TUI AG (TUI1) Earnings Call Transcript

[Interpreted] Ladies and gentlemen, this concludes the report of the Supervisory Board. I like to thank the Management Board and the staff of the company, also on behalf the entire Supervisory Board for the excellent work done in 2019. Ladies and gentlemen, I would now like to ask Mr. Joussen to give his report on the business of our company and the TUI Group. After that, Ms. Conix is going to talk about the annual accounts of 30th September, 2019, and the report of the first quarter 2020 published today. Thank you.

[Interpreted] Dr. Zetsche, thank you very much. Ladies and gentlemen, dear shareholders, I'm very pleased to be here today and to be able to speak to you, speak about the strategic projects of our company. And I would also like to go to the topic of sustainability, because sustainability is exactly the topic which you can hear everywhere. And this is also one of the purposes of our company and one of the focuses of our attention. But let me first have a look back at last year. Now, last year has been a year which was a very difficult year to cope with. There were enormous challenges to cope with. Dr. Zetsche mentioned it. He mentioned the 737 MAX, which I'm going to come back later on; the developments in the framework of Brexit; but also the insolvency of Thomas Cook due to the excessive capacity in the airline market. This has led to major distortions and disruptions. But at the same time, the tourism industry has grown above the GDP. And we, as an integrated company, are very well positioned here. But let us now have a look here at the figures. Our turnover last year rose by 2.7% to reach EUR 18.9 billion. This means that we have grown much, much stronger than the market as such. And a company that's growing and even growing at a larger rate than the market provides us with a good baseline for further growth. We had, unfortunately, to cope with a drop in the operative earnings. We had to accept a drop of approximately 26% to EUR 896 million. And this includes the cost of the Boeing MAX. Taking this amount out, we would have been able to reach the same record high that we reached the previous year. Now after the insolvency of Thomas Cook, it becomes a [Audio Gap] behind us, and that's something that I'm going to cover soon. Now we have 9 -- we have the 98 euro percent (sic) [ EUR 0.89 ]. That's in line with the EBIT and the 24%. Nevertheless, we want to give you a dividend payment of EUR 0.54. And I think based on the 89% (sic) [EUR 0.89 ], it does make sense. Now due to the fact that the 737 is no longer available, I would like to discuss this with you. First of all, you can understand that the charges are high. Last year, it was approximately [ EUR 3 million ]. This year, we just mentioned it this morning, we assume that this is going to be a major problem until the 1st of September. That means that this year, once again, approximately EUR 350 million will have to be added to the loss. These are very high figures. But at least this year, they are within the figures forecasted. So that means it's something that doesn't come as a surprise. As far as operations are concerned, and this is something which is also important, when you look at the operation, it means a major loss that we have to cope with this year, 55 airplanes will have to be replaced, which we will have to lease from the market or we'll have to buy in. Now as far as scheduled airlines are concerned, they have it much easier. They simply cancel their flights. This is something that we cannot do because our hotels would stay empty and our customers could not start their holidays. We always say safety is everything. But of course, another thing which is very important is to keep to our flight schedule. That is very, very important to us. But at the same time, it means that there is not much that we can change on a short-term basis. So that means we have to cope with what is presented to us in terms of challenges and we cannot come up with quick solutions. But nevertheless, I would like to establish the following thing: TUI is strong enough to cope with these dramatic effects and that has not always been the case. The figures that I mentioned to you were figures that are gross figures, no net figures. That means that compensation payments by Boeing have not been used and are not in the pipeline either. But it means that the negotiations that are done at the moment are done with all seriousness. But at the same time, one has to admit that one cannot start with any speculations. Today, I was approached by investors and I was approached by analysts as well. And they kept asking me, now what is the situation going to be like? Because -- I couldn't answer these questions because this has something to do with protecting the interests of our company. We think we should start with the negotiations first and finish the negotiations and then talk about it. But we do not want to stop at the moment with -- and we cannot make any forecast because we do not know when the Boeing is going to be in the air again. But be assured that we are going to take these conversations very seriously. Now the third point, we are not going to have any strategic problems because we are continuing with the transformation of our company. And it really shows that this incident does not stop us to keep transforming our company. And the last item I wanted to cover is the development of operative earnings. When we look at the bookings, we can see that our business is now doing very well after the insolvency of Thomas Cook. When we look at the bookings for the summer, for example, which are very, very important, we are looking very well. That is the tone over in the summer months, which are -- which enjoy very high bookings. We have a plus of 70% and here, once again, and this is very important, this is something which is sustainable in the long run. And this is why we decided we are going to invest into airplanes. If we didn't so, we would not be able to get the market share. Somebody else would be getting the market shares, and that would hurt us in the long term. This is one while we are making an extra effort to make sure that we can follow this direction further, and it's really worth our efforts. Now at this point, I would like to say -- to express my gratitude to more than our 70,000 people working for us because without their contribution, the financial year 2019 would have been much, much worse because when in March, we noticed that the 737 would not be flying, everybody thought that the problem would be overcome very quickly. But as you know, machines, the machines were not available for the whole of the year. And that meant that we had to do some additional planning, that we had to look at how we could procure additional capacities. But at the same time, we have to say that the market was really very tough to deal