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Good morning, ladies and gentlemen, and welcome to the TUI AG conference call regarding the FY '21 Q3 results. [Operator Instructions]Let me now turn the floor over to your host, Mr. Friedrich Joussen and Mr. Sebastian Ebel.
Thank you very much, and good morning, everybody, and welcome to our Q3 results announcement. I will be opening the floor, and I will be followed by Sebastian and then we will be taking questions.So let me turn to Page #4 and summarize the major developments. I think the first good news is that we added 1.5 million summer bookings since H1 update. So in the last 3 months, net earnings, 1.5 million, and we have right now 4.2 million summer bookings in the system.The second good news is that we saw a rebound of working capital, EUR 320 million free cash flow before financing. So it's the first quarter since the pandemic that we don't -- we didn't burn cash, but that we had a positive free cash flow. And when you look at our liquidity position, then our headroom increased to EUR 3.1 billion. And if you recall, our headroom just 3 months ago was EUR 1.7 billion. Sebastian will talk about it later, but we added EUR 700 million customer -- mainly customer prepayments, EUR 200 million via the upsizing of our convertible bonds and EUR 540 million via our selling of the real estate portfolio joint venture, with RIU 19 real estate, EUR 541 million. So all together, EUR 1.4 billion. So our liquidity position is quite strong and it is building as we speak.But at the same time, and you will see that our free cash flow is now mainly built on prepayments. And you will see that in a later slide. It is not yet built based -- mainly based on revenues because we are talking Q3. So of the 4.2 million, only less than 900,000 customers have been on the vacation in Q3. So the revenues are still very moderate. The start-up costs are high. So the route for our free cash flow is prepayment, as we speak, in Q3.One major point last quarter was actually the extension of the RCF maturity by 24 months, so the maturity right now is 2024. So we have a good cash position. We've got all 24 -- all 20 banks plus WSF to agree to our prolongation of our RCF maturity. So we have now some time to think a little bit better and more in detail about the balance sheet and to get to lower that profile. But I think it's important that we have now the certainty, we have the liquidity, business is building.Two other things I want to mention in the summary. Global realignment, so the saving program is on track. We promised more than EUR 400 million savings. More than half have been delivered. Acceleration of digital strategy. Mainly the most important -- or one of the most impressive things is now 2/3 of our customers are using -- active users of our app. In line with that, by the way, is that we get week over week over week already record high, for example, selling our excursion through the app. Even with low customers in destinations yet, we see record levels of sales of excursions.Now let's go -- let's turn to Page #6, some major drivers. 283 hotels open in Q3. Of course, now more. We have 354. So more than 80% open in Q3. And also, occupancy levels very good, you see on the later slides. And at the same time, in Q3, it was only 876. Of course, much better than 159,000, but 876,000 pax. So of the 4.2 million, much more to come. So this is actually the missing revenue what I said. The revenue in Q4 will be, of course, much better. And then the picture will be not so much influenced by the prepayment but more by the revenue. That also has resulting effects in profitability, as you can imagine. We have 8 of 15 ships operating. And excursions, of course, have increased their sales as well.Now on digitalization, Page #17 (sic) [ Page #7 ]. Bookings have been coming in much more online in Q3. And Germany being usually the least online is even -- Germany is now up 17 percentage points to 39. It has been 22 before. So almost a doubling of online sales in Germany with respective positive effects. In the U.K., we are now talking about 3/4 of sales being online, and Belgium, Netherlands alike.Now in -- the thing I mentioned was 68% plus 21 percentage points package departure penetration of our app. And that -- actually, you have your documents and everything, you get the cross-selling one-to-one and express activity, each and every customer, and we see the [indiscernible] effects, not only in customer care but also in -- and that's the satisfaction with our app. And the ratings of our app, very, very high, but also in terms of cross-selling.Now vaccination. Vaccination progress has been significantly -- and you see the vaccination rates in source markets, you see there in destinations. So they have been going up. Still, incidence rates are in some countries higher. In some countries, they are lower. In the U.K., for example, there are now, here on the chart, 274. That has been 400, by the way.And the interesting thing here is actually the hospitalization. And here, the -- it doesn't come as a surprise, but it's important to note that the hospitalization rates are very low. In the U.K., just 1/5 of peak hospitalization in January, right? So we don't have overloads in the health system. And therefore, we expect that we will have no restrictions on vaccinated. In some countries, even more restrictions for people who are not vaccinated but who didn't have to vaccinate -- or shouldn't vaccinate are children. So we expect a stable program for Q4. So a lot of the bookings now turning into revenue. That is the message here which I want to make.Now that said, still there are differences. And this is actually the next page where you see the government messaging and restrictions. And here, you see the checks that, actually, you more or less don't have any procedure; the yellow checks that you have PCR tests; and then red checks and red crosses that -- with even more harsh restrictions; and to the red crosses, no operation.But the major difference which, actually, is driving right now net bookings and, to some extent, also gross bookings is the yellow checks in the U.K. More or less everybody treats vaccinated as without any restriction. But the U.K., there you need to have PCR tests on return. Sometimes, even 2. And that is, of course, additional efforts, but this is also additional costs. That actually has some elasticity.And when you look in the next slide, you see actually the net bookings. Almost everywhere, we see very positive net bookings or catch-up effects. But in the U.K., in the U.K., we have been losing net. We have been losing customers until the last week. And the last week, you see first days actually now positive, and the trajectory is quite good. But at least here, you didn't see the very positive net bookings like you had in all other countries. And that actually led us to the decision that we thought, on risk capacity, we would actually do summer 60% instead of 75%. And that is the explanation. Now it will come up in the U.K., and it has come up, but it needs to turn positive over the next weeks.Maybe -- and when you look at capacity, then it's even more clear