities + discounted value of
financial commitments from lease, rental and leasing agreements
+ defined-benefit obligations) / (reported EBITDA + long-term leasing
and rental expenses); Coverage ratio = (reported EBITDA + long-
term leasing and rental expenses) / (net interest expense + ⅓ of
Interest and financing environment
In the period under review, short-term interest rates remained at an
extremely low level compared with historical rates. In some currency
areas, the interest rate remained negative throughout the year,
with corresponding impacts on returns from money market invest-
ments but also on reference interest rates for floating-rate debt.
Quoted credit margins (CDS levels) for corporates in the sub-
investment grade area remained almost flat year-on-year. Quota-
tions remained on a persistently low level for TUI AG. Refinancing
options were available against the backdrop of the receptive capital
market environment, and TUI AG took advantage of this in July 2018
by issuing a Schuldschein worth € 425.0 m.
In the completed financial year, in addition to the issue of a
Schuldschein worth € 425.0 m, sale-and-lease-back agreements
were signed for seven new airplane. These include finance leases
for one B787-8 and two B737-8 Max and operating lease agree-
ments for one B787-9 and three B737-8 Max.
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Liquidity analysis
L I Q U I D I T Y R E S E R V E
In the completed financial year, TUI Group’s solvency was secured
at all times by means of cash inflows from operating activities,
liquid funds, and bilateral and syndicated credit agreements with
banks.
At the balance sheet date, TUI AG, the parent company of TUI
Group, held cash and cash equivalents worth € 889.3 m.
R E S T R I C T I O N S O N T H E T R A N S F E R O F L I Q U I D F U N D S
At the balance sheet date, there were restrictions worth around
€ 0.2 bn on the transfer of liquid funds within the Group that might
significantly impact the Group’s liquidity, such as restrictions on
capital movements and restrictions due to credit agreements
concluded.
C H A N G E O F C O N T R O L
Significant agreements taking effect in the event of a change of
control due to a takeover bid are outlined in the chapter on Infor-
mation required under takeover law.
See chapter Information required under takeover law
Cash flow statement
Summary cash flow statement
€ million
2018
2017
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Change in cash and cash equivalents
with cash effects
+ 1,150.9
– 845.7
– 236.9
+ 1,583.1
– 687.7
– 733.8
+ 68.3
+ 161.6
The cash flow statement shows the flow of cash and cash equivalents
with cash inflows and outflows presented separately for operating,
investing and financing activities. The effects of changes in the
group of consolidated companies are eliminated. The prior year’s
cash flow statement shows the flow of cash and cash equivalents
for the continuing and discontinued operations.
In the period under review, cash and cash equivalents rose by
€ 31.9 m to € 2,548.0 m.
N E T C A S H I N F L O W F R O M O P E R AT I N G A C T I V I T I E S
In the financial year under review, the cash inflow from operating
activities amounted to € 1,150.9 m (previous year € 1,583.1 m). The
year-on-year decrease on a positive operating performance was
mainly driven by a lower increase in working capital year-on-year
as well as a higher one-off payment to pension funds in the UK.
N E T C A S H O U T F L O W F R O M I N V E S T I N G A C T I V I T I E S
In the financial year under review, the cash outflow from investing
activities totalled € 845.7 m (previous year € 687.7 m). While the
cash outflow for capital expenditure related to property, plant and
equipment and financial investments amounted to € 956.2 m, the
cash inflow from the sale of property, plant and equipment and
financial investments stood at € 192.4 m. The cash outflow of
€ 135.6 m for the acquisition of consolidated companies almost
exclusively relates to the Destination Experiences and Hotels &
Resorts segments. The cash outflow for capital expenditure relat-
ed to property, plant and equipment and intangible assets and the
cash inflow from corresponding sales do not match the additions
and disposals shown in the development of fixed assets, as these
also include non-cash investments and disposals.
N E T C A S H O U T F L O W F R O M F I N A N C I N G A C T I V I T I E S
The cash outflow from financing activities totals € 236.9 m (previ-
ous year € 733.8 m). TUI AG recorded an inflow of cash of € 422.9 m
from the issue of an unsecured Schuldschein after deducting bor-
rowing costs. TUI Group companies took out further financial lia-
bilities worth € 11.3 m. A further cash outflow of € 162.7 m related
to the redemption of financial liabilities, including € 106.5 m for
finance lease obligations. An amount of € 110.8 m was used for
interest payments, while a cash outflow of € 381.8 m related to
dividend payments to TUI AG shareholders and a further outflow
of € 53.5 m to dividend payments to minority shareholders.
Change in cash and cash equivalents
€ million
2018
2017
Cash and cash equivalents at the
beginning of period
Changes due to changes in exchange rates
Cash changes
Cash and cash equivalents at the end
of period
+ 2,516.1
– 36.4
+ 68.3
+ 2,403.6
– 49.1
+ 161.6
+ 2,548.0
+ 2,516.1
Cash and cash equivalents comprise all liquid funds, i. e. cash in
hand, bank balances and cheques.
The detailed cash flow statement and additional explanations are
provided in the consolidated financial statements and in the section
Notes to the cash flow statement in the Notes to the consolidated
financial statements.
See page 158 and 241
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Analysis of investments
The development of fixed assets, including property, plant and
equipment, intangible assets and shareholdings and other invest-
ments, is presented in the section on Net assets in the Management
Report. Additional explanatory information is provided in the Notes
to the consolidated financial statements.
A D D I T I O N S T O P R O P E R T Y, P L A N T A N D E Q U I P M E N T
The table below lists the cash investments in intangible assets and
capital expenditure in property, plant and equipment. This indicator
does not include financing transactions such as the taking out of
loans and finance leases.
Net capex and investments
€ million
2018
2017
Var. %
Cash gross capex
Hotels & Resorts
Cruises
Destination
Experiences
Holiday Experiences
Northern Region
Central Region
Western Region
Markets & Airlines
All other segments
TUI Group
Discontinued operations
Total
Net pre delivery
payments on aircraft
Financial investments
Divestments
Net capex and
investments
240.6
244.6
9.5
494.8
78.9
26.8
46.4
152.2
146.2
793.2
–
793.2
17.7
164.1
– 148.0
223.0
281.4
10.1
514.5
58.5
22.3
31.0
111.9
146.1
772.5
28.6
801.2
202.5
122.6
– 54.4
+ 7.9
– 13.1
– 5.9
– 3.8
+ 34.9
+ 20.2
+ 49.7
+ 36.0
+ 0.1
+ 2.7
n. a.
– 1.0
– 91.3
+ 33.8
– 172.1
827.0
1,071.9
– 22.8
Investments in other intangible assets and property, plant and
equipment totalled € 793.2 m in the period under review, down
– 1.0 % year-on-year.
In the financial year under review, investments mainly related to
the acquisition and renovation of Marella Explorer, the construction
of hotels, in particular in Mexico and the Cape Verde Islands, and
the acquisition of two hotels in Zanzibar, the development and
launch of Group-wide IT platforms and down payments on ordered
aircraft. Investments were also effected for renovation and main-
tenance in all areas.
The table below shows a reconciliation of capital expenditure to
additions to TUI Group’s other intangible assets and property,
plant and equipment.
Reconciliation of capital expenditure
€ million
Capital expenditure
Finance leases
Advance payments
Additions within assets held for sale
Other non-cash changes
Additions to other intangible assets
and property, plant and equipment
2018
793.2
194.0
163.1
–
– 4.2
2017
801.2
136.0
247.8
– 28.6
3.5
1,146.1
1,159.9
Investment obligations
O R D E R C O M M I T M E N T S
Due to agreements concluded in FY 2018 or in prior years, order
commitments for investments totalled € 3,883.3 m as at the bal-
ance sheet date; this total includes an amount of € 1,092.1 m for
scheduled deliveries in FY 2018.
At the balance sheet date, order commitments for aircraft com-
prised 70 planes (two B-787s and 68 B-737s), to be delivered by
the end of FY 2023. Delivery of 18 B-737-Max aircraft has been
scheduled for FY 2019.
More detailed information is provided in the section Other financial
liabilities in the Notes to the consolidated financial statements.
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81
Net financial position
From the H1 2018 interim report onwards, we have adjusted the
definition of our net debt. While net debt had previously been cal-
culated as the balance between current and non-current financial
debt on the one hand and cash and cash equivalents on the other,
from now on we also consider short-term interest-bearing invest-
ments as deduction items. The majority of these investments have
terms of three to six months. In accordance with IFRS regulations,
these investments are not shown in the consolidated balance
sheet as cash and cash equivalents but as current trade receivables
and other assets. The adjustment had no effect on the previous year.
The net liquidity position of the continuing operations decreased
by € 459.4 m year-on-year to € 123.6 m as at 30 September 2018.
The year-on-year reduction in the net liquidity position was
primarily attributable to the reinvestment of gains on disposal
received last year as well as higher touristic prepayments.
Net financial position
€ million
30 Sep 2018
30 Sep 2017
Var. %
Financial debt
Cash and cash
equivalents
Short-term interest-
bearing investments
Net cash
2,442.9
1,933.1
+ 26.4
2,548.0
2,516.1
+ 1.3
18.5
123.6
–
583.0
n. a.
– 78.8
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NON - FINA NCIAL DECL AR ATION
pursuant to the CSR Directive Implementation Act
For TUI Group, economic, environmental and social sustainability
is a fundamental management principle and a cornerstone of our
strategy for continually enhancing the value of our company and
beyond. We recognise that sustainable development is critical for
long term economic success and we aspire to pioneer sustainable
tourism across our sector.
In the following section we report on sustainability issues which
support better understanding of our business’s operations, context
and future development, in line with CSR reporting legislation. In
compliance with Section 315b, paragraph 1, clause 3 German
Commercial Code (HGB) we also refer to relevant aspects of non-
financial disclosure found in other parts of the Group manage-
ment report.
Within the framework of our materiality analysis we gained insight
into the sustainability risks and opportunities. We did not identify
any non-financial risks as defined by the CSR-RUG. In particular,
we report on our risk management system and principle risks
linked with our business activities, business relations and services
in our Risk Report from page 40 on.
This non-financial Group statement has been reviewed by the
Supervisory Board with regard to aspects of legality, regularity
and relevance. Our reporting covers the United Nations Global
Compact principles and we regularly review our activities against
the United Nations Sustainable Development Goals (SDGs). The
goals provide a useful framework with which to view our impact
and the contributions we make to a better world. We see a special
contribution towards seven of the SDGs – knowing these are
also interdependent. A detailed mapping is published in our sus-
tainability report.
Business model
TUI Group’s business model as defined in HGB section 289b is
outlined from page 28 in the present Annual Report.
C O M B I N E D M A N A G E M E N T R E P O R T » N o N - f I N A N C I A l D eCl A r AT I o N
83
Sustainability strategy and implementation
TUI Sustainability Strategy 2020
Step
lightly
Make
a difference
Lead
the way
Care
more
betterholidays
betterworld
TUI Sustainability Strategy
2020
Reducing the environmental
impact of holidays
Creating positive change
for people and communities
Pioneering sustainable tourism
across the world
Building the best place to work
where people are passionate about
what they do
Our ‘Better Holidays, Better World’ 2015 – 2020 strategy is built
around the following core pillars:
• Step lightly, where we commit to operate the most carbon-
efficient airlines in Europe and cut the carbon intensity of our
operations by 10 % by 2020.
• Make a difference, where we commit to deliver 10 m ‘greener
and fairer’* holidays per year by 2020, enabling more local people
to share in the benefits of tourism.
• Lead the way, where we commit to invest € 10 m per year by
2020, to support good causes and enhance the positive impacts
of tourism, using the TUI Care Foundation to support this work.
• Care more, where we commit to achieve a colleague engagement
score of over 80.
* Measured by the number of customers we take to hotels with credible sustainability
certification – defined as those recognised or approved by the Global Sustainable
Tourism Council (GSTC).
M AT E R I A L I T Y
TUI Group carried out a formal materiality assessment in FY 2018
involving a variety of stakeholder groups. Through a global stake-
holder survey and an impact analysis, the most material aspects
were identified and prioritized using recognized qualitative and
quantitative methods. The graph below shows the major areas
where TUI’s stakeholders would like us to focus even more com-
mitment and engagement.
For our assessment, we identified the following key stakeholder
groups
• Customers
• Employees
• Financial markets
• Media
• Non-Governmental Organisations
• Politics
• Science
• Shareholders
• Suppliers / Business Partners
C O M B I N E D M A N A G E M E N T R E P O R T » N o N - f I N A N C I A l D eCl A r AT I o N
Findings will now be discussed with senior management and help
inform the development of TUI’s sustainability strategy for the
next years.
M A N A G I N G S U S TA I N A B I L I T Y
Across TUI Group dedicated and experienced sustainability pro-
fessionals work in close collaboration with senior management at
Group and at divisional level to help ensure that TUI’s business and
sustainability strategies are aligned. Our sustainability colleagues’
role is to drive uptake of more sustainable business practices
across the TUI Group and along its supply chain, and to advise the
TUI Care Foundation on destination project proposals and imple-
mentation. On a regular basis the TUI Group Executive Committee
is updated on our performance against the sustainability strategy
and on material issues. Also sustainability is regularly on the agenda
in divisional management boards, platform boards (i. e. hotels and
aviation) and in the risk oversight committee.
As part of TUI’s sustainability management approach, the cor-
porate headquarters has been successfully audited against the
ISO 14001:2015 environmental standard.
Senior Management from across TUI regularly speak at a range of
forums and conferences about the industry’s most material issues
and TUI’s response to them. Furthermore sustainability is a key
issue whenever we collaborate with destination governments and
develop our growth strategy.
84
Materiality Matrix
h
g
H
i
i
m
u
d
e
M
w
o
L
T
C
A
P
M
I
&
E
C
N
A
V
E
L
E
R
E
V
I
T
C
E
P
S
R
E
P
R
E
D
L
O
H
E
K
A
T
S
5
1
2
3
4
11
6
10
7
9
8
Low
Medium
High
B USI N ESS PERS PEC TIVE RELEVAN CE
7 Fair business conduct
8 Customer well-being
9 Crisis management
10 Colleague working
environment
11 Animal welfare & biodiversity
1
Resource efficiency,
sustainable procurement
2 Child protection
3
Local value creation &
communities
4 Emissions & pollution
5 Forced labour
6
Creating more sustainable
holidays & engaging
customers
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85
Managing sustainability-embedding
G R O U P E X E C U T I V E C O M M I T T E E
Minimum twice yearly agenda slot and update report
D I V I S I O N A L B O A R D S
Regular update presentations to Source Market,
Tourism, Hotel & Airline boards
R I S K O V E R S I G H T C O M M I T T E E
Annual update to this committee and meetings
with Group Risk Department at regular intervals
to review risk register
G R O U P S U S TA I N A B I L I T Y N E T W O R K
Sustainability Managers at head office, source
markets and divisions: developing and
coordinating sustainability strategy and specific
working groups
S U S TA I N A B I L I T Y I N D I C E S A N D A W A R D S
TUI AG is represented in the sustainability index FTSE4Good and
on the Ethibel Investment Register. In 2018 TUI was included in the
RobecoSam Sustainability Yearbook with a ‘Silver Class’ distinction.
TUI participated again in the CDP Climate Change assessment 2018,
results being announced in early 2019.
Throughout the year TUI companies have been recognized by a
variety of awards. TUI Cruises was awarded in December 2017
with the EcoTrophea at the German Travel Association Awards. In
January 2018 TUI fly Belgium won the Brussels Airport Environ-
ment Award and in March 2018 TUI fly Germany, TUI Cruises,
TUI Germany, Robinson Club and TUI Magic Life ranked high in a
consumer research within the sustainability dimension undertaken
by the Service Value and Focus in Germany.
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The environment
Carbon dioxide emissions (CO2)
Respecting the environment in our products, services and processes
is an essential feature of our quality standards. We place priority
on improving carbon and resource efficiency. Conserving natural
resources and mitigating negative environmental impacts are both
in the interests of our business as as well as the future success of
travel and tourism.
We face additional environmental challenges at a local level. Plastic
waste, for example, is having a negative impact on destinations and
ecosystems, especially in the oceans. Fresh water is also likely to
become increasingly scarce in the coming years in some destinations.
Tackling climate change is an urgent global challenge. The goal of
the Paris Agreement to limit global warming to below 2°C above
pre-industrial levels is ambitious and requires that every industry
makes a timely transition towards an energy-efficient, lower-carbon
future. As a sector leader, TUI has a responsibility to play our part.
Carbon emissions are one of the most significant environmental
impacts of tourism. Travel and tourism contribute some 5 % (UNEP
2008) of global carbon emissions – half of which is attributable to
aviation.
Our ‘Step lightly’ strategy therefore aims to reduce the environ-
mental intensity of our operations and sets clear stretch targets
for improvement across aviation, cruise, hotels, offices, retail
shops and ground transport. TUI has implemented specific carbon
reduction initiatives across the business – from airline and cruise
efficiency programmes, to retail energy savings and the reduction
of printed brochures.
• Our headline goal: We will operate Europe’s most carbon-efficient
airlines and reduce the carbon intensity of our operations by
10 % by 2020 (Baseline year 2014)
tons
2018
2017
Var. %
Airlines & Aviation
Cruises
Hotels
Major premises / shops
Ground Transport
Scope 3 (Other)
Group
6,393,342
850,335
554,666
26,195
16,782
78,852
7,920,172
6,115,492
815,582
507,230
29,511
15,388
73,254
7,556,457
+ 4.5
+ 4.3
+ 9.4
– 11.2
+ 9.1
+ 7.6
+ 4.8
In FY 2018, TUI Group’s total emissions increased year-on-year in
absolute terms, primarly due to growth in its Airline & Aviation
sector. The increase in absolute carbon emissions in Hotels is driven
by the expansion of TUI’s hotel portfolio. Carbon emissions in
Cruises increased by 4.3 % which was the result of the launch of
the new Mein Schiff 1 (operated by TUI Cruises) and the first full
year reporting of Mein Schiff 6.
Emissions from offices and retail shops significantly declined,
mainly due to energy efficiency initiatives in the UK and Germany.
Energy usage by business area
MWh
2018
2017
Var. %
Airlines & Aviation
Cruises
Hotels
Major premises / shops
Ground transport
Total
26,070,988
3,227,813
1,527,259
88,076
67,283
30,981,419
24,940,489
3,077,062
1,420,438
91,422
61,697
29,591,108
+ 4.5
+ 4.9
+ 7.5
– 3.7
+ 9.1
+ 4.7
E N E R G Y U S A G E B Y B U S I N E S S A R E A
As part of TUI’s environmental reporting we have included a
breakdown of energy usage by business area. Airlines and Aviation
represents more than 84 % of the total energy used.
C L I M AT E P R O T E C T I O N A N D R E S O U R C E E F F I C I E N C Y
B Y T U I A I R L I N E S
We already operate one of Europe’s most carbon-efficient airlines
and we aim to continuously improve. TUI Airlines’ comparative
performance was recognised in November 2017 by the independent
climate protection organisation atmosfair, which ranked TUI Airways
and TUI fly Germany #1 and #3 respectively as the most carbon-
efficient airlines amongst the 200 largest airlines worldwide. TUI
Airlines have numerous measures in place to further enhance carbon
efficiency. We have implemented the following measures to support
our efficiency goals:
C O M B I N E D M A N A G E M E N T R E P O R T » N o N - f I N A N C I A l D eCl A r AT I o N
87
• Fleet renewal: TUI took receipt of the first five Boeing 737 Max
aircraft in FY 2018 (of 73 total confirmed orders), which are 14 %
more fuel efficient resulting in lower carbon and NOx emissions
and have a 40 % smaller noise footprint compared to previous
generation aircraft
• Process optimisation, e. g. single-engine taxing in and out, ac-
celeration altitude reduction and wind uplinks
• Weight reduction, e. g. introduction of carbon brakes and water
uplift optimisation
• Flight planning optimisation, e. g. Alternate Distance Optimisation
and Minimum Fuel Optimisation
• Implementation of fuel management systems to improve fuel
analysis, identify further opportunities and track savings
With efficiency measures and fleet renewal, we expect to continue
to make progress over the next few years but acknowledge that
reaching our commitment to reduce our operational carbon intensity
by 10 % by 2020 will be a challenge.
TUI Airlines – Fuel consumption and CO2 emissions
TUI’s airlines play a pioneering role in introducing environmental
management systems based on the internationally recognised
ISO 14001 standard. In the period under review, each of our five
tour operator airlines (representing 95 % of our aircraft) achieved
ISO 14001:2015 certification.
The TUI Aviation Environment & Fuel Team is responsible for an
alignment of the fuel and environment practices and activities,
integrating them into a single TUI Airlines operating policy, pro-
cedures and performance tools. The team drives best practice in
fuel and environment management, providing end-to-end delivery of
initiatives and projects in order to deliver the TUI Group sustaina-
bility objectives. Latest developments and updates about the per-
formance are presented to the TUI Aviation Board regularly so
that appropriate measures can be taken.
2018
2017
Var. %
l / 100 rpk*
t
kg / 100 rpk*
2.65
5,860,431
6.67
2.65
5,571,719
6.67
– 0.1
+ 5.2
– 0.1
Specific fuel consumption
Carbon dioxide (CO 2) – total
Carbon dioxide (CO 2) – specific
* rpk=revenue passenger kilometer
TUI Airlines – Carbon intensity
TUI Airline fleet
Corsair International
TUI Airways
TUI fly Belgium
TUI fly Germany
TUI fly Netherlands
TUI fly Nordic
g CO 2 / rpk*
g CO 2 / rpk*
g CO 2 / rpk*
g CO 2 / rpk*
g CO 2 / rpk*
g CO 2 / rpk*
g CO 2 / rpk*
2018
66.7
84.9
63.6
70.0
64.7
64.0
58.2
2017
66.7
84.3
63.4
71.5
63.5
65.2
61.3
Var. %
g CO 2e / rpk*
– 0.1
+ 0.8
+ 0.2
– 2.2
+ 1.9
– 1.8
– 5.3
67.3
85.8
64.2
70.7
65.4
64.7
58.8
* rpk=revenue passenger kilometer
We commissioned PwC Netherlands to provide assurance on the carbon intensity metrics displayed in the table ‘TUI Airlines – Carbon Intensity’ above. To read our airline
carbon data methodology document and PwC’s Assurance report in full, please visit www.tuigroup.com/en-en/sustainability/reporting
Relative carbon emissions across our airlines improved by 0.1 %
in the FY 2018. As a scheduled longhaul operator Corsair Inter-
national’s payload consists of both passengers and cargo. Cargo
transportation results in higher fuel burn and carbon emissions as
is reflected in Corsair’s carbon intensity performance. TUI fly
Germany’s carbon efficiency performance deteriorated due to
fleet expansion associated with Air Berlin’s insolvency.
To enhance the information content, specific emissions are also
shown in the form of CO2 equivalents (CO2e). Apart from carbon
dioxide (CO2), they include the other five greenhouse gases im-
pacting the climate as listed in the Kyoto Protocol: methane (CH4),
nitrous oxide (N2O), hydro-fluorocarbons (HFCs), perfluorocarbons
(PFCs) and Sulphur hexafluoride (SF6).
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Cruises – carbon intensity, fresh water and waste
2018
2017
Var. %
Carbon dioxide (CO2) –
relative
kg / Cruise passenger night
Fresh water –
relative l / Cruise
passenger night
Waste – relative l / Cruise
passenger night
101
108
– 6.5
110
12.7
162
14.7
– 31.9
– 13.6
In FY 2018, relative carbon emissions in Cruises decreased by
6.5 % mainly driven by the on-going re-fleeting programme, more
efficient energy use and technological improvements.
Per cruise passenger night 12.7 litres of waste were measured – a
reduction by 13.6 % and 110 litres of fresh water consumed, a
reduction by 31.9 %, due to fleet renewal and enhanced water
desalination facilities on board.
C L I M AT E P R O T E C T I O N A N D R E S O U R C E M A N A G E M E N T
B Y H O T E L S
Together with our hotel partners we constantly work on improving
our sustainability performance. We have found our hotels with
sustainability certifications deliver on average better environmental
performance and higher customer satisfaction.
We have included a sustainability clause in contracts with our ac-
commodation suppliers outlining minimum expectations and the
requirement to work towards credible sustainability certification
recognised by the Global Sustainable Tourism Council (GSTC). TUI
is supporting its hotel partners by providing guidance and consul-
tancy to enable our hotel partners to prepare for certification.
TUI hotels were involved in numerous sustainability projects and
initiatives in 2018 including the following:
• In time for the 2018 summer season Robinson Club Apulia has
installed a large solar panel system with 3,280 solar panels
across a total area of 5,500 square meters. During the four-month
construction period, the modern solar system was installed on
various building complexes of the club including the restaurant,
workshop and some guest houses. Around 71 % of the electricity
produced will be used for the self-supply of the club and 29 %
will be fed into the local power grid.
C L I M AT E P R O T E C T I O N A N D R E S O U R C E M A N A G E M E N T
I N C R U I S E S
In 2018, TUI Cruises launched the new Mein Schiff 1. The newbuild
ships in the fleet save fuel through a combination of the latest
technologies. A smart energy management system, efficient air
conditioning, innovative lighting controls and the use of waste heat
from the engines all contribute to a significantly reduced carbon
footprint. The International Maritime Organization (IMO) has defined
particularly stringent NOx limit values for ship newbuilds in specified
Nitrogen Emission Control Areas (NECAS) off the North American
coast. Equipped with a main engine that is completely compliant
with TIER III, the new Mein Schiff 1 fully meets these criteria.
TUI Cruises Environment Report:
www.tuicruises.com/nachhaltigkeit/umweltbericht/
Sulphur emissions from the newbuilds in the fleet are also up to
99 % lower thanks to new systems that treat exhaust fumes before
releasing them. The ships are fitted with advanced emission purifica-
tion systems, which operate around the clock worldwide – not only
in the designated special emission control areas of the North and
Baltic Seas, the English Channel and North America but also in the
other areas that TUI Cruises travels to, such as the Mediterranean,
Orient, Caribbean and Central America.
In FY 2018, TUI Cruises continued a food waste project supported
by the industry initiative Futouris entitled ‘Reduction of food waste
on cruise ships’. Using a waste analysis tool and applying various
measures onboard led to an overall 17 % reduction in food waste
onboard the ship. These results, including specific proposals relating
to measurement of food waste and best practices, will be made
available to the entire cruise sector and are being implemented
more widely across the TUI Cruises fleet.
All Hapag-Lloyd Cruises ships have Tributyltin-free underwater
coatings, seawater desalination systems for water treatment
purposes as well as a biological sewage treatment system for
wastewater. Waste is separated on board in an environmentally-
friendly manner prior to disposal on land by specialized companies
in accordance with international regulations (MARPOL). Hapag-Lloyd
Cruises’ expedition vessel MS Bremen is one of the first ships world-
wide which has achieved the ‘Polar Ship Certificate’, a certificate
for navigating in polar regions. To reduce emissions in harbors, the
MS Europa 2 has facilities for cold ironing for the energy supply
onboard when berthing in respective harbors.
In the FY 2018 Marella Cruises has invested significant time im-
proving its environmental data management systems and processes.
This has helped to drive environmental performance with carbon
emissions, fresh water consumption and waste production per
passenger cruise night all improving year on year. The fleet continues
to operate as efficiently as possible. This is achieved through the
installation of new equipment on board such as air conditioning
plant, and operating single engine running, or drifting on passage,
so that the engines can run at their most efficient speed – all of
which cuts energy demand on board.
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• TUI Group’s largest hotel brand Riu made an important contri-
bution to avoiding plastic waste. The Riu hotels in Spain and
Portugal as well as Cape Verde have been offering compostable
straws to their guests since this summer. Likewise, Riu is planning
to incorporate them into its hotels in the Americas as of 2019.
This will produce less plastic waste and protect the environment.
The new drinking straws are 100 %biodegradable and also com-
postable. Several other TUI hotel brands also took the decision to
ban the single-use plastics straws and to offer – if necessary –
environmentally friendly straws, i. e. TUI Blue, TUI Magic Life
and Robinson.
• TUI Group developed a programme to identify potential cost
savings for energy and water. Through an intensive analysis of
the consumption data as well as an onsite visit with experts in
Portugal, on Lanzarote and Menorca, potential savings of more
than 1,700 MWh were identified in three TUI Hotels, and rec-
ommended measures are now being implemented.
Hotels – carbon intensity, water* and waste
2018
2017
Var. %
Carbone dioxide (CO 2) –
relative
kg / guest night
Water –
relative l / guest night
Waste –
relative kg / guest night
9.45
556
2.2
9.43
531
2.3
+ 0.2
+ 4.7
– 4.3
* Includes water for domestic, pool and irrigation purposes
Effective waste management aims to conserve resources and reduce
environmental impacts and costs through recycling practices. Our
owned and partner hotels implement various measures to reduce
waste, for example through a stronger focus on local procurement
and reducing packaging via buying in bulk. Per guest night 2.2 kg of
waste were measured in FY 2018.
Water is one of the most precious resources in the world. Beyond
measures to control usage, hotels are finding innovative ways to
address fresh water supply problems. For instance, desalination
projects can make a big impact in destinations where they are in
operation.
A N I M A L W E L F A R E
TUI audits its suppliers against established animal welfare guide-
lines. TUI excursions featuring animals must comply with ABTA
guidelines (Global Animal Welfare Guidance for Animals in Tourism).
Since 2016 more than 150 independent audits of animal attractions
featured by TUI were conducted. Wherever possible we prefer to
work with suppliers on improvement plans, however a number of
venues were taken out of the programme who did not meet the
standards.
Social issues and destination collaboration
Tourism can be a powerful force for good – boosting economies,
creating jobs and enhancing cultural understanding and tolerance.
Through our ‘Better Holidays, Better World’ strategy we aim to
ensure that local communities share the benefits of tourism and
that the environment and human rights are protected along our
value chain.
• Our headline goal: We will deliver 10 m ’greener and fairer’*
holidays a year by 2020, enabling more local people to share in
the benefits of tourism
* Measured by the number of customers we take to hotels with credible sustainability
certification – defined as those recognised or approved by the Global Sustainable
Tourism Council (GSTC).
G R E E N E R A N D F A I R E R H O L I D AY S
One of our key areas of focus is the hotel – the largest component of
the holiday experience. Our expectation of hotels that work with us
is that they will commit to social and environmental good practice.
Certification is central to our commitment to offer ’greener and
fairer’ holidays. It is a credible way of showing whether our hotels
go further than others when it comes to social and environmental
issues. We encourage our hotels to aim for certification that is
GSTC (Global Sustainable Tourism Council) recognised and we are
strong supporters of the certification programme Travelife.
We also have a set of exclusive TUI Collection excursions that have
been developed by TUI and tailored to give customers a true taste
of the destination. Each excursion must meet specific criteria for
sustainability, showing that it is bringing benefit to local people
and minimising its impact on the environment.
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Greener and fairer holidays
2018
2017
Var. %
A C C E S S F O R A L L
We aim to provide as many people as possible with accessible
holidays, and to pioneer development of new products and processes
that enhance the ease and comfort of travel.
9.2
8.3
1,520
1,356
78
76
+ 11.9
+ 12.1
+ 2 2
In 2018 we continued to assess the services we offer to ensure we
are in line with the requirements of the new EU Package Travel
Directive 2015 on accessible travel, that was implemented on
1 July 2018. We will continue to focus on improving the information
available to customers to ease their holiday booking experience.
Number of customers
(millions) staying at
certified hotels 1
Number of contracted
hotels with certifications 1
% of TUI Hotels with
certifications 1
Number of TUI Collection
excursions
1,177,095
1,024,000
+ 15.0
1 Hotels that are certified to a GSTC-recognised certification
2 Variance is given in percentage points
In FY 2018, the number of customers staying in a hotel which is
certified according to a GSTC-recognised standard increased by
11.9 % to 9.2 million. This increase reflects improved and adjusted
reporting processes, as well as the increase in the number of
accommodation suppliers who achieved certification to GSTC-
recognised standards, by 12.1 % to 1,520 hotels. The number stated
in FY 2017 was updated for a like to like comparison which resulted
in an increase from 1,220 hotels to 1,356 hotels. Our customers
went on 1,177,095 TUI Collection excursions in FY 2018, up 15 %
on 2017.
C U S T O M E R D E M A N D
Embedding sustainability into our brand and raising customer
awareness are key priorities. We want to stimulate demand for more
sustainable holidays by showing customers how these contribute
to a better holiday experience and highlighting the role they can
play in creating positive change.
Our consumer research from 2017 showed a significant increase in
customer demand for holiday companies to manage their sustain-
ability impacts and to provide more sustainable holiday products.
This aligns with our Better Holidays, Better World strategy and
spurs on efforts to communicate proactively with customers on
sustainability throughout the holiday journey.
• 57 % would book more environmentally responsible holidays if
they were more readily available (up from 40 % in 2012)
• 53 % have a better image of holiday companies that actively invest
in environmental and social initiatives (up from 39 % in 2012)
• 68 % are prepared to make lifestyle changes to benefit the
environment (up from 60 % in 2012)
D I A L O G U E
Stakeholders in destinations have a significant role to play in sustain-
able tourism management. We work closely with communities, local
and national governments, non-governmental organisations and
trade associations to support the sustainable management of
destinations.
T H E L A B O F T O M O R R O W
The tourism industry is a major part of Egypt’s economy. In the
‘lab of tomorrow’, a joint initiative with the German development
organisation GIZ, TUI – with the support of the TUI Care Foundation –
is tackling the challenges of lack of appropriately skilled personnel
and vocational training opportunities, as well as the low participation
of women in the labour force. During 2018 we worked with the
project’s public and private partners to develop solutions for these
problems, researching, co-creating and piloting new business
models on a small scale in Egypt to prove the concepts. Issues
being examined include development of hotel management skills
and improving technical and vocational education for young people
in the tourism sector to improve quality standards.
L E A D I N G T H E W AY
The TUI Care Foundation is the main channel to fulfil our ambition to
support good causes and enhance the positive impacts of tourism.
Read more about TUI Care Foundation on www.tuicarefoundation.com
• Our headline goal: We will invest € 10 m per year by 2020, to
support good causes and enhance the positive impacts of
tourism, using the TUI Care Foundation to support this work
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Investments into projects and good causes
€ million
2018
2017
Var. %
Amount raised for
research / good causes
7.8
7.3
+ 6.8
The amount raised for sustainability projects and good causes
reached 7.8 million in FY 2018, an increase by 6.8 %.
TUI Care Foundation was adopted as our Group corporate founda-
tion in 2016 to unite our project activities. The TUI Care Foundation
is an independent charitable foundation, with a majority of non-TUI
trustees. TUI Care Foundation builds on the potential of tourism
as a force for good by supporting and initiating partnerships and
projects that create new opportunities for the young generation
and contribute to thriving destinations all over the world.
The Foundation’s ‘Caring for a Better World’ strategic framework
has three fields of engagement – empowering young people,
protecting the natural environment and helping communities
thrive. Examples include:
• The Foundation is helping to empower young people through
the TUI ACADEMY programme in the Dominican Republic,
Zanzibar and Vietnam, where disadvantaged youth are given
education and vocational training opportunities.
• The TUI TURTLE AID programme aims to save one million sea
turtles by 2020 through innovative research and protection
methods. Projects are supported with local organisations in
Cape Verde, Turkey and Greece.
• Through the TUI CARES programme, the Foundation is driving
local sourcing, creating cultural experiences for holidaymakers
and enhancing entrepreneurship opportunities in holiday
destinations such as Crete, Lanzarote and Andalucía.
Human Rights
TUI Group respects all internationally proclaimed human rights as
specified in the International Bill of Human Rights and expects the
same of our suppliers and business partners. Modern slavery
and its components of forced labour and human trafficking are of
particular concern given their egregious nature and increasing
prevalence.
Modern Slavery Act Statement on
http://www.tuigroup.com/en-en/sustainability/msa
In accordance with applicable law, conventions and regulation TUI
is committed to respecting human rights throughout its worldwide
operations. We have a number of policies and initiatives in place to
monitor, identify, mitigate and prevent human rights impacts in
line with the UN Guiding Principles on Business and Human Rights,
and will take remedial action where necessary.
In September 2014, TUI signed up to the UN Global Compact,
committing the Group to 10 universally accepted principles in the
areas of human rights, labour, environment and anticorruption. In
2012, TUI signed the UN World Tourism Organisation’s (UNWTO)
Global Code of Ethics– further underlining our commitment to
respecting human rights.
We have a working group on human rights, drawing on senior
management from major departments across our business to help
with the continuous process of analysing potential human rights
risks. We also sit on the Boards of the Global Sustainable Tourism
Council (GSTC) and Travelife, both of which are addressing these
issues through sustainability certification standards.
TUI Group has a number of policies and procurement processes in
place focused on the prevention of human rights violations and
modern slavery.
• The Employee Code of Conduct commits us to respect and
observe human rights. TUI Group employees are also encouraged
to report any wrongdoing to the ’Speak Up’ Line.
• The Supplier Code of Conduct sets out the minimum standards
we expect from suppliers. The code includes guidance on human
rights and labour laws, bribery and corruption, environmental
impacts and support for local communities.
• We have incorporated environmental and social requirements
into contracts for our accommodation suppliers as well as other
areas of procurement.
We require our hotel suppliers to implement credible sustainability
3rd party certifications recognised or approved by the Global
Sustainable Tourism Council (GSTC). Schemes approved and / or
recognised by GSTC mandate the highest standards of human
rights, child protection and social welfare in the tourism industry.
The number of TUI customers staying in a hotel certified to a
GSTC-recognised standard grew to 9.2 million and the number of
hotels with certification grew to 1,520.
A key focus is raising awareness of human rights across our business.
In 2018 we continued to roll out bespoke training sessions and
material on modern slavery, including a modern slavery video.
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Over 4,600 TUI Destination Experiences colleagues completed child
protection training in 2018. An e-learning module on modern slavery
was developed and cascaded by Destination Experiences in 2018
and over 82 % of customer-facing colleagues have completed it.
Airline crew in the UK and Nordics receive Vulnerable Children &
Trafficking Training during their inductions, where they learn about
how to spot trafficking and what to do. Other TUI airlines are in the
process of rolling out similar trainings.
TUI Group supports a number of projects and partnerships to
protect human rights in our destinations. We raise awareness of
modern slavery at TUI hotel partner conferences and support
Travelife with road shows. We co-organised hotelier seminars in
Thailand with Travelife in April 2018 to discuss modern slavery and
influence more hotels to reach sustainability certification standards.
TUI Care Foundation supports a number of projects which protect
human rights. In 2018 the Foundation expanded the TUI Academy
programme by launching one in Hue, Vietnam. The project is provid-
ing education and training to help young vulnerable street workers
improve their lives, including providing 350 young people with
vocational training. Some 180 street workers will take part in
hospitality training in a social enterprise training restaurant being
set up in Hue city.
Our employees
Qualified and engaged employees are a major prerequisite for
TUI’s long-term success as a leading tourism company. Seeking to
recruit, develop and retain the best talents, we therefore adopted
a sustainable HR strategy in 2016 designed to make us ‘The best
company to work for’. It consists of five core strategic ar eas:
Engagement, Leadership, People Development, Organisational
Effectiveness and HR Function Development. Within these areas,
we have launched 15 strategic projects in total, pursuing them
further in the period under review. Thereby we also aim to embed
our vision ‘Think Travel. Think TUI.’ and our corporate values
‘Trusted’, ‘Unique’ and ‘Inspiring’ further in our employees’ day-
to-day activities.
Digital transformation is increasingly important for TUI. On the
one hand, the provision of products and services to meet our
customers’ needs and preferences changes. On the other hand,
digitisation also creates technical, cultural and organisational
challenges for our employees. Economic and social interdependen-
cies are becoming more complex and technological networks more
extensive. At the same time, this development also creates the
opportunity for our employees to structure their working and
private lifes in a manner more in line with their needs. TUI and
the Group Works Council are seeking to actively address these
requirements and the permanent change taking place in the world
of work so as to shape the future together. The policy paper
‘newWork@TUI’, agreed this year, provides the necessary framework
and milestones for the journey through digital transformation.
In order to support our goal to become more digital in HR, we have
launched the Group-wide HR cloud solution TUI People. It will
support us in our employee recruitment, performance reviews,
development and retention activities in the long term. Thus, TUI
People makes an essential contribution to securing our Company’s
competitiveness and the personal development of our employees.
In October 2017, we successfully launched the first out of a total of
five modules, ‘Performance & Talent Management’, as a pilot
project in seven German Group companies. With the start of the
new financial year, this module will be rolled out in additional
source markets and other German Group companies to support
the Group-wide ‘Great Place to Grow’ process. The other modules
will be successively implemented in 2019.
C A R E M O R E
We are seeking to be an attractive employer encouraging employees
to engage with passion and personality. With ‘Care more’, the
fourth pillar of our ‘Better Holidays, Better World’ initiative, our
employees are an integral and crucial part of our sustainability
strategy. After all, they make TUI the number one in the tourism
sector and their satisfaction, engagement and personal development
are a key prerequisite for our sustained success. Our goal is to
achieve a colleague engagement score of over 80 by 2020 in order
to be among the Top 25 global companies. This goal also forms the
framework for the implementation of our strategic HR projects.
The Supervisory Board and management are regularly briefed
about the implementation status of our HR strategy and the
strategic projects. In the completed financial year, we continued to
establish an efficient project reporting process, and we intend to
build on this further. Beyond that, the definition of KPIs as a
control tool will enable us to measure the progress of projects and
to depict their sustainability more comprehensively.
H R S T R AT E G Y P R O J E C T S
T U I G E T H E R E M P L O Y E E S U R V E Y
TUIgether is TUI’s employee survey, operated in partnership with
an independent employee engagement research institute. Now
well-established after 3 annual survey cycles from 2015 onward,
this year taking account of leadership and employee feedback, a
decision was made to hold a Pulse survey.
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The Pulse survey was positioned as an interim ‘health check’ of
engagement, providing leaders and teams across the Group a
longer timeframe to implement and embed initiatives identified
from 2017’s annual survey results. Survey participation scope and
results reporting to team level were unchanged, yet a shorter
questionnaire was adopted. A further annual survey is planned in
2019, utilising the full question set, when teams and businesses
across TUI will be able to assess the impact of their 2017 initiatives
in depth.
The Pulse survey focused on our priority topics of Engagement, TUI’s
VIBE leadership model – Vision, Inspire, Build Teams, Execute –
and three questions assessing follow up process effectiveness.
Increasing digitisation is a common objective across TUI, and to
align with that goal, an App, enabling participants to complete the
survey via mobile phone or tablet, was trialled in specific populations
this year. The App functionality also permits managers to download
their team’s results report directly to their mobile phone or tablet
if they wish. This is a great benefit, particularly for those managers
with geographically dispersed teams who spend significant time
travelling.
The TUI Group Engagement Index is 76 in 2018, 2 percentage
points above our research institute’s Global norm. Compared to
the score of 77 in 2017, it slightly decreased by 1. The overall VIBE
leadership index was also stable with 72 compared to 73 in 2017.
Furthermore, the sub-indices results of the 4 VIBE pillars have
helped our senior leaders to identify appropriate focus areas for
the year ahead.
With a participation rate of 75 % we almost achieved our goal of an
80 % response rate.
Clear and transparent results communications and an active
involvement in follow up processes at all levels, underpin the
TUIgether survey philosophy. There are many ways we deliver on
these principles. The results and follow up phase starts with a
presentation of the TUI Group overall results to the Group Execu-
tive Committee. There is also a clear expectation towards the
leaders at all levels to share the results with their own teams and
co-create action plans based on the findings.
The inclusion of TUIgether on the Senior Leadership Team con-
ference agenda also demonstrates the level of importance the
Group Executive Committee places on TUIgether. Regular follow
up at senior leadership meetings ensures momentum progressing
initiatives is maintained throughout the year. The Supervisory
Board also receives results presentations and updates over the
course of the year. All these measures combine to set an appro-
priate leadership focus on maximising benefit from the survey
as a tool to help improve business performance and employee
engagement.
Furthermore, the TUIgether results are communicated to our
employees via different channels. The team results are communi-
cated to the managers who share and discuss these together with
their employees in workshops. The overall results are also
published in our group intranet. In the course of the already
established ‘TUIgether chats’, employees have the possibility to
discuss with and raise questions directly to Board members. A new
initiative is ‘TUIgether Heroes’. This campaign aims at raising
awareness of specific actions taken at local business level and
sharing best practices.
Our sustained commitment to TUIgether and delivering a trans-
parent and comprehensive range of follow up activity has now
established our employee survey as the principle instrument for
receiving feedback and supporting continuous business improve-
ment across TUI.
E M P L O Y E R B R A N D I N G
By creating a uniform employer brand, TUI is seeking to position
and establish itself as an attractive employer. The overall goal of
our HR strategy, ‘The best company to work for’, provided the
framework for developing and launching an employer branding
campaign. With this campaign, we aim to attract and recruit the
best talents. Our transformation into a more digital company
characterised by stronger networking and integration, is reflected
in the campaign by the active use of different digital channels and
our homogeneous approach to job advertisements. Having been
implemented in Germany in the prior financial year, the campaign
was rolled out to other regions such as Western Region and TUI
Destination Experiences in the period under review. It will shortly
be extended to further countries.
O N E S H A R E
OneShare is another strategic project aimed at increasing employee
engagement and loyalty. Participation in this programme offers
employees around the world the opportunity to subscribe to
shares from a joint employee share programme in the long term.
The goal is to offer them an attractive investment opportunity
while strengthening their identification with TUI. OneShare,
launched in 2017 with a total of 18 countries, was successfully
rolled out to six additional countries in the reporting period. In
addition, the new ‘Golden Shares’ were offered for the first time in
2018. Every participant received 12 additional shares on top of
their investment, regardless of the amount invested. In 2018, the
rate of participation was 14.1 %, significantly exceeding the target
of 10 %. This result reflects the high attractiveness of the offer for
our employees.
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P E O P L E D E V E L O P M E N T
Our success depends on qualified and engaged employees. People
Development is therefore one of the key elements of TUI’s HR
strategy. Within this area, we have launched a number of projects
and programmes to develop specialists and executives in anticipation
of future needs, increase diversity within the workforce and promote
different career paths.
G R E AT P L A C E T O G R O W
A key milestone in People Development was the Group-wide
establishment of the global performance and talent management
approach ‘Great Place to Grow’, supported by the IT platform
TUI People.
‘Great Place to Grow’ is a three-stage, structured dialogue process
between managers and their employees. The first step is the
annual planning process of individual goals and development
opportunities for the new financial year. The mid- and the year-
end dialogue serve to review the individual progress towards the
goals and the employee’s current development. The dialogue
focuses on the respective tasks and objectives, individual potentials
and the implementation of TUI’s values in the employee’s day-to-day
activities. Due to clear guidelines and definitions, ‘Great Place to
Grow’ secures a uniform understanding of performance, potential
and development perspectives, greater transparency and visibility
of high potentials, and selective succession management.
The ‘Great Place to Grow’ annual cycle also includes the implemen-
tation of ‘Talent Calibration Panels’. Within these, Executives and
HR validate and calibrate jointly the performance and potential
assessments of employees in their areas. The results achieved for
each area also form the basis for the creation of a succession plan.
L E A R N I N G @T U I
TUI sees itself as a learning organisation. We provide regular
training and learning sessions to offer our employees personal and
technical development opportunities and prepare them for future
tasks thoroughly. In order to enhance the dialogue between the
companies and segments within TUI and to encourage people to
learn from one another and with each other, we carried out a
Group-wide Learning Week ‘newWork@TUI − TUI as a Learning
Organisation’ in the established format. One of the key topics was
digital transformation, which becomes increasingly important in
the field of learning. Apart from numerous e-learnings and online
training sessions, we also operate our TUI Academies, which offer
online training programmes for selected areas. In addition to this,
we provide individual, digital learning opportunities at the local
level, e. g. online libraries and digital learning hubs.
In the new financial year, we will also launch the TUI People learning
module. With this common platform based on state-of-the-art
technology, ‘anytime, anywhere’ access and high-quality personal-
ised, innovative and intuitive learning programmes, we are aiming
to optimally qualify our employees and comprehensively support
them in exercising their tasks. Moreover, the joint use of learning
schemes delivers synergies and ensures compliance with specific
legal requirements within the World of TUI.
S U C C E S S I O N P L A N N I N G & TA L E N T M A N A G E M E N T
Foreseeing succession planning is essential for the success of our
Company. In order to secure succession for critical business
functions and key roles in line with the respective demands, a
specific succession plan for the top management levels was
adopted this year. It sets out short-, medium- and long-term
succession so that appropriate resources are available at any time
if necessary. The status of succession planning is regularly reported
to the Supervisory Board.
In order to secure and build a pipeline of specialist and leadership
talent, TUI operates a number of programmes including the
Group-wide ‘International Graduate Leadership Programme’ as
well as already established global programmes like ‘Global High
Performance Leadership’, ‘Perspectives’ and ‘Horizons’. In addition,
a variety of measures are implemented at local level to develop
expert and managerial skills.
I N T E R N AT I O N A L C A R E E R S / G L O B A L 3 6 0
TUI aims to foster international careers and promote employee
mobility within the Group. Therefore, the ‘Global 60’ programme
was initiated in 2016. Interested employees are given the opportu-
nity to make their next career move in another country to gain
international work experience, benefit from immersion in another
culture and learn about TUI Group from a different perspective.
The programme also aims to encourage managers to look beyond
their own market when recruiting talents.
At the ‘Global 60 Conference’ held at the end of 2017, the partici-
pants of the first ‘Global 60’ programme year met Executive Board
members to discuss the pros and cons of international careers and
to formulate recommendations for future programme development
and ways to translate it into ‘business as usual’. One result of the
conference was that the programme was renamed ‘Global 360’.
The new name reflects TUI’s internationality and 360-degree
view of international careers at all levels and in all functions of
the organisation. It also reflects the diverse impacts of the project
on culture, operations as well as on the exchange of experience
between the source markets and different functions. Thus, the
initiative also drives cultural change at TUI towards a more
globalised world of work.
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In the period under review, 44 employees agreed to participate in
‘Global 360’ to gain new professional, personal and cultural ex-
periences.
managerial functions. The women’s share of managerial functions
has continued to develop positively from 34.1 % to 34.5 %.
D I V E R S I T Y@T U I
Group-wide, the proportion of women in the overall headcount
reduced slightly from 56.6 % to 55.7 %. The main focus of our
Diversity activities is to increase the proportion of women in
The proportion of women on our German supervisory bodies also
continued to rise in the period under review. On 30 Septem-
ber 2018, women accounted overall for almost 42 % of members,
up by around 2 percentage points year-on-year.
Proportion of Women
Ø German Supervisory
Boards
Executive Board
TUI AG
Group Executive
Committee
Managerial Positions
Group
Employees
Group
42 (40)
29 (17)
23 (17)
35 (34)
56 (57)
%
%
%
%
%
58 (60)
71 (83)
77 (83)
65 (66)
44 (43)
In brackets: previous year
In Germany, advantage was taken of the self-commitment mecha-
nism provided for under the German Stock Corporation Act (AktG)
and the Act on Limited Liability Companies (GmbHG) to fix specific
targets for TUI AG, TUI Deutschland and TUI fly in FY 2015. In the
period under review, nearly all targets were achieved. For 2020,
targets were fixed for these companies under the self-commitment
mechanism. Regular reports on the status quo are presented to
the Executive Board.
See Declaration on Corporate Governance and Corporate Governance
Report on page 112
TUI initiated measures aimed at increasing the number of women
in leadership functions in the long term. These include incorporating
at least one woman in the short list for new roles or replacements
within the Senior Leadership Team.
96
C O M B I N E D M A N A G E M E N T R E P O R T » N o N - f I N A N C I A l D eCl A r AT I o N
Proportion of women in managerial positions
in %
TUI AG
Supervisory Board
Executive Board
First management level below Executive Board
Second management level below Executive Board
TUI Deutschland
Supervisory Board
Executive Board
First management level below Executive Board
Second management level below Executive Board
TUI fly
Supervisory Board
Executive Board
First management level below Executive Board
Second management level below Executive Board
30 Sep 2018
30 Sep 2017
Target 2020
35
2 women
24
24
56
20
28
48
33
0
25
42
35
30
1 woman at least 1 woman
20
30
18
24
50
25
36
39
33
0
43
42
30
25
30
40
30
20
30
40
A further focus is on reconciliation of family and work life. TUI
offers its employees a number of attractive schemes to reconcile
the demands on their professional and private lives. These include
flexible working time models such as flexitime, part-time work,
sabbaticals but also mobile working. We furthermore support our
employees when they are caring for children or other family
members. All of TUI’s activities in this field are in line with local
requirements and circumstances.
E M P L O Y E E I N D I C AT O R S
In the period under review, TUI Group’s total headcount grew by
4.5 %, above all due to the acquisition of Destination Management
from Hotelbeds Group.
Personnel by segment
Hotels & Resorts
Cruises*
Destination
Experiences
Holiday Experiences
Northern Region
Central Region
Western Region
Markets & Airlines
All other segments
TUI Group
30 Sep 2018
30 Sep 2017
restated
Var. %
27,643
328
8,469
36,440
12,513
10,389
6,595
29,497
3,609
69,546
26,313
316
5,412
32,041
14,196
10,276
6,523
30,995
3,541
66,577
+ 5.1
+ 3.8
+ 56.5
+ 13.7
– 11.9
+ 1.1
+ 1.1
– 4.8
+ 1.9
+ 4.5
* Excludes TUI Cruises (JV) employees. Cruises employees are primarily hired by
external crew management agencies.
H O T E L S & R E S O R T S
Due to the continued growth strategy in Hotels & Resorts, the
headcount rose by 5.1 % to 27,643 employees. The launch of new
hotel resorts and the inclusion of additional destinations resulted
in staff increases. Riu Group reported a slight increase in its
headcount by 2.0 % to 12,336. While new hotels were opened,
for instance in Tanzania, a number of hotels were closed in the
Dominican Republic and St Martin. The number of employees
working for Robinson grew by 1.5 % to 3,945, wheras Other Hotels
rose to 1,536. This was primarily due to the continued expansion
of the TUI Blue brand. The number of employees working for
Northern Hotels increased slightly by 2.4 % to 9,826.
C R U I S E S
The headcount in the Cruises segment grew by 3.8 % year-on-year
to 328. The increase was primarily attributable to the newbuild
projects in the expedition cruise segment and a slight build-up in
staff numbers working for Marella Cruises.
T U I D E S T I N AT I O N E X P E R I E N C E S
The Destination Experiences segment reported a headcount growth
of 56.5 % to 8,469 compared to the previous financial year. The
increase was primarily attributable to the acquisition of Destination
Management from Hotelbeds Group. Staff numbers also rose due
to the organisational transfer of employees from the UK.
N O R T H E R N R E G I O N
Northern Region recorded a decline in its headcount of 11.9 % to
12,513 in the period under review. It mainly resulted from the
organisational transfer of employees from the UK to TUI Destination
Experiences.
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C E N T R A L R E G I O N
The headcount in Central Region was almost flat year-on-year at
10,389 as at the balance sheet date. In Germany and Austria, staffing
numbers remained more or less constant. Switzerland reported a
slight increase in its headcount to 509 employees. Due to the
opening of new shops, staff numbers rose, in particular in Poland,
which recorded an increase to 671 employees.
W E S T E R N R E G I O N
Compared to the previous financial year, the headcount in Western
Region grew by 1.1 % to 6,595. Staffing numbers rose in the Nether-
land airline and Belgium airline. On the other hand, the number of
employees working in France decreased.
A L L O T H E R S E G M E N T S
At 3,609 employees, the headcount in the category All Other
Segments was nearly flat year-on-year. The number of employees
working for the Corporate Centre rose by 9.3 % to 317, above all as
new functions were built up. The number of employees working
for Head Office functions in the UK grew by 4.5 % to 299. Due to
organisational changes in India, Future Markets reduced its
headcount by 21.1 % to 359.
Personnel by region*
Germany
Great Britain
Spain
Other EU
North and South America
Other regions
TUI Group
* By domicile of company
30 Sep 2018
30 Sep 2017
Var. %
10,345
11,770
9,952
22,594
5,005
9,880
69,546
10,274
13,354
9,607
20,911
4,535
7,896
66,577
+ 0.7
– 11.9
+ 3.6
+ 8.0
+ 10.4
+ 25.1
+ 4.5
At 79 %, the majority of our employees are employed in Europe.
The reported decline of employees in Great Britain to 17 % is
mainly attributable to an organisational transfer of employees to
TUI Destination Experiences. The number of employees working
in Germany amounted to around 15 %, followed by Spain with
around 14 %.
Due to the acquisition of Destination Management from Hotelbeds
Group, TUI operates in 11 additional countries. This particularly
explains the increase of employees outside Europe.
Other employee indicators
in %
Employment structure
Number of employees
Employees, female
Females in managerial positions
Employees in part-time, total
Employees in part-time, female
Employees, fixed-term employment contract
Age structure
Employees up to 20 years
Employees 21 – 30 years
Employees 31 – 40 years
Employees 41 – 50 years
Employees more than 50 years
Company affiliation
up to 5 years
6 – 10 years
11 – 20 years
21 – 30 years
more than 30 years
Vocational training in Germany
Number of trainees
Trainees, female
Training rate
Number of trainees gained certification in finanical year
Hiring rate
TUI Group
Germany
30 Sep 2018
30 Sep 2017
30 Sep 2018
30 Sep 2017
69,546
55.7
34.5
16.4
25.6
28.4
4.8
29.3
26.6
23.8
15.5
55.7
13.9
20.4
8.0
2.0
–
–
–
–
–
66,577
56.6
34.1
17.3
26.2
30.0
5.1
30.1
26.4
23.7
14.7
54.0
14.9
20.8
8.3
2.0
–
–
–
–
–
10,345
68.4
35.4
38.8
49.1
12.7
2.8
19.6
22.3
30.1
25.2
34.1
11.7
30.2
19.1
4.9
565
77.5
5.5
190
71.6
10,274
68.4
33.9
37.9
47.8
14.2
3.1
20.1
22.9
30.8
23.1
33.6
12.8
30.8
17.9
4.9
571
79.0
5.6
193
73.1
98
C O M B I N E D M A N A G E M E N T R E P O R T » N o N - f I N A N C I A l D eCl A r AT I o N
Personnel costs
€ million
2018
2017
Var. %
Wages and salaries
Social security
contributions
Pension costs
Total
1,982.3
1,896.4
299.7
154.3
2,436.3
293.0
167.6
2,357.0
+ 4.5
+ 2.3
– 7.9
+ 3.4
The pay package offered by TUI Group is made up of various
components, reflecting the framework conditions in different
countries and companies. It also reflects the appropriateness of
remuneration and customary market rates. Depending on the
function concerned, a fixed basic salary may go hand in hand with
variable components. TUI Group uses these variable factors to
honour individual performance and to enable employees to partici-
pate in the Company’s strategic and long-term success. Moreover,
senior management have share options and are thus able to
benefit directly when the Company grows in value.
In the period under review, TUI Group’s personnel costs increased
by 3.4 % to € 2,436 m. The year-on-year increase in expenses for
wages and salaries was mainly attributable to higher staff numbers
in operating areas as well as pay rises.
O T H E R H R A R E A S
P E N S I O N S C H E M E S
Many TUI Group companies offer their employees pension schemes
in the form of direct insurance contracts and individual or direct
commitments to build up a private pension, or they pay additional
contributions to pension schemes for their employees. In Germany,
collective contracts have been concluded in order to meet the
legal entitlement to deferred compensation. These schemes were
devised to take advantage of fiscal and social security opportunities,
particularly for employee-funded company pension schemes
through direct insurance.
PA R T-T I M E E A R LY R E T I R E M E N T
To further increase the flexibility of their company HR and succes-
sion planning, Group companies in Germany are able to make use
of the opportunities provided under the German Part-Time Early
Retirement Act, enabling people to shift gradually from employment
to retirement. This opportunity is partly supported by current
collective bargaining contracts and company agreements, and is
increasingly being taken up. At the balance sheet date, € 9.4 m was
provided through a capital investment model for the 227 employees
working under part-time early retirement contracts in order to
hedge their accrued assets against employer insolvency.
G L O B A L E M P L O Y M E N T S TAT E M E N T
A further milestone achieved during the period under review was
the resolution to publish a Global Employment Statement. It is
aimed at fair and respectful treatment of employees at all levels
and compliance with applicable law and industrial standards. Our
TUI Global Employment Statement aims to make a Group-wide
commitment to promote human rights, no discrimination, no forced
labor, no child labour, salaries and benefits, freedom of association
and collective bargaining, health and safety, diversity as well as
people development and feedback culture. This commitment
should be applied both to our own employees and those of our
contractual partners.
E M P L O Y E E R E P R E S E N TAT I V E S
TUI Group has a large number of co-determination bodies at a
national and international, company and supra-company level. They
include local works councils, company works councils and the Group
Works Council. The members of these bodies represent the interests
of our Group’s employees in Germany. Through their statutory
rights of participation and initiative, they ensure representation of
the interests of employees on all issues and projects of relevance
to staff members and compliance with employee rights.
The Group Works Council is the top-level body for representing
the interests of employees in German companies in accordance
with legislation on industrial relations. In FY 2018, it consisted of
28 members from 21 companies. By delegating their representatives
to the Group Works Council, the respective bodies obtain continuous
and up-to-date information about structural and operational chal-
lenges within the Group. Due to their co-determination activities
and their active participation in response to the needs and issues
that call for action, they have a high penetration rate among the
Group’s employees. In this context, both the Group Works Council
and the local works councils in Germany have made an important
contribution to the implementation of the HR strategy through the
conclusion of accompanying works council agreements.
A key project was the conclusion of an agreement on the launch of
long-term worktime accounts for German Group companies. This
has laid the basis for employees to take up options for paid time
off later in their career in the form, for example, of early retirement
or a sabbatical. The next step is to implement the model.
At a European level, TUI’s Europe Forum ensures a proper process
of information and consultation on cross-border issues affecting
the interests of employees in at least two member states of the
European Economic Area (and Switzerland). TUI’s Europe Forum
represents the interests of employees in companies abroad, there-
by performing important work in supporting the companies and
integrating their employees. In FY 2018, 45 employee representa-
tives from 14 countries were delegated to the Forum. The area of
focus of the TEF in the period under review included the establish-
ment of a cross-border Group Occupational Health Management
system and various strategic projects in European countries.
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Security, Health & Safety
In the reporting period, TUI AG’s Group Security, Health & Safety
(Group SHS) team continued to refine our holistic, Group-wide safety
concept for customers and employees, the Company’s reputation
and assets. Dialogue on a regular basis with our subsidiaries and
Group departments provides the basis for professional safety
management in line with needs and requirements. Group SHS
focuses on pro-active and sustainable action. It continually monitors
and analyses developments in the destinations, prepares response
measures and manages exceptional situations. In conjunction with
subsequent follow-up measures (lessons learnt and process adjust-
ments), this cycle is implemented as a continuous, interconnected
process.
The period under review saw the development and implementation
of standardised, Group-wide frameworks such as guidelines, opera-
tional instructions and processes. They ensure fast and pertinent
responses to safety-critical events and pro-active protection from
risks.
Examples include guidelines for safety measures within Hotels &
Resorts, for business travel or for event and crisis management.
These frameworks are based on a holistic risk analysis, taking
account of incidents, nature-related, social and political develop-
ments in destinations, health-related information and safety-
relevant briefings from government agencies. They form the basis
for advice provided by Group SHS, e. g. in the form of safety training,
consulting, defined actions or planning documents.
The frameworks are applicable group-wide. Shareholdings in which
management control does not lie with TUI AG, are advised to imple-
ment the frameworks. On this basis, security and safety functions
across the Group cooperate within a network coordinated by Group
SHS. This ensures full Group coverage and a coordinated approach
on safety-related issues tailored to the needs of the activities
concerned.
Implementation of these safety standards is ensured by regular
trips to destinations and to our Hotels & Resorts for the purposes
of consultancy and evaluation. In the period under review, Group
SHS carried out fifteen evaluation visits to various destinations.
Apart from obtaining local insights into the safety standards of our
hotels, this dialogue with hotel managers and with representatives of
both TUI Destination Experiences and safety and tourism authorities
provides an overview of the destination concerned and the challenges
it poses to TUI as an integrated travel group. Reporting to manage-
ment creates the opportunity to initiate and orchestrate further
measures.