with. But I believe that our team has grown closer together and they came up with solutions on behalf of our customers, which benefited the customers. And they showed high ethical values and a lot of commitment. And I think this is not something that you can take for granted, considering the context they had to work with. I'm really proud to see that the NPS, that is the number of recommendations we get from our customers, was increased to 56%. And of course, it was due to the contributions of our staff. Our staff are our brand. Our staff are TUI and they did very, very well that year. I would like to thank you at this event very, very much for what they've done. Also on behalf of the Supervisory Board and I think on behalf of all of you, thank you very, very much. Now let's have a look at the individual areas of business. First of all, Hotels & Resorts. They have an increase by 8% to EUR 452 million. The average rate per bed has been increased by EUR 3. This is our main driver. And we are very proud that we are 30% above the average earned in the industry. That means we don't just have a profitable growth, but when we look at our competition, we have very lucrative hotel companies. I'm going to come back to that when I come to the strategy. The same applies to cruise liners, where we were able to increase our EBIT by 13%. All companies have contributed to this increase. The average rate, despite the fact that the capacity was increased considerably, remained stable. And here, once again, in this line of industry, we are approximately 40% above the medium of the industry, that means the most successful cruise companies are working with us. Now if we now look at the Destination Experiences, that is all the activities that people can book when they go on their holidays. You can see that this area is one of the growth drivers in our portfolio. The number of excursions sold and other activities sold was double last year. That has something to do with organic growth, but not just with organic growth. You will remember that we bought in additional companies. Now on an operative level, that is without the ramp-up losses. You'll remember the platform that we started with a digitized platform. Our earnings was 44% above previous years. Now if we increase the ramp-up losses, it was still more than 20% here. We are -- we make sure that we can ensure that we do not talk too much about profitability because the global market is a little bit sustained. And if you want to consolidate on a global level, we have to grow, and we have to grow quickly enough. This is one of our main strategic targets that we want to reach. Now then, the market of airlines (sic) [ Markets & Airlines ]. First of all, we were able to maintain and even improve our leading market position. That is the dues -- that is the increase in [ dual ] but -- and was the problem with the MAX 737. But in addition, there was the competition, which was very tough. All together, the earnings were increased -- excuse me, the earnings were decreased by EUR 293 million. So you know exactly what the problem is. And I am going to cover this later on. Now the excess capacities was the reason why Thomas Cook could not cope because the problem that they looked exactly like TUI, and we simply have to define a proper strategy to make sure that we are not going to end up as one of the dinosaurs in the industry. And of course, we thought about this very carefully today. Nobody can compare with us because today, 80% of our profits are based on cruise lines and hotels. But nevertheless, we cannot just stand still. We have to move forward and try to do more. And this is why I would like to talk now about our strategy. Now first of all, what's the baseline? We are the market leader in those markets where we are working. We make sure that we can offer the activities for 21 million customers. That means we are a major player. We are working in the tourist industry. And these are markets which offer a lot of potential for growth. We have a turnover of EUR 800 per customer, much, much more than the cheap airliners. And this is really very important when it comes to look at acquisitions, because very often, this has -- the acquisition and the turnover that comes with it has not always something to do with the profit. So this is a good brand that we have. We can differentiate through our product portfolio and have a high profitability when it comes to Hotels & Cruises. I just gave you the benchmark figures, 30% against our competition or 40% against our competition. And what is so good about it is that we do not do that by having high prices, but we do so as a rule by having high demand. That is, we are just better suited to achieve vertical integration. We have a lot of customers in many different source markets. For example, we have more than 80% or 85% of capacity in our beds and in our hotels. And of course, that is very important when it comes to the cruise ships. It is more than 100% of the capacities which are being utilized. So this is good. So this is within our system. So that is very good. You could say, well, this looks good as far as our strategies are concerned. Nevertheless, there are 4 areas where we have to work on. The first field that we have to do something at -- has something to do with Markets & Airlines. That is where our markets are, where the Boeing is situated. What we have to do here is to try to maintain our market share or even better said, try to enlarge them. And this will only be possible if we are able to have competitive costs, and that we will never get into a situation that somebody comes up with prices which are below our cost level, so that we can no longer compete with everybody else in the market. We have to have a very good cost position and we have to make sure that we can come up with innovations to make sure that the changes in the demands of our customers will be reflected in our offerings. David Burling and Frank Rosenberger, my colleagues, are in charge of the market and domain transformation. They are doing that. They are making sure that all systems and all processes across all markets are built together so that they can be implemented in the global cloud. That is, we make it available in the global cloud. This is a project which is supposed to be implemented by mid next year. This is the largest transformation process within the history of our group. But what's important here is to make sure that everybody feels part of it and to make sure that this change is being implemented in such times that it has a positive effect on our team. This is, of course, a major challenge for Elke and everybody else. Now let me explain what I mean when I talk about costs. Let me explain to you what I mean when I talk about innovation. At the moment, we spend EUR 20 million for web and the back-end software. That is the software which controls