what I mean. Capacity, you see here on the left side, April, May and June. And in June, for example, we saw a capacity of around about 350,000, yes? In July, you already saw a capacity of 700,000, right? So the capacity is building nicely.And when you look, for example, right now, the U.K., it has been quadrupling from June. But it is still only half the level of what it is in Germany. And usually, it should be, let's say, 30% above Germany, right? So that's actually what I mean. The dynamic is there. It is getting there. But it's getting there later than we originally expected, and that's the reason why we actually are now more targeting 60% of summer than 75% of the summer '19.Now load factors anyhow are very good, in very stable environments between 83% and 89%. So on the right side, 71% U.K. is actually related to the strong buildup from June to July. When you have this strong buildup of program, you have this intellect challenge, you fly much more customers into destination, then you get back. And that actually makes it 71%. Otherwise, it would be also higher than 80%.But I think interesting here is, still, 71% is not a bad load factor when you compare it to competitors. So we are internalizing demand. We are getting good load factors into aircraft. And therefore, I think you will see the results in revenues and EBIT also in Q4.Also, internalization is working well in the hotels. I mean even with this July pattern, which is around 45%, let's say, of program we achieved in all of our destinations, more than average -- index average occupancy in our hotels. And I could have -- I did Germany and Greece and Turkey, and I could have done Spain. I mean Majorca or on the Canaries are equally booked. And you even have scarcity of supply.Now the next page actually shows the numbers. Our net bookings up from 2.6 million for summer '21 to 4.2 million. Summer next year is 120% higher than we would expect. And capacity planning, as I said, we reduced slightly from 75% to 60%. Summer '22, by the way, is not fixed. We actually pushed out here our dates to really fix the capacity to something in February and March so that we have enough time to react.Maybe one last point before I hand over to Sebastian, our positioning on vaccination. I think the vaccination levels are very good. I think there is a sentiment building in the EU and also in U.K. that whoever is vaccinated should have the full -- get the freedom rights back and travel. So I think this is very good. And for us, it is good cornerstone for Q4 and future -- this year and future seasons to believe that the program will be much more stable than the last year where we had on and off developments based on incidents. Prior to the contract, we believe incidence is less and less important and hospitalization is important.Now there are 2 camps in different countries. The one camp says, well, the non-vaccinated, if they don't want to protect themselves, the society shouldn't protect them. But it is their own rights to determine. And there are others to say, we should push them to vaccinate themselves. I think good arguments from both sides. And I believe the only thing we are lobbying for is, of course, that people, particularly children, where the recommendation is not to vaccinate, they should not suffer any restrictions, and like, for example, on the U.K., if they are part of the family and travel, they should be traveling without quarantine requirements. And I think that is important.With that, I would like -- stop for a moment and would like to hand over to Sebastian. Sebastian?
Many thanks, Fritz, and a very warm welcome also from my side. Let me guide you on the following pages through the Q3 results of the financial year 2021. I would like to start with our achievements during the last quarter.Post the completion of the third support package in Q2, including a EUR 500 million capital increase, we managed to successfully further enhance our financing structure and liquidity position with the following instruments: We used the favorable capital markets environment to issue convertible bonds in the total volume of EUR 590 million. This includes the upsizing of our bonds with a tap issue of around EUR 190 million in June.Post balance sheet date, we successfully agreed with our 19 banks and KfW the prolongation of our maturity profile with the extension of our EUR 4.7 billion RCF. We achieved an extension by 24 months, the new maturity now being July 2024. Based on our current rating, the margin will be 4.5% per annum.As you will all remember, part of our state support package was the agreement of covenant waivers for September 2020 and March '21. Reflecting the continued disruption and limitation on our operations as a result of travel restriction, in May, we again agreed with our banks and KfW a further covenant testing waiver until the end of March '22. So covenant testing will resume in September 2022, with higher ratio limits set for testing in September 2022 and March '23. For these dates, net leverage was agreed at 4.5 multiple and interest cover at 2.25. Normalized limits have been agreed to resume from September 2023. Here, the ratios are for net leverage 3 and for interest cover 2.5.And finally, we made further progress with our asset-right strategy by disposing of a real estate portfolio of 21 properties to the Riu family. The transaction, with an equity value of around EUR 1.5 billion, implies an equity value EBITDA multiple of close to 12, closed earlier than expected on 30th of July, and we received cash proceeds of EUR 541 million. There is an additional earn-out of EUR 130 million payable upon RIU Hotel delivering its full year '22 and full year '23 operating budget. And we furthermore expect a considerable booking of around EUR 200 million, which will benefit our adjustment line in the P&L in the fourth quarter.Strategically, allow me to mention once again that the 21 hotels will still be operated under our core entity, RIUSA II, and thus remain exclusively available to our customers. Only the ownership structure of the 21 RIU properties is changing from owned under RIU Hoteles to a managed structure under RIU II. All in all, we have achieved important steps regarding our refinancing this quarter.And operationally, we are very pleased that with the rebound of customer deposits and the inflow in working capital, Q3 is the first quarter to deliver a positive cash flow since the start of the pandemic, reflecting the strong pent-up demand for travel.So with the current liquidity position of EUR 3.1 billion, we are fully financed through the winter. And let me confirm again that we will work hard to return to solid and healthy balance sheet and a gross leverage of less than 3.Let me now come to our Q3 results. The ongoing effects of the coronavirus crisis are still putting considerable pressure on our business performance overall. However, clear signs of recovery started to emerge in the third quarter, and we expect to see further improvements in the fourth quarter.Before I start to take you through the detailed analysis of our income statement, cash flow and balance sheet, where I will focus on the quarter-on-quarter development, meaning