In the reporting period, numerous audits embedded in the quality
assurance process were carried out. Apart from safety audits,
Group SHS launched around 5,400 safety and security audits.
In addition to this consultancy work, particular weight is attached
to professional development and awareness-building for our own
staff. Travel agency and airport station staff received additional
safety and security advice tailored to their specific areas of activity.
TUI AG operates a Group-wide event and crisis management system.
It was successfully applied, for instance, in connection with tropical
storms, earthquakes and wildfires as well as health-relevant
events. Apart from aggregating data and analysing the local situa-
tion, our event management frameworks ascertain how guests and
employees are affected and what support they need, as well as
coordinating with local public agencies, European bodies and other
partners. 24 / 7 control centres form the basis for fast and pertinent
responses to critical events. Appropriate reporting ensures that
management is informed and continually updated on all key events
and developments.
Compliance / Anti-corruption and anti-bribery
Details of TUI Group’s anti-corruption and anti-bribery measures
are presented in the Corporate Governance section on Compliance
from page 125 in the present Annual Report.
100
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A NNUAL FINA NCIAL
S TATE ME NT S OF T UI AG
Condensed version according to German Commercial Code (HGB)
Earnings position of TUI AG
The annual financial statements of TUI AG were prepared in
accordance with the provisions of the German Commercial Code
(HGB), taking account of the complementary provisions of the
German Stock Corporation Act (AktG), and audited by Deloitte
GmbH Wirtschaftsprüfungsgesellschaft, Hanover. They are
published in the federal gazette. The annual financial statements
have been made permanently available on the Internet at
www.tuigroup.com and can be requested in print from TUI AG.
In the present Annual Report, the Management Report of TUI AG
has been combined with the Management Report of TUI Group.
Income statement of TUI AG
€ million
Turnover
Other operating income
Cost of materials
Personnel costs
Depreciation
Other operating
expenses
Net income from
investments
Write-downs of
investments
Net interest
Taxes on income
and profit
Profit after taxes
Other taxes
Net profit for the year
2018
122.7
326.4
7.7
67.9
1.3
349.3
2017
45.4
392.6
7.6
49.9
1.0
Var. %
+ 170.3
– 16.9
+ 1.3
+ 36.1
+ 30.0
500.4
– 30.2
1,010.0
933.3
+ 8.2
128.8
5.2
– 67.2
976.5
– 6.9
983.4
58.1
8.7
15.7
747.3
5.6
741.7
+ 121.7
– 40.2
n. a.
+ 30.7
n. a.
+ 32.6
The earnings position of TUI AG, the Group’s parent company, is
primarily determined by the appropriation of profits by its Group
companies, either directly associated with TUI AG via profit and
loss transfer agreements or distributing their profits to TUI AG
based on relevant resolutions.
T U R N O V E R A N D O T H E R O P E R AT I N G I N C O M E
The increase in turnover in the financial year under review mainly
resulted from higher licensing revenue due to the launch of a
changed licensing fee model. The decline in other operating income
was primarily attributable to a year-on-year decline in gains on
exchange. This income was offset by expenses for exchange losses
of a similar amount, carried in other operating expenses. Apart
from the gains on exchange, other operating income primarily
included income from the elimination of intercompany services,
carried alongside expenses of almost the same amount passed on
to TUI AG from other Group companies, also carried in other oper-
ating expenses.
E X P E N S E S
Personnel costs rose versus FY 2017. Pension expenses increased
primarily due to transfers to pension provisions. The increase in
personnel costs was driven in particular by bonus payments and
share options from multi-year remuneration models for members
of the boards.
Other operating expenses mainly comprised the cost of financial
and monetary transactions, charges, fees, services, transfers to
impairments, other administrative costs as well as expenses for
exchange losses and the intercompany elimination of services.
Other operating expenses declined in particular due to the decrease
in expenses for exchange losses.
N E T I N C O M E F R O M I N V E S T M E N T S
In the financial year under review, TUI AG’s net income from invest-
ments was driven by the distribution of profits by TUI Cruises
GmbH and by TUI Travel Holdings via TUI Travel Ltd. in the context
with the acquisition of TUI Nordics Holding AB. Net income from
investments also included income from profit transfers from hotel
companies and companies allocable to central operations. It also
comprised expenses for loss transfers from Group companies,
resulting in a corresponding reduction in net income from invest-
ments. Loss transfers increased year-on-year.
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101
W R I T E - D O W N S O F I N V E S T M E N T S
In the period under review, write-downs of investments mainly
related to write-downs of a subsidiary allocated to central opera-
tions as well as an investment in a Turkish hotel. In the period
under review, write-downs were also effected on loans to Group
companies.
F I X E D A S S E T S
At the balance sheet date, fixed assets almost exclusively consisted
of investments. The increase in investments was mainly attributable
to the acquisitions of TUI Nordic Holding AB and TUI Portugal SA
as well as the implementation of capital increases by subsidiaries.
I N T E R E S T R E S U LT
The decline in the interest result was partly attributable to an
increase in interest expenses (to affiliated companies). This effect
was not fully offset by the increase in non-current loans to Group
companies by TUI AG and the associated interest income.
TA X E S
In the period under review, taxes related to income taxes and
other taxes. They did not include any deferred taxes.
N E T P R O F I T F O R T H E Y E A R
For FY 2018, TUI AG posted a net profit for the year of € 983.4 m.
Net assets of TUI AG
TUI AG’s net assets and financial position as well as its balance
sheet structure reflect its function as the TUI Group’s parent
company. The balance sheet total rose by 6.1 % to € 10.4 bn in
FY 2018.
Abbreviated balance sheet of TUI AG (financial statement
according to German Commercial Code)
€ million
30 Sep 2018
30 Sep 2017
Var. %
Intangible assets /
property, plant and
equipment
Investments
Fixed assets
Receivables / Trade
securities
Cash and cash
equivalents
Current assets
Prepaid expenses
Assets
Equity
Special non-taxed items
Provisions
Bonds
Other liabilities
Liabilities
Liabilities
21.9
7,998.8
8,020.7
19.4
7,078.9
7,098.3
+ 12.9
+ 13.0
+ 13.0
1,470.5
1,644.4
– 10.6
889.3
2,359.8
0.5
10,381.0
5,801.5
0.1
361.9
300.0
3,917.4
4,217.4
10,381.0
1,039.0
2,683.4
0.7
9,782.4
5,192.7
0.1
462.5
300.0
3,827.1
4,127.1
9,782.4
– 14.4
– 12.1
– 28.6
+ 6.1
+ 11.7
–
– 21.8
–
+ 2.4
+ 2.2
+ 6.1
C U R R E N T A S S E T S
The decrease in current assets of 12.1 % to € 2,359.8 m was mainly
driven by the decline in cash and cash equivalents and receivables /
securities, which had included short-term money market funds in
the prior year.
T U I A G ’ S C A P I TA L S T R U C T U R E
E Q U I T Y
TUI AG’s equity increased by € 608.8 m to € 5,801.5 m. The sub-
scribed capital of TUI AG consists of no-par value shares, each
representing an equal portion in the capital stock. The proportionate
share in the capital stock per share is around € 2.56. At the end of
FY 2018, the subscribed capital of TUI AG rose due to the issue of
employee shares. At the end of the financial year under review,
subscribed capital comprised 587,901,304 shares.
In FY 2018, capital reserves rose by € 5.9 m due to the issue of
employee shares and share-based payments. Revenue reserves
exclusively consisted of other revenue reserves. The Articles of
Association do not contain any provisions concerning the formation
of reserves.
The profit for the year amounted to € 983.4 m. Taking account of
the profit carried forward of € 814.0 m, net profit available for
distribution totalled € 1,797.4 m. A proposal will be submitted to
the Annual General Meeting to use the net profit available for
distribution for the financial year under review to distribute a
dividend of € 0.72 per no-par value share and to carry the amount
of € 1,374.1 m, remaining after deduction of the dividend total of
€ 423.3 m, forward on new account. The equity ratio rose to 55.9 %
(previous year 53.1 %) in FY 2018.
P R O V I S I O N S
Provisions decreased by € 100.6 m to € 361.9 m. They consisted of
pension provisions worth € 144.5 m (previous year € 136.0 m), tax
provisions worth € 122.6 m (previous year € 196.1 m) and other
provisions worth € 94.8 m (previous year € 130.4 m).
While pension provisions rose slightly year-on-year in the financial
year under review, tax provisions and provisions for invoices
outstanding, personnel costs and other risks declined versus the
prior year.
L I A B I L I T I E S
TUI AG’s liabilities totalled € 4,217.4 m, up by € 90.3 m or 2.2 %.
102
C O M B I N E D M A N A G E M E N T R E P O R T » A N N U A l f I N A N C I A l S TAT e M e N T S o f T U I A G
In October 2016, TUI AG issued an unsecured bond worth € 300.0 m
maturing in October 2021. TUI AG used the proceeds from the is-
sue of this bond to cancel and repay a five-year bond issued in
September 2014 ahead of its maturity date. In July 2018, TUI AG
issued an unsecured Schuldschein with banks with a total volume
of € 425.0 m for general corporate financing purposes with different
tenors of five to ten years.
The increase in liabilities was mainly driven by the transactions of
the TUI AG subsidiaries included in its cash pool.
TUI’s net financial position (cash and cash equivalents as well as
marketable securities less bonds and Schuldschein) declined
year-on-year, amounting to a clearly positive position of € 164.3 m
in the period under review.
C A P I TA L A U T H O R I S AT I O N R E S O L U T I O N S
Information on new or existing resolutions concerning capital
authorisation, adopted by Annual General Meetings, is provided in
the next chapter on Information Required under Takeover Law.
C O M B I N E D M A N A G E M E N T R E P O R T » T U I S H A r e
103
T UI SHARE
TUI share has gained 61 % since the merger
with TUI Travel
The TUI share has outperformed significantly over the four-year
period. The share’s Total Shareholder Return (TSR) has increased
by 61 % since the announcement of the merger with TUI Travel in
June 2014, considerably outperforming the FTSE 100 (+ 31 %) and
DAX 30 (+ 23 %) indices. In a market environment characterised by
macroeconomic and geopolitical challenges, TUI Group delivered
the total announced merger synergies of € 100 m, accelerated the
Group’s transformation as a leading provider of holiday products
and launched important digitalisation initiatives. During that period,
the Group has paid dividends worth around € 1.6 bn to its share-
holders (including the dividend proposal for FY 2018) and in-
creased its operating result by more than 10 % on a constant
currency basis for the fourth consecutive year. The share price
performance demonstrates TUI Group’s strong positioning as a
leading provider with own hotel and cruise products and unique
holiday experiences with its own direct distribution. Our strategy
of double diversification, i. e. our balanced portfolio of markets
and destinations, creates resilience and enables us to flexibly
respond to different market conditions. It forms the basis for the
further implementation of our growth roadmap.
TUI share continues considerable outperformance
in F Y 2018
The TUI share started off the current financial year at a price of
€ 14.53. Supported by strong business results, further progress
in the transformation of the Group and the presentation of new
digitalisation strategy, the TUI share gained significantly in the
course of the year. Shortly after the Capital Markets Day for analysts
and investors with a special focus on the cruise segment, the share
price closed at its full year high of € 20.66 on 17 May 2018.
The market environment was subsequently characterised by external
challenges: On the one hand, it was adversely affected by flight
disruptions, driven primarily by air traffic control strikes in France.
On the other hand, customers’ booking behaviour was impacted
by the sustained period of exceptionally hot weather in Northern
Europe this summer. TUI’s share also saw impact from announce-
ments of lowered profit guidance by other travel and tourism com-
panies. Moreover, the trade dispute between the US and China as
well as Turkey intensified further, causing increasing uncertainty in
the international capital markets and, among others, a strong fall
in the Turkish lira.
At the end of the financial year under review, the TUI share turned
positive again, benefiting from high booking numbers and the
reiteration of the operating profit guidance at constant currency.
This further demonstrates the strength and resilience of our
transformed business model in a challenging environment. The
Total Shareholder Return of the TUI share rose by a total of 17 % in
2018, while FTSE 100 only gained 6 % and DAX 30 lost around 5 %.
TUI share data
30 September 2018
WKN
ISIN
Stock exchange centres
Reuters / Bloomberg
Stock category
Capital stock
Number of shares
Market capitalisation
Market capitalisation
TUAG00
DE000TUAG000
London, Xetra, Hanover
TUIGn.DE / TUI1.GR (Frankfurt);
TUIT.L / TUI:LN (London)
Registered ordinary shares
1,502,945,818
587,901,304
9.7
8.7
€
bn €
bn £
104
C O M B I N E D M A N A G E M E N T R E P O R T » T U I S H A r e
TUI share price (F Y 2018)
in %
160
150
140
130
120
110
100
90
80
30 SEPTEMBER 2017
TUI (TSR)
DAX 30
FTSE 100
28 SEPTEMBER 2018
TUI Share price since the merger announcement of TUI AG with TUI Travel PLC
in %
220
200
180
160
140
120
100
80
60
24 JUNE 2014
2015
2016
2017
28 SEPTEMBER 2018
TUI (TSR)
DAX 30
FTSE 100
C O M B I N E D M A N A G E M E N T R E P O R T » T U I S H A r e
105
Long-term development of the TUI share (Xetra)
€
High
Low
Year-end share price
2014
6.97
3.14
6.70
2015
17.71
9.84
16.35
2016
17.21
10.17
12.69
2017
14.90
11.46
14.38
2018
20.66
14.34
16.56
Quotations, indices and trading
Analyst recommendations
The TUI share has its primary listing in the Premium segment of
the Main Market of the London Stock Exchange and is included in
FTSE’s UK Index Series including FTSE 100, the UK’s major share
index. It also has a secondary listing in the electronic trading system
Xetra and at the Hanover Stock Exchange.
TUI AG is represented in the sustainability index FTSE4Good and
on the Ethibel Investment Register. In 2018 TUI was included in the
RobecoSam Sustainability Yearbook with a ‘Silver Class’ distinction.
TUI participated again in the CDP Climate Change assessment 2018,
results being announced in early 2019.
In FY 2018, the average daily trading volume at the London Stock
Exchange was around 1.3 million shares, while about 0.6 million
shares were traded on Xetra. Across all trading platforms, the
trading volume in the UK amounted to around 3.4 million shares,
with around 1.8 m shares traded in the euro line. Both the sterling
and the euro lines thus delivered strong liquidity for trading by
institutional and retail investors.
Analysts’ Recommendations (30 SEPTEMBER 2018)
in %
63.2
Buy
%
5.3
Sell
31.5
Hold
Analysis and recommendations by financial analysts are a key
decision-making factor for institutional and private investors. In the
financial year under review, more than 20 analysts regularly pub-
lished studies on TUI Group. In September 2018, 63 % of analysts
issued a recommendation to ‘buy’ the TUI share, with 32 % rec-
ommending ‘hold’. One analyst recommended ‘sell’.
106
C O M B I N E D M A N A G E M E N T R E P O R T » T U I S H A r e
Shareholder structure
Shareholder structure (30 SEPTEMBER 2018)
in %
Geographical shareholder structure (30 SEPTEMBER 2018)
in %
6.6
Private
investors
24.9*
Alexey
Mordashov
%
53.6
EU
%
16.7
North America
29.7
Other
3.4
Riu Hotels S. A.
65.1
Institutional
investors
* 24.998 %
The current shareholder structure and the voting right notifications
pursuant to section 33 of the German Securities Trading Act are avail-
able online at: www.tuigroup.com/en-en/investors/share/shareholder-
structure and www.tuigroup.com/de-de/investoren/news
At the end of FY 2018, around 75 % of TUI shares were in free float.
Around 7 % of all TUI shares were held by private shareholders,
around 65 % by institutional investors and financial institutes
and around 28 % by strategic investors. Analysis of the share
register shows that most shares are being held by investors from
EU countries.
Dividend policy
Development of dividends and earnings of the TUI share
€
Earnings per share
Dividend
2014
+ 0.26
0.33
2015
+ 0.64
0.56
2016
+ 1.78
0.63
2017
+ 1.10
0.65
2018
1.25
0.72
In the framework of the merger with TUI Travel, TUI Group defined
a dividend policy under which the dividend increases in line with
the growth in underlying EBITA at constant currency. A proposal
will therefore be submitted to the Annual General Meeting to
distribute a dividend of € 0.72 per no-par value share to the share-
holders for FY 2018.
Investor Relations
Open and continuous dialogue and transparent communication
form the basis for our Investor Relations work with our private
shareholders, institutional investors, equity and credit analysts
and lenders. There are three reasons to invest in the TUI share:
C O M B I N E D M A N A G E M E N T R E P O R T » T U I S H A r e
107
1
STRONG STRATEGIC POSITION
2
STRONG EARNINGS GROWTH
3
STRONG C ASH GENERATION
More details about Investor Relations online at:
www.tuigroup.com/de-de/investoren
Our integrated business model covers the entire value chain
in tourism – from distribution through aviation, accommoda-
tion in the hotel or on board the cruise liner all the way to
excursions organised by our local incoming agencies in the
destinations. TUI covers the entire customer journey to drive
customer satisfaction and loyalty and hence profitability. We
are convinced that this provides us with a strategic advantage
over our competitors.
TUI operates in a growth market and considerably increased
its operating result over the past few years thanks to its
strong positioning. Underlying EBITA grew by more than 10 %
for the fourth consecutive year at constant currency. We will
deliver future growth, supported by the further implementa-
tion of our growth roadmap and the increasing delivery of
the benefits from our digitalisation initiatives.
TUI is characterised by balance sheet stability and strong
operating cash conversion. The Group has defined a clear
financial policy, improved its coverage ratio* and leverage ratio
over the past few years and pays an attractive dividend to its
shareholders.
* We define our cash conversion as the difference between underlying EBITDA
less net normalised net capex and financial investments in relation to adjusted
EBITDA .
In the completed financial year, many discussions were held, centring
on the growth strategy for the integrated tourism group, the digital-
isation initiatives and the business performance in the individual
segments, enabling stakeholders to make a realistic assessment of
TUI Group’s future development. In this context, TUI’s management
team sought dialogue with investors at roadshows and conferences
in London, Dublin, Frankfurt, Berlin, Munich, Zurich, Vienna, Milan,
Madrid, Amsterdam, Brussels, Paris, Oslo, Copenhagen, Tokyo,
New York, Boston, Chicago, Montreal and Toronto.
TUI’s Investor Relations team also makes every effort to engage in
direct contact with private investors. TUI Group’s IR team sought
dialogue with this target group on many occasions, such as events
organised by shareholder associations. Another key platform for
exchanges with private shareholders was the IR stall at TUI’s Annual
General Meeting. TUI also offers a broad range of information for its
analysts, investors and private shareholders on its website. All results
conference calls were transmitted live and comprehensive informa-
tion on the Capital Markets Day was presented on the website.
108
C O M B I N E D M A N A G E M E N T R E P O R T » I Nf o r M AT I o N r e q U Ir e D U N D e r TA K e o V e r l A w
INFORMATION REQUIRED
UNDER TAK EOVER L AW
pursuant to sections 289a (1) and 315a (1) of the German
Commercial Code (HGB) and explanatory report
Composition of subscribed capital
The subscribed capital of TUI AG consists of no-par value shares,
each representing an equal share of the capital stock. As a propor-
tion of the capital stock, the value of each share is around € 2.56.
The subscribed capital of TUI AG, registered in the commercial reg-
isters of the district courts of Berlin-Charlottenburg and Hanover,
consisted of 587,901,304 shares at the end of FY 2018 (previous
year 587,386,900 shares) and totalled € 1,502,945,818.40. Each share
confers one vote at the Annual General Meeting.
R E S T R I C T I O N S O N V O T I N G R I G H T S A N D
S H A R E T R A N S F E R S
The Executive Board of TUI AG is not aware of any restrictions on
voting rights or the transfer of shares.
Shareholder structure (30 SEPTEMBER 2018)
in %
6.6
Private
investors
24.9*
Alexey
Mordashov
%
3.4
Riu Hotels S. A.
65.1
Institutional
investors
* 24.998 %
E Q U I T Y I N T E R E S T S E X C E E D I N G 1 0 % O F T H E
V O T I N G R I G H T S
The Executive Board of TUI AG has been notified of the following
direct or indirect equity interests reaching or exceeding 10 % of the
voting rights:
At the end of FY 2018, around 75 % of TUI shares were in free float.
Around 7 % of all TUI shares were held by private shareholders,
around 65 % by institutional investors and financial institutes
and around 28 % by strategic investors.
Alexey Mordashov, Russia, notified us on 15 December 2016 pur-
suant to section 33 (1) of the German Securities Trading Act that
the voting shares in TUI AG, Hanover, Germany, attributable to him
exceeded the 20 % threshold on 12 December 2016. As per that
date, voting shares totalling 20.01 % (or 117,484,579 voting rights)
were attributable to Alexey Mordashov pursuant to section 34 (1)
sentence 1 no. 1 of the German Securities Trading Act. On the
basis of the notifications pursuant to section 19 of the MAR, the
voting shares in TUI AG attributable to him amounted to 24.998 %
as at 30 September 2018.
Shares with special rights conferring powers of control
No shares with special rights conferring powers of control have
been issued.
System of voting right control of any employee
share scheme where the control rights are not
exercised directly by the employees
Where TUI AG grants shares to employees under its employee
share programme, the shares are directly transferred to the em-
ployees (sometimes with a lock-up period). Beneficiaries are free to
directly exercise the control rights to which employee shares entitle
them, in just the same way as other shareholders, in line with legal
requirements and the provisions of the Articles of Association.
C O M B I N E D M A N A G E M E N T R E P O R T » I Nf o r M AT I o N r e q U Ir e D U N D e r TA K e o V e r l A w
109
Appointment and removal of Executive Board members
and amendments to the Articles of Association
if a third partly directly or indirectly acquires control over at least
50 % or the majority of the voting shares in TUI AG.
In the event of a change of control, the holders of the Schuldschein
worth € 425.0 m and of the fixed-interest senior bond worth
€ 300.0 m must be offered a buyback.
For the syndicated credit line worth € 1.75 bn, of which € 102.4 m
had been used via bank guarantees as at the balance sheet date, a
right of termination by the lenders has been agreed in the event of
a change of control. This also applies to several bilateral guarantee
lines with a total volume of £ 85.0 m, concluded with various insur-
ance companies. At the balance sheet date, an amount of £ 27.3 m
had been used.
Beyond this, there are no agreements in guarantee, leasing, option
or other financial contracts that might cause material early re-
demption obligations that would be of significant relevance for the
Group’s liquidity.
Apart from the financing instruments mentioned above, a frame-
work agreement between the Riu family and TUI AG includes a
change of control clause. A change of control occurs if a shareholder
group represents a predefined majority of AGM attendees or if one
third of the shareholder representatives on the Supervisory Board
are attributable to a shareholder group. In the event of a change of
control, the Riu family is entitled to acquire at least 20 % and at
most all shares held by TUI in RIUSA II S.A. A similar agreement
concerning a change of control at TUI AG has been concluded
with the El Chiaty Group. Here, too, a change of control occurs if
a shareholder group represents a predefined majority of AGM
attendees or if one third of the shareholder representatives on the
Supervisory Board are attributable to a shareholder group. In that
case, the El Chiaty Group is entitled to acquire at least 15 % and at
most all shares held by TUI in the joint hotel companies in Egypt
and the United Arab Emirates. A change of control agreement has
also been concluded for the joint venture TUI Cruises between
Royal Caribbean Cruises Ltd and TUI AG for the event that a
change of control occurs in TUI AG. The agreement gives the part-
ner the right to demand termination of the joint venture and to
purchase the stake held by TUI AG at a price which is lower than
the selling price of their own stake.
Compensation agreements have not been concluded between the
Company and Executive Board members or employees in the
event of a takeover bid.
The appointment and removal of Executive Board members is
based on sections 84 et seq. of the German Stock Corporation Act
in combination with section 31 of the German Co-Determination
Act. Amendments to the Articles of Association are based on the
provisions of sections 179 et seq. of the German Stock Corpora-
tion Act in combination with section 24 of the Articles of Associa-
tion of TUI AG.
Powers of the Executive Board to issue or buy back
shares
The Annual General Meeting of 13 February 2018 authorised
TUI AG’s Executive Board to acquire own shares of up to 5 % of the
capital stock. The authorisation will expire on 12 August 2019. The
Annual General Meeting of 13 February 2018 adopted a resolution
to create authorised capital for the issue of employee shares
worth € 30.0 m. The Executive Board of TUI AG is authorised to use
this approved capital by 12 February 2023 in one or several trans-
actions by issuing employee shares against cash contribution. In
the completed financial year, 514,404 new employee shares were
issued, so that the authorised capital totalled around € 28.7 m at
the balance sheet date.
The Annual General Meeting of 9 February 2016 adopted a resolu-
tion to create conditional capital of € 150.0 m for the issue of
bonds. The authorisation to issue bonds with conversion options
or warrants as well as profit-sharing rights and income bonds (with
or without fixed terms) of up to a nominal amount of € 2.0 bn will
expire on 8 February 2021. The Annual General Meeting of 9 Feb-
ruary 2016 also adopted a resolution to create authorised capital
for the issue of new registered shares against cash contribution
worth a maximum of € 150.0 m. The authorisation will expire on
8 February 2021. The Annual General Meeting on 9 February 2016
furthermore adopted a resolution to create authorised capital for
the issue of new shares of € 570.0 m against cash contributions or
contributions in kind. The issue of new shares against contribu-
tions in kind has been limited to € 300.0 m. The authorisation will
expire on 8 February 2021.
To date, the authorisations approved in 2016 have not been used.
See (23) Subscribed capital in the Notes on page 206 and (6) Sub-
scribed capitel in the Financial Statements of TUI AG.
Significant agreements taking effect in the event of a
change of control of the Company following a takeover
bid, and the resulting effects
Some of TUI AG’s outstanding financing instruments contain
change of control clauses. A change of control occurs in particular
The Cape Verde Islands deep in the Atlantic Ocean are
a perfect place to relax with about 350 days of
sunshine a year. TUI is extending its presence on the isle of
Sal, where the Robinson Club Cabo Verde will open
in late 2019.
»
R E A D M O R E A B O U T S A L’ S B L U E S K I E S
A N D T H E N E W R O B I N S O N C L U B I N O U R M A G A Z I N E
A R T I C L E ‘ S U N S O A K E D ’ .
CORPOR ATE
GOVERNA NCE
112 Executive Board and Supervisory Board
115 Corporate Governance Report
115
Statement on Corporate Governance
(as part of the Management Report)
128 Remuneration Report
112
C O R P O R AT E G O V E R N A N C E » e X e C U T I Ve B o A r D A N D S U p e r V I So r y B o A r D
E XECU TIVE BOARD A ND
SUPERVISORY BOARD
Supervisory Board
Name
Prof. Klaus Mangold
Frank Jakobi1
Sir Michael Hodgkinson
Function / Occupation
Chairman of the Supervisory Board of TUI AG
Chairman of the Supervisory Board of Rothschild GmbH
Chairman of the Supervisory Board of Knorr-Bremse AG
Deputy Chairman of the Supervisory Board of TUI AG
Travel Agent
Deputy Chairman fo the Supervisory Board of TUI AG
Andreas Barczewski1
Peter Bremme1
Prof. Edgar Ernst
Aircraft Captain
Regional Head of the Special Services Division
of ver.di – Vereinte Dienstleistungsgewerkschaft
President of Deutsche Prüfstelle für Rechnungslegung (DPR)
Wolfgang Flintermann1
Group Director Financial Accounting & Reporting, TUI AG
Angelika Gifford
Valerie Frances Gooding
Supervisory Board Member and Technology Executive
Member of supervisory bodies in different companies
Location
Stuttgart
Hamburg
London
Hanover
Hamburg
Bonn
Großburgwedel
Kranzberg
Weybridge
Dr Dierk Hirschel1
Janis Kong
Business unit manager of the trade-unition ver.di – Vereinte Dienstleistungsgewerkschaft
Member of supervisory bodies in different companies
Berlin
London
Peter Long
Coline McConville
Chairman Countrywide PLC
Member of supervisory bodies in different companies
Alexey Mordashov
Chairman Board of Directors of PAO Severstal
Michael Pönipp1
Hotel Manager
London
London
Moscow
Hanover
Carmen Riu Güell
Managing Director RIUSA II S. A.
Palma de Mallorca
Carola Schwirn1
Anette Strempel1
Ortwin Strubelt1
Stefan Weinhofer1
Dr Dieter Zetsche
Department Coordinator in the Transportation Division
of ver.di – Vereinte Dienstleistungsgewerkschaft
Travel Agent
Travel Agent
International Employee Relations Coordinator at TUI AG
Chairman of the Board of Management Daimler AG
Berlin
Hemmingen
Hamburg
Vienna
Stuttgart
1 Representative of the employees
2 Information refers to 30 September 2018 or date of resignation from the
Supervisory Board of TUI AG in F Y 2018.
3 Chairman
4 Deputy Chairman
a)
b)
Membership in supervisory boards within the meaning of section 125 of the
German Stock Corporation Act (AktG)
Membership in comparable German and non-German bodies of companies
within the meaning of section 125 of the German Stock Corporation Act (AktG)
Initial
Appointment
Appointed
until AGM
Other Board Memberships 2
7 Jan 2010
2021
a) Continental AG
Knorr-Bremse AG3
15 Aug 2007
2021
11 Dec 2014
13 Feb 2018
b) Keolis (UK) Limited3
Number of
TUI AG shares
(direkt und indirekt)2
b) Alstom S. A.
Baiterek Holding JSC
Rothschild GmbH3
10 May 2006
2 Jul 2014
9 Feb 2011
13 Jun 2016
26 Mar 2012
11 Dec 2014
16 Jan 2015
11 Dec 2014
9 Feb 2016
11 Dec 2014
9 Feb 2016
17 Apr 2013
14 Feb 2005
1 Aug 2014
2 Jan 2009
3 Apr 2009
9 Feb 2016
13 Feb 2018
2021
2021
2021
2021
2021
2020
2021
2020
2021
2020
2021
2021
2021
2021
2021
2021
2021
2023
Keolis Amey Docklands Ltd.
World Airport Partners GmbH
a) TUIfly GmbH4
a) TÜV Nord AG
a) Metro AG
VONOVIA SE 4
a) Deutscher Reisepreis-
Sicherungsverein VVaG
a) ProSiebenSat1 Media SE
b) Vodafone Group PLC
Aviva Insurance Ltd.
Aviva Life Holdings
a) DZ-Bank AG
b) Bristol Airport Ltd.
Copenhagen Airport
Portmeirion Group PLC
b) Countrywide PLC3
b) Fevertree Drinks PLC
Inchape PLC
PJSC ‘Power Machines’ 3
a) TUI Deutschland GmbH
MER-Pensionskasse VVaG
b) Hotel San Francisco S. A.
b) TUI Austria Holding GmbH
b) Vita Health LLC
b) AO ‘Severstal Management’ 3
Nord Gold S. E.
Productores Hoteleros Reunidos S. A.
RIUSA II S. A.
RIU Hotels S. A.
b) Rothschild & Co
South West Airports Ltd.
Roadis Transportation Holding S. L. U.
Travis Perkins PLC
600
7,980
0
0
0
0
382
4,100
994
0
5,985
10,317
0
146,963,612
469
19,854,616
1,729
2,228
0
0
0
C O R P O R AT E G O V E R N A N C E » e X e C U T I Ve B o A r D A N D S U p e r V I So r y B o A r D
113
E XECU TIVE BOARD A ND
SUPERVISORY BOARD
Supervisory Board
Function / Occupation
Name
Frank Jakobi1
Prof. Klaus Mangold
Chairman of the Supervisory Board of TUI AG
Chairman of the Supervisory Board of Rothschild GmbH
Chairman of the Supervisory Board of Knorr-Bremse AG
Deputy Chairman of the Supervisory Board of TUI AG
Travel Agent
Andreas Barczewski1
Peter Bremme1
Aircraft Captain
Regional Head of the Special Services Division
of ver.di – Vereinte Dienstleistungsgewerkschaft
Prof. Edgar Ernst
President of Deutsche Prüfstelle für Rechnungslegung (DPR)
Wolfgang Flintermann1
Group Director Financial Accounting & Reporting, TUI AG
Angelika Gifford
Supervisory Board Member and Technology Executive
Valerie Frances Gooding
Member of supervisory bodies in different companies
Peter Long
Coline McConville
Chairman Countrywide PLC
Member of supervisory bodies in different companies
Alexey Mordashov
Chairman Board of Directors of PAO Severstal
Michael Pönipp1
Hotel Manager
Carola Schwirn1
Anette Strempel1
Ortwin Strubelt1
Stefan Weinhofer1
Dr Dieter Zetsche
Department Coordinator in the Transportation Division
of ver.di – Vereinte Dienstleistungsgewerkschaft
Travel Agent
Travel Agent
International Employee Relations Coordinator at TUI AG
Chairman of the Board of Management Daimler AG
Dr Dierk Hirschel1
Janis Kong
Business unit manager of the trade-unition ver.di – Vereinte Dienstleistungsgewerkschaft
Member of supervisory bodies in different companies
Location
Stuttgart
Hamburg
London
Hanover
Hamburg
Bonn
Großburgwedel
Kranzberg
Weybridge
Berlin
London
London
London
Moscow
Hanover
Berlin
Hemmingen
Hamburg
Vienna
Stuttgart
Carmen Riu Güell
Managing Director RIUSA II S. A.
Palma de Mallorca
Sir Michael Hodgkinson
Deputy Chairman fo the Supervisory Board of TUI AG
11 Dec 2014
13 Feb 2018
b) Keolis (UK) Limited3
Initial
Appointment
Appointed
until AGM
Other Board Memberships 2
7 Jan 2010
2021
a) Continental AG
Knorr-Bremse AG3
15 Aug 2007
2021
b) Alstom S. A.
Baiterek Holding JSC
Rothschild GmbH3
10 May 2006
2 Jul 2014
9 Feb 2011
13 Jun 2016
26 Mar 2012
11 Dec 2014
16 Jan 2015
11 Dec 2014
9 Feb 2016
11 Dec 2014
9 Feb 2016
17 Apr 2013
14 Feb 2005
1 Aug 2014
2 Jan 2009
3 Apr 2009
9 Feb 2016
13 Feb 2018
2021
2021
2021
2021
2021
2020
2021
2020
2021
2020
2021
2021
2021
2021
2021
2021
2021
2023
Keolis Amey Docklands Ltd.
World Airport Partners GmbH
a) TUIfly GmbH4
a) TÜV Nord AG
a) Metro AG
VONOVIA SE 4
a) Deutscher Reisepreis-
Sicherungsverein VVaG
a) ProSiebenSat1 Media SE
b) Vodafone Group PLC
Aviva Insurance Ltd.
Aviva Life Holdings
a) DZ-Bank AG
b) Bristol Airport Ltd.
Copenhagen Airport
Portmeirion Group PLC
b) Countrywide PLC3
b) Fevertree Drinks PLC
Inchape PLC
b) AO ‘Severstal Management’ 3
PJSC ‘Power Machines’ 3
a) TUI Deutschland GmbH
MER-Pensionskasse VVaG
b) Hotel San Francisco S. A.
Productores Hoteleros Reunidos S. A.
b) TUI Austria Holding GmbH
b) Vita Health LLC
b) Rothschild & Co
South West Airports Ltd.
Roadis Transportation Holding S. L. U.
Travis Perkins PLC
Nord Gold S. E.
RIU Hotels S. A.
RIUSA II S. A.
Number of
TUI AG shares
(direkt und indirekt)2
0
600
7,980
0
0
0
382
4,100
994
0
5,985
10,317
0
146,963,612
469
19,854,616
0
1,729
2,228
0
0
114
Executive Board
Name
Friedrich Joussen
(Age 55)
Member of the Executive Board since
October 2012
CEO of the Executive Board from
February 2013
Joint-CEO since December 2014
CEO since February 2016
Current appointment until October 2020
Horst Baier
(Age 61)
Member of the Executive Board since
November 2007
Current appointment until
30 September 2018
David Burling
(Age 50)
Member of the Executive Board since
June 2015
Current appointment until May 2021
Birgit Conix
(Age 53)
Member of the Executive Board since
July 2018
Current appointment until July 2021
Sebastian Ebel
(Age 55)
Member of the Executive Board since
December 2014
Current appointment until Novem-
ber 2020
Dr Elke Eller
(Age 56)
Member of the Executive Board since
October 2015
Current appointment until October 2021
Frank Rosenberger
(Age 50)
Member of the Executive Board since
January 2017
Current appointment until December 2019
C O R P O R AT E G O V E R N A N C E » e X e C U T I Ve B o A r D A N D S U p e r V I So r y B o A r D
Department
Other Board Memberships1
CEO
a) Sixt SE 2
TUI Deutschland GmbH2
TUIfly GmbH2
Number of
TUI AG
shares (direct
and indirect)1
328,081
CFO
CEO
Markets & Airlines
CFO
b) RIUSA II S. A.2
40,717
TUI Canada Holdings Inc.
Sunwing Travel Group Inc.
a) TUI Deutschland GmbH
b) TUI Travel Holdings Ltd.
16,300
TUIfly GmbH
TUI Travel Ltd.
First Choice Holidays Ltd.
First Choice Holidays & Flights Ltd.
Sunwing Travel Group Inc.
First Choice Olympic Ltd.
TUI Sverige AB
TUI Travel Holdings Sweden AB
TUI Nordic Holdings Sweden
ABThomson Travel Group
(Holdings) Ltd.
TUI Travel Overseas Holdings Ltd.
TUI Canada Holdings Inc.
TUI Northern Europe Ltd.
TUI Travel Group Management
Services Ltd.
TUI UK Transport Ltd.
CEO
Hotels & Resorts,
Cruises,
Destination
Experiences
a) TUI Cruises GmbH
BRW Beteiligungs AG
Eintracht Braunschweig
GmbH & Co KG2
Eves Information Technology AG2
b) RIUSA II S. A.
TUI Spain S. A.
TUI Suisse Ltd.2
HR, Labour
Director
a) K+S AG
TUI Deutschland GmbH
TUIfly GmbH
b) TUI Nederland N. V.
TUI Belgium N. V.
CIO and
New Markets
a) TUI Deutschland GmbH
Peakwork AG
0
250
12,545
0
1 Information refers to 30 September 2018 or date of resignation
from the Excecutive Board in F Y 2018.
2 Chairman
a)
b)
Membership in Supervisory Boards required by law within the meaning of section
125 of the German Stock Corporation Act (AktG)
Membership in comparable Boards of domestic and foreign companies within
the meaning of section 125 of the German Stock Corporation Act (AktG)
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
115
CORPOR ATE GOVERNA NCE
REPORT
Statement on Corporate Governance
(as part of the Management Report)
The actions of TUI AG´s management and oversight bodies are
determined by the principles of good and responsible corporate
governance.
The Executive Board and the Supervisory Board comprehensively
discussed Corporate Governance issues in FY 2018. In this chapter,
the Executive Board and the Supervisory Board provide their report
on Corporate Governance in the Company pursuant to sub-section
3.10 of the German Corporate Governance Code (DCGK) and section
289a of the German Commercial Code (HGB) as well as Disclosure
and Transparency Rule (DTR) 7.2 and Listing Rule (LR) 9.8.7R.
2. Declaration of Compliance pursuant to DTR 7.2 and
LR 9.8.7R
As an overseas company with a premium listing on the London
Stock Exchange, TUI AG’s Executive Board and Supervisory Board
are obliged pursuant to No. 7.2 DTR and LR 9.8.7R to make a
statement on the application of the UK Corporate Governance
Code (UK CGC).
At the time of the merger TUI AG had announced it would comply
with the UK Code
1. Declaration of Compliance pursuant to section 161
of the German Stock Corporation Act (AktG)
As a stock corporation company under German law, TUI AG’s Execu-
tive Board and Supervisory Board are obliged to submit a decla-
ration of compliance with the DCGK pursuant to section 161 of the
German Stock Corporation Act.
www.dcgk.de/en/code.html
W O R D I N G O F T H E D E C L A R AT I O N O F C O M P L I A N C E F O R 2 0 1 8
‘In accordance with section 161 of the German Stock Corporation
Act, the Executive Board and Supervisory Board hereby declare:
Since the last annual declaration of compliance was submitted in
December 2017, the recommendations of the German Corporate
Governance Code in the version dated 7 February 2017 have been
and will be fully observed.‘
Place of publication:
www.tuigroup.com/en-en/investors/corporate-governance
https://www.frc.org.uk/getattachment/ca7e94c4-b9a9-49e2-a824-
ad76a322873c/UK-Corporate-Governance-Code-April-2016.pdf
to the extent practicable. In many respects, the requirements of
the DCGK and the UK Code are similar. However, there are certain
aspects which are not compatible (in some cases due to the different
legal regimes in Germany und the UK). Therefore some deviations
from Code requirements and best practice in the UK have been
necessary.
Under the German Stock Corporation Act, the legislation applicable
to TUI AG, a two-tier board system is mandatory (see below section
‘Functioning of the Executive and Supervisory Board’ on page 120).
The two-tier board structure is different to the UK unitary board
structure on which the UK Code is based. Some of the principles
of composition and operation of the boards of a German stock
corporation also differ from those of a UK company (for example,
there is no Company Secretary). For this reason, the Executive
Board and the Supervisory Board have set out below in which areas
the UK Code is not complied with and explained the reasons for
the deviations. In addition, the Executive Board and the Supervisory
Board have also explained those instances where they consider
TUI AG not to be compliant with the UK Code in the literal sense
but where it lives up to the spirit and meaning of the respective
regulation.
Sub-headings refer to sections of the UK Code for ease of reference
for investors.
116
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
W O R D I N G O F T H E U K C O R P O R AT E G O V E R N A N C E
S TAT E M E N T 2 0 1 8
“Executive Board and Supervisory Board declare pursuant to DTR
7.2 and LR 9.8.7R:
‘Throughout the reporting period, TUI AG has complied with the
provisions of the UK Code in the version of April 2016, including its
main principles, except as set out and explained below.’
non-executive directors for the purposes of the UK Code. Under
the UK Code, persons are ‘independent’ if they are independent in
character and judgement and if there are no relationships or circum-
stances which are likely to affect, or could appear to affect, their
judgement. TUI AG does not, however, extend its independence
disclosures to employee representatives on the Supervisory Board
(for a detailed explanation of shareholder and employee repre-
sentatives and the underlying considerations, please see below).
Place of publication:
www.tuigroup.com/en-en/investors/corporate-governance
I D E N T I F I C AT I O N O F S E N I O R I N D E P E N D E N T D I R E C T O R
( A1 . 2 , A 4 .1)
Under German law and the German Code, there is no concept of a
‘Senior Independent Director’. Instead, shareholders may raise any
issues at the Annual General Meeting (AGM). In this forum, the
Executive Board and the Chairman of the Supervisory Board are
available to address any issues and are legally obliged to provide
adequate responses.
Outside the AGM, shareholders may approach the Executive
Board, in particular the CEO or the CFO, or, for topics relating to
Supervisory Board matters, the Chairman of the Supervisory
Board or any of his Deputies. Sir Michael Hodgkinson, who was the
Deputy Chairman and Senior Independent Director of TUI Travel
PLC before the merger, was re-elected as additional Deputy Chair-
man of the Supervisory Board of TUI AG in February 2016 along-
side Frank Jakobi (First Deputy Chairman who, under the German
Co-Determination Act, must be an Employee Representative). After
Sir Michael Hodgkinson resigned from the Supervisory Board at
the end of the Annual General Meeting on 13 February 2018, the
Supervisory Board elected Peter Long to replace him as additional
Deputy Chairman at its meeting on 13 February 2018 following the
Annual General Meeting.
D I V I S I O N O F R E S P O N S I B I L I T I E S – C H A I R M A N & C H I E F
E X E C U T I V E ( A 2 .1)
The separation of the roles of the Chairman of the Supervisory
Board (Prof. Klaus Mangold) and the CEO (Friedrich Joussen) is
clearly defined under German law as part of the two-tier board
structure. Therefore, no further division of responsibilities is
required and both the Executive Board and the Supervisory Board
consider that TUI AG lives up to the spirit and meaning of the
UK Code.
I N D E P E N D E N C E O F S U P E R V I S O R Y B O A R D M E M B E R S ( B 1 .1)
Under the UK Code, the Board must identify in the annual report
each non-executive director it considers to be ‘independent’ for
the purposes of the UK Code. Based on the responsibilities as-
signed to the Supervisory Board by the German Stock Corporation
Act, the members of the Supervisory Board are considered to be
The Supervisory Board has determined that six of its nine share-
holder representatives (the Chairman is not taken into account
according to the UK Code) are independent for the purposes of the
UK Code. The shareholder representatives considered to be inde-
pendent are: Prof. Edgar Ernst, Valerie Gooding, Janis Kong, Coline
McConville, Angelika Gifford and Sir Michael Hodgkinson (until
13 February 2018), resp. Dr Dieter Zetsche (since 13 Febru-
ary 2018). Additionally, the Chairman was independent on election
in 2011 and re-election in February 2016 and is still considered
independent (Prof. Klaus Mangold also was independent when he
was elected to the Supervisory Board in January 2010).
The members of the Supervisory Board not considered to be inde-
pendent for the purposes of the UK Code are Carmen Riu Güell,
Alexey Mordashov and Peter Long.
In reaching its determination, the Supervisory Board has consid-
ered, in particular, the factors set out below.
S H A R E H O L D E R A N D E M P L O Y E E R E P R E S E N TAT I V E S
The Supervisory Board of TUI AG consists of ten members who are
elected by shareholders at AGM (the ‘Shareholder Representa-
tives’) and ten members who represent the employees of TUI AG
(the ‘Employee Representatives’). This differs from UK practice
where only those board members representing major sharehold-
ers are typically referred to as ‘Shareholder Representatives’ and
are not considered independent under the UK Code because of
their link to a significant shareholder.
In TUI AG, only the shareholder representatives Carmen Riu Güell
(Riu-Hotels, approx. 3.4 % of the voting rights) and Alexey
Mordashov (approx. 24,998 % of the voting rights via Unifirm Ltd.,
majority controlled by himself) are connected to significant share-
holders or are shareholders themselves. It should also be noted
that joint ventures exist between TUI AG and both Riu Hotels S. A.
and TUI Russia & CIS (in which a majority controlling interest is
held by Mr Mordashov) (for further details see page 108 of the
Annual Report). Until his election to the Supervisory Board in Feb-
ruary 2016, Peter Long was Joint-CEO of TUI AG from December
2014 to February 2016. Prior to that, he was a member of the
Executive Board of TUI AG from 2007 and CEO of TUI Travel PLC.
Therefore, neither Ms Riu Güell nor Mr Mordashov nor Mr Long
are considered independent for the purposes of the UK Code.
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
117
Seven of the ten employee representatives of the Supervisory
Board are elected by the employees of TUI Group entitled to vote.
Three employee representatives are nominated by a German
trade union (ver.di).
Under the UK Code, directors who are or have been employees of
the Group in the last five years or who participate in the Group’s
pension arrangements would generally not be considered inde-
pendent. In the UK, directors with an employment relationship are
normally current or former executives. By contrast, under German
law, employee representatives of the Supervisory Board must be
employees of the Group, and must be elected by the employees
without any involvement of the Executive or Supervisory Boards.
Furthermore, the employment contract of employee representa-
tives may only be terminated in exceptional cases.
The employee representatives may also participate in Group
pension schemes as is normal for employees and in their capacity
as employees.
Trade union representatives are nominated, and employed by, the
trade union but are still classified as employee representatives.
They can only be removed from the Supervisory Board by their
respective union and neither the Executive nor the Supervisory
Board has any role in their appointment or removal.
H A L F T H E B O A R D S H O U L D B E I N D E P E N D E N T
N O N - E X E C U T I V E D I R E C T O R S ( B 1 . 2 )
Since, for the purpose of the UK Code, only the shareholder rep-
resentatives on the Supervisory Board are taken into account,
with six independent members (excluding the Chairman of the
Supervisory Board) more than half of its members are considered
independent.
N O M I N AT I O N C O M M I T T E E – C O M P O S I T I O N A N D
R E S P O N S I B I L I T I E S ( B 2 .1)
The role of the Nomination Committee in a typical UK company is
fulfilled in TUI AG by two Committees of the Supervisory Board:
Under the Rules of Procedure for the Supervisory Board and its
Committees (which are equivalent to the Terms of Reference of a
British corporation) the Nomination Committee considers and
proposes suitable candidates as shareholder representatives to
the Supervisory Board for its election proposals to the AGM. The
Presiding Committee determines the requirements and remuner-
ation for any new appointments to the Executive Board and rec-
ommends suitable candidates to the Supervisory Board. On that
basis, the Supervisory Board appoints Executive Board members.
This approach is different from the UK where all director appoint-
ments are approved by shareholders at the AGM.
However, as is common practice in Germany, at each AGM share-
holders are asked to decide whether they approve the actions of
the Executive Board and Supervisory Board members during the
past financial year. Since the AGM 2015, in the light of UK practice,
TUI AG has changed its procedure to allow a separate vote on each
individual Executive Board and Supervisory Board member, as it is
customary in the UK.
TUI AG intends to continue this practice. Accordingly, the Super-
visory Board considers that TUI AG lives up to the spirit and mean-
ing of the UK Code to the extent practicable.
There is no requirement under German law or the German Corpo-
rate Governance Code for the majority of the Nomination Com-
mittee members to be independent. Of the four members of the
Nomination Committee, two are either significant shareholders
themselves or associated with significant shareholders (Carmen
Riu Güell and Alexey Mordashov) and therefore not independent
for the purposes of the UK Code. Until 13 February 2018 the re-
maining two members, Sir Michael Hodgkinson and Prof. Klaus
Mangold (Chairman) were both independent. Since 13 Febru-
ary 2018, Peter Long has replaced Sir Michael Hodgkinson as a
member of the Nomination Committee, so that only Prof. Klaus
Mangold is independent under the UK Code. Therefore TUI AG is
not compliant with the UK Code which requires a majority of the
Nomination Committee to be independent. However, TUI AG con-
siders that the current membership of the Nomination Committee
provides a strong and experienced pre-selection of Supervisory
Board shareholder representation members, while keeping the
Committee to a manageable size.
A publication of the Rules of Procedure for the Supervisory Board,
its committees (including the Audit Committee) and for the Execu-
tive Board is not provided for under German law and the German
Corporate Governance Code. Therefore TUI AG is not compliant
with this provision of the UK Code.
N O M I N AT I O N C O M M I T T E E S E C T I O N I N T H E A N N U A L
R E P O R T & A C C O U N T S ( B 2 . 4 )
For the activities of the Nomination Committee, see page 19 which
is part of the Chairman’s letter to shareholders.
Succession planning for management levels below Executive Board
is carried out by the Executive Board. The Presiding Committee is
responsible for succession planning for the Executive Board.
T E R M S & C O N D I T I O N S O F A P P O I N T M E N T S O F
N O N - E X E C U T I V E D I R E C T O R S ( B 3 . 2 )
The terms and conditions of Supervisory Board members’ ap-
pointments follow the provisions of the German Stock Corpora-
tion Act and the Articles of Association of TUI AG. The Articles of
Association are available on the website at www.tuigroup.com/
en-en/investors/corporate-governance.
A D V I C E A N D S E R V I C E S O F T H E C O M PA N Y S E C R E TA R Y ( B 5 . 2 )
There is no specific role of Company Secretary in German compa-
nies. However, Executive and Supervisory Board members have
access to the Board Office of TUI AG if they need any advice or
services. The Board Office acts as an interface in corporate matters
for the Executive and Supervisory Board members and is respon-
sible for ensuring that the requisite processes and procedures are
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C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
in place governing all Executive and Supervisory Board meetings
(i. e. preparation of agendas, minuting of meetings and ensuring
compliance with German and UK law, as appropriate, and with rec-
ommendations for corporate governance). The Board Office also
supports the Chairman, the CEO, the CFO and the Chairmen of the
Audit Committee and the Strategy Committee. Executive and
Supervisory Board members also have access to legal advice via the
Group Director Legal, Compliance & Board Office and via the Board
Office. The Supervisory Board can also approach the Executive
Board directly for specific advice on any matters. Accordingly, the
Executive Board and the Supervisory Board consider that TUI AG
lives up to the spirit and meaning of the UK Code.
B O A R D P E R F O R M A N C E E V A L U AT I O N ( B 6 )
The performance of each individual Executive Board member is
evaluated annually by the Supervisory Board for the annual per-
formance-based remuneration. In this context, the Supervisory
Board also reviews the individual member’s overall performance
as part of the Executive Board. However, no external performance
evaluation is done for the Executive Board.
It is not customary to conduct annual reviews of the Supervisory
Board’s efficiency. Each Supervisory Board member can give feed-
back to the Chairman, the Deputy Chairmen or the Supervisory
Board as a whole as and when appropriate or required.
External evaluation, which includes the work of the Chairman of
the Supervisory Board, is performed by means of individual inter-
views and anonymous reviews. Executive Board members are in-
vited to contribute to the process. Consolidated results are shared
with the entire Supervisory Board and appropriate actions are
suggested and discussed as appropriate. The last external review
of the Supervisory Board was undertaken in 2015 by Board Con-
sultants International. Board Consultants International has no
other connection with TUI AG. Most recently, the Supervisory
Board dealt with an update on the efficiency review and with
measures derived from the results of the efficiency review at its
meeting on 8 February 2016. An internal efficiency review was con-
ducted at the end of 2018. It is planned to conduct an efficiency
review with external support in the course of 2019.
A N N U A L R E - E L E C T I O N B Y S H A R E H O L D E R S
AT T H E A G M ( B 7.1)
None of the Executive or Supervisory Board members is re-elected
annually. However, as noted above, in light of the UK Code and UK
best practice, TUI AG voluntarily puts individual resolutions ap-
proving the actions of each Executive and Supervisory Board
member to the AGM resolving on the annual financial statements
for the previous year. TUI AG intends to continue this practice.
The end of appointment periods for Supervisory Board members
are disclosed in the table from page 112. Current curricula vitae of
all Executive and Supervisory Board members are published at
www.tuigroup.com/en-en/investors/corporate-governance.
F A I R , B A L A N C E D A N D U N D E R S TA N D A B L E A N N U A L R E P O R T
A N D A C C O U N T S ( C1 .1)
In a German stock corporation the Executive Board is responsible
for drafting the Annual Report & Accounts (ARA). According to
section 243 (2) of the German Commercial Act (HGB) the ARA
must be clearly arranged and should present a realistic picture of
the Company’s economic situation. This is equivalent to the UK
Code requirement for the ARA to be fair, balanced and under-
standable. Although this assessment has not been delegated to
the Audit Committee (C3.4), the Executive Board is convinced that
this ARA satisfies both requirements.
E S TA B L I S H M E N T A N D O P E R AT I O N O F R E M U N E R AT I O N
C O M M I T T E E ( D 2 ) , R E M U N E R AT I O N ( D 1)
In the German governance structure there is no separate Remu-
neration Committee. The remuneration of the Executive Board is
under involvement of the employee representatives monitored
and agreed by the Supervisory Board based on recommendations
from the Presiding Committee, which is governed by the Supervisory
Board Rules of Procedure, as referred to above.
Supervisory Board remuneration and the remuneration of Board
Committee members is governed by the Articles of Association as
resolved on by the shareholders at the AGM.
There are no clawback or malus provisions in the service contracts
of Executive Board members. Such provisions are not yet wide-
spread in Germany and, depending on their design, are difficult to
enforce. However, there are different contractual and statutory
provisions that may allow for a reduction or forfeiture of remunera-
tion components or allow TUI AG to claim damages from Executive
Board members. First, the service contracts of Executive Board
members provide for forfeiture of the annual bonus and the LTIP
if TUI AG terminates the service contract for cause without notice
before the end of the one year performance period in the case of
the annual bonus or before the end of the respective performance
period of the LTIP. Second, according to section 87 (2) German
Stock Corporation Act (AktG) the Supervisory Board may, under
certain exceptional circumstances, reduce Executive Board com-
pensation in case of a deterioration of the economic situation of
TUI AG. Third, Executive Board members may be liable for damages
under the German Stock Corporation Act in case of a breach of
their duties of care or fiduciary duties.
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
119
See the Directors’ Remuneration Report from page 128 for full de-
tails on Executive and Supervisory Board member´s remuneration.
Dialogue with shareholders
Date
Meeting
Participants
N O T I C E P E R I O D S F O R E X E C U T I V E D I R E C T O R S ( D 1 . 5 )
In accordance with the customary practice in Germany members
of the Executive Board are appointed for a term of three to five
years. This does not comply with the UK Code recommendation
which stipulates that notice or contract periods should be set at
one year or less. However, the contracts include maximum limits
on the amounts payable on termination.
October 2017
November 2017
December 2017
January 2018
See Remuneration Report from page 128
D I A L O G U E W I T H S H A R E H O L D E R S ( E 1)
It was not common practice in German companies for Supervisory
Board members to make themselves available for meetings with
major shareholders. However, the German Corporate Governance
Code in the version dated 7 February 2017 now stipulates in sec-
tion 5.2 that the Chairman of the Supervisory Board should be
willing to meet with investors in an appropriate manner to discuss
Supervisory Board matters. Shareholders made no use of this option
in FY 2018.
The table below provides an overview of all meetings of the Execu-
tive Board with shareholders, in some of which also employees of
Investor Relations participated.
February 2018
March 2018
April 2018
May 2018
June 2018
August 2018
September 2018
Roadshow Brussels
Roadshow Paris
J.P. Morgan Best of British F TSE 100
Conference
Roadshow UK
Commerzbank German Investment
Seminar
Roadshow US
UniCredit / Kepler Cheuvreux German
Corporate Conference
Roadshow UK
Berenberg IR Forum
Roadshow Tokio
Roadshow Dublin
Barclays Select Leisure & Transport
Corporate Day
Barclays Select UK Conference
Roadshow US
Morgan Stanley Roundtable
Roadshow UK
Roadshow Frankfurt
Roadshow Paris
Roadshow Amsterdam
Roadshow Zurich
Roadshow Copenhagen
Roadshow Oslo
dbAccess German, Swiss and Austrian
Conference
Roadshow US
Credit Suisse Leisure Sector Conference
MainFirst Travel and Transport Days
Commerzbank Sector Conference
BAML – Travel & Leisure Field Trip
Citi Growth Conference 2018 –
Travel & Leisure Day
Berenberg & Goldman Sachs GCC
Conference
Bernstein Strategic Decisions Conference
HB
HB
HB
FJ, HB
HB
HB
HB
HB
HB
HB
HB
HB
HB
HB
HB
FJ, HB
FJ, HB
HB
HB
HB
HB
HB
HB
HB
HB
HB
HB, BC
HB
HB, BC
HB, BC
FJ, BC
Key: Friedrich Joussen (FJ), Horst Baier (HB), Birgit Conix (BC)
Key topics discussed at meetings between shareholders and
Executive Board members included:
• Exogenous impacts on the business model
• Growth strategy of the integrated tourism group
• Business development in the individual company sectors
The Supervisory Board receives feedback from the Chairman and
Deputy Chairman (shareholder representative) and Executive
Board members following meetings with major shareholders or
investors. Additionally, a monthly Investor Relations Report and
event-driven assessments of brokers are forwarded to the Executive
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C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
Board and the Supervisory Board. They contain updates on the
share price development, analyses of the shareholder structure
as well as purchases and sales of shares and feedback and assess-
ments from investors.The Executive Board and the Supervisory
Board consider that TUI AG lives up to the spirit and meaning of
the UK Code.
for the financial year ending 30 September 2017 was published on
13 December 2017, significantly more than 20 working days before
the 2018 AGM. Accordingly, the Executive Board and the Supervi-
sory Board consider that TUI AG lives up to the spirit and meaning
of the UK Code requirements. A similar timetable will be followed
in relation to the 2019 AGM.“
A G M R E S O L U T I O N O N F I N A N C I A L S TAT E M E N T S A N D
C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S ( E 2 .1)
It is not common practice in Germany to pass a resolution at the
AGM to approve the financial statements and consolidated finan-
cial statements. Therefore, this was not done at the AGM in 2018
and it is not intended to do so at the AGM in 2019. However, as
required by German law, the first item on the agenda of TUI AG’s
AGM is the presentation of the financial statements and consoli-
dated financial statements to the AGM. Under this item, the Exec-
utive Board will explain the financial statements and consolidated
financial statements and the Chairman will explain, in particular,
the report of the Supervisory Board (including this UK Corporate
Governance Statement). Shareholders will have the opportunity to
raise questions. Questions are typically raised, as is normal in the
AGMs of German companies, and, as a general rule, answers must
be provided under German law.
This is the standard practice for a German company and is in full
compliance with the German Code. While the lack of a resolution
to approve the Annual Report & Accounts is not in compliance with
the UK Code, TUI AG considers that the arrangements afford
shareholders with sufficient opportunity to raise any questions or
concerns that they may have in relation to the Annual Report &
Accounts, and to receive answers, in the AGM. Accordingly, the
Executive Board and the Supervisory Board consider that TUI AG
lives up to the spirit and meaning of the UK Code to the extent
practicable.
C I R C U L AT I O N O F A G M D O C U M E N TAT I O N T O
S H A R E H O L D E R S ( E 2 . 4 )
The 2018 AGM of TUI AG was held on 13 February 2018. As re-
quired by German law, the notice convening TUI AG’s 2018 AGM
(including the agenda and the voting proposals of the Executive
Board and the Supervisory Board) was published in the Federal
Gazette in Germany on 4 January 2018. Shareholders then had
the right under German law to request additional agenda items
at any time up to 30 days before the AGM. In accordance with
German practice, once this deadline had expired, the combined
invitation and explanatory notes relating to the AGM were sent to
shareholders on 18 January 2018, which was less than the 20
working days before the AGM recommended in the UK Code (but
more than the 21 days’ notice required by German law). However,
in addition to the original publication of the Invitation in the Fed-
eral Gazette in Germany, the combined invitation and explanatory
notes relating to the AGM was published on TUI AG’s website on
4 January 2018. As no additional agenda items were requested by
shareholders, this was in the same form as the final combined in-
vitation and explanatory notes relating to the AGM later sent to
shareholders. Furthermore, TUI AG´s Annual Report and Accounts
3. Further information on Corporate Governance
F U N C T I O N I N G O F T H E E X E C U T I V E A N D S U P E R V I S O R Y
B O A R D S
TUI AG is a company under German law. One of the fundamental
principles of German stock corporation law is the dual manage-
ment system involving two bodies, the Executive Board in charge
of managing the company and the Supervisory Board in charge of
monitoring the company. TUI AG’s Executive Board and Supervisory
Board cooperate closely and in a spirit of trust in managing and
overseeing the Company, with strict separation between the two
bodies in terms of their membership and competences. Both bod-
ies are obliged to ensure the continued existence of the Company
and sustainable creation of added value in harmony with the prin-
ciples of the social market economy.
TUI AG’s Executive Board comprised seven members as at the
closing date 30 September 2018. The Executive Board is responsi-
ble for managing the Company’s business operations in the inter-
ests of the Company. The allocation of functions and responsibili-
ties to individual Board members is presented in a separate section.
For functions, see tables ‘Supervisory Board and Executive Board’
on page 112 et seq.
In accordance with the law and the Articles of Association, the
Supervisory Board had 20 members at the balance sheet date, i. e.
30 September 2018. The Supervisory Board advises and oversees
the Executive Board in the management of the Company. It is
involved in strategic and planning decisions and all decisions of
fundamental importance to the Company. When the Executive
Board takes decisions on major transactions, such as the annual
budget, major acquisitions or divestments, it is required by its
terms of reference to seek the approval of the Supervisory Board.
The Chairman of the Supervisory Board coordinates the work in
the Supervisory Board, chairs its meetings and represents the
concerns of the body externally. The Supervisory Board and the
Audit Committee have adopted terms of reference for their own
work. In the run-up to the Supervisory Board meetings, the repre-
sentatives of shareholders and employees meet separately.
The Executive Board provides the Supervisory Board at regular
meetings and in writing with comprehensive, up-to-date informa-
tion about the strategy, the budget, business performance and the
situation of the Group, including risk management and compliance.
The Executive Board works on the basis of terms of reference
issued by the Supervisory Board.
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TUI AG has taken out a D & O insurance policy with an appropriate
deductible for all members of the Executive Board and Supervisory
Board. The deductible amounts to 10 % of the loss up to the
amount of one and a half times the fixed annual compensation.
