annual report  accounts for the year ended 30 september 2012
positioned for growth
tt11  ar 2012  20122012  proof 5 our growth levers 
creating shareholder value
•	delivering	mainstream	growth
 unique holidays only available  
from tui travel
 distributed directly to the customer –  
growth from online
 leveraging our scale 
•	organic	specialist		activity	growth 	
•	leveraging	our	global	leadership	position 	
in	 accommodation	 wholesaler	 through	
growth	in	existing	markets	and	new 	
market	 entry
•	 	 investing	in	accommodation	ota	– 	 	
focus	on	high	growth	and	new	markets 	
•	 	 focus	on	free	cash	flow	generation
the	investment	case
reasons to invest in tui travel plc
wwwtuitravelplccom
tt11  ar 2012  20122012  proof 5 tui travel plc annual report  accounts 2012 1
tt11  ar 2012  20122012  proof 5
group	 overview
wwwtuitravelplccom
	 contents
  group overview
 ifc the investment case
 02 tui travel overview
 04 our structure
 06 operational and financial highlights 
  strategic overview 
 08 chairman’s statement
 09 chief executive’s statement
 10 tui travel at a glance
 12 why we do it market overview
 14 how we do it strategic framework 
 15 how we do it business models
 16 how we do it strategy
 18 how we measure it key performance indicators
 20 what are the risks principal risks
 28 our people
 30 health  safety
 32 sustainable development
  business and financial review
 36 group performance 
 39 segmental performance
 48 current trading and outlook
  governance
 50 board of directors
 52 directors’ report
 55 directors’ responsibilities statement
 56 corporate governance report
 66 remuneration report
  financial statements
	 78	 independent	auditors’	report	group
	 79	 consolidated 	 financial 	 statements
 79 consolidated income statement
 80 consolidated statement of comprehensive income 
 81 consolidated balance sheet
 82 consolidated statement of changes in equity
 83 consolidated statement of cash flows
 84 notes to the consolidated financial statements
	147	 independent	auditors’	report	parent	company
	148	 parent	company	financial	statements
 148 company balance sheet
 149 notes to the company’s financial statements
  shareholder information
 154 financial calendar
 154 contacts and advisers
 154 glossary of key terms
 155 shareholder discount
 156 index
tui	travel	plc	is	one 	
of	the	world’s	leading 	
leisure	 travel	 groups
wwwtuitravelplccom
the annual report  accounts contain forwardlooking statements that are subject  
to risk factors associated with amongst other things the economic and business 
circumstances occurring from time to time in countries and sectors in which the  
group operates it is believed that the expectations reflected in these statements  
are reasonable but they may be affected by a wide range of variables which could  
cause actual results to differ from those currently anticipated
strategic	 overview business	and	financial	review governance financial	 statements shareholder	 information 2 tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
our vision
making travel experiences special 
who we are
tui travel plc tui travel or the group is one of the world’s  
leading leisure travel groups operating in approximately 180 countries 
worldwide and comprising over 240 brands we serve more than  
30 million customers across 31 source markets making us a global 
player in a growing industry headquartered in the uk we employ 
approximately 54000 people and operate six airlines consisting of  
141 aircraft
through our global brand portfolio and our travel expertise we are 
focused on delivering a wide variety of leisure travel experiences 
designed for our customers’ ever changing needs
the group reported through four business sectors until 30 september 
2012 mainstream specialist  activity accommodation  destinations 
and emerging markets as of the 1 october 2012 the group will be 
reporting in a new structure which you can review in the ‘how we  
do it our new structure’ section of this annual report and accounts
tui travel is listed on the london stock exchange and is a member  
of the ftse 250 and ftse4good indices with the ticker code tt 
for more information visit wwwtuitravelplccom
group overview
tui	travel	overview wwwtuitravelplccom
tui travel plc annual report  accounts 2012 3
group overview
tt11  ar 2012  20122012  proof 5
group overview
where we operate
tui travel is a global business operating across 31 key source markets  
in 180 countries worldwide
australia
austria
belgium
brazil
canada
china
czech republic
denmark
finland
france
germany
hungary
india
ireland
italy
luxembourg
 
mexico
the netherlands
new zealand
norway
poland
russia
singapore
slovenia
spain
sweden 
switzerland
thailand 
ukraine
united kingdom
united states
our featured brands
tui travel operates over 240 brands which are available to view on our website  
wwwtuitravelplccombrandexperience a selection of our featured brands includes
our 31 key source markets are
in germany tui is one of the best 
known consumer brands and the 
favourite holiday brand for consumers 
and travel agencies alike it has  
a marketleading position
wwwtuicom
jetair is tui belgium’s master brand it 
is a tour operator which offers a range 
of air and car holidays and city trips 
wwwjetairbe
thomson has been selling holidays 
from the uk for over 50 years it is one 
of the uk’s most wellknown holiday 
brands delivering unique and modern 
holiday experiences in 2013 90 of 
hotels in its brochures will be exclusive 
to thomson 
wwwthomsoncouk
fritidsresor is the leading tour operator 
and retail business in the swedish 
source market offering package tours 
to destinations worldwide including  
the mediterranean canary islands  
and thailand
wwwfritidsresorse
lateroomscom offers a large array  
of accommodation across the uk  
and worldwide from bbs to castles  
to hotels to apartments to chalets
wwwlateroomscom
hotelbeds is the leading global 
accommodation wholesaler  
supplying over 50000 hotels  
across 147 countries to travel  
agents airlines and tour operators
wwwhotelbedscom
airtours is a luxury holiday brand which 
for more than 40 years has offered  
the most comprehensive individual  
and exclusive holidays in the german 
speaking market 
wwwairtoursde
intercruises shoreside  port services 
is an experienced global business 
offering first class ground handling  
and port agency services to the  
ocean and river cruise industry
wwwintercruisescom
for over 20 years quark expeditions 
has been the leading provider of polar 
adventure travel with its diverse fleet 
of specially equipped vessels and 
seasoned expedition leaders it offers 
travellers unparalleled access to the 
most remote regions on earth
wwwquarkexpeditionscom
tui netherlands operates arke the 
leading b2c travel brand in the dutch 
source market and a household name 
besides tour operating it operates 
130 travel shops a call centre and the 
website arkenl arke is an important 
supplier of passengers to the airline 
arkefly also operated by tui netherlands 
wwwarkenl
the moorings is the world’s leading 
yacht charter company with over  
650 yachts in 27 cruising destinations 
worldwide the moorings offers a 
collection of memorable getaways  
from handson sailing or power  
yacht vacations to allinclusive  
private luxury crewed yachts 
wwwmooringscom
with over 30 years’ experience crystal 
is the uk’s number one ski operator 
taking customers to more of the world’s 
best snow resorts than anyone else 
from selfcatering apartments to cosy 
friendly ski chalets
wwwcrystalskicouk wwwtuitravelplccom
4 tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
business	sectors
group overview
our	 structure
mainstream sector
the mainstream sector makes up the largest part of our group in terms of financial performance scale 
scope and number of employees this sector incorporates our familiar ‘power’ brands such as our tour 
operators with circa 1800 retail stores across europe and six airlines consisting of 141 aircraft throughout 
our key source markets previously it has been structured in the following regions
northern
the northern region comprises the distribution tour operating businesses and airlines in the uk  
 ireland canada the nordic countries sweden norway denmark and finland and the hotels  
division consisting of hotel management companies and joint ventures in hotels
central europe
central europe comprises distribution tour operating businesses and airlines in the source markets  
of germany austria switzerland and poland germany is the largest market in terms of customer 
numbers and tui is the marketleading brand both here and in austria 
western europe
western europe comprises the leading tour operators and airlines in the netherlands belgium  
and france and two smaller tour operators in italy and spain
accommodation  destinations sector
accommodation  destinations ad sector is a global provider of accommodation and inbound  
travel services its businesses provide hotel accommodation transfers excursions and tours meetings 
and events and cruise handling services to the travel trade corporate clients and direct to customers 
worldwide ad competes in fastgrowing areas of the travel sector through three business lines 
accommodation wholesaler accommodation ota online travel agent and inbound services it  
has marketleading brands including the global brands hotelbeds intercruises destination services 
worldcome and pacific world and leading local brands including lateroomscom asiaroomscom  
and from 23 september 2012 malaprontacom
specialist  activity sector
if you can dream it we can take you there that’s the ethos of our specialist  activity sector comprising 
more than 100 global travel businesses the sector offers a wide range of unique activity and experience
based holidays that truly capture the spirit of adventure to provide longlasting holiday memories skiing 
sailing safaris and nature polar expeditions sports tourism volunteering cycling and trekking holidays 
cultural tours canal boating family activity sustainable travel and educational travel this sector brings  
a diverse and exciting range of holidays to 15m customers from around the world
emerging markets sector
the emerging markets sector works closely with the senior management across the group to develop 
and implement our participation strategies in the emerging markets through a combination of organic 
and acquisitional growth our objective is to establish a leading position in these developing economies 
delivering longterm growth and optimum shareholder value
mainstream sector
accommodation 
 destinations sector 
specialist  activity sector 
79
12
9
underlying operating  
profit mix by sector  
before central costs  
 and emerging markets
during the financial year ended 30 september 2012 tui travel was organised and managed 
through four business sectors mainstream accommodation  destinations specialist   
activity and emerging markets group overview
wwwtuitravelplccom
tui travel plc annual report  accounts 2012 5
group overview
tt11  ar 2012  20122012  proof 5
our	new	structure
from the start of the new financial year tui travel plc will report in three sectors mainstream specialist 
 activity and accommodation  destinations the businesses within our sectors follow either the tour 
operator or online accommodation business model depending on which market they address see how 
we do it business models
as previously announced in april 2012 the mainstream sector will be reporting via key source markets 
instead of regionally the emerging markets sector has been absorbed into other sectors depending  
on whether the specific business addresses the tour operator or online accommodation market 
the accommodation  destinations sector divisions will now report through two business lines – online 
accommodation and inbound services online accommodation includes the accommodation wholesaler 
and accommodation ota businesses inbound services include our businesses that provide transfers 
excursions tours tailormade products cruise handling services and meetings and events this business 
line straddles both models as its businesses serve both individual travellers and tour operators
uk  ireland
france
nordics
germany
other
inbound services
online accommodation
online 
accommodation
tour  
operator
mainstream 
specialist  
 activity
accommodation  
 destinations wwwtuitravelplccom
6 tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
•	 	 record	year	of	profit	and	improved	operational	efficiency
 operating profit increase of 12 to £526m on a constant currency basis  
underlying operating profit of £490m 2011 £471m an increase of 4
 record mainstream underlying operating profits on a constant currency basis  
in all markets with the exception of france and southern europe
 outstanding performance in the uk with a record underlying operating profit  
of £197m 2011 £149m and operating profit margins of 54 up from 42  
in the prior year
 business improvement programme outperformance with £42m delivered in the year
 strong underlying earnings per share growth of 9 to 258p 2011 236p  
statutory earnings per share grew by 62 to 125p 2011 77p
 final dividend increase of 4 to 83p per share 2011 80p resulting  
in a full year dividend of 117p per share 2011 113p
•	 	 modern	mainstream	strategy	delivering	results
 sales of higher margin unique holidays increased by three percentage points  
to 65 of mainstream holidays
 online sales up three percentage points to 33 of mainstream sales  
direct distribution up two percentage points to 65 of mainstream sales
•	 	 significant	international	expansion	across	online	accommodation
 online accommodation profits up 3 to £35m including an £11m investment  
in our accommodation ota 
 accommodation wholesaler continues to consolidate its global leadership  
position ttv growth of 13 to £14bn
 accommodation ota continues its investment in high growth markets  
ttv growth of 4 to £447m including asiarooms growth of 25
•	 	 clear	strategy	continuing	to	drive	strong	trading	momentum
 very encouraging winter 201213 trading
 strong summer 2013 bookings in the uk nordics and germany  
significant growth in profitable market share in the uk
 clear roadmap for sustainable future growth with an annualised underlying  
operating profit growth rate of between 7 to 10
 constant currency basis calculated by translating the 2012 results at 2011 exchange rates
group overview
operational	and	financial	highlights group overview
wwwtuitravelplccom
tui travel plc annual report  accounts 2012 7
group overview
tt11  ar 2012  20122012  proof 5
revenue 
12 £14460m
 