Q2 versus the ramp-up quarter Q3, allow me a quick view on the year-on-year comparison.Compared to last year's Q3, where our operations were in standstill, we saw a significant improvement of performance. TUI benefited from market recovery with increasing customer numbers. Relaxation of travel restriction in international air traffic and the pent-up demand drove both demand and activity. This leads to an increase in revenue year-on-year by more than 8x to EUR 650 million. Also, EBITDA and EBIT improved significantly by 28% and 43%, respectively. Now I will continue with the income statement and our Q3 versus Q2 commentary.As already mentioned, Q3 group revenue of EUR 650 million reflects the restart of travel across our markets and reopening of destinations ahead of the key summer period. This is an increase of EUR 400 million compared to Q2 and was driven by 876,000 Markets & Airlines passengers departing in the quarter compared to 159,000 in Q2. But after this mixed start into the summer season due to constantly changing governmental advice, we recently see an improvement in booking trend for the remainder of the season.Q3 underlying EBIT loss of minus EUR 670 million demonstrated our continued cost discipline on fixed costs, but also higher operational and ramp-up costs ahead of peak summer period, with a limited opportunity to recover these due to the change in restrictions. This was particularly true for the U.K., and I will give you some more color on the following chart, but let me continue first with my comments on the income statement.Adjustments this quarter were predominantly related to the group realignment program. Overall, for full year '21, we now assume a positive adjustment range of between plus EUR 50 million and plus EUR 70 million, taking the expected RIU real estate portfolio booking of around EUR 200 million in Q4 into account.Lower Q3 net interest costs versus Q2 reflect the non-repeat of the bond modification costs in Q2 and lower RCF drawings in the period. For full year '21, we can reconfirm expected net interest charges of between EUR 400 million to EUR 450 million.The increase in the tax expense was mainly attributable to a future tax rate increase from 19% to 25% in the United Kingdom, which affects the valuation of deferred tax balances. However, this has no effect on cash taxes.As said, with the following chart, I would like to give some more color on the ramp-up costs which occurred in the third -- in the quarter to prepare for the peak summer period as well as in context of limited opportunities to cover these due to constant and late changes in governmental advice.The first bucket of ramp costs is airline related and reflects the start-up of our airlines from minimum operations to the peak season. This is seasonal staff coming to the business as well as necessary engineering, maintenance and additional airport flying and landing parking changes. And of course, when you start the operation, you have a lower factor -- load factor, and especially during flying, you hardly have any customers.The second bucket is in the amount of EUR 15 million refers to the impact of changing restrictions. An example which you probably all remember is the change of governmental advice in the U.K. regarding Portugal.The third bucket is the distribution costs, which includes expenses for online distribution and also for the reopening of our stores. As Fritz said, we have an increase of our online booking share. And the cost of sale for online bookings have to be recognized immediately as cost.The fourth bucket consists of costs for getting our hotels ready for operations ahead the summer season.The following bucket is related to our cruise segment in connection with additional ships returning to the fleet during the quarter.And last but not least, the sixth bucket is TUI Musement facing EUR 5 million in ramp-up costs as we prepared our cost base for receiving our summer customers. So overall, in total, EUR 125 million.This brings me to our underlying EBITDA bridge. As in the prior quarters, we continued to focus on cost discipline as we quite successfully do since the beginning of the corona crisis. And we are also trying to capture margins where possible. Nevertheless, we achieved a lower result in Q3 compared to Q2 as a result of permanent changing travel advice during the period of ramp-up of operations. And I explained the costs in detail on my previous slide.When we look on the performance of the segment, we saw improved contribution from hotels due to the increase in levels of operations. Similarly, for Continental Europe, we saw increased passenger numbers, which also led to an improvement of the results. The remaining businesses, however, were impacted by operational ramp-up costs, which could not be recovered in an environment of constantly changing travel advice restrictions.Looking now at the development of the single segments. I will start with Hotels & Resorts. Within Hotels & Resorts, 283 hotels, almost 80% of group portfolio were open at the end of the third quarter across destinations such as Balearics, Canaries, North Africa, Greek Islands, Mexico, Turkey and Cuba. This delivered -- these hotels delivered an average occupancy rate of 48% and average revenue per bed of EUR 70. Underlying EBIT loss improved by EUR 28 million versus prior quarter as a result.During Q3, TUI Cruises increased its operation from May from 3 ships to 4, offering itineraries to the Canaries, Spanish Coast, Greek Islands and Baltic Sea. Average daily rate of the operated fleet was EUR 120, reflecting shorter average duration of itineraries offered. Occupancy of the operated fleet was 41%.For Hapag-Lloyd Cruises, in addition to Europa 2, which was already in operation, expedition class ship Hanseatic nature and Hanseatic inspiration resumed sailings with short cruises from Hamburg and to the Baltic Sea. Average daily rate of the operated fleet was EUR 443, reflecting the pricing of shorter and more local itineraries. Occupancy of the operated fleet was 42%.Our U.K. cruise brand, Marella, resumed sailing with Explorer, with the ship Explorer, at the end of June, which -- with a domestic program from Southampton, its first since the government imposed suspension of cruise operations in March 2020. Average daily rate and occupancy of the operated fleet was GBP 127 and GBP 48, respectively, with occupancy capped at 50% as required by U.K. government restrictions.The segment underlying EBIT loss declined by EUR 26 million versus prior quarter, reflecting the ramp-up of operations in preparing our fleet and returning our crew on board ahead of our peak summer period.On TUI Musement, as Fritz already mentioned, TUI Musement sold 212,000 excursions and activities in the quarter, reflecting the increased departures and reopening of destinations. Online sales participation was 39%. Underlying EBIT loss declined by EUR 5 million, including ramp-up costs as we prepared staff to return to destinations ahead of peak summer period.Our Markets & Airlines business restarted operations in April, firstly, from our German source market. In Q3, we took 876,000 customers on their summer holidays, mostly