TUI AG Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jamie Rollo - Morgan Stanley - Analyst : I've got a few questions on Markets & Airlines and then one on free cash flow. So just on Markets & Airlines, the margins looked like they dropped only 1% this year. It will be helpful for us to understand how much of that pressure -- is the demand environment, whether that's the consumer, the weather, the Middle East, how much of it is the competitive environment, basically insufficient ASPs? And how much is the higher cost of the transformation? And is there a risk that your margins in 2026 in Markets & Airlines will drop further? Secondly, on the strategy in that division, you sound really confident it's working. As you said, we can't see any evidence yet. Is there anything you are disappointed about? Or are you going to be making any changes? And why are you so confident it is working? And then finally, on cash, the mix of profit is moving even more towards the joint ventures. So what does that mean in terms of your free to conversion and the eventual possible payout to your shareholders at the end of the year?

Question: Jamie Rollo - Morgan Stanley - Analyst : Could I just come back on a couple of things you said, Sebastian, could you please, if possible, quantify Belgium, Netherlands hit? And also, you didn't answer the question about margins in 2026 in markets. We're not asking for a forecast, but do you think we have bottomed or it could be a bit more of a U-shape before we get to the 3%?

Question: Richard Clarke - Sanford C Bernstein & Co LLC - Analyst : I guess going back to Q2, you were quite optimistic that the slight step down in bookings you've seen is due to a a later booking window and you're calling out the improvements you've seen since Labor Day that print. So just a little bit more color on what's happened in the last couple of months? That trend didn't hold. Is that all down to heat wave and Middle East? And in particular, maybe second question, just a bit of color over the last 12 months as to what particularly happened in Germany. I think after FTI came out, we kind of assume there was a vacuum there the 2-year lease was slightly fell. Who has stepped into that vacuum and is that as you sort of raised the competitive pressure is the replacement more competitive against you than FTI. And then the third question is just around the dividend. I mean I haven't mentioned it today, but I guess we're expecting a dividend policy at your next print in December. Does dividend policy mean you're going to declare a dividend? Or does it mean you're going to set out a policy and declare a dividend at the end of 2026?

Question: Richard Clarke - Sanford C Bernstein & Co LLC - Analyst : Okay. Maybe just one quick clarification. Why is Germany suffered more from the heat wave and the Middle East than the UK as, what is the differentiation there?

Question: Cristian Nedelcu - Ubs Inc - Analyst : Could I please start with the working capital. Correct me if I'm wrong, but I think your revenues in Markets & Airlines in the first nine months are EUR800 million higher year over year. Usually have a negative working capital. So this should mean some cash inflow from working capital better than last year. But I believe the contrary, I think the working capital cash inflow is EUR100 million less than you had last year. Could I just double check the moving part and what's happening there? I think the second one on Markets & Airlines, coming a bit back to the cost savings and transformation costs and benefit, I think you mentioned you'll provide us more details in December. But just ballpark for us to understand is this year the transformation program is it a net headwind to the EBIT or the benefits are higher than the transformation cost? Could you give us a bit -- I'm trying to understand if this year, there's a EUR50 million, EUR100 million benefit from the transformation or is the headwind or anything like that? And maybe the third one, if I may, just coming back to your guidance for a modest improvement in the net debt. If I look on Slide 33, I think that the segments which may be a bit more difficult, at least for me, to forecast this movement in the lease and other repayments and other noncash additions to the lease. Could you talk a little bit about that. So leaving aside the free cash flow generation, while the impact on the net debt from all these movements in the leases and additions and other movements, I think you mentioned in Q3, you had a benefit from the FX on the dollar-denominated leases. I think that itself helps you by EUR200 million. So could you help us for the full year, roughly how we should think this moving parts?

Question: Cristian Nedelcu - Ubs Inc - Analyst : Can I add one short -- sorry, go ahead.

Question: Cristian Nedelcu - Ubs Inc - Analyst : Can I add one short follow-up on the working capital. So Mathias, based on your answer, you suggested that at the end of the year, the working capital should be pretty much aligned with the usual relationship. So this means that the usual EUR600 million cash inflow you're seeing from working capital in Q4 that's more or less what you're counting on for this year, too? And maybe secondly, looking at your -- in your balance sheet the touristic payments received, I think this have increased year over year by something like 3%, while your revenues have increased by 7%. Just double checking the increased competition in the market, does that materialize also by offering better payment terms for your customers lower deposits or collecting money closer to the departure date is something you're seeing at an industry level or not really?

Question: Andre Juillard - Deutsche Bank AG - Analyst : Most of my questions were already answered. But just follow-up on the airlines and the cruise lines. Could you give us some more color about your intentions about financing? Do you plan to continue to and some lease contracts for the airlines and transform them into a full ownership? And have you made any progress on the financing of the two new ships from?

Question: Jurgen Kolb - Kepler Cheuvreux SA - Analyst : Two questions from my side, a follow-up on the airline business here. Is there an ideal share of owned airlines? Or is that rather a moving target that you decide on the opportunities and whenever or whatever is possible? And then secondly, on the on the bookings, Germany, down 5% summer. What are you seeing in terms of length of the vacations? Are people or are the consumers in Germany specifically also cutting down on the length? Or just in parenthesis just the number of of bookings that is down. And maybe one additional one, so that makes three. How are you planning the winter period? I would assume no capacity increase because you want to grow with dynamic packaging, but maybe some words on how you're seeing the winter period coming along?

Question: Karan Puri - JPMorgan Chase & Co - Analyst : Three quick questions from my end. The first one is on group EBIT sensitivity to top line growth within Markets & Airlines. I'm wondering if you could share something on the drop-through here? Second one is again on the Q4 implied EBIT growth coming in slightly softer than previously expected. Sorry if I missed it, but just if you could touch a bit on the phasing between Q3 and Q4 once again. And the last one is on your sort of evolution of German market share in the context of the minus 5% bookings that you communicated today?

Question: Karan Puri - JPMorgan Chase & Co - Analyst : Makes sense. Just if it's possible to sort of give sort of a high-level understanding of blended and the blended market share in this context. Just trying to understand what the market is doing in terms of bookings versus minus 5%?

Question: Muneeba Kayani - Bofa Merrill Lynch Asset Holdings Inc - Analyst : First question, on Cruises. It's a clearly strong performance this year and I see your guidance upgrade on that specific segment. As we think about next year on Cruises, can you talk about the building blocks for this business and separately between JV and Marella? What's your visibility for next year at this point? And then also on the cash flow side from Cruises and the dividends. You've clearly said it for this year, but also a bit of thinking about it for next year. So that's my first question around just overall Cruises into next year. And then secondly, just on FX, so your guidance is at constant currency. There was a EUR10 million headwind in the third quarter. What are the moving parts on FX for the fourth quarter as we model out reported EBIT?