2
11 £14687m
underlying operating profit 
12 £490m
 
4
11 £471m
underlying profit before tax
12 £390m
 
8
11 £360m
free cash flow
12 £240m
 
47
11 £451m
basic underlying earnings per share
12 258p
 
9
11 236p
dividend per share
12 117p
 
4
11 113p
 underlying results
1
 statutory results
  
 2012 2011 change 2012 2011 
year ended 30 september £m £m  £m £m
revenue 14460	 14687 2	 14460	 14687
operating profit 490	 471 4	 301	 255
profit before tax 390	 360 8	 201	 144
free cash flow 240	 451 47	 240	 451
basic earnings per share pence 258	 236 9	 125	 77
dividend per share pence 117	 113 4	 117	 113
1  underlying operating profit excludes separately disclosed items amortisation of business combination intangibles acquisition related 
expenses impairment of goodwill and available for sale financial assets predecessor accounting for magic life in 2011 and interest and 
taxation of results of the group’s joint ventures and associates tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
8 tui travel plc annual report  accounts 2012
our statutory profit before tax pbt has 
increased 40 in the year from £144m to 
£201m and our statutory earnings per 
share eps rose 62 from 77p to 125p 
these results prove that we have the right 
strategy and are executing it well
dividends
the board is recommending a final 
dividend of 83p per share 2011 80p 
on 8 may 2012 the board recommended 
an interim dividend of 34p per share 
2011 33p resulting in a full year dividend 
of 117p per share a 4 increase on the 
previous year 2011 113p the group has 
a progressive dividend policy and will look 
to maintain underlying dividend cover at 
around two times
dividend increase on 2011
4
board
at the beginning of our financial year johan 
lundgren was appointed deputy chief 
executive from 20 october 2011 with the 
responsibility for the mainstream sector 
on 19 october 2011 sir michael hodgkinson 
joined the remuneration committee and 
clare chapman previously nonexecutive 
director resigned from her post on 2 
december 2011 minnow powell and harold 
sher were appointed to the nomination 
committee bill dalton retired from the 
board on 29 may 2012 while janis kong 
and coline mcconville were appointed 
independent nonexecutive director and 
remuneration committee chairman 
respectively janis subsequently joined the 
remuneration and audit committees on 
26 july 2012 post year end tony campbell 
stepped down from the remuneration and 
audit committee from 1 october 2012 
finally i will be stepping down as chairman 
of tui travel plc from september 2013
sustainable development
our vision is to make travel experiences 
special whilst minimising environmental 
impact respecting culture and people and 
bringing economic benefit to communities 
during the year we launched our threeyear 
sustainable holidays plan highlighting our 
continued commitment to sustainable 
development the plan highlights significant 
integration of environmental and social 
principles into the way we do business 
achieving our vision is critical to the future 
health of our own business the wider 
industry the customers we serve and the 
communities they visit
colleagues
the record performance that we have 
achieved this year comes down to one  
thing in particular our colleagues across 
the world 54000 people strive to make  
our strategy come to life and it is their 
commitment passion and ambition  
that results in the ultimate success of  
our business we aim to make travel 
experiences special a large number of our 
colleagues are customer facing and it is 
their service that makes the difference 
between a good holiday and a great one 
the board and i would like to personally 
thank each and every one of our colleagues 
for their continuing commitment and hard 
work
dr michael frenzel
nonexecutive chairman
2012 has been a record year for our 
business we are pleased to be 
reporting a 4 increase in underlying 
operating profit for the full year to 
£490m 2011 £471m this is even 
more impressive against a backdrop of 
global economic uncertainty political 
turmoil weak consumer sentiment the 
eurozone crisis natural catastrophes 
and downgrades to forecasts across 
numerous consumer industries
underlying operating profit
4
the travel and tourism industry has 
grown by an average of 4 every year 
since 1995 this year is no different 
with the number of international 
arrivals set to reach one billion in 2012 
the market today is directly worth  
over us2 trillion to global gdp and 
supports 98 million jobs worldwide 
by offering our customers exactly  
what they want not what we think they 
need we are very well positioned to 
benefit from the size and growth of  
this vast industry in the longterm
results
the group has achieved record results this 
year whilst we have witnessed a slight 
decrease in revenue to £14460m 2011 
£14687m mainly due to foreign exchange 
translations following the eurozone crisis 
we have seen record underlying operating 
profit increase 4 to £490m 2011 £471m 
underlying profit before tax is up 8 to 
£390m 2011 £360m for the full year 
whilst underlying basic earnings per share 
increased by 9 to 258p 2011 236p 
strategic overview
chairman’s	statement wwwtuitravelplccom
tui travel plc annual report  accounts 2012 9
strategic overview
tt11  ar 2012  20122012  proof 5
cycle which in turn helps us to manage 
capacity and therefore efficiency we are 
always looking for opportunities to develop 
the portfolio of unique holidays across the 
group and this will continue into 2013 and 
beyond
our direct distribution channels are central 
to the group’s continued growth we have 
room to expand these in all our markets 
which will lead to improved margins and 
better results the core contribution of  
our direct distribution comes from online 
channels 
at present we consider ourselves to be an 
onlinedriven group however we can do 
more the online drive continues across the 
group from frontend customer interaction 
at the time of booking to back office 
functions technology is an integral part  
of the direction we are heading in and as 
such in march 2012 we appointed mittu 
sridhawa as the group’s chief information 
officer and member of the group 
management board 
we have been successful in implementing 
groupwide cost efficiency and business 
improvement programmes as we have done 
over previous years the total savings made 
this year of these activities equates to 
£42m the drive for operational efficiency 
is groupwide
the uk has had a great year delivering a 
record underlying operating profit up 32 
on the previous year to £197m 2011 
£149m this has been achieved through 
the increase in sales of our unique holidays 
and continued focus on direct distribution 
with online as the core contributor as well 
as our operational efficiency programmes 
our strategy has evolved over the year  
it now stems from two very prominent 
customer demands in the leisure travel 
market – individualisation and 
commoditisation we see these trends as 
central to our future growth and have 
developed two strong business models  
see how we do it business models 
section that satisfy these customer 
demands one model addresses the tour 
operator segment of the market satisfying 
the individualisation demands of our 
customers in practice this means offering 
unique holidays to customers through our 
mainstream sector such as sensatori in the 
uk sensimar in germany and blue village 
in the nordics and also includes our 
specialist  activity sector offering  
focused on tailormade holidays including 
private jet tours polar expeditions and 
sailing experiences among many others 
the other model addresses the online 
accommodation segment of the market 
satisfying the commoditisation demands  
of our customers we are able to take 
advantage of our scale and technological 
developments to offer our customers a 
wide variety of choice at very competitive 
prices we have the marketleading position 
in accommodation wholesale and continue 
to invest in our own accommodation online 
travel agent ota business
we have had a good start to the new 
financial year with strong winter 201213 
trading for the two markets on sale for 
summer 2013 we have increased capacity 
showing our confidence in the market  
and our ability to deliver growth our 
mainstream sector has begun reporting 
from 1 october 2012 in its new structure 
which has been developed to accelerate 
more rapidly the move to modern 
mainstream 
we could not do any of this without our 
fantastic colleagues all 54000 of them  
i am hugely proud of every single one  
of them and would like to personally  
thank them all for their consistent effort 
determination and successes in a 
challenging macroeconomic environment
peter long
chief executive 
this has been a year of record success 
across the group proving that our 
strategy is delivering results we have 
recorded our largest underlying profit 
figure to date despite the negative 
foreign exchange translation of £36m 
on a constant currency basis our 
underlying profit increased 12 to 
£526m 2011 £471m
underlying profit
12
these are the results of a resilient  
and flexible business with the right 
strategy for the market and a large 
number of colleagues who care about 
our customers are passionate about 
our leisure travel experiences and can 
plan implement and deliver growth
our return on invested capital has 
increased again this year now standing 
at 122 with our weighted average 
cost of capital at 10 we continue  
to generate returns in excess of our 
cost of capital we are therefore well 
positioned to invest further in the 
business and accelerate our growth 
plans 
return on invested capital
122
overall the group has expanded its unique 
holidays portfolio this is our differentiated 
and exclusive products combined which 
books earlier and provides higher margins 
for our businesses the sales of these 
products have continued to increase 
contributing to the success of the group 
this year the feedback received from our 
customers experiencing these products has 
been incredibly positive this helps lead to 
repeat bookings often early in the booking 
on a constant currency basis
strategic overview
chief	executive’s	statement tt11  ar 2012  20122012  proof 5
strategic overview
tui	travel	at	a	glance
wwwtuitravelplccom
10 tui travel plc annual report  accounts 2012
  why we do it
	 	market 	 overview
  leisure travel market
•	directly	worth	usd2	trillion	to	global	gdp	in	2012
•	directly	supports	98	million	jobs	worldwide
•	average	growth	rate	of	4	since	1995	and	set	to	continue
•	2012	will	be	the	first	year	where	international	arrivals 	
break	the	one	billion	mark
•	two	sides	to	the	market	customers	demanding 	
individualisation	and	those	who	demand	commoditisation
•	we	have	strategies	that	address	both	explained 	 	
in	the	‘how	we	do	it’	section
		 we are well positioned to benefit from the market’s 
size and growth 
 what we do 
	make travel  
experiences  
special 
for more see p age 12 tt11  ar 2012  20122012  proof 5
 how we do it
	 strategic	 framework	 	
business	models	and	strategy
•	 our strategy	
through	 our	 global	 brand	
portfolio	and	travel	expertise 	 	
we	are	focused	on	delivering 	
leisure	 travel	 experiences	
designed	 for	 our	 customers’	 	
ever	changing	needs
•	 two strong business models	
addressing	 the	 different	
customer	 demands	 within	 	
the	market	the	demand	for 	
individualisation	 is	 addressed	
through	 our	 tour	 operating	
model	and	the	demand	for 	
commoditisation	 is	 addressed	
through	our	online 	
accommodation	model
•	 our strategic drivers  
content	 brands	 	 distribution	
technology	growth		scale 	 	
and	people
•	 our values  
customer	driven	playing	to 	 	
win	responsible	leadership 	 	
and	 value	 driven
strategic overview
wwwtuitravelplccom
tui travel plc annual report  accounts 2012 11
strategic	 overview
 how we measure it
	 our	kpis
•	return	on	invested	capital
 2012 122 vs 2011 113
•	cash	conversion
1
	