tui.com. EUR 20 million a year for 6 markets. The largest market where we are active is the U.K. market. This accounts for 6 million of these 21 million. And in other words, if we did it all at once in a standardized fashion, the innovation speed could be doubled, let's say, from 6 million to 12 million and still save about 50% of our costs. So as you can see, this is something which is absolutely feasible. You simply have to do things. Now the second point I want to mention has something to do with innovation here. We want to have a very personalized approach to our customers. We have a customer relationship management system, CRM system, where each individual customers has their profile. And that means that they receive e-mails with offerings, of which we think they may be more interesting to them than just an average standard offer. And that really does work very well. Now these systems have to be changed so that they become real-time feasible. What does that mean? If you don't want to continue with the emails, but if you want to use an app in the future, it means that you've got this customized offer, the customer looks at the offering and responds, of course. That means that you've got the full attention of the customer, focusing on the offering as soon as he responds. So if you can respond in real time and come back with a good answer for the customer in real time by trying to sharpen up the profile of the offering or offer something in addition, of course, it means that you have made the best of the attention of the customers. If you're not able to respond in real time and it takes you some hours before you can process all this information, then the customer has put the mobile phone aside. So that means that it's going to create a real big advantage for us if we can do so. But at the same time, it means that it requires high investment. If you wanted to do it six-fold in different markets, it would be much too expensive or you would simply not invest at all. So once again, I just wanted to point out that it's not just something about cost, but it has something to do with the investment. You simply have to make sure that you've got standardized systems, that you build only once and implement in a global cloud. And now let's have a look at the second item of the strategy that is Hotels & Cruise ships. "Asset-right," what does that mean? We have 400 hotels and -- more than 400 hotels and more than 18 cruise liners. I mentioned it earlier and I said that we are very successful there. That means that the profitability across our industry is really very high. What we are doing at the moment is that we want to consolidate our brands in order to improve our profitability and to speed up growth. We want to invest only if we really have to do that. That's what we call asset-right. If you don't have to invest, we would have rather have a look at existing hotels and maybe try to incorporate them into our brand. A good example is the consolidation of Hapag-Lloyd into TUI Cruises. This is something we announced last week. Now each company on their own would not have been able to grow TUI Cruises simply because they do not have the capacities for the shipyards for these large cruise liners. And Hapag-Lloyd, because this is a brand which is only available in the German market and is the luxury brand, you could destroy any luxury brand if you've got too much of a capacity, so that means this brand has to grow on an international level and we cannot finance it through our balance sheet. Now we are now going to integrate both brands, that we both now have the potential for growth and can, at the same time, produce a lot of synergies of more than EUR 300 million. And at the same time, this transaction is going to give us additional cash. In the final analysis, this means that if we merge both companies, we will have more assets. We will grow much, much quicker, and we will produce more synergies and this is really a very good asset-right business. Now let's have a look at Hotels. Here, the team surrounding Sebastian Ebel is focusing on Riu and TUI Blue. I think of Robins -- I think of Robinson, for example, and Magic Life. These are individual hotel portfolios. Here, we have 100 TUI Blue hotels. Last summer, it was only 10. What we want to achieve is to open up this system to third-party hotels. That is, we are going to open up the brand to hotels outside the TUI Group and market it to them and we hope to be able to grow doing that. We are not going to primarily invest into real estate and hotels, but we just want to invest into improving the standards. That means that the 21 million customers in our source markets and the brands are so attractive these days that third-party hotels are really interested in becoming a member of the TUI Group. Now when we look at the booking system that we're using at the moment, Amadeus, we decided that we need to add 2 more components, which are already part of the road map. And they are so interesting for the hotels that by looking at the brand and the 21 million customers, they think they would like to work together with us more closer. And what we want to do in order to achieve this is build a kind of Amadeus platform for hotels. How do we do this? We will have 2 platforms. This is the GDN, a global distribution network; and the second one, a PMS, that is a property management system. That means that is a system which helps you to manage the rooms that you have in your hotel and helps you to commercialize them. Now let's have a quick look at these 2 components. GDN, the global distribution network, here, we focus on source markets where we don't have any history, that is, not in England and not in the Nordic country, but China, Brazil, Malaysia, but also Spain and Portugal, because in Spain and Portugal, they've always been our target markets. But we've never had Spanish guests who we booked their holidays for. So this is now going to be part of the distribution system. And as far as the function is concerned, this is going to concern the markets where we can market hotel capacities. When we look back at our history, we always had a full package deal and we sold everything as a package deal. But what we want to do now is to offer individual hotel rooms, for example. So next weekend, there's a room that's going to be available, how do I get a customer to fill that vacancy? Now, with the help of this platform, which, by the way, is a cloud-based platform and AI-based, this is something that I mentioned in 2017, we want to enlarge this platform. Now the second item is a property management system. This is a system which offers completely different type of products. It is based on the accommodation for night. All the other systems are based on room category. For example, you can book a room with a sea view or something else. It just varies when you go on a platform, like book and say I