Central Europe
Central Europe includes the source markets of Germany, Austria, Switzerland and Poland. In Germany and Austria, TUI is the number one brand with many different tour operator and distribution activities. In Germany, the largest market, there is a broad brand portfolio that reaches out to all customer segments. TUI is the favourite brand of the German holidaymaker, 1-2-Fly appeals to price-conscious customers, while airtours is a brand designed for the luxury segment.
Central Europe reported an underlying operating profit of £66m in 2009 (2008: £62m). As outlined in the table below, the improvement of £4m is principally due to strong Summer 2009 trading in the German tour operator (up £15m), the elimination of TUIfly losses (£10m), partially offset by weak trading in Switzerland (down £4m) and Poland (down £11m).
£m | Germany | Austria | Switzerland | Poland | Central Europe |
|---|---|---|---|---|---|
| 2008 | 45 | 9 | 4 | 4 | 62 |
| Scheduled flying losses | 10 | – | – | – | 10 |
| Impact of sale and leasebacks | (5) | – | – | – | (5) |
| Trading | 15 | (2) | (4) | (11) | (2) |
| Synergies | – | 1 | – | – | 1 |
| 2009 | 65 | 8 | – | (7) | 66 |
| Central Europe | 2009 | 2008 | Change % |
|---|---|---|---|
| Customers (’000) | |||
| Germany | 8,775 | 10,056 | 13% |
| Switzerland | 286 | 324 | 12% |
| Austria | 565 | 682 | 17% |
| Poland | 104 | 141 | 27% |
| Total | 9,730 | 11,203 | 13% |
| Revenue (£m) | |||
| Germany | 4,144 | 4,036 | +3% |
| Switzerland | 185 | 196 | -6% |
| Austria | 405 | 385 | +5% |
| Poland | 62 | 85 | -27% |
| Total | 4,796 | 4,702 | +2% |
| Underlying operating profit/(loss) (£m) | |||
| Germany | 65 | 45 | +44% |
| Switzerland | – | 4 | n/a |
| Austria | 8 | 9 | -11% |
| Poland | (7) | 4 | n/a |
| Total | 66 | 62 | +6% |
| Underlying operating margin (%) | |||
| Germany | 1.6% | 1.1% | +50bps |
| Switzerland | – | 2.0% | -200bps |
| Austria | 2.0% | 2.4% | -40bps |
| Poland | (11.3)% | 4.7% | -1,600bps |
| Total | 1.4% | 1.3% | +100bps |
Germany
Underlying operating profit for 2009 was £65m, an improvement of £20m over the prior year (2008: £45m). Strong Summer 2009 trading in the tour operator led to an improvement of £18m in the 2009 result. This was driven by a 17% cut in charter capacity, which resulted in fewer holidays left to sell than in the prior year, particularly in the lates market. As a result, higher average selling prices were achieved which led to improved margins over last year. Demand was also stimulated by passing on hotel rate renegotiations to the customer. The capacity cuts were mainly in the short and medium haul destinations of Balearics, Greece, Canaries and Mainland Spain, partly offset by increased customer demand for destinations such as Turkey, Cape Verde, Croatia and the US.
TUIfly also improved its result by cutting capacity in its loss-making scheduled flying routes. Capacity was cut by 16% in Summer 2009, which led to a two percentage point improvement in load factors for its Summer 2009 programme and resulted in a £10m improvement in margins over the prior year. During the year, we also announced that we entered into a strategic venture with Air Berlin, which will further de-risk the TUIfly business through an exit of the scheduled flying operation and will secure optimal capacity for the German tour operator.
Germany improved its controlled distribution by six percentage points to 46% in 2009, through increased sales through our own retail network and direct brands such as Berge & Meer and l’tur.
The underlying operating margin % in Germany improved by 50bps to 1.6% (2008: 1.1%), but this remains below target margins. The pro forma margin, which reflects the benefit of eliminating residual losses of £20m and associated revenues of £275m in the scheduled flying operation, is 2.2%.
Switzerland
Switzerland reported a breakeven underlying operating result in 2009 (2008: profit of £4m). Customer volumes decreased by 12% over the prior year due to soft consumer demand, as well as over capacity in the market and aggressive pricing by competitors to protect market share. In addition, prices were adversely affected by the unfavourable exchange rate for the Swiss Franc against the Euro.
Austria
Austria reported underlying operating profits of £8m (2008: £9m). Trading performance was adversely impacted by weaker customer demand in the Austrian market, although margins were protected by capacity control which led to a decline in volumes of 17% over the prior year. The volume decreases were largely in the destinations of Greece, Spain and Tunisia.
The Austrian business delivered synergies of £4m in 2009, an increase of £1m over the prior year figure of £3m. This has been achieved through the integration of the former First Choice and TUI businesses, including significant savings on IT, commission, advertising and brochure costs.
Poland
Poland reported an underlying operating loss of £7m in 2009 (2008: profit of £4m). This decline was driven by the significant weakening of the Polish Zloty against the Euro which increased input costs and significantly reduced customer demand for Euro destinations. Volumes decreased by 27% in 2009 over the prior year.