C O M P O S I T I O N O F T H E S U P E R V I S O R Y B O A R D
As at the balance sheet date, 30 September 2018, the Supervisory
Board of TUI AG comprised 20 members. The composition of the
Supervisory Board in FY 2018 ensured that its members as a
group had the knowledge, ability and expert experience required
to properly complete their tasks. The goals set by the Supervisory
Board itself for its composition include in particular comprehensive
industry knowledge, at least five independent shareholder repre-
sentatives, at least five members with international experience,
and diversity (see also the diversity concepts for the Supervisory
Board and the Executive Board from page 123 of this report).
Twelve members of the Supervisory Board had considerable inter-
national experience. Due to the different professional experiences
of its members, the composition of the Supervisory Board overall
reflects a great diversity of relevant experience, ability and indus-
try knowhow. None of the shareholder representatives on the
Supervisory Board had any commercial or personal relationship
with the Company, its Executive Board or third parties that might
cause a material clash of interests. Seven shareholder representa-
tives are independent (including the Chairman of the Supervisory
Board, who can be included in the count according to the German
Corporate Governance Code). The seven independent members
were Prof. Edgar Ernst, Ms Angelika Gifford, Ms Valerie Gooding,
Sir Michael Hodgkinson (until February 13, 2018), Dr Dieter Zetsche
(from February 13, 2018), Ms Janis Kong, Ms Coline McConville and
Prof. Klaus Mangold.
In accordance with the recommendations of the German Corpo-
rate Governance Code, the original shareholder representatives
were individually elected for five-year terms of office during elec-
tions to the Supervisory Board at the relevant General Meetings
(October 2014, February 2016, February 2018). Only Prof. Klaus
Mangold and Sir Michael Hodgkinson were older than 68 years
when they were elected as members of the Supervisory Board. In
both cases, the Supervisory Board deemed it appropriate to deviate
from the regular age limit in order for the Company to benefit
from Prof. Klaus Mangold’s and Sir Michael Hodgkinson’s extensive
experience in order to complete the integration process and in
order to ensure continuity. With Peter Long, a former member of
the Executive Board has been a Supervisory Board member since
the Annual General Meeting 2016 held on 9 February 2016.
C O M M I T T E E S O F T H E S U P E R V I S O R Y B O A R D A N D T H E I R
C O M P O S I T I O N
At 30 September 2018, the balance sheet date, the Supervisory
Board had established four committees from among its members
to support its work: the Presiding Committee, the Audit Committee,
the Nomination Committee and the Strategy Committee. In addition,
in accordance with section 27 (3) of the German Co-Determination
Act, the Mediation Committee was furthermore established.
The Presiding Committee and Audit Committee have eight mem-
bers each, with an equal number of shareholder representatives
(including the respective chairpersons of the committees) and
employee representatives. The Presiding Committee prepares, in
particular, the appointment of Executive Board members, includ-
ing the terms and conditions of service contracts and remunera-
tion proposals. The Audit Committee’s task is to support the
Supervisory Board in exercising its oversight function. The Chair-
man of the Audit Committee is an independent financial expert
and has particular knowledge and experience in the application of
accounting principles and internal control methods from his own
professional practice.
The Nomination Committee consists exclusively of shareholder
representatives, in keeping with the recommendation in the
German Corporate Governance Code. The task of its four members
is to suggest suitable candidates for the Supervisory Board to
propose to the Annual General Meeting.
The Strategy Committee began its work after the Annual General
Meeting 2016. Its task is to comprehensively advise and oversee
the Executive Board in developing and implementing the corporate
strategy. It prepares the annual strategy offsite meeting for the
Supervisory Board, but does not have a mandate to take any
decisions on behalf of the Supervisory Board. It comprises five
shareholder representatives and one employee representative.
C O N F L I C T S O F I N T E R E S T
Executive and Supervisory Board members have a duty to act in
TUI AG’s best interests. In the completed FY 2018, there were no
conflicts of interest requiring disclosure to the Supervisory Board.
None of the Executive Board or Supervisory Board members has
a board role or a consultancy contract with one of TUI’s competitors.
S P E C I F I C AT I O N S P U R S U A N T T O S E C T I O N S 7 6 (4 ) , 111 ( 5 )
O F T H E G E R M A N S T O C K C O R P O R AT I O N A C T
At least 30 % of the Supervisory Board members were women and
at least 30 % were men at the balance sheet date. The Supervisory
Board was therefore compliant with section 96 (2) sentence 1 of
the German Stock Corporation Act. Neither the shareholder nor
the employee representatives on the Supervisory Board objected
to overall compliance in accordance with section 96 (2) sentence 2
of the German Stock Corporation Act.
The Supervisory Board resolved, in keeping with section 111 (5) of
the German Stock Corporation Act, that until 31 October 2020 one
woman is required to be a member of the Executive Board. This
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goal was achieved in the reporting period with Dr Elke Eller’s mem-
bership in the Executive Board and was exceeded since 15 July 2018
with the appointment of Ms Birgit Conix.
In turn, the Executive Board resolved, in keeping with section 76 (4)
of the German Stock Corporation Act, that women should account
for 20 % of executives at the level immediately below the Executive
Board and 30 % at the level below this. Both targets are to be
achieved by 30 September 2020. For this reason, TUI AG has imple-
mented various measures over the past years aimed at increasing
the proportion of women on a long-term and sustainable basis.
This includes, among other things, the promotion of women in tal-
ent programmes and specifically addressing them in the recruit-
ment process. In addition, at least one woman should always be on
the shortlist in the recruitment process for positions in the Senior
Leadership Team. As a result of these measures, the proportion of
women at TUI AG at the first management level below the Execu-
tive Board increased from 18 % to 24 % and thus exceeded the
target of 20 %. The proportion of women at TUI AG at the second
management level below the Executive Board was kept constant at
24 %. At these levels, however, staff turnover is generally very low.
As a result, the proportion of women can only be increased slowly.
Despite all the measures taken, the suitability and qualification of
candidates for filling vacant positions are still of primary importance.
S H A R E H O L D E R S A N D A N N U A L G E N E R A L M E E T I N G
TUI AG shareholders exercise their co-determination and monitor-
ing rights at the Annual General Meeting, which takes place at least
once a year. The AGM takes decisions on all statutory matters, and
these are binding on all shareholders and the Company. For voting
on resolutions, each share confers one vote.
All shareholders registering in due time are entitled to participate
in the Annual General Meeting. Shareholders who are not able to
attend the AGM in person are entitled to have their voting rights
exercised by a bank, a shareholder association, one of the repre-
sentatives provided by TUI AG and acting on the shareholders’ be-
half in accordance with their instructions, or some other proxy of
their own choosing. Shareholders also have the opportunity of
authorising the representative provided by TUI AG via the web in
the run-up to the AGM. Shareholders can, moreover, register for
electronic dispatch of the AGM documents.
The invitation to the AGM and the reports and information required
for voting are published in accordance with the provisions of the
German Stock Corporation Act and provided in German and English
on TUI AG’s website. During the AGM, the presentations by the
chairman of the Supervisory Board and the Executive Board members
can be followed live over the Internet.
R I S K M A N A G E M E N T
Good corporate governance entails the responsible handling of
commercial risks. The Executive Board of TUI AG and the manage-
ment of the TUI Group have comprehensive general and company-
specific reporting and monitoring systems available to identify,
assess and manage these risks. These systems are continually
developed, adjusted to match changes in overall conditions and
reviewed by the auditors. The Executive Board regularly informs
the Supervisory Board about existing risks and changes to these
risks. The Audit Committee deals in particular with monitoring the
accounting process, including reporting, the effectiveness of the
internal control and risk management systems and the internal
auditing system, compliance and audit of the annual financial
statements.
More detailed information about risk management in the TUI Group
is presented in the Risk Report. It also contains the report on the
accounting-related internal control and risk management system
required in accordance with the German Commercial Code (sec-
tions 289 (5), 315 (2) no. 5 HGB).
Risk Report see page 40
T R A N S PA R E N C Y
TUI provides immediate, regular and up-to-date information about
the Group’s economic situation and new developments to capital
market participants and the interested public. The Annual Report
and the Interim Reports are published within the applicable
timeframes. The Company publishes press releases and ad hoc
announcements, if required, on topical events and any new devel-
opments. Moreover, the company website at www.tuigroup.com
provides comprehensive information on TUI Group and the TUI
share.
The scheduled dates for the principal regular events and publica-
tions – such as the AGM, Annual Report and Interim Reports – are
set out in a financial calendar. The calendar is published well in
advance and made permanently accessible to the public on
TUI AG’s website.
D I R E C T O R S ’ D E A L I N G S
The Company was informed by Alexey Mordashov (via Unifirm Ltd.),
Friedrich Joussen and Ortwin Strubelt of notifiable purchase and
sale transactions of TUI AG shares or related financial instruments by
directors (directors’ dealings or managers’ transactions) concerning
FY 2018. Details are provided on the Company’s website.
Purchase and sales transactions by members of the boards are
governed by the Group Manual Share Dealings by Restricted Per-
sons, approved by the Executive Board and the Supervisory
Board, alongside corresponding statutory provisions. The Group
Manual Share Dealings by Restricted Persons stipulates above all
an obligation to receive a clearance to deal for transactions with
TUI AG’s financial instruments.
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123
A C C O U N T I N G A N D A U D I T I N G
TUI AG prepares its consolidated financial statements and consoli-
dated interim financial statements in accordance with the provi-
sions of the International Financial Reporting Standards (IFRS) as
applicable in the European Union. The statutory annual financial
statements of TUI AG, which form the basis for the dividend pay-
ment, are prepared in accordance with the German Commercial
Code (HGB). The consolidated financial statements are prepared
by the Executive Board, audited by the auditors and approved by
the Supervisory Board. The interim report is discussed between
the Audit Committee and the Executive Board prior to publication.
The consolidated financial statements and the financial statements
of TUI AG were audited by Deloitte GmbH Wirtschaftsprüfungs-
gesellschaft, Hannover, the auditors elected by the 2018 Annual
General Meeting. The audit was based on German auditing rules,
taking account of the generally accepted auditing standards issued
by the German Auditors’ Institute as well as the International
Standards on Auditing. It also covered the risk detection system.
A review pursuant to Listing Rule 9.8.10R was carried out.
See audit opinion by the auditors on page 260
The condensed consolidated interim financial statement and
management report as at 31 March 2018 was reviewed by the
auditors.
In addition, a contractual agreement was concluded with the audi-
tors to the effect that the auditors will immediately inform the
Supervisory Board of any grounds for disqualification or partiality
as well as of all findings and events of importance arising during
the performance of the audit. There were no grounds to provide
such information in the framework of the audit of FY 2018.
Diversity concepts for the composition of the
Executive Board and Supervisory Boards
D I V E R S I T Y C O N C E P T F O R T H E C O M P O S I T I O N O F T H E
E X E C U T I V E B O A R D
The diversity concept for the composition of the Executive Board
takes into account the following diversity aspects:
(a) Age
As a rule, the employment contracts of members of the Exec-
utive Board end once the standard retirement age for statutory
retirement insurance has been reached (currently 67).
(b) Gender
The Executive Board should include one woman.
(c) Educational / professional background
The necessity for a variety of educational and professional
backgrounds already arises from the obligation to manage the
company in accordance with the law, the company’s articles of
association and its terms of reference. In addition, the Execu-
tive Board as a whole, through its individual members, should
possess the following essential background qualities:
• management experience, some of which ideally has been
acquired abroad, and intercultural competence for successful
management and motivation of global teams
• in-depth practical experience in stakeholder dialogue (i. e.
with managers and employees, including their representative
bodies, with shareholders and the public)
• experience in IT management and an understanding of
digitalisation of vertically integrated value chains
• profound experience in value-driven, KPI-based strategy
development and implementation and corporate governance
• profound knowledge of the intricacies and requirements of
the capital market (shareholder management)
• knowledge of accounting and financial management (con-
trolling, financing)
• in-depth understanding of and experience with change
management.
G O A L S O F T H E D I V E R S I T Y C O N C E P T F O R T H E C O M P O S I T I O N
O F T H E E X E C U T I V E B O A R D
The standard retirement age on the one hand enables incumbent
members of the Executive Board to contribute their professional
and life experience for the good of the company for as long a time
as possible. On the other hand, adherence to the standard retire-
ment age is intended to promote regular rejuvenation of the
board.
Inclusion of both genders in Executive Board work is on the one
hand an expression of the conviction of the Supervisory Board
that mixed-gender teams lead to the same or better outcomes as
teams with representation from only one gender. But it is also the
logical continuation of the gender diversity measures implement-
ed by the Executive Board within the wider company, which aim to
increase the proportion of women in leadership roles. These
measures are only to be applied and implemented in a credible
manner if the Executive Board does not consist solely of male
members (‘proof of concept’).
A variety of professional and educational backgrounds is necessary
on the one hand to properly address the tasks and obligations of
the law, the company’s articles of association and its terms of refer-
ence. In addition, it is the view of the Supervisory Board that they
are a guarantee of ensuring diverse perspectives on the challenges
and associated approaches to overcoming them that are faced in
the day-to-day work of the company. International management
experience is of particular importance. Without such skill and ex-
perience with integrating, leading and motivating global teams, it is
impossible to take into consideration the different cultural back-
grounds of managerial staff and the workforce as a whole.
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M E T H O D O F I M P L E M E N TAT I O N O F T H E D I V E R S I T Y C O N C E P T
D I V E R S I T Y C O N C E P T F O R T H E C O M P O S I T I O N O F T H E
F O R T H E C O M P O S I T I O N O F T H E E X E C U T I V E B O A R D
A key aspect of applying the diversity concept to the composition
of the Executive Board is inclusion of the Supervisory Board within
the corporate organisation, as is prescribed by law, the company’s
articles of association and its terms of reference. This ensures the
Supervisory Board is familiar with the strategic, economic and actual
situation of the company.
In its role as overseer of the management of the Executive Board,
the Supervisory Board of TUI AG makes decisions on the allocation
of business responsibilities within the Executive Board, appoint-
ments to the Executive Board and thus also workforce and succes-
sion planning within the Executive Board. As part of that work-
force and succession planning, the Presiding Committee or the
Supervisory Board itself regularly meets with the Executive Board
or its members to discuss suitable internal succession candidates
for Executive Board positions (emergency, medium-term and
long-term scenarios). As part of these Supervisory Board and
Committee meetings, or in preparation for them, members of the
Supervisory Board have the opportunity to meet up with so-called
high potentials within the Group in a professional and personal
setting. The Presiding Committee and Supervisory Board make
their own deliberations about these matters and also discuss them
in the absence of the Executive Board. This includes evaluation
and possible inclusion of external candidates for Executive Board
positions in the selection process. In all of these deliberations, the
above-mentioned diversity aspects of Executive Board appoint-
ments play a part in the decision-making of the Supervisory
Board. The Supervisory Board also asks the Executive Board to
report twice a year on current progress and implementation of
family-friendly concepts (e. g. flexible work times and locations via,
for
instance, video-conferencing, part-time options, cultural
change) and concrete measures for promotion of women (e. g. at
least one woman on the final shortlist for any new or replacement
appointments to roles within the senior leadership team).
R E S U LT S A C H I E V E D I N F Y 2 0 18
With effect from 15. July 2018, Ms Birgit Conix was appointed
member of the Executive Board. The target set by the Supervisory
Board that at least one woman should be a member of the Execu-
tive Board has thus been exceeded. In addition, the appointments
of Dr Elke Eller and Mr David Burling were extended for a further
three years each by the respective Supervisory Board resolutions
and the signing of the corresponding contracts in December 2017
(see overview of the Executive Board on page 114). It is the view of
the Supervisory Board that Ms Conix. Dr Eller and Mr Burling
among other things through their professional careers, their
wide-ranging international experience and by virtue of their diverse
professional histories and individual backgrounds, will contribute
to the diversity of the Executive Board. For anyone interested in
further information, the CVs of these and all other members of the
Executive Board are available on the company website, as well as
further details communicated about the appointment decisions of
the Supervisory Board.
S U P E R V I S O R Y B O A R D
The diversity concept for the composition of the Supervisory
Board takes into account the following diversity aspects: The
terms of reference of the Supervisory Board of TUI AG stipulate a
standard age limit of 68 for elections to the Supervisory Board.
Furthermore, the Supervisory Board has determined a standard
limit for membership of the Supervisory Board in accordance with
the recommendation in point 5.4.1.(3) of the DCGK. As well as the
statutory gender quota (section 96(2)(1) of the German Stock
Corporation Act, (AktG) the Supervisory Board has set itself
further goals in relation to its composition. These include e. g. the
kind of international character and sector experience that diverse
educational and professional backgrounds provide. Application of
the law about the codetermination rights of employees also con-
tributes greatly to ensuring diverse educational and professional
backgrounds within the Supervisory Board of TUI AG.
G O A L S O F T H E D I V E R S I T Y C O N C E P T F O R T H E C O M P O S I T I O N
O F T H E S U P E R V I S O R Y B O A R D
The Supervisory Board is convinced that the diversity of its own
composition sends an important signal both inside and outside the
company. The age limit and standard membership term have the
goal on the one hand of finding and retaining suitable candidates.
Members of the board must possess sufficient professional expe-
rience and personal suitability for the position and have the nec-
essary time available to perform the role. After familiarisation with
the business model and the peculiarities of a vertically integrated
company, the Supervisory Board considers the stability of board
composition in the sense of continuity of corporate development
to be equally important. On the other hand, the Supervisory
Board should be looking at new approaches and new ideas on a
regular basis, in order to further the continual development of the
company and the business model. The Supervisory Board consid-
ers the age limit and standard membership term to be worthwhile
instruments for achieving both goals.
Other goals in relation to composition (including international
character and sector experience) reflect the demands placed on
the advisory and oversight body and its role within a globally
active Group of companies operating in a challenging competitive
environment. Multicultural and international experience of corpo-
rate integration is equally as important for this as knowledge of
the value drivers and success levers of the sector. In all of this, the
effect and cultural features of the so-called stakeholder approach
of a social market economy must be taken into account, which is
also ensured on the Supervisory Board by the codetermination of
employee representatives.
M E T H O D O F I M P L E M E N TAT I O N O F T H E D I V E R S I T Y C O N C E P T
F O R T H E S U P E R V I S O R Y B O A R D
Implementation of the goals pursued by the diversity concept is
assured by the anchoring of its key components in law and in the
company’s terms of reference as well as the requirement for a
Declaration of Compliance in accordance with section 161 of the
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125
German Stock Corporation Act (AktG) on Corporate Governance
within the company. As far as the shareholder side of the Supervi-
sory Board is concerned, the Nomination Committee ensures that
the binding and voluntary targets for the composition of the Super-
visory Board are met. As part of regularly conducted efficiency
audits, the Supervisory Board also undertakes a self-evaluation
process, which includes aspects of its composition.
R E S U LT S A C H I E V E D I N F I N A N C I A L Y E A R 2 0 18
In the current financial year, no changes have been made to the
diversity concept or the composition of the Supervisory Board. In
accordance with the recommendation in point 5.4.1 (2) of the Ger-
man Corporate Governance Code (version dated 7 February 2017)
the Supervisory Board in its resolution of 14 September 2017 issued
a competency profile for the composition of the board as a whole.
Since his election to the Supervisory Board at the 2018 Annual
General Meeting, Dr Dieter Zetsche has made a very valuable con-
tribution to the diversity of the Supervisory Board thanks to his
extensive international experience and his extensive experience in
the management of a major global corporation. From the point of
view of the Supervisory Board, there is currently no further need
for action in relation to diversity. On the shareholder side, both
genders are equally represented, (50:50), and in terms of the
board as whole, the proportion of women of 35 % is in excess of
the statutory quota. With six different nationalities represented on
Compliance Management Processes
P R E V E N T I O N
Compliance Policies and Group Policies
Compliance Training
Compliance Communication
Compliance Information
Compliance Risk Identification
and Risk Assessment
E X P O S U R E
Reporting
Leads
Investigations
the Supervisory Board, its composition can be described as inter-
national. The diversity of professional and educational back-
grounds of the individual members of the board is also evident
from the yearly updated CVs of Supervisory Board members pub-
lished on the corporate website.
Compliance / Anti-corruption and anti-bribery
TUI Group’s Compliance Management System is a fundamental
component in our commitment to entrepreneurial, environmental
and socially responsible operations and management. It forms
an indispensable part of TUI Group’s corporate culture and our
corporate governance activities.
The strategic goal of TUI Group’s Compliance Management System
is to prevent misconduct and avoid liability risks for the Company,
its legal representatives, executives and employees and protect
the reputation of the Company.
C O M P L I A N C E M A N A G E M E N T S Y S T E M
TUI Group’s Compliance Management System is based on a risk
management approach and is built around three pillars: prevention,
discovery and response, which, in turn, comprise a large number of
internal measures and processes.
R E A C T I O N
Implementation of Process Controls
Exchange with Management and
local Compliance Officers
Disciplinary Measures
TUI Group’s Compliance Management System focuses on the legal
sub-areas anti-corruption, competition and anti-trust law, data
protection and export controls. It defines the related pilot and
standard operation of the Compliance Management System and
the documentation of the roles, responsibilities and processes in
these areas.
The Compliance Management System applies to TUI AG and all
German and foreign companies in which TUI AG directly or indirectly
holds an interest of more than 50 % as well as other stakes directly
or indirectly controlled by TUI AG (‘managed Group companies’).
Implementation of the Compliance Management System is recom-
mended for investments not controlled by TUI AG (‘non-managed
Group companies’). The Compliance Management System has been
designed to meet the requirements of Auditing Standard PS 980
of the German Institute of Auditors.
C O M P L I A N C E S T R U C T U R E
TUI Group’s Compliance structure supports those responsible in
their task of communicating values and rules and anchoring them
in the Group. It ensures that Compliance requirements are imple-
mented throughout the Group in different countries and cultures.
TUI Group’s decentralised Compliance structure includes Head
Compliance Officers, whose role is to implement and support the
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requirements of Group Legal Compliance. Under the aegis of the
Chief Legal Compliance Officer, Group Legal Compliance works with
the decentralised Compliance Officers to perform the following tasks
at different management levels:
• Raising awareness of Compliance and the technical issues allo-
cated to Legal Compliance
• Achieving the goals of the Code of Conduct and the Compliance
Rules
• Providing training
• Advising managers and employees
• Securing the necessary exchange of information
• Monitoring plans for national and international legislation
• Providing regular quarterly reports to the Board and annual
reports to the Audit Committee of the Supervisory Board
In addition, the Group has a Compliance Committee headed by the
CFO and consisting of the HR Director, the Heads of Group External
Affairs and Communications, the Chief Legal Compliance Officer,
Group Audit and representatives of the Group Works Council and
the TUI Europe Forum. The committee meets on a regular basis as
well as ad hoc in order to monitor implementation of the Compliance
Management System and obtain reports about key indicators in
this area.
C O M P L I A N C E C U LT U R E
The Compliance culture forms the basis for an appropriate, effective
Compliance Management System. It reflects management’s funda-
mental attitude and conduct and the role of the supervisory body.
It is expressed in our corporate value ‘Trusted’, appealing to our
employees’ personal responsibility and their honesty and sincerity
in handling customers, stakeholders and employees.
C O D E O F C O N D U C T / S U P P L I E R S ’ C O D E O F C O N D U C T
The Code of Conduct, drawn up for the entire TUI Group, is a further
embodiment of our Compliance culture and enshrines guiding
principles for everyone to follow, from the Board members, execu-
tives and senior management to every Group employee. It defines
minimum standards for our employees to follow in their everyday
work and in conflict situations. TUI’s Code of Conduct covers anti-
corruption, avoiding conflicts of interest and handling invitations
and gifts appropriately.
The Suppliers’ Code of Conduct forms the counterpart to TUI’s
Code of Conduct. It details our ethical, social and legal expectations
of our business partners.
Moreover, all business partners are required by contract to observe
all national and international anti-corruption laws applicable to the
supplier relationship. This places our business relationship with
our partners on a solid legal and social basis.
C O M P L I A N C E R U L E S
In addition, the principles set out in the Code of Conduct are de-
tailed in various policies and rules reflecting the legal requirements.
This is supported by our Group-wide policy management, devel-
oping the standards for Group-wide policies and coordinating
incorporation of the relevant internal stakeholder groups, e. g. other
departments and the works council. This approach is designed to
provide TUI Group with a set of policies which are as complete and
comprehensible as possible without seeking overregulation. TUI
Group’s Compliance Rules offer guidance on appropriate conduct
regarding gifts and invitations, data protection and compliance
with trade sanctions. All groups of employees have thus been ac-
quainted with policies of relevance to their everyday work.
C O M P L I A N C E R I S K A N A LY S I S
In the financial year under review, the Compliance Programme
focused on various issues including data protection, protecting free
and fair competition, anti-corruption measures and the handling
of trade sanctions. A software is used, in particular for the above
topics, to facilitate risk identification based on self-disclosure by
TUI Group companies, with risks evaluated according to likelihood
of occurrence and potential damage (including reputational damage).
The results of the self-assessment are discussed with the companies
affected and are included in a Group-wide risk evaluation process.
The results of the compliance risk identification process are used to
derive corresponding risk-minimising measures, which are included
in the annual plan of Group Legal Compliance and agreed with the
relevant bodies. Monitoring of the implementation of the measures
is automated.
Risk analysis and prevention also includes the annual survey
among 1,189 legal representatives and executives of TUI Group to
identify potential conflicts of interest. Through the survey they
have to provide information on any interests held in TUI Group
competitors or key business partners as well as other issues of
relevance to Compliance. The survey carried out in the financial
year under review was completed by 100 % of the respondents. No
indications were found suggesting that there were any conflicts of
interests.
E U G E N E R A L D ATA P R O T E C T I O N R E G U L AT I O N ( G D P R )
With the EU GDPR taking effect on 25 May 2018, data protection,
which was already a key priority for TUI Group, was stepped up in
the financial year under review. Many measures were initiated
both at Group level and in local companies, e. g. the structured
coordination of all specialist data protection functions within the
Company and the appointment of Data Protection Officers in nearly
all relevant TUI Group companies (data protection governance).
One of the key measures was the roll-out of online training on
data protection in TUI Group companies from June 2018. By the
end of FY 2018, 78 % of the target employees had completed the
training. The training is still being carried out in some parts of the
organisation.
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127
C O M P L I A N C E T R A I N I N G
Compliance training is a key element of TUI’s Compliance Manage-
ment System, with its focus on preventing misconduct, and a crucial
component of TUI Group’s Compliance culture. It is carried out
according to a graded concept: managers and staff at TUI have all
benefited from face-to-face teaching and online programmes. This
enables all our executives and employees to acquaint themselves
with Compliance and the underlying corporate values, regardless
of their position in the company hierarchy and their geographical
location. In the completed financial year, the training programme
for new employees and risk groups was extended to include new
concepts and allow for harmonisation. In addition, TUI companies
and sectors offered training schemes with their own specific focus,
e. g. anti-corruption, competition law or the appropriate handling
of gifts and invitations, to raise awareness of the challenges they
might face.
W H I S T L E B L O W E R S Y S T E M
In agreement with various stakeholder groups TUI offers its
managers and employees a Group-wide whistleblower system to
enable serious infringements of laws or of the corporate values
anchored in TUI’s Code of Conduct to be reported anonymously
and without reprisals. This whistleblowing system is currently
available to staff in 53 countries. All reports are followed up in the
interests of all stakeholders and the Company. Our top priority is
to ensure confidentiality and handle information discreetly. In
FY 2018, a communication campaign was carried out to remind
employees of the existing whistleblower system. Any incidents
resulting from the use of the whistleblower system are reviewed by
Group Legal Compliance in conjunction with Group Audit. Infringe-
ments are fully investigated in the interests of all our staff and the
Company itself.
In the completed financial year, a total of 70 reports were received
through the SpeakUp Line. Apart from the SpeakUp Line, employees
also used the opportunity to directly report infringements to their
line managers, the Compliance contact in charge or the Compliance
Mailbox. A further 13 reports were received through these channels.
They were followed up whenever there were any indications suggest-
ing potential infringements of internal policies or the law. Out of
the 83 reports submitted in total, 24 cases initially presented
prima facie indications of a Compliance infringement, leading to
further investigations which in four cases resulted in disciplinary
measures, culminating where appropriate in terminations of em-
ployment contracts.
In the financial year under review, there were no infringements of
a severe nature that would have given rise to a publication.
B U S I N E S S PA R T N E R S C R E E N I N G ( D U E D I L I G E N C E )
The risk analysis carried out by Compliance shows that there is a
risk of active and passive corruption because we operate in countries
with a high corruption index. Moreover, the risk of TUI business
partners being subject to trade sanctions or similar listing cannot
be ruled out.
Group Legal Compliance therefore performs software-based
screenings of selected business partners at regular intervals. The
process involves checking the names of business partners against
international sanctions, terrorist and wanted persons lists. In the
event of a match, we launch a range of measures, in extreme cases
terminating the business relationship.
In FY 2018, we used this process to check 11,286 business partners
against Compliance criteria. The screening software initially
flagged 9,697 of these business partners as potential ‘hits’ as their
names were identical with or similar to names included in sanctions
lists. These potential ‘hits’ were then further investigated. In nine
cases, the business organisation cooperating with the business
partners in question were briefed about the results of the review,
enabling them to implement further security measures.
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Remuneration Report
A. Introduction
The remuneration report outlines the remuneration of the members
of the Executive Board of TUI AG as well as the remuneration of the
members of its Supervisory Board in accordance with the articles
of association. The remuneration report is based, in particular, on
the recommendations of the German Corporate Governance
Code (GCGC), the requirements of the German Commercial Code
(Handelsgesetzbuch) and the German Stock Corporation Act
(Aktiengesetz) and, to the extent practicable, the requirements of
the UK Corporate Governance Code (UK CGC).
TUI AG is a German stock corporation that is also listed on the
London Stock Exchange (LSE). Where mandatory provisions regard-
ing the governance of or legal requirements for a German stock
corporation are affected, these are disclosed in this report and
placed in context with the UK CGC, as required.
B. Remuneration of the Executive Board
I .
S H A R E H O L D E R S ’ A P P R O V A L O F T H E R E M U N E R AT I O N
S Y S T E M
In FY 2018 a new remuneration system for the members of the
Executive Board has been established and approved with retroactive
effect from the beginning of FY 2018 by the shareholders at the
Annual General Meeting on 13 February 2018. With the exception of
Mr Baier the new remuneration system is applicable to all members
of the Executive Board. Due to Mr Baier’s resignation from the
Executive Board of TUI AG, which was originally planned for
8 November 2018 in accordance with the service agreement con-
cluded between him and the company and which was brought
forward to the end of FY 2018 by mutual agreement, Mr Baier was
not migrated to the new remuneration system.
Although the previous remuneration system meets all legal require-
ments and results in appropriate remuneration, the Supervisory
felt that the time has come to make the next step after the success-
ful completion of the integration of former TUI Travel PLC into
TUI AG. The new remuneration system contains improvements
that follow best practice standards which are relevant to TUI AG as
well as the Executive Board’s strategy for sustainable growth. The
recommendations of the UK-Code as well as a diverging UK market
practice are included respectively in the position described.
Considering that and in view of the latest developments of the
arrangement of the remuneration in Germany it has been decided
to establish a remuneration system that takes into account both
perspectives. The defined performance indicators aim to take into
account the interests of all stakeholders and to create value for
our providers of equity and external funding.
Thereby the new remuneration system completely waives the
previous possibility of the Supervisory Board of granting an addi-
tional bonus subject to its discretion and not linked to any targets or
financial indicators. In fact, the variable remuneration components
are subject of specific target sets which are closely oriented towards
the forecast for the financial markets, which has been published
within the Annual Report and Accounts and is if necessary, updated
during the year.
Even though it is common practice in many companies applying
the UK-Code, the shareholders of TUI AG do not vote annually on the
remuneration system. This corresponds to the practice in most of
the German stock companies and is in conformity with the German
Stock Corporation Act. Nevertheless the targets to be achieved
for FY 2018 are being retroactively clarified in the remuneration
report in order to enable stakeholders to gain an understanding of
the underlying target achievements in the framework of the new
remuneration system.
I I . G E N E R A L P R I N C I P L E S
Following a recommendation from the Presiding Committee, the
Supervisory Board determines in accordance with section 87(1)
sentence 1 German Stock Corporation Act the remuneration of
the individual Executive Board members. It also regularly reviews
the remuneration system for the Executive Board.
For further remits of the Presiding Committee, please see the report
of the Supervisory Board page 14
The following principles, in particular, are taken into account in this
regard:
• Clarity and transparency
• Economic position, performance and sustainable development
of the company
• Tying shareholder interest to value increase and distribution
of profits (e. g. total shareholder return indicator) with corre-
sponding incentives for Executive Board members
• Ability to be competitive on the market for highly qualified
Executive Board members
• Appropriateness and conformity with tasks, responsibilities and
success of each individual Executive Board member, including in
the relevant environment of comparable international firms, and
taking into account standard practice at other major German
companies
• Tying a material portion of total remuneration to the achievement
of ambitious, long-term performance targets
• Appropriate correlation between the levels of fixed remuneration
and performance-based remuneration
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129
• Appropriateness in horizontal and vertical comparison (see
page 144)
The remuneration system does not contain malus or clawback
clauses. From the perspective of the Supervisory Board malus and
clawback clauses which allow for a retroactive correction of variable
remuneration are first of all an understandable request of stake-
holders. However, in the German jurisdiction such clauses are still
widely uncommon. Only for certain financial institutes they have
recently become legally binding. It has thus not yet been clarified
by the highest court, on which principles (eg. Transparency and
appropriateness of malus and clawback) malus and clawback clauses
are based in order to be effective and enforceable. Consequently,
the Supervisory Board has abstained to include malus and clawback
clauses in the service agreements of the members of the Executive
Board in the course of the revision of the remuneration system.
However, it has to be expressively stressed that the German law,
especially the German Stock Corporation Act, does provide sufficient
possibilities to enforce compensation claims towards members
of the Executive Board who disregard their duties of acting in
good faith.
R E M U N E R AT I O N O F T H E E X E C U T I V E B O A R D I N F Y 2 0 1 8
I I I .
In FY 2018, the remuneration for the members of the Executive
Board comprises: (1) a fixed remuneration; (2) an annual perfor-
mance-based remuneration (Jahreserfolgsvergütung – JEV); (3)
virtual shares of TUI AG in accordance with the Long-Term Incentive
Plan (LTIP); (4) fringe benefits and (5) pension entitlements.
Details are set out below:
1 .
F I X E D R E M U N E R AT I O N
Purpose and link to company strategy
Highly-qualified Executive Board members who are needed to
develop and implement company strategy are to be attracted
and retained.
The remuneration should be commensurate with the abilities,
experience and tasks of the individual Executive Board member.
Procedure
In determining the fixed remuneration the Supervisory Board takes
into account, in particular, the relevant and aforementioned general
principles.
The fixed remuneration is paid in twelve equal instalments at
the end of each month. If the service agreement begins or ends
in the course of the financial year relevant for payment of the
remuneration, the fixed annual remuneration will be paid pro rata
for that year.
The remuneration is generally reviewed when service agreements
of Executive Board members are extended, and can be adjusted or
revised for the term of the new service agreement. A review of the
remuneration can also take place during the term of a service
agreement in particular if there is a change with respect to the
tasks or responsibility of an Executive Board member.
2 .
A N N U A L P E R F O R M A N C E - B A S E D R E M U N E R AT I O N ( J E V )
Purpose and link to company strategy
The JEV is intended to motivate Executive Board members to
achieve ambitious and challenging financial, operational and strategic
targets throughout the financial year. The targets are reflective of
the company strategy and aimed at increasing corporate value.
Procedure
The JEV is calculated on the base of three group performance
indicators and the individual performance of the member of the
Executive Board. The performance period is the financial year of
TUI AG.
An individual target amount (Target Amount) is agreed for each
Executive Board member in their service agreement. Since 1 Octo-
ber 2018 the performance targets are Earnings Before Taxes (EBT)
at constant currency, Return on Invested Capital (ROIC) and the
Cash flow to the firm (Cash flow). The target values for the one-year
performance period for the EBT, ROIC and Cash flow are set by
Supervisory Board at the beginning of each financial year for the
respective financial year.
The target achievement is calculated as follows:
2 .1
E A R N I N G S B E F O R E TA X E S ( E B T )
The previous group performance indicator Group EBITA was
replaced by EBT on a constant currency basis with a weighting
of 50 %. This change in group performance indicators permits
inclusion of the net financial result in the calculation. The
adjustment for currency effects makes it possible to measure
the actual management performance without distortion
from currency-induced translation effects.
• The EBT component of the JEV must reach a threshold of
at least 90 % of the earnings target (on a constant currency
basis) (equals target achievement of 50 %), in order to be
relevant for bonus purposes.
• The achievement of an earnings target of 100 % equals a
target achievement of 100 %.
• Anything in excess of 110 % (on a constant currency basis) of
the earnings target (corresponds to a target achievement
of 180 %) is not included.
130
2 . 2
In the event of a quotient between 90 % and 100 %, linear
interpolation will be used to determine the target achievement
between 50 % and 100%, and in the event of a quotient
between 100 % and 110%, linear interpolation will be used to
determine the target achievement between 100 % and
180 %. The target achievement will be rounded to two decimal
figures, as is customary in commercial practice.
R E T U R N O N I N V E S T E D C A P I TA L ( R O I C ) A S A D D I T I O N A L
G R O U P P E R F O R M A N C E I N D I C AT O R
The newly introduced group performance indicator ROIC will
be included in the JEV with a weighting of 25 %. The Group
EBITA and the average invested interest-bearing capital for
the financial year will be weighed against each other to
establish the ROIC of the TUI Group used to calculate the JEV.
The average invested interest-bearing capital is calculated as
the average value based on the invested capital balance at
the beginning and end of the year. The invested capital is
calculated as the equity (including non-controlling interests)
plus interest-bearing liabilities, minus interest-bearing assets,
plus a seasonal adjustment. By applying the average assess-
ment previously used in the Annual Report, seasonal fluctu-
ations and differences in capital intensity of the business
model specific segments of TUI AG can be taken into account
and a return on equity target can be included in the annual
variable remuneration.
• The ROIC component of the JEV will only be included in
the JEV where the return on investment is no more than
3 % points below the defined target (corresponds to a tar-
get achievement of 50 %).
• If the return on investment corresponds to the defined
target, the target achievement is 100 %.
• In order to reach maximum target achievement of 180 %
the target must be exceeded by 3 % points or more.
In the event of a deviation between – 3 % points and 0 %
points, linear interpolation will be used to determine the target
achievement between 50 % and 100 %, and in the event of a
deviation between 0 % points and 3 % points, linear interpola-
tion will be used to determine the target achievement between
100 % and 180 %. The target achievement will be rounded to
two decimal figures, as is customary in commercial practice.
2 . 3
C A S H F L O W A S A D D I T I O N A L G R O U P P E R F O R M A N C E
I N D I C AT O R
A cash flow component will also be included in the calculation
as a third group performance indicator with a weighting of
25 %. For this purpose The cash flow is calculated based on the
unadjusted earnings before interest, taxes and amortisation of
goodwill reported in the approved and audited consolidated
accounts of the TUI Group (EBITA according to the approved
and audited consolidated accounts of the TUI Group) on a
constant currency basis plus the difference between amorti-
sations and write-backs, plus the change to the so-called
Working Capital, minus the earnings from companies measured
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
according to the equity method, plus the dividends received
by TUI AG from participating interests and minus net capex
and investments. Working Capital includes short-term assets
and liabilities that are not cash or cash equivalents (‘cash’),
income tax receivables or liabilities or derivative financial
instruments. Furthermore, interest- bearing assets and
liabilities as well as short-term provisions for pensions are
not included.
• The cash flow component of the JEV must reach a
threshold of at least 90 % of the liquidity target (adjusted
for foreign exchange effects) (corresponds to a target
achievement of 50 %), in order to be relevant for bonus
purposes.
• The achievement of a liquidity target of 100 % equals a
target achievement of 100 %.
• Anything in excess of 110 % of the liquidity target (corre-
sponds to a target achievement of 180 %) is not included.
In the event of a quotient between 90 % and 100 %, linear
interpolation will be used to determine the target achievement
between 50 % and 100 %, and in the event of a quotient
between 100 % and 110 %, linear interpolation will be used to
determine the target achievement between 100 % and 180 %.
The target achievement will be rounded to two decimal figures,
as is customary in commercial practice.
As before, the JEV depends on an individual performance factor in
addition to the target achievements of the aforementioned group
performance indicators. Under the new remuneration system the
Supervisory Board shall determine the individual performance
factor for the JEV (0.8 to 1.2) for each Executive Board member
based on the achievement of three target categories: In addition to
individual performance targets, this includes targets for the overall
performance of the Executive Board and stakeholder targets. The
Supervisory Board will establish the targets from these three
categories and their relative weighting for each Executive Board
member and financial year.
The value resulting from the multiplication of the target amount
by the degree of target achievement for the EBT, the ROIC, the
Cash flow and the individual performance factor will be paid out in
the month of the approval and audit of the consolidated accounts
of the TUI Group for the relevant financial year. If the service
agreement begins or ends in the course of the relevant financial
year, the claims for payment of the JEV will generally be pro rata.
Cap
The JEV will be capped at 180 % prior to the consideration of the
individual performance factor. As a result, there is an annual cap
for the JEV and an individual cap for each member of the Executive
Board, which is shown in the table on page 136.
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131
In accordance with section 87(1) sentence 3 German Stock Corpo-
ration Act, the Supervisory Board is entitled to limit the amount of
the JEV to allow for extraordinary circumstances (e. g. takeover of
the company, sale of parts of the company, uncovering of hidden
reserves, external influences).
3 .
A N N U A L P E R F O R M A N C E - B A S E D R E M U N E R AT I O N
A C C O R D I N G T O P R E V I O U S R E M U N E R AT I O N S Y S T E M
( O N LY A P P L I C A B L E T O M R B A I E R )
Due to his retirement from the Executive Board Mr Baier’s re-
muneration has not been migrated to the new system in FY 2018.
Thus, the provisions for the JEV of the previous remuneration
system continue to be applicable for Mr Baier in FY 2018 and are
set out as follows:
Procedure
The JEV is calculated on the basis of a group performance indicator
and the individual performance of the Executive Board member.
The performance reference period is the financial year of TUI AG.
An individual target amount (Target Amount) is agreed for Mr Baier
in his service agreement. Since 1 October 2010 the performance
target has been the reported earnings before interest, tax and
amortisation of goodwill (Group EBITA). The target value for the
one-year performance reference period for the group EBITA
performance target is set each year by the Supervisory Board.
To measure performance, the target value will be compared with
the corresponding actual value of the Group EBITA as reported in
the audited consolidated accounts of TUI AG to be prepared in
accordance with the accounting rules in force at the time. The
degree of target achievement is determined as follows:
• If the actual value of the Group EBITA achieved is below the
target value by 50 % or more, this is equivalent to a target
achievement of 0 %.
• If the value achieved corresponds to the target value, this is
equivalent to a target achievement of 100 %.
• If the value achieved exceeds the target value by 50 % or more,
this is equivalent to a target achievement of 187.5 %.
Between 50 % below target value and target value, linear inter-
polation between 0 % and 100 % will be used to determine the
degree of target achievement. Between target value and 50 %
above target value, linear interpolation between 100 % and 187.5 %
will be used to determine the degree of target achievement. The
degree of target achievement will be rounded to two decimal places,
as is customary in commercial practice.
As in the past, the JEV depends on an individual performance factor
in addition to the achievement of the above Group key performance
indicator. The Supervisory Board now determines this individual
JEV performance factor (0.8 to 1.2) for Mr Baier based on the
achievement of three target categories: In addition to individual
performance targets, performance targets for the entire Executive
Board and the stakeholder targets are also included in the de-
termination. The Supervisory Board defined the targets from
these three categories and their relative weighting for Mr Baier as
well as for the other members of the Executive Board for FY 2018
at the beginning of the financial year.
The amount resulting from the multiplication of the target amount
by the degree of target achievement for the Group EBITA and the
individual performance factor will be paid out in cash in the month
in which the Supervisory Board approves the annual accounts of
TUI AG for the respective financial year.
Cap
There is an annual and individual cap for Mr Baier’s JEV, which is
shown on page 136.
In accordance with section 87(1) sentence 3 German Stock Corpo-
ration Act, the Supervisory Board is entitled to limit the amount of
the JEV to allow for extraordinary circumstances (e. g. takeover of
the company, sale of parts of the company, uncovering of hidden
reserves, external influences).
4 .
4 .1
V I R T U A L S H A R E S A C C O R D I N G T O T H E L O N G -T E R M
I N C E N T I V E P L A N ( LT I P )
F U N C T I O N I N G O F T H E N E W L O N G -T E R M I N C E N T I V E
P L A N ( LT I P )
Purpose and link to company strategy
The long-term objective is to increase corporate and shareholder
value by defining ambitious goals that are closely linked to the
company’s earnings, share price performance and dividends.
Procedure
The LTIP is a performance share plan based on virtual shares and
is assessed over a period of four years (Performance Reference
Period). Virtual shares are granted in annual tranches.
For Executive Board members, an individual target amount (Target
Amount) is agreed in the service agreement. At the beginning of
each financial year a provisional number of virtual shares, commen-
surate with the target amount, will be set. This will constitute the
basis for the determination of the final performance-based payment
for the tranche in question at the end of the respective perfor-
mance reference period. To set this number, the target amount
will be divided by the average Xetra price of TUI AG shares over the
20 trading days prior to the beginning of the performance reference
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period (1 October of each year). The claim to a payment only arises
upon expiry of the performance reference period and depends on
whether or not the respective performance target is achieved.
The target achievement for the average development of
the EPS p. a. based on the annual amounts is calculated as
follows:
4 .1 .1 T O TA L S H A R E H O L D E R R E T U R N ( T S R )
• An average increase p. a. of less than 3 % corresponds to a
The relevant performance target for determining the amount
of the payout after the performance reference period is the
development of the Total Shareholder Return (TSR) of
TUI AG in relation to the development of the TSR of the
STOXX Europe 600 Travel & Leisure Index (Index). The relative
TSR is being considered with a weighting of 50 %. The degree
of target achievement is being determined depending on the
TSR-value of TUI AG compared to the TSR-value of the com-
panies belonging to the Index over the performance reference
period. To determine the relative TSR of TUI AG the respective
established TSR-value and those of the comparable companies
are sorted in descending order. The relative TSR of TUI AG is
expressed as a percentile (percentile rank).
Thereby the TSR is the aggregate of all share price increases
plus the gross dividends paid over the performance reference
period. The Data for the observation of the development of
the TSR-values of TUI AG and the Index is provided by a
reputable data provider (eg. Bloomberg, Thomson Reuters).
The reference to determine the ranking is the composition
of the Index on the last day of the respective performance
reference period. The values for companies that were not
listed over the entire performance reference period will be
factored in on a pro rata basis. The level of target achieve-
ment (in percent) for the relative TSR of TUI AG based on the
percentile is calculated as follows:
• A percentile below the median corresponds, unlike the
remuneration system removed with effect from 1 Octo-
ber 2017, to a target achievement of 0 %
• A percentile equivalent to the median corresponds to a
target achievement of 100 %.
• A percentile equivalent to the maximum value corresponds
to a target achievement of 175 %.
In the event of a percentile between the median and the
maximum value, linear interpolation will be used to determine
the target achievement between 100 % and 175 %. The target
achievement will be rounded to two decimal figures as is
customary in commercial practice.
4 .1 . 2 E A R N I N G S P E R S H A R E ( E P S ) A S A D D I T I O N A L G R O U P
P E R F O R M A N C E I N D I C AT O R
Furthermore the average development of the Earnings per
Share (EPS) p. a. as additional group performance indicator
with a weighting of 50 % is taken into account for the LTIP.
The average over the four years performance reference period
is based on a pro forma underlying earnings per share from
continuing operations as they are being published in the
Annual Report and Accounts already.
target achievement of 0 %.
• An average increase p. a. of 3 % corresponds to a target
achievement of 25 %.
• An average increase p. a. of 5 % corresponds to a target
achievement of 100 %.
• An average increase p. a. of 10 % or more corresponds to a
target achievement of 175 %.
In the event of an average increase p. a. between 3 % and 5 %
linear interpolation will be used to determine the target
achievement between 25 % and 100 % and in the event of an
average increase p. a. between 5 % and 10 % or more, linear
interpolation will be used to determine the target achievement
between 100 % and 175 %. The target achievement will be
rounded as well to two decimal figures as is customary in
commercial practice.
If the previous year’s EPS is below € 0.50 the Supervisory
Board will, for each subsequent financial year, redefine
absolute target values for the EPS as well as minimum and
maximum values for determining the percentage target
achievement.
The degree of target achievement (in percent) is calculated as the
average of the respective target achievements for the performance
targets relative TSR of TUI AG and EPS. To determine the final
number of virtual shares the degree of target achievement at the
date of the expiry of the performance reference period is being
multiplied with the provisional number of virtual shares. The payout
is obtained by the multiplication of the final number of virtual
shares with the average XETRA price of TUI AG shares over the last
20 trading days in the respective performance reference period
(until 30 September of every year). The amount will be paid out in
the month of the approval and audit of the consolidated accounts
of the TUI Group. If the service agreement begins or ends during
the financial year relevant for the granting of the LTIP the claim to
payout of the LTIP is in general calculated on a pro rata basis.
Cap
The maximum LTIP-payout is capped at 240 % of the individual
target amount for each performance reference period. As a result,
there is an annual cap for the LTIP and an individual cap for each
member of the Executive Board, which is shown in the table on
page 136.
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133
4 . 2
L O N G T E R M I N C E N T I V E P L A N A C C O R D I N G T O P R E V I O U S
• a TSR value of TUI AG equivalent to the median of the index
R E M U N E R AT I O N S Y S T E M
For those members of the Executive Board whose service agree-
ments already existed prior to FY 2018, the replaced remuneration
system will initially continue to apply in part in parallel. This relates
only to the LTIP tranches granted before FY 2018 but not yet
included in the remuneration paid due to the performance period.
In addition, Mr Baier did not migrate to the new remuneration
system due to his aforementioned retirement from the Executive
Board. Accordingly, the LTIP provisions of the former remuneration
system continue to apply to Mr Baier for FY 2018, as described below:
corresponds to a target achievement of 100 %.
• a TSR value of TUI AG equivalent to the third to top, second to
top or top value of the index corresponds to a target achievement
of 175 %.
For performance between the third to bottom and the third to top
rank, linear interpolation will be used to determine the level of
target achievement at between 25 % and 175 %. The degree of
target achievement will be rounded to two decimal places, as is
customary in commercial practice.
Procedure
The LTIP is a performance share plan based on virtual shares and
is assessed over a period of four years (Performance Reference
Period). Virtual shares are granted in annual tranches.
For Executive Board members, an individual target amount ( Target
Amount) is agreed in the service agreement. At the beginning of
each financial year a provisional number of virtual shares, commen-
surate with the target amount, will be set. This will constitute the
basis for the determination of the final performance-based payment
for the tranche in question at the end of the respective performance
reference period. To set this number, the target amount will be
divided by the average Xetra price of TUI AG shares over the 20
trading days prior to the beginning of the performance reference
period (1 October of each year). The claim to a payment only arises
upon expiry of the performance reference period and depends on
whether or not the respective performance target is achieved.
The performance target for determining the amount of the final
payout at the end of the performance reference period is the
development of the total shareholder return (TSR) of TUI AG relative
to the development of the TSR of the STOXX Europe 600 Travel &
Leisure (Index), whereby the ranking of the TUI AG TSR in relation to
the index companies will be monitored over the entire perfor-
mance reference period. The TSR is the aggregate of all share price
increases plus the gross dividends paid over the performance
reference period. Data from a reputable data provider (e. g.
Bloomberg, Thomson Reuters) will be used for the purpose of
establishing the TSR values for TUI AG and the index. The reference
for the purpose of determining the rankings is the composition of
the index on the last day of the performance reference period. The
values for companies that were not listed over the entire perfor-
mance reference period will be factored in on a pro rata basis. The
level of target achievement is established as follows depending on
the ranking of the TSR of TUI AG relative to the TSR values of the
index companies over the performance reference period:
• a TSR value of TUI AG equivalent to the bottom and second to
bottom value of the index corresponds to a target achievement
of 0 %.
• a TSR value of TUI AG equivalent to the third to bottom value of
the index corresponds to a target achievement of 25 %.
To determine the final number of virtual shares, the degree of target
achievement will be multiplied by the provisional number of virtual
shares on the final day of the performance reference period.
The payout is determined by multiplying the final number of
virtual shares by the average Xetra price of TUI AG shares over
the 20 trading days prior to the end of the performance reference
period (30 September of each year). The payout which is calculated
in this way will be due in the month of the approval of the annual
accounts of TUI AG for the fourth financial year of the performance
reference period and is paid out in cash. If the service agreement
begins or ends in the course of the financial year relevant for the
grant of the LTIP, the claims for payment of the same will generally
be pro rata.
Cap
The LTIP is capped annually and individually for each member of
the Executive Board; for the figures, see the table on page 136.
4 . 3
D E V E L O P M E N T O F A G G R E G AT E V I R T U A L S H A R E S O F
C U R R E N T E X E C U T I V E B O A R D M E M B E R S I N F Y 2 0 18
Granting in F Y 2018
Friedrich Joussen
Horst Baier
David Burling
Birgit Conix
Sebastian Ebel
Dr Elke Eller
Frank Rosenberger
Decrease in FY 2018*
Friedrich Joussen
Horst Baier
David Burling
Sebastian Ebel
Number
125,342
56,507
63,014
13,303
54,012
52,740
52,397
129,484
59,055
14,582
35,186
* Decrease corresponts to amounts paid for LTIP-tranches that ended in F Y 2018
(see DCGK-table on remuneration paid).
134
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
4 . 4
E X P E N D I T U R E O F A W A R D I N G V I R T U A L S H A R E S F O R
T H E LT I P I N F Y 2 0 18 T O C U R R E N T E X E C U T I V E B O A R D
M E M B E R S A C C O R D I N G T O I F R S 2
Expenditure for granting of virtual shares in FY 2018
acc. to IFRS 2
€ ’000
Friedrich Joussen
Horst Baier
David Burling
Birgit Conix
Sebastian Ebel
Dr Elke Eller
Frank Rosenberger
Total
Part of total
expenditure
FY 2018
Part of total
expenditure
F Y 2017
2,815.0
1,090.3
1,139.0
313.4
1,161.7
897.5
502.5
7,919.4
1,830.0
495.1
296.2
0.0
381.3
252.4
238.3
3,493.2
The table shows the individual amounts of the total expenditure
arising from the addition to the provisions to be formed pro rata
according to IFRS 2 for all of the LTIP tranches to be granted
during the term of the respective service agreements. According to
IFRS 2, there are provisions totaling € 16,504.4 k (previous year:
€ 8,585.0 k) to cover entitlements under TUI AG’s LTIP for current
Executive Board members.
According to the German Commercial Code, there are provisions
totaling € 10,709.8 k (previous year: € 4,625.8 k) for LTIP tranches
currently in the lock-up period.
There are liabilities in accordance with IFRS and the German
Commercial Code totaling € 4,079.0 k (previous year: € 1,604.6 k).
5 .
F R I N G E B E N E F I T S
Purpose and link to company strategy
Fringe benefits offered should be competitive on the market for
highly qualified Executive Board members.
Procedure
as to type of holiday, category or price. Accompanying spouses /
partners shall be granted a 50 % discount for these benefits,
whereas accompanying own children and accompanying children
of spouses / partners shall be granted a 100 % discount on the
regular price of the aforementioned vacations until they no
longer have a claim to a child allowance or a comparable state
benefit pursuant to a foreign legal order. A discount of 75 %
(50 % for accompanying spouses/partners, accompanying children
meeting the requirements mentioned before) will be granted
for flights (seat-only business of an airline in which TUI AG holds
a majority participation pursuant to section 16 German Stock
Corporation Act) that are not part of a trip.
• A suitable company car with driver or alternatively a car allowance
of € 1.5 k gross per month.
• Insurance cover is provided in line with the agreements applicable
in Germany and the United Kingdom. This is offered as follows:
TUI AG provides an accident insurance for Mr Joussen, Mr Baier,
Ms Conix, Mr Ebel, Dr Eller and Mr Rosenberger to the customary
extend and pays the respective insurance contributions for the
term of the service agreements. The coverage amounts to € 1,500 k
for death and € 3,000 k for full disablement. Furthermore TUI AG
pays an allowance towards health and long-term care insurance
in the amount that would be payable for an employee but no more
than half of the respective insurance premium for Mr Joussen,
Mr Baier, Ms Conix, Mr Ebel, Dr Eller and Mr Rosenberger.
Insofar as this is permitted by law, Mr Burling remains a beneficiary
of the UK term life, vocational disability and health insurance
programs at the expense of TUI AG.
TUI AG also takes out criminal law protection insurance that provides
cover for the Executive Board members regarding criminal and
misdemeanor proceedings, if these proceedings are based on an
act or a failure to act in the exercise of their duties for TUI AG.
TUI AG also takes out a suitable financial liability insurance policy
(D&O insurance) coverage for the Executive Board members to
cover possible claims brought under private law on the basis of
statutory liability provisions against one or more of the Executive
Board members by a third party or the company for damages for
a breach of duty committed in the exercise of their duties. The
D&O insurance provides for a deductible of 10 % of the damage up
to 150 % of the fixed annual remuneration.
Executive Board members receive the following fringe benefits:
Amount
• Reimbursement of business travel expenses in accordance with
TUI AG’s general business travel guidelines; if applicable.
• Twice each financial year, the reimbursement of substantiated
(e. g. by invoices) costs of a trip or individual components of a
trip that take place at essentially the same time (flight, transfer
in destination area, accommodation including holiday houses
and apartments, cruise, rental car, round trip), from the ranges
of a provider in which TUI AG holds a majority participation
(section 16 German Stock Corporation Act), without any limitation
The value of the company car, free holidays and insurance benefits
which every member of the Executive Board receives annually is
taken into account within the scope of the maximum remuneration
listed on page 136 as fringe benefits.
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135
6 .
P E N S I O N B E N E F I T S
Purpose and link to company strategy
• Mr Joussen: € 454.5 k per year. Mr Joussen becomes eligible for
payment of the pension upon reaching the age of 62.
• Dr Eller: € 230.0 k per year. Dr Eller becomes eligible for payment
of the pension upon reaching the age of 63.
Highly-qualified Executive Board members who are needed to
develop and implement company strategy are to be acquired and
retained.
• Mr Baier: € 267.75 k per year. Mr Baier becomes eligible for
payment of the pension upon reaching the age of 60.
• Mr Ebel: € 207.0 k per year. Mr Ebel becomes eligible for payment
The pension benefits should be competitive on the market for
highly qualified Executive Board members and should provide
them with a corresponding level of benefits in their retirement.
Procedure
Benefits in the form of pensions are paid to former Executive Board
members if they reach the predefined age limit or are permanently
incapacitated. The Executive Board members are not entitled to
receive transition payments upon leaving the Executive Board,
with the exception of Mr Ebel who has an acquired right to receive
transition payments under a legacy contract.
With regard to pension entitlements, different principles apply to
Mr Joussen, Dr Eller, Mr Baier, Mr Ebel and Mr Rosenberger on the
one hand and Mrs Conix and Mr Burling on the other hand due to
the legacy systems in Germany, Belgium and the UK.
Mr Joussen, Dr Eller, Mr Baier, Mr Ebel and Mr Rosenberger are
entitled to pensions according to the pension commitments granted
to Executive Board members of TUI AG (TUI AG Pension Scheme).
These Executive Board members receive, on an annual basis, a
contractually agreed amount that is paid into an existing pension
account for the respective Executive Board member. The contribu-
tions to the company pension scheme of Mr Joussen, Dr Eller,
Mr Baier and Mr Ebel carry an interest rate established in the
pension commitment. The interest rate stands at 5 % p. a. The
annual interest for Mr Rosenberger’s contributions to the company
pension scheme is established by the company at its reasonable
discretion in such a way that it does not exceed 5 % p. a. The
beneficiary may choose between a one-off payment, payment by
instalments or pension payments. The amounts agreed on in
the service agreements of the aforementioned Executive Board
members are:
of the pension upon reaching the age of 62.
• Mr Rosenberger: € 230.0 k per year. Mr Rosenberger becomes
eligible for payment of the pension upon reaching the age of 63.
Should Mr Joussen, Dr Eller, Mr Baier, Mr Ebel and Mr Rosenberger
retire from TUI AG before the normal retirement date due to an
ongoing occupational disability, they will receive an occupational
disability pension until they are able to work again, but at most
until they reach the normal retirement date.
Under certain circumstances, spouses, partners or cohabitants of
the Executive Board members will, should the respective Executive
Board member die, receive a survivor’s pension worth 60 % of the
pension for their lifetime or until remarriage. Children of Executive
Board members will, should the respective Executive Board member
die, receive an orphan’s pension, paid no longer than until they
reach the age of 27 at the latest. Children who have lost one parent
will receive 20 % of the pension, and those who have lost both
parents will receive 25 %. This claim is subject to the prerequisite
that the child meets the requirements set out in section 32(3), (4),
sentence 1 nos. 1 to 3 and (5) German Income Tax Act (Einkommen-
steuergesetz).
Mr Burling receives a fixed annual amount of € 225.0 k paid out in
cash for his pension.
Ms Conix receives a fixed annual amount of € 230.0 k paid out in
cash for her pension.
7.
P E N S I O N P R O V I S I O N S F O R T H E C U R R E N T
E X E C U T I V E B O A R D M E M B E R S U N D E R T H E T U I A G
P E N S I O N C O M M I T M E N T S
At 30 September 2018, pension obligations for current Executive
Board members totaled € 22,061.9 k (previous year balance sheet
date: € 19,731.2 k) according to IAS 19. This includes € 4,624.3 k
(previous year balance sheet date: € 4,501.3 k) for claims earned
by Mr Ebel during the course of his work for the TUI Group up
until 31 August 2006. The remaining claims can be broken down
as follows:
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Pension of current Executive Board members below TUI AG Pension scheme
€ ’000
Friedrich Joussen
Horst Baier
Sebastian Ebel
Dr Elke Eller
Frank Rosenberger
Total
Addition to / reversal from
pension provision
Net present value
2018
2017
30 Sep 2018
30 Sep 2017
343.5
1,080.9
164.3
313.5
305.6
2,207.8
200.0
89.7
118.7
277.6
805.9
1,491.9
3,550.3
10,190.7
1,558.4
1,026.7
1,111.5
17,437.6
3,206.9
9,109.8
1,394.1
713.2
805.9
15,229.9
According to commercial law provisions, the pension obligations
for current Executive Board members amounted to € 18,508.4 k
(previous year balance sheet date: € 15,738.4 k); this includes
€ 3,263.2 k (previous year balance sheet date: € 2,925.0 k) for claims
earned by Mr Ebel during the course of his work for the TUI Group
up until 31 August 2006.
Where the above table shows a corresponding amount, the pension
obligations for beneficiaries are funded via the conclusion of
pledged reinsurance policies.
R E M U N E R AT I O N C A P S
8 .
The following caps apply to the remuneration (remuneration
components and total remuneration) payable to Executive Board
members for a financial year:
Remuneration caps
€ ’000
Friedrich Joussen
Horst Baier
David Burling
Birgit Conix1
Sebastian Ebel1
Dr Elke Eller
Frank Rosenberger
Fixed remuneration2
JE V
LTIP
1,100.0
740.0
680.0
680.0
680.0
680.0
600.0
2,743.2
1,687.5
1,080.0
1,188.0
1,080.0
961.2
1,004.4
4,392.0
2,475.0
2,208.0
2,208.0
2,208.0
1,848.0
1,836.0
Maximum total
remuneration3
7,500.0
4,200.0
3,500.0
3,500.0
3,500.0
3,500.0
3,500.0
1 Full-year values (12 months), possibly pro rated caps: see table on page 138
2 Fixed amount, no cap applied
3 Contractually agreed cap for total remuneration (incl. fixed remuneration, JE V, LTIP, pension, additional remuneration and fringe benefits). In case the cap of total
remuneration is exceeded, the LTIP is reduced accordingly.
9 .