would like to have a room with a sea view or not. But everybody knows that not every room simply is the same, simply because they have a sea view or they have a garden view. And this is why we now want to differentiate our marketing and concentrate on each of the features of each room. Each room can have a different price. You can say, well, each night in the room can have a different night. Now what is the advantage of doing it that way? Now for us and for the customer, it will have advantages. I will give you an example. If you have a hotel and you know that a room is sold for EUR 100, they know still there's one room left which is empty. But the manager of the hotel doesn't know. Had it been possible to sell the 10 rooms for EUR 120? I would say 7 of the rooms he could have offered for EUR 120. So that means that EUR 20 per night for each of these rooms are wasted. So if you're able to come up with a differentiated marketing so that each individual room has a different price level, then, of course, there's the opportunity for the hotel manager to make more money. The question is, why should the customer be prepared to pay more? There must be an advantage for the customer as well. And that shows you that there's also some benefit for the customer between the path at the moment for the TUI Blue houses, for example, 13% of our customers buy a room that they -- a special room that they want to have. Like, for example, I want to have the room 31 because it has sea view. It is very close to the beach, for example. If the customer is disabled, they want to have a room which is located closely to the elevator. Or if you have a children's room -- children's club somewhere, you want a room which is close to the children's club. So this is a specific request that the customer can make, and at the moment, there's an extra of EUR 15 per night and per room. Of course, I have to be able not to market categories, but to market these rooms for what they are. We have hotels which have categories of rooms based on what I just explained, a sea view with the sun in the morning or the sun in the evening. Who would have thought of that before? But if you give the opportunity to the manager to do that because he knows that people like the sun in the evening, then it's something that you can do. And then I spoke to another manager recently, and he would say that do you have a room which is close to a restaurant that people don't like, but he came up with a category where he said, we will have a baby phone, which is going to be covered when you are at the restaurant. I think this is another aspect that you could market, and you become much, much more inventive if you have individual categories for the different rooms. So that each room becomes marketable and this is possible with the system that we have with 21 (sic) [ 21 million ] customers, with the global distribution network, which can actually cover all the markets worldwide and supported by a software, which makes it possible that you have a much more differentiated approach to the sales of the rooms with all the -- which is a lot better than categories. We think this will help us to gain a major edge in the market. Now the last item has something to do with our platform, 1 million things to do. At the moment, we have a market for $150 million (sic) [ EUR 150 billion ] that is a 7% increase, 350,000 offers. We are now going to consolidate the market. And as I just mentioned, we are now going to make sure that we concentrate on our Destination Experiences to drive growth. We have a very good benchmark that we start from which other competition doesn't have; that is our advantage as compared to the competition. It's always important to have some advantage as compared to the competition. We are not starting from scratch, but we do have 21 million customers. We sold 10,000 (sic) [ 10 million ] activities in this area last year. We are already leading, but of course, we want to grow more. Now the second point, as a rule, the customers book well in advance. For example, if somebody is going to Egypt, they know -- we know that 4 months in advance that this customer wants to go to Egypt. We can already start with the marketing of our activities, whereas our competition is still sitting there and waiting and hoping for customers to book their hotel groups. They don't know that, but we do. And another thing is we do have 10,000 people locally. And if you don't just sell standard tickets for museum access, for example, like, for example, a hot balloon ride in front of the Atlas Mountains, then you want to make sure that this is assured locally, that this exists and that will help you with the sales. So we believe that these 3 aspects will help us to give us an edge over our competition in the market and will help us to consolidate globally. Now all in all, we hope that the 21 million customers that we have now will be increased to 30 million customers and not only when it comes to events. But we'll take the whole package that is cruise, ships, hotels and so on. This growth is mainly supposed to be an organic growth, and it requires a certain amount of investment. Of course, we want to be very conservative when it comes to our balance sheet. That means we want to reduce our debt. We have a specific allocation strategy, which is going to be covered by Birgit Conix soon, will help us to achieve this. And I think it's why the new policy of a dividend payment makes a lot of sense because it will help us to achieve all the different targets that we have set ourselves for the transformation process. Now let me have a quick look at sustainability. Sustainability is very important. It's very important for our line of industry. It's important for our company. And as you can see here, when you look at the individual tiles, you can see they're all based on the UN Sustainability Development Goals. So that means we did not just come up with an imaginative framework, but we rather decided to use a framework which is already in place, so make sure you speak the language that everybody understands. So this is our framework, and this framework tells us there is an ecological sustainability and economic sustainability and ecological (sic) [ social ] sustainability. And this framework also tells us, if you look at one sustainability, one type of sustainability, you have to have the other 2. So somebody who's only interested in food is not going to look at the environment. Somebody who's not -- who can have a career is not going to look at what effect it may have on the environment. So I think it's all very -- it's really very important that we look at all of these different aspects together. And if you now see what this means for tourism, it becomes evident, very, very clearly that tourism in this context can be very, very sustainable. Here, this is a comparison between Haiti and the Dominican