from our central and western markets. The Greek Islands, the Balearics and Canaries were the most popular destinations during the quarter.Underlying loss increased by EUR 69 million versus prior quarter, reflecting the ramp-up costs of operations as we prepared for airline fleet, retained crew and increased the number of retail staff in stores ahead of peak summer period.A quick look at the different source markets. In Northern region, 50,000 customers departed in the third quarter, reflecting the limited list -- green list destinations made available by the U.K. government.Underlying loss increased by EUR 94 million versus prior quarter as a result of ramp-up costs in preparation for peak quarter 4 and related costs from stop/start nature of permitting destinations under U.K. travel restrictions.In Central Region, 510,000 customers departed in the third quarter, reflecting the more consistent travel advice given by our Central Region governments, enabling customers to depart with more certainty to destinations such as Greece, the Balearics, Canaries and Turkey. Underlying loss improved by EUR 18 million versus prior quarter, reflecting the contribution from more substantial departures and operations.In Western Region, 317,000 customers departed in the period, reflecting the reopening of destinations partway through the quarter. Underlying loss improved by EUR 7 million versus prior quarter as a result.All other segments and other one-off costs contributed with EUR 30 million to the development of the quarter, an improvement in other segments reflecting ongoing cost saving measures across head office and other entities as part of our global realignment program. Net one-offs quarter-on-quarter were EUR 5 million, mainly comprising the impact from net hedging ineffectiveness and impairments.Moving over to our cash flow slide on -- of Q3. We are very pleased to have generated a positive free cash flow for the first time since the start of the pandemic. This positive development was driven, as expected, by the inflow of working capital. The Q3 inflow of around EUR 790 million is mainly reflecting the increase in customers' deposits for summer '21 and underlines the high level of short-term bookings we are currently seeing. The other main driver was the increase in supplier payables from the operational ramp-up. Our assumption for full year '21 is that we expect the working capital position to further recover during Q4 due to the late summer business.Coming to various other cash items. The Q3 improvement was driven by a lower noncash effect of a positive P&L impact from derivatives compared to Q2 as well as some reduced cash interest due to the lower RCF drawings and the repayment of the senior notes.In line with our initiatives to support liquidity, net investments is an inflow of EUR 14 million. While we managed to reduce Q3 CapEx further, proceeds from divestments were lower in Q2. The inflow comprises net positive predelivery payments and the sale of 2 smaller hotel assets, the Castelfalfi and the Lena Mary.As already mentioned, we have successfully executed our asset-right strategy, and we are pleased to update our assumptions for the development of net investments for financial year '21. Including the disposal proceeds for RIU properties, we now expect overall net investments to show an inflow to EUR 600 million to EUR 650 million for full year '21. That brings me to a positive free cash flow of EUR 320 million and the total cash flow post financing activities of EUR 120 million. Overall, total cash flow is in line with Q2 as the cash flow from financing is reflecting our reduction in RCF products.We managed to improve our cash and available facilities position per 9th of August to EUR 3.1 billion, which is an increase of EUR 1.4 billion compared to our Q4 -- Q2 update. This position includes the proceeds from the convertible bond tapped as well as from the RIU disposal. But even more importantly, it demonstrates that we were able to generate positive EUR 700 million cash from our operations in the month of May, June, July and the early days of August. As mentioned several times already, this year, we are managing the business with a strong focus on cash.Coming to the left-hand side of the chart. With many of our key Continental European markets reopening for travel and confirmation of quarantine exemption and lesser restriction for those fully vaccinated, we have seen an increase in customers' confidence and subsequently, new bookings momentum from central and western region markets. Q3, as a result, saw our first cash breakeven quarter since the start of the pandemic, delivering an average positive EUR 40 million of cash per month in this quarter. Net fixed costs of EUR 225 million per month were better than our assumption range of EUR 250 million to EUR 300 million per month due to our strict cash discipline.Our assumption for Q3 full year '21 is for short-term bookings to drive working capital and revenue. Given the prevailing uncertainty in our fixed capacity over Q4 as a result, we target towards net cash neutral, excluding special items such as RIU real estate disposal proceeds.To conclude, I would like to reiterate that we are fully financed through the winter with EUR 3.1 billion available liquidity. And I also wanted to remind here that we are also -- expects to see a lower liquidity swing this winter due to lower volumes this summer compared to a normal year.This brings me to my next slide, the balance sheet and the movement in net debt. The net financial position improved by EUR 460 million quarter-on-quarter and stood at EUR 6.4 billion at 30th of June '21. The improvement in net predominantly reflects the positive cash flow driven by the positive working capital development and the increase in equity by drawing Silent Participation II [ info ]. For more details, please find also on this chart our comments regarding drawings of the silent participations as well as under the RCF as at 30th of June and post balance sheet date on 10th of August. As last time, on the right-hand side of the slide, we have included for our convenience -- for your convenience the split of our financial liabilities with a full detail on lease liabilities and liabilities to banks.As a reminder, and as our commitment, I would like to finalize my section again with the ongoing priorities I have on my agenda as the CFO of TUI: manage liquidity, driving operating effectiveness and optimize financing. We are and remain committed to return to a gross leverage ratio of less than 3x, and the whole of TUI is working hard on achieving this target.We have made very good progress over the quarter. And I want to use the opportunity here to once thank you to all the teams who go through these challenging times with us. The corona pandemic has been the biggest challenge for the industry and our company. But as a team, we acted quickly and managed the situation, taking important and necessary actions at the right time. We can see the light at the end of the tunnel, and we are preparing TUI to be even stronger and more resilient in the future.With this, let me hand over to Fritz again for his closing remarks.