 2012 75 vs 2011 121
1 free	cash	flow	adjusted	for	net	predelivery 	 	
payments	of	£53m	2011	£34m
•	unique	holidays	mix	as 	 	
a	proportion	of	total 	 	
mainstream	sector	holidays
 2012 65 vs 2011 62
•	direct	distribution	mix 	 	
as	a	proportion	of	total 	
mainstream	sector	holidays
 2012 65 vs 2011 63
•	online	distribution	mix 	 	
as	a	proportion	of	total 	
mainstream	sector	holidays
 2012 33 vs 2011 30
•	turnaround	and	cost 	 	
savings	delivered
 2012 £42m
•	total	transaction	value	in 	 	
the	online	accommodation 	
business
 £18bn 
 an increase of 10 over the prior year
•	carbon	efficiency	measured 	
through	tui	travel	airlines’ 	
average	carbon	emissions	per 	
revenue	passenger	kilometre 	
co
2
rpk
 2012 730g co
2
rpk vs  
2011 759g co
2
rpk 
 what are the risks
		 principal	risks
  strategic risks
•	consumer 	 preferences	 	
and	desires
•	business 	 improvement	
opportunities	
•	emerging 	 markets	
acquisitions	 and	 investments	
  operational risks
•	global 	 financial	 factors
•	economic 	 environment	
•	talent 	 management
•	political 	 volatility	 natural	
catastrophes	and	outbreaks 	
  compliance risk
•	regulatory 	 environment
for more see p age 14 for more see p age 18 for more see p age 20 tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
12 tui travel plc annual report  accounts 2012
the political climate 
as a global organisation we feel the impact 
of government regulation in all of the 
markets in which we operate some of our 
activities such as those undertaken by our 
airline are heavily regulated many of our 
lawmakers particularly in europe are 
becoming increasingly focused upon 
measures to protect customers
the policy of our political and regulatory 
affairs team is to seek to engage with 
legislators at an early stage in relation to  
all of those areas of regulation that might 
have a material impact upon the way we  
do business our focus is always to work 
with governments to bring forward 
legislation that is fit for purpose is no more 
burdensome on industry than it needs to 
be and does not discriminate between 
different business models 
our engagement with the european 
institutions has been particularly important 
over the last 12 months as we seek to 
achieve a proper balance between the 
aviation industry and the customer in the 
area of passenger rights this will also 
remain an area of focus in the coming 
12 months
the work of the european institutions in 
relation to the revision of the european 
directive on package travel also continues 
we are confident that the european 
institutions are convinced of the need for 
reform and will bring forward a proposal  
in the first quarter of 2013
over the last 12 months eurozone 
countries have had to come to grips with 
austerity measures placed on them by 
national governments some more severe 
than others we continue to monitor the 
developments across the region and do not 
expect this to have a major impact on our 
business the good relationships we have 
with our suppliers and the flexibility in our 
business model means we are well 
positioned to deal with any eventuality 
aviation taxation also remains on the 
agenda as governments across the world 
look for ways to increase revenue our role 
is to remind them of the importance of the 
travel and tourism industry as a driver for 
growth
in the uk the debate on airport capacity 
continues we will take a full part in that 
debate as it develops in order to ensure 
that the specific requirements of leisure 
airlines and passengers are fully 
understood
both segments are being driven by high 
growth in online bookings and while the 
uncertain economic environment has had 
an effect on consumer travel spending 
habits demand for leisure travel remains 
strong
our business models see how we do it 
business models section aims to cater 
to these trends – individualisation and 
commoditisation – to best serve the 
changing needs of our customers we 
consider individualisation to be the tour 
operator market and commoditisation 
as the online accommodation market
the sustainability challenge
travel and tourism accounts for 9 of 
global gdp the industry will continue  
to be one of the world’s fastest growing 
sectors with emerging economies in 
particular seen as engines of such growth 
and the unwto expecting international 
tourist arrivals to exceed 1 billion in 2012 
travel and tourism today is responsible for 
9 of global employment but also for 5 
of global carbon dioxide emissions from 
a sustainable development perspective this 
poses a challenge – the growth of an 
industry highly dependent on fossil fuels 
and biodiversity in a world of finite natural 
resources
our businesses have been facing up to this 
challenge for over a decade for tui travel 
responding to these issues means bringing 
sustainability centre stage to build on the 
efficiency and resilience of our business 
and the services it provides our 
sustainable holidays plan is a major step 
forward for tui travel in our journey 
towards providing special travel experiences 
whilst minimising environmental impact 
respecting the culture and people in 
destinations and bringing real economic 
benefit to local communities see our 
sustainable development section for more 
information
reference
world travel and tourism council’s economic impact 
report 2011
united nations world tourism organisation unwto 
united nations environment programme unep and 
world meteorological organisation wmo october 2007 
climate change and tourism responding to global 
challenges
the market
the economic environment
the global economic recovery has slowed 
down over the past six months in addition 
to the eurozone crisis and the unrest in  
the middle east and north africa growth  
in a number of major emerging market 
economies has been lower than previously 
forecast the imf projects real gdp growth 
worldwide at 35 for 2012 growth is 
expected to be driven by emerging and 
developing economies which are forecast  
to expand by 56 in 2012 in comparison 
advanced economies are expected to grow 
by only 14
our two largest source markets the uk 
and germany are expected to grow by 
02 and 1 respectively in 2012 within 
the eurozone the unemployment rate 
currently stands at 114 up 120 
percentage points from last year compared 
to other eurozone countries both germany 
and the uk have withstood the economic 
crisis in the eurozone with unemployment 
at just 55 in germany and 81 in the 
uk
the economic outlook for 2013 seems 
more positive with real gdp growth 
worldwide projected at 39 driven by the 
expansion of both advanced and emerging 
markets while advanced economies are 
forecast to grow at 19 emerging and 
developing economies are projected to 
expand by 59
the leisure travel market
demand for international tourism remained 
strong in 2011 with international arrivals 
growing by 46 compared to 2010 the 
percentage increase was slightly below 
2010 7 driven primarily by economic 
factors coupled with unrest in the middle 
east and north africa which were the only 
regions to record a decline in arrivals 8 
and 9 respectively unwto
europe home to the majority of our core 
markets and accounting for over half of all 
international arrivals worldwide together 
with asia were the fastest growing regions 
globally
the travel and tourism market continues  
to experience a clear polarisation of 
demand on one hand we have customers 
who demand individualisation ie unique 
holidays with bespoke services on the 
other hand we have customers who  
are increasingly moving towards 
commoditisation ie flights in combination 
with hotels with minimal levels of 
differentiation 
strategic overview
why	we	do	it
market overview tt11  ar 2012  20122012  proof 5
strategic overview
wwwtuitravelplccom
tui travel plc annual report  accounts 2012 13
strategic	 overview
market	 size	
	coverage
our	footprint
our 10 core markets including the uk sweden 
germany france belgium the netherlands austria 
poland switzerland and canada account for £405bn  
of global travel spend euromonitor our four largest 
source markets of the uk  ireland germany  
france and sweden make up 70 of this spend
due to the niche nature of specialist  activity 
businesses it is hard to quantify total worldwide 
spend on these holidays but their geographical  
reach and popularity continues to rise
the total online accommodation market accounts 
for £82bn of global travel spend 
the accommodation wholesaler market accounts 
for £15bn of this spend with the accommodation 
online travel agent ota market accounting for 
the remaining £67bn 
our group’s addressable market in the 
accommodation ota segment including uk and 
asiapacific focus markets makes up £75bn of the 
total ota market
market	 growth
our core markets are projected to grow at a 3 
cagr over the next five years the mainstream 
holiday market remains resilient and has actually 
seen resurgence in a tough economic environment
online accommodation is the fastest growing 
segment of the travel market and is expected to 
grow at a cagr of 75 over the next five years
our	positioning 	
we are the number one tour operator in europe 
with strong positions in each of our core markets 
in addition we have marketleading positions in a 
number of specialist segments with a portfolio of 
unique holidays unrivalled product knowledge  
and superb customer experience
our accommodation wholesaler business 
hotelbeds and bedsonline is the market leader  
in the b2b space 
with our accommodation ota business we are 
positioned strongly in the uk lateroomscom  
and asiapacific asiaroomscom and have recently 
established ourselves in the latin american market 
through the acquisition of malaprontacom brazil’s 
fourth largest online accommodation ota
key	trends	 	
future	outlook
customers are increasingly moving towards online 
channels to fulfil their travel needs and we expect 
this trend to continue into 2013 and beyond we 
therefore remain focused on improving our online 
presence increasing our participation in social media 
and moving towards an onlinedriven company 
culture
demand for unique holiday experiences continues  
to see strong growth and with a diverse range of 
experiences on offer tui travel remains well placed
online accommodation has seen tremendous 
growth over the last few years fuelled by the 
growth in online bookings and supplemented by 
strong demand from the emerging markets online 
accommodation therefore remains a key area of 
focus for tui travel where we look to consolidate 
our leadership position within the accommodation 
wholesaler market and build on our strong position 
in the accommodation ota segment
tour	operator	market 	
	 individualisation
online	accommodation	market 	
commoditisation wwwtuitravelplccom
14 tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
strategic overview
how	we	do	it
strategic framework  business models
strategic	 framework
our strategic framework underpins everything we do and comprises of our vision strategy  
strategic drivers and the values that are innate within our business culture 
making travel experiences special
through	our	global	brand	portfolio		travel	expertise 	
we	are	focused	on	delivering	leisure	travel	experiences 	
designed	for	our	customers’	ever	changing	needs
vision
strategy
strategic	 	
drivers
values
content
brands	 	
distribution
technology
growth	 	
	scale
customer	 	
driven
playing	 	
to	win
responsible	 	
leadership
value	 	
driven
people
customer driven
we respect our customers and never forget that they choose to spend their leisure time with us we share a 
duty to maintain their loyalty and trust we anticipate customer desires and everything we do is with them  
in mind we believe there is no such thing as a mass market but a huge market of individuals
playing to win
we are passionate about being the best and about winning with integrity we seek the ideas and trends that 
change leisuretime markets for the better and move quickly to action them we thrive on teamwork we are 
not afraid of making brave decisions we want to do something new every day and we love what we do
value driven
we share an infectious entrepreneurial streak and a clear focus on the need for profitability we look for 
opportunities that have a commercial advantage for us and add value to our customers’ experiences we 
predict translate and bring to market new leisuretime products based on their genuine appeal to customers
responsible leadership
we are committed to sustainable development and to making a positive impact on society we know 
leadership has to be earned and we never take it for granted we communicate openly and easily and help 
each other develop and grow we celebrate local differences and actively seek to contribute to a better world wwwtuitravelplccom
tui travel plc annual report  accounts 2012 15
strategic overview
tt11  ar 2012  20122012  proof 5
strategic overview
business	models
we have refined our business model to focus on the two key areas of longterm growth within the  
market the tour operator model addresses the individualisation needs of the customer while the online 
accommodation model addresses the commoditisation needs the strategic drivers of both areas are 
ingrained in our strategic framework with a clear focus on content brands  distribution technology 
growth  scale and people
›  range and diversity of hotel 
stock
› global destination and source  
 market coverage
› leveraging scale
› well known accommodation  
 wholesaler and accommodation  
 ota brands
› online
› marketleading technology
› knowledge  expertise
› driving innovation
› unique inclusive holidays
› tailormade holidays
› leveraging scale
› marketleading brands
› trusted brands –  
 safety  security
› high levels of controlled  
 distribution – focus on online
› flexible technological  
 platforms to support growth
› knowledge  expertise
› driving innovation
content
brands	 	
distribution
technology
growth	
	scale
people
tour operator online accommodation
online driven  cost efficiency tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
16 tui travel plc annual report  accounts 2012
strategic overview
how	we	do	it
strategy
tour 
operator
online 
accommodation
 unique holidays – why is it 
important
›	 puts the customer’s needs first and 
foremost
›	 provides value added services and 
features which command a margin 
premium over commodity products
›	 leads to higher customer loyalty  
and an increase in repeat bookings
›	 books early when compared to 
commodity products enabling us to 
manage our capacity and yield more 
effectively
 what are we doing about it
›	 unique holidays form the backbone  
of our tour operator strategy
›	 our specialist businesses through their 
unique holiday portfolio provide 
tailormade holidays to cater to a wide 
range of customer needs
›	 in the mainstream sector the levels of 
unique holidays have continued to grow  
in 2012 they represented 65 of total 
holidays booked compared to 62 in 
2011 we have clear targets and plans to 
grow the proportion of unique holidays 
across all markets in 2013 and beyond
 content diversity –  
why is it important
›	 customers have an everincreasing choice 
of destinations to fly to it is only logical 
that we keep pace and provide our 
customers with an everincreasing range 
of hotels to complement their flights
›	 geographical diversity and reach of our 
content will be the key growth driver 
within the online accommodation space
 what are we doing about it
›	 increasing the range and diversity of our 
hotel stock is core to our strategy within 
the online accommodation space we 
want to be able to offer our customers a 
onestopshop for their accommodation 
needs
›	 from fy11 to fy12 our accommodation 
wholesaler business has seen a 20 
increase in hotel inventory in the same 
time period our accommodation ota 
business has seen a 32 rise in hotels  
on offer
›	 tui travel has a clear strategy of 
continuing to increase its hotel offering 
even further in the coming years with  
a strong focus on emerging markets
 brands  distribution – why is it important
›	 onlinedriven – increased online distribution improves our proportion  
of direct distribution reduces reliance on third party distributors and 
reduces our distribution costs
›	 onlinedriven – the higher the proportion of direct distribution the 
better we understand our customers and their needs it provides us with 
tangible and useful information about customer preference in that sense 
onlinedriven also contributes to the success of our unique holidays  
the more we understand our customer the better and more tailored  
the products we can offer and directly market to them
›	 brands – having multiple touch points with our customers enables us to 
build stronger brand and product loyalty whilst ensuring that customers 
come back to tui travel for another unique holiday experience strong 
brands also increase organic traffic to our websites which has a higher 
conversion rate
 what are we doing about it
›	 tui travel is focusing on being an ‘onlinedriven’ business providing 
customers with an easy and inspiring online experience we have widened 
the traditional definition of ‘online’ as a distribution channel to being 
‘onlinedriven’ which encompasses the entire customer journey 
dreaming planning booking predeparture experiencing and sharing
›	 over the past year we have increased our online sales by three 
percentage points across the mainstream sector from 30 in 2011 to 
33 in 2012 and have clear strategic plans and targets in place to drive 
online sales further in all source markets
›	 our specialist businesses leverage a strong brand portfolio offering 
everything from adventure holidays to sailing holidays and private jet 
tours we are investing in our online platforms to enhance booking  
and search functionality and provide our customers with inspirational 
content to showcase our products
 brands  distribution – why is it important
›	 brand awareness – to be the first place that customers turn to for their 
accommodation needs reduces online advertising spend and attracts 
customers directly to our websites
›	 distribution – being an ‘onlineonly’ business it is critical that we provide 
our customers with an effective and easytouse search and booking 
experience
 what are we doing about it
›	 our accommodation wholesaler business is the market leader operating 
in over 100 countries with a global distribution presence the current  
five year plan focuses on leveraging our existing distribution network 
maintaining growth across europe and expanding further into the 
americas and asia
›	 in accommodation ota our focus is to build on our strong brand 
positioning of lateroomscom in the uk and expand in the emerging 
markets through asiaroomscom across asia and in brazil with the  
recent acquisition of malaprontacom
›	 following the launch of five language sites asiaroomscom launched a 
panregional brand development campaign to drive sales and increase 
brand awareness the campaign entitled ‘the right room for you’ 
focused on the uniqueness of each traveller and their travel preferences 
delivering good results traffic growth from singapore and malaysia  
grew over 49 and 132 respectively in 2012
content brands		distribution wwwtuitravelplccom
tui travel plc annual report  accounts 2012 17
strategic overview
tt11  ar 2012  20122012  proof 5
strategic overview
 “through our global brand portfolio and travel expertise we are focused on delivering leisure travel experiences designed for our 
customers’ ever changing needs” we	have	two	strong	business	models	that	share	the	same	strategic	drivers	our	strategy	differs	depending 	
upon	whether	we	are	talking	about	the	tour	operator	or	online	accommodation	model	we	have	therefore	set	out	below	why	our	strategic 	
drivers	are	important	for	each	and	what	we	are	doing	about	them	to	ensure	the	longterm	growth	of	our	business
 technology – why is it important
›	 onlinedriven – critical support structure  
for seamless frontend interaction with the 
customer
›	 robust finance and reservation systems to 
support business operations but also to provide 
reliable and actionable management information
›	 flexible technological platforms which can  
adapt to changing customer demands
 what are we doing about it
›	 within mainstream we are in the process of 
upgrading our web frontend reservation and 
finance systems across all source markets  
these technology upgrades will provide our 
websites with new search functionalities 
improved personalisation and richer content  
as well as enhanced mobile capability as our 
customers increasingly research and book their 
holidays on mobile devices
›	 our specialist businesses have made good 
progress in consolidating their finance and 
reservation systems to leverage our scale across 
multiple brands and continue on their journey  
of standardisation while balancing the varied 
requirements of the different holiday 
experiences they offer
 technology – why is it important
›		 onlinedriven – provide marketleading 
technological platforms to support seamless 
frontend interaction with the customer
›		 robust finance and reservation systems  
support business operations but also provide 
reliable and actionable management information
›		 flexible technological platforms which can  
adapt to changing customer demands
 what are we doing about it
›		 both accommodation wholesaler and 
accommodation ota businesses are supported 
by effective and efficient it platforms
›		 accommodation wholesaler operational systems 
are being upgraded and updated in order to be 
able to continue improving its service delivery  
to global customers
›		 in our accommodation ota business we have 
been investing in a new platform to support  
our growth strategy
 growth  scale – why is it important
›	 growth – consolidating our marketleading 
positions and seizing new growth opportunities 
will be the key driver of success going forward
›	 scale – leveraging our scale and driving further 
cost efficiencies will provide added value to 
customers
 what are we doing about it
›	 as europe’s largest tour operator we are 
leveraging our scale across all source markets to 
consolidate our marketleading position and grow 
the number of customers travelling with us
›	 growth in new markets is an important area of 
focus for tui travel our russian tour operator 
business has given us a position in this market 
and a platform for further growth
›	 our customers demand ‘value for money’  
for their travel spend and we are constantly 
reviewing areas where we can optimise our 
operations and be as cost efficient as possible 
without compromising on customer experience
 growth  scale – why is it important
›		 scale is a critical success factor for any online 
accommodation business
›		 in a pricedriven lowermargin business it is 
imperative for us to achieve high volumes which 
can be leveraged to gain competitive advantage
 what are we doing about it
›		 tui travel is a firm market leader in the 
accommodation wholesaler market we have a 
clear strategy of consolidating our marketleading 
position even further by continuing to grow our 
existing destinations whilst accelerating our 
expansion into new markets with particular  
focus on asia latin america and africa
›		 within the accommodation ota space we are 
concentrating our growth strategy in attractive 
emerging markets which exhibit the highest 
growth potential in this segment asiarooms is 
now an established and growing brand in the 
asiapacific region the acquisition of 
malaprontacom brazil’s fourth largest 
accommodationonly ota gives tui travel  
a foothold into the fastgrowing and lucrative 
latin american market
›		 laterooms is now ranked as the number two 
accommodationonly ota in the uk market  
we aim to continue delivering superior growth  
by developing new distribution channels and  
new customer segments in this market
 people – why are they important
›		 people are a key differentiator at tui travel it  
is their unrivalled knowledge and expertise that  
is the driving force of our successful business
›		 our people are the face of our company it is 
their ability to delight our customers which 
ensures high customer satisfaction scores  
and repeat bookings
 what are we doing about it
›	 investing in training and development of our 
people to ensure that they have the right skills 
and expertise to provide us with a competitive 
advantage
›	 making sure that we work closely with our people 
to drive high levels of pride and engagement 
within the company
›	 our international graduate leadership 
programme continues to attract high quality 
talent from across the world and is considered 
among the best in the industry
›	 biannual talent reviews ensure that we monitor 
the talent and capabilities within our organisation 
and have clear succession plans in place for 
business critical roles
›	 established ‘centres of excellence’ which enable 
best practice sharing across the group and  
make sure that good ideas are not limited to  
one source market but flow through the entire 
organisation
 people – why are they important
›		 people are the key driver of any online business 
where agility speed and innovation are essential 
elements of success
›		 talent retention and acquisition are increasingly 
gaining priority in a market characterised by rapid 
changes and high competition for top talent
 what are we doing about it
›		 building a strong brand proposition to attract 
and retain the best online talent
›		 identifying knowledge gaps within the 
organisation and providing colleagues with  
the necessary tools and skills to succeed in 
the online world
›		 developing an onlinedriven culture where 
employees are encouraged to keep abreast of 
latest trends whilst providing an environment 
which fosters new ideas and innovation
›		 the international nature of our business 
necessitates that we look beyond european 
boundaries when it comes to sourcing talent  
tui travel continues to tap into the vast talent 
pool of markets like brazil and south east asia  
to fuel its global growth ambitions
technology growth		scale people wwwtuitravelplccom
18 tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
strategic overview
how	we	measure	it
key performance indicators kpis
financial
product
distribution
operational  
efficiency
online  
accommodation 
growth
responsible  
leadership
	 strategy	 target	 performance	 key	performance	indicators
    