PAY M E N T S I N C A S E O F P R E M AT U R E D E PA R T U R E
O F A N E X E C U T I V E B O A R D M E M B E R
The payments to be made to a member of the Executive Board on
the premature termination of his or her service agreement without
good cause are in principle limited in the service agreements of
Mr Joussen und Mr Baier to an amount equal twice their annual
remuneration. In the service agreements of Ms Conix and
Mr Rosenberger it has been agreed that payments in the event of
premature termination without good cause may not – in case of
premature termination during the first year after the coming into
force of the service agreement – exceed the amount equal twice
their annual remuneration and – in case of premature termination
after the end of the first year of the service agreement – exceed
the amount on an annual remuneration (severance pay cap). In
the service agreements of Mr Burling, Mr Ebel and Dr Eller is has
been agreed that payments due to premature termination of the
respective service agreement without good cause shall not exceed
the amount of an annual remuneration (severance pay cap).
For any member of the Executive Board, payments upon premature
termination shall not cover more than the remaining term of the
service agreement. The severance payment is calculated based on
the target direct remuneration (fixed remuneration, target amount
for JEV and target amount for LTIP) of the expired financial year
and, if relevant, the expected target remuneration for the current
financial year, provided that the application of the GCGC does not
result in a lesser sum. If the service agreement is terminated extra-
ordinarily without notice no payments will be made to the members
of the Executive Board.
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137
1 0 .
O T H E R PAY M E N T S / B E N E F I T S F O R E X E C U T I V E B O A R D
M E M B E R S W H O L E F T T H E B O A R D I N F Y 2 0 1 8
The Chief Financial Officer of TUI AG, Mr Horst Baier, has retired
from the Executive Board at the end of FY 2018. The service agree-
ment of Mr Baier stipulated an appointment until 8 November 2018.
Given Mr Baier’s request to not further extend his appointment in
view of his impending retirement and following the succession
planning process, on 15 July 2018 a successor, Ms Conix, has been
introduced to this position. This way an orderly hand-over process
has been ensured whereby the Supervisory Board and Mr Baier
could mutually agree on the termination of his activity as of the
expiry of 30 September 2018. For the remaining term of his service
agreement Mr Baier received – due to the premature termination – a
severance payment in the amount of € 234,689.50 (gross). Moreover,
Mr Baier will be at the company’s disposal as an advisor for one
year wherefore he receives a fixed fee of € 10 k (net) per month.
For the time until 8 November 2018 this salary has been deducted
from his severance payment. Subjects of counseling as well as
place and time are stipulated by contract.
11 .
P E N S I O N PAY M E N T S M A D E T O PA S T E X E C U T I V E
B O A R D M E M B E R S
In FY 2018, the pension payments to former Executive Board
members and their surviving dependents totaled € 4,963.6 k
(previous year: € 13,497.1 k).
Pension provisions for former members of the Executive Board
and their dependents amounted as at the balance sheet date to
€ 63,738.2 k (previous year: € 64,683.5 k) as measured according to
IAS 19, not including Mr Ebel’s claims in the amount of € 4,624.3 k
(previous year: € 4,501.3 k) which he earned before 31 August 2006
during the course of his work for the TUI Group.
According to commercial law provisions, the pension obligations
for former members of the Executive Board and their dependents
amounted to € 56,021.4 k (previous year: € 55,074.1 k), not including
Mr Ebel’s claims in the amount of € 3,263.2 k (previous year:
€ 2,925.0 k) which he earned before 31 August 2006 during the
course of his work for the TUI Group.
In cases of premature termination of the service agreement, the
annual performance-based remuneration (JEV) and payments
according to the LTIP will be managed as follows:
• JEV
• If the company terminates the service agreement without
notice before the end of the one-year performance reference
period for good cause attributable to the beneficiary or if the
beneficiary terminates the service agreement without good
cause, the claim to the JEV for the performance reference
period in question will be forfeited and no alternative re-
muneration or compensation will be paid.
• In all other cases of premature termination of the service
agreement before the end of the one-year performance
reference period, the JEV will be paid on a pro rata basis.
• LTIP:
• If the company terminates the service agreement without
notice before the end of the respective performance reference
period for good cause attributable to the Executive Board
member, or if the Executive Board member terminates the
service agreement without good cause, all claims under the
LTIP will lapse for all tranches not yet paid and no alternative
remuneration or compensation will be paid.
• If the service agreement ends before the expiry of the per-
formance reference period for other reasons, the claims under
the LTIP will be maintained for tranches not yet paid. The
tranche of the current financial year will be reduced on a pro
rata basis. The payout will be calculated in the same way as
in the case of a continuation of the service agreement.
In connection with a termination of an Executive Board Member’s
service agreement, in particular subsequent to a termination of the
service agreement, regardless of by which party, or the conclusion
of a termination agreement, TUI AG shall be entitled to release the
respective Executive Board Member in full or in part from his or
her obligation to perform work subject to continued payment of
the remuneration. Such release shall initially be irrevocable for the
period of any still outstanding holiday entitlement, which shall
hereby be deemed exhausted. The release shall subsequently be
maintained until the service agreement ends. The release shall be
revocable in the event that questions exist in connection with the
winding-up of the service relationship or temporary work becomes
necessary for business reasons. This shall not affect the remainder
of the service agreement.
The service agreements of the Executive Board members do not
contain change of control clauses.
138
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
I V.
O V E R V I E W : I N D I V I D U A L R E M U N E R AT I O N O F
E X E C U T I V E B O A R D M E M B E R S
1 .
I N D I V I D U A L R E M U N E R AT I O N O F T H E M E M B E R S O F
T H E E X E C U T I V E B O A R D M E M B E R S F O R F Y 2 0 1 8 ( P U R -
S U A N T T O S E C T I O N 3 14 (1) , N O . 6 ( A ) G E R M A N C O M -
M E R C I A L C O D E )
The amount for the LTIP shown in the following table corresponds
to the fair value of the LTIP tranches of the respective member of the
Executive Board at the grant date in accordance with the provisions
of the German Commercial Code (HGB) covering the entire term
of the respective service agreement. The values of the fixed re-
muneration and the JEV, on the other hand, reflect the remuneration
paid for FY 2018.
Remuneration of individual Executive Board members granted by TUI AG for FY 2018
(acc. to section 314, paragraph 6 lit a of the German Commercial Code)
€ ’000
Friedrich Joussen
Horst Baier
David Burling
Birgt Conix3
Sebastian Ebel 4
Dr Elke Eller
Frank Rosenberger
Total
Previous year
Fixed remuneration1
JE V
Additional
remuneration
1,191.6
795.0
688.5
143.6
582.9
715.5
619.5
4,736.6
4,528.8
2,078.1
965.3
892.5
190.0
701.3
794.3
657.1
6,278.6
3,097.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
2,600.0
LTIP 2
3,915.7
935.8
3,496.9
2,786.1
2,887.8
4,036.1
2,397.7
20,456.1
2,889.5
Total
2018
7,185.4
2,696.1
5,077.9
3,119.7
4,172.0
5,545.9
3,674.3
31,471.3
13,115.7
Total
2017
3,248.3
1,746.1
1,584.4
0.0
2,899.2
1,371.6
2,266.0
1 Incl. fringe benefits (without insurances under Group coverage).
2 Based on the price of TUI AG share this corresponds for Mr Joussen to a number of 269,674 virtual shares, for Mr Baier to a number of 64,446 virtual shares, for
Mr Burling to a number of 240,829 virtual shares, for Ms Conix to a number of 191,878 virtual shares, for Mr Ebel to a number of 198,882 virtual shares, for Dr Eller
to a number of 240,829 virtual shares and for Mr Rosenberger to a number of 165,131 virtual shares.
3 Pro-rated disclosudre of all remuneration components as of 15 July 2018.
4 Reduction due to his sababatical from 26 April 2018 to 15 June 2018.
TA R G E T A C H I E V E M E N T
2 .
The multiplication of the target amounts by the weighted degrees
of target achievement for EBT, ROIC, Cash flow and the individual
performance factor results in the amount paid to member of the
Executive Board as JEV.
T A R G E T
A M O U N T
+
E B T
5 0 %
+
R O I C
2 5 %
+
C A S H F L O W
2 5 %
+
I N D I V I D U A L
P E R F O R M A N C E
F A C T O R F R O M
I N D I V I D U A L
P E R F O R M A N C E
T A R G E T S
=
I N D I V I D U A L
P A Y M E N T
A M O U N T O F J E V
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
139
The targets set by the Supervisory Board for EBT, ROIC and Cash
flow are based on the annual operating plan and are in line with
the financial communication. The achieved EBT of € 1,059.5 k and the
achieved Cash flow of € 759.8 k each lead to a degree of target
achievement of more than 100 %. At 22.8 %, the target value for the
ROIC could not be achieved in full, which was taken into account
accordingly in the calculation of the JEV with a partial target
achievement. All in all, the three key figures result in an excess
amount of the defined target values of 48.8 %. Mr Baier is not taken
into account in this consideration, as he was not migrated to the
new remuneration system.
In addition, the Supervisory Board set ambitious targets for
FY 2018 both for the individual performance of the members of
the Executive Board and for the performance of the Executive
Board as a whole as well as for stakeholder targets. These targets,
like the individual performance criteria, were largely based on the
Company’s current strategic planning. During the definition phase,
care is taken to ensure that these targets are precisely defined,
contain measurability criteria or can be verified, have both a
challenging and a positive, motivating dimension, and include a
specific point in time at which the targets should be met.
Taking these prerequisites into account, the Supervisory Board’s
decision on setting the individual performance factors was based
not only on strategic goals in the individual areas of responsibility
of the respective members of the Executive Board but also on the
development of a corporate, management and work culture that
optimally supports digital innovations in our tourism business, the
establishment of a reporting process on and the implementation
of measures for gender diversity below Executive Board level and
the implementation of measures to maintain or increase high
customer satisfaction. After intensive deliberation and detailed
discussion by the Supervisory Board, an individual performance
factor was determined for each member of the Executive Board.
Overall, the multiplication of the target amounts by the weighted
degree of target achievement for EBT, ROIC and Cash flow as well
as the individual performance factor leads to a JEV for the
members of the Executive Board that is in reasonable proportion to
the results of the financial year.
The target achievement was also determined for the LTIP. The pay-
ment of the LTIP tranche 2015 / 18 is based on the provisions of the
remuneration system applicable before 1 October 2017.
T A R G E T A M O U N T L T I P -
T R A N C H E 2 0 1 5 / 1 8
Ø X E T R A S H A R E
P R I C E T U I A G O F T H E
2 0 T R A D I N G D A Y S
P R I O R T O S T A R T O F
P E R F O R M A N C E P E R I O D
I N T E R P O L A T E D
+
D E G R E E O F T A R G E T
A C H I E V E M E N T F O R
+
T S R R A N K I N G
Ø X E T R A S H A R E
P R I C E T U I A G
2 0 T R A D I N G D A Y S
B E F O R E E N D O F
P E R F O R M A N C E
P E R I O D
=
A M O U N T P A I D
F O R L T I P - T R A N C H E
2 0 1 5 / 1 8
140
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
The LTIP tranche was granted on the basis of an average stock
market price of TUI AG of € 11.43. At the end of the performance
period, TUI AG’s average share price was € 15.46. Taking these figures
into account, the level of target achievement was determined on
the basis of TUI AG|s TSR ranking compared with the TSR values
of the STOXX Europe 600 Travel & Leisure companies over the
performance period, resulting due to interpolation in a level of
target achievement of 110.7 %.
Additionally, she acquired a claim of € 3.0 k from Nord / LB, which is
due for payment in December 2018. Furthermore, Dr Eller received
€ 0.8 k from K+S AG and acquired a claim there amounting to
€ 44.8 k. For his mandate on the Supervisory Board of SIXT SE,
Mr Joussen received € 25.2 k in FY 2018 and acquired a claim of
€ 74.8 k, due for payment after the end of SIXT SE’s financial year.
This remuneration was not offset against the Executive Board
remuneration paid by TUI AG.
A D D I T I O N A L I N F O R M AT I O N
3 .
As in the previous year, no loans or advances were granted to the
members of the Executive Board in FY 2018.
For her activities – which were approved by the Supervisory Board
of TUI AG – in supervisory boards or comparable domestic and
foreign supervisory bodies of companies to be set up in accordance
with section 125 of the German Stock Corporation Act (AktG)
which are not carried out on the basis of a shareholding of TUI AG
in the companies concerned Dr Eller received € 3.1 k from Nord / LB.
Pursuant to 4.2.5, attachment tables 1 and 2 GCGC, the two tables
below (remuneration awarded and remuneration paid) show the
benefits granted by TUI AG and the payments received. The table
of remuneration awarded’ in accordance with the GCGC shows the
amount awarded in each financial year. The table ‘remuneration
paid’ for the financial year under review shows the actual cash
payment from the LTIP for the performance period ‘LTIP 2015 – 2018’
for Mr Joussen, Mr Baier, Mr Burling and Mr Ebel. The other
members of the Executive Board are not entitled to LTIP-payments,
yet due to their length of membership in the Executive Board.
4 .
R E M U N E R AT I O N A W A R D E D
Remuneration awarded
Friedrich Joussen
CEO,
since 14 February 20131
Horst Baier
CFO,
since 8 November 2007
€ ’000
2017
2018
2018 (min.)
2018 (max.)
2017
2018
2018 (min.)
2018 (max.)
Fixed remuneration
Fringe benefits
Total
JE V
Additional remuneration
LTIP
LTIP (2017 – 2020)
LTIP (2018 – 2021)
Total
Pension / service costs5
Total remuneration6
1,100.0
132.3
1,232.3
920.0
920.0
1,494.8
4,567.1
625.7
5,192.8
1,100.0
91.6
1,191.6
1,270.0
–
1,729.0
4,190.6
563.5
4,754.1
1,100.0
91.6
1,191.6
–
–
–
1,191.6
563.5
1,755.1
1,100.0
91.6
1,191.6
2,743.2
–
4,392.0
8,326.8
563.5
7,500.0
740.0
20.0
760.0
450.0
450.0
681.8
2,341.8
–
2,341.8
740.0
55.0
795.0
750.0
–
644.2
2,189.2
–
2,189.2
740.0
55.0
795.0
–
–
–
795.0
–
795.0
740.0
55.0
795.0
1,687.5
–
2,475.0
4,957.5
–
4,200.0
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
141
Remuneration awarded
David Burling
Member of the Executive Board,
since 1 June 2015
Birgit Conix
Member of the Executive Board,
since 15 July 2018
€ ’000
2017
2018
2018 (min.)
2018 (max.)
2017
20182
2018 (min.)
2018 (max.)
600.0
107.9
707.9
400.0
400.0
505.0
2,012.9
225.0
2,237.9
680.0
8.5
688.5
500.0
–
869.2
2,057.7
225.0
2,282.7
680.0
8.5
688.5
–
–
–
688.5
225.0
913.5
680.0
8.5
688.5
1,080.0
–
2,208.0
3,976.5
225.0
3,500.0
–
–
–
–
–
–
–
–
–
–
143.6
–
143.6
116.1
–
183.3
443.0
47.9
490.9
143.6
–
143.6
–
–
–
143.6
47.9
191.5
143.6
–
143.6
250.8
–
466.1
860.5
47.9
738.9
Fixed remuneration
Fringe benefits
Total
JE V
Additional remuneration
LTIP
LTIP (2017 – 2020)
LTIP (2018 – 2021)
Total
Pension / service costs5
Total remuneration6
Remuneration awarded
Sebastian Ebel
Member of the Executive Board,
since 12 December 2014
Dr Elke Eller
Member of the Executive Board / Labour Director,
since 15 October 2015
€ ’000
2017
20183
2018 (min.)
2018 (max.)
2017
2018
2018 (min.)
2018 (max.)
Fixed remuneration
Fringe benefits
Total
JE V
Additional remuneration
LTIP
LTIP (2017 – 2020)
LTIP (2018 – 2021)
Total
Pension / service costs5
Total remuneration6
680.0
18.0
698.0
320.0
320.0
505.0
1,843.0
286.1
2,129.1
582.9
–
582.9
428.6
–
745.1
1,756.6
259.2
2,015.8
582.9
–
582.9
–
–
–
582.9
259.2
842.1
582.9
–
582.9
1,080.0
–
2,208.0
3,870.9
259.2
3,500.0
680.0
34.3
714.3
300.0
300.0
424.2
1,738.5
345.1
2,083.6
680.0
35.5
715.5
445.0
–
680.0
35.5
715.5
–
–
680.0
35.5
715.5
961.2
–
727.5
1,888.0
323.7
2,211.7
–
715.5
323.7
1,039.2
1,848.0
3,524.7
323.7
3,500.0
142
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
Remuneration awarded
€ ’000
Fixed remuneration
Fringe benefits
Total
JE V
Additional remuneration
LTIP
LTIP (2017 – 2020)
LTIP (2018 – 2021)
Total
Pension / service costs5
Total remuneration6
Frank Rosenberger
Member of the Executive Board,
since 1 January 2017
2018
2018 (min.)
2018 (max.)
600.0
19.5
619.5
465.0
–
722.8
1,807.3
342.1
2,149.4
600.0
19.5
619.5
–
–
–
619.5
342.1
961.6
600.0
19.5
619.5
1,004.4
–
1,836.0
3,459.9
342.1
3,500.0
20174
375.0
41.4
416.4
210.0
210.0
227.3
1,063.7
382.6
1,446.3
1 Joint-CEO until 09.02.2016; member of the Executive Board since 15 October 2012.
2 Pro-rated disclosure of all remuneration components as of 15 July 2018.
3 Reduction due to his sabbatical from 26 April 2018 until 15 June 2018.
4 Pro-rated disclosure of all remuneration components as of 1 January 2017.
5 For Mr Joussen, Mr Baier, Mr Ebel, Dr Eller and Mr Rosenberger service costs aa. to IA S19; for Mr Burling and Ms Conix payments for pension contribution.
6 When contractually agreed cap for total remuneration to be paid is exceeded, LTIP is reduced proportionally.
The following overview of the total remuneration awarded to the
members of the Executive Board in FY 2018 illustrates the dis-
tribution of the individual remuneration components in relation to
each other. It has to be emphasized that the share of variable
components of the total remuneration awarded is quite consider-
able: The LTIP accounts for 35 % of the total remuneration awarded,
the JEV accounts for 25 %. It can be stated that variable components
account for 60 % of the total remuneration awarded to the members
of the Executive Board.
Composition of total remuneration awarded 2018
in %
1
Fringe benefits
35
LTIP
25
Annual
performance-
based
remuneration
(JE V )
11
Pension /
service costs
28
Fixed
remuneration
%
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
143
5 .
R E M U N E R AT I O N PA I D
Remuneration paid
Friedrich Joussen
CEO,
since 14 February 2013 1
Horst Baier
CFO,
since 8 November 2007
David Burling
Member of the Executive Board,
since 1 June 2015
€ ’000
2017
2018
Fixed remuneration
Fringe benefits
Total
JE V
Additional remuneration
LTIP
LTIP (2014 – 2017)
LTIP (2015 – 2018)
Others
Total
Pension / service costs5
Total remuneration
Remuneration paid
1,100.0
132.3
1,232.3
1,096.0
920.0
820.0
–
4,068.3
625.7
4,694.0
1,100.0
91.6
1,191.6
2,078.1
–
2,216.2
–
5,485.9
563.5
6,049.4
2017
740.0
20.0
760.0
536.1
450.0
784.6
–
2,530.7
–
2,530.7
2018
740.0
55.0
795.0
965.3
–
1,010.8
–
2,771.1
–
2,771.1
2017
600.0
107.9
707.9
476.5
400.0
–
1,584.4
225.0
1,809.4
2018
680.0
8.5
688.5
892.5
–
249.6
–
1,830.6
225.0
2,055.6
Birgit Conix
Member of the Executive Board,
since 15 July 2018
Sebastian Ebel
Member of the Executive Board,
since 12 December 2014
Dr Elke Eller
Member of the Executive Board /
Labour Director,
since 15 October 2015
€ ’000
2017
Fixed remuneration
Fringe benefits
Total
JE V
Additional remuneration
LTIP
LTIP (2014 – 2017)
LTIP (2015 – 2018)
Others
Total
Pension / service costs5
Total remuneration
–
–
–
–
–
–
–
–
–
20182
143.6
–
143.6
190.0
–
–
333.6
47.9
381.5
2017
680.0
18.0
698.0
381.2
320.0
–
1,399.2
286.1
1,685.3
20183
582.9
–
582.9
701.3
–
602.2
–
1,886.4
259.2
2,145.6
2017
680.0
34.3
714.3
357.4
300.0
2018
680.0
35.5
715.5
794.3
–
–
1,371.7
345.1
1,716.8
–
1,509.8
323.7
1,833.5
144
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
Remuneration paid
€ ’000
Fixed remuneration
Fringe benefits
Total
JE V
Additional remuneration
LTIP
LTIP (2014 – 2017)
LTIP (2015 – 2018)
Others
Total
Pension / service costs5
Total remuneration
Frank Rosenberger
Member of the Executive Board,
since 1 January 2017
20174
375,0
41,4
416,4
250,2
210,0
2018
600,0
19,5
619,5
657,1
–
–
876,6
382,6
1.259,1
–
1.276,6
342,1
1.618,7
1 Joint-CEO until 9 February 2016; member of the Executive Board since 15 Octo-
ber 2012. Mr Joussen received a prepayment for the LTIP-tranche in the amount
of € 1,280 k and consequently in F Y 2017 only a remaining payment in the
amount of € 820 k.
2 Pro-rated disclosure of all remuneration components as of 15 July 2018.
3 Reduction due to his sabbatical from 26 April 2018 until 15 June 2018.
4 Pro-rated disclosure of all remuneration components as of 1 January 2017.
5 For Mr Joussen, Mr Baier, Mr Ebel, Dr Eller and Mr Rosenberger service costs aa.
to IA S19; for Mr Burling and Ms Conix payments for pension contribution.orge.
An examination of the total remuneration paid also clearly shows
that the majority of payments made to the members of the
Executive Board consist of variable components: The LTIP
accounts for 25 % of the total amount paid, while JEV accounts for
39 %. It can be stated that 64 % of the total remuneration paid
to the members of the Executive Board consists of variable
components.
Composition of total remuneration paid 2018
in %
1
Fringe
benefits
39
Annual
performance-
based
remuneration
(JE V )
%
11
Pension /
service costs
24
Fixed
remuneration
25
LTIP
V.
R E V I E W O F A P P R O P R I AT E N E S S O F T H E R E M U N E R AT I O N
A N D P E N S I O N S O F E X E C U T I V E B O A R D M E M B E R S
Following the end of FY 2018, the Supervisory Board carried out
the annual review of the remuneration and pensions of Executive
Board members for FY 2018. It concluded that these are appropriate
in accordance with section 87(1) German Stock Corporation Act.
The Supervisory Board also regularly makes use of external advisors
when assessing the appropriateness of the remuneration and
pensions of Executive Board members. This involves assessing the
level and structure of the remuneration of Executive Board members
in relation to the remuneration of senior management and the work-
force as a whole (vertical comparison) from an outside perspective.
In addition to a status quo review, the vertical comparison also
takes into account how this relationship changes over time. Secondly,
the remuneration level and structure are assessed based on the
position of TUI AG in a peer market consisting of a combination of
DAX and MDAX companies that are similar to TUI AG in terms of
size and complexity of business (horizontal comparison). In addition
to the fixed remuneration, the horizontal comparison also covers
the short- and long-term remuneration components as well as the
amount of company pension. For FY 2018, the Supervisory Board
commissioned the consultancy company hkp Deutschland GmbH
to prepare an expert report on the appropriateness of the remu-
neration level for Executive Board members. The partner of
hkp Deutschland GmbH commissioned by the Supervisory Board
and responsible for carrying out the assessment is independent of
the Executive Board of TUI AG and the company. The finding of
the external advisor supports the judgment of the Supervisory
Board that the level of remuneration of Executive Board members
complies with section 87(1) German Stock Corporation Act as well
as the recommendations of the GCGC.
V I . R E M U N E R AT I O N O F T H E S U P E R V I S O R Y B O A R D
The provisions and remuneration of members of the Supervisory
Board are derived from section 18 of TUI AG’s Articles of Association,
which have been made permanently accessible to the public on the
internet. The remuneration of the Supervisory Board is reviewed
at appropriate intervals. In this regard the expected time required
for the relevant duties and experience in companies of a similar
size, industry and complexity are taken into account.
Purpose and link to company strategy
Highly-qualified Supervisory Board members are to be acquired
and retained.
Procedure
Besides reimbursement of their expenses, which include the
turnover tax due on their emoluments, the members of the
Supervisory Board receive a fixed remuneration of € 90.0 k per
financial year, payable upon completion of the financial year. The
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
145
chairman shall receive three times, and his deputies twice, the
fixed remuneration of a Supervisory Board member.
An additional fixed remuneration of € 42.0 k is paid for membership
of committees (e. g. the presiding committee, the audit committee
and the strategy committee, but not the nomination committee).
As a result of the successful completion of the integration of TUI AG
and the former TUI Travel PLC, the integration committee was
dissolved as planned in December 2016, which has already been
described in the Annual Report 2017. The chairman of the audit
committee shall receive three times, and the chairman of the
strategy committee twice, this remuneration. This remuneration
is also paid out at the end of the respective financial year.
The members of the Supervisory Board receive no further re-
muneration components and no fringe benefits. In all cases the
remuneration relates to a full financial year. For parts of a financial
year and for short financial years the remuneration shall be paid
on a pro rata basis.
The members of the Supervisory Board and the committees receive
an attendance fee of € 1.0 k per meeting, regardless of the form
the meeting takes.
Moreover, the members of the Supervisory Board are included in
a financial liability insurance policy (D&O insurance) taken out in
an appropriate amount by the company in its own interests. The
relevant insurance premiums are paid by the company. In line with
the recommendation of the GCGC, there is a deductible for which
the Supervisory Board members can take out their own private
insurance.
Cap
There is no need to set a cap because the remuneration for the
Supervisory Board members consists solely of fixed components.
On 9 February 2016 the Annual General Meeting of TUI AG passed
a resolution to change the remuneration of the Supervisory Board
to fixed remuneration only as well as to adjust the amount of the
fixed remuneration components. The new remuneration model
applied retroactively as of 1 October 2015, which meant that the
variable remuneration granted in accordance with the provisions
of the articles of association applicable until 9 February 2016 and
based on the long-term success of the company was no longer
paid. This variable remuneration was based on the average undiluted
earnings per share (EPS) carried in the consolidated financial
statements for the respective last three financial years. At the
time of redemption, the members of the Supervisory Board were
still entitled to the long-term remuneration granted in financial
years 2014 and 2015 because of the three-year vesting period.
These entitlements were redeemed on the basis of EPS planned
values for financial years 2016 and 2017. Reducing the remuneration
of the members of the Supervisory Board for past and current
financial years is not permitted under stock corporation law. For
this reason it needed / needs to be checked, also upon completion
of financial years 2016 and 2017, whether this has taken place with
the change to the remuneration model by taking the EPS planned
value for the relevant financial years as a basis. If using the EPS
values actually achieved were to lead to higher long-term incentives
than taking into account the planned values, the corresponding
difference is to be paid to the relevant members of the Supervisory
Board upon the close of the Annual General Meeting that will vote
on the ratification of the acts of the Supervisory Board for the
respective financial year.
For the variable remuneration component granted in FY 2014, it
was found that, upon the close of the Annual General Meeting
2017, the actual EPS value of FY 2016, € 1.78, was above the EPS
planned value of € 0.81 taken as a basis for the redemption. The
resulting difference was paid to the relevant members of the
Supervisory Board accordingly. As a result of an incorrect formula,
the gross settlement amount had been included in the credit entry
as a net figure. This led to VAT being calculated a second time on
the gross settlement amount so that an excessive overall amount
had been paid out. A correction was made for simplified processing
by offsetting it against the payment of the fixed Supervisory
Board remuneration for the 2018 financial year. The correction is
shown in the tables below.
146
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
Offsetting of too high / too low variable remuneration of the Executive Board for FY 2014 and FY 2015
Name
Andreas Barczewski
Peter Bremme
Prof. Edgar Ernst
Frank Jakobi
Prof. Klaus Mangold
Michael Pönipp
Carola Schwirn
Anette Strempel
Ortwin Strubelt
Total
Invoicing / Payment F Y 2017
Net
VAT 19 %
Gross /
Amount paid
15,390.67
11,514.50
15,390.67
21,482.81
46,172.00
15,390.67
11,101.22
15,390.67
15,390.67
167,223.88
2,924.23
2,187.75
2,924.23
4,081.73
8,772.68
2,924.23
2,109.23
2,924.23
2,924.23
31,772.54
18,314.90
13,702.25
18,314.90
25,564.54
54,944.68
18,314.90
13,210.45
18,314.90
18,314.90
198,996.42
Net
corrected
VAT 19 %
corrected
Correction F Y 2018
Gross /
Amount paid
corrected
12,933.33
9,676.05
12,933.33
18,052.78
38,800.00
12,933.33
9,328.77
12,933.33
12,933.33
2,457.33
1,838.45
2,457.33
3,430.03
7,372.00
2,457.33
1,772.47
2,457.33
2,457.33
15,390.67
11,514.50
15,390.67
21,482.81
46,172.00
15,390.67
11,101.22
15,390.67
15,390.67
differential
amount
net
– 2,457.34
– 1,838.45
– 2,457.34
– 3,430.03
– 7,372.00
– 2,457.34
– 1,772.45
– 2,457.34
– 2,457.34
differential
amount
VAT 19 %
– 466.90
– 349.30
– 466.90
– 651.70
– 1,400.68
– 466.90
– 336.76
– 466.90
– 466.90
140,524.25
26,699.60
167,223.88
– 26,699.63
– 5,072.94
– 31,772.54
Offsetting of too high / too low variable remuneration of the Executive Board for FY 2014 and FY 2015
Name
Carmen Riu Güell
Total
The invoices for Mr Shemetov, Mr Strenger and Mr Witt were not subject to an incorrect formula.
Invoicing / Payment F Y 2017
Gross
30 % withheld
tax
Net /
Amount paid
Correction F Y 2018
Gross
30 % withheld
Net /
differential
differnetial
tax
Amount paid
amount
amount 30 %
gross
withheld tax
8,839.93
8,839.93
– 2,651.98
– 2,651.98
6,042.09
6,042.09
12,933.33
12,933.33
– 3,880.00
– 3,880.00
8,839.93
8,839.93
4,093.40
4,093.40
– 1,228.02
– 1,228.02
Set off
differential
amount
gross
– 2,924.23
– 2,187.75
– 2,924.23
– 4,081.73
– 8,772.68
– 2,924.23
– 2,109.23
– 2,924.23
– 2,924.23
Set off
differential
amount
net
2,797.84
2,797.84
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
147
Offsetting of too high / too low variable remuneration of the Executive Board for FY 2014 and FY 2015
Name
Andreas Barczewski
Peter Bremme
Prof. Edgar Ernst
Frank Jakobi
Prof. Klaus Mangold
Michael Pönipp
Carola Schwirn
Anette Strempel
Ortwin Strubelt
Total
Name
Total
Carmen Riu Güell
Offsetting of too high / too low variable remuneration of the Executive Board for FY 2014 and FY 2015
The invoices for Mr Shemetov, Mr Strenger and Mr Witt were not subject to an incorrect formula.
Invoicing / Payment F Y 2017
Net
VAT 19 %
Gross /
Amount paid
15,390.67
11,514.50
15,390.67
21,482.81
46,172.00
15,390.67
11,101.22
15,390.67
15,390.67
2,924.23
2,187.75
2,924.23
4,081.73
8,772.68
2,924.23
2,109.23
2,924.23
2,924.23
18,314.90
13,702.25
18,314.90
25,564.54
54,944.68
18,314.90
13,210.45
18,314.90
18,314.90
167,223.88
31,772.54
198,996.42
Correction F Y 2018
Net
corrected
VAT 19 %
corrected
12,933.33
9,676.05
12,933.33
18,052.78
38,800.00
12,933.33
9,328.77
12,933.33
12,933.33
140,524.25
2,457.33
1,838.45
2,457.33
3,430.03
7,372.00
2,457.33
1,772.47
2,457.33
2,457.33
26,699.60
Gross /
Amount paid
corrected
15,390.67
11,514.50
15,390.67
21,482.81
46,172.00
15,390.67
11,101.22
15,390.67
15,390.67
167,223.88
differential
amount
net
– 2,457.34
– 1,838.45
– 2,457.34
– 3,430.03
– 7,372.00
– 2,457.34
– 1,772.45
– 2,457.34
– 2,457.34
– 26,699.63
differential
amount
VAT 19 %
– 466.90
– 349.30
– 466.90
– 651.70
– 1,400.68
– 466.90
– 336.76
– 466.90
– 466.90
– 5,072.94
Invoicing / Payment F Y 2017
Gross
30 % withheld
Net /
tax
Amount paid
Correction F Y 2018
Gross
30 % withheld
tax
Net /
Amount paid
differential
amount
gross
differnetial
amount 30 %
withheld tax
8,839.93
8,839.93
– 2,651.98
– 2,651.98
6,042.09
6,042.09
12,933.33
12,933.33
– 3,880.00
– 3,880.00
8,839.93
8,839.93
4,093.40
4,093.40
– 1,228.02
– 1,228.02
Set off
differential
amount
gross
– 2,924.23
– 2,187.75
– 2,924.23
– 4,081.73
– 8,772.68
– 2,924.23
– 2,109.23
– 2,924.23
– 2,924.23
– 31,772.54
Set off
differential
amount
net
2,797.84
2,797.84
148
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
For the remuneration component granted in FY 2015, it was found
that, upon the close of the Annual General Meeting 2018, the actual
EPS value of FY 2017, € 1.17, was above the planned EPS value of
€ 0.85 taken as a basis for the redemption. The resulting difference
was paid to the relevant members of the Supervisory Board accord-
ingly and is shown in the following tables.
In addition, regarding the remuneration granted in FY 2016, it will
be reviewed – upon the close of the Annual General Meeting 2019 –
whether applying the remuneration model valid until 9 Febru-
ary 2016 would have resulted in higher remuneration than applying
the new model. If this is the case, the corresponding difference has
to be paid to the members of the Supervisory Board upon the
close of the Annual General Meeting 2019.
V I I .
R E M U N E R AT I O N O F T H E S U P E R V I S O R Y B O A R D
A S A W H O L E
Remuneration of the Supervisory Board
€ ’000
2018
2017
Fixed remuneration
Long-term variable remuneration
Remuneration for committee
memberships
Attendance fee
Remuneration for TUI AG Supervisory
Board mandate
Remuneration for Supervisory Board
mandates in the Group
Total
2,160.1
225.1
1,050.0
323.0
2,160.0
176.1*
1,096.2
321.0
3,758.2
3,753.3
35.6
3,793.8
41.4
3,794.7
* The ‘Long-term variable remuneration’ of the Supervisory Board reported in the
2017 Annual Report was subject to a correction in F Y 2018, see page 146.
In addition, travel and other expenses totaling € 529.0 k (previous
year: € 507.6 k) were reimbursed. Total remuneration of the Super-
visory Board members, including reimbursement of travel and other
expenses, thus amounted to € 4,321.8 k (previous year: € 4,302.2 k).
C O R P O R AT E G O V E R N A N C E » C o r p o r AT e G o V e r N A N C e r e p o rT
149
V I I I . R E M U N E R AT I O N O F I N D I V I D U A L S U P E R V I S O R Y B O A R D M E M B E R S F O R F Y 2 0 1 8
Individual remuneration of Supervisory Board in FY 2018
€ ’000
Prof. Klaus Mangold (Chairman)
Frank Jakobi (Deputy Chairman)
Sir Michael Hodgkinson1
(Deputy Chairman until 13 Feb 2018)
Peter Long 2 (Deputy Chairman)
Andreas Barczewski
Peter Bremme
Prof. Edgar Ernst
Wolfgang Flintermann
Angelika Gifford
Valerie Gooding
Dr Dierk Hirschel
Janis Kong
Coline McConville
Alexey Mordashov
Michael Pönipp
Carmen Riu Güell
Carola Schwirn
Anette Strempel
Ortwin Strubelt
Stefan Weinhofer
Dr Dieter Zetsche 3
Total
Fixed
remuneration
Ex-post
adjustment of
long-term
variable
remuneration
Attendance fee
Remuneration
for committee
memberships
Remuneration
for Supervisory
Board
mandates in
the Group
270.0
180.0
66.5
146.8
90.0
90.0
90.0
90.0
90.0
90.0
90.0
90.0
90.0
90.0
90.0
90.0
90.0
90.0
90.0
90.0
56.8
2,160.1
38.4
19.2
17.6
12.8
12.8
12.8
12.0
11.5
12.0
12.0
12.8
12.8
12.8
12.8
12.8
225.1
126.0
84.0
15.5
110.5
42.0
42.0
126.0
0.0
42.0
42.0
42.0
42.0
42.0
84.0
42.0
42.0
0.0
42.0
84.0
0.0
0.0
1,050.0
33.0
22.0
11.0
18.0
15.0
16.0
15.0
9.0
13.0
11.0
16.0
16.0
16.0
13.0
16.0
16.0
9.0
19.0
25.0
9.0
5.0
323.0
17.5
18.1
35.6
Total
467.4
305.2
110.6
275.3
177.3
160.8
243.8
99.0
145.0
155.0
159.5
160.0
160.0
187.0
178.9
160.8
111.8
163.8
211.8
99.0
61.8
3,793.8
1 Pro-rated disclosure of all remuneration components until 13 February 2018.
2 Pro-rated disclosure of remuneration for committee memberships.
3 Pro-rated disclosudre of all remuneration components as of 13 February2018.
Apart from the work performed by the employees’ representatives
pursuant to their contracts, none of the members of the Supervisory
Board provided any personal services such as consultation or
agency services for TUI AG or its subsidiaries in FY 2018 and thus
did not receive any additional remuneration arising out of this.
In the evergreen climes of South East Asia the
growing middle classes are increasingly eager for travel
to distant lands. TUI has spotted the potential and
will now develop Malaysia not only as a destination, but
also as a source market.
»
R E A D M O R E A B O U T H O W T U I I S P O S I T I O N E D I N A S I A
I N O U R M A G A Z I N E A R T I C L E ‘ G R O W T H D R I V E R S ’ .
CONSOLIDATED FINA NCIAL
S TATE ME NT S A ND NOTE S
152
C O N S O L I D AT E D F I N A N C I A L
S TAT E M E N T S
152
Income statement
152 Earnings per share
153 Statement of comprehensive income
154 Financial position
156 Statement of changes in Group equity
158 Cash flow statement
159 N O T E S
159
Principles and methods underlying the
Consolidated Financial Statements
178 Segment reporting
182 Notes to the consolidated income statement
Notes on the consolidated statement of
189
financial position
241 Notes on the cash flow statement
242 Other notes
259 Responsibility statement by management
260 Independent auditor’s report
268 Forward-looking Statements
152
C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S » I N C o M e S TAT e M e N T, e A r N I N G S p e r S H A r e
CONSOLIDATED FINA NCIAL
S TATE ME NT S
Income Statement of the TUI Group
for the period from 1 Oct 2017 to 30 Sep 2018
€ million
Notes
2018
2017
Turnover
Cost of sales
Gross profit
Administrative expenses
Other income
Other expenses
Financial income
Financial expenses
Share of result of joint ventures and associates
Earnings before income taxes
Income taxes
Result from continuing operations
Result from discontinued operations
Group profit
Group profit attributable to shareholders of TUI AG
Group profit attributable to non-controlling interest
Earnings per share
€
Basic earnings per share
from continuing operations
from discontinued operations
Diluted earnings per share
from continuing operations
from discontinued operations
(1)
(2)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
Notes
(11)
(11)
19,523.9
17,542.4
1,981.5
1,289.9
67.4
3.5
83.8
165.5
297.7
971.5
191.3
780.2
38.7
818.9
732.5
86.4
2018
1.25
1.18
0.07
1.25
1.18
0.07
18,535.0
16,535.5
1,999.5
1,255.8
12.5
1.9
229.3
156.2
252.3
1,079.7
168.8
910.9
– 149.5
761.4
644.8
116.6
2017
1.10
1.36
– 0.26
1.10
1.36
– 0.26
C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S » S TAT e Me N T o f C o Mp r e He N S I V e I N C o Me
153
Statement of comprehensive income of TUI Group
for the period from 1 Oct 2017 to 30 Sep 2018
€ million
Group profit
Remeasurements of defined benefit obligations and related fund assets
Income tax related to items that will not be reclassified
Items that will not be reclassified to profit or loss
Foreign exchange differences
Foreign exchange differences outside profit or loss
Reclassification
Financial instruments available for sale
Changes in the fair value
Reclassification
Cash flow hedges
Changes in the fair value
Reclassification
Other comprehensive income of joint ventures and associates
Changes in the measurement outside profit or loss
Reclassification
Income tax related to items that may be reclassified
Items that may be reclassified to profit or loss
Other comprehensive income
Total comprehensive income
attributable to shareholders of TUI AG
attributable to non-controlling interest
Allocation of share of shareholders of TUI AG
of total comprehensive income
Continuing operations
Discontinued operations
Notes
(12)
(12)
2018
818.9
66.0
– 12.5
53.5
– 15.3
– 28.1
12.8
0.5
0.5
–
429.7
607.3
– 177.6
41.2
41.2
–
– 103.5
352.6
406.1
1,225.0
1,132.7
92.3
2017
761.4
280.7
– 66.9
213.8
– 17.9
– 89.3
71.4
– 31.8
147.8
– 179.6
– 263.6
– 635.4
371.8
19.3
28.0
– 8.7
46.9
– 247.1
– 33.3
728.1
620.0
108.1
1,132.7
–
705.7
– 85.7
154
C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S » f I N A N C I Al p o S I T I o N
Financial position of the TUI Group as at 30 Sep 2018
€ million
Notes
30 Sep 2018
30 Sep 2017
Assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments in joint ventures and associates
Financial assets available for sale
Trade receivables and other assets
Touristic prepayments
Derivative financial instruments
Income tax assets
Deferred tax assets
Non-current assets
Inventories
Trade receivables and other assets
Touristic prepayments
Derivative financial instruments
Income tax assets
Cash and cash equivalents
Assets held for sale
Current assets
Total assets
(13)
(14)
(15)
(16)
(36)
(17), (36)
(18)
(36)
(19)
(20)
(17), (36)
(18)
(36)
(21), (36)
(22)
2,958.6
569.9
4,899.2
1,436.6
54.3
287.7
157.3
83.2
9.6
225.7
10,682.1
118.5
981.9
720.2
441.8
113.8
2,548.0
5.5
4,929.7
15,611.8
2,889.5
548.1
4,253.7
1,306.2
69.5
211.8
185.2
79.9
–
323.7
9,867.6
110.2
794.5
573.4
215.4
98.7
2,516.1
9.6
4,317.9
14,185.5
C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S » f I N A N C I Al p o S I T I o N
155
Financial position of the TUI Group as at 30 Sep 2018
€ million
Notes
30 Sep 2018
30 Sep 2017
Equity and liabilities
Subscribed capital
Capital reserves
Revenue reserves
Equity before non-controlling interest
Non-controlling interest
Equity
Pension provisions and similar obligations
Other provisions
Non-current provisions
Financial liabilities
Derivative financial instruments
Income tax liabilities
Deferred tax liabilities
Other liabilities
Non-current liabilities
Non-current provisions and liabilities
Pension provisions and similar obligations
Other provisions
Current provisions
Financial liabilities
Trade payables
Touristic advance payments received
Derivative financial instruments
Income tax liabilities
Other liabilities
Current liabilities
Current provisions and liabilities
Total provisions and liabilities
(23)
(24)
(25)
(27)
(28)
(29)
(30), (36)
(36)
(19)
(31), (36)
(28)
(29)
(30), (36)
(36)
(36)
(31), (36)
1,502.9
4,200.5
– 2,005.3
3,698.1
635.5
4,333.6
962.2
768.1
1,730.3
2,250.7
12.8
108.8
184.5
103.4
2,660.2
4,390.5
32.6
348.3
380.9
192.2
2,937.3
2,551.0
65.7
86.2
674.4
6,506.8
6,887.7
15,611.8
1,501.6
4,195.0
– 2,756.9
2,939.7
594.0
3,533.7
1,094.7
801.4
1,896.1
1,761.2
50.4
150.2
109.0
150.2
2,221.0
4,117.1
32.7
349.9
382.6
171.9
2,653.3
2,446.4
217.2
65.3
598.0
6,152.1
6,534.7
14,185.5
156
C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S » S TAT e M e N T o f C H A N G e S I N G r o U p e q U I T y
Statement of changes in Group equity of the TUI Group for the period from 1 Oct 2017 to 30 Sep 2018
Subscribed
capital
(23)
Capital reserves
(24)
Other revenue
reserves
Foreign
exchange
differences
Financial
instruments
available for sale
Cash flow
Revaluation
hedges
reserve
Equity before
Non-controlling
Total
non-controlling
interest
interest
(27)
€ million
Balance as at 1 Oct 2016
Dividends
Share-based payment schemes
Issue of employee shares
Acquisition of own shares
Disposal of own shares
Deconsolidation
Effects on the acquisition of non-controlling interests
Group profit for the year
Foreign exchange differences
Financial instruments available for sale
Cash flow hedges
Remeasurements of defined benefit obligations and related fund assets
Other comprehensive income of joint ventures and associates
Taxes attributable to other comprehensive income
Other comprehensive income
Total comprehensive income
Balance as at 30 Sep 2017
Dividends
Share-based payment schemes
Issue of employee shares
First-time consolidation
Effects on the acquisition of non-controlling interests
Group profit for the year
Foreign exchange differences
Financial instruments available for sale
Cash flow hedges
Remeasurements of defined benefit obligations and related fund assets
Other comprehensive income of joint ventures and associates
Taxes attributable to other comprehensive income
Other comprehensive income
Total comprehensive income
Balance as at 30 Sep 2018
1,500.7
–
–
0.9
–
–
–
–
–
–
–
–
–
–
–
–
–
1,501.6
–
–
1.3
–
–
–
–
–
–
–
–
–
–
–
1,502.9
4,192.2
–
–
2.8
–
–
–
–
–
–
–
–
–
–
–
–
–
4,195.0
–
–
5.5
–
–
–
–
–
–
–
–
–
–
–
4,200.5
– 2,215.3
– 368.2
– 1.0
–
– 22.3
32.4
1.8
–
644.8
132.2
–
–
280.7
19.3
– 66.9
365.3
1,010.1
– 1,562.5
– 381.8
0.7
–
0.4
– 0.4
732.5
15.4
–
–
66.0
42.1
– 12.5
111.0
843.5
– 1,100.1
– 1,095.2
–
–
–
–
–
–
–
–
– 142.4
–
–
–
–
–
– 142.4
– 142.4
– 1,237.6
–
–
–
–
–
–
– 34.9
–
–
–
–
–
– 34.9
– 34.9
– 1,272.5
31.8
241.5
19.4
2.8
– 2.1
– 31.8
– 31.8
– 31.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.5
0.5
0.5
0.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 263.5
46.9
– 213.8
– 213.8
27.7
– 0.2
429.9
– 103.5
326.2
326.2
353.9
– 1.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 2.1
– 2.1
15.5
– 2.6
– 2.6
– 2.6
12.9
Revenue
reserves
(25)
– 3,017.8
– 368.2
– 1.0
– 22.3
32.4
–
–
–
644.8
– 9.5
– 31.8
– 263.5
280.7
19.3
– 20.0
– 24.8
620.0
0.7
–
0.4
– 0.4
732.5
– 22.3
0.5
429.9
66.0
42.1
– 2,756.9
– 381.8
– 116.0
400.2
1,132.7
– 2,005.3
2,675.1
– 368.2
– 1.0
3.7
– 22.3
32.4
–
–
644.8
– 9.5
– 31.8
– 263.5
280.7
19.3
– 20.0
– 24.8
620.0
2,939.7
– 381.8
0.7
6.8
0.4
– 0.4
732.5
– 22.3
0.5
429.9
66.0
42.1
– 116.0
400.2
1,132.7
3,698.1
573.1
– 87.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
116.6
– 8.4
– 0.1
– 8.5
108.1
594.0
– 53.5
3.0
– 0.3
86.4
7.0
– 0.2
– 0.9
5.9
92.3
635.5
3,248.2
– 455.4
– 1.0
3.7
– 22.3
32.4
–
–
761.4
– 17.9
– 31.8
– 263.6
280.7
19.3
– 20.0
– 33.3
728.1
3,533.7
– 435.3
0.7
6.8
3.4
– 0.7
818.9
– 15.3
0.5
429.7
66.0
41.2
– 116.0
406.1
1,225.0
4,333.6
Statement of changes in Group equity of the TUI Group for the period from 1 Oct 2017 to 30 Sep 2018
Subscribed
Capital reserves
Other revenue
(24)
reserves
capital
(23)
Foreign
exchange
differences
Financial
instruments
available for sale
Cash flow
hedges
Revaluation
reserve
Revenue
reserves
(25)
Equity before
non-controlling
interest
Non-controlling
interest
(27)
Total
C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S » S TAT e M e N T o f C H A N G e S I N G r o U p e q U I T y
157
€ million
Balance as at 1 Oct 2016
Dividends
Share-based payment schemes
Issue of employee shares
Acquisition of own shares
Disposal of own shares
Deconsolidation
Other comprehensive income
Total comprehensive income
Balance as at 30 Sep 2017
Dividends
Share-based payment schemes
Issue of employee shares
First-time consolidation
Effects on the acquisition of non-controlling interests
Group profit for the year
Foreign exchange differences
Financial instruments available for sale
Cash flow hedges
Remeasurements of defined benefit obligations and related fund assets
Other comprehensive income of joint ventures and associates
Taxes attributable to other comprehensive income
Effects on the acquisition of non-controlling interests
Group profit for the year
Foreign exchange differences
Financial instruments available for sale
Cash flow hedges
Remeasurements of defined benefit obligations and related fund assets
Other comprehensive income of joint ventures and associates
Taxes attributable to other comprehensive income
Other comprehensive income
Total comprehensive income
Balance as at 30 Sep 2018
1,500.7
4,192.2
– 1,095.2
– 2,215.3
– 368.2
0.9
2.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 1.0
–
– 22.3
32.4
1.8
–
644.8
132.2
–
–
280.7
19.3
– 66.9
365.3
0.7
–
0.4
– 0.4
732.5
15.4
–
–
66.0
42.1
– 12.5
111.0
843.5
1,010.1
– 1,562.5
– 381.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 142.4
– 142.4
– 142.4
– 1,237.6
– 34.9
– 34.9
– 34.9
1,501.6
4,195.0
1.3
5.5
1,502.9
4,200.5
– 1,100.1
– 1,272.5
31.8
–
–
–
–
–
–
–
–
–
– 31.8
–
–
–
–
– 31.8
– 31.8
–
–
–
–
–
–
–
–
0.5
–
–
–
–
0.5
0.5
0.5
241.5
–
–
–
–
–
–
–
–
2.8
–
– 263.5
–
–
46.9
– 213.8
– 213.8
27.7
–
–
–
–
–
–
– 0.2
–
429.9
–
–
– 103.5
326.2
326.2
353.9
19.4
–
–
–
–
–
– 1.8
–
–
– 2.1
–
–
–
–
–
– 2.1
– 2.1
15.5
–
–
–
–
–
–
– 2.6
–
–
–
–
–
– 2.6
– 2.6
12.9
– 3,017.8
– 368.2
– 1.0
–
– 22.3
32.4
–
–
644.8
– 9.5
– 31.8
– 263.5
280.7
19.3
– 20.0
– 24.8
620.0
– 2,756.9
– 381.8
0.7
–
0.4
– 0.4
732.5
– 22.3
0.5
429.9
66.0
42.1
– 116.0
400.2
1,132.7
– 2,005.3
2,675.1
– 368.2
– 1.0
3.7
– 22.3
32.4
–
–
644.8
– 9.5
– 31.8
– 263.5
280.7
19.3
– 20.0
– 24.8
620.0
2,939.7
– 381.8
0.7
6.8
0.4
– 0.4
732.5
– 22.3
0.5
429.9
66.0
42.1
– 116.0
400.2
1,132.7
3,698.1
573.1
– 87.2
–
–
–
–
–
–
116.6
– 8.4
–
– 0.1
–
–
–
– 8.5
108.1
594.0
– 53.5
–
–
3.0
– 0.3
86.4
7.0
–
– 0.2
–
– 0.9
–
5.9
92.3
635.5
3,248.2
– 455.4
– 1.0
3.7
– 22.3
32.4
–
–
761.4
– 17.9
– 31.8
– 263.6
280.7
19.3
– 20.0
– 33.3
728.1
3,533.7
– 435.3
0.7
6.8
3.4
– 0.7
818.9
– 15.3
0.5
429.7
66.0
41.2
– 116.0
406.1
1,225.0
4,333.6
158
C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S » C A S H f l o w S TAT e M e N T
Cash flow statement
€ million
Group profit
Depreciation, amortisation and impairment (+) / write-backs (–)
Other non-cash expenses (+) / income (–)
Interest expenses
Dividends from joint ventures and associates
Profit (–) / loss (+) from disposals of non-current assets
Increase (–) / decrease (+) in inventories
Increase (–) / decrease (+) in receivables and other assets
Increase (+) / decrease (–) in provisions
Increase (+) / decrease (–) in liabilities (excl. financial liabilities)
Cash inflow from operating activities
Payments received from disposals of property, plant and equipment
and intangible assets
Payments from disposals of consolidated companies
(less disposals of cash and cash equivalents due to divestments)
Payments received from the disposals of other non-current assets
Payments made for investments in property, plant and equipment
and intangible assets
Payments made for investments in consolidated companies
(less cash and cash equivalents received due to acquisitions)
Payments made for investments in other non-current assets
Cash outflow from investing activities
Payments made for acquisition of own shares
Payments received from the sale of own shares
Payments received from the issuance of employee shares
Payments made for interest increase in consolidated companies
Dividend payments
TUI AG
subsidiaries to non-controlling interest
Payments received from the issue of bonds and the raising
of financial liabilities
Payments made for redemption of loans and financial liabilities
Interest paid
Cash outflow from financing activities
Net change in cash and cash equivalents
Development of cash and cash equivalents
Cash and cash equivalents at beginning of period
Change in cash and cash equivalents due to exchange
rate fluctuations
Net change in cash and cash equivalents
Cash and cash equivalents at end of period
of which included in the balance sheet as assets held for sale
Notes
2018
2017
Var.
818.9
438.9
– 272.2
162.4
222.7
– 99.0
– 10.0
– 569.4
– 71.5
530.1
1,150.9
761.4
517.8
– 239.6
141.8
118.2
– 100.7
– 18.5
169.5
– 84.6
317.8
1,583.1
57.5
– 78.9
– 32.6
20.6
104.5
1.7
8.5
– 738.9
13.1
212.3
– 432.2
192.4
79.5
112.9
88.6
5.5
– 14.3
418.7
102.9
– 413.2
– 956.2
– 1,049.0
92.8
– 135.6
– 40.4
– 845.7
– 1.0
32.7
6.8
– 0.8
– 381.8
– 53.5
434.2
– 162.7
– 110.8
– 236.9
68.3
– 66.0
– 56.6
– 687.7
– 22.3
–
3.7
–
– 368.2
– 88.6
329.8
– 513.4
– 74.8
– 733.8
161.6
2,516.1
2,403.6
– 36.4
68.3
2,548.0
–
– 49.1
161.6
2,516.1
–
– 69.6
16.2
– 158.0
21.3
32.7
3.1
– 0.8
– 13.6
35.1
104.4
350.7
– 36.0
496.9
– 93.3
112.5
12.7
– 93.3
31.9
–
(38)
(39)
(40)
(41)
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159
NOTE S
Principles and methods underlying the
Consolidated Financial Statements
General
The TUI Group with its major subsidiaries and shareholdings operates in tourism.
TUI AG, based in Karl-Wiechert-Allee 4, Hanover is the TUI Group’s parent company and a listed corporation under
German law. The Company is registered in the commercial registers of the district courts of Berlin-Charlottenburg
(HRB 321) and Hanover (HRB 6580). The shares in the company are traded on the London Stock Exchange and the
Hanover and Frankfurt Stock Exchanges.
These consolidated financial statements of TUI AG were prepared for the FY 2018 comprising the period from 1 Octo-
ber 2017 to 30 September 2018. Where any of TUI’s subsidiaries have different financial years, financial statements were
prepared as at 30 September in order to include these subsidiaries in TUI AG’s consolidated financial statements.
The Executive Board and the Supervisory Board have submitted a Declaration of Compliance with the German
Corporate Governance Code required pursuant to section 161 of the German Stock Corporation Act (AktG) and made
it permanently available to the general public on the Company’s website (www.tuigroup.com).
The consolidated financial statements are prepared in euros. Unless stated otherwise, all amounts are indicated in
million euros (€m). Due to the utilisation of rounded amounts there may be minor rounding differences in total and
percentages.
The consolidated financial statements were approved for publication by TUI AG’s Executive Board on 11 December 2018.
Accounting principles
D E C L A R AT I O N O F C O M P L I A N C E
Pursuant to Regulation EEC No. 1606/2002 of the European Parliament and Council, TUI AG’s consolidated financial
statements as at 30 September 2018 were prepared in accordance with the International Financial Reporting Standards
(IFRS) as applicable in the European Union. Moreover, the commercial-law provisions listed in section 315e (1) of the
German Commercial Code (HGB) were also observed in preparing the consolidated financial statements.
The accounting and measurement methods and the explanatory information and Notes to these annual financial
statements for FY 2018 are generally consistent with those followed in preparing the previous consolidated financial
statements for FY 2017.
160
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N E W LY A P P L I E D S TA N D A R D S
Since the beginning of the FY 2018 the following standards amended or newly issued by the IASB became mandatorily
applicable for the first time to TUI Group:
New applied standards in FY 2018
Standard
IAS 7
Disclosures Initiative
Applicable
from
1 Jan 2017
IAS 12
Recognition of Deferred
Tax Assets for Unrealised
Losses
Various
Annual Improvements
to IFRS (2014 – 2016)
1 Jan 2017
1 Jan 2017 /
1 Jan 2018
(early
adoption)
Amendments
The amendments will enable users of financial statements to better evaluate
changes in liabilities arising from financing activities. An entity is required
to disclose additional information about cashflows and non-cash changes in
liabilities, for which cashflows are classified as financing activities in the
statement of cashflows.
The amendment clarifies the accounting for deferred tax assets for unrealised
losses from available for sale financial assets.
Impact on financial
statements
Additional disclosures
No material impact
The various amendments from the annual improvement project 2014 – 2016
affect minor changes to IFRS 12, IA S 28 and IFRS 1. Regarding the amendments
to IA S 28 and IFRS 1, TUI has elected to early adopt the changes voluntarily.
No impact
Going concern reporting according to the UK Corporate Governance Code
The Executive Board remains satisfied with the Group’s funding and liquidity position. At 30 September 2018, the main
sources of debt funding included:
• an external revolving credit facility of € 1,535.0 m maturing in July 2022, used to manage the seasonality of the
Group’s cash flows and liquidity,
• 2016 / 21 bonds with a nominal value of € 300.0 m, issued by TUI AG, maturing in October 2021,
• a Schuldschein with a maximum maturity until July 2028 and a nominal value of € 425.0 m, issued by TUI AG,
• further bank liabilities of € 355.5 m, primarily for loans used to acquire property, plant and equipment and
• € 1,342.7 m of finance lease obligations.
The credit facility requires compliance with certain financial covenants, which were fully complied with at the balance
sheet date. These covenants are calculated based on EBITDA (€ 1,498.5 m; prior year € 1,490.9 m) and EBITDAR
(€ 2,219.9 m; prior year € 2,240.9 m), which does not include long-term leasing and rental expenses (€ 721.4 m; prior year
€ 750.0 m).
In accordance with rule C1.3 of the UK Corporate Governance Code, the Executive Board confirms that it considers it
appropriate to adopt the going concern basis of accounting in preparing the financial statements.
N O T E S » p r I N C I p l e S A N D M e T H o D S U N D e r lyI N G T H e C o N So lI D ATe D f I N A N C I A l S TATe M e N T S
161
Principles and methods of consolidation
P R I N C I P L E S
The consolidated financial statements include all significant subsidiaries directly or indirectly controlled by TUI AG.
Control exists where TUI AG has power over the relevant activities, is exposed to variable returns or has rights to the
returns, and has the ability to affect those variable returns through its power over the investee.
As a rule, the control is exercised by means of a direct or indirect majority of voting rights. If the TUI Group holds less
than the majority of voting rights in a shareholding, it may exercise control due to contractual agreements or similar
arrangements, just as in the case of the participation in the RIUSA II Group. Due to the contractual agreements between
the shareholders and the framework agreements with TUI Group as well as the considerable importance of tour operation
for the economic success of RIUSA II Group, TUI Group is able to exercise a controlling influence on decisions about the
most relevant activities and consequently the amount of returns. TUI Group is subject to variable returns from RIUSA II
Group, in particular due to dividend payments and fluctuations in the value of the stake itself. RIUSA II Group is therefore
consolidated although TUI Group only holds a 50 % equity stake.
In assessing control, the existence and effect of potential voting rights that are currently exercisable or convertible are
taken into account. Consolidation of subsidiaries starts from the date TUI gains control. When TUI ceases to control the
corresponding companies, they are removed from the group of consolidated companies.
The consolidated financial statements are prepared from the separate or single-entity financial statements of TUI AG
and its subsidiaries, drawn up on the basis of uniform accounting, measurement and consolidation methods and usually
audited or reviewed by auditors.
Associates for which the TUI Group is able to exert significant influence over the financial and operating policy decisions
within these companies are accounted for using the equity method. As a rule, significant influence is assumed if TUI AG
directly or indirectly holds voting rights of 20 to less than 50 per cent.
Stakes in joint ventures are also measured using the equity method. A joint venture is a company managed jointly by
the TUI Group with one or several partners based on a contractual agreement, in which the parties that jointly exercise
control have rights to the company’s net assets. Joint ventures also include companies in which the TUI Group holds a
majority or minority of voting rights but in which decisions about the relevant activities may only be taken on an unanimous
basis due to contractual agreements.
The dates as of which associates and joint ventures are included in or removed from the group of companies measured
at equity are determined in a manner consistent with that applied to subsidiaries. At equity measurement in each case
is based on the last annual financial statements available or the interim financial statements as at 30 September if the
balance sheet dates differ from TUI AG’s balance sheet date. This affects 35 companies with a financial year from 1 January
to 31 December, four companies with a financial year from 1 November to 31 October and two companies with a financial
year from 1 April to 31 March of the following year.
162
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G R O U P O F C O N S O L I D AT E D C O M PA N I E S
In FY 2018, the consolidated financial statements included a total of 285 subsidiaries. The table below presents changes
in the number of companies since 1 October 2017.
Development of the group of consolidated companies*
and the Group companies measured at equity
Balance at 30 Sep 2017
Additions
Incorporation
Acquisition
Disposals
Liquidation
Sale
Merger
Added to group of consolidated companies
due to further acquisition of shares
Balance at 30 Sep 2018
* Excl. TUI AG
Consolidated
subsidiaries
Associates
Joint ventures
259
51
4
47
25
14
5
6
–
285
13
4
–
4
–
–
–
–
–
17
28
1
–
1
2
1
–
–
1
27
TUI AG’s direct and indirect subsidiaries, associates and joint ventures are listed under Other Notes – TUI Group
Shareholdings.
57 subsidiaries were not included in the consolidated financial statements. Even when taken together, these companies
are of minor significance to the presentation of a true and fair view of the financial position and performance of the Group.
The effects of the changes in the group of consolidated companies in FY 2018 on financial years 2018 and 2017 are
outlined below. While the value of companies deconsolidated in FY 2018 posted in the statement of financial position is
carried as per the closing date for the previous period, items in the income statement are also shown for FY 2018 due
to prorated effects.