Republic. Now those 2 countries are based on the same island, as you can see here. Now this is in the Caribbean. That is the island which you can find these 2 states. And they have approximately the same amount of population of roughly 11 million. The only difference is that one of them have 11.2 million -- excuse me, 6.2 million tourists, and the other have 470,000 tourists. That is the main difference. Now look at the individual categories which are listed here. That is: poverty line is reduced, income has increased, education has improved, the infant mortality rate decreases, there's more -- better access to medical care, they have better access to clean water and that is important. The population is happy, much happier than before. And then when you go to bottom of the line, yes, to the bottom of the line, you can see that is really the thing which may come as a big surprise, that even the change in the forest areas is -- has been minus 20% in Haiti, and in the other state, where you have got all the tourism, plus 80%. It has improved by 80%. That shows something very clear. If you haven't got any food to eat, you fell the trees and you use them. But if you have tourists, nobody would even come up with the idea of felling the palms which are so of attractive for tourists and attract them to the island. So even if you look at everything from ecological aspects, and this is something that I did here, picking those 2 countries because it makes it very clear what it means. I could give you the same example for North Africa. I could give you another example, for example, for Cape Verde or in all these countries, in all the countries where you've got tourism, where you've got a certain amount of investment, you have a certain amount of affluence. And in all of these countries, you will notice that people take more care of the environment. So that means that tourism as such is sustainable. It makes sure that economic, ecological and social sustainability are assured. It makes it possible for societies to have a fair share in wealth. Without it, there would be a much larger discrepancy in the way of life in the people and also on a global level. I think this is something which has become very clear. Now let's come to TUI. Now sustainability for our company has always been a major factor in our company here. This is a page from our business report. Our sustainability strategy is not just concentrated on ecology but is also concentrating on the economy and social standards. We are making standards for the tourist industry. When it comes to social sustainability, for example, we found that the TUI Care Foundation, which is more than 30 projects in more than 25 countries, offers training projects. They help start-ups. For example, I recently went to Marrakesh. I met a social entrepreneur who makes sure that children are taken off the street and trains them to become guides. So in Marrakesh, for example, in Agadir, in Taghazout, this is not something which is highly sophisticated, you may think, but it's still something where people can have an income and make sure they can live. Now, as far as economic sustainability is concerned, we are usually the largest investor in target areas to make sure there is a proper base for the economy. In most countries, we are the partner who's been there the longest. If -- for example, if you remember 2 years ago, there was a warning against travel in Egypt. And what happens there? The Egypt authorities call us, they want to know what's happening because -- simply because we usually have a much, much better information about the situation because the politicians, there are usually politicians that we put in their position recently. Well, we've been working together with Egypt more than 50 years, with Spain and Greece, even longer. So that means that we have long-standing interests and long-standing investments. And so we always make sure that you have proper information. Of course, we make sure that ecological sustainability is also assured. For example, if you look at the left-hand side, in the top line, for example, we have the most efficient fleets in the world and we are #4 from all the fleets in the world. And of course, it has something to do with the fact that our airplanes are hardly ever empty. So it's a very efficient fleet. Now there's also 83% of our hotels that have obtained sustainability certificates now. So if -- I just want to make a general statement here on this point once again. This is supposed to be a contribution to a discussion; it's not supposed to be an excuse that we are not doing anything. I think we are doing a lot. And I'm going to tell you that this is something that we want to do -- continue in the future. We have a new strategy 2030, sustainability 2030, which I am going to cover next time, so that means that we are not going to let down in our efforts. As far as sustainability is concerned, I would like to say the following. If you look at this chart now, what you can see is the following. The CO2 emissions, that is on the line on the left-hand side and on the perpendicular line; and on the other line, you can see the growth, the GDP. This is really a correlation between those 2 items. So that means that CO2 emissions are always in proportion to the wealth of a country. They are the highest for the people in Europe and Canada. And in China, India and Africa, this value is the lowest, which you can see on the far left. And one must expect that while affluence will grow, emissions will grow at the same time, at the same rate. And this is actually happening if you look at the situation in those countries there. Because people want to live somewhere, they wanted to heat their houses, they want to eat, and just like everybody. And I must say, if I go to China, I can't tell them, "This is not something you should do." And if it's something that you want to provide to millions of people, then you can see where the problem is. Now let's have a look at the next graph and let's look at the reasons for this. Now you can see that the main reasons have to do with the electricity -- with electricity consumption, with road traffic, and these are exactly the areas where you have growth in China. But when you look at the air traffic, which you can see on the right-hand side, with 2.8%, this is really a small figure. Of course, that doesn't mean that there's no room for improvement. We will always have to renew our fleet. Now for each new fleet, you will have a reduction in CO2 emissions of 15%. And there's also something that we call the European air corridor, which is not that efficient. Because for 20 years, we've been trying to create a single European sky; that means that you don't have to go through different countries if you want to go [ yourself ]. That alone will cut emissions by 15%. So that means there's a lot that you can do if you want to. But here, once