    
    
 
    
 
    
 
    
our main strategic objective is to continue to improve the group’s 
profitability and free cash flow and therefore deliver superior 
returns on investment this improvement will allow us to invest 
further in the future of our business which will benefit our 
customers colleagues and shareholders
we target continuous 
improvement in group roic 
and cash conversion of at least 
70 of profit before tax
to measure our financial progress we have two financial kpis i  
the return on invested capital roic and ii the conversion of 
underlying profit before tax to adjusted free cash flow 
roic has improved again this year by 09 percentage points to 
122 this increase was driven by an improvement in earnings 
during the year and a deterioration in the carrying value of net 
assets resulting from the increasing strength of sterling
we generated a cash conversion rate of 75 in 2012 as expected this 
number has fallen from the prior year due to investments in capital 
expenditure to improve the underlying businesses we continue to 
target a cash conversion rate of at least 70 going forward 
roic
2012 122 2011	113	 2010	97
1
cash conversion
2
2012 75 2011	121	 2010	116
1
1  2010 represented for jet4you and magic life predecessor accounting 2010 
profits based on pro forma unaudited underlying operating profit excluding the 
impact of volcanic ash
2  free cash flow adjusted for net predelivery payments of £53m 2011 £34m
our unique holidays form the backbone of our mainstream 
businesses and are exclusive to us by increasing our unique holiday 
portfolio we can achieve earlier bookings higher margins and 
superior customer satisfaction and retention rates due to our 
existing brand loyalty and experience in designing and operating 
new concepts it is very difficult for our competitors to replicate 
these holidays
we are targeting a unique 
holiday mix of 76 as a 
proportion of total mainstream 
sector holidays over the next 
five years
in the year we increased the unique holidays mix by three 
percentage points across the mainstream sector as a whole  
within this the nordic region improved by five percentage  
points and the uk by four percentage points
unique holidays mix as a proportion of total mainstream  
sector holidays
2012 65 2011	62	 2010	55
by increasing the direct distribution of our holidays we lower 
distribution costs and can build on our customer relationships as  
an onlinedriven business we have a focus on the online booking 
experience increasing our direct distribution leads to better value 
for customers customer trends support a shift towards the online 
channel with social media and richer content all helping drive higher 
conversion rates
we are targeting a direct 
distribution mix of 80 and an 
online distribution mix of 49 
in our mainstream sector over 
the next five years
to measure our progress we have two distribution kpis i direct 
distribution mix and ii online distribution mix
direct distribution mix improved by two percentage points over  
the year with a strong performance by the uk which saw a five 
percentage point increase over the prior year the improvement  
in direct distribution was driven by the online channel which also 
increased by three percentage points in 2012
direct distribution mix as a proportion of total mainstream  
sector holidays
2012 65 2011	63	 2010	62
online distribution mix as a proportion of total mainstream  
sector holidays
2012 33 2011	30	 2010	27
our objective is to be as cost efficient as possible without compromising 
customer experience within mainstream we target overheads of less 
than 5 in each source market we also continue to make cost savings 
in our other sectors including centralisation of backoffice functions 
where appropriate
we are targeting a further 
£65m of business improvement 
opportunities over the next 
two to three years to be 
delivered in broadly even 
tranches
we delivered £42m of operational efficiency savings through the 
business improvement programme in the last 12 months this 
exceeded original guidance given at the start of the financial year 
we made progress in a number of areas including the restructuring 
within the french and german markets as well as jet4you 
turnaround and cost savings delivered
2012 £42m
our online accommodation business enjoys highmargin and growth 
characteristics we currently have a leading global position in 
accommodation wholesaler and strong presence within the uk and 
asian markets in accommodation ota a combination of organic and 
acquisitive growth will be a key driver of profit growth in this business 
we are targeting an  
underlying operating  
profit growth of between  
15 to 20 per annum  
over the next five years 
accommodation wholesaler continued to consolidate its global 
leadership position over the year with ttv growth of 13 to £14bn 
in accommodation ota we continued to invest in highgrowth 
markets delivering ttv growth of 4 to £447m this included 
asiarooms which delivered ttv growth of 25
total transaction value in the online accommodation business
2012 £18bn an increase of 10 over the prior year
we are experiencing greater stakeholder interest in sustainability 
and believe that creating more sustainable holidays will help protect 
our product into the future and also support product differentiation 
brand loyalty customer satisfaction and competitive advantage
we are targeting our airlines to 
reduce per passenger carbon 
emissions by 6 by 201314 
against a baseline of 200708 
see sustainable development 
section
four years ago tui travel airlines set a relative target to reduce 
carbon emissions by 6 by 201314 against a baseline of 200708 
in 201112 tui travel airlines’ relative carbon emissions were 73g per 
revenue passenger kilometre co
2
rpk ie 63 less than 200708 
therefore the sixyear target has been achieved within four years
carbon efficiency measured through tui travel airlines’ average 
carbon emissions per revenue passenger kilometre co
2
rpk 
2012 730g co
2
rpk  2011 759g co
2
rpk  
2010 761g co
2
rpk 2009 781g co
2
rpk
 achieved through operational efficiencies fuel conservation activities and 
capacity amendments wwwtuitravelplccom
tui travel plc annual report  accounts 2012 19
strategic overview
tt11  ar 2012  20122012  proof 5
strategic overview
	 strategy	 target	 performance	 key	performance	indicators
    
    
    
 
    
 
    