Impact of changes in the group of consolidated companies on the statement of financial position
€ million
Investments in joint ventures and associates
Other non-current assets
Trade receivables and other assets
Touristic payments on account
Cash and cash equivalents
Other current assets
Current financial liabilities
Other non-current liabilities
Trade payables
Current other liabilities
Additions
Disposals
30 Sep 2018
30 Sep 2017
54.3
190.3
113.3
25.4
65.5
1.5
7.0
35.0
131.6
44.8
6.5
20.0
–
–
8.6
19.7
–
1.3
1.8
3.9
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163
Impact of changes in the group of consolidated companies on the consolidated income statement
€ million
Turnover with third parties
Turnover with consolidated Group companies
Cost of sales and administrative expenses
Other income / other expenses
Share of result of joint ventures and associates
Financial expenses (+) / income (–)
Earnings before income taxes
Income taxes
Group profit for the year
Acquisitions – divestments
Additions
Disposals
2018
92.8
23.2
110.5
1.6
– 1.9
0.2
5.0
1.9
3.1
2018
3.9
–
4.9
31.7
– 0.7
–
30.0
0.2
29.8
2017
43.6
–
39.0
–
– 0.7
–
3.9
1.9
2.0
A C Q U I S I T I O N S
In FY 2018, companies and businesses were acquired at total consideration of € 170.2 m. The consideration transferred by
TUI Group for all acquisitions consists of cash and cash equivalents of € 172.9 m as at the balance sheet date.
Summary presentation of acquisitions
Name and headquarters
of the acquired company or business
Business activity
Acquirer
Date of
acquisition
Acquired
share
%
Consideration
transferred in
€ million
Cruisetour AG, Zurich, Switzerland
Croisimonde AG, Zug, Switzerland
Antwun S. A., Clémency, Luxembourg
(subgroup)
GBH Turizm Sanayi Isletmecilik ve Ticaret A. S.,
Istanbul, Turkey
Darecko S. A., Clémency, Luxembourg
(subgroup)
Business Destination Management
3 Travel Agencies in Germany
1 Travel Agency in Austria
Total
Travel Agent for
Cruise tours
Online Service Provider
TUI Suisse AG
TUI Suisse AG
21 Dec 2017
21 Dec 2017
Accommodation Service
RIUSA II S. A.
18 Apr 2018
Accommodation Service
Accommodation Service
Destination Service
Robinson Club GmbH
TUI Hotel Betriebs-
gesellschaft mbH
various
Travel Agent
Travel Agent
TUI Deutschland GmbH
TUI Austria
Holding GmbH
25 Jun 2018
31 Jul 2018
31 Jul 2018
1 Oct 2017 –
30 Sep 2018
1 Sep 2018
* 39 subsidiaries, 16 thereof with non-controlling interest, four companies measured at equity and four other companies.
The transfer of six companies has not yet been completed.
100 %
100 %
100 %
50 %
100 %
various*
n. a.
n. a.
4.7
1.6
24.2
10.5
33.7
94.8
0.6
0.1
170.2
164
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The acquisitions of the travel agencies in Germany and Austria in the completed financial year were carried out in the
form of asset deals.
TUI Group acquired Cruisetour AG, Zurich, Switzerland, and Croisimonde AG, Zug, Switzerland, in order to expand its
footprint in the cruise sector in the Swiss market.
The acquisition of the stake in Antwun S. A., Luxembourg, listed in the table above, also included the takeover of its
subsidiary Nungwi Limited, headquartered in Zanzibar, Tanzania. The consideration transferred by TUI Group for the
acquisition of the stake comprises the purchase price paid of € 24.2 m. Moreover, receivables from the acquired company
held by the former owner were taken over at a purchase price of € 14.5 m. The purpose of the acquisition is to develop
Zanzibar as a destination.
In order to develop additional earnings potential, TUI AG has increased its stake in GBH Turizm Ticaret A. S., Istanbul, to
100 %. Fair value measurement of the company, previously measured using the at equity method, of € 7.4 m directly before
the acquisition of further stakes resulted in a profit of € 2.1 m, including the reclassification of foreign exchange effects.
The acquisition of the stake in Darecko S. A., Luxembourg, also includes its subsidiary Zanzibar Beach Village Limited,
Zanzibar, Tanzania. The consideration transferred includes the purchase price paid of € 35.0 m and debt of € 1.3 m taken
over from the previous owner. Just as with the acquisition of Antwun S. A., this acquisition serves to develop Zanzibar
as a destination.
Statement of financial position as at the date of first-time cosolidation
€ million
Other intangible assets
Property, plant and equipment
Fixed assets
Inventories
Trade receivables and other assets
Cash and cash equivalents
Deferred tax liabilities
Other provisions
Financial liabilities
Trade and other liabilities
Equity
Cruisetour AG and
Croisimonde AG
Antwun S. A.
(subgroup)
Darecko S. A.
(subgroup)
GBH Turizm
Sanayi
Isletmecilik ve
Ticaret A. S.
0.1
–
0.1
–
2.9
2.5
–
0.1
–
4.7
0.7
–
49.7
49.7
0.1
11.8
2.2
12.6
0.5
25.1
1.4
24.2
–
18.1
18.1
–
0.4
0.1
3.0
0.6
–
3.7
11.3
–
39.8
39.8
0.3
8.1
0.4
13.6
–
–
7.8
27.2
The gross amounts of the acquired trade accounts receivable of Antwun S. A. totalled € 0.8 m as at the date of acquisition;
for Darecko S. A. they totalled € 8.0 m. No impairment was made. The purchase price allocation of Antwun S. A. is
provisional in terms of certain receivables and liabilities.
The difference of € 21.5 m arising between the consideration transferred and the acquired revalued net assets was
carried as goodwill for the above-mentioned acquisitions carried out in the financial year. This goodwill primarily relates
to the acquisition of stakes in hotel companies (GBH Turizm Ticaret A. S. worth € 9.1 m and Darecko S. A. worth € 6.5 m)
and the acquisition of Cruisetour AG and Croisimonde AG worth € 5.6 m. It constitutes a part of the future earning
potential. The goodwill capitalised in the completed financial year includes an amount of € 0.5 m which is expected to be
tax-deductible.
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With the conclusion of the purchase agreement between HNVR Midco Limited as seller and TUI AG, HNVR Midco Limited
undertook to transfer the stake in 53 companies forming the Destination Management busines. As the overall transaction
has been approved by the relevant competition authorities, the agreement is not subject to any approvals that might
prevent the agreed completion of the existing purchase agreement. Due to local legal requirements, the transfer of six
companies has not yet been completed and will be finalised next year. The consideration transferred for the transactions
completed as at the balance sheet date comprises a purchase price of € 94.8 m. The total purchase price paid in the
reporting period amounted to € 97.5 m. At the end of the financial year, an entitlement to a refund worth € 2.7 m arose
from the purchase agreement, and a corresponding receivable was recognised. The purchase price for the transfers to
be completed in the new financial year totals € 29.9 m.
The Destination Management business primarily comprises the delivery of services and leisure activities in the holiday
destinations and the handling of services for the cruise industry. The purpose of the acquisition is to expand the
Group’s global market presence in activities and excursions and leverage operational synergies so as to become one of
the world’s leading providers of destination services.
Due to the acquisition of Destination Management, TUI AG now holds a 50.1 % stake in ATC Group (previously 24.99 %).
Fair value measurement of the company, previously measured using the at equity method, of € 3.0 m directly before the
acquisition of further stakes resulted in a profit of € 1.5 m, including the reclassification of foreign exchange effects.
Statement of financial position of the business Destination Management
as at the date of first-time consolidation
€ million
Other intangible assets
Property, plant and equipment
Investments in joint ventures and associates
Fixed assets
Inventories
Trade receivables
Other assets
Cash and cash equivalents
Deferred tax liabilities
Other provisions
Financial liabilities
Trade payables
Other liabilities
Equity
attributable to shareholders of TUI AG
attributable to non-controlling interest
Fair value at date of
first-time consolidation
0.9
7.3
4.5
12.7
0.1
68.9
64.5
47.8
0.2
7.4
10.3
110.2
49.0
16.9
13.9
3.0
Non-controlling interests were measured at the corresponding equity stake in the amounts carried for the identifiable
net assets of the acquired business. The gross amounts of the acquired trade accounts receivable for Destination
Management totalled € 71.4 m as at the acquisition date. Impairment charges of € 2.5 m were booked.
The goodwill provisionally capitalised for Destination Management totals € 82.3 m. Consequently, given the preliminary
nature, the goodwill comprises anticipated synergies as well as intangible assets that can be capitalized.
In the acquisition of Destination Management, the measurement of some parts of the acquired assets and liabilities was
not yet finalised as at the balance sheet date based on the information available. Use was made of the twelve-month
period to finalise purchase price allocations allowed under IFRS 3, which allows for provisional purchase price allocations
to individual assets and liabilities until the end of the twelve-month period. Due to the high complexity resulting from
the acquisition of a large number of companies with different business areas and currency areas, the numbers presented
are provisional. Moreover, the acquisition of companies of the business division has not yet been completed. As the
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period passed since the acquisition is relatively short, identification of the intangible assets has been finalised, but
measurement is still outstanding.
Turnover and profit contribution of newly acquired entities
€ million
Turnover from first-time
consolidation
Profit from first-time consolidation
Pro-Forma turnover from
1 Oct 2017 until 30 Sep 2018
Pro-Forma profit / loss from
1 Oct 2017 until 30 Sep 2018
Cruisetour AG and
Croisimonde AG
Antwun S. A.
(subgroup)
GBH Turizm
Sanayi
Isletmecilik ve
Ticaret A. S.
Darecko S. A.
(subgroup)
Business
Destination
Management
11.6
0.2
17.6
0.5
5.6
1.4
10.2
2.6
5.2
1.5
6.7
– 1.6
1.5
0.5
4.9
1.5
108.9
4.7
501.9
– 0.9
In the presented financial statements, the purchase price allocations for the 20 travel agencies acquired in the prior year
were finalised within the twelve-month period provided under IFRS 3 without a major impact on the consolidated statement
of financial position.
A C Q U I S I T I O N S A F T E R T H E B A L A N C E S H E E T D AT E
On 2 October 2018, TUI acquired 100 % of the shares in the technology start-up Musement S. p. A., Milan, Italy, and four
other companies to strengthen its growth area TUI Destination Experiences. The acquisition served to acquire one of
the leading digital platforms for activities, tours and excursions in destination in order to strengthen TUI’s position in
this business and expand its holiday experiences portfolio.
The consideration transferred for the acquisition of the stake totals € 36.2 m plus receivables of the acquired company
as well as liabilities taken over from the company. Further disclosures, such as the fair value measurement of the assets
and liabilities cannot be provided due to the short period of time since the acquisition has taken place.
D I V E S T M E N T S
In FY 2018, three hotel companies of RIUSA II Group were sold. The divestment of Dominicanotel S. A., Puerto Plata, and
Puerto Plata Caribe Beach S. A., Puerto Plata, Dominican Republic, resulted in a gain on disposal of € 24.3 m. This gain
includes the disposal of partial goodwill of RIUSA II Group of € 5.2 m. The sale of St. Martin RIUSA II S. A. resulted in a
gain on disposal of € 8.2 m. This gain includes the disposal of partial goodwill of RIUSA II Group of € 3.4 m.
F O R E I G N E X C H A N G E T R A N S L AT I O N
Transactions in foreign currencies are translated into the functional currency at the foreign exchange rates at the date
of the transaction. Any gains and losses resulting from the execution of such transactions and the translation of
monetary assets and liabilities denominated in foreign currencies at the foreign exchange rate at the date of the
transaction are shown in the income statement, with the exception of gains and losses to be recognised in equity as
qualifying cash flow hedges.
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The annual financial statements of companies are prepared in the respective functional currency. The functional
currency of a company is the currency of the primary economic environment in which the company operates. With the
exception of a small number of companies, the functional currencies of all subsidiaries correspond to the currency of
the country of incorporation of the respective subsidiary.
Where subsidiaries prepare their financial statements in functional currencies other than the Euro, being the Group’s
reporting currency, the assets and liabilities are translated at the rate of exchange applicable at the balance sheet date
(closing rate). Goodwill allocated to these companies and adjustments of the fair value arising on the acquisition of a
foreign company are treated as assets and liabilities of the foreign company and also translated at the rate of exchange
applicable at the balance sheet date. The items of the income statement and hence the result for the year shown in the
income statement are translated at the average rate of the month in which the respective transaction takes place.
Differences arising on the translation of the annual financial statements of foreign subsidiaries are reported outside
profit and loss and separately shown as foreign exchange differences in the consolidated statement of changes in equity.
When a foreign company or operation is sold, any foreign exchange differences previously included in equity outside
profit and loss are recognised as a gain or loss from disposal in the income statement through profit and loss.
Translation differences relating to non-monetary items with changes in their fair values eliminated through profit and
loss (e. g. equity instruments measured at their fair value through profit and loss) are included in the income statement.
In contrast, translation differences for non-monetary items with changes in their fair values taken to equity (e. g. equity
instruments classified as available for sale) are included in revenue reserves.
The TUI Group did not hold any subsidiaries operating in hyperinflationary economies in the completed financial year,
nor in the previous year.
The translation of the financial statements of foreign companies measured at equity follows the same principles for
adjusting carrying amounts and translating goodwill as those used for consolidated subsidiaries.
N E T I N V E S T M E N T I N A F O R E I G N O P E R AT I O N
Monetary items receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely
in the foreseeable future, essentially constitute part of a net investment in this foreign operation. Foreign exchange
differences from the translation of these monetary items are recognised in other comprehensive income. TUI Group has
granted loans of this type in particular to hotel companies in North Africa.
Exchange rates of currencies of relevance to the TUI Group
1 € equivalent
Sterling
US dollar
Swiss franc
Swedish krona
Closing rate
Annual average rate
30 Sep 2018
30 Sep 2017
0.89
1.16
1.13
10.31
0.88
1.18
1.15
9.65
2018
0.89
1.19
1.16
10.13
2017
0.87
1.07
1.08
9.69
C O N S O L I D AT I O N M E T H O D S
The recognition of the net assets of acquired businesses is based on the acquisition method. Accordingly all identifiable
assets and all liabilities assumed are measured at fair value as of the acquisition date. Subsequently, the consideration
for the stake is measured at fair value and eliminated against the acquiree’s revalued equity attributable to the acquired
share. As in the prior year, the option to measure the non-controlling interests at their fair value (full goodwill method)
was not used.
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Any excess of acquisition costs over net assets acquired is capitalised as goodwill and recognised as an asset in
accordance with the provisions of IFRS 3. Any negative goodwill is recognised immediately in profit and loss and
presented as other income.
When additional shares are purchased after obtaining control, the difference between the purchase price and the
carrying amount of the stakes acquired is recognised directly in equity. The effects from sales of stakes not entailing a
loss of control are also recognised directly in equity. By contrast, when control is obtained or lost, gains or losses are
recognised in profit and loss. In the case of business combination achieved in stages (where the acquirer held an equity
interest before he obtained control), the equity stake previously held in the acquired company is revalued at the fair
value applicable at the acquisition date and the resulting gain or loss is recognised in profit or loss. For transactions
involving a loss of control, the profit or loss does not only comprise the difference between the carrying amounts of the
disposed stakes and the consideration received but also the result from the revaluation of the remaining shares.
On loss of control of a subsidiary the gain or loss on derecognition will be calculated as the difference of the fair value
of the consideration plus the fair value of any investment retained in the former subsidiary less the share of the book
value of the net assets of the subsidiary. Any gains or losses previously recognised in other comprehensive income from
currency translations or the valuation of financial assets and liabilities will be reclassified to the income statement.
When a subsidiary is sold, any goodwill allocated to the respective subsidiary is taken into account in the calculation of
the profit or loss of disposal.
The Group’s associates and joint ventures are measured at equity and included at the cost to purchase as at the
acquisition date. The Group’s stake in associates and joint ventures includes the goodwill arising from the respective
acquisition.
The Group’s share in profits and losses of associates and joint ventures is carried in the income statement from the date of
acquisition (Share of result from joint ventures and associates), while the Group’s share in the total other comprehensive
income is shown in its revenue reserves. The accumulated changes arising after the acquisition are shown in the carrying
amount of the shareholding. When the share in the loss of an associated company or joint venture equals or exceeds
the Group’s original stake in this company, including other unsecured receivables, no further losses are recognised. Any
losses exceeding that stake are only recognised to the extent that obligations have been assumed or payments have
been made for the associated company or joint venture.
Where the accounting and measurement methods applied by associates and joint ventures differ from the uniform
accounting rules applied in the Group, the differences are adjusted.
Intercompany receivables and payables or provisions are eliminated, as are intercompany turnover, other income and
the corresponding expenses. Intercompany results from intercompany deliveries and services are reversed through
profit and loss, taking account of deferred taxes. However, intercompany losses are an indicator that an asset may be
impaired. Intercompany profits from non-trading transactions with companies measured at equity are eliminated in
relation to the Group’s stake in the company. Intercompany profits from transactions with companies measured at
equity are eliminated in relation to the Group’s stake in the companies unless these intercompany profits result from
the usual deliveries effected or services rendered between Group companies. Intercompany transactions are provided
on an arm’s length basis.
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Accounting and measurement methods
The consolidated financial statements were prepared according to the historical cost principle, with the exception of
certain financial instruments such as financial assets and derivatives held for trading or available for sale as well as plan
assets from externally funded pensions benefit obligations held at fair value at the balance sheet date.
The financial statements of the consolidated subsidiaries are prepared in accordance with uniform accounting and
measurement principles. The amounts recognised in the consolidated financial statements are not determined by tax
regulations but solely by the commercial presentation of the financial position and performance as set out in the rules
of the IASB.
T U R N O V E R R E C O G N I T I O N
Turnover and other income is recognised upon delivery of the service or assets and hence upon transfer of the risk.
The commission fees received by travel agencies for package tours are recognised once the travel agencies have
performed their contractual obligations towards the tour operator. As a rule, this condition is met upon payment by the
customers or, at the latest, at the date of departure. The services of tour operators mainly consist in organising and
coordinating package tours. Turnover from the organisation of tours is therefore recognised in full when the customer
departs. Turnover from individual travel modules booked by the customer directly with airlines, hotel companies or
incoming agencies is recognised when the customers use the services concerned. Income from non-completed cruises
is recognised according to the proportion of contract performance at the balance sheet date. The percentage of
completion is determined as the ratio between travel days completed by the balance sheet date and overall travel days.
G O O D W I L L A N D O T H E R I N TA N G I B L E A S S E T S
Acquired intangible assets are carried at cost. Internally generated intangible assets are capitalised at cost where an
inflow of future economic benefits for the Group is probable and can be reliably measured. The cost to produce
comprises direct costs and directly allocable overheads. Intangible assets with a finite service life are amortised over the
expected useful life.
Intangible assets acquired as a result of business combinations, such as customer base or trademark rights, are included
at their fair value as at the date of acquisition and are amortised on a straight-line basis.
Useful lives of intangible assets
Brands, licences and other rights
Transport and leasing contracts
Computer software
Customer base as at acquisiton date
Useful lives
15 to 20 years
12 to 20 years
3 to 10 years
7 to 15 years
If there are any events or indications suggesting potential impairment, the amortised carrying amount of the intangible
asset is compared with the recoverable amount. Any losses in value going beyond wear-and-tear depreciation are taken
into account through the recognition of impairment charges.
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Depending on the functional area of the intangible asset, amortisation and impairment charges are included under cost
of sales or administrative expenses. Intangible assets with indefinite useful lives are not amortised but are tested for
impairment at least annually. In addition, impairment tests are conducted if there are any events or indications suggesting
potential impairment. The TUI Group’s intangible assets with an indefinite useful life consist exclusively of goodwill.
Impairment tests for goodwill are conducted on the basis of cash generating units (CGU) or group of cash generating units.
Impairment charges are recognised where the carrying amount of the tested units plus the allocated goodwill exceeds
the recoverable amount. The recoverable amount is the higher of fair value less costs of disposal and the present value
of future cash flows based on continued use (value in use). The fair value less costs of disposal corresponds to the
amount that could be generated between knowledgeable, willing, independent business partners after deduction of the
costs of disposal.
Impairment of goodwill is shown separately in the consolidated income statement.
P R O P E R T Y, P L A N T A N D E Q U I P M E N T
Property, plant and equipment are measured at amortised cost. The costs to purchase include costs to bring the asset
to a working condition. The costs to produce are determined on the basis of direct costs and directly attributable indirect
costs and depreciation.
Borrowing costs directly associated with the acquisition, construction or production of qualifying assets are included in
the costs to acquire or produce these assets until the assets are ready for their intended use.
To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the underlying
capitalisation rate is determined on the basis of the specific borrowing cost; in all other cases the weighted average of
the borrowing costs applicable to the borrowings outstanding is applied.
Depreciation of property, plant and equipment is based on the straight-line method, based on the customary useful
lives. The useful economic lives are as follows:
Useful lives of property, plant and equipment
Hotel buildings
Other buildings
Cruise ships
Aircraft
Fuselages and engines
Engine overhaul
Major overhaul
Spare parts
Operating and business equipment
Useful lives
30 to 40 years
25 to 50 years
30 to 40 years
22 to 25 years
depending on intervals, up to 12 years
depending on intervals, up to 12 years
up to 12 years
3 to 10 years
Moreover, the level of depreciation is determined by the residual values recoverable at the end of the useful life of an
asset. The residual value assumed in first-time recognition for cruise ships and hotel complexes is up to 35 % of the
acquisition costs. The determination of the depreciation of aircraft fuselages and aircraft engines in first-time recognition
is based on a residual value of a maxium of 5 % of the cost of acquisition. The payments made under a power by the
hour arrangement relating to maintenance overhauls are capitalised as PPE under construction up to a maintenance
event at which point the cost is transferred to the appropriate PPE category.
Both the useful lives and residual values are reviewed on an annual basis when preparing the Group financial statements.
The review of the residual values is based on comparable assets at the end of their useful lives as at the current point
in time. Any adjustments required are recognised as a correction of depreciation over the remaining useful life of the
asset. The adjustment of depreciation is recognised retrospectively for the entire financial year in which the review has
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taken place. Where the review results in an increase in the residual value so that it exceeds the remaining net carrying
amount of the asset, depreciation is suspended. In this case, the amounts are not written back.
Any losses in value going beyond wear-and-tear depreciation are taken into account through the recognition of impairment
losses. If there are any events or indications suggesting impairment, the required impairment test is performed to
compare the carrying amount of an asset with the recoverable amount.
Investment grants received are shown as reductions in the costs to purchase or produce items of property, plant or
equipment where these grants are directly allocable to individual items. Where a direct allocation of grants is not possible,
the grants and subsidies received are included as deferred income under other liabilities and reversed in accordance
with the use of the investment project.
L E A S E S
F I N A N C E L E A S E S
In accordance with IAS 17, leased property, plant and equipment in which the TUI Group assumes substantially all the
risks and rewards of ownership is capitalised. Capitalisation is based on the fair value of the asset or the present value
of the minimum lease payments, if lower. Depreciation is charged over the useful life or the lease term, if shorter, on
the basis of the depreciation method applicable to comparable purchased or manufactured assets. Every lease payment
is broken down into an interest portion and a redemption portion so as to produce a constant periodic rate of interest
on the remaining balance of the liability. The interest portion is disclosed in the income statement through profit or loss.
F I N A N C I A L I N S T R U M E N T S
Financial instruments are contractual rights or obligations that will lead to an inflow or outflow of financial assets or the
issue of equity rights. They also comprise derivative rights or obligations derived from primary assets.
In accordance with IAS 39, financial instruments are broken down into financial assets or liabilities to be measured at fair
value through profit and loss, loans and receivables, financial assets available for sale, financial assets held to maturity
and other financial liabilities measured at amortised cost using the effective interest method (financial liabilities at
amortised cost).
In terms of financial instruments measured at fair value through profit and loss, the TUI Group holds derivative financial
instruments mainly to be classified as held for trading as they do not meet the criteria as hedges in the framework of a
hedging relationship according to IAS 39. The fair value option is not exercised. In addition, the TUI Group holds financial
assets in the loans and receivables and available for sale categories. However, the presented financial statements do not
include any financial assets held to maturity.
P R I M A R Y F I N A N C I A L A S S E T S A N D F I N A N C I A L L I A B I L I T I E S
Primary financial assets are recognised at the value as at the trading date on which the TUI Group commits to buy the
asset. Primary financial assets are classified as loans and receivables or as financial assets available for sale when
recognised for the first time. Loans and receivables as well as financial assets available for sale are initially recognised
at fair value plus transaction costs.
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Allowances are recognized for identifiable individual risks. Where objective information indicates that impairment
charges are required, e. g. substantial financial difficulties of the counterparty, payment delays or adverse changes in
regional industry conditions expected to impact the solvency of the Group’s debtors in the light of past experience,
impairment charges are recognised at an amount corresponding to the expected loss of non-recoverable cash flows.
Impairment charges and reversals of impairment charges are included under cost of sales, administrative expenses or
financial expenses, depending on the nature of the transaction.
Financial assets available for sale are non-derivative financial assets either individually expressly assigned to this category
or not allocable to any other category of financial assets. Within the TUI Group, they consist of investments in affiliated,
non-consolidated subsidiaries, trade investments and other securities. They are allocated to non-current assets unless
management intends to sell them within twelve months of the balance sheet date.
Financial assets available for sale are measured at their fair value upon initial recognition. Changes in the fair value are
included directly in equity until the disposal of the assets. Interest payments and dividends on available for sale financial
assets are recognized in profit or loss. If there is objective evidence of impairment, an impairment loss is taken through
profit and loss. Objective evidence may, in particular, be substantial financial difficulties of the counterparty and significant
changes in the technological, market, legal or economic environment.
Moreover, for equity instruments held, a significant or prolonged decline in the fair value below its cost is also objective
evidence of impairment. The TUI Group concludes that a significant decline exists if the fair value falls by more than
20 % below cost. A decline is assessed as prolonged if the fair value remains below cost for more than twelve months.
In the event of subsequent reversal of the impairment, the impairment included in profit or loss is not reversed for
equity instruments but recognised in other comprehensive income. Where a listed market price in an active market is
not available for shares held in companies and other methods to determine an objective market value are not applicable,
these equity instruments are measured at cost, with potential impairments taken into account.
As a matter of principle, the foreign exchange differences resulting from the translation of trade accounts payable are
reported as a correction of the cost of sales. Foreign exchange differences from the translation of liabilities not resulting
from normal operating processes are reported under other income / other expenses, financial expenses / income or
administrative expenses, depending on the nature of the underlying liability.
A derecognition of assets is primarily recognised as at the date on which the rights for payments from the asset expire
or are transferred and therefore as at the date essentially all risks and rewards of ownership are transferred. The rights
to an asset expire when the rights to receive the cash flows from the asset have expired. For transfers of financial
assets, it is tested whether a write-off has to be recognised in accordance with IAS 39 disposal rules.
Primary financial liabilities are included in the consolidated statement of financial position if an obligation exists to
transfer cash and cash equivalents or other financial assets to another party. First-time recognition of a primary liability
is recognised at its fair value. For loans taken out, the nominal amount received is reduced by discounts obtained and
transaction costs paid. In the framework of follow-up measurement, primary financial liabilities are measured at amortised
cost based on the effective interest method.
D E R I V AT I V E F I N A N C I A L I N S T R U M E N T S A N D H E D G I N G
At initial measurement, derivative financial instruments are measured at the fair value attributable to them on the date
the contract is entered into. Subsequent re-measurement is also recognised at the fair value applicable at the respective
balance sheet date. Where derivative financial instruments are not part in the framework of IAS 39 of a hedge in
connection with hedge accounting, they are classified as held for trading.
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The method used to recognise profits and losses depends on whether the derivative financial instrument has been
classified as a hedge and on the type of underlying hedged item. Changes in the fair values of derivative financial
instruments are recognised in profit and loss unless they are classified as a hedge in accordance with IAS 39. If they are
classified as an effective hedge in accordance with IAS 39, the transaction is recognised as a hedge.
Upon conclusion of the transaction, the TUI Group documents the hedge relationship between the hedge and the
underlying item, the risk management goal and the underlying strategy. In addition, a record is kept of the assessment,
both at the beginning of the hedge relationship and on a continual basis, as to whether the derivatives used for the hedge
are highly effective in compensating for the changes in the fair values or cash flows of the underlying transactions.
The effective portion of changes in the fair value of derivatives forming cash flow hedges is recognised in equity. Any
ineffective portion of such changes in the fair value, by contrast, is recognised immediately in the income statement
through profit and loss. Amounts taken to equity are reclassified to the income statement and included as income or
expenses in the period in which the hedged item has an effect on results.
If a hedge expires, is sold or no longer meets the criteria of IAS 39 for hedge accounting, the cumulative gain or loss
remains in equity and is only recognised in the income statement through profit and loss when the originally hedged
future transaction occurs. If the future transaction is no longer expected to take place, the cumulative gains or losses
recognised directly in equity are recognised immediately through profit and loss.
I N V E N T O R I E S
The measurement method applied to similar inventory items is the weighted average cost formula.
C A S H A N D C A S H E Q U I V A L E N T S
Cash and cash equivalents comprise cash, call deposits, other current highly liquid financial assets with an original term
of a maximum of three months and current accounts. Overdrawn current accounts are shown as liabilities to banks
under current financial liabilities.
E Q U I T Y
Ordinary shares are classified as equity. Costs directly allocable to the issue of new shares or conversion options are
taken to equity on a net after-tax basis as a deduction from the issuance proceeds.
O W N S H A R E S
The group’s holdings in its own equity instruments are shown as deductions from shareholders’ equity at cost, including
directly attributable transaction costs. No gain or loss is recognised in the income statement on the purchase or sale of
shares. Any difference between the proceeds from sale and the original cost are taken to reserves.
P E N S I O N P R O V I S I O N S
The pension provision recognised for defined benefit plans corresponds to the net present value of the defined benefit
obligations (DBOs) as at the balance sheet date less the fair value of the plan assets. If the value of the plan assets
exceeds the value of the DBO, the excess amount is shown within other assets. Measurement of such an asset is limited to
the net present value of the value in use in the form of reimbursements from the plan or reductions in future contribution
payments. The DBOs are calculated annually by independent actuaries using the projected unit credit method.
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For defined contribution plans, the Group pays contributions to public or private pension insurance plans on the basis
of a statutory or contractual obligation or on a voluntary basis. The Group does not have any further payment obligations
on top of the payment of the contributions. The contributions are recognised under staff costs when they fall due.
O T H E R P R O V I S I O N S
Other provisions are formed when the Group has a current legal or constructive obligation as a result of a past event,
where in addition it is probable that assets will be impacted by the settlement of the obligation and the level of the
provision can be reliably determined.
Where a large number of similar obligations exist, the probability of a charge over assets is determined on the basis of
this group of obligations. A provision is also recognised if the probability of a charge over assets is low in relation to an
individual obligation contained in this group.
Provisions are measured at the present value of the expected expenses, taking account of a pre-tax interest rate,
reflecting current market assessments of the time value of money and the risks specific to the liability. Risks already
taken into account in estimating future cash flows do not affect the discount rate. Increases in provisions due to
accretion of interest are recognised as interest expenses through profit or loss.
D E F E R R E D TA X E S A N D I N C O M E TA X E S
Expected tax savings from the use of tax losses carried forward assessed as recoverable in the future are recognised as
deferred tax assets. Regardless of the unlimited ability to carry German tax losses forward which continues to exist, the
annual utilisation is limited by the minimum taxation. Foreign tax losses carried forward frequently have to be used
within a given country-specific time limit and are subject to restrictions concerning the use of these losses carried
forward for profits on ordinary activities, which are taken into account accordingly in the measurement.
Income tax is directly charged or credited to equity if the tax relates to items directly credited or charged to equity in
the same period or some other period.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against
which the temporary difference or an unused tax loss can be utilised.
Deferred taxes are measured at the tax rates and tax provisions applicable at the balance sheet date or adopted by
law and expected to be applicable at the date of recognition of the deferred tax asset or the payment of the deferred
tax liability.
Deferred and current income tax liabilities are offset against the corresponding tax assets if they exist in the same fiscal
territory and have the same nature and maturity.
S H A R E - B A S E D PAY M E N T S
Share-based payment schemes in the Group comprise both cash-settled and equity-settled schemes.
For cash-settled transactions, the resulting liability for the Group is charged to expenses at its fair value as at the date
of the performance of the service by the beneficiary. Until settlement of the liability, the fair value of the liability is
re-measured at every closing date and all changes in the fair value are recognised through profit and loss.
For equity-settled transactions the fair value of the awards granted is recognised under staff costs with a corresponding
direct increase in equity. The fair value is determined at the point when the awards are granted and spread over the
vesting period during which the employees become entitled to the awards. The method for the calculation of the granted
awards is described in Note 35.
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175
S U M M A R Y O F S E L E C T E D A C C O U N T I N G A N D M E A S U R E M E N T M E T H O D S
The table below lists the key accounting and measurement methods used by the TUI Group.
Summary of selected measurement bases
Item in the statement of financial position
Measurement base
Assets
Goodwill
Other intangible assets with definite useful lives
Property, plant & equipment
Joint ventures and associates
Financial assets
Loans and receivables
Held for trading / Derivatives
Available for sale
Inventory
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Liabilities and Provisions
Loans and borrowings
Provision for pensions
Other provisions
Financial liabilities
Non-derivative financial liabilities
Derivative financial liabilities
Payables, trade and other liabilities
At cost (subsequent measurement: impairment test)
At amortised cost
At amortised cost
At the Group’s share of the net assets of the joint ventures and associates
At amortised cost
At fair value
Fair value (with gains or losses recognised within other
comprehensive income) or at cost
Lower of cost and net realisable value
At amortised cost
At cost
Lower of cost and fair value less cost of disposal
At amortised cost
Projected unit credit method
Present value of the settlement amount
At amortised cost
At fair value
At amortised cost
Key judgements, assumptions and estimates
The presentation of the assets, liabilities, provisions and contingent liabilities shown in the consolidated financial
statements is based on judgements, estimates and assumptions. Any uncertainties are appropriately taken into account
in determining the values.
All estimates and assumptions are based on the conditions and assessments as at the balance sheet date. In evaluating
the future development of business, reasonable assumptions are made regarding the expected future economic
environment in the business areas and regions in which the Group operates.
Despite careful preparation of the estimates, actual results may differ from the estimate. In such cases, the assumptions
and the carrying amounts of the assets and liabilities concerned, if necessary, are adjusted accordingly. As a matter of
principle, changes in estimates are taken into account in the financial year in which the changes have occurred and in
future periods.
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J U D G E M E N T S
The judgements made by management in applying accounting policies that may have a significant impact on TUI Group’s
assets and liabilities mainly relate to the following topics:
• Assessment when the Group has de facto control over an investee and therefore consolidates this investment
• Definition whether a Group company acts as an agent or as a principal in a transaction
• Determination whether an arrangement contains a lease and classification of the lease
A S S U M P T I O N S A N D E S T I M AT E S
Assumptions and estimates that may have a material impact on the amounts reported as assets and liabilities in the
TUI Group are mainly related to the following balance sheet-related facts and circumstances:
• Establishment of assumptions for impairment tests, in particular for goodwill,
• Determination of the fair values for acquisitions of companies and determination of the useful lives of acquired
intangible assets,
• Determination of useful lives and residual carrying amounts of property, plant and equipment,
• Determination of actuarial assumptions to measure pension obligations,
• Recognition and measurement of other provisions,
• Recoverability of future tax savings from tax losses carried forward and tax-deductible temporary differences
• Measurement of tax risks
• Recoverable amounts of touristic prepayments.
G O O D W I L L
The goodwill reported as at 30 September 2018 has a carrying amount of € 2,958.6 m (previous year € 2,889.5 m). The
determination of the recoverable amount of a Cash Generating Unit (CGU) for the annual impairment test requires
estimates and judgement with regard to the methodology used and the assumptions, which may have a considerable
effect on the recoverable amount and the level of a potential impairment. They relate, in particular, to the weighted
average cost of capital (WACC) after income taxes, used as the discounting basis, the growth rate in perpetuity and the
forecasts for future cash flows including the underlying budget assumptions based on corporate planning. Changes in
these assumptions may have a substantial impact on the recoverable amount and the level of a potential impairment.
B U S I N E S S A C Q U I S I T I O N S A N D I N TA N G I B L E A S S E T S
In accounting for business combinations, the identifiable assets, liabilities and contingent liabilities acquired have to be
measured at their fair values. In this context, cash flow-based methods are regularly used, which may lead to different
results depending on the underlying assumptions. In particular, some judgement is required in estimating the economic
useful lives of intangible assets and determining the fair values of contingent liabilities.
Detailed information on business acquisitions and useful lives of intangible assets is provided in the section ‘Acquisitions –
divestments’ in the note on ‘Principles and methods of consolidation’ and in the section on ‘Goodwill and other intangible
assets’ of the note ‘Accounting and measurement methods’.
P R O P E R T Y, P L A N T A N D E Q U I P M E N T
The measurement of wear-and-tear to property, plant and equipment items entails estimates. The carrying amount of
property, plant and equipment as at 30 September 2018 totals € 4,899.2 m (previous year € 4,253.7 m). In order to review
the amounts carried, an evaluation is carried out on a regular basis to assess whether there are any indications of a
potential impairment. These indications relate to a number of areas and factors, e. g. the market-related or technical
environment but also physical condition. If any such indication exists, management must estimate the recoverable
amount on the basis of expected cash flows and appropriate interest rates. Further, essential estimates and judgements
include the definition of economic useful lives and the residual values of items of property, plant and equipment which
may be recovered.
N O T E S » p r I N C I p l e S A N D M e T H o D S U N D e r lyI N G T H e C o N So lI D ATe D f I N A N C I A l S TATe M e N T S
177
More detailed information on the useful lives and residual values of property, plant and equipment items is provided in
the section ‘Property, plant and equipment’ in the note ‘Accounting and measurement methods’.
P E N S I O N P R O V I S I O N S
As at 30 September 2018, the carrying amount of provisions for pensions and similar obligations totals € 994.8 m
(previous year € 1,127.4 m). For those pension plans where the plan assets exceed the obligation, other assets amounting
to € 125.1 m are shown as at 30 September 2018 (prior year € 57.0 m).
In order to determine the obligations under defined benefit pension schemes, actuarial calculations are used which rely
on underlying assumptions concerning life expectancy and the discount rate.
At the balance sheet date, the fair value of the plan assets totals € 2,701.1 m (previous year € 2,631.3 m). As assets
classified as plan assets are never available for short-term sale, the fair values of these plan assets may change
significantly up to the realisation date. Detailed information on actuarial assumptions is provided under Note 28.
O T H E R P R O V I S I O N S
As at 30 September 2018, other provisions of € 1,116.4 m (previous year € 1,151.3 m) are reported. When recognising and
measuring provisions, assumptions are required about probability of occurrence, maturity and level of risk.
Determining whether a current obligation exists is usually based on review by internal or external experts. The amount
of provision is based on expected expenses, and is either calculated by assessing the specific case in the light of empirical
values, outcomes from comparable circumstances, or else estimated by experts. Due to the uncertainties associated
with assessment, actual expenses may deviate from estimates so that unexpected charges may result.
More detailed information on other provisions is provided in the notes to the statement of financial position in Note 29.
D E F E R R E D TA X A S S E T S
As at 30 September 2018, deferred tax assets totalling € 225.7 m (previous year € 323.7 m) were recognised. Prior to
offsetting against deferred tax liabilities, deferred tax assets total € 519.4 m, included an amount of € 198.3 m (previous
year € 198.1 m) for recognised losses carried forward. The assessment of the recoverability of deferred tax assets is
based on the ability of the respective Group company to generate sufficient taxable income. TUI therefore assesses at
every balance sheet date whether the recoverability of expected future tax savings is sufficiently probable in order to
recognise deferred tax assets. The assessment is based on various factors including internal forecasts regarding the
future earnings situation of the Group company. If the assessment of the recoverability of future deferred tax assets
changes, impairment charges may be recognised, if necessary, on the deferred tax assets.
More detailed information on deferred tax assets is available in the Notes to the statement of financial position in Note 19.
I N C O M E TA X E S
The Group is liable to pay income taxes in various countries. Key estimates are required when determining income tax
liabilities, including the probability, the timing and the size of any amounts that may become payable. For certain
transactions and calculations the final tax charge cannot be determined during the ordinary course of business. After
taking appropriate external advice, the Group makes provisions or discloses contingencies for uncertain tax positions
based on the probable or possible level of additional taxes that might be incurred. The level of obligations for expected
tax audits is based on an estimation of whether and to what extent additional income taxes will be due. Judgements are
corrected, if necessary, in the period in which the final tax charge is determined.
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R E C O V E R A B L E A M O U N T S O F T O U R I S T I C P R E PAY M E N T S
At 30 September 2018, the carrying amount of touristic prepayments totals € 877.5 m (previous year € 758.6 m). The
assessment of the recoverable amounts of touristic prepayments made to hoteliers requires judgement about the
volume of future trading with hoteliers and the credit worthiness of those hoteliers. To assess the recoverability of
touristic prepayments, TUI considers the financial strength of those hoteliers, the quality of the hotels as well as the
demand for each hotel and the relevant destination during the past and in coming seasons.
Segment reporting
Notes on the segments
The identification of operating segments is based on the internal organisational and reporting structure primarily built
around the different products and services as well as a geographical structure within the TUI Group. Allocation of
individual organisational entities to operating segments is exclusively based on economic criteria, irrespective of the
participation structure under company law. The segments are independently managed by those in charge, who regularly
receive separate financial information for each segment. They regularly report to the Group Executive Committee,
which consists of six Executive Board members and six other executives. The legally binding decision regarding the use
of resources is taken by the Executive Board. The TUI Group Executive Board has therefore been identified as the Chief
Operating Decision Maker (CODM) in accordance with IFRS 8.
The Hotels & Resorts segment comprises all Group-owned hotels and hotel shareholdings of TUI Group.
The Cruises segment consists of Hapag-Lloyd Cruises and the joint venture TUI Cruises as well as the British cruise
business Marella Cruises.
Since the first quarter of 2018, the companies providing services in the destinations have been separately reported as the
Destination Experiences segment. This segment also contains the newly acquired business unit Destination Management.
The Northern Region segment comprises the tour operators and airlines in the UK, Ireland and the Nordic countries and
the stake in the tour operation business of the Canadian company Sunwing as well as the joint venture TUI Russia. This
segment also includes the tour operators Crystal Ski and TUI Lakes & Mountains, which play a major role in securing the
load factor for our aircraft fleet in the UK, especially in winter.
The Central Region segment comprises the tour operators and airlines in Germany and tour operators in Austria,
Poland and Switzerland.
The Western Region segment comprises the tour operators and airlines in Belgium and the Netherlands and tour
operators in France.
Apart from the above segments, the recognised items also include All other segments, which comprises the business
operations for new markets and in particular the central corporate functions and interim holdings of TUI Group and the
Group’s real estate companies. Additionally, the companies previously included in Other Tourism, such as the French
scheduled carrier Corsair and central tourism functions such as information technology, are included in All Other
Segments since Q1 2018.
N O T E S » S e G Me N T r e p o rT I N G
179
Notes to the segment data
The selection of segment data presented is based on the regular internal reporting of segmented financial indicators to
the Executive Board. Segment reporting discloses in particular the performance indicator underlying EBITA, since this
indicator is used for value-oriented corporate management and thus represents the consolidated performance indicator
within the meaning of IFRS 8.
The TUI Group defines underlying EBITA as EBITA, adjusted for gains on disposal of financial investments, expenses in
connection with restructuring measures according to IAS 37, all effects of purchase price allocations, ancillary acquisition
cost and conditional purchase price payments and other expenses for and income from one-off items. The one-off items
carried as adjustments are income and expense items impacting or distorting the assessment of the operating profitability
of the segments and the Group due to their level and frequency. These one-off items include major restructuring and
integration expenses not meeting the criteria of IAS 37, major expenses for litigation, profit and loss from the sale of
aircraft and other material business transactions of a one-off nature.
EBITA is defined as earnings before interest, income taxes and goodwill impairment. EBITA includes amortisation of
other intangible assets. EBITA does not include measurement effects from interest hedges and in the prior year the
measurement effects from container shipping, as the stake in Hapag-Lloyd AG, held until its sale on 10 July 2017, was
a financial investment and not an operative stake from TUI AG’s perspective.
Internal and external turnover, depreciation and amortisation, impairment on other intangible assets (excluding
goodwill), property, plant and equipment and investments as well as the share of result of joint ventures and associates
are likewise shown for each segment, as these amounts are included when measuring EBITA. As a rule, inter-segment
business transactions are based on the arm’s length principle, as applied in transactions with third parties. No single
external customer accounts for 10 % or more of turnover.
Assets and liabilities per segment are not included in the reporting to the Executive Board and are therefore not shown
in segment reporting.
Depreciation, amortisation, impairment and write-backs relate to non-current and current assets that are split
geographically and do not include goodwill impairment.
The non-current assets, which are split geographically, contain other intangible assets, property, plant and equipment
and other non-current assets that do not meet the definition of financial instruments.
180
N O T E S » S e G Me N T r e p o rT I N G
Segment indicators
Turnover by segment
€ million
Hotels & Resorts
Cruises
Destination experiences
Consolidation
Holiday experiences
Northern Region
Central Region
Western Region
Consolidation
Markets & Airlines
All other segments
Consolidation
Continuing operations
Discontinued operations
Total
Underlying EBITA by segment
€ million
Hotels & Resorts
Cruises
Destination experiences
Holiday experiences
Northern Region
Central Region
Western Region
Markets & Airlines
All other segments
Continuing operations
Discontinued operations
Total
External
Group
606.8
901.9
303.5
–
1,812.2
6,854.9
6,563.7
3,577.6
–
16,996.2
715.5
–
19,523.9
–
19,523.9
782.9
–
290.6
– 3.0
1,070.5
2.0
23.9
31.5
– 40.9
16.5
111.9
– 1,198.9
–
–
–
2018
Total
1,389.7
901.9
594.1
– 3.0
2,882.7
6,856.9
6,587.6
3,609.1
– 40.9
17,012.7
827.4
– 1,198.9
19,523.9
–
19,523.9
External
restated
Group
restated
679.0
815.0
202.5
–
1,696.5
6,601.5
6,039.5
3,502.2
–
16,143.2
695.3
–
18,535.0
829.0
19,364.0
687.2
0.1
242.3
– 3.2
926.4
35.2
22.8
35.6
– 44.3
49.3
114.6
– 1,090.3
–
–
–
2017
Total
restated
1,366.2
815.1
444.8
– 3.2
2,622.9
6,636.7
6,062.3
3,537.8
– 44.3
16,192.5
809.9
– 1,090.3
18,535.0
829.0
19,364.0
2018
2017
restated
425.7
324.0
44.7
794.4
254.1
89.1
109.3
452.5
– 99.9
1,147.0
–
1,147.0
356.5
255.6
35.1
647.2
345.8
71.5
109.2
526.5
– 71.6
1,102.1
– 1.2
1,100.9
In order to enhance comparability, underlying EBITA from the discontinued operations does not include the result
from the sale of the Specialist Group in the previous year.
N O T E S » S e G Me N T r e p o rT I N G
181
Reconciliation to earnings before income taxes of the continuing
operations of the TUI Group
€ million
Underlying EBITA of continuing operations
Result on disposal*
Restructuring expense*
Expense from purchase price allocation*
Expense from other one-off items*
EBITA of continuing operations
Profit on sale of financial investment in Container Shipping
Net interest expense
Expense from measurement of interest hedges
Earnings before income taxes of continuing operations
* For a description of the adjustments please refer to the management report page 66
Other segmental information
2018
1,147.0
2.1
– 34.9
– 31.8
– 22.2
1,060.2
–
– 82.3
– 6.4
971.5
2017
1,102.1
2.2
– 23.1
– 29.2
– 25.5
1,026.5
172.4
– 113.5
– 5.7
1,079.7
Amortisation (+), deprecia-
tion (+), impairment (+) and
write-backs (–) of other
intangible assets, property,
plant and equipment, invest-
ments and current assets
Thereof impairment of
intangible assets
and property, plant
and equipment
Thereof amortisation /
depreciation of intangible
assets and property,
plant and equipment
Share of result of
joint ventures
and associates
€ million
Hotels & Resorts
Cruises
Destination Experiences
Holiday Experiences
Northern Region
Central Region
Western Region
Markets & Airlines
All other segments
Continuing operations
Discontinued operations
Total
2018
2017
restated
2018
2017
restated
2018
2017
restated
2018
2017
restated
98.8
74.3
9.0
182.1
60.5
22.7
22.6
105.8
150.4
438.3
–
438.3
130.8
57.3
7.8
195.9
69.0
20.3
22.6
111.9
156.6
464.4
–
464.4
5.4
–
–
5.4
–
0.1
–
0.1
6.7
12.2
–
12.2
36.4
–
–
36.4
11.2
0.3
–
11.5
25.2
73.1
–
73.1
93.9
74.3
9.1
177.3
60.5
22.6
22.6
105.7
144.1
427.1
–
427.1
98.5
57.3
7.9
163.7
64.5
21.7
22.2
108.4
130.9
403.0
–
403.0
92.1
181.3
7.8
281.2
14.2
2.0
0.2
16.4
0.1
297.7
–
297.7
91.2
135.9
7.8
234.9
13.2
3.7
0.4
17.3
0.1
252.3
–
252.3
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N O T E S » S eG M e N T r e p o r T I N G , N o Te S T o T H e C o N So lI D ATe D I N C o M e S TATe M e N T
Key figures by region
External turnover by
customer location
Thereof external
turnover from
discontinued operations
Non-current assets
€ million
2018
2017
2018
Germany
Great Britain
Spain
Other Europe
North and South America
Rest of the world
Total
5,493.3
6,085.7
217.1
7,063.8
386.5
277.5
19,523.9
5,513.8
5,983.6
147.2
6,861.0
591.1
267.3
19,364.0
–
–
–
–
–
–
–
2017
9.0
316.0
0.9
62.2
372.3
68.6
829.0
2018
2017
710.3
2,729.4
504.1
538.8
507.9
659.5
5,650.0
720.9
2,340.3
479.7
522.4
449.9
490.2
5,003.4
Notes to the consolidated income statement
TUI Group’s operating profit continued its positive development in FY 2018. The growth was primarily driven by the
continued sound business performance of Holiday Experiences.
(1) Turnover
Group turnover is mainly generated from tourism services. A breakdown of turnover by segment and region is shown
under segment reporting.
(2) Cost of sales and administrative expenses
Cost of sales relates to the expenses incurred in the provision of tourism services. In addition to the expenses for
personnel, depreciation, amortisation, rental and leasing, it includes all costs incurred by the Group in connection with
the procurement and delivery of airline services, hotel accommodation, cruises and distribution costs.
Administrative expenses comprise all expenses incurred in connection with activities by the administrative functions
and break down as follows:
Administrative expenses
€ million
Staff cost
Rental and leasing expenses
Depreciation, amortisation and impairment
Others
Total
2018
737.4
60.1
75.8
416.6
1,289.9
2017
710.9
62.5
92.6
389.8
1,255.8
N O T E S » N o Te S T o T H e C o N So lI D ATe D I N C o M e S TATe M e N T
183
The cost of sales and administrative expenses include the following expenses for personnel, depreciation / amortisation,
rent and leasing:
Staff costs
€ million
Wages and salaries
Social security contributions
Pension costs
Total
2018
1,982.3
299.7
154.3
2,436.3
2017
1,896.4
293.0
167.6
2,357.0
Pension costs include service cost for defined benefit obligations and contributions to defined contribution pension
schemes.
The year-on-year increase in staff costs in FY 2018 mainly results from a higher number of employees and salary increases.
The average annual headcount (excluding trainees) evolved as follows:
Average annual headcount in the financial year (excl. trainees)
Hotels & Resorts
Cruises
Destination Experiences
Holiday Experiences
Northern Region
Central Region
Western Region
Markets & Airlines
All other segments
TUI Group
Discontinued operations
Total
Depreciation / amortisation / impairment
€ million
Depreciation and amortisation of other intangible assets and property, plant and equipment
Impairment of other intangible assets and property, plant and equipment
Total
2018
23,001
310
5,406
28,717
12,900
9,768
6,304
28,972
3,495
61,184
–
61,184
2018
427.1
12.2
439.3
2017
21,987
307
3,927
26,221
14,166
9,652
6,119
29,937
3,533
59,691
1,741
61,432
2017
403.0
73.1
476.1
The increase in depreciation and amortisation is driven by the addition of a cruise ship in the prior year and the completed
financial year and the addition of aircraft.
In the prior year, impairment charges on property, plant and equipment related to hotel resorts, in particular due to
damages caused by hurricanes in the Caribbean, and impairment of software and other property, plant and equipment.
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N O T E S » N o Te S T o T H e C o N So lI D ATe D I N C o M e S TATe M e N T
Rental and leasing
€ million
Rental and leasing expenses
Sub-lease income
thereof contingent rent
2018
786.3
36.7
10.7
2017
838.5
34.1
7.6
Where rental and leasing expenses for operating leases are directly related to revenue-generating activities, these
expenses are shown within cost of sales. However, where rental and leasing expenses are incurred in respect of
administrative buildings, they are shown under administrative expenses.
Leasing expenses for aircraft declined year-on-year due to foreign currency effects. Leasing expenses for cruise ships
also declined year-on-year due to the expiry of a lease agreement at Marella Cruises.
In order to improve the load factor of the aircraft fleet, some planes are also used by other Group companies and
leased out to non-Group third parties. These operating leases have terms of 6 months to 12 years and usually expire
automatically after the end of the contract term. The income from sub-leases carried in the income statement for the
completed financial year is presented in the table above.
(3) Other income
In FY 2018, other income mainly resulted from the disposal of three hotel companies and a hotel. Income was also
generated from the sale of aircraft assets.
Other income recognised in the prior year mainly resulted from the sale of two subsidiaries and an investment. Income
had also been generated from the sale of commercial real estate owned by TUI Immobilien Services GmbH, Salzgitter,
the sale of aircraft spare parts not required, and the sale of vehicles owned by incoming agencies.
(4) Financial income
Financial income
€ million
Bank interest income
Other interest and similar income
Income from the measurement of hedges
Interest income
Income from investments
Income from the measurement of other financial instruments
Foreign exchange gains on financial instruments
Total
2018
24.9
42.6
6.3
73.8
3.7
0.7
5.6
83.8
2017
11.0
8.5
2.2
21.7
175.9
30.6
1.1
229.3
The decrease in financial income by € 145.5 m in FY 2018 results mainly from the gain on disposal of the sale of the stake
in Hapag-Lloyd AG worth € 172.4 m included in the prior year. This decline was partially offset by the effects of a change
in the cash pooling scheme, resulting in an increase in interest income from bank balances of € 13.9 m.
N O T E S » N o Te S T o T H e C o N So lI D ATe D I N C o M e S TATe M e N T
185
(5) Financial expenses
Financial expenses
€ million
Bank interest payable on loans and overdrafts
Finance lease charges
Net interest expenses from defined benefit pension plans
Unwinding of discount on provisions
Other interest and similar expenses
Expenses relating to the measurement of hedges
Interest expenses
Expenses relating to the measurement of other financial instruments
Foreign exchange losses on financial instruments
Total
2018
20.2
46.1
19.5
2.2
61.8
12.7
162.5
1.0
2.0
165.5
2017
10.2
46.2
15.7
3.7
57.2
7.9
140.9
5.0
10.3
156.2
The increase in financial expenses in FY 2018 mainly results from an increase in interest expenses from bank liabilities.
This increase primarily results from a change in the cash pooling scheme and is offset by interest income, which had an
opposite effect.
The foreign exchange losses on financial instruments do not include any expenses for hedges.
(6) Share of result of joint ventures and associates
The share of result of joint ventures and associates of € 297.7 m (previous year € 252.3 m) comprises the net profit for
the year attributable to the associated companies and joint ventures.
For the development of the results of the material joint ventures and associates we refer to Note 16 ‘Investments in
joint ventures and associates’.
(7) Income taxes
As in the prior year, the German TUI Group companies have to pay trade tax of 15.7 % and corporation tax of 15.0 % plus
a 5.5 % solidarity surcharge on corporation tax.
The calculation of foreign income taxes is based on the laws and provisions applicable in the individual countries. The
income tax rates applied to foreign companies vary from 0.0 % to 35.0 %.
Breakdown of income taxes
€ million
Current tax expense
in Germany
abroad
Deferred tax expense / income
Total
2018
2017
– 42.9
201.9
32.3
191.3
17.3
115.9
35.6
168.8
186
N O T E S » N o Te S T o T H e C o N So lI D ATe D I N C o M e S TATe M e N T
In FY 2018, corporate income taxes in Germany include the reassessment of tax risks which results in tax income of
€ 52.8 m due to the release of provisions attributable to prior periods. Corporate income taxes outside of Germany
include a tax expense of € 70.3 m relating to tax liabilities arising in Spain. Corporate tax expense attributable to prior
periods amount to € 28.7 m (prior year income of € 4.6 m) in FY 2018.
The deferred tax expense largely arose outside of Germany.
In FY 2018, total income taxes of € 191.3 m (previous year € 168.8 m) are derived as follows from an ‘expected’ income
tax expense that would have arisen if the statutory income tax rate of parent company TUI AG (aggregate income tax
rate) had been applied to earnings before tax.
Reconciliation of expected to actual income taxes
€ million
Earnings before income taxes
Expected income tax (current year 31.5 %, previous year 31.5 %)
Effect from the difference of the actual tax rates to the expected tax rates
Changes in tax rates and tax law
Income not taxable
Expenses not deductible
Effects from loss carryforwards
Temporary differences for which no deferred taxes were recognised
Deferred and current income tax relating to other periods (net)
Other differences
Income taxes
2018
971.5
306.0
– 67.3
1.6
– 164.1
104.6
– 14.0
– 5.6
19.7
10.4
191.3
2017
1,079.7
340.1
– 61.9
– 1.5
– 207.5
102.7
– 16.4
– 4.4
20.2
– 2.5
168.8
In the prior year the non-taxable income was affected by the tax-free disposal of the shares of Hapag-Lloyd AG.
(8) Result from discontinued operation
The result from discontinued operations consists of changes, which are directly related to the disposal of Hotelbeds
Group and Specialist Group in prior periods.
On disposal of Hotelbeds Group in 2016 TUI granted to Hotelbeds Group a revenue guarantee and accounted for a
respective liability. On acquisition of the business Destination Management this financial year this guarantee was
terminated. Prior to the acquisition the revenue generated by the Hotelbeds Group in the liability for the revenue
guarantee, was revalued based on the periods since disposal. Accordingly, the liability was reduced by € 41.4 m.
The other results relate to the Specialist Group, sold in 2017.
In the prior year the result from discontinued operations showed the after-tax result of the Specialist Group including
the profit on the sale.
(9) Group profit attributable to shareholders of TUI AG
In FY 2018, the share in Group profit attributable to TUI AG shareholders rose from € 644.8 m in the prior year to
€ 732.5 m. The increase is primarily due to the continuing sound operating performance in Holiday Experiences.
N O T E S » N o Te S T o T H e C o N So lI D ATe D I N C o M e S TATe M e N T
187
(10) Group profit attributable to non-controlling interest
In the Hotels & Resorts segment, the Group profit attributable to non-controlling interest primarily relates to the
RIUSA II Group with € 84.8 m (previous year € 115.5 m).
(11) Earnings per share
In accordance with IAS 33, basic earnings per share are calculated by dividing the Group profit for the year attributable to
TUI AG shareholders by the weighted average number of registered shares outstanding during the financial year. The average
number of shares is derived from the total number of shares at the beginning of the financial year (587,386,900 shares)
and the employee shares issued on a pro rata basis (22,611 new shares). In prior year the prorated effect of the own
shares held by an employee benefit trust of 2,643,389 shares was deducted. These shares have been sold at the end of
the previous financial year.
Earnings per share
Group profit for the year attributable to shareholders of TUI AG
Weighted average number of shares
Basic earnings per share
– Basic earnings per share from continuing operations
– Basic earnings per share from discontinued operations
Diluted Earnings per share
Group profit for the year attributable to shareholders of TUI AG
Weighted average number of shares
Diluting effect from assumed exercise of share awards
Weighted average number of shares (diluted)
Diluted earnings per share
– Diluted earnings per share from continuing operations
– Diluted earnings per share from discontinued operations
2018
2017
€ million
€
€
€
732.5
587,409,511
1.25
1.18
0.07
644.8
584,410,126
1.10
1.36
– 0.26
2018
2017
732.5
587,409,511
67,111
587,476,622
1.25
1.18
0.07
644.8
584,410,126
52,514
584,462,640
1.10
1.36
– 0.26
€ million
€
€
€
As a rule, a dilution of earnings per share occurs when the average number of shares increases due to the addition of
the issue of potential shares from conversion options. In the completed financial year, these effects resulted from
employee shares. The share-based remuneration plans from prior years have fully expired.
188
N O T E S » N o Te S T o T H e C o N So lI D ATe D I N C o M e S TATe M e N T
(12) Taxes attributable to other comprehensive income
Tax effects relating to other comprehensive income
€ million
Gross
Tax effect
Foreign exchange differences
Available for sale financial
instruments
Cash flow hedges
Remeasurements of
benefit obligations and
related fund assets
Changes in the measurement of
companies measured at equity
outside profit or loss
Other comprehensive income
2018
Net
– 15.3
0.5
326.2
Gross
Tax effect
– 17.9
– 31.8
– 263.6
–
–
46.9
2017
Net
– 17.9
– 31.8
– 216.7
– 15.3
0.5
429.7
–
–
– 103.5
66.0
– 12.5
53.5
280.7
– 66.9
213.8
41.2
522.1
–
– 116.0
41.2
406.1
19.3
– 13.3
–
– 20.0
19.3
– 33.3
Deferred income tax worth € – 0.9 m (previous year € – 2.4 m) and corporate income tax worth € – 1.7 m (previous year
€ – 2.5 m) were generated in the reporting period and recognised directly in equity.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
189
Notes on the consolidated statement of financial position
(13) Goodwill
Goodwill
€ million
Historical cost
Balance as at 1 Oct
Exchange differences
Additions
Disposals
Balance as at 30 Sep
Impairment
Balance as at 1 Oct
Exchange differences
Balance as at 30 Sep
2018
2017
3,319.1
– 27.0
103.8
8.6
3,387.3
– 429.6
0.9
– 428.7
3,286.7
– 42.5
74.9
–
3,319.1
– 433.2
3.6
– 429.6
Carrying amounts as at 30 Sep
2,958.6
2,889.5
The increase in the carrying amount is mainly attributable to the acquisition of Destination Management worth € 82.3 m in
Q4 2018. Moreover, the carrying amount grew due to the acquisition of stakes in hotel companies (GBH Turizm Ticaret A. S.
worth € 9.1 m and Darecko S. A. worth € 6.5 m) and the acquisition of Cruisetour AG and Croisimonde AG worth € 5.6 m.
In the prior year, the additions mainly arose from the acquisition of Transat France S. A.
The disposal of € 8.6 m results from the sale of three RIUSA II Group hotel companies. More detailed information on the
acquisitions and divestments is presented in the section on Principles and methods of consolidation. A reduction was
caused by the translation of goodwill not carried in TUI Group’s reporting currency into euros.
In accordance with the rules of IAS 21, goodwill allocated to the individual segments and sectors was recognised in the
functional currency of the subsidiaries and subsequently translated when preparing the consolidated financial statements.
Similar to the treatment of other differences from the translation of annual financial statements of foreign subsidiaries,
differences due to exchange rate fluctuations between the exchange rate at the date of acquisition of the subsidiary and
the exchange rate at the balance sheet date are taken directly to equity outside profit and loss and disclosed as a
separate item. In FY 2018, a decrease in the carrying amount of goodwill of € 26.1 m (previous year decrease of € 38.9 m)
resulted from foreign exchange differences.
190
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
The following table presents a breakdown of goodwill by cash generating unit (CGU) at carrying amounts:
Goodwill per cash generating unit
€ million
Northern Region
Central Region
Western Region
Destination Services
Riu
Marella Cruises
Other
Total
30 Sep 2018
30 Sep 2017
1,196.2
516.4
411.2
168.3
343.1
287.4
36.0
2,958.6
1,217.0
510.2
411.2
86.0
351.7
289.2
24.2
2,889.5
In the completed financial year, goodwill was tested for impairment at the level of CGUs as at 30 June 2018.
For all CGUs, the recoverable amount was determined on the basis of fair value less costs of disposal. The fair value was
determined by means of discounting the expected cash inflows. This was based on the Q4 forecast for the financial year
and on the medium-term plan for the entity under review, prepared as at 30 September 2018, following deduction of
income tax payments. Budgeted turnover and EBITA margins are based on empirical values from prior financial years
and expectations with regard to the future development of the market.
