29 September 2008

TUI Travel PLC

Pre-Close Trading Update

Prior to entering its close period on 1 October 2008, TUI Travel PLC announces the following update on current trading.

Current Trading

Summer 2008

In the seven weeks since our last trading update on 14 August, Summer 2008 trading has continued to progress as anticipated. Within the UK, as a consequence of the capacity reductions and the strong rate of sale, we entered the 'lates' booking period with significantly less stock left to sell. This has enabled us to reduce the level of discounting compared to prior years. The total UK programme is now 94% sold, which is three percentage points ahead of the prior year. Across our other European source markets, we have also experienced stronger pricing in the 'lates' booking market. Our portfolio of specialist, activity and online businesses has traded in line with our expectations. 

  Winter 2008/09

As a result of our actions to eliminate unprofitable capacity, coupled with a reduction in the number of competitors trading in the marketplace, we anticipate that the level of supply will be significantly lower in Europe, particularly in the UK, for both the Winter 2008/09 and Summer 2009 programmes.

Within the UK, demand remains broadly in line with our previous update. We are achieving average selling prices for charter holidays up 7% on capacity that is 6% lower. The total UK programme is now 33% sold, which is three percentage points ahead of the prior year. 

All our European markets are now on sale. We are achieving average selling prices in excess of the inflationary cost pressures for the season. We remain confident that the flexibility within our business model will enable us to further adjust both flight and bed capacity if necessary in response to any weaker demand.

In our other sectors, early trading has been encouraging with sales up 1% and 5% in Specialist and Activity respectively, with total transaction values up 36% in ODS.

The Group is now 87% hedged on fuel, 95% hedged on the Euro and 91% on USD requirements for the Winter season. 

Summer 2009

Although it remains very early in the selling season, we are pleased with Summer 2009 trading in the UK, which remains the only key source market currently on sale. The total UK programme is now 12% sold, which is in line with the prior year. We are achieving average selling prices for charter holidays up 12% that is significantly ahead of the c.6% cost inflation for this season. 

The Group is now 78% hedged on fuel, 84% hedged on the Euro and 76% on USD requirements for the Summer season, and as such is well positioned to benefit from the recent falls in oil prices.

TUIfly

We can confirm that Thomas Cook Group PLC have withdrawn from discussions with Lufthansa AG and ourselves regarding a potential merger of Condor, Germanwings and TUIfly. We continue to explore alternatives for our German airline operation and will update the market in due course. 

Outlook

We remain encouraged by current trading and believe that the flexibility in our business model gives us the ability to manage successfully through a challenging economic period. Accordingly, we are confident that we can meet the Board's expectations for the years ending 30 September 2008 and 30 September 2009. 

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