 
    
our main strategic objective is to continue to improve the group’s 
profitability and free cash flow and therefore deliver superior 
returns on investment this improvement will allow us to invest 
further in the future of our business which will benefit our 
customers colleagues and shareholders
we target continuous 
improvement in group roic 
and cash conversion of at least 
70 of profit before tax
to measure our financial progress we have two financial kpis i  
the return on invested capital roic and ii the conversion of 
underlying profit before tax to adjusted free cash flow 
roic has improved again this year by 09 percentage points to 
122 this increase was driven by an improvement in earnings 
during the year and a deterioration in the carrying value of net 
assets resulting from the increasing strength of sterling
we generated a cash conversion rate of 75 in 2012 as expected this 
number has fallen from the prior year due to investments in capital 
expenditure to improve the underlying businesses we continue to 
target a cash conversion rate of at least 70 going forward 
roic
2012 122 2011	113	 2010	97
1
cash conversion
2
2012 75 2011	121	 2010	116
1
1  2010 represented for jet4you and magic life predecessor accounting 2010 
profits based on pro forma unaudited underlying operating profit excluding the 
impact of volcanic ash
2  free cash flow adjusted for net predelivery payments of £53m 2011 £34m
our unique holidays form the backbone of our mainstream 
businesses and are exclusive to us by increasing our unique holiday 
portfolio we can achieve earlier bookings higher margins and 
superior customer satisfaction and retention rates due to our 
existing brand loyalty and experience in designing and operating 
new concepts it is very difficult for our competitors to replicate 
these holidays
we are targeting a unique 
holiday mix of 76 as a 
proportion of total mainstream 
sector holidays over the next 
five years
in the year we increased the unique holidays mix by three 
percentage points across the mainstream sector as a whole  
within this the nordic region improved by five percentage  
points and the uk by four percentage points
unique holidays mix as a proportion of total mainstream  
sector holidays
2012 65 2011	62	 2010	55
by increasing the direct distribution of our holidays we lower 
distribution costs and can build on our customer relationships as  
an onlinedriven business we have a focus on the online booking 
experience increasing our direct distribution leads to better value 
for customers customer trends support a shift towards the online 
channel with social media and richer content all helping drive higher 
conversion rates
we are targeting a direct 
distribution mix of 80 and an 
online distribution mix of 49 
in our mainstream sector over 
the next five years
to measure our progress we have two distribution kpis i direct 
distribution mix and ii online distribution mix
direct distribution mix improved by two percentage points over  
the year with a strong performance by the uk which saw a five 
percentage point increase over the prior year the improvement  
in direct distribution was driven by the online channel which also 
increased by three percentage points in 2012
direct distribution mix as a proportion of total mainstream  
sector holidays
2012 65 2011	63	 2010	62
online distribution mix as a proportion of total mainstream  
sector holidays
2012 33 2011	30	 2010	27
our objective is to be as cost efficient as possible without compromising 
customer experience within mainstream we target overheads of less 
than 5 in each source market we also continue to make cost savings 
in our other sectors including centralisation of backoffice functions 
where appropriate
we are targeting a further 
£65m of business improvement 
opportunities over the next 
two to three years to be 
delivered in broadly even 
tranches
we delivered £42m of operational efficiency savings through the 
business improvement programme in the last 12 months this 
exceeded original guidance given at the start of the financial year 
we made progress in a number of areas including the restructuring 
within the french and german markets as well as jet4you 
turnaround and cost savings delivered
2012 £42m
our online accommodation business enjoys highmargin and growth 
characteristics we currently have a leading global position in 
accommodation wholesaler and strong presence within the uk and 
asian markets in accommodation ota a combination of organic and 
acquisitive growth will be a key driver of profit growth in this business 
we are targeting an  
underlying operating  
profit growth of between  
15 to 20 per annum  
over the next five years 
accommodation wholesaler continued to consolidate its global 
leadership position over the year with ttv growth of 13 to £14bn 
in accommodation ota we continued to invest in highgrowth 
markets delivering ttv growth of 4 to £447m this included 
asiarooms which delivered ttv growth of 25
total transaction value in the online accommodation business
2012 £18bn an increase of 10 over the prior year
we are experiencing greater stakeholder interest in sustainability 
and believe that creating more sustainable holidays will help protect 
our product into the future and also support product differentiation 
brand loyalty customer satisfaction and competitive advantage
we are targeting our airlines to 
reduce per passenger carbon 
emissions by 6 by 201314 
against a baseline of 200708 
see sustainable development 
section
four years ago tui travel airlines set a relative target to reduce 
carbon emissions by 6 by 201314 against a baseline of 200708 
in 201112 tui travel airlines’ relative carbon emissions were 73g per 
revenue passenger kilometre co
2
rpk ie 63 less than 200708 
therefore the sixyear target has been achieved within four years
carbon efficiency measured through tui travel airlines’ average 
carbon emissions per revenue passenger kilometre co
2
rpk 
2012 730g co
2
rpk  2011 759g co
2
rpk  
2010 761g co
2
rpk 2009 781g co
2
rpk
 achieved through operational efficiencies fuel conservation activities and 
capacity amendments wwwtuitravelplccom
20 tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
strategic overview
what	are	the	risks
principal risks
operational risk governance
whilst ultimate responsibility for risk 
management rests with the board effective 
daytoday management of risk rests within 
the business management is responsible for 
setting the right tone at the top and 
establishing a culture where employees are 
expected to be risk aware control minded 
and to ‘do the right thing’
grmc the grmc is a committee of the 
group management board gmb comprising 
the full membership of the gmb supported 
by key members of the risk  control 
community it is chaired by the chief 
executive and meets four times a year  
the grmc oversees the risk management 
process operating throughout the group and 
ensures that the most significant risks to the 
group are identified debated and managed 
appropriately individual members of the 
grmc are accountable for specific risks on 
the group risk profile risk  control 
summaries are presented which set out the 
key controls on which reliance is placed and 
further actions as necessary to achieve 
targeted risk level these risks controls and 
targets are reviewed and approved at the 
grmc and then communicated top down to 
the wider business to ensure that risks are 
managed within these levels through the 
organisation the executive directors in the 
grmc feed back to the full board the key 
risks under consideration for its formal 
review and approval 
recognising the speed at which risks can 
materialise into issues risk velocity and  
the impact this can have on the group the 
grmc has developed tailored response plans 
for each of the group’s key risks the grmc 
also recognises the interaction of individual 
risks and the extent to which individual risks 
may be offset through natural hedging or 
amplified through specific risk combinations
group	 capability	 committee the capability 
committee supports the risk governance 
process by assessing the group’s current 
capability against its future needs in the 
achievement of its strategic objectives 
group	 investment	 committee the 
investment committee ensures that risk  
and reward is closely scrutinised prior to any 
acquisitions capital expenditure and major 
investments 
group	crossproject	review	committee  the 
committee oversees crossgroup projects 
and ensures that interdependencies and risks 
both upside and downside are understood 
fully and guidance provided as appropriate
shareholder value through this process a 
strategy is progressively developed and 
refined that best fits the business its culture 
capabilities and resource the strategy once 
fully defined and approved by the board is 
then incorporated into the group’s five year 
plan
risks	to	the	strategy
having determined the appropriate level  
of risk for the business in relation to the 
potential for reward the board then ensures 
that risks to the delivery of the strategic 
objectives are identified assessed and 
managed effectively 
while the nomination committee ensures an 
optimum balance of skills knowledge and 
experience required within the executive 
management team to deliver the strategy 
the remuneration committee ensures the 
appropriate incentivisation to drive high 
performance with commensurate control 
business performance relating to the 
achievement of strategic operational and 
financial objectives is reviewed and 
monitored closely at business review 
meetings chaired by the chief executive
the audit committee on behalf of the 
board seeks assurance that the risk 
management process is operating effectively 
throughout the organisation and that risks to 
the delivery of the strategy and longterm 
viability of the business are being managed 
effectively in line with the risk appetite and 
tolerance levels determined by the board 
the audit committee receives this assurance 
from the three lines of defence – 
management group oversight  support 
functions and internal audit see the audit 
committee report in the corporate 
governance section 
• management the audit committee invites 
presentations from management on a 
routine basis to understand the key risks 
facing their businesses and how these are 
being addressed
• group	oversight		support	functions 
the group risk management committee 
grmc and group risk function present 
on activities relating to risk management 
while the group compliance functions 
present on activities relating to the 
establishment of control standards and 
adherence to them 
• internal	 audit the audit committee 
receives assurance from internal audit 
over the processes and business 
transformation initiatives most critical  
to the group’s continued success 
risk governance
successful risk management is critical to the 
longterm success of our business and a key 
area of management focus we continue to 
strengthen our risk governance framework 
which enables us to understand more fully 
the threats and opportunities in the market 
place to match these against the strengths 
and weaknesses of our group and respond 
accordingly our risk management process 
and the risk software supporting it helps  
to drive clarity consistency transparency  
and accountability at every level of the 
organisation it enables us to manage our risk 
exposures across the group so that at any 
given time we are incurring the right level 
and the right type of risk to pursue 
effectively our strategic goals
our	risk	governance	framework 	
our risk governance framework is set  
out on page 21 and summarises the various 
risk related roles responsibilities and 
relationships throughout the group
strategic risk governance
risks	of	the	strategy
the board determines the strategic direction 
of the business and agrees the nature and 
extent of the risk it is prepared to take to 
achieve its strategic objectives 
effective risk management is dependent  
on the capability and commitment of our 
people the nomination committee ensures 
that an appropriate balance of skills 
knowledge and experience exists in the 
boardroom to understand and manage  
the risk environment at a strategic level 
providing a culture whereby risks and 
assumptions are rigorously and freely 
challenged and debated 
to ensure that the strategic direction chosen 
by the business represents the best of the 
strategic options open to it the board is 
supported by the group strategy function 
this exists to facilitate and inform the 
process of assessing the risk landscape and 
developing potential strategies to drive 
longterm shareholder value on an annual 
basis it develops an indepth fact base in a 
consistent format which outlines the market 
attractiveness competitive position and 
financial performance by sector and source 
market these are presented to the full 
board by the executive directors and time 
set aside in april july and september to 
allow full consideration and debate as to the 
level and type of risk that the board finds 
appropriate in the pursuit of enhanced  wwwtuitravelplccom
tui travel plc annual report  accounts 2012 21
strategic overview
tt11  ar 2012  20122012  proof 5
strategic overview
  board
   sets the tone at the top by determining the nature and extent of the significant  
risks it is willing to take in achieving its strategic objectives
   participates actively in the ‘topdown’ identification assessment and acceptance  
of strategic or highly material upsidedownside risk 
  subcommittees
a  oversee the effectiveness of the internal control and risk management systems  
across the organisation
b  ensure an appropriate balance of skills knowledge and experience on the board  
to effectively manage the risk environment 
c  ensure the appropriate incentivisation of the senior executive
  management
   sets the tone at the top by promoting a culture of risk awareness control focus  
and ‘doing the right thing’ within the business area
   identifies assesses and manages risk and reports upwards
   self certifies mitigating controls and actions and reports upwards
  nominated risk champions
   support sector and source market management by promoting and implementing  
group risk management policy and procedure within the relevant business areas 
   coordinate the ‘bottomup’ reporting process through collating risks identified and 
assessed by management along with associated mitigating controls and actions
  group functions
   identify opportunities to further mitigate common groupwide risks and set required 
control standards proportionate to risk communicate and educate management
   support management by promoting and implementing group risk management  
policy and procedure within the functional area
   participate in the ‘bottomup’ reporting process through collating risks identified  
and assessed within the function along with associated mitigating controls and  
actions and assist in the validation of risks reported by management
  group risk  control functions
a  develop and implement group strategy for insurable risk including placement  
into the external insurance market where economically appropriate and provide 
advice to subsidiary companies on all insurance related matters
b  provide fact base and a range of strategic options for board consideration  
and decisionmaking
c  provide guidance support and challenge to management in the development of 
an effective risk management process and act as a central point for coordinating 
monitoring and reporting across the group
d  validate management controls and self certification and provide expert guidance  
on policy setting 
  independent assurance
   provides independent and objective assessment of the effectiveness of risk  
management operational controls and governance processes
   provides guidance to management on risk and control through adhoc consulting 
activities as required
  group management board
   sets the tone at the top by the way it manages risk in the daytoday management  
of the organisation
   ensures the appropriate incentivisation of management in relation to risk and control
  subcommittees
a  ensure investment and major transactions align with the risk tolerances set  
by the board
b  ensure an appropriate balance of skills knowledge and experience is available  
to the organisation
c1  set the tone at the top by reinforcing the importance of risk management  
throughout the organisation
c2  actively participate in the identification assessment and mitigation of risk  
where these are significant to the organisation
c3  ensure the risk management process applied within each business area  
is appropriate and aligned to the activities undertaken within that area
d  monitor progress on key transformational projects to ensure in line with  
reported milestones and key risks and issues are mitigated
risk governance framework 
strategic governance operational governance 1st line of defence 2nd line of defence 3rd line  
of defence
independent assurance
group functions
a	 	
group	
insurance
a	group	audit	services
b	 	
group	
strategy
c	 	
group	 	
risk	
d	 	
group	
compliance
a	 	
audit	 	
committee
b	 	
nomination	
committee
c	 	
remuneration	
committee
board
group management board
a	 	
group	
investment	
committee
b	 	
group	
capability	
committee
c	 	
group	risk 	
management	
committee
d	 	
cross	 project	
review	
committee
