Winter 2009/2010

Booking volumes have improved since our previous trading statement on 29 September, 2009. Across all source markets, recent booking volumes are significantly ahead of the cumulative booking position and ahead of capacity reductions.

This trading pattern is similar to that experienced in the last two seasons, where booking volumes improved throughout the season, reflecting a later booking trend. Our focus is on ensuring that we achieve required prices and load factors and, as such, we entered the season with reduced capacity in anticipation of weaker demand and have leveraged the flexibility in our model to further reduce supply in Germany, which is now down 9%. We retain flexibility to further adjust capacity to reflect changes in demand, although on the evidence of recent trading, we do not expect to alter capacity significantly in either direction in the remainder of the season.

In the UK, booking volumes have improved in recent weeks, reflecting similar trends to those seen in the Winter 2008/2009 and Summer 2009 seasons. In the last four weeks, booking volumes were down 4% compared to the cumulative position which is down 16%. Capacity reductions mean that we now have 13% fewer holidays left to sell in the UK. Including mix benefits, average selling prices remain up 10%, with margins flat year-on-year.

In the Nordics, booking volumes have been ahead of prior year in recent weeks and the cumulative booking position has improved significantly from -24% at our last trading update to -15%. The improvement has been seen across all source markets in the region, with particular strength in Sweden and Finland which are our two largest markets in the Nordics. Although we currently have more product left to sell than last year, our rate of sale leaves us confident that we will achieve required load factors.

In Germany, we have leveraged the flexibility in our model to reduce capacity by 9% to ensure that we achieve required load factors and average selling prices. We have reduced our prices to pass lower flying costs (driven by lower fuel prices) and accommodation savings through to our customers, which should help to deliver our required volumes without harming our margins.

In Western Europe, like our other source markets, cumulative booking volumes are down versus the prior year but the trend has improved in recent weeks and volumes were ahead in Belgium and France. Belgium is trading particularly well, continuing its strong performance in the Summer 2009 lates market, and has taken more bookings than at the same time last year.

The Specialist and Activity Sectors have also experienced a later booking trend and have seen significant improvements in demand in recent weeks. In the Specialist & Emerging Markets Sector, bookings in the last four weeks are flat on the prior year, whereas cumulative booking volumes are down 11%. The improvement has been seen across all divisions within the Sector, with a particularly marked upturn in the US and Russian source markets. In the Activity Sector, sales in the last four weeks were up 15% versus the prior year, with all divisions showing positive year-on-year trends.

In the A&D Sector, greater availability of bedstock and price reductions by accommodation suppliers has led to a significant growth in volumes (+30%) in our online B2B division. As a wholesaler of accommodation, our margins per transaction have remained flat despite the fall in average transaction values and the strong volume growth means that total margins are ahead of the prior year for the season so far. We are seeing similar trends in our online B2C division, with strong growth in our LateRooms business, and we have successfully transitioned our AsiaRooms brand from a merchant to a commissionable model, driving higher conversion rates and improved margins.

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