Thank you. Thank you, Sebastian. So before you get to the questions, I think 3 things are worth mentioning. First of all, the pandemic has been pushing the pause button for our industry, but there is no reason to assume that travel is not a megatrend in the future. Tourism has been growing above GDP in the last 15 years, and it will be growing above GDP. We have aging populations, more time, more money, more healthy, I think one major contribution. The other one, experience new luxury. It's more important what people want to experience and what they own. And tourism is a force for good in destinations. I mean you see over there. So travel will be a megatrend. Travel will be a great business.Our business model, I think, is fit for purpose. When you look at our brand positioning, leading markets position, the integrated model which helps us right now to steer up the demand and steer demand into our hotels, get good occupancy levels, load factors in our aircraft, so -- good hygiene concepts and high quality in destination, I think it's important.And last, yes, we understand and we know that we have to transform, more digital, less costs, better quality at the same time, and that is digitalization. And we stay committed through the balance sheet target 3 -- of the leverage ratio, less than 3x. So when the crisis will be gone, and we are now in front of, I think, the full back to normality, then TUI will be in a better position than before.And with that, I would like to open for your questions. Thanks a lot.
[Operator Instructions] And the first question comes from Jamie Rollo.
It's Jamie Rollo from Morgan Stanley. I've got 3 questions, please. First, the statement talks about having sufficient liquidity to get over the winter season. So I just got a question about that liquidity number of EUR 3.1 billion. What's the customer deposit number behind that on that 9th of August date? I can see it's about EUR 2.8 billion at June, including both elements, but it's probably gone up since then. So it looks like company cash is actually still quite small. And although you're expecting cash neutrality in the fourth quarter, are you not expecting an outflow in your fiscal first quarter?Secondly, Fritz, I saw a Reuters interview this morning where you're talking about raising -- you might raise more capital at some point. What does that sort of mean? Is that equity? Also, could you talk a bit about what the German government's view on the silent participation is, particularly the convertible one? It looks like Lufthansa is trying to repay theirs as soon as possible. I'm just wondering whether that's your plan or whether you think they might convert that.And then just finally, just on some trading numbers. The 120% increase in volumes for next summer sounds great, but what percent of summer 2022 is sold at this stage? And also, you've not mentioned winter much. That was mentioned in the last update. But what percent of the winter season is also sold both compared to 2019?
Should I -- do you want to start, Sebastian?
If you like.
Yes. Sure.
The customer prepayments, if we compare the situation to '19, we should have had in a normal year roughly EUR 5 billion. And we would not see a significant reduction from the base we have now if there would be a normal winter. So EUR 500 million to EUR 1 billion. So that shows very clearly that we are well financed. And what we can see is that the strong short-term intake improves the liquidity situation in general. So that's why we will have significant cash above any threshold.Capital measures. As we said in the past, we are looking at all the options. And if there are opportunities, we will take them. We are screening the market, and we will always take decisions on the latest development.On the bookings for summer, the overall magnitude and the increase is on a base of 20%. So this is a reasonable high number, which shows that there is pent-up demand, especially compared to the booking pattern we have seen before.The winter has seen a slow start. It's very difficult to judge as we see, actually, a very strong momentum on short-term bookings for always the next 2 to 3, 4 months. So that's why it's very difficult for us to predict how much increase we can achieve. At the moment, we are roughly at 50%. And with -- taking into account the short-term bookings, there will be a significantly higher number to be achieved.
Maybe one thing to add, Jamie. When you look operationally today, we just had the last week before departure between 13% and 15% load factor in our aircraft. I mean this is absolutely unprecedented. And therefore, winter will be okay.In summer, by the way, we pushed out the time when we really have to fix our capacity to sometime, let's say, mid-end February. So therefore, that is something that I think is important in times where it's not 100% clear where we will stand. Yes. So the risk capacity will be finally fixed on the end of February '22 for summer '22.
Sorry, can I just follow up on the first 2 questions? Is there any company cash then? Or is all that liquidity, essentially customer deposits? And also, on the second question, what's the view on the German government's approach to the Silent Participation I, in particular?
I think on the -- maybe the cash position is something Sebastian and the team can offer to answer. I think we're in constant discussions and -- with the German state. I think that the likelihood that they will convert is very high, right? Therefore, they will convert, if that was the question. That's what we assume at least. And we want to repay. Of course, we want to get out of government debt as soon as possible, but let's say, as soon as reasonably possible, right? And when you think about our cash position right now, which is still building, so EUR 3.1 billion liquidity is still building as we speak, I think the position is not so bad, particularly when we think about maybe M&A or maybe an equity raise that might be coming.
Okay. So just to clarify. You think it's a very high likelihood the state convert. So the discussion about raising equity is not to repay the Silent Participation I. That's just to support other company liquidity needs and deleverage.
Deleverage, yes.
So we have no [indiscernible] what the government wants to do.
No, but it's very likely that it will do it. That's [ right ].
And the next questioner is Alex Brignall.
