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TUI Group resolved a 1.1bn euros capital increase to strengthen the balance sheet

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1.1 billion euros fully underwritten capital increase with subscription rights enables sustainable strengthening of the balance sheet structure and lower interest costs. Demand for travel remains high: Overall Summer 2021 programme totals 5.2 million bookings, an increase of ~1.1 million since update in August.

The Executive Board of TUI resolved, with the consent of the Supervisory Board, a capital increase to improve the balance sheet structure. The fully underwritten capital increase with subscription rights is expected to raise gross proceeds of around 1.1 billion euros. For this, 523,520,778 new shares will be offered at a subscription ratio of 10:21 (10 new shares for every 21 existing shares). "Following transformation and restructuring of business areas and the relaunch of tourism in recent months, our focus is now on refinancing and reducing the utilization of government loans. We want to, we can and we will find our way back to economic strength. We are working on this relentlessly. The new TUI will be leaner, more digital and more efficient. But it will continue to set standards in tourism, in quality, innovation and sustainability," said TUI CEO Fritz Joussen. Unifirm Limited of the Mordashov family supports the strategy and, as the largest shareholder of TUI, has undertaken to exercise all subscription rights attributable to its shareholding of 32 percent and to subscribe to the new shares accordingly. The remainder of the capital increase is fully underwritten with Barclays Bank Ireland PLC, BofA Securities, Citigroup, Deutsche Bank and HSBC acting as Joint Global Coordinators and Joint Bookrunners and COMMERZBANK, Landesbank Baden-Württemberg and Natixis acting as Joint Bookrunners.

TUI intends to use the net proceeds of the capital increase to reduce interest costs and net debt by reducing current drawings under the KFW facilities. Taking into account the expected net proceeds of around 1,099.5 million euros, the current drawings under the KfW Facility would be reduced by 375.0 million euros to zero. The current drawings under the Cash Facility (RCF) would be reduced by the remaining net proceeds of around 724.5 euros million to around 762.0 million euros. As of October 4, 2021, TUI’s total cash and available facilities amounts to 3.4 billion euros at its disposal, slightly more than in August 2021. Including the proceeds from the capital increase, total cash and available facilities amounts to 4.5 billion euros.

Fritz Joussen, TUI Group CEO: “The capital increase will enable us to take a significant step closer to our goal of rapidly repaying the government loans. The improved capital structure creates a solid foundation and enables us to take even better advantage of the opportunities arising from the recovery of the industry. We are excellently positioned to benefit from the full return of tourism."

Demand for travel remains high: 5.2 million summer bookings
Overall Summer 21 programme of the Group now totals 5.2m bookings, an increase of c.1.1 million bookings since our August update. In particular, we have seen strong improving trends over recent weeks with bookings in Germany and the Netherlands in particular, well ahead of Summer 2019 levels. This reflects the returning customer confidence in departure in our Continental European markets. with load factor improvement in the last two to three weeks before departure evident of the short-term booking trend and pent-up demand for our holidays. The high demand for travel and the continuing short-term booking trend is reflected in the load factor improvement of the aircraft fleet in the last two to three weeks before departure. Over 2.6m customers departed for their TUI holidays during July and August, doubling the 1.3 million customers who travelled in July and August last year.

For the overall Winter 2021/22 programme, bookings at this stage are 54 percent of Winter 2018/19 levels and ASP is up +14 percent. Travel restrictions are now largely lifted for short and medium-haul winter destinations in our key markets and the vaccination rates of the EU and UK adult population has reached a very high level. Therefore, we expect a wider increase in international travel this Winter. TUI currently plans winter capacity between c.60 to c.80 percent of a normalised programme, with long-haul destinations expected to recover more slowly. The most popular winter destinations include the Canary Islands, mainland Spain, Egypt and Cape Verde.

For Summer 2022, we have a very encouraging pipeline of 1.6 million bookings. Overall Summer 2022 bookings are up 54 percent and ASP is up 15 percent versus Summer 2019 in the same period.  Turkey, Florida, Greece, and Cyprus are the most popular destinations at present. With the strong indications of pent-up effects, TUI believes Summer 2022 volumes will likely recover close to normalised levels of Summer 2019.

The demand is there. Wherever government travel restrictions have been lifted, we immediately experience the rapid return of business, catch-up effects and higher sales of customers for their trips. In Germany and the continental European markets, this development could already be seen throughout Summer of 2021. In England, this occurred more frequently after the previously extensive restrictions were eased in recent weeks.

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