again, if you just look in Europe, if we want to reduce the number of flights in Europe, and at the same time, look at the 160 airports that are being built in China or are in the pipeline of being built, it's not going to achieve anything. Irrespective of what we do here, it will not help us to reduce the CO2 commissions -- emissions considerably. I think what we can do here is innovation. We need new fuels, not based -- which are not based on fossil fuel, with power to liquid is hydrogen. We do have new technologies, but the marketability, of course, is a different factor. It's still a very expensive product. We have to make sure is to support the marketability of this product. Maybe it makes sense to introduce a CO2 tax. But what we need in the final analysis is innovation. And as far as the air industry is concerned, what concerns the air industry is something that -- is something that we have to do in general. When we come up with a solution, it has to be a global solution. It can only be efficient if we come up with innovations because we have to make sure that affluent will no longer be directly linked to the amount of CO2 emissions. And hydrogen can play a major part to replace fossil fuels. The -- for the hydrogen production, you do need CO2, that means there is a certain amount of recycling of CO2 involved in the process. And the hydrogen that you need has to be green and has to be produced as competitive cost that is less than EUR 0.02 per kilowatt hour. From a technical point of view, this is feasible only if we achieve such a figure will we be able to reduce the exploration of fossil fuels, like, for example, gas or oil. As long as hydrogen is too expensive, there will always be people who will make sure that they extract oil, and if it is extracted somewhere, anywhere, and we don't want to use it in Europe, somebody will use it and it will be emitted into the atmosphere. That means that we need hydrogen for less than EUR 2 (sic) [ EUR 0.02 ] per kilowatt hour. That means we have to make the right savings, and we have to create the right context for innovation and make sure that we do not continue to bank on fossil fuels. I believe that hydrogen is going to be the future. I'm an engineer by training, and I've been looking into it for a long time. In our sustainability strategy 2030, we are going to look at efficiency; that means savings and innovation. Now to conclude, I must say, it was a difficult year. I think TUI has done well, especially considering that our largest competitor became bankrupt. Now we are facing a new transformation process. We have to become a digitized platform company, a very demanding thing to do, but it will be successful. We have a team of people who are willing to do their best and who want to be successful. A strategy can only be successful in the long run if all the stakeholders are happy with what they're doing. That is the shareholders, the staff, the customers and the company as a whole. Now I concentrated mainly on society as a whole. We always have been a predecessor when it came to sustainability. I'm very, very proud of this. We want to continue to be a predecessor for new development, and for that, we are working very hard. And now to conclude, I would like to thank everybody in our company for what they have done because they are our brand, they are important for our customers. Without them, we wouldn't be what we are. And the same gratitude goes to our shareholders, so thank you very much for being part of our company and thank you very much for being here today. Now I hand the floor to Birgit.

[Interpreted] Thank you, Mr. Joussen, and hello. Good morning, ladies and gentlemen. I'd like to welcome you most warmly to our Annual General Meeting. As you know, the financial year 2019 was the first year in this position for me. Fritz Joussen already mentioned it in his speech, the impact of external factors on our business posed particular challenges in 2019. The good news is that our hotels and cruise ships continued to develop very positively in the financial year 2019. And in contrast, our Markets & Airlines division was severely impacted by the market environment, and in particular, by the flight ban on the Boeing 737, which was imposed in March 2019. Therefore, we had to adjust our earnings expectations in the financial year 2019 in 2 steps. On the 6th of February, 2019, we reduced our earnings expectations for the financial year 2019 to the level of the financial year 2018. The reasons were: shorter bookings as a result of the hot summer of 2018; an oversupply in the aircraft sector; a shift in demand from the Western to the Eastern Mediterranean region; and the uncertainty around the Brexit and the weakness of the sterling. On 29th of March, 2019, we, again, had to adjust our earnings forecast for the financial year 2019 due to the flight ban for the Boeing 737. Unfortunately, we were unable to use this aircraft type for the rest of the financial year 2019. And this was -- this carries along one-off charges for replacement aircraft; higher fuel costs; costs in connection with business interruptions; and negative effects on the operating business. In total, we had one-off cost effects of around EUR 290 million, which resulted to a reduction of the underlying EBITDA for the financial year 2019 of around 26%. Despite the persistent challenges, we met our adjusted forecast for the underlying EBITDA. For all other key indicators, we even achieved our originally set target. This applies above all to our free cash flow and our net debt. And also, our relative leverage ratio, so-called group's leverage ratio, remains also within our long-term range as a factor -- at a factor of 3.0x. And thus, it could enable us to largely offset the negative effect in the Markets & Airlines divisions. So let me now first present the key performance indicators for the financial year 2019. The underlying EBITA of -- EBITA declined by 22% to around EUR 893 million in the financial year 2019. On a constant currency basis, this represents a decline of almost 26%. This development was in line with our adjusted earnings expectations for the financial year 2019. I've already mentioned the difficult market environment. Our Holiday Experiences business, this means our hotels and cruise ships and also our, for example, range of excursions and activities, continued to develop very well. Our diversified positioning enabled us to offset the normalized demand for our Spanish hotels by an increasing occupancy rate at our hotels in North Africa and Turkey. Our Markets & Airlines developed more weakly than originally expected. In particular, the flight ban on the Boeing 737 MAX resulted in the charge or burden of around EUR 290 million. Group sales increased by 2.7% on a year-on-year basis to EUR 18.9 billion and was in line with our expectations. Adjusted by the sales generated in the