TT. Tui Travel

 

TIDMTT. 
 
RNS Number : 6652P 
TUI Travel PLC 
27 March 2009 
 

27 March 2009 
 
 
TUI TRAVEL PLC 
 
 
STRATEGIC COOPERATION AGREED BETWEEN TUIfly AND AIR BERLIN 
 
 
TUI Travel PLC ("TUI Travel") today announces that it has agreed the terms of a 
strategic cooperation between Air Berlin and TUI Travel's German aviation 
business ("TUIfly") (the "Transaction"). 
 
 
The Transaction satisfies the key strategic goals of de-risking the TUIfly 
business through an exit of the scheduled flying operation and secures optimal 
capacity for our tour operator in Germany. 
 
 
We are pleased to be establishing a strategic relationship with Air Berlin, 
Germany's second largest airline and the largest supplier of third party flying 
capacity to our German tour operator. 
 
 
The key benefits of the Transaction to TUI Travel are: 
 
 
+--------------+---------------------------------------------------------------------+ 
|          *   |    Eliminates losses in the scheduled flying operation of TUIfly,   | 
|              |    which generated an operating loss of c.EUR35m in the year ending   | 
|              |    30 September 2008;                                               | 
+--------------+---------------------------------------------------------------------+ 
|          *   |    Reduces tour operator margin dilution caused by excess capacity; | 
+--------------+---------------------------------------------------------------------+ 
|          *   |    Retains economies of scale benefits in TUIfly;                   | 
+--------------+---------------------------------------------------------------------+ 
|          *   |    Secures the future of the airline for customers and employees.   | 
+--------------+---------------------------------------------------------------------+ 
 
 
Under the terms of the Transaction, TUIfly will continue to operate 38 aircraft 
and will enter into long-term wet lease contracts(a)  with Air Berlin and TUI 
Germany under the following commercial arrangements: 
 
 
+--------------+---------------------------------------------------------------------+ 
|          *   |     17 aircraft will be operated for Air Berlin. This represents    | 
|              |     the transfer of the 'city-pairs' flying operation to Air        | 
|              |     Berlin, along with full commercial responsibility and risk. The | 
|              |     aircraft will be operated under the Air Berlin brand.           | 
+--------------+---------------------------------------------------------------------+ 
|          *   |     21 aircraft will be operated for TUI Germany, which will        | 
|              |     provide dedicated capacity for our charter business in Germany. | 
|              |     This business will retain the TUIfly brand.                     | 
+--------------+---------------------------------------------------------------------+ 
 
 
TUI Travel will acquire a 19.9% equity stake in Air Berlin for cash 
consideration of EUR64.8 million(b), via a capital increase in Air Berlin. Air 
Berlin will acquire a 19.9% equity stake in TUIfly for EUR36.3 million, also in 
cash. Upon completion, TUI Travel will receive the right to nominate one 
non-executive director to the Board of Air Berlin. 
 
 
The Transaction is subject to anti-trust clearances in Germany, Austria, Spain 
and Portugal and has an effective date of 1 October 2009 (depending on the 
satisfaction of certain customary conditions). 
 
 
Peter Long, Chief Executive Officer of TUI Travel PLC, commented: 
 
 
"I am delighted to have agreed a commercial deal which not only optimises our 
tour operator programme in Germany but also minimises the disruption to our 
colleagues within TUIfly, who despite the recent uncertainty, have continued to 
deliver an excellent performance in the airline. Furthermore, I look forward to 
a successful strategic partnership with Air Berlin." 
 
+-----+-------------------------------------------------------------------+ 
| (a) | These contracts will include all costs relating to aircraft,      | 
|     | crew, maintenance, insurance and overheads. The contracts have an | 
|     | initial term of ten years and are automatically extended by ten   | 
|     | years unless either party gives 24-month notice of termination    | 
+-----+-------------------------------------------------------------------+ 
| (b) | Cash consideration may increase to a maximum of EUR68.2 million if  | 
|     | certain minority shareholders in Air Berlin also participate in   | 
|     | the capital increase                                              | 
+-----+-------------------------------------------------------------------+ 
 
 
Enquiries: 
Jessica Rouleau / Kate Hough, Hudson Sandler 
Tel: +44 (0) 207 796 4133 
 
 
Notes for editors: 
 
 
+----+--------------------------------------------------------------------+ 
| 1. | The value of gross assets on Air Berlin's balance sheet as at 30   | 
|    | September 2008 was EUR2,409.6 million and the loss attributable to   | 
|    | these assets for the year ended 31 December 2007 was EUR21.0 million | 
+----+--------------------------------------------------------------------+ 
| 2. | The value of gross assets attributable to TUIfly as at 30          | 
|    | September 2008 was EUR505.2 million and the loss attributable to     | 
|    | these assets for the year ended 30 September 2008 was EUR23.5        | 
|    | million                                                            | 
+----+--------------------------------------------------------------------+ 
| 3. | Following completion, TUI Travel's stake in Air Berlin will be     | 
|    | accounted for as an investment, which will be marked-to-market     | 
|    | through reserves.                                                  | 
+----+--------------------------------------------------------------------+ 
| 4. | Losses on fuel hedges and associated foreign exchange contracts    | 
|    | totalling approximately EUR26 million relating to TUIfly's "city     | 
|    | pairs" business will be recorded through the income statement of   | 
|    | TUI Travel at completion.                                          | 
+----+--------------------------------------------------------------------+ 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
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