management
a	 	
mainstream
b	 	
independent
c	 	
emerging	
markets wwwtuitravelplccom
22 tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
strategic overview
what	are	the	risks	 continued
principal risks
risk	descriptions	the nature of the risk is 
articulated including the possible causal 
factors that may give rise to the risk 
materialising this allows the sectorssource 
markets and the group to assess the 
interaction of risks and the triggering events 
before developing appropriate mitigation 
strategies
risk	 assessment risks are assessed in 
relation to potential impact and likelihood as 
measured against predefined financial and 
nonfinancial criteria relevant to the specific 
business area the current net risk position 
which takes into account existing controls  
is then considered in relation to the risk 
appetite and tolerances determined by the 
grmc on behalf of the board where the 
current risk position is considered too high 
relative to the targets of the group 
management identify mitigating actions to 
achieve the target planned risk position
mitigating controls for the principal risks 
reviewed and monitored by the grmc  
and the next layer of risks reviewed and 
monitored at sectorsource market level  
the controls on which reliance is placed are 
formally documented by management as 
required these controls are articulated in 
detail control type control owner control 
operators control frequency and are subject 
to independent validation by internal audit 
risk management process
the group risk function supports the grmc 
by providing guidance support and challenge 
to management whilst acting as the central 
point for coordinating monitoring and 
reporting on risk across the group
the group risk function applies a consistent 
risk methodology across all key areas of the 
business this is underpinned by the new risk 
and control software implemented during 
the year which has reinforced clarity of 
language visibility of risks controls and 
actions and accountability of ownership 
risk	 identification on a quarterly basis line 
management closest to the risks identify the 
gross risks within their business area in the 
context of
• longerterm strategic and emerging 
threats 
• mediumterm challenges associated with 
business change programmes 
• shorterterm risks triggered by changes in 
the external and regulatory environment 
• shorterterm risks in relation to internal 
operations and control
mitigating actions where mitigating actions 
are required these are also articulated in 
detail action plan owner action task owners 
initial and revised delivery dates and then 
tracked by the grmc or sectorsource 
market 
review	and	approval it is the responsibility 
of sector boards across the group and 
senior management teams beneath them  
to review and agree the risk profile for their 
area of responsibility including signing off  
on the effectiveness of controls and the 
progression of action plans within agreed 
delivery timescales
the group risk function consolidates the 
sectorsource market risk registers and 
reports this ‘bottomup’ to the grmc for 
review alongside the group’s key risks new 
risks are added to the group risk profile if 
deemed to be of a significant nature so that 
the ongoing status and the progression of 
key action plans can be managed in line with 
the group’s targets and expectations
enhancing risk management 
capabilities
as the group’s risk management capabilities 
and governance framework continue to 
mature we will further develop and formalise 
our suite of key risk and control indicators so 
that the status of the group’s risks can be 
managed within justifiable and tolerable levels
understand
market
adapt
strategy
manage
change
control and
monitor
internal
leadership
and structure
change
management
resource
and skills
technology
change
process
effectiveness integration and
synergy delivery
employee
relations
economic
environment
natural
catastrophes
geopolitical
events
legal action
litigation
fuel and
fx hedging
counterparty
risk
competition
compliance
t axation
differentiated
product
sustainable
development
controlled
distribution
efficiency
improvements
technology
innovation
consumer
behaviour
data security
completeness
and accuracy
customer
satisfaction
recruitment
and retention
health
and safety
business interruption
reliability
talent
management
reporting
and control
budgeting
and forecasting
liquidity and
cash management
external 
and regulatory
internal
operations
strategic 
and emerging
business
change
changing
new
stable
known
external
the
enterprise
risk aide memoire wwwtuitravelplccom
tui travel plc annual report  accounts 2012 23
strategic overview
tt11  ar 2012  20122012  proof 5
strategic overview
principal risk table 
consumer 
preferences  
 desires
strategic 
drivers
›	 content
›	 brands	 	
distribution
›	 technology
›	 growth 	 	
	scale
context
price product and social media play a key 
part in the consumer’s decisionmaking 
process consumers are increasingly turning 
online to research and book holidays and are 
moving towards booking nearer the time  
of travel
“our direct distribution channels are central 
to the group’s continued growth we have 
room to expand these in all our markets 
which will lead to improved margins and 
better results the core contribution of our 
direct distribution comes from online 
channels”
“at present we consider ourselves to be an 
onlinedriven group however we can do 
more the online drive continues across the 
group from frontend customer interaction 
at the time of booking to back office 
functions” 
risk
we do not respond quickly enough to 
changes in consumer preferences and  
do not keep up with latest technological 
developments
potential impact
our market positions come under pressure 
resulting in lower short to mediumterm 
growth rates and reduced margins
 groupwide
›		 our strategy emphasises our vision of being ‘onlinedriven’ and ensures we focus on 
providing our customers with an easy and inspiring online experience we continue  
to develop and enhance the nature and mix of our distribution channels including 
increasing our participation in social media according to the preference of our 
customers encompassing the entire customer journey from dreaming and planning 
through to experiencing and sharing
 tour operator
›		 we have implemented a distribution strategy tailored to the specific customer 
preferences and market dynamics of each of our source markets we remain focused 
on our strategy of controlled distribution through which we will enhance our customer 
access and reduce costs within our mainstream business we are now leveraging our 
new structure to enhance the portfolio of unique and exclusive products which will 
increase our competitive advantage command a premium margin and attract greater 
customer loyalty within our specialist business we have developed a strong brand 
portfolio of tailormade products and services and will continue to look for specialist 
innovative products and attractive markets that cater for changing customer needs 
and that will provide future growth
›		 we are in the process of upgrading our web frontend reservation and finance 
systems across all source markets within our mainstream sector these technology 
upgrades will provide our websites with new search functionalities improved 
personalisation and richer content as well as enhanced mobile capability as our 
customers increasingly research and book their holidays on mobile devices our 
specialist businesses have made good progress in consolidating their finance and 
reservation systems to leverage our scale across multiple brands and continue on 
their journey of standardisation while balancing the varied requirements of the 
different holiday experiences they offer 
 online accommodation
›		 we have a wide and diverse range of hotel stock and our strategy focuses on 
increasing this further as we seek to provide our customers with a onestopshop  
for their accommodation needs
›		 we seek to ensure that both our accommodation wholesaler and accommodation 
ota businesses are supported by effective and efficient it platforms within the 
accommodation wholesaler business our operational systems are being upgraded  
and updated in order to continue improving service delivery to global customers and 
in the accommodation ota business we have been investing and continue to invest 
in a new platform to support our growth strategy
risk nature and   current  
category extent of risk  mitigation
strategic tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
24 tui travel plc annual report  accounts 2012
strategic overview
what	are	the	risks	 continued
principal risk table continued
business 
improvement 
opportunities
strategic  
drivers
›	 content
›	 brands	 	 	
distribution
›	 technology
›	 growth 	 	
	scale
context
the group is heavily reliant on legacy 
systems processes and structures which  
in some cases are outdated complex and 
inefficient
“we have been successful in implementing 
groupwide cost efficiency and business 
improvement programmes as we have done 
over previous years the total savings made 
this year of these activities equates to £42m 
the drive for operational efficiency is 
groupwide”
“technology is an integral part of the 
direction we are heading in and as such in 
march 2012 we appointed mittu sridhara as 
the group’s chief information officer and 
member of the group management board 
the online drive continues across the group 
from frontend customer interaction at the 
time of booking to back office functions” 
risk
we do not address successfully the legacy 
inefficiencies and complexities of our existing 
infrastructure
potential impact
we incur higher costs due to inefficiencies 
impacting our ability to optimise business 
performance and provide a value added 
service to our consumers
 groupwide
›		 we have progressed our ambition to strengthen our internal control environment 
through the rollout of the coso control framework across the group and we continue 
to implement business continuity management in our various businesses in order to 
build resilience into our operations
›		 we continue to drive stronger and more costeffective relationships with our key 
service providers through better coordination of key procurement activities across 
the group better targeting of prepayments as well as closer scrutiny of the financial 
standing of our key partners and their achievement of required standards of customer 
service health  safety and sustainable development
 tour operator
›		 we have consolidated our tour operator businesses in french mainstream to create  
a single business and have repositioned our french airline as a scheduled carrier 
specialising in longhaul through delivery of the corsairfly transformation project  
our strategy within german mainstream is progressing and starting to deliver growth 
through differentiated and exclusive products our focus now is to use our new 
mainstream structure to leverage scale in order to grow and consolidate our leading 
position within europe we review continuously areas where the efficiency of our 
operations can be improved without compromising on customer experience
›		 as mentioned under consumer preferences and desires we are in the process of 
upgrading our web frontend reservation and finance systems across all source 
markets with plans progressing well in our key source markets ie germany and uk 
this will deliver significant improvement in both the customer booking experience  
and back office process efficiencies and we continue to examine opportunities to 
further consolidate in our other source markets
 online accommodation
›		 our scale is a key factor in driving our online accommodation business and in a 
pricedriven environment with lower margins high volumes can be leveraged to gain 
competitive advantage we are a firm leader in the accommodation wholesaler market 
and have a clear strategy of consolidating this position further by continuing to grow 
our existing destinations and accelerating our expansion into new markets within the 
accommodation ota market we are concentrating our growth strategy on attractive 
emerging markets which exhibit the highest growth potential in this segment 
›		 our it transformation programme in both the accommodation wholesaler and 
accommodation ota businesses looks to improve overall competitiveness and  
to facilitate the rapid integration of new brands whether acquired or organically 
developed
risk nature and   current  
category extent of risk  mitigation
strategic tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
tui travel plc annual report  accounts 2012 25
strategic	 overview
strategic overview
principal risk table continued 
emerging 
markets 
acq uisitions  
investments
strategic  
drivers
›	 content
›	 growth 	 	
	scale
global 
financial 
factors
strategic  
drivers
›	 growth 	 	
	scale
context
the crossborder nature of trading exposes our business to fluctuations 
in exchange rates and complex tax laws in addition a significant 
proportion of operating expenses are in relation to aircraft fuel which 
is also subject to fluctuation pressure in the travel and tourism and 
banking sectors is set to continue due to the inherent risks within travel 
and tourism the eurozone debt crisis and the introduction of basel iii
“over the last 12 months eurozone countries have had to come  
to grips with austerity measures placed on them by national 
governments some more severe than others we continue to monitor 
the developments across the region and do not expect this to have  
a major impact on our business the good relationships we have  
with our suppliers and the flexibility in our business model means  
we are well positioned to deal with any eventuality”
“we have recorded our largest underlying profit figure to date 
despite the eurozone crisis which led to a negative foreign exchange 
translation we reviewed and approved the group’s overall taxation 
strategy during the year this covered the key factors for the group’s 
overall tax position and forecasts for the future tax charge and cash 
taxes and we remain satisfied with our funding and liquidity position 
and have three main sources of longterm debt funding”
risk
we do not manage adequately the volatility of exchange rates and fuel 
prices or other rising input costs we face an increase in tax authorities 
taking a more strident tax approach in order to fund local fiscal deficits 
and we face difficulties in securing additional facilities if needed and  
at a reasonable cost
potential impact
we suffer increased costs which reduce demand resulting in lower 
revenue andor margins we face a negative impact on cash flow 
lengthy tax litigation processes and possible reduction in group’s 
aftertax earnings
 groupwide
›		 we have a team dedicated to exploring and evaluating our 
strategic options and growth opportunities worldwide through 
desktop and local research 
 tour operator
›		 we have established a significant presence in the fastgrowing 
russian and the cis markets as part of our longerterm 
growth strategy and these businesses are now starting to 
reach critical mass we have also launched small tour operating 
businesses in the indian and chinese markets
 online accommodation
›		 we are concentrating our growth strategy on attractive 
emerging markets which exhibit the highest growth potential 
in this segment asiarooms is now an established and growing 
accommodation ota brand in the asiapacific region and we  
are expanding further in to the americas and asia with our 
accommodation wholesaler business 
›		 we recently acquired malaprontacom brazil’s fourth largest 
accommodationonly ota which has given us a foothold into 
the fastgrowing and lucrative latin american latam 
market we are now concentrating on our expansion into other 
attractive emerging markets which exhibit high growth 
potential and are accelerating our expansion plans with 
particular focus on asia latin america and africa
 groupwide
›		 our policy is to ensure hedging cover for fuel and foreign currency 
is taken out ahead of source market customer booking profiles in 
order to provide certainty of input costs when planning pricing 
and capacity 
›		 we track closely the foreign exchange and fuel markets to  
ensure the most uptodate market intelligence and we monitor 
continuously the appropriateness of our hedging policies
›		 we have developed and continue to maintain high quality 
relationships with tax authorities and are in regular 
communication to keep them abreast of the commercial reality  
of our business operations where appropriate we minimise 
uncertainty through recording of provisions to reflect potential  
tax exposures
›		 we review our funding and liquidity position and continue to 
ensure our key facilities are refinanced well ahead of maturity we 
have three main sources of debt funding including external bank 
revolving syndicated credit facilities totalling £970m which mature 
in june 2015 and are used to manage the seasonality of the 
group’s cash flows and liquidity a £350m convertible bond due 
october 2014 issued in october 2009 and a £400m convertible 
bond due april 2017 issued in april 2010 
›		 we have developed and continue to maintain high quality 
relationships with the group’s key financiers and monitor 
compliance actively with the covenants contained within our 
financing facilities
operational