year 2019, the acquired Destination Management and Musement, turnover what would have been at the previous year's level. The one-off effects in the underlying EBITA were around EUR 125 million and met our expectations. And the group's net interest expense decreased by approximately EUR 12 million to EUR 77 million. As in the previous year, this figure includes also our one-off interest income. We have eliminated these effects in both years to calculate the core earnings per share. So at EUR 691 million, our earnings before taxes were around 2750 -- EUR 275 million lower. This was mainly due to the flight ban of the Boeing 737 MAX. The reported tax rate in 2019 has risen slightly compared to the previous year. This was due to the revaluation of taxes loss carryforwards. And the adjusted tax rate fell by a further 2 percentage points year-on-year from 20% to 18%. This is due to the further increase in the relative earnings contributions of the Holiday Experience division. And earnings from continuing operations reached around EUR 532 million in the last financial year. In the financial year 2019, the group had no discontinued operations. In the previous year, this item included income from -- in connection with the divestiture of hotel groups -- Hotelbed Groups (sic) [Hotelbeds Group ]. And in the year reported here, the share of noncontrolling shares -- shareholders in consolidated earnings amounted to EUR 116 million and related primarily to the Riu Group. TUI's shareholders accounted for group profit after minority interest of EUR 416 million. And at EUR 0.89, our adjusted earnings per share show a decrease of 23% and, thus, follow the operating development in the year. So far, the notes referring to the income statement and let me now briefly discuss our financial stability indicators. As you know, we use the cash inflow from divestments of noncore businesses to further finance our growth in the Hotel & Cruise business. As a result, the group net liquidity reported at the end of the financial year 2018 declined in 2019, in line with our expectations. At the end of the financial year 2019, the group's net debt amounted to EUR 0.9 billion. At a factor of 3.0x, the debt-to-equity ratio is within the range that we are aiming on the long term. The slight increase in the factor compared to the previous year is due to the -- in particular, due to the impact of the flight ban of the Boeing 737 MAX. Without this special effect, the debt coverage ratio would have been at the level of the previous year with a factor of 2.7 despite the continuation of our investment program. So the calculated equity ratio as of the 30th of September, 2019, was 25.6% and almost 2 percentage points below the previous year figure. The external rating of the group by the 2 agencies, Standard & Poor's and Moody's, did not change in the year -- in the last year. However, Moody's adjusted its ratings in December due to the uncertainty around the flight ban on the Boeing 737 MAX. And currently, we have rating at S&P of BB, and for Moody's, we have Ba3 and both have a negative outlook. We are in a very good exchange with the rating agencies and have initiated internal measures to further strengthen our financial profile. This also includes our adjusted dividend policy, which will -- which I would like to discuss in the following charts. Of course, we cannot decouple completely from the development of external conditions. Let me first explain our dividend proposal for the last financial year and our updated dividend policy. Based on the dividend of EUR 0.72 per TUI AG share paid in the last financial year and a decline in operating earnings by almost 26%, we propose a dividend of EUR 0.54 per share for this financial year. Okay. Against the background of the intended further transformation of the group, we have developed a new framework for our capital allocation, and this framework defines the order of priority as follows. First, we intend to continue to grow organically in our Hotel & Cruise business, and we also want to achieve this together with our joint venture partners and secondly, we want to significantly expand our digital platforms, as Fritz Joussen has already set out. In the future, we want also to pay you as our shareholders a reliable and attractive dividend. The third pillar in our capital allocation is the optimization of our current investment portfolio, for example, through value-enhancing mergers or acquisitions. A good example of this transfer -- of this is the transfer of Hapag-Lloyd Cruises to TUI Cruises, as already mentioned by Fritz Joussen. Should the group sustainably have more liquidity available in the future than is necessary to achieve the priorities, we will return the surplus to you as shareholders. At the same time, we will be disciplined to maintain a solid balance sheet. We, therefore, continue to aim for a debt coverage ratio of 2.25 or 3x. Okay. Now the realignment of capital allocation offers TUI Group greater flexibility. It enables investments in our strategic initiatives and future growth opportunities and an attractive dividend to our shareholders. At the same time, the framework is underpinned by a sound and robust financial structure. As of the financial year 2020, we will propose you a core dividend. The new dividend will amount to 30% to 40% of the underlying group profit, which will then be attributable to the TUI AG shareholders but at least EUR 0.35 per share. Our new dividend policy will lead to lower payouts, but the lower dividend limit of EUR 0.35 per share will guarantee then a minimum payout. As our shareholders, you will receive this regardless of the tourism market environment. This is important based on the TUI share price. At the end of the financial year 2019, the lower dividend limit would have corresponded to a dividend yield of 3.3%. We are convinced that a core dividend, combined with a lower dividend limit, is an attractive and balanced dividend policy for TUI and you as our shareholders. Good. This brings me to the current business development in the first quarter of this financial year and to our assessment for the full year 2020. First, a technical note. I'm sorry, like other groups, we are applying in the financial year 2020 the new IFRS standard 16 for the recognition of leasings. This is described in detail in the annual report. And since we will not retroactively adjust the figures for the past financial year 2019, we will always then disclose in the financial year 2020, for example, how the figures would have developed without the application of IFRS 16. For the better comparability, we have also prepared our guidance for the financial year 2020 without the effect of this new standard. And the -- this new outlook does not include, for example, then the sale of Hapag-Lloyd Cruises to TUI Cruises. And starting in the financial year 2020, we will also be replacing the