The discount rates are calculated as the weighted average cost of capital, taking account of country-specific risks of the
CGU and based on external capital market information. The cost of equity included in the determination reflects the
return expected by investors. The cost of borrowing is derived from the long-term financing terms of comparable
companies in the peer group.
The table below provides an overview of the parameters underlying the determination of the fair values per CGU. It
shows the timeframe for the cash flow forecast, the growth rates used to extrapolate the cash flow forecast, the
discount rates and the relevant valuation hierarchy according to IFRS 13. The table lists the CGUs to which goodwill has
been allocated. The below stated EBITA margin p. a. is adjusted for reasonable discounts for centrally incurred cost.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
191
Assumptions for calculation of fair value in FY 2018
Planning
period in
years
Growth rate
revenues
in % p. a.
EBITA-
Margin
in % p. a.
Growth rate
after planning
period in %
WACC
in %
Level
Northern Region
Central Region
Western Region
Destination Services
Riu
Marella Cruises
Other
3.25
3.25
3.25
3.25
3.25
3.25
3.25
7.1
6.6
7.0
3.9
1.7
9.7
18.4 to 77.5
3.9
1.4
2.6
7.1
34.2
15.1
1.5 to 18.1
1.0
1.0
1.0
1.0
1.0
1.0
1.0
5.42
5.42
5.42
5.42
6.38
6.30
6.38 to 7.52
3
3
3
3
3
3
3
Assumptions for calculation of fair value in FY 2017
Planning
period in
years
Growth rate
revenues
in % p. a.
( restated)
3.25
3.25
3.25
3.25
3.25
3.25
3.25
5.6
4.5
6.4
5.5
4.9
11.7
17.3 to 79.1
EBITA-
Margin
in % p. a.
( restated)
3.9
1.1
3.0
8.8
33.1
17.5
3.7 to 19.7
Growth rate
after planning
period in %
WACC
in %
Level
1.0
1.0
1.0
1.0
1.0
1.0
1.0
5.25
5.25
5.25
5.25
6.25
5.25
6.25 to 7.00
3
3
3
3
3
3
3
Northern Region
Central Region
Western Region
Destination Services
Riu
Marella Cruises
Other
Goodwill was tested for impairment as at 30 June 2018. The test did not result in a requirement to recognise any further
impairment. Neither an increase in WACC by 50 basis points nor a reduction by 50 basis points in the growth rate after
the detailed planning period would have led to an impairment of goodwill. The same applies to a reduction of the
discounted free cash flow in perpetuity of 10 %.
192
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
(14) Other intangible assets
The development of the line items of other intangible assets in FY 2018 is shown in the following table.
Other intangible assets
€ million
Historical cost
Balance as at 1 Oct 2016
Exchange differences
Additions due to changes in the group
of consolidated companies
Additions
Disposals
Transfer
Transfer
Balance as at 30 Sep 2017
Exchange differences
Additions due to changes in the group
of consolidated companies
Additions
Disposals
Transfer
Balance as at 30 Sep 2018
Amortisation and impairment
Balance as at 1 Oct 2016
Exchange differences
Amortisation for the current year
Impairment for the current year
Disposals
Transfer
Balance as at 30 Sep 2017
Exchange differences
Amortisation for the current year
Impairment for the current year
Disposals
Transfer
Balance as at 30 Sep 2018
Carrying amounts as at 30 Sep 2017
Carrying amounts as at 30 Sep 2018
Computer software*
Brands,
licenses and
other rights*
internally
generated
acquired
Transport
and leasing
contracts
Customer
base
Total
Intangible assets in
the course of
construction and
Payments on
account*
686.4
– 2.0
8.1
1.3
– 2.2
– 0.1
– 309.3
382.2
0.4
0.1
2.8
– 3.8
– 1.5
380.2
– 390.7
– 0.5
– 16.0
–
1.2
159.1
– 246.9
1.4
– 14.3
– 3.9
2.3
–
– 261.4
135.3
118.8
300.2
– 6.2
0.2
11.0
– 7.1
48.1
0
346.2
– 4.5
–
13.8
– 6.6
66.5
415.4
– 121.3
1.2
– 37.8
– 27.3
7.0
–
– 178.2
2.4
– 46.2
– 1.6
6.0
– 0.7
– 218.3
168.0
197.1
–
– 6.4
0.2
16.6
– 5.1
20.8
247.0
273.1
1.2
0.7
13.0
– 8.4
13.8
293.4
–
1.8
– 35.0
– 0.3
4.0
– 159.1
– 188.6
– 1.4
– 31.0
–
7.9
0.7
– 212.4
84.5
81.0
93.0
– 1.5
–
–
–
–
0
91.5
– 0.4
–
–
–
–
91.1
– 43.3
1.0
– 4.5
–
–
–
– 46.8
0.3
– 4.5
–
–
–
– 51.0
44.7
40.1
49.2
– 0.5
11.3
–
– 1.2
–
0
58.8
1.2
0.2
–
–
–
60.2
– 30.2
0.4
– 4.8
–
1.3
–
– 33.3
–
– 4.9
– 1.3
–
–
– 39.5
25.5
20.7
2.5
3.0
0.9
100.6
– 9.2
– 70.0
62.3
90.1
– 0.8
0.2
101.5
–
– 78.8
112.2
–
– 0.2
–
– 9.0
9.2
–
–
–
–
–
–
–
–
90.1
112.2
1,131.3
– 13.6
20.7
129.5
– 24.8
– 1.2
0
1,241.9
– 2.9
1.2
131.1
– 18.8
–
1,352.5
– 585.5
3.7
– 98.1
– 36.6
22.7
–
– 693.8
2.7
– 100.9
– 6.8
16.2
–
– 782.6
548.1
569.9
* The acquired computer software, which was previously reported within brands, licences and other rights, was in the prior year for the first time
presented together with the internally generated computer software. In addition the intangible assets under construction have no longer been
reported as part of brands, licences and other rights but have been presented for the first time together with the payments on accounts. The
opening balances of the prior year have been reclassified accordingly.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
193
Internally generated computer software consists of computer programs for tourism applications exclusively used internally
by the Group.
Transport contracts relate to landing rights at airports in the UK purchased and measured during the acquisition of First
Choice Holidays Plc in 2007.
The lease contracts relate to intangible assets from the measurement of aircraft leases in connection with the acquisition
of First Choice Holidays Plc in 2007. The assets are amortised in line with the length of the lease.
Payments on account made totalled € 4.7 m as at 30 September 2018 (previous year € 1.9 m).
Additions to consolidation mainly relate to the acquisition of Destination Management. For details, please refer to the
section on Acquisitions.
The prior year’s impairment charges related to financial software and an Internet platform in the Northern Region
segment.
194
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
(15) Property, plant and equipment
The table below presents the development of the individual items of property, plant and equipment in FY 2018.
Property, plant and equipment
€ million
Historical cost
Balance as at 1 Oct 2016
Exchange differences
Additions due to changes in the group of consolidated companies
Additions
Disposals
Transfer to assets held for sale
Transfer
Balance as at 30 Sep 2017
Exchange differences
Additions due to changes in the group of consolidated companies
Additions
Disposals
Transfer to assets held for sale
Transfer
Balance as at 30 Sep 2018
Depreciation and impairment
Balance as at 1 Oct 2016
Exchange differences
Depreciation for the current year
Impairment for the current year
Disposals
Transfer to assets held for sale
Transfer
Balance as at 30 Sep 2017
Exchange differences
Depreciation for the current year
Impairment for the current year
Disposals
Transfer to assets held for sale
Transfer
Balance as at 30 Sep 2018
Carrying amounts as at 30 Sep 2017
Carrying amounts as at 30 Sep 2018
Hotels incl. land
Other buildings
and land
Aircraft
Cruise ships
Other plant,
operating and
office equipment
Assets under
construction
Payments
on account
Total
1,436.9
– 19.0
15.8
51.8
– 4.9
– 21.1
92.8
1,552.3
– 23.9
132.3
68.2
– 18.3
– 46.6
112.9
1,776.9
– 458.0
3.7
– 45.6
– 19.9
4.7
10.6
– 7.0
– 511.5
3.1
– 44.6
– 3.4
4.8
45.9
– 8.4
– 514.1
1,040.8
1,262.8
231.4
– 0.7
4.9
15.2
– 3.5
– 0.7
– 5.9
240.7
– 0.4
0.5
35.5
– 3.9
– 0.9
– 2.5
269.0
– 76.0
0.7
– 4.2
– 8.0
2.9
–
9.0
– 75.6
– 0.2
– 2.6
–
3.5
–
–
– 74.9
165.1
194.1
1,835.1
– 68.0
–
182.1
– 29.5
– 57.6
15.7
1,877.8
28.8
–
264.7
– 24.6
– 5.4
43.9
2,185.2
– 633.1
– 9.7
– 107.9
–
27.0
53.1
–
– 670.6
– 5.4
– 115.2
–
21.1
–
–
– 770.1
1,207.2
1,415.1
894.5
– 16.6
–
8.4
– 4.7
0.2
247.6
– 6.7
–
8.9
– 4.9
–
204.8
1,129.4
1,331.5
– 220.2
2.7
– 56.4
– 269.3
0.9
– 72.8
4.6
–
–
–
4.9
–
–
–
– 336.3
860.1
995.2
1,138.8
– 24.1
3.4
101.3
– 56.5
– 0.5
32.9
1,195.3
– 15.9
11.9
98.6
– 57.0
– 4.9
31.8
1,259.8
– 803.3
16.3
– 90.8
– 8.5
54.1
0.4
– 2.3
– 834.1
11.8
– 91.0
– 2.1
51.4
3.7
8.4
– 851.9
361.2
407.9
158.1
25.7
376.8
– 366.7
193.9
– 4.5
318.1
– 0.5
– 1.9
– 360.5
144.6
0.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
0.2
194.1
144.8
210.1
– 21.0
294.8
– 45.5
–
–
– 13.2
425.2
9.1
–
220.8
– 145.4
–
– 30.4
479.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
425.2
479.3
5,904.9
– 123.7
24.1
1,030.4
– 144.6
– 79.7
3.2
6,614.6
– 13.5
144.7
1,014.8
– 254.6
– 59.7
–
7,446.3
– 2,190.4
13.7
– 304.9
– 36.4
93.3
64.1
– 0.3
– 2,360.9
10.2
– 326.2
– 5.5
85.7
49.6
–
– 2,547.1
4,253.7
4,899.2
The table below presents the development of the individual items of property, plant and equipment in FY 2018.
(15) Property, plant and equipment
Property, plant and equipment
Additions due to changes in the group of consolidated companies
Additions due to changes in the group of consolidated companies
€ million
Historical cost
Balance as at 1 Oct 2016
Exchange differences
Transfer to assets held for sale
Balance as at 30 Sep 2017
Exchange differences
Additions
Disposals
Transfer
Additions
Disposals
Transfer
Transfer to assets held for sale
Balance as at 30 Sep 2018
Depreciation and impairment
Balance as at 1 Oct 2016
Exchange differences
Depreciation for the current year
Impairment for the current year
Disposals
Transfer
Transfer to assets held for sale
Balance as at 30 Sep 2017
Exchange differences
Depreciation for the current year
Impairment for the current year
Disposals
Transfer
Transfer to assets held for sale
Balance as at 30 Sep 2018
Carrying amounts as at 30 Sep 2017
Carrying amounts as at 30 Sep 2018
1,436.9
– 19.0
1,552.3
15.8
51.8
– 4.9
– 21.1
92.8
– 23.9
132.3
68.2
– 18.3
– 46.6
112.9
1,776.9
– 458.0
3.7
– 45.6
– 19.9
4.7
10.6
– 7.0
– 511.5
3.1
– 44.6
– 3.4
4.8
45.9
– 8.4
– 514.1
1,040.8
1,262.8
231.4
– 0.7
4.9
15.2
– 3.5
– 0.7
– 5.9
240.7
– 0.4
0.5
35.5
– 3.9
– 0.9
– 2.5
269.0
– 76.0
0.7
– 4.2
– 8.0
2.9
–
9.0
– 75.6
– 0.2
– 2.6
3.5
–
–
–
– 74.9
165.1
194.1
1,835.1
– 68.0
1,877.8
–
182.1
– 29.5
– 57.6
15.7
28.8
–
264.7
– 24.6
– 5.4
43.9
2,185.2
– 633.1
– 9.7
– 107.9
27.0
53.1
–
–
– 670.6
– 5.4
– 115.2
21.1
–
–
–
– 770.1
1,207.2
1,415.1
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
195
Hotels incl. land
Other buildings
Aircraft
Cruise ships
and land
Other plant,
operating and
office equipment
Assets under
construction
Payments
on account
Total
894.5
– 16.6
–
8.4
– 4.7
0.2
247.6
1,129.4
– 6.7
–
8.9
– 4.9
–
204.8
1,331.5
– 220.2
2.7
– 56.4
–
4.6
–
–
– 269.3
0.9
– 72.8
–
4.9
–
–
– 336.3
860.1
995.2
1,138.8
– 24.1
3.4
101.3
– 56.5
– 0.5
32.9
1,195.3
– 15.9
11.9
98.6
– 57.0
– 4.9
31.8
1,259.8
– 803.3
16.3
– 90.8
– 8.5
54.1
0.4
– 2.3
– 834.1
11.8
– 91.0
– 2.1
51.4
3.7
8.4
– 851.9
361.2
407.9
158.1
25.7
–
376.8
–
–
– 366.7
193.9
– 4.5
–
318.1
– 0.5
– 1.9
– 360.5
144.6
0.2
–
–
–
–
–
–
0.2
–
–
–
–
–
–
0.2
210.1
– 21.0
–
294.8
– 45.5
–
– 13.2
425.2
9.1
–
220.8
– 145.4
–
– 30.4
479.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
194.1
144.8
425.2
479.3
5,904.9
– 123.7
24.1
1,030.4
– 144.6
– 79.7
3.2
6,614.6
– 13.5
144.7
1,014.8
– 254.6
– 59.7
–
7,446.3
– 2,190.4
13.7
– 304.9
– 36.4
93.3
64.1
– 0.3
– 2,360.9
10.2
– 326.2
– 5.5
85.7
49.6
–
– 2,547.1
4,253.7
4,899.2
196
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
The additions from changes in the group of consolidated companies mainly relate to the acquisition of hotel companies.
For details, please refer to the section on Acquisitions.
In the financial year under review, advance payments of € 29.2 m (previous year € 33.2 m) were made for the acquisition
of cruise ships and € 163.0 m (previous year € 252.4 m) for the acquisition of aircraft.
In the reporting period, the cruise ship Marella Explorer was added at a carrying amount of € 202.2 m, initially carried
as assets under construction. Following her launch, the cruise ship was reclassified accordingly. In the prior year,
assets under construction had included the addition of Marella Discovery 2 at € 228.6 m. Both ships are operated in
the Cruises segment.
Further additions to assets under construction include an amount of € 63.0 m (previous year € 92.1 m) for investments
in hotels in the Hotels & Resorts segment.
In the completed financial year, five aircraft were acquired.
In the course of the year, a hotel resort was reclassified to assets held for sale. The resort was sold before the end of
the financial year. Moreover, two aircraft fuselages were classified as held for sale and reclassified accordingly.
In FY 2018, borrowing costs of € 2.2 m (previous year € 4.0 m) were capitalised as part of the acquisition and production
costs. The capitalisation rate of capitalised borrowing costs is 3.40 % p. a. for FY 2018 and 3.75 % p. a. for the prior year.
The carrying amount of property, plant and equipment subject to ownership restrictions or pledged as security totals
€ 535.2 m (previous year € 553.8 m) as at the balance sheet date.
F I N A N C E L E A S E S
Property, plant and equipment also comprise leased assets in which Group subsidiaries have assumed the risks and
rewards of ownership of the assets (finance leases).
Composition of finance leased assets
€ million
Other buildings and land
Aircraft
Cruise ships
Other plant, operating and office equipment
Total
Net carrying amounts
30 Sep 2018
30 Sep 2017
5.5
1,060.4
189.7
34.6
1,290.2
16.4
906.6
209.0
26.1
1,158.1
The leasing contracts for aircraft include repurchase options for the lessee at fixed residual values.
Total payment obligations resulting from future lease payments total € 1,530.4 m (previous year € 1,420.7 m). Group
companies have not granted any guarantees for the residual values of the leased assets, as in the prior year.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
197
Reconciliation of future lease payments to liabilities from finance leases
30 Sep 2018
30 Sep 2017
Remaining term
Remaining term
€ million
up to 1 year
1– 5 years
Total future lease payments
Interest portion
Liabilities from finance
leases
139.3
34.1
105.2
588.1
105.6
482.5
more than
5 years
803.0
48.0
755.0
Total
up to 1 year
1– 5 years
more than
5 years
Total
1,530.4
187.7
1,342.7
128.2
32.0
96.2
513.1
107.8
405.3
779.4
54.4
1,420.7
194.2
725.0
1,226.5
(16) Investments in joint ventures and associates
The table below presents all joint arrangements and associates of relevance to TUI Group. All joint arrangements and
associates are listed as TUI Group Shareholdings in Note 47. All joint arrangements are joint ventures. There are no joint
operations within the meaning of IFRS 11.
Significant associates and joint ventures
Name and headquarter of company
Nature of business
30 Sep 2018
30 Sep 2017
30 Sep 2018
30 Sep 2017
Capital share in %
Voting rights share in %
Associates
Sunwing Travel Group Inc.,
Toronto, Canada
Joint ventures
Riu Hotels S. A., Palma de Mallorca, Spain
TUI Cruises GmbH, Hamburg, Germany
Togebi Holdings Limited, Nicosia, Cyprus
Tour operator &
Hotel operator
Hotel operator
Cruise ship operator
Tour operator
All companies presented above are measured at equity.
49.0
49.0
50.0
25.0
49.0
49.0
50.0
25.0
25.0
49.0
50.0
25.0
25.0
49.0
50.0
25.0
The financial year of Sunwing Travel Group Inc., Toronto / Canada (Sunwing) corresponds to TUI Group’s financial year.
The financial years of the joint ventures listed above deviate from TUI Group’s financial year, ending on 31 December of
any one year. In order to update the at equity measurement as at TUI Group’s balance sheet date, interim financial
statements for the period ending 30 September are prepared for these companies.
S I G N I F I C A N T A S S O C I AT E S
In 2009, Sunwing entered into a partnership with TUI Group. Sunwing is a vertically integrated travel company comprising
tour operation, an airline and retail shops. Since the transfer of the hotel operation and development company Blue
Diamond Hotels & Resorts Inc., St Michael / Barbados, to Sunwing in September 2016, Sunwing has also included the
hotel operation business with a chain of luxury beach resorts and hotels in the Caribbean and Mexico. Sunwing’s hotel
operation business is carried in the Hotels & Resorts segment, while the tour operation business is carried in the Northern
Region segment. The company has different classes of shares. TUI Group holds 25 % of the voting shares.
198
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
S I G N I F I C A N T J O I N T V E N T U R E S
Riu Hotels S. A. is a hotel company owning and operating hotels in the 4- to 5-star segments. The hotels of the company
established in 1976 are mainly located in Spain and Central America.
TUI Cruises GmbH is a joint venture with the US shipping line Royal Caribbean Cruises Ltd established in 2008. The
Hamburg-based company offers German-speaking cruises for the premium market. TUI Cruises GmbH currently operates
six cruise ships.
Togebi Holdings Limited (TUI Russia) is a joint venture between TUI and Oscrivia Limited, a subsidiary of Unifirm Limited.
Unifirm Limited is a subsidiary of OOO Severgroup, owned by a large shareholder and Supervisory Board member of
TUI AG. The business purpose of this joint venture, established in 2009, is to develop the tour operation business, in
particular in Russia and Ukraine. The company owns tour operation subsidiaries and retail chains in these countries. The
relevant activities of TUI Russia are jointly determined by TUI Group and Oscrivia Limited, so that TUI Russia is classified
as a joint venture.
After the balance sheet date TUI Group’s share in TUI Russia decreased to 10 % due to a capital increase in which
TUI Group did not participate.
F I N A N C I A L I N F O R M AT I O N O N A S S O C I AT E S A N D J O I N T V E N T U R E S
The tables below present summarised financial information for the significant associates and joint ventures of the
TUI Group. The amounts shown reflect the full amounts presented in the consolidated financial statements of the
relevant associates and joint ventures (100 %); they do not represent TUI Group’s share of those amounts.
Summarised financial information of material associates
€ million
Non-current assets
Current assets
Non-current provisions and liabilities
Current provisions and liabilities
Revenues
Profit / loss*
Other comprehensive income
Total comprehensive income
* Solely from continuing operations
Sunwing Travel Group Inc.,
Toronto, Canada
30 Sep 2018 /
2018
30 Sep 2017 /
2017
1,186.3
545.9
598.5
596.1
1,941.6
77.5
12.5
90.0
1,061.9
471.9
570.4
511.7
2,022.6
67.7
– 35.8
31.9
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
199
Summarised financial information of material joint ventures
Riu Hotels S. A.,
Palma de Mallorca, Spain
TUI Cruises GmbH,
Hamburg, Germany
Togebi Holdings Limited,
Nicosia, Cypres
30 Sep 2018 /
2018
30 Sep 2017 /
2017
30 Sep 2018 /
2018
30 Sep 2017 /
2017
30 Sep 2018 /
2018
30 Sep 2017 /
2017
844.8
148.3
61.1
25.9
0.5
56.8
4.9
292.7
20.4
0.6
1.1
22.8
102.2
47.7
149.9
757.1
129.8
67.4
18.1
5.6
106.4
42.3
316.7
22.7
0.3
0.8
32.3
105.5
25.1
130.6
2,799.3
217.9
117.0
1,707.0
1,707.0
623.6
157.4
2,542.5
193.7
109.4
1,393.0
1,392.5
657.6
200.0
1,246.4
1,052.5
86.1
0.1
43.3
0.1
362.5
38.6
401.1
71.8
–
32.3
– 0.1
271.8
14.0
285.8
3.4
64.4
15.4
109.7
109.0
94.6
56.9
436.6
1.6
–
5.8
0.3
– 17.0
–
– 17.0
3.5
57.1
10.7
102.0
102.0
75.1
49.3
259.8
1.5
–
5.3
–
– 10.5
–
– 10.5
€ million
Non-current assets
Current assets
thereof cash and cash equivalents
Non-current provisions and liabilities
thereof financial liabilities
Current provisions and liabilities
thereof financial liabilities
Turnover
Depreciation / amortisation of intangible
assets and property, plant and equipment
Interest income
Interest expenses
Income taxes
Profit / loss*
Other comprehensive income
Total comprehensive income
* Solely from continuing operations
In FY 2018, TUI Group received dividends of € 200.0 m from TUI Cruises and € 227.5 m from all joint ventures in total
(previous year € 117.5 m, including € 90.0 m from TUI Cruises). In FY 2018, TUI Group received dividends worth € 2.0 m
from Sunwing Travel Group (previous year none). In total, TUI Group received dividends of € 3.5 m from its associates
(previous year € 2.0 m).
In addition to TUI Group’s significant associates and joint ventures, TUI AG has interests in other associates and joint
ventures measured at equity, which individually are not considered to be of material significance. The tables below
provide information on TUI Group’s share of the earnings figures shown for the major associates and joint ventures as
well as the aggregated amount of the share of profit / loss, other comprehensive income and total comprehensive income
for the immaterial associates and joint ventures.
Share of financial information of material and other associates
Sunwing Travel Group Inc.,
Toronto, Canada
Other immaterial
associates
Associates Total
€ million
2018
2017
2018
2017
2018
2017
TUI’s share of
Profit / loss*
Other comprehensive income
Total comprehensive income
* Solely from continuing operations
38.0
5.1
43.1
33.2
– 17.5
15.7
3.4
– 1.5
1.9
2.5
– 2.8
– 0.3
41.4
3.6
45.0
35.7
– 20.3
15.4
200
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
Share of financial information of material and other joint ventures
Riu Hotels S. A.,
Palma de Mallorca, Spain
TUI Cruises GmbH,
Hamburg, Germany
Togebi Holdings Limited,
Nicosia, Cypres
Other immaterial
joint ventures
Joint ventures
Total
€ million
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
TUI’s share of
Profit / loss*
Other
comprehensive
income
Total
comprehensive
income
50.1
51.7
181.2
135.9
23.4
12.4
19.3
7.0
73.5
64.1
200.5
142.9
* Solely from continuing operations
Net assets of the material associates
–
–
–
–
–
–
24.4
29.0
255.7
216.6
– 3.8
– 45.2
38.9
– 25.8
20.6
– 16.2
294.6
190.8
€ million
Net assets as at 1 Oct 2016
Profit / loss
Other comprehensive income
Dividends
Capital increase
Foreign exchange effects
Consolidation effects
Net assets as at 30 Sep 2017
Profit / loss
Other comprehensive income
Dividends
Capital increase
Foreign exchange effects
Consolidation effects
Net assets as at 30 Sep 2018
Sunwing Travel Group
Inc., Toronto, Canada
419.8
67.7
– 9.3
–
–
– 26.6
–
451.6
77.5
–
– 4.1
–
12.5
–
537.5
Reconciliation to the carrying amount of the associates in the Group balance sheet
€ million
Share of TUI AG in % as at 30 Sep 2017
TUI AG‘s share of the net assets as at 30 Sep 2017
Goodwill as at 30 Sep 2017
Carrying value as at 30 Sep 2017
Share of TUI AG in % as at 30 Sep 2018
TUI AG‘s share of the net assets as at 30 Sep 2018
Goodwill as at 30 Sep 2018
Carrying value as at 30 Sep 2018
Sunwing Travel Group
Inc., Toronto, Canada
Other immaterial
associates
Associates
Total
49.0
221.3
51.4
272.7
49.0
263.4
50.4
313.8
–
49.3
4.0
53.3
–
66.5
7.0
73.5
–
270.6
55.4
326.0
–
329.9
57.4
387.3
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
201
Net assets of the material joint ventures
€ million
Net assets as at 1 Oct 2016
Profit / loss
Other comprehensive income
Dividends
Foreign exchange effects
Net assets as at 30 Sep 2017
Profit / loss
Other comprehensive income
Dividends payable
Foreign exchange effects
Net assets as at 30 Sep 2018
Riu Hotels S. A., Palma
de Mallorca, Spain
TUI Cruises GmbH,
Hamburg, Germany
Togebi Holdings
Limited, Nicosia, Cyprus
656.3
105.5
38.2
– 26.0
– 13.0
761.0
102.2
45.8
–
1.4
910.4
579.2
271.9
14.3
– 180.0
–
685.4
362.5
38.6
– 400.0
–
686.5
– 113.5
– 10.5
–
–
7.5
– 116.5
– 17.0
–
–
– 3.0
– 136.5
Reconciliation to the carrying amount of the joint ventures in the Group balance sheet
€ million
Share of TUI AG in % as at
30 Sep 2017
TUI AG’s share of the net
assets as at 30 Sep 2017
Unrecognised share of losses
Goodwill as at 30 Sep 2017
Carrying value as at
30 Sep 2017
Share of TUI AG in % as at
30 Sep 2018
TUI AG’s share of the net
assets as at 30 Sep 2018
Unrecognised share of losses
Goodwill as at 30 Sep 2018
Carrying value as at
30 Sep 2018
Riu Hotels S. A., Palma
de Mallorca, Spain
TUI Cruises GmbH,
Hamburg, Germany
Togebi Holdings
Limited, Nicosia, Cyprus
Other immaterial
joint ventures
Joint ventures
Total
49.0
372.9
–
1.7
374.6
49.0
446.1
–
1.7
447.8
50.0
342.7
–
–
342.7
50.0
343.3
–
–
343.3
25.0
– 29.2
8.5
20.7
–
25.0
– 34.1
13.0
21.1
–
–
246.5
–
16.4
262.9
–
243.8
–
14.4
258.2
–
932.9
8.5
38.8
980.2
–
999.1
13.0
37.2
1,049.3
U N R E C O G N I S E D L O S S E S B Y J O I N T V E N T U R E S
Unrecognised accumulated losses increased by € 4.5 m to € 13.0 m. They relate to the joint venture TUI Russia, operating
in source markets Russia and Ukraine. Due to the recognition of prorated losses in previous years, the carrying amount
of the joint venture was already fully written off in FY 2014. Recognition of further losses would have reduced the carrying
amount of the joint ventures to below zero.
202
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
R I S K S A S S O C I AT E D W I T H T H E S TA K E S I N A S S O C I AT E S A N D J O I N T V E N T U R E S
Contingent liabilities of € 34.6 m (previous year € 33.9 m) existed in respect of associates as at 30 September 2018.
Contingent liabilities in respect of joint ventures totalled € 22.9 m (previous year € 73.2 m). Moreover, financial commitments
from investments of € 272.7 m (previous year € 613.2 m) are in place in respect of joint ventures.
(17) Trade receivables and other assets
Trade receivables and other assets
€ million
Trade receivables
Advances and loans
Other receivables and assets
Total
30 Sep 2018
30 Sep 2017
Remaining
term more
than 1 year
Total
Remaining
term more
than 1 year
Total
–
93.6
194.1
287.7
549.0
135.7
584.9
1,269.6
–
97.9
113.9
211.8
431.4
142.7
432.2
1,006.3
Ageing structure of the financial instruments included in trade receivables and other assets
of which not impaired and
overdue in the following periods
Carrying
amount of
financial
instruments
of which
not impaired
but overdue
less than
30 days
between
30 and 90
days
between
91 and 180
days
more than
180 days
548.9
135.6
133.6
818.1
431.4
142.3
171.4
745.1
185.8
3.8
8.3
197.9
159.3
19.1
25.6
204.0
92.1
3.8
4.0
99.9
112.3
19.0
6.1
137.4
65.3
–
0.3
65.6
30.5
–
9.9
40.4
12.4
–
0.5
12.9
12.0
–
1.7
13.7
16.0
–
3.5
19.5
4.5
0.1
7.9
12.5
€ million
Balance as at 30 Sep 2018
Trade receivables
Advances and loans
Other receivables and assets
Total
Balance as at 30 Sep 2017
Trade receivables
Advances and loans
Other receivables and assets
Total
For financial assets which are neither past due nor impaired, TUI Group assumes that the counter party has a good
credit standing.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
203
As at 30 September 2018, trade accounts receivable and other receivables worth € 96.6 m (previous year € 76.0 m) were
impaired. The table below provides a maturity analysis of impairment.
Ageing structure of impairment of financial instruments included in trade receivables and other assets
30 Sep 2018
30 Sep 2017
€ million
Gross value
Impairment
Net value
Gross value
Impairment
Net value
Trade receivables and other assets
Not overdue
Overdue less than 30 days
Overdue 30 – 90 days
Overdue 91 – 180 days
Overdue more than 180 days
Total
639.8
102.6
69.7
15.2
87.4
914.7
19.6
2.7
4.1
2.3
67.9
96.6
620.2
99.9
65.6
12.9
19.5
818.1
559.4
151.1
48.5
15.7
46.4
821.1
18.3
13.7
8.1
2.0
33.9
76.0
Impairment of trade receivables and other assets developed as follows:
Impairment on assets of the trade receivables and other assets category according to IFRS 7
€ million
Balance at the beginning of period
Additions
Disposals
Other changes
Balance at the end of period
2018
76.0
33.4
13.1
0.3
96.6
541.1
137.4
40.4
13.7
12.5
745.1
2017
62.7
26.4
12.4
– 0.7
76.0
As in the previous year, in FY 2018, no material cash inflow was recorded from impaired interest-bearing trade receivables
and other assets.
(18) Touristic payments on account
Touristic payments on account mainly relate to customary advance payments on future tourism services, in particular
advance payments made by tour operators for future hotel services.
204
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
(19) Deferred tax assets
Individual items of deferred tax assets and liabilities recognised in the financial position
30 Sep 2018
30 Sep 2017
€ million
Asset
Liability
Asset
Liability
Finance lease transactions
Recognition and measurement differences for property,
plant and equipment and other non-current assets
Recognition differences for receivables and other assets
Measurement of financial instruments
Measurement of pension provisions
Recognition and measurement differences for other provisions
Other transactions
Capitalised tax savings from recoverable losses carried forward
Netting of deferred tax assets and liabilities
Balance sheet amount
2.2
40.6
4.4
5.6
156.7
68.2
43.4
198.3
– 293.7
225.7
–
2.2
–
253.2
41.2
110.9
12.5
2.2
58.2
–
– 293.7
184.5
50.6
60.5
22.3
183.3
71.2
58.3
198.1
– 322.8
323.7
210.1
114.8
22.5
5.6
17.0
61.8
–
– 322.8
109.0
Deferred tax assets include an amount of € 218.8 m (previous year € 311.6 m) expected to be realised after more than
twelve months. Deferred tax liabilities include an amount of € 114.8 m (previous year € 57.3 m) expected to be realised
after more than twelve months.
No deferred tax assets are recognised for deductible temporary differences of € 191.4 m (previous year € 315.7 m).
No deferred tax liabilities are carried for temporary differences of € 66.7 m (previous year € 58.6 m) between the net
assets of subsidiaries and the respective taxable carrying amounts of subsidiaries since these temporary differences are
not expected to be reversed in the near future.
Recognised losses carried forward and time limits for non-recognised losses carried forward
€ million
30 Sep 2018
30 Sep 2017
Recognised losses carried forward
Non-recognised losses carried forward
of which losses carried forward forfeitable within one year
of which losses carried forward forfeitable within 2 to 5 years
of which losses carried forward forfeitable within more than 5 years
(excluding non-forfeitable loss carryforwards)
Non-forfeitable losses carried forward
Total unused losses carried forward
1,061.5
4,773.0
2.3
61.0
–
4,709.7
5,834.5
998.2
4,654.5
3.8
89.8
–
4,560.9
5,652.7
Losses carried forward for German companies comprise the cumulative amount of trade tax and corporation tax as well
as interest carried forward in relation to the German interest barrier. Potential tax savings totalling € 925.6 m (previous
year € 900.1 m) were not capitalised since the underlying losses carried forward are unlikely to be utilised in the
foreseeable future.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
205
In FY 2018, the use of losses carried forward previously assessed as non-recoverable and for which no deferred tax
asset had been recognised as at 30 September 2017 led to tax reductions of € 6.4 m (previous year € 0.4 m). As in the
prior year, no tax reductions were realised by means of losses carried back.
Development of deferred tax assets from losses carried forward
€ million
Capitalised tax savings at the beginning of the year
Use of losses carried forward
Capitalisation of tax savings from tax losses carried forward
Impairment of capitalised tax savings from tax losses carried forward
Reclassification to discontinued operation
Exchange adjustments and other items
Capitalised tax savings at financial year-end
2018
198.1
– 34.7
35.6
– 0.3
–
– 0.4
198.3
2017
211.5
– 38.7
27.9
– 2.9
–
0.3
198.1
Capitalised deferred tax assets from temporary differences and losses carried forward that are assessed as recoverable
of € 1.7 m (previous year € 4.0 m) are covered by expected future taxable income even for companies that generated
losses in the reporting period or the prior year.
(20) Inventories
Inventories
€ million
Airline spares and operating equipment
Real estate for sale
Consumables used in hotels
Other inventories
Total
In FY 2018, inventories of € 557.8 m (previous year € 541.1 m) were recognised as expense.
(21) Cash and cash equivalents
Cash and cash equivalents
€ million
Bank deposits
Cash in hand and cheques
Total
30 Sep 2018
30 Sep 2017
37.0
33.6
15.8
32.1
118.5
32.1
33.4
17.2
27.5
110.2
30 Sep 2018
30 Sep 2017
2,520.8
27.2
2,548.0
2,486.1
30.0
2,516.1
At 30 September 2018, cash and cash equivalents of € 199.2 m were subject to restrictions (previous year € 261.0 m).
206
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
On 30 September 2016, TUI AG entered into an agreement to close the gap between the obligations and the fund assets of
defined benefit pension plans in the UK in the long run. At the balance sheet date an amount of € 79.0 m is deposited as
security within a bank account. TUI Group can only use that cash and cash equivalents if it provides alternative collateral.
Further, an amount of € 116.5 m (previous year € 116.5 m) was deposited with a Belgian subsidiary without acknowl-
edgement of debt by the Belgian tax authorities in FY 2013 in respect of long-standing litigation over VAT refunds for
the years 2001 to 2011. The purpose was to suspend the accrual of interest for both parties. In order to collateralise a
potential repayment, the Belgian government was granted a bank guarantee. Due to the bank guarantee, TUI’s ability
to dispose of the cash and cash equivalents has been restricted. The other restrictions relate to cash and cash equivalents
to be deposited due to legal or regulatory requirements.
(22) Assets held for sale
At 30 September 2018 two aircraft fuselages are presented as held for sale. In the prior year hotels of € 5.0 m and
aircraft assets of € 4.6 m were classified as held for sale.
(23) Subscribed capital
The fully paid subscribed capital of TUI AG consists of no-par value shares, each representing an identical share in the
capital stock. The proportionate share in the capital stock per no-par value share is around € 2.56. As the capital stock
consists of registered shares, the owners are listed by name in the share register.
The subscribed capital of TUI AG has been registered in the commercial registers of the district courts of Berlin-
Charlottenburg and Hanover. In the financial year, it rose by a total of 514,404 employee shares. It thus comprised
587,901,304 shares (previous year 587,386,900 shares) as at the end of the financial year. It rose by € 1.3 m to € 1,502.9 m.
The Annual General Meeting on 13 February 2018 authorised the Executive Board of TUI AG to acquire own shares of
up to 5 % of the capital stock. The authorisation will expire on 12 August 2019. The authorisation was used to acquire
own shares amounting to € 1.1 m.
C O N D I T I O N A L C A P I TA L
The Annual General Meeting on 9 February 2016 had created conditional capital of € 150.0 m and authorised the
Company to issue bonds. The conditional capital authorisation to acquire bonds with conversion or option rights
and profit participation (with or without a mixed maturity) is limited to a nominal amount of € 2.0 bn and expires on
8 February 2021.
Overall, TUI AG’s total conditional capital remained flat year-on-year at € 150.0 m as at 30 September 2018.
A U T H O R I S E D C A P I TA L
The Annual General Meeting on 13 February 2018 resolved to create additional authorised capital of € 30.0 m for the
issue of employee shares. The Executive Board of TUI AG has been authorised to use this authorised capital in one or
several transactions to issue employee shares against cash contribution by 12 February 2023. 514,404 new employee shares
were issued in the completed financial year so that authorised capital totals around € 28.7 m at the balance sheet date.
The Annual General Meeting on 9 February 2016 resolved an authorisation to issue new registered shares against cash
contribution for up to a maximum of € 150.0 m. This authorisation will expire on 8 February 2021.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
207
The Annual General Meeting on 9 February 2016 also resolved to create authorised capital for the issue of new shares
against cash or non-cash contribution for up to € 570.0 m. The issue of new shares against non-cash contribution is
limited to a maximum of € 300.0 m. The authorisation for this authorised capital will expire on 8 February 2021.
At the balance sheet date, the accumulated authorised capital that had not yet been taken up amounted to € 748.7 m
(previous year € 745.4 m).
(24) Capital reserves
The capital reserves comprise transfers of premiums. They also comprise amounts entitling the holders to acquire
shares in TUI AG in the framework of bonds issued for conversion options and warrants. Premiums from the issue of
shares due to the exercise of conversion options and warrants were also transferred to the capital reserve.
Capital reserves rose by € 5.5 m (previous year € 2.8 m) due to the issue of employee shares in the completed financial year.
(25) Revenue reserves
In the completed financial year, TUI AG paid a dividend of € 0.65 per no-par value share to its shareholders; the total
amount paid was € 381.8 m (previous year € 368.2 m). The share of non-controlling interests declined by € 53.5 m (previous
year € 87.2 m) in FY 2018 due to the issue of dividends.
The ongoing recording of existing equity-settled stock option plans resulted in a decrease in equity of € 0.7 m in the
reporting period. Disclosures on these long-term incentive programmes are outlined in the section on Share-based
payments in accordance with IFRS 2 in Note 35.
In FY 2018, the movement in the first-time consolidation of non-controlling interests was essentially attributable to the
non-controlling interests of the acquired companies in Destination Management worth € 3.0 m.
Foreign exchange differences comprise differences from the translation of the financial statements of foreign subsidiaries
as well as differences from the translation of goodwill denominated in foreign currencies. They also comprise reclassification
amounts from the sale of two RIUSA II Group hotel companies totalling €– 12.8 m to be recognised through profit or loss.
The proportion of gains and losses from hedges used as effective hedges of future cash flows is carried directly in equity
at € 429.7 m (pre-tax). A reversal of this provision through profit and loss takes place in the same period in which the
hedged item has an effect on profit and loss or is no longer assessed as probable. The significant increase in FY 2018 is
primarily attributable to changes in exchange rates and fuel prices.
The revaluation of pension obligations (in particular actuarial gains and losses) is also carried directly in equity.
The revaluation reserve formed in accordance with IAS 27 (old version) in the framework of step acquisitions of companies
is retained until the date of deconsolidation of the company concerned.
208
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
(26) Use of Group profit available for distribution
In accordance with the German Stock Corporation Act, the Annual General Meeting resolves the use of the profit available
for distribution carried in TUI AG’s commercial-law annual financial statements. TUI AG’s profit for the year amounts to
€ 983.4 m (previous year € 741.7 m). Taking account of profit carried forward of € 814.0 m (previous year € 454.1 m),
TUI AG’s profit available for distribution totals € 1,797.4 m (previous year € 1,195.8 m). A proposal will be submitted to
the Annual General Meeting to use the profit available for distribution for the financial year under review to pay a dividend
of € 0.72 per no-par value share and carry the amount of € 1,374.1 m remaining after deduction of the dividend total of
€ 423.3 m forward on account. The final dividend total will depend on the number of dividend-bearing no-par value
shares at the date on which the resolution regarding the use of Group profit available for distribution is adopted by the
Annual General Meeting.
(27) Non-controlling interest
Non-controlling interests mainly relate to RIUSA II S. A. based in Palma de Mallorca, Spain. TUI’s capital share in this
hotel operator stands at 50.0 %, as in the prior year.
The financial year of RIUSA II S. A. ends on 31 December and thus deviates from TUI Group’s financial year. This reporting
date was fixed when the company was founded. In order to include the RIUSA II Group in TUI Group’s consolidated
financial statements as at 30 September, the RIUSA II Group prepares sub-group financial statements as at 30 September,
the balance sheet date.
RIUSA II Group, allocated to Hotels & Resorts, operates owned and leased hotels and hotels operated under management
contracts in tourism destinations of TUI Group.
The table below provides summarised financial information on RIUSA II S. A., Palma de Mallorca, Spain – the subsidiary
for which material non-controlling interests exist. It presents the consolidated financial statements of the sub-group.
Summarised financial information on RIUSA II S. A., Palma de Mallorca, Spain*
€ million
Current assets
Non-current assets
Current liabiities
Non-current liabilities
Revenues
Profit / loss
Other comprehensive income
Cash inflow / outflow from operating activities
Cash inflow / outflow from investing activities
Cash inflow / outflow from financing activities
Accumulated non-controlling interest
Profit / loss attributable to non-controlling interest
Dividends attributable to non-controlling interest
* Consolidated Subgroup
30 Sep 2018 /
2018
30 Sep 2017 /
2017
223.9
1,569.3
104.6
88.8
843.7
161.0
11.0
228.2
– 126.1
– 124.4
628.4
84.8
53.1
272.7
1,400.8
110.1
29.3
852.5
231.0
– 19.8
251.7
– 147.5
– 181.7
591.2
115.5
87.0
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
209
(28) Pension provisions and similar obligations
A number of defined contribution and defined benefit pension plans are operated for Group employees. Pension obligations
vary, reflecting the different legal, fiscal and economic conditions in each country of operation, and usually depend on
employees’ length of service and pay levels.
All defined contribution plans are funded by the payment of contributions to external insurance companies or funds.
German employees enjoy benefits from a statutory defined contribution plan paying pensions as a function of employees’
income and the contributions paid in. Several additional industry pension organisations exist for TUI Group companies.
Once the contributions to the state-run pension plans and private pension insurance organisations have been paid, the
Company has no further payment obligations. One major private pension fund is Aegon Levensverzekering N. V., operating
the defined contribution pension plans for the main Dutch subsidiaries of TUI Group. Contributions paid are expensed
for the respective period. In the reporting period, the expenses for all defined contribution plans totalled € 80.3 m
(previous year € 85.4 m).
Apart from these defined contribution pension plans, the TUI Group operates defined benefit plans, which usually entail
the formation of provisions within the Company or investments in funds outside the Company.
Within this group, MER-Pensionskasse VVaG, a private pension fund in which German companies of the tourism industry
are organised, represents a multi-employer plan classified as a defined benefit plan. In accordance with the statues of
the plan, the plan participants and the employers pay salary-based contributions into the plan. There are no further
obligations pursuant to the statutes of the plan; an additional funding obligation of the participating companies is explicitly
excluded. The paid-in contributions are invested in accordance with the policies of the pension plan unless they are
used in the short term for benefit payments. As the investments are pooled and are not kept separately for each
participating employer, an allocation of plan assets to individual participating employers is not possible. The investment
risk and the mortality risk are jointly shared by all plan participants. Moreover, the pension fund does not provide any
information to participating companies that would allow the allocation of any over- or underfunding or TUI’s participation
in the plan. For this reason, accounting for the plan as defined benefit plan is not possible, and the plan is therefore in
accordance with the requirements of IAS 19 shown like a defined contribution plan. In the reporting period, contributions
to MER-Pensionskasse VVaG totalled € 5.9 m (previous year € 5.9 m). For the next financial year, contributions are
expected to remain at that level.
TUI Group’s major pension plans recognised as defined benefit plans exist in Germany and the UK. By far the largest
pension plans are operated by the Group’s tour operators in the UK. They accounted for 71.6 % (previous year 72.6 %) of
TUI Group’s total obligations at the balance sheet date. German plans account for a further 23.3 % (previous year 22.5 %).
Material defined benefit plans in Great Britain
Scheme name
BAL Scheme
TUI UK Scheme
TAPS Scheme
Status
closed
closed
closed
Almost all defined benefit plans in the UK are funded externally. Under UK law, the employer is obliged to ensure sufficient
funding so that plan assets cover the pension payments to be made and the administrative costs of the funds. The
pension funds are managed by independent trustees. The trustees comprise independent members but also beneficiaries
of the plan and employer representatives. The trustees are responsible for the investment of fund assets, taking
account of the interests of plan members, but they also negotiate the level of the contributions to the fund to be paid
by the employers, which constitute minimum contributions to the funds. To that end, actuarial valuations are made
every three years by actuaries commissioned by the trustees. The annual contributions to be paid to the funds in order
to cover any shortfalls were last defined in September 2016.
210
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
On 21 September 2018 TUI Group formally announced to members that the main sections of the TUI Group UK Pension
Trust will close to future accrual of benefits with effect from 31 October 2018. Beginning 1 November 2018, accrued
benefits for current active members will increase in line with deferred revaluation rates rather than members’ pensionable
salaries. As a result of this, with an effective date of 21 September 2018, the DBO of the TUI Group UK Pension Trust
decreased by € 6.3 m which is reflected in the income statement for the year under review as a past service credit due
to plan amendment.
Accordingly, the major future payments into the pension plans in the UK are limited to the annual payments agreed to
recover the existing funding shortfall.
By contrast, defined benefit plans in Germany are mainly unfunded and the obligations from these plans are recognised
as provisions. The company assumes the obligation for payments of company pensions when the beneficiaries reach the
legal retirement age. The amount of the pension paid usually depends on the remuneration received by the staff members
at the retirement date. Pension obligations usually include surviving dependants’ benefits and invalidity benefits. Pension
payments are partly limited by third party compensations, e. g. from insurances and MER-Pensionskasse.
Material defined benefit plans in Germany
Scheme name
Versorgungsordnung TUI AG
Versorgungsordnung TUIfly GmbH
Versorgungsordnung TUI Deutschland GmbH
Versorgungsordnung TUI Beteiligungs GmbH
Versorgungsordnung TUI Immobilien Services GmbH
In the reporting period, defined benefit pension obligations created total expenses of € 77.1 m.
Pension costs for defined benefit obligations
€ million
Current service cost for employee service in the period
Curtailment gains
Net interest on the net defined benefit liability
Past service cost
Total
Status
open
open
closed
closed
closed
2017
76.3
1.8
15.7
– 0.2
90.0
2018
68.1
4.4
19.5
– 6.1
77.1
Provisions for pension obligations are established for benefits payable in the form of retirement, invalidity and surviving
dependants’ benefits. Provisions are exclusively formed for defined benefit schemes under which the Company guarantees
employees a specific pension level, including arrangements for early retirement and temporary assistance benefits.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
211
Defined benefit obligation recognised on the balance sheet
€ million
Present value of funded obligations
Fair value of external plan assets
Deficit of funded plans
Present value of unfunded pension obligations
Defined benefit obligation recognised on the balance sheet
of which
Overfunded plans in Other assets
Provisions for pensions and similar obligations
of which current
of which non-current
30 Sep 2018
Total
30 Sep 2017
Total
2,760.6
2,701.1
59.5
810.2
869.7
125.1
994.8
32.6
962.2
2,892.3
2,631.3
261.0
809.4
1,070.4
57.0
1,127.4
32.7
1,094.7
For funded pension plans, the provision carried only covers the shortfall in coverage between plan assets and the present
value of benefit obligations.
Where plan assets exceed funded pension obligations, taking account of a difference due to past service cost, and where
at the same time there is an entitlement to reimbursement or reduction of future contributions to the fund, the excess
is recognised in conformity with the cap defined by IAS 19. As at 30 September 2018, other assets include excesses of
€ 125.1 m (previous year € 57.0 m).
212
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
Development of defined benefit obligations
€ million
Balance as at 1 Oct 2017
Current service cost
Past service cost
Curtailments and settlements
Interest expense (+) / interest income (–)
Pensions paid
Contributions paid by employer
Contributions paid by employees
Remeasurements
due to changes in financial assumptions
due to changes in demographic assumptions
due to experience adjustments
due to return on plan assets not included in group profit for the year
Exchange differences
Other changes
Balance as at 30 Sep 2018
Development of defined benefit obligations
€ million
Balance as at 1 Oct 2016
Current service cost
Past service cost
Curtailments and settlements
Interest expense (+) / interest income (–)
Pensions paid
Contributions paid by employer
Contributions paid by employees
Remeasurements
due to changes in financial assumptions
due to changes in demographic assumptions
due to experience adjustments
due to return on plan assets not included in group profit for the year
Exchange differences
Other changes
Balance as at 30 Sep 2017
Present value
of obligation
Fair value of
plan assets
3,701.7
68.1
– 6.1
– 5.5
85.3
– 156.2
–
2.1
– 105.1
– 70.6
– 38.2
3.7
–
– 15.6
2.1
3,570.8
– 2,631.3
–
–
1.1
– 65.8
125.8
– 177.1
– 2.1
39.1
–
–
–
39.1
9.9
– 0.7
– 2,701.1
Present value
of obligation
Fair value of
plan assets
4,154.7
76.3
– 0.2
– 6.3
79.0
– 152.6
–
1.4
– 405.2
– 289.2
– 1.0
– 115.0
–
– 78.3
32.9
3,701.7
– 2,740.0
–
–
4.5
– 63.3
118.9
– 107.6
– 1.4
124.5
–
–
–
124.5
62.2
– 29.1
– 2,631.3
Total
1,070.4
68.1
– 6.1
– 4.4
19.5
– 30.4
– 177.1
–
– 66.0
– 70.6
– 38.2
3.7
39.1
– 5.7
1.4
869.7
Total
1,414.7
76.3
– 0.2
– 1.8
15.7
– 33.7
– 107.6
–
– 280.7
– 289.2
– 1.0
– 115.0
124.5
– 16.1
3.8
1,070.4
In the reporting period, the present value of the pension obligations decreased by € 130.9 m to € 3,570.8 m, mainly due
to remeasurements from changes in assumptions especially a slight increase in interest rates in the UK.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
213
The Group’s fund assets increased by € 69.8 m in the same period mainly due to a one-off payment made in September
of £ 50.0 m (€ 56.0 m) according to the agreed payment schedule to recover the existing funding shortfall in the UK and
is split into asset categories as shown in the table below.
Composition of fund assets at the balance sheet date
€ million
Fair value of fund assets at end of period
of which equity instruments
of which government bonds
of which corporate bonds
of which liability driven investments
of absolute return bonds
of which property
of which growth funds
of which insurance policies
of which insurance linked securities
of which loans
of which cash
of which other
30 Sep 2018
Quoted market price
in an active market
30 Sep 2017
Quoted market price
in an active market
yes
1,363.0
167.4
20.4
47.1
543.3
411.7
169.8
–
–
–
–
–
3.3
no
yes
1,338.1
141.5
–
–
–
–
39.7
252.6
121.5
137.4
277.2
362.1
6.1
1,833.5
199.0
41.9
216.4
707.3
517.4
108.9
–
–
–
–
–
42.6
no
797.8
147.8
–
–
–
–
14.9
143.1
119.7
136.0
180.7
30.0
25.6
At the balance sheet date, as in the prior year, fund assets did not comprise any direct investments in financial instruments
issued by TUI AG or its consolidated subsidiaries or any property owned by the Group. For funded plans, investments
in passive index tracker funds may entail a proportionate investment in Group-owned financial instruments.
Pension obligations are measured on the basis of actuarial calculations based on country-specific parameters and
assumptions. The obligations under defined benefit plans are calculated on the basis of the internationally accepted
projected unit credit method, taking account of expected future increases in salaries and pensions.
Actuarial assumptions
30 Sep 2018
Percentage p. a.
Germany
Great Britain
Other countries
Discount rate
Projected future salary increases
Projected future pension increases
1.7
2.5
1.8
2.8
2.8
3.4
1.2
1.4
1.3
Percentage p. a.
Germany
Great Britain
Other countries
30 Sep 2017
Discount rate
Projected future salary increases
Projected future pension increases
1.8
2.5
1.8
2.6
2.8
3.4
1.3
1.3
1.2
214
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
The interest rate applicable in discounting the provision for pensions is based on an index for corporate bonds adjusted
for securities already downgraded and under observation by rating agencies as well as subordinate bonds in order to
meet the criterion for high quality bonds (rated AA or higher) required under IAS 19. In order to cover a correspondingly
broad market, an index partly based on shorter-term bonds is used (e. g. iBoxx € Corporates AA 7-10 for the Eurozone).
The resulting yield structure is extrapolated on the basis of the yield curves for almost risk-free bonds, taking account
of an appropriate risk mark-up reflecting the term of the obligation.
Apart from the parameters described above, a further key assumption relates to life expectancy. In Germany, the Heubeck
reference tables 2018 G, as published on 20 July 2018, are used to determine life expectancy. Compared to the Heubeck
tables 2005 G used in prior year, the remeasurement amounts to € 11.2 m. In the UK, the S2NxA base tables are used,
adjusted to future expected increases on the basis of the Continuous Mortality Investigation (CMI) 2017. Using CMI 2017
adjustments resulted in a decrease in obligations from remeasurements of € 17.1 m compared to CMI 2016 adjustments
used in prior year. The pension in payment escalation formulae depend primarily on the pension plan concerned. Apart from
fixed rates of increase, there are also a number of inflation-linked pension adjustment mechanisms in different countries.
Based on the currently observable age of retirement of employees of the Group’s German airline, the expected age of
retirement used for the calculation of the obligation for these plans was increased in the reported period. Due to this
remeasurement the obligation decreased by € 32.9 m compared to the assumption used in prior year.
Changes in the key actuarial assumptions mentioned above would lead to the changes in defined benefit obligations
presented below. The methodology used to determine sensitivity corresponds to the method used to calculate the
defined benefit obligation. The assumptions were amended in isolation each time; actual interdependencies between
the assumptions were not taken into account. The effect of the increase in life expectancy by one year is calculated by
means of a reduction in mortality due to the use of the Heubeck tables 2018 G for pension plans in Germany. In the UK,
an extra year is added to the life expectancy determined on the basis of the mortality tables.
Sensitivity of the defined benefit obligation due to changed actuarial assumptions
€ million
Discount rate
Salary increase
Pension increase
Life expectancy
30 Sep 2018
30 Sep 2017
+ 50 basis points
– 50 Basis points
+ 50 Basis points
– 50 Basis points
– 315.1
+ 17.0
+ 108.7
+ 1 year
+ 135.7
+ 360.3
– 15.8
– 103.9
–
– 320.8
+ 26.9
+ 106.9
+ 1 year
+ 142.3
+ 368.2
– 25.6
– 109.6
–
The weighted average duration of the defined benefit obligations totalled 19.0 years (previous year 19.5 years) for the
overall Group. In the UK, the weighted duration was 19.8 years (previous year 20.7 years), while it stood at 17.4 years
(previous year 16.0 years) in Germany.
Fund assets are determined on the basis of the fair values of the funds invested as at 30 September 2018. The interest
rate used to determine the interest income from the assets of external funds is identical with the discount rate used for
the defined benefit obligation.
For the forthcoming financial year, the companies of TUI Group are expected to contribute around € 113.5 m (previous
year € 183.1 m) to pension funds and pay pensions worth € 32.6 m (previous year € 32.7 m) for unfunded plans. The
expected employer contribution includes an annual payment of £ 81.0 m agreed with the trustees to reduce the existing
coverage shortfall. For funded plans, payments to the recipients are fully made from fund assets so that TUI Group
does not record a cash outflow as a result.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
215
TUI Group’s defined benefit plans entail various risks; some of which may have a substantial effect on the Company.
I N V E S T M E N T R I S K
The investment risk plays a major role, in particular for the large funded plans in the UK. Although shares usually
outperform bonds in terms of producing higher returns, they also entail stronger volatility of balance sheet items and
the risk of short-term shortfalls in coverage. In order to limit this risk, the trustees have built a balanced investment
portfolio to limit the concentration of risks.
I N T E R E S T R AT E R I S K
The interest rate influences in particular unfunded schemes in Germany as a decline in interest rates leads to an increase
in the defined benefit obligations. Accordingly, an increase in the interest rate leads to a reduction in the defined benefit
obligations. Funded plans are less strongly affected by this development as the performance of the interest-bearing
assets included in plan assets regularly dampens the effects.
I N F L AT I O N R I S K
An increase in the inflation rate normally increases the obligation in pension schemes linked to the final salary of
beneficiaries as inflation causes an increase in the projected salary increases. At the same time, inflation-based pension
increases included in the plan also rise. The inflation risk is reduced through the use of caps and collars. Moreover, the
large pension funds in the UK hold inflation-linked assets, which also partly reduce the risk from a significant rise in
inflation.
L O N G E V I T Y R I S K
An increasing life expectancy increases the expected benefit duration of the pension obligation. This risk is countered
by using regularly updated mortality data in calculating the present values of the obligation.
C U R R E N C Y R I S K
For the TUI Group, the pension schemes entail a currency risk as most pension schemes are operated in the UK and
therefore denominated in sterling. The risk is limited as the currency effects on the obligation and the assets partly
offset each other. The currency risk only relates to any excess of pension obligations over plan assets or vice versa.
216
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
(29) Other provisions
Development of provisions in the FY 2018
€ million
Maintenance provisions
Provisions for other personnel costs
Provisions for environmental protection
Provisions for other taxes
Risks from onerous contracts
Provisions for Litigation
Restructuring provisions
Miscellaneous provisions
Other provisions
Balance as
at 30 Sep
2017
Changes with
no effect on
profit and loss*
Usage
Reversal
Additions
615.4
40.8
43.9
35.2
43.6
81.0
27.8
263.6
1,151.3
– 1.6
– 0.7
–
4.4
– 5.4
– 2.4
0.8
– 1.7
– 6.6
95.7
13.6
1.8
0.9
11.9
12.5
25.6
52.1
214.1
11.6
0.4
–
6.4
12.5
46.6
2.1
75.0
154.6
163.1
30.3
4.9
11.1
15.1
4.1
20.0
91.8
340.4
Balance as
at 30 Sep
2018
669.6
56.4
47.0
43.4
28.9
23.6
20.9
226.6
1,116.4
* Reclassifications, transfers, exchange differences and changes in the group of consolidated companies.
Provisions for external maintenance primarily relate to contractual maintenance, overhaul and repair requirements for
aircraft, engines and other specific components arising from aircraft operating lease contracts. Measurement of these
provisions is based on the expected cost of the next maintenance event, estimated on the basis of current prices,
expected price increases and manufacturers’ data sheets. In line with the terms of the individual contracts and the
aircraft model concerned, additions are recognised on a prorated basis in relation to flight hours, the number of flights
or the length of the complete maintenance cycle.
Provisions for personnel costs comprise provisions for jubilee benefits and provisions for cash settled share-based
payment schemes in accordance with IFRS 2. Information on these long-term incentive programmes is presented under
Note 35 in the section ‘Share-based payments in accordance with IFRS 2’.
Provisions for environmental protection measures primarily relate to statutory obligations to remediate sites contaminated
with legacy waste from former mining and metallurgical activities.
Provisions for onerous contracts principally relate to unfavourable lease contracts.
Provisions for litigation are established in relation to existing lawsuits. For further details on lawsuits please refer to
note 33.
Restructuring provisions comprise severance payments to employees and payments for the early termination of lease
agreements. They primarily relate to restructuring projects in France and Sweden for which detailed, formal restructuring
plans have been drawn up and communicated to the parties concerned. The restructuring provisions included at the
balance sheet date of € 20.9 m (previous year € 27.8 m) largely relate to benefits for employees in connection with the
termination of employment contracts.
Miscellaneous provisions include several kinds of other provisions. Taken individually, none of the lawsuits has a significant
influence on TUI Group’s economic position. This category also includes compensation claims from customers and provision
for interest.
Changes in other provisions outside profit and loss primarily relate to changes in the group of consolidated companies,
foreign exchange differences and reclassifications within other provisions.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
217
Where the difference between the present value and the settlement value of a provision is material for the measurement
of a non-current provision as at the balance sheet date, the provision is recognised at its present value in accordance
with IAS 37. The discount rate to be applied should take account of the specific risks of the liability and of future price
increases. This criterion applies to some items contained in TUI Group’s other provisions. Additions to other provisions
comprise an interest portion of € 2.2 m (previous year € 3.7 m), recognised as an interest expense.
Terms to maturity of other provisions
€ million
Maintenance provisions
Provisions for other personnel costs
Provisions for environmental protection
Provisions for other taxes
Risks from onerous contracts
Provisions for litigation
Restructuring provisions
Miscellaneous provisions
Other provisions
(30) Financial liabilities
Financial liabilities
30 Sep 2018
30 Sep 2017
Remaining
term more
than 1 year
Total
Remaining
term more
than 1 year
559.2
38.9
43.2
27.5
10.0
5.6
0.2
83.5
768.1
669.6
56.4
47.0
43.4
28.9
23.6
20.9
226.6
1,116.4
523.5
23.7
39.4
28.6
13.4
55.8
0.2
116.8
801.4
Total
615.4
40.8
43.9
35.2
43.6
81.0
27.8
263.6
1,151.3
Remaining term
30 Sep 2018
30 Sep 2017
Remaining term
€ million
Bonds
Liabilities to banks
Liabilities from finance leases
Other financial liabilities
Total
up to 1 year
1– 5 years
–
64.1
105.2
22.9
192.2
296.8
368.6
482.5
–
1,147.9
more than
5 years
–
347.8
755.0
–
1,102.8
Total
up to 1 year
1– 5 years
296.8
780.5
1,342.7
22.9
2,442.9
–
46.2
96.2
29.5
171.9
295.8
180.4
405.3
–
881.5
more than
5 years
–
154.7
725.0
–
879.7
Total
295.8
381.3
1,226.5
29.5
1,933.1
Non-current financial liabilities increased year-on-year by € 489.5 m to € 2,250.7 m as at the balance sheet date. This
increase was mainly driven by the issuance of a Schuldschein, carried under liabilities to banks. The Schuldschein issued
in July 2018 has a value of € 425.0 m, divided into three tranches with tenures of 5 years, 7 years and 10 years. In addition,
liabilities from finance leases increased, primarily due to the renewal and modernisation of the aircraft fleet.