I just got a couple. Looking at 2022, I didn't quite get the answer that you gave to Jamie on how much of 2022 is booked. And therefore, within that, could you tell us if there are sort of coupons, tokens that have been rolled over that couldn't be taken in the early part of this summer?The second question is on restricted cash. That's a bit higher now than it was sort of pre-COVID. I think there were some changes to CAA restricted cash requirements. And obviously, you've had customer deposit inflows. But could you just tell us what restricted cash might look like sort of in a normal world post COVID with some normal customer deposit levels?And then the third question, and again, I think Jamie was looking for it and maybe I just didn't interpret it correctly. But in terms of [indiscernible] works through the winter, what would you anticipate customer deposits will look like, let's say, at the end of Q1 or at the end of Q2 versus where we currently are?
Okay. On the restricted cash, which is around EUR 500 million, in the medium term, we believe that we can reduce this number again. On the customer deposits at the end of Q2, I think there, we -- because we anticipate a significant intake of bookings in end of December, January, this should be up to the level we have. The cash outflow in the Q1 is not easy to calculate as we -- as said, we have strong short-term bookings, but we have no real knowledge today what the long-term bookings will be.If you look at the base where we are today, the outflow should be something between EUR 500 million and maybe EUR 700 million, EUR 800 million, maximum EUR 1 billion. So that really depends on the momentum of short-term bookings. As we have seen at the moment, we always have underestimated the intake. And we assume, while the situation gets more stable, that we will see this trend also in future. And the '22 summer bookings, as said, 20% of overall, and there is only a small -- very, very small portion of bookings rolled over.
And the next question comes from Richard Clarke.
Just first one, on price. At the half year results, you talked about price per summer up 22%. Today, you said 9%. If I kind of roughly do the calculation, it looks like the incremental bookings have come at a price about 10% below maybe pre-pandemic levels. Is that about right? And the remaining capacity you've got left to sell through the rest of the summer, should we be thinking about that kind of pricing level sort of running forward? I know there's some mix in there as well, but maybe help with that.Then just the RIU sale. We made about EUR 100 million of EBIT from RIU in Q4 sort of 2018, 2019. What would be the impact from the disposals you've done in RIU on that sort of normalized level when we kind of recover back from there?And then just last one, just want to understand the leverage, the sort of covenant calculation. So could you give us what gross debt is today? Because I know it often differs from the accounting numbers. So where are we on gross debt today? And that's sort of backward looking. So at September 2023 and I guess March sort of 2024, you'll need to make EBIT -- EBITDA that's about -- that's 1/3 of that gross debt. Is that the way -- right way to think about it?
Maybe on pricing. I mean one thing is very clear. The pricing is a mix, as you said, between more holidays. But at the same time, the short-term booking is, of course, putting some pressure. And at the end of the day, if we get to load factors of, let's say, above 80%, 85% in aircraft, also 10% discount is producing very, very good margins. And the high pricing period starts to happen right now. So the biggest margins we are making is summer. So you can assume that the prices will be lower because it is absolutely the right thing to do in order to marginally fill our aircrafts.On the RIU and cost level, maybe I'll let Sebastian take these. Sebastian, can you do this?
So the average EBIT of the participation in -- within RIU I was, over the years, EUR 35 million. The cash dividend on average is EUR 15 million. We expect a book gain of EUR 200 million. That shows that this is very value accretive to realize the sale here.Financial liabilities stand, end of June, at EUR 7.887 billion, so almost EUR 7.9 billion. This not includes yet the proceeds from RIU with the EUR 450 million. And out of this EUR 7.9 million (sic) [ EUR 7.9 billion ], the lease liabilities are EUR 3.3 billion.
And so does that match your -- the gross leverage number you used for the covenant calculation? Because I know sometimes, the lease liability number is different between the 2 definitions.
No. What -- I haven't -- what you also have to take into account are the pension obligations which are -- were, at end of June, EUR 839 million.
Yes. But the lease liabilities are part or not part of the 3 point -- 3 multiple. That's your question, right?
Yes.
Yes, they are. It's the same number.
It's the same calculation. Okay. That's very helpful.
And the next question comes from Stuart Gordon.
Few for me as well. Just to get -- circling back on summer '22. I know it's been asked a couple of different ways. But last year, at this time, you told us you had 1.5 million holiday booked for summer '21. What is that number now for summer '22?Question on online distribution. It was rising 1% to 2% per annum prior to the pandemic. That's not really changed, which, given what we've seen elsewhere in terms of online migration, seems a little bit disappointing. Is there anything structurally different that is not accelerating that moving forward? And can you just clarify how many passengers in the summer season travel with children?
Okay. Let me tackle on that. I mean when you look at the page with online migration, yes, you see enormous uplift, from 10 percentage points to 17 percentage points, right? So 17 is actually Germany. It goes up from 22 to 39. Thus the average is going up 5%. So below or single upgrades is a mix effect because in Germany, you have the highest migration with the lowest absolute level, right? So the 5% is just a mix. When you want to have the trends, you need to look into the countries. And this is an enormous online shift.I mean even more so, I think, interesting is the shift which we see after booking. And this is actually the app shift, so the 68%. And this is 20% -- 21 percentage point up. And this is related also to our aftersales sales which we have the chances. And even though the customers and destinations are relatively low in Q3, and also today only picking up, we saw week over week over week the highest in-app sales which we have seen ever, and particularly also excursions, week over week over week, we see a new record high for excursion sales and accessory sales. So I think that is something which is remarkable and which is there to stick.On the summer bookings '22, I think 1.2 million, 1.3 million is not a bad number. How much it is relatively is determined by the -- but of course, the capacity which we will fix on the end of February. But the interesting thing, I think, and that is the difference between last year and this year, is there's no vaccination levels, it's above 60%. And that's, of course, something that actually makes the predictability of our revenues much better.Just remember, last time this year, all the bookings were more or less in the U.K. 1.5 million. And then that actually decreased to something below 750,000 as a base because we couldn't fulfill the travel demands to Portugal, on, off, and so on and so on. And that is something which I believe is an enormous difference between a year ago and this year.And the third question, I'm not 100% sure that I remember it. Maybe, Sebastian, can you answer that when you remember it?