strategic continued
risk nature and   current  
category extent of risk  mitigation
context
the group continues to look into new markets as the traditional 
mainstream markets mature specialist businesses accommodation 
online and the emerging markets represent a significant opportunity 
to participate in longerterm travel growth trends and have higher 
growth potential
“during the year we consolidated our existing businesses in russia 
and cis source market into a single brand tui featuring all 
destinations establishing a strong platform for the future the  
sector now has close to 600000 customers up 15 on prior year” 
“we successfully entered the brazilian market through the 
acquisition of malaprontacom in september 2012” 
risk
we do not maximise opportunities to deliver results in emerging 
markets because we have limited experience in these markets  
andor we have difficulty in integrating operations and systems
potential impact
our potential longterm growth rates and margins are impacted 
with cash flows lower than anticipated and significant absorption  
of resource tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
26 tui travel plc annual report  accounts 2012
strategic overview
what	are	the	risks	 continued
principal risk table continued
economic 
environment 
strategic  
drivers
›	 content
›	 distribution
›	 growth 	 	
	scale
talent 
management 
strategic  
drivers
›	 people
context
spending on travel and tourism is discretionary and price 
sensitive the economic outlook remains uncertain with different 
source markets at different points in the recovery cycle 
consumers are also waiting longer to book their trips in order  
to assess their financial situation
“whilst the uncertain economic environment has had an effect  
on consumer travel spending habits demand for leisure travel 
remains strong”
“overall the group has expanded its unique holidays portfolio 
this is our differentiated and exclusive products combined which 
books earlier and provides higher margins for our businesses”
“we are able to take advantage of our scale and technological 
developments to offer our customers a wide variety of choice at 
very competitive prices we have the marketleading position in 
accommodation wholesale and continue to invest in our own 
accommodation online travel agent ota business”
risk
we do not respond successfully to changes in consumer  
demand andor the consumer preference for late booking
potential impact
our shortterm growth rates and margins are lower than 
anticipated
context
the group’s success depends on its ability to retain key 
management and it relies on having good relations with its 
colleagues
“our results are reflective of our resilient and flexible business 
with the right strategy for the market and a large number of 
colleagues who care about our customers who are passionate 
about our leisure travel experiences and can plan implement 
and deliver growth” 
risk
we are unable to attract and retain talent build future 
leadership capability and maintain the commitment and trust  
of our employees
potential impact
we do not maximise on our operating results and financial 
performance
 groupwide
›		 we are working across our mainstream sector to ensure our unique 
holidays and distribution channels are aligned closely with the aspirations 
and preferences of our customers to drive more benign business 
conditions see consumer preferences  desires risk we also ensure 
that we exploit the flexibility and resilience of our business model and the 
functionality of sophisticated capacity and yield management systems to 
the fullest extent through their active management we can ensure that 
capacity is aligned very closely to forecasts in order to protect margins 
and profit growth within our overall accommodation online business the 
model involves minimum commitment or risk and operates extremely 
well in relation to the latest market 
 groupwide
›		 we assess continuously our current capability against that required  
to maximise current and future shareholder value 
›		 we have ensured succession plans are in place for all identified business 
critical roles in particular emergency successors for all source market  
and sector board roles and these plans are reviewed every six months
›		 our succession planning for senior management appointments was 
reviewed during the year by the nomination committee as was the 
broader issue of talent management across the group 
›		 our talent management priorities are overseen on an ongoing basis by 
the capability committee which assesses the strength of the talent pool 
relative to the needs of the business it uses inputs from a number of 
sources such as the group risk management committee to inform those 
priorities and take the necessary action to deliver the balance of skills 
knowledge and experience required to deliver the business strategy
›		 we use our groupwide leadership framework to develop and recruit  
all senior roles and to drive high levels of pride and engagement
›		 this year we conducted competency testing in conjunction with korn 
ferry of our key finance management which enabled us to assess the 
adequacy of the skillset of individual finance managers as well as the 
competency of the finance community within key businesses and across 
the group as a whole we also launched our finance academy to drive up 
levels of financial maturity within our various businesses which has been 
very well received by our employees 
›		 we continue to invest in international and tailored graduate programmes 
and more generally in the training and development of our people  
to ensure they have the right skills this is further supported by the 
introduction of centres of excellence to enable the sharing of best 
practice so that skills are not limited to one source market 
›		 this year we refreshed the performance and talent management 
guidelines and have continued to drive high performance and 
engagement through our performance review development plans  
and career planning process
operational continued
risk nature and   current  
category extent of risk  mitigation wwwtuitravelplccom
tui travel plc annual report  accounts 2012 27
strategic overview
tt11  ar 2012  20122012  proof 5
strategic overview
political 
volatility 
natural 
catastrophes 
and 
outbreaks
strategic  
drivers
›	 content
›	 growth 	 	
	scale
context
providers of holiday and travel services are exposed to the inherent  
risk of domestic andor international incidents affecting some of the 
countriesdestinations within its operations
“2012 has been a record year for our business we are pleased to be 
reporting a 4 increase in underlying operating profit for the full 
year to £490m 2011 £471m this is even more impressive against 
a backdrop of global economic uncertainty political turmoil weak 
consumer sentiment the eurozone crisis and natural catastrophes”
risk
we are not able to respond efficiently and effectively to large scale 
events 
potential impact
we suffer significant operational disruption in our source markets  
and destinations leading to significant losses holiday cancellations 
repatriation of customers and a general decline in consumer demand 
and increase in our insurance premiums
 groupwide
›		 our business model is based on having a balanced destination 
mix to minimise concentration and having flexible supplier 
agreements in order to enable capacity to be switched as 
required 
›		 we have strong relationships with local tourism bodies travel and 
aviation industry associations and monitor actively the political 
situation in volatile destinations and act upon security intelligence 
advice as it is received
›		 we seek continuously to minimise the impact of any negative 
events in our source markets and destinations should they occur 
by ensuring the effective execution of our established incident 
management and emergency response plans and the deployment 
of our experienced leadership teams to support and repatriate 
stranded customers
›		 we promote the benefits of travelling with a recognised and 
leading tour operator to increase consumer confidence 
throughout source markets
regulatory 
environment
strategic  
drivers
›	 content
›	 growth 	 	
	scale
context
industries in which the group operates are highly regulated particularly  
in relation to consumer protection aviation and the environment
“as a global organisation we feel the impact of government 
regulation in all of the markets in which we operate some of our 
activities such as those undertaken by our airline are heavily 
regulated our focus is always to work with governments to bring 
forward legislation that is fit for purpose is no more burdensome  
on industry than it needs to be and does not discriminate between 
different business models”
“our sustainable holidays plan is a major step forward for tui 
travel in our journey towards providing special travel experiences 
whilst minimising environmental impact respecting the culture and 
people in destinations and bringing real economic benefit to local 
communities”
risk
we do not establish an effective system of internal control to ensure  
we operate in compliance with all legal and regulatory requirements
potential impact
we suffer negative impact which damages our reputation and incurs  
higher costs
 groupwide
›		 we continue to address issues affecting the industry and our 
customers through our skilled public affairs team who work closely 
with governments and regulators to ensure our position is 
communicated clearly and understood 
›		 we believe we have taken appropriate action and established 
appropriate monitoring controls to minimise the impact of the 
recent ruling by the european court on delayed flights
›		 we are committed to developing more sustainable holidays  
and to reducing the environmental impact at each stage of our 
customer’s journey we have a dedicated sustainable development 
team who support the group and work closely with business 
management see our sustainable development section
›		 we are focused on delivering our carbon management strategy 
through commitment to reducing tui travel’s airlines’ per revenue 
passenger carbon emissions by 6 by 20132014 against a 
baseline of 200708 – see our sustainable development section
›		 we have submitted tui travel’s annual 2011 airline data which 
has been externally assured to the relevant authorities in line  
with the eu emission trading scheme see our sustainable 
development section
›		 our decentralised structure for health  safety management 
enables our source markets to focus on specific risks in the 
context of their bespoke operating and legal environments while 
ensuring appropriate oversight at group level
›		 we have rolled out a comprehensive antibribery  corruption 
training programme across the group in order to raise awareness 
of the provisions of the bribery act 2010 with the intent of 
preventing bribery and corruption in the countries in which we 
operate we monitor the adequacy and effectiveness of the 
procedures and measures established including legal compliance 
self certification twice a year by our businesses across the group
compliance
operational continued
risk nature and   current  
category extent of risk  mitigation
principal risk table continued  wwwtuitravelplccom
28  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
group management board gmb
the strategic direction of the group is set by the   group management board gmb in conjunction   with the board see board of directors section   the gmb consists of tour operating online   accommodation and function experts from across   the group this highly experienced international   team manages and executes tui travel’s   daytoday operations and is responsible for the   overall performance of the group during the   year and post yearend there have been some   changes to the composition of the gmb
•  johan lundgren was appointed deputy chief   executive with overall responsibility for the   mainstream sector on 20 october 2011
•  christian clemens joined the gmb on     26 april and was appointed managing director   tui germany in october 2012
•  david burling joined the gmb in his capacity     as managing director tui uk  ireland on     26 april 2012
•  dr volker böttcher was appointed as   managing director of german specialist   businesses following the restructuring of   the mainstream sector on 26 april 2012
•  mittu sridhara joined the gmb when he     was appointed chief information officer     on 25 june 2012
•  bart brackx managing director western   europe stepped down on 30 september 2012
•  john wimbleton managing director   specialist  activity will leave the gmb   on 31 december 2012
our people
we are in an industry where people are the   key differentiator we have 54000 colleagues   in 180 countries and they are the face of our   organisation working hard to make travel   experiences special for our customers this is why   our values customer driven playing to win   responsible leadership and value driven   continue to be so important at tui travel they   act as cornerstones of our culture and support   the future success of our business
    for more information on ‘our values’ see the how we do it   strategic framework section
investing in our leaders
to deliver our strategy we must have the most   capable leaders both today and in the future     and we have many initiatives in place to support   this in 2011 we launched a new development   programme global high performance   leadership for senior leaders who demonstrate   potential for further success in a global   environment the programme was delivered     in conjunction with the highly renowned   international  institute  for  management  development imd in switzerland and leadership   consultancy lane4 the modules are linked to     our strategic objectives and have an immediate   application in tui travel as they focus on real   strategic  overview
our people
our team as at 3 december 2012   1 2
3 4
6
9 10
7 8
5
1 peter long chief executive
2 william waggott chief  financial  officer
3 johan lundgren deputy chief executive
4 dr volker böttcher managing    director german specialist businesses
5 david burling  
managing director tui uk  ireland   6 mittu sridhara chief information officer   7 joan vilà managing  director  accommodation  destinations   8 christian clemens  
managing director tui germany   9 andrew john group legal director       company  secretary
10 jacky simmonds group hr director wwwtuitravelplccom
tui travel plc annual report  accounts 2012  29
strategic overview
tt11  ar 2012  20122012  proof 5
strategic  overview
the your voice survey is an important     way to measure whether we are meeting   our people goals overall and it helps us   ensure that we are continually driving   improvements it is also a tool that we     use to benchmark ourselves against high   performing organisations externally the   survey had a 69 response rate some   highlights include respondents feeling high   levels  of  pride  working  for  our  organisation  and strong results when it comes to our   organisation being customer focused
our people have great ideas and are the   ones that understand our business the   best in addition to the global survey we   have a substantial number of employee   representative forums in place to make   sure we get input on matters that impact   our business and colleagues we do this   both by consulting elected employee   representatives and by liaising with our   people in team meetings and open forums
valuing everyone’s contribution
with 54000 colleagues in 180 countries     we have a diverse workforce serving a   varied customer base we believe that   having people from a range of different   backgrounds and cultures is a significant   advantage allowing us to truly understand   our  customers  at tui  travel  diversity  means  understanding   that each individual in the organisation is   unique and making the most of our people’s   differences everyone’s contribution is   valued and our people are treated fairly and   with respect we believe that all colleagues   should have the same opportunities and   no one should suffer discrimination on any   basis we give full and fair consideration   to applications for employment from     those who may be disabled and wherever   possible continue to employ colleagues   who have become disabled ensuring they   have equal access to development and   career opportunities we have guidelines in   place both globally and locally to support   these aspects of our culture   our most senior leadership group 236   leaders illustrates the diverse nature of our   organisation they are based in 24 different   countries with over a quarter being female   if we look at our total workforce 42 of   managers are female this year we have   started taking part in a programme which   focuses on mentoring specifically for   female talent as part of our commitment   to increase the number of women in senior   roles within tui travel       79 of respondents feel proud to work for our   company
    84 of respondents feel that we are customer   focused and that we work hard to understand the   needs of our customers