218
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
Movements financial liabilities
€ million
Balance as at 1 Oct 2017
Payment in the period
Aquisitions
Foreign exchange movements
Other non-cash movement
Balance as at 30 Sep 2018
Bonds
Short-term
liabilities to
banks
Long-term
liabilities to
banks
295.8
–
–
–
1.0
296.8
46.2
– 14.1
8.0
– 2.0
26.0
64.1
335.1
398.6
–
1.9
– 19.2
716.4
Finance
Leasing
1,226.5
– 106.5
1.0
18.3
203.3
1,342.6
Other
financial
liabilities
Total
financial
liabilities
29.5
– 6.6
0.7
0.1
– 0.7
23.0
1,933.1
271.4
9.7
18.3
210.4
2,442.9
Fair values and carrying amounts of the bonds at 30 Sep 2018
Issuer
Nominal
value initial
Nominal
value
outstanding
Interest rate
% p. a.
TUI AG
300.0
300.0
2.125
€ million
2016 / 21
bond
Total
30 Sep 2018
30 Sep 2017
Carrying
amount
Stock
market
value
Carrying
amount
296.8
296.8
314.0
314.0
295.8
295.8
Stock
market
value
311.1
311.1
The fixed-interest bond with a nominal value of € 300.0 m issued in October 2016 has a coupon of 2.125 % p. a. The bond
will mature on 26 October 2021. It can be redeemed ahead of its maturity date any time at its value as at the redemption
date. In addition, a 100 % redemption option exists on 26 July 2021.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
219
(31) Other liabilities
Other liabilities
30 Sep 2018
30 Sep 2017
Remaining term
Remaining term
€ million
up to 1 year
1– 5 years
Total
up to 1 year
1– 5 years
Other liabilities relating to employees
Other liabilities relating to social security
Other liabilities relating to other taxes
Other miscellaneous liabilities
Deferred income
Other liabilities
255.9
51.4
48.0
240.3
78.8
674.4
24.2
–
–
14.4
64.8
103.4
280.1
51.4
48.0
254.7
143.6
777.8
238.7
49.4
26.6
239.4
43.9
598.0
22.8
–
–
44.0
83.4
150.2
Total
261.5
49.4
26.6
283.4
127.3
748.2
(32) Contingent liabilities
As at 30 September 2018, contingent liabilities amounted to € 118.7 m (previous year € 156.1 m). Contingent liabilities
are reported at an amount representing the best estimate of the potential expenditure that would be required to meet the
potential obligation as at the balance sheet date. Contingent liabilities as at 30 September 2018 are mainly attributable
to the granting of guarantees for the benefit of hotel activities. The decline of € 37.4 m as against 30 September 2017
mainly results from the return of all guarantees given for the benefit of TUI Cruises GmbH.
(33) Litigation
TUI AG and its subsidiaries are involved in several pending or foreseeable court or arbitration proceedings, which do not
have a significant impact on their economic position as at 30 September 2018 or future periods. This also applies to
actions claiming warranty, repayment or any other compensation in connection with the divestment of subsidiaries and
business units over the past few years. As in previous years, the Group recognised adequate provisions, partly covered
by expected insurance benefits, to cover all probable financial charges from court or arbitration proceedings.
220
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
(34) Other financial commitments
Financial commitments from operating lease and rental contracts
€ million
Aircraft
Hotel complexes
Travel agencies
Administrative
buildings
Ships, Yachts and
Motorboats
Other
Total
up to
1 year
383.4
229.8
63.2
1 – 5
years
919.4
353.0
120.3
228.5
83.0
24.0
40.3
113.9
53.6
1.0
28.9
746.6
–
43.4
1,550.0
–
7.3
396.4
Remaining term
5 – 10
years
more than
10 years
30 Sep 2018
Total
1,547.1
675.2
212.3
up to
1 year
365.2
237.9
62.8
1 – 5
years
866.2
413.6
117.3
229.7
66.9
28.7
244.0
37.2
102.1
54.2
1.0
131.3
2,810.9
27.1
20.3
750.5
2.1
27.4
1,528.7
–
8.7
388.2
15.8
9.4
4.8
36.2
–
51.7
117.9
Remaining term
5 – 10
years
more than
10 years
30 Sep 2017
Total
–
10.0
8.3
40.3
–
51.4
110.0
1,461.1
728.4
217.1
233.8
29.2
107.8
2,777.4
The commitments from lease, rental and charter agreements exclusively relate to leases that do not transfer all risks
and rewards of ownership of the assets to the TUI Group companies in accordance with IFRS rules (operating leases).
The average basic lease term is around 9 years.
The increase in commitments against 30 September 2017 is driven by an increase in lease obligations for aircraft. New
aircraft lease commitments and extensions to existing arrangements more than off-set lease payments made in the
financial year. Off-setting the increase are lower hotel commitments as a result of fewer extensions. A further decrease
was driven by foreign exchange effects for liabilities denominated in Turkish lira.
The expected payments to be received from non-cancellable sublease contracts for aircraft are shown in the following table:
Expected minimum lease payments from operating lease contracts
Remaining term
up to 1 year
1– 5 years
more than
5 years
30 Sep 2018
30 Sep 2017
Remaining term
Total
up to 1 year
1– 5 years
more than
5 years
Total
32.3
56.9
51.5
140.7
28.0
63.6
58.9
150.5
€ million
Aircraft
Order commitments in respect of capital expenditure and other financial commitments
Remaining term
up to 1 year
1– 5 years
more than
5 years
30 Sep 2018
30 Sep 2017
Remaining term
Total
up to 1 year
1– 5 years
more than
5 years
Total
1,092.1
52.2
1,144.3
2,480.9
18.0
2,498.9
310.3
–
310.3
3,883.3
70.2
3,953.5
733.0
49.6
782.6
2,769.4
46.3
2,815.7
662.1
–
662.1
4,164.5
95.9
4,260.4
€ million
Order commitments
in respect of capital
expenditure
Other financial commitments
Total
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
221
Order commitments in respect of capital expenditure relate almost exclusively to tourism and decreased by € 281.2 m
year-on-year as at 30 September 2018. This was due to various factors including the delivery of Marella Explorer and
additional aircraft. Further declines resulted from additional advance payments for aircraft and aircraft equipment,
which were partly offset by new order commitments for cruise ships and new commitments for hotel projects.
(35) Share-based payments in accordance with IFRS 2
As at 30 September 2018, all existing awards except the employee share program oneShare are recognized as cash-settled
share-based payment schemes.
The following share-based payment schemes are in effect within TUI Group as at 30 September 2018.
L O N G T E R M I N C E N T I V E P L A N W I T H E A R N I N G S - P E R - S H A R E P E R F O R M A N C E M E A S U R E ( LT I P E P S )
The long-term incentive programme for Board members is based on phantom shares. In each financial year, a new
period of performance measurement commences, spanning the current plus the following three financial years. As a
result, each performance measurement period has a general term of four years. All Board members have their individual
target amount defined in their service contract. At the beginning of each performance measurement period, this target
amount is translated into phantom shares based on the average price of TUI AG shares (‘preliminary number of phantom
shares’). The average share price is calculated based on the share prices during the 20 trading days prior to the beginning
of any financial year. The entitlement under the long-term incentive programme arises upon completion of the four-year
performance period.
Upon the completion of the four-year performance period, the preliminary number of phantom shares is multiplied by
the degree of target achievement.
50 % of this degree of target achievement is determined by comparing the total shareholder return (TSR) achieved by
TUI Group with the TSR of companies listed in the ‘Dow Jones Stoxx 600 Travel & Leisure’ index. If the TUI Group TSR
is below the median value, the target achievement is 0 %. If the TUI Group TSR is equal to the median value, target
achievement is 100 %. If the TUI Group TSR is the maximum value in the comparison, the target achievement equals 175 %.
The remaining 50 % of the degree of target achievement is based on the average pro forma underlying earning per share
(LTIP relevant EPS) growth of TUI Group in the four-year performance period. An average EPS growth of less than 3 %
results in a target achievement of 0 %. An average EPS growth of 3 % results in a target achievement of 25 %, an average
EPS growth of 5 % in a target achievement of 100 % and an average EPS growth of at least 10 % results in 175 % target
achievement. The target achievement percentages between 3 % and 5 % and between 5 % and 10 % are calculated on a
straight line basis.
At the end of the four-year performance period, the average degree of target achievement of both performance measures
above is calculated and multiplied with the number of preliminary phantom shares. The number of phantom shares
determined this way is multiplied by the average price (20 trading days) of TUI AG shares, and the resulting amount is
paid out in cash. The maximum amount payable under the long-term incentive programme has been capped for each
individual.
If the conditions mentioned above are met, upon expiry of the performance period, the awards are automatically exercised.
If the conditions are not met, the awards are forfeited. The service period will be restricted to the end of the employment
period if plan participants leave the Company, as long as employment is not terminated due to a significant reason
within the sphere of responsibility of the participant or by the participant without cause.
L O N G T E R M I N C E N T I V E P L A N W I T H O U T E A R N I N G S - P E R - S H A R E P E R F O R M A N C E M E A S U R E ( LT I P )
The EPS performance measurement described above was added to the formerly labeled ‘Multi-Annual bonus payment’
LTIP scheme in the FY 2018. Before 2018, and for certain Board members also during 2018, the LTIP without the EPS
performance measure was in effect. The phantom shares awarded under the original LTIP scheme remain in effect and
will vest according to the original plan conditions. 100 % of the target achievement is therefore determined by the the
TUI AG TSR performance measure.
222
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
P E R F O R M A N C E S H A R E P L A N ( P S P )
The PSP details the share-based payments for entitled Group executives who are not part of the Board. The scheme
conditions are harmonized with the LTIP without earnings-per-share performance measure of the Board members with
the notable exceptions of a three year performance period instead of four years. Target amounts and grant frequency
are subject to individual contractual agreements.
Since LTIP and PSP follow common scheme principles, the following development of awarded phantom shares under the
programs are shown on an aggregated basis. The development of phantom shares awarded that are subject to the EPS
performance measure are shown separately.
Development of phantom shares awarded (LTIP EPS, LTIP & PSP)
Balance as at 30 Sep 2016
Phantom shares awarded
Phantom shares exercised
Phantom shares forfeited
Measurement results
Balance as at 30 Sep 2017
Phantom shares awarded
Phantom shares exercised
Phantom shares forfeited
Measurement results
Balance as at 30 Sep 2018
LTIP EPS
LTIP & PSP
Number of
shares
Present value
€ million
Number of
shares
Present value
€ million
–
–
–
–
–
–
360,808
–
–
–
364,528
–
–
–
–
–
–
5.3
–
–
0.8
6.1
662,251
931,575
– 219,368
– 117,604
–
1,256,854
523,738
– 341,311
– 75,326
–
1,363,955
8.2
11.7
– 3.2
– 1.5
3.1
18.3
6.9
– 5.0
– 1.1
3.5
22.6
E M P L O Y E E S H A R E P R O G R A M O N E S H A R E
Eligible employees can acquire TUI AG shares under preferential conditions when participating in the oneShare program.
The preferential conditions include a discount on ‘investment’ shares bought during a twelve month investment period
plus one ‘matching’ share per three held investment shares, after a lock up period of two years. Investment shares are
created via capital increase, while matching shares are bought on the open market. Eligible employees decide once a
year about their participation in oneShare. In the FY 2018, one oneShare tranche commenced with a twelve month
investment period. This 2018 tranche contained an additional element, the ‘Golden shares’. Each participant was awarded
twelve shares free of charge, which were not subject to any restrictions. In the completed financial year, 59,196 Golden
shares were awarded to employees.
Since investment, matching and Golden shares are equity instruments of TUI AG, oneShare is accounted for as an equity-
settled share-based payment scheme in line with IFRS 2. Once all eligible employees have decided upon their yearly
participation, the fair value of the equity instrument granted is calculated once and fixed for each tranche on the basis
of the proportional shares price at grant date taking into consideration the discounted estimated dividends.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
223
The development of acquired investment and estimated matching shares, as well as the parameters used for the calculation
of the fair value are as follows:
Overview oneShare tranches
Investment period
Matching date
Acquired investment shares
thereof forfeited investment shares
Estimated matching shares
thereof forfeited matching shares
Share price at grant date
Fair value: Discount per investment share
recognised estimated dividend
Fair value: matching share
recognised discounted estimated dividend
Tranche 1
(2017 / 3)
Tranche 2
(2017 / 7)
Tranche 3
(2018 / 7)
Total
1 Apr 2017 –
31 Jul 2017
30 Sep 2019
349,941
1,228
114,811
409
12.99
2.60
–
11.65
1.34
1 Aug 2017 –
31 Jul 2018
30 Sep 2020
524,619
10,216
174,873
3,405
13.27
2.20
0.63
11.15
2.11
1 Aug 2018 –
31 Jul 2019
30 Sep 2021
135,715
–
45,238
–
18.30
2.94
0.72
15.92
2.37
€
€
€
€
€
–
–
1,010,275
11,444
334,922
3,814
–
–
–
–
–
C L O S E D S H A R E - B A S E D PAY M E N T S C H E M E S
The following share-based payment schemes are closed, resulting in no new awards being granted. Awards made in the
past remain valid and will vest according to the respective plan conditions.
T U I A G S T O C K O P T I O N P L A N
The stock option plan for qualifying Group executives below Board level was closed during FY 2016. The last tranche
was granted in February 2016 and vested in February 2018.
Bonuses were granted to Group executives entitled to receive a bonus; the bonuses were translated into phantom
shares in TUI AG on the basis of an average share price. The phantom shares were calculated on the basis of Group
earnings before interest, taxes and amortisation of goodwill (EBITA). The translation into phantom shares was based on
the average share price of the TUI share on the 20 trading days following the Supervisory Board meeting at which the
annual financial statements were approved. The number of phantom shares granted in a financial year was, therefore,
only determined in the subsequent year. Following a lock-up period of two years, the individual beneficiaries are free to
exercise their right to cash payment from this bonus within three years. Following significant corporate news, the
entitlements have to be exercised within defined timeframes. The lock-up period is not applicable if a beneficiary leaves
the Company; in that case, the entitlements have to be exercised in the next time window. The level of the cash payment
depends on the average share price of the TUI share over a period of 20 trading days after the exercise date. There are
no absolute or relative return or share price targets. A cap has been agreed for exceptional, unforeseen developments.
Since the strike price is € 0.00 and the incentive programme does not entail a vesting period, the fair value corresponds
to the intrinsic value and hence the market price at the balance sheet date. Accordingly, the fair value of the obligation
is determined by multiplying the number of phantom shares with the share price at the respective reporting date.
As at 30 September 2018, 40,593 share options valued at € 0.7 m are vested and outstanding. Since the plan is closed,
no new grants were made, 113,167options were exercised (total value of € 2.0 m) and no options were forfeited.
S H A R E - B A S E D PAY M E N T S C H E M E S O F F O R M E R T U I T R A V E L P L C
The three principal schemes below were all closed to new participants during the FY 2016. The last tranche will vest in
December 2018 and will be settled in cash.
224
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
The share option awards of these remuneration schemes will only vest if the average annual return on invested capital
(ROIC) is at least equal to the average weighted average cost of capital (WACC) over a period of three years. If this
condition is fulfilled, the number of vesting awards is determined as a function of the fulfilment of the following
performance conditions.
P E R F O R M A N C E S H A R E P L A N ( P S P )
Up to 50 % of these awards granted will vest based on growth in the Group’s reported earnings per share (EPS) relative
to the UK Retail Price Index. Up to 25 % of the awards will vest based on the Group’s total shareholder return (TSR)
performance relative to an average of the TSR performance of an index of other capital market-orientated travel and
tourism companies. Likewise, up to 25 % of the awards vest if the Group’s average return on invested capital (ROIC)
meets predefined targets.
D E F E R R E D A N N U A L B O N U S S C H E M E ( D A B S )
The awards granted under this scheme vest upon completion of a three-year period at the earliest. Up to 50 % of the
granted awards will vest based on growth in earnings per share (EPS) relative to the UK Retail Price Index (RPI). 25 % of
the awards will vest based on total shareholder return (TSR) performance relative to the TSR performance of other
capital market-oriented travel and tourism companies. Likewise, up to 25 % of the awards will vest if the average return
on invested capital (ROIC) meets certain targets.
D E F E R R E D A N N U A L B O N U S L O N G -T E R M I N C E N T I V E S C H E M E ( D A B L I S )
The Deferred Annual Bonus Long-Term Incentive Scheme (DABLIS), for executive staff (except for the Executive Board)
requires a 25 % conversion of any annual variable compensation into share options. Some eligible staff have been
awarded further (matching) share option awards as additional bonuses. Matching share options are limited to four times
the converted amount. The earliest point for the share options to be eligible for release is at the end of a three-year
period. Up to 50 % of the awards will vest based on achievement of certain EBITA targets. Up to 25 % of awards will vest
based on the earnings per share (EPS) performance relative to the UK Retail Price Index and up to 25 % based on the
total shareholder return (TSR) performance in relation to the TSR performance of other capital market-oriented travel
and tourism companies.
The development of awards schemes granted under DABLIS and the closed TUI Travel PLC PSP and the former DABS is
as follows:
Development of phantom shares options awarded (DABS, DABLIS & TUI Travel PLC PSP)
Balance as at 30 Sep 2016
Phantom share options exercised
Phantom share options forfeited
Measurement results
Balance as at 30 Sep 2017
Phantom share options exercised
Phantom share options forfeited
Measurement results
Balance as at 30 Sep 2018
Number of shares
Present value
€ million
1,739,933
– 171,351
– 210,912
–
1,357,670
– 800,668
– 174,654
–
382,348
22.2
– 2.2
– 2.7
2.2
19.5
– 12.8
– 2.9
2.4
6.2
The weighted average TUI AG share price was € 15.93 at exercise date (previous year € 12.32).
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
225
A C C O U N T I N G F O R S H A R E - B A S E D PAY M E N T S C H E M E S
As at 30 September 2018, all existing awards except oneShare are recognized as cash-settled share-based payment
schemes and are granted with an exercise price of € 0.00. The personnel expense is recognized upon actual delivery of
service according to IFRS 2 and is, therefore, spread over a period of time. According to IFRS 2, all contractually granted
entitlements have to be accounted for, irrespective of whether and when they are actually awarded. Accordingly, phantom
shares granted in the past are charged on a pro rata basis upon actual delivery of service.
In the FY 2018, personnel expenses due to cash-settled share-based payment schemes of € 18.2 m (previous year € 11.1 m)
were recognised through profit and loss.
In the FY 2018, personnel expenses due to equity-settled share-based payment schemes of € 4.3 m (previous year € 1.9 m)
were recognised through profit and loss.
As at 30 September 2018, provisions relating to entitlements under these long-term incentive programmes totaled
€ 34.2 m and further € 4.1 m were included as liabilities (previous year provisions of € 32.9 m and € 1.6 m liabilities).
(36) Financial instruments
R I S K S A N D R I S K M A N A G E M E N T
R I S K M A N A G E M E N T P R I N C I P L E S
Due to the nature of its business operations, the TUI Group is exposed to various financial risks, including market risks
(consisting of currency risks, interest rate risks and market price risks), credit risks and liquidity risks.
In accordance with the Group’s financial goals, financial risks have to be mitigated. In order to achieve this, policies and
procedures have been developed to manage risk associated with financial transactions undertaken.
The rules, responsibilities and processes as well as limits for transactions and risk positions have been defined in policies.
The trading, processing and control have been segregated in functional and organisational terms. Compliance with the
policies and limits is continually monitored. All hedges by the TUI Group are consistently based on recognised or forecasted
underlying transactions. Standard software is used for assessing, monitoring, reporting, documenting and reviewing the
effectiveness of the hedging relationships for the hedges entered into. In this context, the fair values of all derivative
financial instruments determined on the basis of the Group’s own systems are regularly compared with the fair value
confirmations from the external counterparties. The processes, the methods applied and the organisation of risk
management are reviewed for compliance with the relevant regulations on at least an annual basis by the internal audit
department and external auditors.
Within the TUI Group, financial risks primarily arise from cash flows in foreign currencies, fuel requirements (jet fuel and
bunker oil) and financing via the money and capital markets. In order to limit the risks from changes in exchange rates,
market prices and interest rates for underlying transactions, the TUI Group uses over-the-counter derivative financial
instruments. These are primarily fixed-price transactions. In addition, the TUI Group also uses options and structured
products. Use of derivative financial instruments is confined to internally fixed limits and other policies. The transactions
are concluded on an arm’s length basis with counterparties operating in the financial sector, whose counterparty risk is
regularly monitored. Foreign exchange translation risks from the consolidation of Group companies not preparing their
accounts in euros are not hedged.
M A R K E T R I S K
Market risks result in fluctuations in earnings, equity and cash flows. Risks arising from input cost volatility are more fully
detailed in the risk report section of the management report. In order to limit or eliminate these risks, the TUI Group has
developed various hedging strategies, including the use of derivative financial instruments.
226
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
IFRS 7 requires the presentation of a sensitivity analysis showing the effects of hypothetical changes in relevant market
risk variables on profit or loss and equity. The effects for the period are determined by relating the hypothetical changes
in risk variables to the portfolio of primary and derivative financial instruments as at the balance sheet date. It is assured
that the portfolio of financial instruments as at the balance sheet date is representative for the entire financial year.
The analyses of the TUI Group’s risk reduction activities outlined below and the amounts determined using sensitivity
analyses represent hypothetical and thus uncertain risks. Due to unforeseeable developments in the global financial
markets, actual results may deviate substantially from the disclosures provided. The risk analysis methods used must
not be considered a projection of future events or losses, since the TUI Group is also exposed to risks of a non-financial
or non-quantifiable nature. These risks primarily include sovereign, business and legal risks not covered by the following
presentation of risks.
C U R R E N C Y R I S K
The business operations of the TUI Group’s companies generate payments or receipts denominated in foreign currencies,
which are not always matched by payments or receipts with equivalent terms in the same currency. Using potential
netting effects (netting of payments made and received in the same currency with identical or similar terms), the TUI Group
enters into appropriate hedges with external counterparties in order to protect its profit margin from exchange rate-related
fluctuations.
Within the TUI Group, risks from exchange rate fluctuations are hedged, with the largest hedging volumes relating to US
dollars, euros and pound sterling. The Eurozone limits the currency risk from transactions in the key tourist destinations
to Group companies whose functional currency is not the euro. The tourism business operations are mainly affected by
changes in the value of the US dollar and the euro, the latter predominantly affecting the TUI tour operators in the UK
and the Nordic countries. In tourism operations, payments in US dollars primarily relate to the procurement of services
in non-European destinations, purchases of jet and ship fuel and aircraft and cruise ship purchases or charter.
The tourism companies use financial derivatives to hedge their planned foreign exchange requirements. They aim to
cover 80 % to 100 % of the planned currency requirements at the beginning of the tourism season. In this regard, account
is taken of the different risk profiles of the TUI Group companies. The hedged currency volumes are adjusted in line with
changes in planned requirements based on reporting by business units.
Currency risks within the meaning of IFRS 7 arise from primary and derivative monetary financial instruments issued in
a currency other than the functional currency of a company. Exchange rate-related differences from the translation of
financial statements into the Group’s presentation currency are not taken into account. Taking account of the different
functional currencies within the TUI Group, the sensitivity analyses of the currencies identified as relevant risk variables
are presented below. A 10 % strengthening or weakening of the respective functional currencies, primarily euro and
pound sterling, against the other currencies would cause the following effects on the revaluation reserve and earnings
after income tax:
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
227
Sensitivity analysis – currency risk
€ million
30 Sep 2018
30 Sep 2017
Variable: Foreign exchange rate
+ 10 %
– 10 %
+ 10 %
– 10 %
Exchange rates of key currencies
€ / US dollar
Revaluation reserve
Earnings after income taxes
Pound sterling / €
Revaluation reserve
Earnings after income taxes
Pound sterling / US dollar
Revaluation reserve
Earnings after income taxes
€ / Swedish krona
Revaluation reserve
Earnings after income taxes
– 142.5
– 20.8
+ 205.3
+ 49.6
– 20.9
+ 17.3
+ 30.2
–
+ 144.3
+ 23.0
– 201.8
– 46.7
+ 17.7
– 14.1
– 30.2
–
– 108.3
– 2.3
+ 197.4
– 8.9
– 138.9
+ 18.8
+ 31.7
–
+ 109.4
+ 0.9
– 190.9
– 2.2
+ 133.4
– 13.3
– 31.7
–
I N T E R E S T R AT E R I S K
The TUI Group is exposed to interest rate risks from floating-rate primary and derivative financial instruments. Where
interest-driven cash flows of floating-rate primary financial instruments are converted into fixed cash flows using derivative
hedges and the critical terms of the hedging transaction are the same as those of the hedged items they are not exposed
to an interest rate risk. No interest rate risk exists for fixed-interest financial instruments carried at amortised cost.
Changes in market interest rates mainly impact floating-rate primary financial instruments and derivative financial
instruments entered into in order to reduce interest-induced cashflow fluctuations.
The table below presents the equity and earnings effects of an assumed increase or decrease in the market interest rate
of 50 base points as at the balance sheet date.
Sensitivity analysis – interest rate risk
€ million
Variable: Interest rate level for
floating interest-bearing debt
Revaluation reserve
Earnings after income taxes
30 Sep 2018
30 Sep 2017
+ 50 basis
points
– 50 basis
points
+ 50 basis
points
– 50 basis
points
+ 12.6
+ 1.5
– 12.0
– 1.5
+ 2.9
+ 2.4
– 2.9
– 2.4
F U E L P R I C E R I S K
Due to the nature of its business operations, the TUI Group is exposed to market price risks from the purchase of fuel,
both for the aircraft fleet and the cruise ships.
The tourism companies use financial derivatives to hedge their exposure to market price risks for the planned consumption
of fuel. At the beginning of the touristic season the target hedging ratio is at least 80 %. The different risk profiles of the
Group companies operating in different source markets are taken into account, including the possibility of levying fuel
surcharges. The hedging volumes are adjusted for changes in planned consumption as identified by the Group companies.
228
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
If the commodity prices, which underlie the fuel price hedges, increase or decrease by 10 % on the balance sheet date,
the impact on equity and on earnings after income taxes would be as shown in the table below.
Sensitivity analysis – fuel price risk
€ million
Variable: Fuel prices for aircraft and ships
Revaluation reserve
Earnings after income taxes
30 Sep 2018
30 Sep 2017
+ 10 %
+ 94.2
–
– 10 %
– 94.2
–
+ 10 %
+ 84.1
– 0.2
– 10 %
– 83.9
+ 0.2
O T H E R P R I C E R I S K S
Apart from the financial risks that may result from changes in exchange rates, commodity prices and interest rates, the
TUI Group is not exposed to significant price risks at the balance sheet date.
C R E D I T R I S K
The credit risk in non-derivative financial instruments results from the risk of counterparties defaulting on their
contractual payment obligations.
Maximum credit risk exposure corresponds to the total of the recognised carrying amounts of the financial assets
(including derivative financial instruments with positive market values). It also relates to the granting of financial guarantees
for the discharge of liabilities. Details concerning the guarantees at the balance sheet date are presented in Note 32.
Where legally enforceable, financial assets and liabilities are netted. Credit risks are reviewed closely on conclusion of
the contract and continually monitored thereafter in order to swiftly respond to potential impairment in a counterparty’s
solvency. Responsibility for handling the credit risk is generally held by the Group company holding the receivable.
Since the TUI Group operates in many different business areas and regions, significant credit risk concentrations of
receivables from and loans to specific debtors or groups of debtors are not to be expected. A significant concentration
of credit risks related to specific countries is not to be expected either. As in the previous year, as at the balance sheet
date, there is no material collateral held, or other credit enhancements that reduce the maximum credit risk. Collateral
held in the prior period relates exclusively to financial assets of the category Trade receivable and other assets. The
collateral mainly comprises collateral for financial receivables granted and maturing in more than one year and / or with
a volume of more than € 1 m. Real property rights, directly enforceable guarantees, bank guarantees and comfort letters
are used as collateral.
Identifiable credit risks of individual receivables are subject to provisions for bad debts. In addition, portfolios are impaired
based on observed values. An analysis of the aging structure of the category Trade receivables and other assets is
presented in Note 17.
Credit management also covers the TUI Group’s derivative financial instruments. The maximum credit risk for derivative
financial instruments entered into is limited to the total of all positive market values of these instruments since in the
event of counterparty default asset losses would only be incurred up to that amount. Since derivative financial instruments
are concluded with different debtors, credit risk exposure is reduced. The specific credit risks of individual counterparties
are taken into account in determining the fair values of derivative financial instruments. In addition, the counterparty
risk is continually monitored and controlled using internal bank limits.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
229
L I Q U I D I T Y R I S K
Liquidity risks arise from the TUI Group being unable to meet its short term financial obligations and the resulting
increases in funding costs. The TUI Group has established an internal liquidity management system to secure TUI Group’s
liquidity at all times and consistently comply with contractual payment obligations. To that end, TUI Group’s liquidity
management system uses the opportunities of physical and virtual cash pooling for more efficient liquidity pooling. It
also uses credit lines to compensate for the seasonal fluctuations in liquidity resulting from the tourism business. The
core credit facility is a syndicated revolving credit facility with banks with a volume of € 1,535 m as a cash line.
As in the previous year, no material assets were deposited as collateral for liabilities. Moreover, the Group companies
participating in the cash pool are jointly and severally liable for financial liabilities from cash pooling agreements.
The tables provided below list the contractually agreed (undiscounted) cash flows of all primary financial liabilities as at
the balance sheet date. Planned payments for future new liabilities were not taken into account. Where financial liabilities
have a floating interest rate, the forward interest rates fixed at the balance sheet date were used to determine future
interest payments. Financial liabilities cancellable at any time are allocated to the earliest maturity band.
The analysis of cash flows from derivative financial instruments shows the contractually agreed (undiscounted) cash
flows of foreign exchange hedges of all liabilities and receivables that existed at the balance sheet date. Derivative financial
instruments used to hedge other price risks are included in the analysis with their agreed cash flows from all financial
liabilities at the balance sheet date.
Cash flow of financial instruments – financial liabilities (30 Sep 2018)
€ million
Financial liabilities
Bonds
Liabilities to banks
Liabilities from finance leases
Other financial liabilities
Trade payables
Other liabilities
up to 1 year
1 – 2 years
2 – 5 years
more than 5 years
Cash outflow until 30 Sep
repay-
ment
interest
interest
repay-
ment
repay-
ment
interest
–
– 64.1
– 105.2
– 22.9
– 2,937.3
– 192.9
– 6.4
– 18.2
– 34.1
–
–
– 25.6
–
– 43.3
– 121.9
–
–
– 10.6
– 6.4
– 16.4
– 31.9
–
–
–
– 300.0
– 325.3
– 360.6
–
–
– 1.2
– 6.4
– 40.5
– 73.7
–
–
–
repay-
ment
–
– 347.8
– 755.0
–
–
– 0.1
interest
–
– 16.2
– 48.0
–
–
–
Cash flow of financial instruments – financial liabilities (30 Sep 2017)
€ million
Financial liabilities
Bonds
Liabilities to banks
Liabilities from finance leases
Other financial liabilities
Trade payables
Other liabilities
up to 1 year
1 – 2 years
2 – 5 years
more than 5 years
Cash outflow until 30 Sep
repay-
ment
interest
–
– 46.2
– 96.2
– 29.5
– 2,653.3
– 185.5
– 6.4
– 11.6
– 32.0
– 0.1
–
– 28.6
repay-
ment
–
– 42.2
– 100.2
–
–
– 20.7
interest
interest
repay-
ment
– 6.4
– 10.3
– 32.5
–
–
–
– 300.0
– 138.2
– 305.1
–
–
– 22.2
– 19.3
– 22.6
– 75.3
–
–
–
repay-
ment
–
– 154.7
– 725.0
–
–
–
interest
–
– 10.4
– 54.4
–
–
–
230
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
Cash flow of derivative financial instruments (30 Sep 2018)
€ million
Derivative financial instruments
Hedging transactions – inflows
Hedging transactions – outflows
Other derivative financial instruments – inflows
Other derivative financial instruments – outflows
Cash in- / outflow until 30 Sep
up to 1 year
1 – 2 years
2 – 5 years
+ 7,889.8
– 7,709.7
+ 2,274.8
– 2,280.9
+ 1,470.5
– 1,423.5
+ 90.8
– 90.4
+ 73.5
– 66.7
–
–
more than
5 years
+ 0.8
– 1.4
–
–
Cash flow of derivative financial instruments (30 Sep 2017)
€ million
Derivative financial instruments
Hedging transactions – inflows
Hedging transactions – outflows
Other derivative financial instruments – inflows
Other derivative financial instruments – outflows
Cash in- / outflow until 30 Sep
up to 1 year
1 – 2 years
2 – 5 years
+ 6,449.2
– 6,487.6
+ 1,108.9
– 1,108.2
+ 1,621.7
– 1,602.5
+ 127.0
– 123.2
+ 196.3
– 198.8
+ 12.2
– 12.2
more than
5 years
–
– 0.7
–
–
For further information for hedging strategies and risk management see also the remarks in the Risk Report section of
the Management Report.
D E R I V AT I V E F I N A N C I A L I N S T R U M E N T S A N D H E D G E S
S T R AT E G Y A N D G O A L S
In accordance with the TUI Group’s policy, derivatives are allowed to be used if they are based on underlying recognised
assets or liabilities, firm commitments or forecast transactions. Hedge accounting based on the rules of IAS 39 is applied
to forecasted transactions. In the completed financial year, hedges consisted of cash flow hedges.
Derivative financial instruments in the form of fixed-price transactions and options as well as structured products are
used to limit currency, interest rate and fuel risks.
C A S H F L O W H E D G E S
As at 30 September 2018, hedges existed to manage cash flows in foreign currencies with maturities of up to four years
(previous year up to four years). The fuel price hedges had terms of up to four years (previous year up to four years).
Hedges to protect variable interest payment obligations have terms of up to thirteen years (previous year up to fourteen
years). The impact on profit or loss for the period is at the time the expected cash inflow / outflow occurs.
In accounting for cash flow hedges, the effective portion of the cumulative change in market value is carried in the
revaluation reserve outside profit and loss until the hedged item occurs. It is recognised in the income statement through
profit and loss when the hedged item is executed. In the completed financial year, expenses of € 177.6 m (previous year
income of € 371.8 m) for currency hedges and derivative financial instruments used as price hedges were carried in the
cost of sales. As in the previous year, there was no result from interest rate hedges. Expenses of € 2.5 m (previous year
expenses of € 4.5 m) were recognised for the ineffective portion of the cash flow hedges.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
231
Nominal amounts of derivative financial instruments used
€ million
Interest rate hedges
Caps / Floors
Swaps
Currency hedges
Forwards
Options
Structured instruments
Commodity hedges
Swaps
Options
30 Sep 2018
30 Sep 2017
Remaining term
up to
1 year
more than
1 year
–
23.0
13,738.6
–
–
853.5
–
361.6
787.5
2,197.1
–
–
270.8
–
Total
361.6
810.5
15,935.7
–
–
1,124.3
–
Remaining term
up to
1 year
more than
1 year
150.0
–
7,010.8
–
113.5
754.3
19.9
115.6
255.4
1,854.6
–
–
407.9
–
Total
265.6
255.4
8,865.4
–
113.5
1,162.2
19.9
The nominal amounts correspond to the total of all purchase or sale amounts or the contract values of the transactions.
F A I R V A L U E S O F D E R I V AT I V E F I N A N C I A L I N S T R U M E N T S
The fair values of derivative financial instruments generally correspond to the market value. The market price determined
for all derivative financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. A description of the determination of the fair
values of derivative financial instruments is provided with the classification of financial instruments measured at fair value.
Positive and negative fair values of derivative financial instruments
shown as receivables or liabilities
€ million
Receivables
Liabilities
Receivables
Liabilities
30 Sep 2018
30 Sep 2017
Cash flow hedges for
currency risks
other market price risks
interest rate risks
Hedging
Other derivative financial instruments
Total
194.3
288.0
2.4
484.7
40.3
525.0
52.2
0.2
3.6
56.0
22.5
78.5
168.6
91.2
–
259.8
35.5
295.3
217.4
11.1
0.7
229.2
38.4
267.6
Financial instruments which are entered into in order to hedge a risk position according to operational criteria but do
not meet the criteria of IAS 39 to qualify for hedge accounting are shown as other derivative financial instruments. They
include foreign currency transactions entered into in order to hedge against foreign exchange-exposure to changes in
the value of balance sheet items and foreign exchange fluctuations from future expenses in Tourism.
232
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
F I N A N C I A L I N S T R U M E N T S – A D D I T I O N A L D I S C L O S U R E S
C A R R Y I N G A M O U N T S A N D F A I R V A L U E S
Where financial instruments are listed in an active market, e. g. shares held and bonds issued, the fair value or market
value is the respective quotation in this market at the balance sheet date. For over-the-counter bonds, liabilities to
banks, promissory notes and other non-current financial liabilities, the fair value is determined as the present value of
future cash flows, taking account of yield curves and the respective credit spread, which depends on the credit rating.
Due to the short remaining terms of cash and cash equivalents, current trade receivables and other assets, current
trade payables and other payables, the carrying amounts are taken as realistic estimates of the fair value.
The fair values of non-current trade receivables and other assets correspond to the present values of the cash flows
associated with the assets, taking account of current interest parameters which reflect market and counter party-
related changes in terms and expectations. There are no financial investments held to maturity.
Carrying amounts and fair values according to classes and measurement categories as at 30 Sep 2018
Carrying
amount
At amortised
cost
At cost
Category under IA S 39
Fair value with
no effect on
profit and loss
Fair value
through profit
and loss
Values
according to
IA S 17
(leases)
Carrying
amount of
financial
instruments
Fair value of
financial
instruments
54.3
–
27.6
1,269.6
818.1
484.7
40.3
–
–
2,548.0
2,548.0
2,442.9
2,937.3
1,100.3
2,932.6
56.0
22.5
777.8
–
–
33.7
–
–
–
–
–
–
–
–
–
26.7
–
484.7
–
–
–
–
56.0
–
–
–
–
–
40.3
–
–
–
–
22.5
–
–
–
–
–
–
54.3
818.1
484.7
40.3
54.3*
818.1
484.7
40.3
2,548.0
2,548.0
1,342.6
–
1,100.3
2,932.6
1,163.6
2,932.6
–
–
–
56.0
22.5
33.7
56.0
22.5
33.7
€ million
Assets
Available for sale
financial assets
Trade receivables and
other assets
Derivative financial
instruments
Hedging
Other derivative
financial instruments
Cash and cash
equivalents
Liabilities
Financial liabilities
Trade payables
Derivative financial
instruments
Hedging
Other derivative
financial instruments
Other liabilities
* Total includes financial instruments measured at cost of € 27.6 m
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
233
Carrying amounts and fair values according to classes and measurement categories as at 30 Sep 2017
Carrying
amount
At amortised
cost
At cost
Category under IA S 39
Fair value with
no effect on
profit and loss
Fair value
through profit
and loss
Values
according to
IA S 17
(leases)
Carrying
amount of
financial
instruments
Fair value of
financial
instruments
69.5
–
43.5
1,006.3
745.1
259.8
35.5
2,516.1
1,933.1
2,653.3
229.2
38.4
748.2
–
–
2,516.1
706.6
2,652.4
–
–
49.4
–
–
–
–
–
–
–
–
–
26.0
–
259.8
–
–
–
–
229.2
–
–
–
–
–
35.5
–
–
–
–
38.4
45.8
–
–
–
–
–
1,226.5
–
69.5
745.1
69.51
745.1
259.8
259.8
35.5
2,516.1
706.6
2,652.4
35.5
2,516.1
766.6
2,652.4
–
–
–
229.2
229.2
38.4
95.2
38.4
95.2
€ million
Assets
Available for sale financial
assets
Trade receivables and
other assets
Derivative financial
instruments
Hedging
Other derivative
financial instruments
Cash and cash equivalents
Liabilities
Financial liabilities
Trade payables
Derivative financial
instruments
Hedging
Other derivative
financial instruments
Other liabilities2
1 Total includes financial instruments measured at cost of € 43.5 m
2 Adjusted
The financial investments classified as financial assets available for sale include an amount of € 27.6 m (previous year
€ 43.5 m) for stakes in partnerships and corporations for which an active market does not exist. The fair value of these
non-listed stakes is not determined using a measurement model since the future cash flows cannot be reliably determined.
The stakes are carried at acquisition cost. In the reporting period and in the previous year, there were no significant
disposals of stakes in partnerships and corporations measured at acquisition cost. The TUI Group does not intend to
sell or derecognise the stakes in these partnerships and corporations in the near future.
Unlike the previous year, a revenue guarantee to the purchaser of Hotelbeds Group with the fair value was recorded in
other liabilities. The prior year presentation has been adjusted.
234
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
Aggregation according to measurement categories under IAS 39 as at 30 Sep 2018
€ million
Loans and receivables
Financial assets
available for sale
held for trading
Financial liabilities
at amortised cost
held for trading
At amortised
cost
At cost
with no effect
on profit
and loss
3,366.1
–
–
4,066.6
–
–
27.6
–
–
–
–
26.7
–
–
–
Fair value
through
profit and
loss
–
–
40.3
–
22.5
Fair value
Carrying
amount
Total
3,366.1
3,366.1
54.3
40.3
4,066.6
22.5
54.3*
40.3
4,129.9
22.5
* Total includes financial instruments measured at cost of € 27.6 m
Aggregation according to measurement categories under IAS 39 as at 30 Sep 2017
€ million
Loans and receivables
Financial assets
available for sale
held for trading
Financial liabilities
at amortised cost
held for trading2
At amortised
cost
At cost
with no effect
on profit
and loss
Fair value
through
profit and
loss
Carrying
amount
Total
Fair value
3,261.2
–
–
3,408.4
–
–
43.5
–
–
–
–
26.0
–
–
–
–
3,261.2
3,261.2
–
35.5
–
84.2
69.5
35.5
3,408.4
84.2
69.51
35.5
3,468.4
84.2
1 Total includes financial instruments measured at cost of € 43.5 m
2 Adjusted
F A I R V A L U E M E A S U R E M E N T
The table below presents the fair values of recurring, non-recurring and other financial instruments measured at fair
value in line with the underlying measurement level. The individual measurement levels have been defined as follows in
line with the inputs:
• Level 1: (unadjusted) quoted prices in active markets for identical assets or liabilities.
• Level 2: inputs for the measurement other than quoted market prices included within Level 1 that are observable in
the market for the asset or liability, either directly (as quoted prices) or indirectly (derivable from quoted prices).
• Level 3: inputs for the measurement of the asset or liability not based on observable market data.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
235
Classification of fair value measurement of financial instruments as of 30 Sep 2018
€ million
Assets
Available for sale financial assets
Derivative financial instruments
Hedging transactions
Other derivative financial instruments
Liabilities
Derivative financial instruments
Hedging transactions
Other derivative financial instruments
Other liabilities
Total
Level 1
Level 2
Level 3
Fair value hierarchy
26.7
484.7
40.3
56.0
22.5
–
–
–
–
–
–
–
–
26.7
484.7
40.3
56.0
22.5
–
–
–
–
–
–
Classification of fair value measurement of financial instruments as of 30 Sep 2017
€ million
Assets
Available for sale financial assets
Derivative financial instruments
Hedging transactions
Other derivative financial instruments
Liabilities
Derivative financial instruments
Hedging transactions
Other derivative financial instruments
Other liabilities*
* Adjusted
Total
Level 1
Level 2
Level 3
Fair value hierarchy
26.0
259.8
35.5
229.2
38.4
45.8
–
–
–
–
–
–
20.1
259.8
35.5
229.2
38.4
–
5.9
–
–
–
–
45.8
At the end of every reporting period, TUI Group checks whether there are any reasons for reclassification to or from
one of the measurement levels. Financial assets and financial liabilities are generally transferred out of Level 1 into
Level 2 if the liquidity and trading activity no longer indicate an active market. The opposite situation applies to potential
transfers out of Level 2 into Level 1. In the reporting period, there were no transfers between Level 1 and Level 2.
Reclassifications from Level 3 to Level 2 or Level 1 are made if observable market price quotations become available for
the asset or liability concerned. Checks of the measurement parameters showed that the stake in peakwork AG did not
classify as Level 2 any longer as observable valuation parameter were no longer available. There were no other transfers
from or to Level 3. The TUI Group records transfers from or to Level 3 at the date of the obligating event or occasion
triggering the transfer.
L E V E L 1 F I N A N C I A L I N S T R U M E N T S
The fair value of financial instruments for which an active market exists is based on quoted prices at the reporting date.
An active market exists if quoted prices are readily and regularly available from an exchange, dealer, broker, pricing
service or regulatory agency and these prices represent actual and regularly occurring market transactions on an arm’s
length basis. These financial instruments are classified as Level 1. The fair values correspond to the nominal amounts
multiplied by the quoted prices at the reporting date. Level 1 financial instruments primarily comprise shares in listed
companies classified as available for sale and bonds issued classified as financial liabilities at amortised cost.
236
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
L E V E L 2 F I N A N C I A L I N S T R U M E N T S :
The fair values of financial instruments not traded in an active market, e. g. over-the-counter (OTC) derivatives, are
determined by means of valuation techniques. These valuation techniques make maximum use of observable market
data and minimise the use of Group-specific assumptions. If all essential inputs for the determination of the fair value
of an instrument are observable, the instrument is classified as Level 2.
If one or several key inputs are not based on observable market data, the instrument is classified as Level 3.
The following specific valuation techniques are used to measure financial instruments:
• For over-the-counter bonds, liabilities to banks, promissory notes and other non-current financial liabilities, the fair
value is determined as the present value of future cash flows, taking account of yield curves and the respective
credit spread, which depends on the credit rating
• The fair value of over-the-counter derivatives is determined by means of appropriate calculation methods, e. g. by
discounting the expected future cash flows. The forward prices of forward transactions are based on the spot or cash
prices, taking account of forward premiums and discounts. The calculation of the fair values of options concluded for
currency options is based on the Black & Scholes model and the Turnbull & Wakeman model for optional fuel hedges.
The fair values determined on the basis of the Group’s own systems are periodically compared with fair value
confirmations of the external counterparties.
• Other valuation techniques, e. g. discounting future cash flows, are used to determine the fair values of other financial
instruments.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
237
L E V E L 3 F I N A N C I A L I N S T R U M E N T S :
The table below presents the fair values of the financial instruments measured at fair value on a recurring basis, classified
as Level 3:
Financial assets measured at fair value in level 3
€ million
Balance as at 1 October 2016
Total gains or losses for the period
recognised through profit or loss
recogniseed in other comprehensive income
Balance as at 30 September 2017
Change in unrealised gains or losses for the period for
financial assets held at the balance sheet date
Balance as at 1 October 2017
Additions (incl. Transfers)
conversion / rebooking
Disposals
repayment / sale
Total gains or losses for the period
recognised through profit or loss
recognised in other comprehensive income
Balance as at 30 September 2018
* Adjusted
Available for sale
financial assets
Other liabilities*
6.0
– 0.1
–
– 0.1
5.9
–
5.9
20.1
20.1
–
–
0.7
–
0.7
26.7
50.3
– 4.5
– 4.5
–
45.8
– 4.5
45.8
–
–
– 4.4
– 4.4
– 41.4
– 41.4
–
–
Further information on Level 3 is not presented for materiality reasons.
E F F E C T S O N R E S U LT S
The effects of the measurement of financial assets available for sale outside profit and loss and the effective portions
of changes in fair values of derivatives designated as cash flow hedges are listed in the statement of changes in equity.
The net results of the financial instruments by measurement category according to IAS 39 are as follows:
Net results of financial instruments
2018
€ million
from
interest
other net
results
net
result
from
interest
other net
results
Loans and receivables
Available for sale financial assets
Financial assets and liabilities held for trading
Financial liabilities at amortised cost
Total
19.2
–
0.6
– 52.4
– 32.6
– 93.5
1.3
1.4
– 39.2
– 130.0
– 74.3
1.3
2.0
– 91.6
– 162.6
– 2.7
–
– 2.5
– 22.2
– 27.4
332.8
173.3
20.0
– 50.5
475.6
2017
net
result
330.1
173.3
17.5
– 72.7
448.2
238
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
The other net result of available-for-sale financial assets mainly consists of the result from participations, capital gains
and losses, the effects of the fair value measurement and value adjustments.
Financial instruments measured at fair value outside profit and loss did not give rise to any commission expenses in
FY 2018, just as in the previous year.
N E T T I N G
The following financial assets and liabilities are subject to contractual netting arrangements:
Offsetting of financial assets
€ million
Financial assets as at
30 Sep 2018
Derivative financial assets
Cash and cash equivalents
Financial assets as at
30 Sep 2017
Derivative financial assets
Cash and cash equivalents
Gross Amounts
of financial
assets
Gross amounts of
financial liabilities
set off
Net amounts of financial
assets presented in the
balance sheet
Related amounts not set off
in the balance sheet
Financial
liabilities
Cash Collateral
received
Net
Amount
525.0
5,900.4
295.3
6,222.3
–
3,352.4
–
3,706.2
525.0
2,548.0
295.3
2,516.1
78.5
–
87.5
–
–
–
–
–
446.5
2,548.0
207.8
2,516.1
Offsetting of financial liabilities
Gross Amounts
of financial
liabilities
Gross amounts
of financial
assets set off
Net amounts of financial
liabilities presented in the
balance sheet
Related amounts not set off
in the balance sheet
Financial
assets
Cash Collateral
granted
Net
Amount
78.5
5,795.3
267.6
5,639.3
–
3,352.4
–
3,706.2
78.5
2,442.9
267.6
1,933.1
78.5
–
87.5
–
–
–
–
–
–
2,442.9
180.1
1,933.1
€ million
Financial liabilities as at
30 Sep 2018
Derivative financial liabilities
Financial liabilities
Financial liabilities as at
30 Sep 2017
Derivative financial liabilities
Financial liabilities
Financial assets and financial liabilities are only netted in the balance sheet if a legally enforceable right to netting exists
and the Company intends to settle on a net basis.
The contracts for financial instruments are based on standardised master agreements for financial derivatives (including
ISDA Master Agreement, German master agreement for financial derivatives), creating a conditional right to netting
contingent on defined future events. Under the contractual agreements all derivatives contracted with the corresponding
counterparty with positive or negative fair values are netted in that case, resulting in a net receivable or payable in the
amount of the balance. As this conditional right to netting is not enforceable in the course of ordinary business
transactions and thus the criteria for netting is not met, the derivative financial assets and liabilities are carried at their
gross amounts in the balance sheet at the reporting date.
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
239
Financial assets and liabilities in the framework of the cash pooling scheme are shown on a net basis if there is a right
to netting in ordinary business transactions and the Group intends to settle on a net basis.
(37) Capital management
TUI Group’s capital management ensures that our goals and strategies can be achieved in the interest of our
share- / bond- and credit-holders as well as other stakeholders. The primary objectives of the Group are as follows:
• Ensuring sufficient liquidity for the Group
• Profitable growth and a sustainable increase in TUI Group’s value
• Strengthening our cash generation allowing to invest, pay dividends and strengthen the balance sheet
• Maintaining sufficient debt capacity and an at least stable credit rating
Key management variables used in capital management to measure and control the above goals are Return On Invested
Capital (ROIC), the leverage ratio and the coverage ratio, presented in the table below. TUI Group’s financial policy aims
for a leverage ratio of 3.00 (x) to 2.25 (x) and a coverage ratio of 5.75 (x) to 6.75 (x).
TUI Group’s financial and liquidity management for all Group subsidiaries is centrally operated by TUI AG, which acts as
the Group’s internal bank. Financing and refinancing requirements, derived from the multi-year finance budget, are
satisfied by the timely conclusion of appropriate financing instruments. The short-term liquidity reserve is safeguarded
by syndicated credit facilities, bilateral bank loans and liquid funds. Moreover, through intra-Group cash pooling the
cash surpluses of individual Group companies are used to finance the cash requirements of other Group companies.
240
N O T E S » N o Te S o N T H e C o N So lI D ATe D S TATe M e N T o f f I N A N C I A l p o S I T I o N
Key figures of capital risk management
€ million
Ø Invested Capital
Underlying EBITA
ROIC
in %
Gross financial liabilities
Discounted value of financial commitments from lease, rental and leasing agreements
Defined benefit obligation recognised on the balance sheet
EBITDAR
Leverage Ratio
EBITDAR
Net interest expense
⅓ of long-term leasing and rental expenses
Coverage Ratio
Reconciliation to EBITDAR
€ million
EBITA (continuing operations)*
Amortisation (+) / write-backs (–) of other intangible assets and
depreciation (+) / write-backs (–) of property, plant and equipment
EBITDA (continuing operations)
Long-term rental, leasing and leasing expenses
EBITDAR
* The reconciliation from EBITA to earnings before income taxes is shown in the segment reporting.
2018
4,978.2
1,147.0
23.0
2,442.9
2,653.7
869.7
2,219.9
2.7
2,219.9
88.7
240.5
6.7
2017
4,667.7
1,102.1
23.6
1,933.1
2,619.3
1,070.4
2,240.9
2.5
2,240.9
119.2
250.0
6.1
2018
2017
1,060.2
1,026.5
438.3
1,498.5
721.4
2,219.9
464.4
1,490.9
750.0
2,240.9
N O T E S » N o T e S o N T H e C A S H f l o w S TAT e M e N T
241
Notes on the cash flow statement
The cash flow statement shows the flow of cash and cash equivalents on the basis of a separate presentation of cash
inflows and outflows from operating, investing and financing activities. The effects of changes in the group of consolidated
companies are eliminated. The cash flows are shown for continuing operations and the discontinued operation.
In the period under review, cash and cash equivalents rose by € 31.9 m to € 2,548.0 m.
(38) Cash inflow from operating activities
Based on the Group result after tax, the cash flow from operating activities is derived using the indirect method. In the
financial year under review, the cash inflow from operating activities amounted to € 1,150.9 m (previous year € 1,583.1 m).
In the period under review, the cash inflow included interest of € 29.9 m (previous year € 17.7 m) and dividends of € 226.5 m
(previous year € 121.7 m). Income tax payments resulted in a cash outflow of € 236.0 m (previous year € 146.1 m).
(39) Cash outflow from investing activities
In FY 2018, the cash outflow from investing activities totalled € 845.7 m (previous year € 687.7 m). The cash flow from
investing activities includes a cash outflow for capital expenditure related to property, plant and equipment and intangible
assets of € 956.2 m, including € 2.2 m for interest capitalised as borrowing costs (previous year € 4.0 m). The Group also
recorded a cash inflow of € 192.4 m from the sale of property, plant and equipment and intangible assets. The item also
includes a cash outflow of € 135.6 m in connection with the acquisition of consolidated companies, including € 135.1 m
relating to the Destination Experiences and Hotels & Resorts segments. The Group recorded a cash inflow of € 94.1 m
from the sale of consolidated companies and an investment. In the period under review, the acquisition of associates
and a joint venture as well as the capital increase of an associate, an advance payment for an investment and the investment
of cash and cash equivalents in a money market fund resulted in an outflow of cash for other assets of € 40.4 m.
(40) Cash outflow from financing activities
The cash outflow from financing activities totals € 236.9 m (previous year € 733.8 m). TUI AG recorded an inflow of cash
of € 422.9 m from the issue of an unsecured Schuldschein after deducting borrowing costs. TUI Group companies took
out further financial liabilities worth € 11.3 m. A further cash outflow of € 162.7 m related to the redemption of financial
liabilities, including € 106.5 m for finance lease obligations (previous year € 97.8 m). The external revolving credit facility
to control the seasonality of the Group’s cash flows and liquidity was not used as at the balance sheet day. An amount
of € 110.8 m was used for interest payments, while a cash outflow of € 381.8 m related to dividend payments to TUI AG
shareholders and a further outflow of € 53.5 m related to dividend payments to minority shareholders. The sale of
shares in TUI AG held by the Employee Benefit Trust of TUI Travel Ltd. in the prior year gave rise to an inflow of € 32.7 m
in October 2017. An amount of € 1.0 m was spent to purchase shares issued to employees. The issue of employee shares
resulted in a cash inflow of € 6.8 m.
242
N O T E S » N o T e S o N T H e C A S H f l o w S TAT e M e N T, o T H e r N o T e S
(41) Development of cash and cash equivalents
Cash and cash equivalents comprise all liquid funds, i. e. cash in hand, bank balances and cheques.
Cash and cash equivalents declined by € 36.4 m (previous year € 49.1 m) due to foreign exchange effects.
Other notes
(42) Services of the auditors of the consolidated financial statements
TUI AG’s consolidated financial statements have been audited by Deloitte GmbH Wirtschaftsprüfungsgesellschaft.
Since FY 2017, Dr Hendrik Nardmann has been the auditor in charge. Total expenses for the services provided by the
auditors of the consolidated financial statements in FY 2018 break down as follows:
Services of the auditors of the consolidated financial statements
€ million
2018
2017
Audit fees for TUI AG and subsidiaries in Germany
Audit fees
Review of interim financial statements
Other audit related services
Other certification and measurement services
Consulting fees
Tax advisor services
Other services
Total
3.4
3.4
1.7
0.2
1.9
0.1
0.0
0.1
5.4
2.9
2.9
1.1
–
1.1
–
0.1
0.1
4.1
(43) Remuneration of Executive and Supervisory Board members acc. to section 314 HGB
In the completed financial year, the remuneration paid to Executive Board members totalled € 3,792.8 k (previous year
€ 3,794.7 k).
Pension payments for former Executive Board members or their surviving dependants totalled € 4,963.6 k (previous
year € 13,497.1 k) in the completed financial year. Pension obligations for former Executive Board members and their
surviving dependants amounted to € 63,738.2 k (previous year € 64,683.5 k) at the balance sheet date.
Disclosures of the relevant amounts for individual Board members and further details on the remuneration system are
provided in the Remuneration Report included in the Management Report.
N O T E S » o T H e r N oT e S
243
(44) Use of exemption provision
The following German subsidiaries fully included in consolidation made use of the exemption provision in accordance
with section 264 (3) of the German Commercial Code (HGB):
Use of exemption provisions
Berge & Meer Touristik GmbH, Rengsdorf
DEFAG Beteiligungsverwaltungs GmbH I, Hanover
DEFAG Beteiligungsverwaltungs GmbH III, Hanover
FOX-TOURS Reisen GmbH, Rengsdorf
Hapag-Lloyd Executive GmbH, Langenhagen
Hapag-Lloyd Kreuzfahrten GmbH, Hamburg
Last-Minute-Restplatzreisen GmbH, Baden-Baden
Leibniz Service GmbH, Hanover
L’tur tourismus GmbH, Baden-Baden
MEDICO Flugreisen GmbH, Baden-Baden
MSN 1359 GmbH, Hanover
Preussag Beteiligungsverwaltungs GmbH IX , Hanover
ProTel Gesellschaft für Kommunikation mbH, Rengsdorf
Robinson Club GmbH, Hanover
TC V Touristik-Computerverwaltungs GmbH, Baden-Baden
TIC S GmbH Touristische Internet und Call Center Services,
Baden-Baden
TUI 4 U GmbH, Bremen
(45) Related parties
TUI aqtiv GmbH, Hanover
TUI Aviation GmbH, Hanover
TUI Beteiligungs GmbH, Hanover
TUI Business Services GmbH, Hanover
TUI Customer Operations GmbH, Hanover
TUI Deutschland GmbH, Hanover
TUI Group Services GmbH, Hanover
TUI-Hapag Beteiligungs GmbH, Hanover
TUI Hotel Betriebsgesellschaft mbH, Hanover
TUI Immobilien Services GmbH, Hanover
TUI InfoTec GmbH, Hanover
TUI Leisure Travel Service GmbH, Neuss
TUI Magic Life GmbH, Hanover
TUIfly GmbH, Langenhagen
TUIfly Vermarktungs GmbH, Hanover
Wolters Reisen GmbH, Stuhr
Apart from the subsidiaries included in the consolidated financial statements, TUI AG, in carrying out its ordinary business
activities, maintains indirect or direct relationships with related parties. Related parties controlled by the TUI Group or
over which the TUI Group is able to exercise a significant influence are shown in the list of shareholdings published in the
Federal Gazette (www.bundesanzeiger.de). Apart from pure equity investments, related parties also include companies
that supply goods or provide services for TUI Group companies.
Financial obligations from order commitments vis-à-vis related parties primarily relate to the purchasing of hotel services.
TUI Group also has obligations of € 272.7 m (previous year € 613.2 m) from order commitments vis-à-vis the related
company TUI Cruises.
244
Transactions with related parties
€ million
Services provided by the Group
Management and consultancy services
Sales of tourism services
Other services
Total
Services received by the Group
In the framework of rental and leasing agreements
Purchase of hotel services
Distribution services
Other services
Total
Transactions with related parties
€ million
Services provided by the Group to
non-consolidated Group companies
joint ventures
associates
other related parties
Total
Services received by the Group from
non-consolidated Group companies
joint ventures
associates
other related parties
Total
N O T E S » o T H e r N oT e S
2018
2017
92.8
104.3
1.5
198.6
47.6
352.2
7.9
14.3
422.0
104.2
79.2
0.7
184.1
46.6
253.1
8.0
11.3
319.0
2018
2017
1.0
95.5
39.1
63.0
198.6
6.5
306.7
94.4
14.4
422.0
0.7
92.0
28.8
62.6
184.1
6.6
264.2
34.5
13.7
319.0
Transactions with joint ventures and associates are primarily effected in the Tourism segment. They relate in particular
to the tourism services of the hotel companies used by the Group’s tour operators.
All transactions with related parties were executed on an arm’s length basis, applying international comparable uncontrolled
price methods in accordance with IAS 24.
N O T E S » o T H e r N oT e S
245
Receivables against related parties
€ million
30 Sep 2018
30 Sep 2017
Trade receivables from
non-consolidated Group companies
joint ventures
associates
other related parties
Total
Advances and loans to
non-consolidated Group companies
joint ventures
associates
Total
Payments on account to
joint ventures
Total
Other receivables from
non-consolidated Group companies
joint ventures
associates
other related parties
Total
Payables due to related parties
€ million
Trade payables due to
joint ventures
associates
other related parties
Total
Financial liabilities due to
non-consolidated Group companies
joint ventures
Total
Other liabilities due to
non-consolidated Group companies
joint ventures
associates
key management personnel
Total
0.1
33.9
2.8
1.1
37.9
0.3
13.2
5.5
19.0
16.8
16.8
2.1
11.7
1.0
34.1
14.8
2.2
18.8
4.9
0.3
26.2
0.3
4.2
6.8
11.3
21.2
21.2
1.5
3.8
1.6
–
6.9
30 Sep 2018
30 Sep 2017
42.2
6.2
0.1
48.5
6.7
152.7
159.4
6.6
20.8
8.0
13.1
48.5
36.2
4.1
0.1
40.4
6.7
175.7
182.4
5.7
13.7
1.9
7.9
29.2
Liabilities to joint ventures included liabilities from finance leases of € 152.7 m (previous year € 168.4 m).
The share of result of associates and joint ventures is shown separately by segment in segment reporting.
The Russian entrepreneur Alexey Mordashov, CEO of OOO Severgroup, has been a member of TUI AG’s Supervisory
Board since February 2016 and held 24.998 % of the shares in TUI AG as at the balance sheet date.
246
N O T E S » o T H e r N oT e S
At the balance sheet date, the joint venture Riu Hotels S.A. holds 3.4 % of the shares in TUI AG. Luis Riu Güell and
Carmen Riu Güell (a member of TUI AG’s Supervisory Board) hold 51 % of the shares in Riu Hotels S. A. At the balance
sheet date there is a compensation claim towards the other shareholders of the Riu Group of € 34.3 m, resulting from
payments made by TUI Group, which relate to the other shareholders of the Riu Group.
In accordance with IAS 24, key management functions within the Group, the Executive Board and the Supervisory Board
are related parties whose remuneration has to be listed separately.
Remuneration of Executive and Supervisory Board
€ million
Short-term benefits
Post-employment benefits
Other long-term benefits (share-based payments)
Termination benefits
Total
2018
12.5
2.2
7.9
0.2
20.3
2017
13.5
1.5
3.5
–
18.5
Post-employment benefits are transfers to or reversals of pension provisions for Executive Board members active in
the reporting period. The expenses mentioned do not meet the definition of remuneration for Executive and Supervisory
Board members under German accounting rules.
Pension provisions for active Executive Board members total € 22.1 m (previous year € 19.7 m) as at the balance sheet date.
In addition, provisions and payables of € 20.6 m (previous year € 10.2 m) are recognised relating to the long-term
incentive programme.