Yes. It was how many passengers travel with children.
Okay. In all fairness, I would be wrong if -- I think -- I would be -- of course, different in seasonality, but I would be wrong if I just pick a number. I'm not sure that I can answer that question.
I have an idea, but it's better not to speculate. So give you then later the real number.
Yes, yes, yes.
And the next questioner is James Ainley.
Few for me as well, please. Just coming back to Q4, you said you expect to be cash neutral after the working capital benefit. So I assume, therefore, you're suggesting you will be better than breakeven in the fourth quarter. If you could just confirm that, please.And secondly, when -- you talked about that really strong online growth, which is encouraging. Do you think there's potential to restructure or close more of your shop network? And how much savings do you think you could make from that? And then third, following the RIU disposal, are there more assets, meaningful assets that you can sell? And what sort of potential asset realization could we be thinking about?
I mean let me -- I think the online migration is something which is around to stick. And therefore, we closed in the U.K. almost half the retail outlets. In Germany, we are talking about targeting 70, 80, 90 or 400. I mean we need to be careful that we overdo this because a customer want to buy retail and we don't have retail like, for example, in Germany, we should be careful. But that said, we are taking the advantage, and each and every shop needs to be profitable, right? So -- but it's baked into our realignment program. It's a big part of it.Now on Q4, maybe, Sebastian, I think it's a fair assessment what I heard. And more -- and then -- as it stands, I mean, yes, maybe you want to take that?
Yes. We have a list of assets we look at. We announced in some of the earlier meetings that we are looking for a good harbor for our Marella assets, which would be the TUI Cruises. This is something which we have on the agenda. We also have some assets which we would like to disclose. For us, it's very much important that we don't have a minimum impact on the P&L. Good example always is we have 2 Robinson Clubs on the Maldives. I think with one less, we would probably have the same profitability, but they're gaining the cash. So we do that very carefully, but there is still a significant amount to become.The Q4 assessment or conclusion you made is a good one. It's very difficult to predict. We are quite surprised by the very strong intake we see in the last days, but we have also seen some limitations which suddenly came from governments. We don't expect that anymore, but that's why we are more careful. The short-term bookings are encouraging, but we would support the conclusions you have made.
The next questioner is James Rowland Clark.
A couple of questions, please. The first is on the winter cash burn, excluding working capital. I wonder if you could give us an idea of what the monthly operating cash burn, excluding working capital, might be through Q1 and Q2. You previously delivered, I think, EUR 225 million of net fixed costs in the third quarter.And then secondly, earlier, you're just talking about restricted cash of EUR 500 million. The first question I have is could you just outline exactly what -- or why that is restricted? I don't know. What proportion relates to ring-fencing of customer cash and what proportion may relate to any debt holder requirements? And then a follow-up to that is exactly how do you expect to reduce that restricted cash number in the future given the ring-fencing of U.K. customer cash pressure that may come from the ATOL review by the CAA at the moment?
I mean, Sebastian, should I -- may take the first one?
Yes.
Yes. Okay. I mean in the nature of our business, yes, we have a seasonal swing with our working capital, yes? And therefore, our liquidity will be less. And the cash low point, as you know, is end of December. But the seasonal swing will be less, right? Not because we wanted it to be less, but because the summer business was less strong than normally, right?So the seasonal swing of liquidity, and that's what Sebastian talks about, might be EUR 500 million, might be EUR 700 million, might be EUR 1 billion. But that's maybe the order of magnitude, yes? But of course, we will be able not to -- operationally, we need to earn our costs. I mean if that answers your question, right? So cash and liquidity-wise, we will see a swing, but cost-wise, we will be able to cover costs.And the second one -- or maybe...
What was the question? On the restricted cash, the EUR 500 million?
Yes.
As said, it is our target, and as the situation eases, to reduce this in the next fiscal year. The majority are for customer deposits. So on the other hand, there are items where we work on. So that's why we predict that this number could go down in the future, not immediately now, but in the time frame of 12 months.
Can I -- just following up on both of those. On the second one, you don't see any pressure on that minimum liquidity requirement given the ATOL review at the moment. And the -- and on the first one, is there any way you could sort of provide a rough monthly operating cost given -- through the winter given you've pulled out a lot of costs already with your global realignment program?
I mean we told you what the costs are. If we are in a hibernation mode, the EUR 250 million to EUR 300 million, which we now were able to reduce significantly below to EUR 50 million. In '19, we had a loss of EUR 100 million in the first quarter, EUR 200 million in the second quarter. I mean probably it's an ambitious goal to offset less revenues by less costs we have. So -- and if you then take into account that in -- from end of -- or middle of December onwards, we should be on the working capital significantly positive. And we're not talking about EUR 100 million but a several hundred million. Then you see how well we are financed through the winter.
And on the minimum liquidity?
You mean the EUR 500 million?
Yes, exactly. I just want to -- where -- or why you have such conviction that, that might come down in the future with the CAA review of the ATOL scheme at the moment and ring-fencing customer cash.