previously used earnings indicator, underlying EBITA, with the adjusted EBIT, so without the A. In the first quarter of the new financial year 2020, the adjusted EBIT of the group increased by around EUR 64 million to a seasonal loss of minus EUR 147 million. This figure includes also, for example, an effect of EUR 45 million from the flight ban on Boeing 737 MAX. As expected, we have started weaker to the new financial year, but this was expected. And bookings for our winter program rose in the first quarter. As a result, our Markets & Airlines division achieved a stable result without taking into account the effect resulting from the flight ban on the 737 MAX. The previous year, we had also a positive one-off effect from the unwinding of the currency hedge. This has included (sic) [ Excluding that gain ], the operating development is even clearly positive. The Holiday and Experience division reported in the segment of Hotels & Resorts reports a weaker result. This was mainly due to higher costs resulting from the increasing number of hotels in our growing portfolio that we closed during the winter season. In the Cruises segment, TUI Cruises benefited strongly from the capacity expansions in the previous year, while Marella Cruises reported weaker development due to higher costs and also Hapag-Lloyd Cruises due to shipyard space. So now the outlook to the current financial year 2020. According to the -- as we have now a strong trading in our different segments, we expect then a one digit of growth. On the basis of the guidance which we determined in 2020 -- the beginning of 2020, then we would have then, for example, been able to limit the burden, the costs of around EUR 220 million, and we would have then got, for example, then EUR 1.0550 million (sic) [ EUR 1,050 million ] of income. The effect of the MAX was already included there. Okay. Then the next slide. Due to the most recent declaration of Boeing, we have now tried to get replacement capacities. This corresponds then to the second scenario of the -- of our guidance in December 2019. And we included the additional costs for the flight ban here for the whole financial year, and we increased this from (sic) [ by ] EUR 25 million to EUR 220 million up to EUR 245 million. There's a small problem with the slide. Sorry. So we can -- maybe I can continue. Maybe we could continue now. Furthermore, the complete costs of Boeing are not considered in this range as we expect that these effects will be also then compensated by the strong trading, by cost measures and also by a certain compensation of Boeing. As before, the range in the guidance includes also, for example, also an investment of 2 digits of millions for our development of our platform. And now we expect -- and expect an adjusted EBITA of EUR 850 million to EUR 1.050 million (sic) [ EUR 1,050 million ]. Please now allow me to make a brief comment at this point. Slide 10 is a significant burden for TUI, which we cannot influence in the short term. However, what we can do as a company is to initiate countermeasures with the aim to minimizing the impact on the cash flow and our financial profile and we are working on this with all our strength. And so our forecast also includes expenses for the expansion of our digital platforms in the mid- to high double-digit million range. These are initiatives which already have been presented by Fritz Joussen. Finally, a brief comment on the coronavirus. At present, we do not see any significant impact from the virus on our outlook as we have only minor activities in the affected regions. Of course, we observe these developments very closely in order to ensure the safety of our customers and employees at all time. The further development of the TUI Group in this challenging market environment, as expected by us, demonstrate the successful transformation into an integrated provider of holiday experiences. Our strategic positioning combines our own hotel brand with cruise brand and strong omnichannel distribution capabilities, and we are diversified across all markets and destinations. We will focus on this in the next year to become more competitive and selectively expand our Holiday Experience business and develop our digital platforms in new markets and destinations. Ladies and gentlemen, allow me to make a few comments on the authorization proposed to the Annual General Meeting under item 6. As in the previous years, we ask you to pass a resolution on the acquisition and use of own shares. This proposal for resolution is intended to safeguard the company's financial room for maneuver. Together with the existing further authorizations, we will be in a position to adjust our capitalization to financial requirements and quickly and flexibly. The term of the proposed authorization pursuant to agenda item 6 is again to be 16 (sic) [ 18 ] months, but acquisition transactions under the terms of debt agreements might only be concluded in the period up to the next Annual General Meeting in 2021. In the last 12 months, the company has not made any use of the existing authorization. It has not acquired any TUI shares. The company, therefore, does not hold any own shares. And under the new authorization, up to 7% (sic) [ 5% ] of the share capital, but not more than around 29.5 million of shares of the company may be acquired through the stock exchange or by means of a public offer to the shareholders. The principle of equal treatment under the Stock Corporation Law must always be observed. Apart from the requirements of the stock -- German Stock Corporation Act, the proposed resolution also takes account of requirements arising from the listing of the TUI share on the London Stock Exchange and the corporate governance standards there. This applies in particular to upper and lower limits to be observed for the purchase price payment for the acquisition of own shares. There is currently no intention to acquire own shares. However, if the Annual General Meeting approves the proposed authorization, the Management Board will examine the use of this possibility from time to time. And it will only be used if the Management Board is convinced that this is in the interest both of the company and all shareholders. As a matter of principle, the Executive Board will only make use of authorizations with the option to exclude the subscription right to issue new shares or to use previously acquired share, treasury shares with the approval of the Supervisory Board and the strict requirements for the exclusion of the subscription rights set forth in the German Stock Corporation Act are met. So we ask you to support this resolution. This report, so sorry. Sorry for the last slide, which did not appear. Thank you very much for your attention.

[Interpreted] Thank you, Ms. Conix for your comments. The live stream will now be stopped. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]