(46) International Financial Reporting Standards (IFRS) not yet applied
New standards endorsed by the EU, but applicable after 30 Sep 2018
Applicable
from
1 Jan 2018
1 Jan 2018
1 Jan 2019
Standard
Amendments to IFRS 2
Classification and
Measurement of
Share-based Payment
transactions
IFRS 9
Financial Instruments
Amendments to IFRS 9
Prepayment Features
with Negative
Compensation
Amendments
Expected impact on financial
position and performance
The amendments clarify the accounting for certain share based payment
transactions.
Not material.
The new standard replaces the current guidance in IA S 39 on classification
and measurement of financial assets and introduces new rules for hedge
accounting. The existing impairment rules are being superseded by a new
model based on expected credit losses.
The amendments serve to enable entities applying IFRS 9 that hold debt
instruments with a prepayment feature under which a party receives or pays
a reasonable compensation in the event of early termination of the contract
to measure these instruments at amortised cost or at fair value through
other comprehensive income. Until the effective date of the amendments,
such instruments have to be measured at fair value through profit or loss.
The likely effects are
explained below.
Not material.
N O T E S » o T H e r N oT e S
247
New standards endorsed by the EU, but applicable after 30 Sep 2018
IFRS 15
Revenue from Contracts
with Customers
1 Jan 2018
1 Jan 2018
Clarifications to
IFRS 15
Revenue from Contracts
with Customers
Amendments to IAS 40
Transfer of Investment
Property
1 Jan 2018
1 Jan 2018
IFRIC 22
Foreign Currency
Transactions and
Advance Consideration
IFRS 16
Leases
1 Jan 2019
IFRIC 23
Uncertainty over
Income Tax Treatments
1 Jan 2019
IFRS 15 combines and supersedes the guidance on revenue recognition
comprised in various standards and interpretations so far. It establishes a
single, comprehensive framework for revenue recognition, to be applied
across industries and for all categories of revenue transactions, specifying
which amount of revenue and at which point in time or over which time
period revenue is to be recognised. IFRS 15 replaces, amongst others,
IA S 18 and IA S 11.
The amendments comprise clarifications of the guidance on identifying
performance obligations, the principal versus agent assessment (i. e., gross
vs. net revenue presentation) as well as the accounting for revenue from
licences at a ‘point in time’ or ‘over time’. In addition, it introduces practical
expedients to simplify first-time adoption.
The amendments set out the conditions, according to which property under
construction or development, which was previously classified as inventory,
could be transferred to investment property in case of an evident change in
use (and reversal).
The interpretation clarifies the exchange rate to be used when an entity
has received or paid advance consideration in a foreign currency. The date
of transaction for the purpose of determining the exchange rate to use on
initial recognition of the related asset, expense or income is the date on
which the entity initally recognises the advance consideration.
IFRS 16 replaces the current IA S 17 and its interpretations. For lessees, there
is no longer the requirement to classify into finance and operating leases. In-
stead all leases are accounted for according to the so-called ‘Rights of Use’
approach. In the statement of financial position a lessee is to recognise an
asset for the right to use the leased item and a liability for the future lease
payments. There are optional exemptions for short-term leases (< 12 months)
and so-called small-ticket leases. For lessors, the accounting stays largely
unchanged. Lessors will continue to classify leases in accordance with the
criteria transfered from IA S 17. In addition, IFRS 16 includes several other new
requirements, in particular a new definition of a lease, on sale and leaseback
transactions and the accounting for subleases.
The interpretation complements the rules of IA S 12 on the accounting
for actual and deferred taxes to clarify the accounting for uncertainties
over income tax treatments and transactions by taxation authorities or
fiscal courts.
IFRS 15 and the clarifications
to IFRS 15 will affect the
Group’s financial statements.
The possible effects are
explained below.
Not material.
No impact as the current
accounting is in line with the
new interpretation.
The new standard will have
significant effects on the Group’s
financial statements. The likely
effects are explained below.
Not material.
248
N O T E S » o T H e r N oT e S
The amendments to IFRS 4 Applying IFRS 9 with IFRS 4 of 12 September 2016, endorsed by the EU on 3 November 2017
and effective from 1 January 2018, are not relevant for TUI Group.
I F R S 15
TUI Group will first apply IFRS 15 from 1 October 2018 using the retrospective method. This means that the prior-year
reference period is presented in accordance with IFRS 15. Revenue reserves will therefore decline by a low double-digit
million amount as at 1 October 2017, primarily due to the three following circumstances:
• Revenue recognition by the tour operator: Depending on the specific contract terms, the tour operation business
currently predominantly recognises revenue as at the date of the start of a journey, i. e. at a point in time. The new
rules of IFRS 15 will predominantly result in revenue recognition over time. This will result in later revenue and cost
recognition.
• Change fees: Revenue from rebooking travel services will no longer be recognised at the date of rebooking but will
be recognised at the point in time or over time when the service is provided.
• Following IFRS 15 adoption, for some business models within the tour operator business, revenues, which TUI
currently presents on a gross basis, will be presented on a net basis. This effect will be in the low-triple-digit million
euro range. The effect results in particular from revised criteria regarding the assessment of whether TUI provides
services for its own account (gross revenue) or for account of a third party (net revenue).
The effects of the recognition of additional revenue and tourism expenses at the beginning of a financial year and
lower revenue and tourism expenses at the end of a financial year will almost fully offset each other at constant
business volume.
The new rules will result in a material expansion of the qualitative and quantitative disclosure requirements.
I F R S 9
TUI Group has assessed the impact of the application of IFRS 9 Financial Instruments in a Group-wide project. Overall,
we do not expect any major effects on the consolidated financial statements.
• There will be no significant measurement effects from the reclassification of financial assets based on the business
model for managing those financial assets and the related contractual cash flows. In our view, all financial assets
currently measured at amortised cost satisfy the conditions for classification at amortised cost under IFRS 9.
• For the individual reclassification, we will irrevocably allocate our equity instruments currently classified as financial
assets ‘available for sale’ to the new measurement category ‘at fair value through OCI’. We expect the future
measurement of shareholdings previously measured at cost, in particular due to the immaterial relevance of
non-consolidated subsidiaries, joint ventures and associates, to increase the carrying amount by € 22.8 m as at the
date of first-time application. On the other hand, debt instruments currently classified as ‘financial assets available
for sale’ will have to be measured at fair value through profit and loss in future. We do not expect this to create any
significant additional volatility in results.
• Due to the transition from the incurred loss model to the new expected loss model, impairment charges will be
recognised in profit or loss at an earlier point in time in the future. The expected credit losses are to be determined
based on historical data and forward-looking information. For the majority of its financial assets, TUI Group will use
the simplified model, in which all expected losses are considered at initial recognition. For all other financial assets
measured at amortised cost (e. g. tourism loans), we will determine the impairments based on the general expected
credit loss model. Compared with the current allowances the transition to the new impairment model will result in an
increase in a low double digit million euro range, which is to be recognised in revenue reserves.
• Recognition of financial liabilities will not be affected. The new rules only relate to recognition of financial liabilities
for which the fair value option is elected. The Group does not make use of that option.
• Regarding the new rules on hedge accounting, we will make use of the option to continue to apply the hedge accounting
rules of IAS 39 as the adaption of the treasury management systems will not be completed before FY 2019.
N O T E S » o T H e r N oT e S
249
The reconciliation of the carrying amounts and loss allowances in transitioning from IAS 39 to IFRS 9 will be presented
in a reconciliation table. We will use the option not to restate the prior-year comparatives in the transition.
I F R S 1 6
The changes in lessee accounting of leases resulting from IFRS 16 will have a significant impact on all parts of the
consolidated financial statements and the presentation of the Group’s financial position, net assets and earnings position:
• Statement of financial position: This far, the payments for operating leases had to be disclosed in the Notes only. In
future, the rights and obligations arising from all leases must be recognised as rights of use and lease liabilities in the
lessee’s statement of financial position. The right-of-use asset is initially recognised at the present value of future
lease payments plus initial direct costs and is subsequently depreciated over the lease term. The lease liability is
initially measured at the present value of the lease payments made during the term of the lease. Following initial
recognition, the carrying amount is increased for the effective interest and reduced by lease payments made. Due to
the obligations from operating leases presented in Note 34, TUI Group expects a material increase in lease liabilities
and fixed assets as at the date of first-time application. The equity ratio will decline as a result of this balance sheet
extension. The material increase in lease liabilities will cause a corresponding increase in net financial liabilities.
• Income statement: In future, a lessee will recognise depreciation on the right-of-use asset and interest expenses
from unwinding the discount on lease liabilities instead of lease expenses. This change will result in a significant
improvement in EBITDA and EBITA and a moderate improvement in EBIT.
• Cash flow statement: The payments representing a repayment of principal or interest portion of a lease liability will
be included in the cash flow from financing activities in future. Only payments that have not been included in the
determination of the lease liability and payments from short-term leases and low-value assets for which TUI Group
makes use of respective exemptions will be allocated to cash flows from operating activities. This change in presentation
in comparison to current recognition of operating lease expenses will result in an increase in cash flows from operating
activities and a decrease in cash flows from financing activities.
• Notes: The new requirements will result in a significant expansion of disclosure requirements for lessees and lessors
in comparison to IAS 17.
TUI Group has launched a Group-wide project to assess the impact and to implement the new requirements.
Currently, TUI Group has decided to make use of the exemptions for short-term leases and low-value assets. Further,
the new rules will not be applied to leases for intangible assets. For car and IT leases, comprising both lease and
non-lease components, we will make use of the simplification to avoid accounting for lease components separately from
non-lease components. We also intend to present intra-Group leases – in line with internal control – as operating
leases in line with IAS 17 in segment reporting in accordance with IFRS 8.
The Group-wide detailed assessment of all external leases included within the implementation project and the assessment
of the impact of the new rules on accounting for maintenance provisions for leased aircraft have not yet been fully
completed. For that reason and due to the Group’s large number of external and internal leases, a reliable estimate of
the quantitative effects is currently not yet possible.
Based on the modified retrospective approach, TUI Group will apply the new rules from 1 October 2019. The Group may
use various practical expedients in transitioning to the new rules, and no decisions have yet been taken on how to
exercise these options. Upon first-time application, the cumulative effect of the transition will be recognised in equity
outside profit and loss. The prior-year comparatives for FY 2019, the year prior to first-time application, will not be
restated retrospectively.
250
N O T E S » o T H e r N oT e S
The following amendments and new standards have not yet been endorsed by the European Union.
New standards and interpretations not yet endorsed by the EU and applicable after 30 Sep 2018
Applicable
from
1 Jan 2019
Standard
Amendments to IAS 28
Long-term Interests in
Associates and Joint
Ventures
1 Jan 2019
1 Jan 2019
Various
Improvements to
IFRS (2015 – 2017)
Amendments to IAS 19
Plan Amendment,
Curtailment or
Settlement
Framework
Amendments to
References to
Conceptual Framework
in IFRS Standards
IFRS 3
Definition of a Business
1 Jan 2020
1 Jan 2020
Amendments
The amendments clarify that the impairment rules of IFRS 9 apply to
long-term interests in associates and joint ventures that, in substance,
form part of the net investment in the associate or joint venture to which
the equity method is applied. Nevertheless, (as a second step) these
long-term interests will have to be taken into account when the IA S 28
loss allocations are adjusted to the value of the long-term interests.
The various amendments from the annual improvement project 2015 – 2017
cycle affect minor changes to IFRS 3, IFRS 13, IA S 12 and IA S 23.
Where an amendment, curtailment or settlement of a defined benefit
plan occurs, the amendments require a company to use updated actuarial
assumptions to determine its current service cost and net interest for the
period. The effect of the asset ceiling is disregarded when calculating the gain
or loss on any settlement of the plan and is dealt with separately in other
comprehensive income (OCI).
The revised Framework includes updated definitions of asset, liabilities as
well as new guidelines around measurement, derecognition, presentation
and disclosures. References from existing standards to the Framework are
being updated. The revised Framework is not subject to the endorsement
process.
The amendments provide more guidance on the definition of a ‘business’
and aim at facilitating the assessment whether a transaction results in the
recognition of a group of assets or a business acquisition.
IAS 1 & IAS 8
Definition of Material
1 Jan 2020
The concept of materiality is an important concept when preparing accounts
in accordance with IFRS. The amendments clarify the definition of material
and how it should be applied. In addition the amendments ensure that the
definition of material is consistent across all IFRS Standards.
Expected impact on financial
position and performance
Not material.
Not material.
TUI Group does currently not
expect any material impacts.
No impact.
TUI Group will review the
impacts of the interpretation
on the consolidated financial
statements in due time.
We currently do not expect
any material impacts.
Not material.
IFRS 17 Insurance Contracts, newly published by the IASB on 18 May 2017, is not of relevance to TUI Group.
N O T E S » o T H e r N oT e S
251
(47) TUI Group Shareholdings
Company
Country
Capital share in %
Malta
Italy
Ireland
Malta
Namibia
Luxembourg
France
South Africa
South Africa
Croatia
Germany
Dominican Republic
Germany
Germany
France
Bulgaria
Cape Verde
Italy
Mauritius
Cape Verde
Tunisia
Switzerland
United States
Greece
Luxembourg
Greece
Morocco
Singapore
Spain
Egypt
Spain
Consolidated companies
Tourism
Absolut Holding Limited, Qormi
Acampora Travel S.r.l., Sorrent
Adehy Limited, Dublin1
Advent Insurance PCC Limited, Qormi
Africa Focus Tours Namibia Pty. Ltd., Windhuk1
Antwun S.A., Clémency
Arccac Eurl, Bourg St. Maurice
ATC African Travel Concept Pty. Ltd., Cape Town1
ATC-Meetings and Conferences (Pty) Ltd, Cape Town1
B2B d.o.o., Dubrovnik1
Berge & Meer Touristik GmbH, Rengsdorf
Blue Travel Partner Services S.A., Santo Domingo1
Boomerang-Reisen GmbH, Trier
Boomerang-Reisen Vermögensverwaltungs GmbH, Trier
Brunalp SARL, Venosc
BU RIUSA II EOOD, Sofia
Cabotel-Hoteleria e Turismo Lda., Santiago
Cassata Travel s.r.l., Cefalù (Palermo)1
Citirama Ltd., Quatre Bornes1
Club Hotel C V SA , Santa Maria
Club Hôtel Management Tunisia SARL, Djerba
Cruisetour AG, Zurich
Crystal Holidays, Inc, Wilmington (Delaware)
Daidalos Hotel- und Touristikunternehmen A.E., Athens
Darecko S.A., Clémency
Destination Services Greece Travel and Tourism SA, Piraeus1
Destination Services Morocco SA1
Destination Services Singapore Pte Limited, Singapore1
Destination Services Spain SL, Barcelona1
Egyptian Germany Co. for Hotels (L.T.D), Cairo
Elena SL, Palma de Mallorca
Entreprises Hotelières et Touristiques PALADIEN Lena Mary A.E., Argolis Greece
Malta
Europa 2 Ltd, Valletta
United Kingdom
Explorers Travel Club Limited, Luton
United Kingdom
First Choice (Turkey) Limited, Luton
United Kingdom
First Choice Holiday Hypermarkets Limited, Luton
United Kingdom
First Choice Holidays & Flights Limited, Luton
Ireland
First Choice Land (Ireland) Limited, Dublin
United Kingdom
First Choice Travel Shops (SW ) Limited, Luton
United Kingdom
First Choice Travel Shops Limited, Luton
Portugal
Follow Coordinate Hotels Portugal Unipessoal Lda, Albufeira
Germany
FOX-TOURS Reisen GmbH, Rengsdorf
India
Fritidsresor Tours & Travels India Pvt Ltd, Bardez, Goa
Turkey
GBH Turizm Sanayi Isletmecilik ve Ticaret A.S., Istanbul
GE AFOND Número Dos Fuerteventura S.A., Las Palmas, Gran Canaria Spain
Spain
GE AFOND Número Uno Lanzarote S.A., Las Palmas, Gran Canaria
Turkey
Germantur Turizm Ticaret A.S., Izmir
France
Groupement Touristique International S.A.S., Lille
Gulliver Travel d.o.o., Dubrovnik1
Croatia
1 Destination Management of Hotelbeds
99.9
100
100
100
100
100
100
50.1
100
100
100
100
100
87.2
100
100
100
66
100
100
100
100
100
89.8
100
100
100
100
100
66.6
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
70
252
N O T E S » o T H e r N oT e S
Hannibal Tour SA , Tunis
Hapag-Lloyd (Bahamas) Limited, Nassau
Hapag-Lloyd Kreuzfahrten GmbH, Hamburg
Hellenic EFS Hotel Management E.P.E., Athens
Holiday Center S.A., Cala Serena/Cala d'Or
Holidays Services S.A., Agadir
Hotelbeds Costa Rica SA , San José1
Iberotel International A.S., Antalya
Iberotel Otelcilik A.S., Istanbul
Imperial Cruising Company SARL, Heliopolis-Cairo
Incorun SA S, Saint Denis1
Inter Hotel SARL, Tunis
Intercruises Shoreside & Port Services Canada, Inc., Quebec1
Intercruises Shoreside & Port Services PT Y LTD, Sydney1
Intercruises Shoreside & Port Services S.a.r.l., Paris1
Intercruises Shoreside & Port Services Sam, Monaco1
Intercruises Shoreside & Port Services, Inc., State of Delaware1
Itaria Limited, Nicosia
Jandia Playa S.A., Morro Jable/Fuerteventura
Jetair Real Estate N.V., Brussels
Kras B.V., Ammerzoden
Kurt Safari (Pty) Ltd, White River – Mpumalanga1
Label Tour EURL, Levallois Perret
Lapter Eurl, Macot La Plagne
Last-Minute-Restplatzreisen GmbH, Baden-Baden
Le Passage to India Tours and Travels Pvt Ltd, New Delhi1
Lodges & Mountain Hotels SARL, Notre Dame de Bellecombe, Savoie
l'tur GmbH, Baden-Baden
L'TUR Suisse AG, Dübendorf/ZH
Lunn Poly Limited, Luton
Luso Ds - Agência de Viagens Unipessoal Lda, Faro1
Lusomice Unipessoal Lda., Lisbon1
Magic Hotels SA , Tunis
MAGIC LIFE Assets GmbH, Vienna
Magic Life Egypt for Hotels LLC, Sharm el Sheikh
Magic Life Greece Tourist Enterprises E.P.E., Athens
Magic Tourism International S.A., Tunis
Manahe Ltd., Quatre Bornes1
Medico Flugreisen GmbH, Baden-Baden
Meetings & Events International Limited, Luton1
Meetings & Events Spain S.L.U., Palma de Mallorca1
Meetings & Events UK Limited, Luton1
Morvik EURL, Bourg Saint Maurice
MX RIUSA II S.A. de C.V., Cabo San Lucas
Nazar Nordic AB, Malmö
Nordotel S.A., San Bartolomé de Tirajana
Nouvelles Frontières Senegal S.R.L., Dakar
Nungwi Limited, Sansibar
Ocean College LLC, Sharm el Sheikh
Ocean Ventures for Hotels and Tourism Services SAE, Sharm el Sheikh
Pacific World (Beijing) Travel Agency Co., Ltd., Peking1
Pacific World (Shanghai) Travel Agency Co. Limited, Shanghai1
Pacific World Meetings & Events (Thailand) Limited, Bangkok1, 2
Pacific World Meetings & Events Hellas Travel Limited, Athens1
1 Destination Management of Hotelbeds
2 Controlling influence
Tunisia
Bahamas
Germany
Greece
Spain
Morocco
Costa Rica
Turkey
Turkey
Egypt
France
Tunisia
Canada
Australia
France
Monaco
United States
Cyprus
Spain
Belgium
Netherlands
South Africa
France
France
Germany
India
France
Germany
Switzerland
United Kingdom
Portugal
Portugal
Tunisia
Austria
Egypt
Greece
Tunisia
Mauritius
Germany
United Kingdom
Spain
United Kingdom
France
Mexico
Sweden
Spain
Senegal
Tanzania
Egypt
Egypt
China
China
Thailand
Greece
100
100
100
100
100
100
100
100
100
90
51
100
100
100
100
100
100
100
100
100
100
51
100
100
100
91
100
100
99.5
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
98
100
100
49
100
CompanyCountryCapital share in % N O T E S » o T H e r N oT e S
253
Pacific World Meetings & Events Hong Kong, Limited, Hong Kong1
Pacific World Meetings & Events SAM, Monaco1
Pacific World Meetings & Events Singapore Pte. Ltd, Singapore1
Pacific World Meetings and Events France SARL, Nanterre1
PATS N.V., Oostende
Preussag Beteiligungsverwaltungs GmbH IX , Hanover
Professor Kohts Vei 108 A S, Stabekk
Promociones y Edificaciones Chiclana S.A., Palma de Mallorca
ProTel Gesellschaft für Kommunikation mbH, Rengsdorf
RC Clubhotel Cyprus Limited, Limassol
RCHM S.A.S., Agadir
Rideway Investment Limited, London
Riu Jamaicotel Ltd., Negril
Riu Le Morne Ltd, Port Louis
RIUSA II S.A., Palma de Mallorca2
RIUSA NED B.V., Amsterdam
ROBINSON AUSTRIA Clubhotel GmbH, Villach-Landskron
Robinson Club GmbH, Hanover
Robinson Club Italia S.p.A., Marina di Ugento
Robinson Club Maldives Private Limited, Malé
Robinson Clubhotel Turizm Ltd. Sti., Istanbul
Robinson Hoteles España S.A., Cala d'Or
Robinson Hotels Portugal S.A., Vila Nova de Cacela
Robinson Otelcilik A.S., Istanbul
SER AC Travel GmbH, Zermatt
Skymead Leasing Limited, Luton
Société d'Exploitation du Paladien Marrakech SA , Marrakech
Société d'Investissement Aérien S.A., Casablanca
Société d'Investissement et d'Exploration du Paladien de Calcatoggio
(SIEPAC), Montreuil
Société d'investissement hotelier Almoravides S.A., Marrakech
Société Marocaine pour le Developpement des Transports
Touristiques S.A., Agadir
Sons of South Sinai for Tourism Services and Supplies SAE,
Sharm el Sheikh
Specialist Holidays, Inc., Mississauga, Ontario
Stella Polaris Creta A.E., Heraklion
STIVA RII Ltd., Dublin
Summer Times International Ltd., Quatre Bornes1
Summer Times Ltd., Quatre Bornes1
Sunshine Cruises Limited, Luton
Tantur Turizm Seyahat A.S., Istanbul
TC V Touristik-Computerverwaltungs GmbH, Baden-Baden
TdC Agricoltura Società agricola a r.l., Florence
TdC Amministrazione S.r.l., Florence
Tec4Jets B.V., Rijswijk ZH
Tec4Jets NV, Oostende
Tenuta di Castelfalfi S.p.A., Florence
Thomson Reisen GmbH, St. Johann
Thomson Services Limited, St. Peter Port
Thomson Travel Group (Holdings) Limited, Luton
TIC S GmbH Touristische Internet und Call Center Services,
Baden-Baden
Tigdiv Eurl, Tignes
1 Destination Management of Hotelbeds
2 Controlling influence
Hong Kong
Monaco
Singapore
France
Belgium
Germany
Norway
Spain
Germany
Cyprus
Morocco
United Kingdom
Jamaica
Mauritius
Spain
Netherlands
Austria
Germany
Italy
Maldives
Turkey
Spain
Portugal
Turkey
Switzerland
United Kingdom
Morocco
Morocco
France
Morocco
Morocco
Egypt
Canada
Greece
Ireland
Mauritius
Mauritius
United Kingdom
Turkey
Germany
Italy
Italy
Netherlands
Belgium
Italy
Austria
Guernsey
United Kingdom
Germany
France
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
67
100
100
100
100
100
100
100
100
84.1
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
CompanyCountryCapital share in % 254
N O T E S » o T H e r N oT e S
TLT Reisebüro GmbH, Hanover
Transfar - Agencia de Viagens e Turismo Lda., Faro
Travel Choice Limited, Luton
Travel Partner Mexico SA de C V, Mexico City1
T T Hotels Italia S.R.L., Rome
T T Hotels Turkey Otel Hizmetleri Turizm ve ticaret A S, Antalya
TUI (Cyprus) Limited, Nicosia
TUI (Suisse) AG, Zurich
TUI 4 U GmbH, Bremen
TUI Airlines Belgium N.V., Oostende
TUI Airlines Nederland B.V., Rijswijk
TUI Airways Limited, Luton
TUI aqtiv GmbH, Hanover
TUI Austria Holding GmbH, Vienna
TUI Belgium NV, Oostende
TUI Belgium Retail N.V., Zaventem
TUI BLUE AT GmbH, Schladming
TUI Bulgaria EOOD, Varna
TUI Curaçao N.V., Curaçao
TUI Customer Operations GmbH, Hanover
TUI Danmark A/S, Copenhagen
TUI Destination Services Cyprus, Nicosia
TUI Deutschland GmbH, Hanover
TUI Dominicana SA S, Higuey
TUI DS USA , Inc, Wilmington (Delaware)
TUI España Turismo SL, Palma de Mallorca
TUI Finland Oy Ab, Helsinki
TUI France SA S, Nanterre
TUI Hellas Travel Tourism and Airline A.E., Athens
TUI Holding Spain S.L., Palma de Mallorca
TUI Hotel Betriebsgesellschaft mbH, Hanover
TUI Ireland Limited, Luton
TUI Jamaica Limited, Montego Bay
TUI Leisure Travel Special Tours GmbH, Hanover
TUI Magic Life GmbH, Hanover
TUI Malta Limited, Pieta
TUI Mexicana SA de C V, Mexico
TUI Nederland Holding N.V., Rijswijk
TUI Nederland N.V., Rijswijk
TUI Nordic Holding AB, Stockholm
TUI Norge A S, Stabekk
TUI Northern Europe Limited, Luton
TUI Norway Holding A S, Stabekk
TUI Österreich GmbH, Vienna
TUI Pension Scheme (UK) Limited, Luton
TUI Poland Dystrybucja Sp. z o.o., Warsaw
TUI Poland Sp. z o.o., Warsaw
TUI PORTUGAL - Agencia de Viagens e Turismo S.A., Faro
TUI Reisecenter Austria Business Travel GmbH, Vienna
TUI Service AG, Altendorf
TUI Suisse Retail AG, Zurich
TUI Sverige AB, Stockholm
TUI Technology NV, Zaventem
TUI Travel (Ireland) Limited, Dublin
1 Destination Management of Hotelbeds
Germany
Portugal
United Kingdom
Mexico
Italy
Turkey
Cyprus
Switzerland
Germany
Belgium
Netherlands
United Kingdom
Germany
Austria
Belgium
Belgium
Austria
Bulgaria
Country of Curaçao
Germany
Denmark
Cyprus
Germany
Dominican Republic
United States
Spain
Finland
France
Greece
Spain
Germany
United Kingdom
Jamaica
Germany
Germany
Malta
Mexico
Netherlands
Netherlands
Sweden
Norway
United Kingdom
Norway
Austria
United Kingdom
Poland
Poland
Portugal
Austria
Switzerland
Switzerland
Sweden
Belgium
Ireland
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
74.9
100
100
100
100
100
CompanyCountryCapital share in % N O T E S » o T H e r N oT e S
255
TUI Travel Distribution N.V., Oostende
TUI UK Italia Srl, Turin
TUI UK Limited, Luton
TUI UK Retail Limited, Luton
TUI UK Transport Limited, Luton
TUIfly GmbH, Langenhagen
TUIfly Nordic AB, Stockholm
TUIfly Vermarktungs GmbH, Hanover
Tunisie Investment Services Holding S.A., Tunis
Tunisie Voyages S.A., Tunis
Tunisotel S.A.R.L., Tunis
Turcotel Turizm A.S., Istanbul
Turkuaz Insaat Turizm A.S., Ankara
Ultramar Express Transport S.A., Palma de Mallorca
Wolters Reisen GmbH, Stuhr
WonderCruises AB, Stockholm
WonderHolding AB, Stockholm
WOT Hotels Adriatic Management d.o.o., Zagreb
Zanzibar Beach Village Limited, Sansibar
All other segments
Absolut Insurance Limited, St. Peter Port
Asiarooms Pte Ltd, Singapore
B.D.S Destination Services Tours, Cairo
Canadian Pacific (UK) Limited, Luton
Cast Agencies Europe Limited, Luton
Cheqqer B.V., Rijswijk
Corsair S.A., Rungis
CP Ships (Bermuda) Ltd., Hamilton
CP Ships (UK) Limited, Luton
CP Ships Ltd., Saint John
DEFAG Beteiligungsverwaltungs GmbH I, Hanover
DEFAG Beteiligungsverwaltungs GmbH III, Hanover
First Choice Holidays Finance Limited, Luton
First Choice Holidays Limited, Luton
First Choice Olympic Limited, Luton
First Choice Overseas Holdings Limited, Luton
Hapag-Lloyd Executive GmbH, Langenhagen
I Viaggi del Turchese S.r.l., Fidenza
Jetset Group Holding (Brazil) Limited, Luton
Jetset Group Holding Limited, Luton
Leibniz-Service GmbH, Hanover
Mala Pronta Viagens e Turismo Ltda., Curitiba
Manufacturer's Serialnumber 852 Limited, Dublin
MSN 1359 GmbH, Hanover
Paradise Hotels Management Company LLC, Cairo
PM Peiner Maschinen GmbH, Hanover
Sovereign Tour Operations Limited, Luton
Thomson Airways Trustee Limited, Luton
travel-Ba.Sys GmbH & Co KG, Mülheim an der Ruhr
TUI Ambassador Tours Unipessoal Lda, Lisbon
TUI Aviation GmbH, Hanover
TUI Beteiligungs GmbH, Hanover
TUI Brasil Operadora e Agencia de Viagens LTDA , Curitiba
Belgium
Italy
United Kingdom
United Kingdom
United Kingdom
Germany
Sweden
Germany
Tunisia
Tunisia
Tunisia
Turkey
Turkey
Spain
Germany
Sweden
Sweden
Croatia
Tanzania
Guernsey
Singapore
Egypt
United Kingdom
United Kingdom
Netherlands
France
Bermuda
United Kingdom
Canada
Germany
Germany
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Germany
Italy
United Kingdom
United Kingdom
Germany
Brazil
Ireland
Germany
Egypt
Germany
United Kingdom
United Kingdom
Germany
Portugal
Germany
Germany
Brazil
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
83.5
100
100
100
100
CompanyCountryCapital share in %
256
N O T E S » o T H e r N oT e S
TUI Business Services GmbH, Hanover
TUI Canada Holdings, Inc, Toronto
TUI Chile Operador y Agencia de Viajes SpA, Santiago
TUI China Travel CO. Ltd., Peking
TUI Colombia Operadora y Agencia de Viajes SA S, Bogota
TUI Group Fleet Finance Limited, Luton
TUI Group Services GmbH, Hanover
TUI Group UK Healthcare Limited, Luton
TUI Group UK Trustee Limited, Luton
TUI Immobilien Services GmbH, Hanover
TUI India Private Limited, New Delhi
TUI InfoTec GmbH, Hanover
TUI International Holiday (Malaysia) Sdn. Bhd., Kuala Lumpur
TUI Leisure Travel Service GmbH, Neuss
TUI LTE Viajes S.A de C.V, Mexico City
TUI Spain, SLU, Madrid
TUI Travel Amber E&W LLP, Luton
TUI Travel Aviation Finance Limited, Luton
TUI Travel Common Investment Fund Trustee Limited, Luton
TUI Travel Group Management Services Limited, Luton
TUI Travel Group Solutions Limited, Luton
TUI Travel Holdings Limited, Luton
TUI Travel Limited, Luton
TUI Travel Nominee Limited, Luton
TUI Travel Overseas Holdings Limited, Luton
TUI-Hapag Beteiligungs GmbH, Hanover
Germany
Canada
Chile
China
Colombia
United Kingdom
Germany
United Kingdom
United Kingdom
Germany
India
Germany
Malaysia
Germany
Mexico
Spain
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Germany
Non-consolidated Group companies
Tourism
"Schwerin Plus" Touristik-Service GmbH, Schwerin
Airline Consultancy Services S.A.R.L., Casablanca
Ambassador Tours S.A., Barcelona
AMCP S.a.r.l., Montreuil
Atora GmbH i.L., Kiel
Best4Concept GmbH, Rengsdorf
Boomerang - Solutions GmbH, Trier
Boomerang Reisen - Pacific Tours AG, Zurich
Centro de Servicios Destination Management SA de C V, Cancun1
FIRST Reisebüro Güttler GmbH & Co. KG, Dormagen
FIRST Reisebüro Güttler Verwaltungs GmbH, Hanover
FIRST Travel GmbH, Hanover
Gebeco Verwaltungsgesellschaft mbH, Kiel
HANSE ATIC TOURS Reisedienst GmbH, Hamburg
Hapag-Lloyd Reisebüro Hagen GmbH & Co. KG, Hanover
Hapag-Lloyd Reisebüro Hagen Verwaltungs GmbH, Hanover
Hotel Club du Carbet S.A., Montreuil
HV Finance S.A.S., Levallois-Perret
Ikaros Travel A.E.(i.L.), Heraklion
Loc Vacances S.A.R.L., Chartres de Bretagne
L'TUR Polska Sp.z o.o., Stettin
L'TUR S.A.R.L., Schiltigheim
Lunn Poly (Jersey) Limited, St. Helier
Magic Life GmbH in Liqu., Vienna
Magyar TUI Utazásszervezö, Kereskedelmi és Szolgáltató Kft., Budapest Hungary
Germany
Morocco
Spain
France
Germany
Germany
Germany
Switzerland
Mexico
Germany
Germany
Germany
Germany
Germany
Germany
Germany
France
France
Greece
France
Poland
France
Jersey
Austria
1 Destination Management of Hotelbeds
100
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
80
100
100
100
100
100
95
100
100
75.1
75
100
50.2
100
70
70
100
100
100
100
100
100
100
100
100
CompanyCountryCapital share in %
N O T E S » o T H e r N oT e S
257
N.S.E. Travel and Tourism A.E. (i.L.), Athens
NE A Synora Hotels Limited (Hinitsa Beach), Porto Heli Argolide
New Eden S.A., Marrakech
NOF Sociedade Imobiliaria, Lda, Lisbon
Nouvelles Frontières Burkina Faso EURL, Ouagadougou
Nouvelles Frontières Tereso EURL, Grand Bassam
Nouvelles Frontières Togo S.R.L.(i.L), Lome
Reisefalke GmbH, Vienna
Résidence Hôtelière Les Pins SARL (i.L.), Montreuil
RIUSA Brasil Empreendimentos Ltda., Igarassu (Pernambuco)
Societe de Gestion du resort Al Baraka, Marrakech
STAR TOURS Reisedienst GmbH, Hamburg
TLT Urlaubsreisen GmbH, Hanover
Transat Développement SA S, Ivri-sur-Seine
Trendturc Turizm Otelcilik ve Ticaret A.S., Istanbul
TUI 4 U Poland sp.zo.o., Warsaw
TUI d.o.o., Maribor
TUI Magyarország Utazasi Iroda Kft., Budapest
TUI Reisecenter GmbH, Salzburg
TUI ReiseCenter Slovensko s.r.o., Bratislava
TUI Travel Cyprus Limited, Nicosia
TUIFly Academy Brussels, Zaventem
V.P.M. SA , Levallois Perret
VPM Antilles S.R.L., Levallois Perret
All other segments
Bergbau Goslar GmbH, Goslar
l'tur ultimo minuto S.A., Palma de Mallorca
Mango Event Management Limited, London
Preussag Beteiligungsverwaltungs GmbH XIV, Hanover
Società Consortile a r.l. Tutela dei Viaggiatori i Viaggi del Turchese,
Fidenza (Pr)
Sportsworld Holdings Limited, Luton
travel-Ba.Sys Beteiligungs GmbH, Mülheim an der Ruhr
TUI Insurance Services GmbH, Hanover
Joint ventures and associates
Tourism
Ahungalla Resorts Limited, Colombo
Aitken Spence Travels (Private) Limited, Colombo
Alpha Tourism and Marketing Services Ltd., Port Louis1
Alpha Travel (U.K.) Limited, Harrow1
Atlantica Hellas A.E., Rhodos
Atlantica Hotels and Resorts Limited, Lemesos
Bartu Turizm Yatirimlari Anonim Sirketi, Istanbul
Daktari Travel & Tours Ltd., Limassol
DER Reisecenter TUI GmbH, Berlin
ENC for touristic Projects Company S.A.E., Sharm el Sheikh
Etapex, S.A., Agadir
Fanara Residence for Hotels S.A.E., Sharm el Sheikh
Gebeco Gesellschaft für internationale Begegnung und
Cooperation mbH & Co. KG, Kiel
GRUPOTEL DOS S.A., Can Picafort
Holiday Travel (Israel) Limited, Airport City
1 Destination Management of Hotelbeds
Greece
Greece
Morocco
Portugal
Burkina Faso
Ivory Coast
Togo
Austria
France
Brazil
Morocco
Germany
Germany
France
Turkey
Poland
Slovenia
Hungary
Austria
Slovakia (Slovak Republic)
Cyprus
Belgium
France
France
Germany
Spain
United Kingdom
Germany
Italy
United Kingdom
Germany
Germany
Sri Lanka
Sri Lanka
Mauritius
United Kingdom
Greece
Cyprus
Turkey
Cyprus
Germany
Egypt
Morocco
Egypt
Germany
Spain
Israel
100
100
100
100
100
100
99
60
100
99
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
83.5
100
40
50
25
25
50
49.9
50
33.3
50
50
35
50
50.1
50
50
CompanyCountryCapital share in %
258
N O T E S » o T H e r N oT e S
Hydrant Refuelling System NV, Brussels
InteRes Gesellschaft für Informationstechnologie mbH, Darmstadt
Interyachting Limited, Limassol
Jaz Hospitality Services DMCC, Dubai
Jaz Hotels & Resorts S.A.E., Cairo
Kamarayat Nabq Company for Hotels S.A.E., Sharm el Sheikh
Karisma Hotels Adriatic d.o.o., Zagreb
Karisma Hotels Caribbean S.A., Panama
Nakheel Riu Deira Islands Hotel F Z CO, Dubai
Pollman's Tours and Safaris Limited, Mombasa1
Raiffeisen-Tours RT-Reisen GmbH, Burghausen
Ranger Safaris Ltd., Arusha1
Riu Hotels S.A., Palma de Mallorca
Sharm El Maya Touristic Hotels Co. S.A.E., Cairo
Sun Oasis for Hotels Company S.A.E., Hurghada
Sunwing Travel Group, Inc, Toronto
Teckcenter Reisebüro GmbH, Kirchheim unter Teck
Tikida Bay S.A., Agadir
TIKIDA DUNE S S.A., Agadir
Tikida Palmeraie S.A., Marrakech
Togebi Holdings Limited, Nicosia
Travco Group Holding S.A.E., Cairo
TR AVEL Star GmbH, Hanover
TUI Cruises GmbH, Hamburg
UK Hotel Holdings F ZC L.L.C., Fujairah
Vitya Holding Co. Ltd., Takua, Phang Nga Province
WOT Hotels Adriatic Asset Company d.o.o., Tučepi
Belgium
Germany
Cyprus
United Arab Emirates
Egypt
Egypt
Croatia
Panama
United Arab Emirates
Kenya
Germany
Tanzania
Spain
Egypt
Egypt
Canada
Germany
Morocco
Morocco
Morocco
Cyprus
Egypt
Germany
Germany
United Arab Emirates
Thailand
Croatia
All other segments
.BOSYS SOF T WARE GMBH, Hamburg
ACCON-RVS Accounting & Consulting GmbH, Berlin
Germany
Germany
1 Destination Management of Hotelbeds
25
25.2
45
50
51
50
33.3
50
40
25
25.1
25
49
50
50
49
50
34
30
33.3
25
50
50
50
50
47.5
50
25.2
50
CompanyCountryCapital share in %
R E S P O N S I B I L I T Y S TAT E M E N T B Y M A N A G E M E N T
259
RE SPONSIBILIT Y
S TATE ME NT
BY MA NAGE ME NT
To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial state-
ments give a true and fair view of the net assets, financial position and results of operations of the Group, and the Group
Management Report includes a fair review of the development and performance of the business and the position of the
Group, together with a description of the principal opportunities and risks associated with the expected development of the
Group.
Hanover, 11 December 2018
The Executive Board
Friedrich Joussen
Horst Baier
Birgit Conix
David Burling
Sebastian Ebel
Dr Elke Eller
Frank Rosenberger
260
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
INDEPE NDE NT
AUDITOR ’ S REPORT
To TUI AG, Berlin and Hanover / Germany
Report on the audit of the consolidated financial statements
and of the combined management report
Audit Opinions
We have audited the consolidated financial statements of TUI AG, Berlin and Hanover / Germany, and its subsidiaries (the
Group), which comprise the consolidated statement of financial position as at 30 September 2018, and the income
statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and
the consolidated statement of cash flows for the financial year from 1 October 2017 to 30 September 2018, and the
notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we
have audited the group management report of TUI AG, Berlin and Hanover / Germany, for the financial year from
1 October 2017 to 30 September 2018, which was combined with the management report of the Parent. In accordance
with the German legal requirements, we have not audited the content of the parts of the combined management
report listed in the Appendix to the Independent Auditor’s Report.
In our opinion, on the basis of the knowledge obtained in the audit,
• the accompanying consolidated financial statements comply, in all material respects, with the International Financial
Reporting Standards (IFRS) as adopted by the EU, and the additional requirements of German commercial law
pursuant to § [Article] 315e Abs. [paragraph] 1 HGB [Handelsgesetzbuch: German Commercial Code] and, in compliance
with these requirements, give a true and fair view of the assets, liabilities, and financial position of the Group as at
30 September 2018, and of its financial performance for the financial year from 1 October 2017 to 30 September 2018,
and
• the accompanying combined management report as a whole provides an appropriate view of the Group’s position. In
all material respects, this combined management report is consistent with the consolidated financial statements,
complies with German legal requirements and appropriately presents the opportunities and risks of future development.
Our audit opinion on the combined management report does not cover the content of the parts of the combined
management report listed in the Appendix to the Independent Auditor’s Report.
Pursuant to § 322 Abs. 3 Satz [Sentence] 1 HGB, we declare that our audit has not led to any reservations relating to the
legal compliance of the consolidated financial statements and of the combined management report.
Basis for the Audit Opinions
We conducted our audit of the consolidated financial statements and of the combined management report in accordance
with § 317 HGB and the EU Audit Regulation (No. 537 / 2014, referred to subsequently as “EU Audit Regulation”) in
compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der
Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). We performed the audit of the consolidated financial
statements in supplementary compliance with the International Standards on Auditing (ISAs). Our responsibilities under
those requirements, principles and standards are further described in the “Auditor’s Responsibilities for the Audit of
the Consolidated Financial Statements and of the Combined Management Report” section of our auditor’s report. We
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
261
are independent of the group entities in accordance with the requirements of European law and German commercial
and professional law, and we have fulfilled our other German professional responsibilities in accordance with these
requirements. In addition, in accordance with Article 10 (2) Point (f) of the EU Audit Regulation, we declare that we have
not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions on the consolidated
financial statements and on the group management report.
Key Audit Matters in the Audit of the Consolidated Financial Statements
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements for the financial year from 1 October 2017 to 30 September 2018. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole and in forming our audit
opinion thereon; we do not provide a separate audit opinion on these matters.
In the following, we present the key audit matters we have determined in the course of our audit:
1 Recoverability of goodwill
2 Recoverability of touristic payments on account for hotel services
3 Recoverability of deferred tax assets
4 Specific provisions
5 Presentation of the acquisition of Destination Management
Our presentation of these key audit matters has been structured as follows:
A Description (including reference to corresponding information in the consolidated financial statements)
B Auditor’s response
1 Recoverability of goodwill
A In TUI AG’s consolidated financial statements as at 30 September 2018, goodwill totalling mEUR 2,958.6 is reported
under the statement of financial position item “Goodwill”. Goodwill is subject to an impairment test at least once
a year, namely as of 30 June of the financial year. Measurement is by means of a valuation model based on the
Discounted Cash Flow method. The result of this valuation depends to a great extent on the estimate of future cash
inflows by the Management Board and also on the discount rate used. Thus, the valuation is subject to a significant
uncertainty. Against this background, we believe that this is a key audit matter.
The Company’s disclosures on goodwill are provided in Note (13) of the Notes to the consolidated financial statements.
B We investigated the process for performing the impairment test on goodwill and conducted an audit of the accounting-
relevant controls contained therein. Specifically, we convinced ourselves of the appropriateness of the future cash
inflows used in the calculation. To do so, among other things we compared these figures with the current budgets
contained in the three-year plan adopted by the Management Board and approved by the Supervisory Board, and
checked it against general and industry-specific market expectations. Since even relatively small changes in the
discount rate can have a material effect on the amount of the business value determined in this way, we also focused
on examining the parameters used to determine the discount rate used, including the Weighted Average Cost of
Capital, and analysed the calculation algorithm. Owing to the material significance of goodwill and the fact that the
valuation also depends on macroeconomic conditions which are beyond the control of the Company, we also assessed
the sensitivity analyses prepared by the Company for the cash-generating units with low excess cover (carrying
amount compared to present value).
262
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
2 Recoverability of touristic payments on account for hotel services
A Payments on account for hotel services amounting to mEUR 366.1 are recognised under the statement of financial
position item “Touristic payments on account” in TUI AG’s consolidated financial statements as at 30 September 2018.
In our opinion, this is a key audit matter, as the measurement of this significant item is based to a large extent on
estimates and assumptions made by the Management Board.
The Company’s disclosures on “Touristic payments on account” are provided in Note (18) of the Notes to the
consolidated financial statements.
B We investigated the process of evaluating hotel prepayments and carried out an audit of the accounting-relevant
controls contained therein. In the knowledge that there is an increased risk of misstatements in financial reporting
with estimated values and that the valuation decisions of the Management Board have a direct and significant effect
on the consolidated net income, we have assessed the appropriateness of the valuations by comparing these values
with historical values and using the contractual bases presented to us. We assessed the recoverability of touristic
payments on account in particular against the background of current developments in Turkey and North Africa. For
this, we took into account, among other things, the repayment schedules agreed with the hoteliers concerned, the
options for offsetting against future overnight accommodation and the framework agreements concluded.
3 Recoverability of deferred tax assets
A TUI AG’s consolidated financial statements as at 30 September 2018 report deferred tax assets totalling mEUR 225.7
under the statement of financial position item “Deferred tax assets”. Recoverability of the deferred tax assets
recognised is measured by means of forecasts about the future earnings situation.
In our opinion, this is a key audit matter because it depends to a large extent on estimates and assumptions made
by the Management Board and is subject to uncertainties.
The Company’s disclosures on deferred tax assets are provided in the Notes to the consolidated financial statements
“Accounting and measurement methods” and under Note (19).
B We involved our own tax specialists in our audit of tax issues. With their support we assessed the internal processes
and controls established for recording tax issues. We assessed the recoverability of deferred tax assets on the basis
of internal forecasts on the future taxable income situation of TUI AG and its major subsidiaries. In this context, we
referred to the planning prepared by the Management Board and assessed the appropriateness of the planning basis
used. Among other things, these were examined in the light of general and industry-specific market expectations.
263
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
4 Specific provisions
A Provisions for maintenance amounting to mEUR 669.6 and provisions for onerous hotel lease contracts amounting
to mEUR 4.4 are disclosed under the statement of financial position item “Other provisions” in TUI AG’s consolidated
financial statements as at 30 September 2018. Furthermore, provisions for pensions and similar obligations amounting
to mEUR 994.8 were recognized as at 30 September 2018. In our opinion, these are key audit matters, as the recognition
and measurement of these significant items are based to a large extent on estimates and assumptions made by
the Management Board.
The Company’s disclosures on provisions are provided under the Notes (28) and (29) as well as under the disclosures
on accounting and measurement methods in the Notes to the consolidated financial statements.
B We investigated the process of recognising and measuring specific provisions and carried out an audit of the
accounting-relevant controls contained therein. In the knowledge that there is an increased risk of misstatements
in financial reporting with estimated values and that the valuation decisions of the Management Board have a direct
and significant effect on consolidated net income, we assessed the appropriateness of the valuations by comparing
these values with historical values and using the contractual bases presented to us.
Among other things we
• assessed the computation of the expected maintenance costs for aircrafts. This was done on the basis of
Group-wide maintenance contracts, price increases expected on the basis of external market forecasts and the
discount rates applied, supported by our own analyses;
• assessed the appropriateness of the valuation parameters used to calculate the pension provisions. Among other
things we did this by comparing them with market data and including the expertise of our internal pension
valuation experts.
• assessed the valuation of the provision for onerous hotel leasing contracts, in particular for hotels in Turkey. We
did this, among other things, on the basis of the contracts concluded and the Company’s profit planning for the
individual hotels.
5 Presentation of the acquisition of Destination Management
A In 2018, TUI has acquired shares of 47 companies of the Destination management line of HNVR Midco Limited for a
purchase price of mEUR 94.8. For performing the final purchase price allocation on the acquired assets and liabilities,
a period of 12 months as from the date of acquisition, i.e. until end of July 2019 is available. In our opinion, the
presentation of the acquisition of the companies of the Destination management line within the statement of financial
position is a key audit matter since the identification of the acquired assets and liabilities, their recognition as well
as also their valuation are highly dependent on discretionary estimates and assumptions of the Management Board
and since the used valuation models are very complex.
The disclosures on the acquisition of the companies of the Destination management line are provided in the section
“Acquisitions” of the Notes to the consolidated financial statements.
B We have audited the performed allocation of the purchase price to the acquired assets and liabilities. In doing so,
we have included the knowledge of our internal experts for the accounting of business acquisitions and assessed
the assumptions made when identifying assets and liabilities.
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I N D E P E N D E N T A U D I T O R ’ S R E P O R T
Other information
The Management Board is responsible for the other information. The other information comprises:
• the parts of the combined management report whose contents were not audited listed in the Appendix to the
Independent Auditor’s Report
• the responsibility statement by management relating to the consolidated financial statements and to the combined
management report pursuant to § 297 Abs. 2 Satz 4 and § 315 Abs. 1 Satz 5 HGB respectively, and
• the remaining parts of the Annual Report, with the exception of the audited consolidated financial statements and
combined management report and our auditor’s report.
Our audit opinions on the consolidated financial statements and on the combined management report do not cover
the other information, and consequently we do not express an audit opinion or any other form of assurance conclusion
thereon.
In connection with our group audit, our responsibility is to read the other information and, in doing so, to consider
whether the other information
• is materially inconsistent with the consolidated financial statements, with the combined management report or our
knowledge obtained in the audit, or
• otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
R E S P O N S I B I L I T I E S O F T H E M A N A G E M E N T B O A R D A N D T H E S U P E R V I S O R Y B O A R D F O R T H E
C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S A N D T H E C O M B I N E D M A N A G E M E N T R E P O R T
The Management Board is responsible for the preparation of the consolidated financial statements that comply, in all
material respects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant
to § 315e Abs. 1 HGB and that the consolidated financial statements, in compliance with these requirements, give a true
and fair view of the assets, liabilities, financial position, and financial performance of the Group. In addition, the
Management Board is responsible for such internal control as they have determined necessary to enable the preparation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Management Board is responsible for assessing the Group’s
ability to continue as a going concern. It also has the responsibility for disclosing, as applicable, matters related to going
concern. In addition, it is responsible for financial reporting based on the going concern basis of accounting unless there
is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so.
Furthermore, the Management Board is responsible for the preparation of the combined management report that,
as a whole, provides an appropriate view of the Group’s position and is, in all material respects, consistent with the
consolidated financial statements, complies with German legal requirements, and appropriately presents the opportunities
and risks of future development. In addition, the Management Board is responsible for such arrangements and measures
(systems) as it has considered necessary to enable the preparation of a combined management report that is in accordance
with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions
in the combined management report.
The Supervisory Board is responsible for overseeing the Group’s financial reporting process for the preparation of the
consolidated financial statements and of the combined management report.
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
265
A U D I T O R ’ S R E S P O N S I B I L I T I E S F O R T H E A U D I T O F T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
A N D O F T H E C O M B I N E D M A N A G E M E N T R E P O R T
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and whether the combined management report as a whole
provides an appropriate view of the Group’s position and, in all material respects, is consistent with the consolidated
financial statements and the knowledge obtained in the audit, complies with the German legal requirements and
appropriately presents the opportunities and risks of future development, as well as to issue an auditor’s report that
includes our audit opinions on the consolidated financial statements and on the combined management report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
§ 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial
Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) and in supplementary compliance with the
ISAs will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements and this combined management report.
We exercise professional judgement and maintain professional scepticism throughout the audit. We also
• identify and assess the risks of material misstatement of the consolidated financial statements and of the combined
management report, whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit opinions. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
• obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of
arrangements and measures relevant to the audit of the combined management report in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an audit opinion on the
effectiveness of these systems.
• evaluate the appropriateness of accounting policies used by the Management Board and the reasonableness of
estimates made by the Management Board and related disclosures.
• conclude on the appropriateness of the Management Board’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in the auditor’s report to the related disclosures in the consolidated financial
statements and in the combined management report or, if such disclosures are inadequate, to modify our respective
audit opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to be able to continue as a going concern.
• evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements present the underlying transactions and events in a
manner that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position
and financial performance of the Group in compliance with IFRSs as adopted by the EU and with the additional
requirements of German commercial law pursuant to § 315e Abs. 1 HGB.
• obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express audit opinions on the consolidated financial statements and on the combined management
report. We are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinions.
• evaluate the consistency of the combined management report with the consolidated financial statements, its
conformity with German law, and the view of the Group’s position it provides.
• perform audit procedures on the prospective information presented by the Management Board in the combined
management report. On the basis of sufficient appropriate audit evidence we evaluate, in particular, the significant
assumptions used by the Management Board as a basis for the prospective information, and evaluate the proper
derivation of the prospective information from these assumptions. We do not express a separate audit opinion on
the prospective information and on the assumptions used as a basis. There is a substantial unavoidable risk that
future events will differ materially from the prospective information.
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I N D E P E N D E N T A U D I T O R ’ S R E P O R T
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with the relevant independence
requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, the related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter.
Other legal an regulatory Requirements
Further Information pursuant to Article 10 of the EU Audit Regulation
We were elected as group auditor by the annual general meeting on 13 February 2018. We were engaged by the
Supervisory Board on 26 March / 15 April 2018. We have been the group auditor of TUI AG, Berlin and Hanover / Germany,
without interruption since the financial year 2016 / 17.
We declare that the audit opinions expressed in this auditor’s report are consistent with the additional report to the
audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report).
Limited Review of the Management Board’s declaration of compliance with the UK Corporate
Governance Code
Pursuant to Section 9.8.10 (1) and (2) of the Listing Rules in the United Kingdom, we were engaged to review Management’s
statement pursuant to Section 9.8.6 R (6) of the Listing Rules in the United Kingdom that relate to provisions C.1.1, C.2.1,
C.2.3 and C.3.1 to C.3.8 of the UK Corporate Governance Code and Management Board’s statement pursuant to
Section 9.8.6 R (3) of the Listing Rules in the United Kingdom in the financial year 2017 / 18 included in the “Viability
statement” of the combined management report and in the section “Going concern reporting according to the UK
Corporate Governance Code”. We have nothing to report in this regard.
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
267
German Public Auditor responsible for the engagement
The German Public Auditor responsible for the engagement is Dr Hendrik Nardmann.
Appendix to the Independent Auditor’s Report: Parts of the combined management report
whose contents are unaudited
We have not audited the content of the following parts of the combined management report:
• the non-financial group statement pursuant to §§ 315b and 315c HGB included in section “Non-financial group
statement” of the combined management report and
• the statement on corporate governance pursuant to § 289f and § 315d HGB included in section “Corporate Governance
Report / Statement on Corporate Governance” of the combined management report.
Hanover / Germany, 12 December 2018
Deloitte GmbH
Wirtschaftsprüfungsgesellschaft
Signed: Schenk
Wirtschaftsprüfer
[German Public Auditor]
Signed: Dr Nardmann
Wirtschaftsprüfer
[German Public Auditor]
268
FO R W A R D - L O O K I N G S TAT E M E N T S
FORWARD - LOOK ING
S TATE ME NT S
The annual report, in particular the report on expected developments included in the management report, includes
various forecasts and expectations as well as statements relating to the future development of the TUI Group and
TUI AG. These statements are based on assumptions and estimates and may entail known and unknown risks and
uncertainties. Actual development and results as well as the financial and asset situation may therefore differ substan-
tially from the expectations and assumptions made. This may be due to market fluctuations, the development of world
market prices for commodities, of financial markets and exchange rates, amendments to national and international
legislation and provision or fundamental changes in the economic and political environment. TUI does not intend to
and does not undertake an obligation to update or revise any forward-looking statements to adapt them to events or
developments after the publication of this annual report.
269
GLOSS ARY
A
D
All other segments – The category ‘All other segments’ includes
our business activities for the new markets, the corporate centre
functions of TUI AG and the interim holdings, as well as the Group’s
real estate companies.
DTR – Disclosure and Transparency Rules of the UK Listing
Authorities
E
Average daily rates – The average rate for hotels refers to the rate
per day and guest. The average rate for cruise ships is calculated
as revenue excluding transportation, onboard and other revenue
divided by actual passenger days.
EBITA – Our definition of EBITA is earnings before net interest
result, income tax and impairment of goodwill and excluding the
result from the measurement of interest hedges.
Average revenue per bed – Arrangement revenue divided by
occupied beds
C
EBITDA – EBITDA is defined as earnings before interest, income
taxes, goodwill impairment and amortisation and write-ups of other
intangible assets, depreciation and write-ups of property, plant
and equipment, investments and current assets. The amounts of
amortisation and depreciation represent the net balance including
write-backs.
Cash conversion – We define our cash conversion as the Group’s
EBITDA less our long-term gross capex target in relation to the
Group’s EBITDA.
EBITDAR – For the reconciliation from EBITDA to the indicator
EBITDAR, long-term leasing and rental expenses are eliminated.
Central Region segment – The Central Region segment comprises
the Sales & Marketing activities and airlines in Germany and the
Sales & Marketing activities in Austria, Switzerland and Poland.
Compliance – Compliance is generally a company’s obligation to
manage and control internal and external rules as well as voluntary
commitments to avoid reputational or financial damages.
Corporate Governance – Corporate governance refers to the
long-term, responsible and transparent management and control
of a company. In Germany, the German Corporate Governance
Code contains the main principles for the management and
supervision of listed companies.
Cruises segment – The Cruises segment consists of Hapag-Lloyd
Cruises and the joint venture TUI Cruises as well as the British
cruise business Marella Cruises.
Customer satisfaction – Customer satisfaction for holiday overall
is measured in customer satisfaction questionnaires completed
post-holiday, based on a customer rating on a scale of 0 to 10.
EBT – Earnings before taxes
Economic value added – Economic Value Added is calculated as
the product of ROIC less associated capital costs multiplied by
interest-bearing invested capital.
EPS – Earnings per share are calculated by dividing the Group
profit for the year attributable to TUI AG shareholders by the
weighted average number of registered shares outstanding during
the financial year.
G
GSTC – Global Sustainable Tourism Council
GLOSSARY 270
H
HFM – The Oracle Hyperion Financial Management reporting
system (HFM) is used as the uniform reporting and consolidation
system throughout the Group so that no additional interfaces
exist for the preparation of the consolidated financial statements.
Hotels & Resorts segment – The Hotels & Resorts segment
comprises TUI Group’s diversified portfolio of Group hotel brands
and hotel companies. The segment includes ownership in hotels,
joint ventures with local partners, stakes in companies giving TUI
a significant influence, and hotels operated under management
contracts.
N
NPS – Net Promoter Score. NPS is measured in customer satis-
faction questionnaires completed post-holiday. It is based on the
question ‘On a scale of 0 to 10 where 10 is extremely likely and 0
is not at all likely, how likely is it that you would recommend the
brand to a friend, colleague or relative?’ and is calculated by taking
the percentage of promoters (9s and 10s) less the percentage of
detractors (0s through 6s).
Northern Region segment – The Northern Region segment
comprises tour operator activities and airlines in the UK, Ireland
and the Nordics. In addition, the Canadian strategic venture
Sunwing and the joint venture TUI Russia have been included
within this segment.
I
IFRS – International Financial Reporting Standards
O
IMF – International Monetary Fund
Invested Capital – The invested capital is derived from liabilities,
comprising equity (including non-controlling interests) and the
balance of interest-bearing liabilities and interest-bearing assets.
The cumulative amortisations of purchase price allocations are
then added to the invested capital.
J
JEV – The annual performance-based remuneration (JEV) is
intended to motivate Executive Board members to achieve
ambitious and challenging financial, operational and strategic
targets throughout the financial year.
LTIP – The LTIP (Long Term Incentive Plan) is a performance share
plan based on virtual shares and is assessed over a period of four
years (Performance Reference Period). Virtual shares are granted
in annual tranches.
Occupancy rate – The occupancy rate for hotels is calculated as
the quotient of occupied beds and capacity. The occupancy rate
for cruises is calculated as the quotient of the actual passenger
days and the potential passenger days.
P
Passenger days – In the Cruises segment we differentiate between
available and achieved passenger days. The number of available
passenger days is calculated as the number of beds on the ship at
full capacity multiplied by the operating days of the ship. The
achieved passenger days show the number at achieved operating
days and achieved occupancy.
R
ROIC – ROIC is calculated as the ratio of underlying earnings before
interest, taxes and amortisation of goodwill (underlying EBITA) to
average invested interest-bearing invested capital (invested capital)
for the segment.
GLOSSARY T
W
271
WACC – Weighted Average Cost of Capital. The cost of capital is
calculated as the weighted average cost of equity and debt capital
(WACC)
Western Region segment – The Sales & Marketing activities and
airlines in Belgium, the Netherlands and the Sales & Marketing
activities in France are included within the segment Western Region.
TSR – Total Shareholder Return
U
UK CGC – UK Corporate Governance Code
UN Global Compact – In September 2014, TUI signed up to the UN
Global Compact, a world-wide United Nations initiative to encourage
businesses worldwide to adopt sustainable and socially responsible
policies. The TUI Group is comitted to 10 universally accepted
principles in the areas of human rights, labour, environment and
anticorruption.
Underlying EBITA – Underlying EBITA has been adjusted for
gains / losses on disposal of investments, restructuring costs
according to IAS 37, ancillary acquisition costs and conditional
purchase price payments under purchase price allocations and
other expenses for and income from one-off items.
UNWTO – UN World Tourism Organisation
GLOSSARY FINANCIAL CALENDAR
1 3 D E C E M B E R 2 0 1 8
Annual Report 2018
1 2 F E B R U A R Y 2 0 1 9
Annual General Meeting 2019
1 2 F E B R U A R Y 2 0 1 9
Quarterly Statement Q1 2019
M AY 2 0 1 8
Half-Year Financial Report H1 2019
A U G U S T 2 0 1 9
Quarterly Statement Q3 2019
S E P T E M B E R 2 0 1 9
Trading update
D E C E M B E R 2 0 1 9
Annual Report 2019
P U B L I S H E D B Y
TUI AG
Karl-Wiechert-Allee 4
30625 Hanover, Germany
Tel.: + 49 511 566-00
Fax: + 49 511 566-1901
www.tuigroup.com
C O N C E P T A N D D E S I G N
3st kommunikation, Mainz, Germany
P H OTO G R A P H Y
Alexia van der Meijden (p. 12 – 13); Christian Wyrwa, (p. 15);
Michael Neuhaus (cover photo); Hapag-Lloyd Cruises (p. 26 – 27);
Paul Vincent Roll, unsplash (p. 150 – 151); plainpicture (p. 110 – 111);
Rüdiger Nehmzow (p. 7, p. 12 – 13)
P R I N T E D B Y
Kunst- und Werbedruck, Bad Oeynhausen, Germany
The Annual Report of TUI Group, the Magazine and the fi nancial statements
of TUI AG are available in German and in English:
annualreport2018.tuigroup.com
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natureOffice.com | DE-149-936095
print production
This report was published on 13 December 2018.
The German version is legally binding. The Company cannot be held responsible
for any misunderstandings or misinterpretation arising from this translation.
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TUI AG
Karl-Wiechert-Allee 4
30625 Hanover, Germany