Because we work on -- like you have seen with all the other cash measures, we work there very much to come to very good solutions. You may have seen that there were significant discussions in Germany. We have now found a good solution with the state authorities. We are in the same process. The market, the sector is in the same process with the U.K. As you know, it's normally only for packages and not for flight only or eco only. You know that payments with a credit card, which has a very high share, is normally also treated differently. And that's why the numbers -- and you know that we have restricted cash already. So that's why the situation is not as sometimes it is described in public.
And the last question comes from Cristian Nedelcu.
This is Cristian Nedelcu from UBS. Could I please ask you, I think every year in -- between January and March, you used to get between EUR 1 billion and EUR 1.5 billion of cash inflows from advanced payments. And I think we can argue -- with the CAA reviewing there, we can argue with the fact that people are -- seem to be booking closer to the departure date. And also, we can argue there's more uncertainty than normal due to COVID. Maybe some of this cash will not come in. So I guess my question is what do you think is the minimum liquidity that you need in the business? In -- sort of in a prudent way, what is the minimum liquidity that business needs throughout the winter?The second question, can you give us a bit of color in terms of your profitability expectations once things come back to normal? And I mean I was looking in your Q3 statement, you -- the margin levels that you give in the goodwill impairment tests. If I use those margin levels, I get more or less to the old EBIT that you are generating on 2019 revenues. Is this the right way to think about it? Do you think you can -- the business can generate the same level of EBITDA as in '19?And I guess the third one, just maybe coming back again to the restricted cash. May I ask you, it was my impression that some of the cash restricted in relation to the CAA is linked to your volumes. Is that correct? Because that would say if there's further recovery in volumes, the cash restricted would go up. But is that correct or not?
Maybe on the working capital, you are right. If the bookings come later, this has an impact. On the other hand, the good thing is as the base now is so low and the intake is so on short term, that this could offset the delay which we may see in January and March, and that's why the impact is low. And on the capital minimum liquidity needed, it's the EUR 500 million. And on the CAA, as I said, we are -- we have managed this very well for all the other markets. We will manage that also in the U.K. market very well. And that's why we anticipate that the number we have today is a number which is not only defendable but which we hopefully can also improve in the future.And maybe, Fritz, you want to say something about the profitability expectations we have. I just would add that the EUR 400 million of the realignment of the program is available and has lowered our cost base in the future. It's a permanent reduction.
Yes. I would say that's absolutely right. And nothing to add here. I also would like to emphasize one thing. This is just cost. If you take into account commercial positioning and pricing as well and lower risk capacity, and we have taken out 20% of aircraft, lower risk capacity will also normally and should also normally generate higher yields, so higher prices. And particularly, when you're in the risk capacity business, that's what you'll see.But that said, this is difficult to predict because you might see overcapacities in the airline industry and more competition. So I think it's a safe bet to say the EUR 400 million cost savings will also turn into profits. That's what we should be seeing definitely.
Understood. Just a short follow-up on the minimum liquidity requirements. So now you have that EUR 3.1 billion liquidity in there. But just what would be the minimum level you would be -- you are still comfortable with throughout the next quarters? Is it EUR 2.5 billion? Is it EUR 2 billion? In fact, I'm trying to understand how much of the German government debt would you be willing to pay from your current cash position?
Again, it's EUR 500 million, but of course, our expectation with what the cash we have today is significantly higher. I mean I fully understand the assessment on the biggest risk, but we are really happy that we have the EUR 3.1 billion. We see an increase at the moment day by day. We see the short-term bookings. Yes, we will have a EUR 500 million to EUR 1 billion lower working capital due to the season, but there will be a counter effect because the bookings come short term. Normally, the October bookings would have been paid now as they come in September. We will have that as an incremental, that we have lowered the cost base significantly. So that's why -- and we are sure that the level we will have is very reasonable.We don't want to give a number, but we feel safe and comfortable. But this doesn't take away any pressure in the company to improve the situation significantly. As I said, we have managed the company for cash, and that we will do also in the future. And we have seen a lot of levers to do so, and we still have.
Yes. Maybe Sebastian, to add one thing. I mean before we saw the crisis, before corona, yes, usually, we targeted our RCF. So excluding the state debt and so on, the RCF, that our minimum liquidity headroom was between EUR 500 million and EUR 1 billion in the winter low. That's how we managed our business.But of course, I mean, we could give back -- potentially, we could start to hand back some of the state money. But we always say, we need to be careful to be reasonable. I mean there is still a lot of volatility out. And once we have given back the money, I mean, it's difficult to untap if a black swan would come around and so on.I mean, therefore, being careful is something which we will be doing, let's say, a couple of other quarters, 3, 4 quarters, to understand exactly how the pandemic turned into an endemic and to live with it all. But then, of course, I mean, EUR 3.1 billion is a good number. And it shows it is a lot of liquidity. Short term, it's giving the safety net for our company, but long term, it's a potential to pay out the state. And that is, of course, something we want to do and we will do because that is a prime -- that's the prime goal, to actually pay back the state money.
We have no further questions from the audience, so we are closing the Q&A. And I hand over again to Mr. Joussen.
Yes. Thank you very much. I think you have seen a good starting point of the recovery. I mean cash inflows and net cash flows of EUR 320 million, liquidity position as they are. Now is a quarter when we have and we want to turn the prepayments into real revenues. And I think we had a good starting point. You saw the summer capacity in July, how it builds from 350,000 capacity to 700,000 capacity, almost even bigger. And I think this is where we need the eyes on the ball. Cost savings remains the main target. And then, of course, taking care of the balance sheet. And the question how we get the state out again is something which is a priority, together with a good balance sheet or solid balance sheet and a solid leverage ratio.Thank you very much for dialing in, and have a great day.