graduates from the netherlands italy   poland france russia great britain   bulgaria and germany have joined us in   the uk tui travel was voted as a top 20   employer for graduate programmes and     is ranked number three in the leisure and   hospitality  industry  we have graduate schemes in both of our   largest  mainstream  source  markets  germany and the united kingdom both   took on graduates during the year as did   our specialist  activity sector within   some  of  our  larger  businesses  our  approach  is to support young people in gaining   valuable work experience by offering   apprenticeships
we continue to develop talent through     our finance academy which has proved   very successful the course open to all   employees has now trained over 300   members of finance teams across the   group from different countries and   sectors the finance academy is working   on developing more training content and   courses that will help us perform finance   roles more effectively
people are now increasingly looking to   social media to find out about tui travel   our brands what it is like to work for our   organisation and to search for vacancies as a   result we are increasingly using social media   for recruitment activities with facebook and   linkedin being two key ways that we engage   with potential future employees
we are also developing an employer brand   that will convey the essence of working for   tui travel this is an exciting opportunity   for us to capitalise on the value of all of our   brands and make sure that we integrate   this promise between our company and     our employees in everything that we do
engaging and involving our people
there is a clear link between our overall   strategy and the role our people play for   us it is important that we engage everyone   with our company’s vision so they can see   the impact that their contribution has on   driving business performance engaged   people are more productive and customer   focused they become advocates of our   business and go above and beyond what     is expected of them which in turn creates     a high performance work climate for   example in the uk we have an employee   share incentive scheme which helps align   our business targets with those of our   people
for the first time this year everyone in our   group was invited to take part in one global   opinion survey which was undertaken in   over 30 countries and across 14 languages   business initiatives this year 14 people   participated and we will continue to run the   programme on an annual basis
during the year we have also taken leaders   to thailand as part of our global   responsible  development  programme  which has been in place since 2008 the   initiative is particularly important as it is   aligned  to  our  sustainable  development  agenda the aim is for leaders to gain   insight into their personal leadership styles   have greater cultural appreciation and work   together with colleagues from other parts   of the business it is also an opportunity for   those taking part to make a contribution to   the local community in which we operate   by providing business advice to make the   community as selfsufficient as possible   the programme emphasises the   importance of respect and diversity whilst   developing  communication  and  influencing  skills in different cultures
the horizons programme is designed to   develop global future leaders it focuses   on developing both leadership and strategic   business skills since its launch in 2008   over 200 people across the group have   been included and this year we had 30   managers take part in this successful   development  programme
we have a tui travel leadership framework   in place which is used for attraction   selection  development  and  performance  management of all leaders it provides     a consistent approach to drive a high
performance  culture  whilst  supporting  development and career progression for     our leaders we have formed the capability   committee as a committee of the group   management board gmb and all members   are directly involved in ensuring that we   have the right capability and succession   plans in place now and in the future
attracting and developing talent
we pride ourselves on developing talent   and offering career prospects in a dynamic   and exciting industry there are several   ways that we can do this in many cases we   support our people in gaining professional   qualifications relevant to their role and we   also aim to provide opportunities to move   between business areas and countries
creating a talent pipeline is crucial and we   continue to invest in graduate recruitment   both internationally and within individual   sectors and markets our international   graduate leadership programme is open   to outstanding university graduates from   all over the world and provides unique   opportunities for participants to build     their skills and gain invaluable business   experience this year 13 international   wwwtuitravelplccom
30  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
strategic  overview
health  safety
the group hs induction programme   ‘safety in your workplace’ continues to provide   employees with the relevant hs knowledge   for their workplace
within the uk any relevant injuries diseases or   dangerous occurrences are reported under the   reporting of injuries diseases and dangerous   occurrences regulations riddor the incident   statistics for the uk for 201112 are given below
local and national authorities continue to visit   various group premises offering advice and   highlighting  relevant  issues  no  enforcement  notices or convictions have occurred within the   201112 financial year
customer safety
each of the sectors has responsibility for   ensuring that sound hs practices and robust   safety management systems are embedded   within their businesses   in mainstream the uk  ireland business has   outsourced certain aspects of its hs activities to   a specialist external third party provider the third   party provider is instructed and monitored by a   ukbased team which sets the hs strategy   agrees the audit schedule and takes responsibility   for the development and implementation of the uk    ireland mainstream safety management system   the specialist third party provider undertakes   audits of overseas accommodation transport   and excursion suppliers utilising a mix of physical   visits and selfassessments where highrisk   areas are identified specialist intervention may be   commissioned such as for example the deployment   of specialist food water or hygiene consultants
hs is a standing agenda item at the monthly   uk  ireland board meetings the distribution    customer director reports directly to the uk    ireland board in respect of hs and is responsible   for implementing  all  necessary  actions  on  its  behalf
health  safety
the group attaches great importance to the health    safety hs of its customers and employees at   all levels of the business andrew john the group   legal director  company secretary continues to   be the group management board gmb member   with responsibility for reporting to the gmb on   hs matters
tui travel has decentralised responsibility for   hs management enabling sectors to focus   on their specific risks in the context of their   bespoke operating and legal environments   sectors and the divisions and businesses within   them continue to liaise cooperate and share   best practice with the overall direction found   in the tui travel hs policy statement issued   and signed by the chief executive peter long   in august 2012 a hs checklist was sent to all   businesses across the group by the group legal    regulatory compliance function this was done to   assess the consistency of baselevel hs controls   in place around the group and the results are   currently being analysed
employee safety
as the group continues to expand into new areas   the nature of hazards faced by employees changes   the likelihood and impact of these hazards needs   to be continually assessed and mitigating measures   put in place where appropriate hazards range from   relatively lowrisk office to the higherrisk airline   engineering  environments  a programme of workplace risk assessment   continues to be undertaken highlighting any   areas of concern where significant risk exists   the assessments are used to understand better   the various hazards involved and identify and   implement  appropriate  mitigating  measures  safety management systems continue to be   developed and improved by individual businesses   with assistance from the relevant sector and   divisional  hs  professionals
uk incident data october 2011 to september 2012
      crawley      airline  uk   and other
uk  incident  category  airline  equivalent
1
  ireland  businesses  total
number of incidents  525    54  20  599
number of riddor   overthreeday  incidents
2 3
  13  28  4  0  45
number of riddor major incidents  2  7  2  0  11
number of riddor fatalities  0  0  0  0  0
1
  where an incident occurs outside of the uk it is not reportable under the riddor legislation but within the group   incidents are reported as a ‘riddor equivalent’
2
  where due to an accident at work an employee is unable to perform their normal work duties for more than     three consecutive days not including the day of the accident
3
  as of 6 april 2012 riddor’s overthreeday injury reporting requirement has changed the trigger point has   increased from over three days’ to over seven days’ incapacitation not including the day of the accident strategic overview
wwwtuitravelplccom
tui travel plc annual report  accounts 2012  31
strategic overview
tt11  ar 2012  20122012  proof 5
each business within sas is ‘risk profiled’ and   appropriate safety management systems devised   and implemented according to the risks identified   within each business the profile of each business   is amalgamated into a divisional risk summary –   the results of which are presented to the sas   board on a regular basis
additionally the number of businesses   complying with safety management system   requirements set by external accreditation bodies   such as the school travel forum stf the council   for learning outside the classroom clotc   british activity providers association bapa   and british standard for adventurous activities   outside the uk bs8848 continues to grow   late 2012 saw the launch of the sas internal   ‘kite mark’ and accreditation logo which will   be awarded to businesses demonstrating the   highest levels of compliance with sas safety   management system standards
in the accommodation  destinations sector   hs is managed by each individual division   and business hotelbeds actively pursues the   collection of hs data on hotels by means of   the ‘sure2care’ due diligence system   intercruises has a dedicated hs manager   who is responsible for the implementation   and development of the intercruises’ safety   management system the operations of   suppliers of services which are part of the   core intercruises business for example   accommodation  transport  and  excursions  are assessed by physical inspections and in   the case of accommodation by means of the   ‘sure2care’ inhouse due diligence system   tui germany’s mainstream sector has a dedicated   hs team which is responsible for all matters   of hs together with the development and   implementation of standards to ensure the   wellbeing of all customers regular checks of all   relevant areas are continuously monitored and   reviewed to identify risk areas the focus over   the last year included pool safety and the hs   management participated in a major project to   minimise the risk of suction entrapment in pools   with the drv german travel association   in tui nordic hs activities for mainstream   businesses sweden norway denmark   and finland are coordinated through the   crisis management  sustainability business   development team this team is responsible   for setting hs strategy undertaking audits   and for the operation and development of   the tui nordic safety management system   speciallytrained employees in tui nordic   undertake audits of overseas accommodation   excursion suppliers hygiene standards   sustainability status and transport except air   carriers and cruise liners these are completed   through physical visitsrevisits and selfassessments   when high risks are identified specialist intervention   may be commissioned to safeguard high and   safe standards of food water and hygiene for   tui nordic clients the crisis  sustainable   development manager reports directly to the   director of product content  aviation and any   issues can be raised during weekly meetings   the specialist  activity sector sas operates   a sectorspecific hs function the sector’s   hs team comprises 16 staff based in the uk   and overseas for all seven sas divisions audits   of suppliers are undertaken utilising a mix of   physical inspections and the use of supplier   selfassessments by means of ‘sure2care’ – the   inhouse webbased due diligence system the   sas hs function was internally audited by group   audit services in august 2012 all key hs controls   were found to be in place and documented wwwtuitravelplccom
32  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
sustainable holidays plan
our new sustainable holidays plan 201214 marks   the next step in our journey towards a more   sustainable  future
it shows significant integration of environmental   and social principles into the way we do business   – performance measures processes and the   customer proposition it sets out four ambitious   goals underpinned by 20 commitments in our   priority  areas  –  taking  care  in  destinations  reducing  carbon emissions and engaging our colleagues and   customers  in  sustainability
these goals will be hard to achieve but this plan   already has the support of many of our internal   and external stakeholders who are key to its   success we will build these partnerships as     the plan progresses working with colleagues   customers partners suppliers governments   trade associations ngos academics and other   stakeholders to achieve the goals and   commitments we share   travel and tourism is one of the world’s largest   industries the growth and employment it creates   makes it of critical importance to the global   economy however from a sustainable development   perspective the industry’s high dependency on   fossil fuel and biodiversity poses a challenge one   which our businesses have been addressing for over   a decade our vision is to make travel experiences   special  whilst  minimising  environmental  impact  respecting culture and people and bringing   economic benefits to communities   in 201112 we were pleased that our performance   was recognised as follows
•  for the fifth consecutive year tui travel was   featured in the carbon disclosure leadership   index and was ranked in the top 10 of the   ftse 350 for our approach to carbon disclosure   and  governance  wwwcdprojectnet
•  we continue to be listed on the ftse4good   index in recognition of meeting strict social   environmental  and  governance  standards  •  we were featured in the 2012 sam sustainability   year book which highlights the best performing   15 of companies who submit data to the dow   jones sustainability index in each industry   sector tui travel also received a silver class   distinction and sector mover status for its   achievements  wwwsamgroupcomyearbook  for further details on awards and our latest   sustainable  development  report  see    wwwtuitravelplccomsustainability
managing sustainable development
commitment at the most senior level is vital     for us to achieve our goal of leading the leisure   travel sector in sustainable development     johan lundgren deputy chief executive officer     is responsible for reporting on sustainable   development to the tui travel plc board and   jacky simmonds group hr director is responsible   for reporting on sustainable development to the   group management board jane ashton is the   director of group sustainable development and   the group management board acts as the steering   committee setting the strategic direction and   longterm  objectives  for  sustainable  development
the  group  sustainable  development  department’s  role is to drive change towards a more sustainable   business and to forge sector leadership our   groupwide work streams meet regularly to tackle   issues and develop programmes of work each   sector within the group has a sustainable   development coordinator or team with a remit to   develop  and  implement  sustainable  development  strategy supported by a network of champions   to review performance and to measure progress   we have incorporated sustainable development   questions into regular colleague surveys at sector   and group level and we conduct an annual   sustainability evaluation of tui travel tour   operating businesses as well as specific surveys   of airlines hotels and water transport operations
strategic  overview
sustainable development
carbon
goal by 2015 we will operate europe’s 
most fuelefficient airlines and save more 
than 20000 tonnes of carbon from our 
ground operations
destinations
goal by 2015 we will deliver 10 million 
‘greener and fairer’ holidays
colleagues
goal by 2015 our colleagues will rate 
tui travel as a leader in sustainability
customers
goal by 2015 customers will regard 
tui travel as a leader in delivering more 
sustainable holidays
for further details on our sustainable   holidays plan including our 20 commitments   see  wwwtuitravelplccomsustainability
our threeyear sustainable  
holidays plan
viewpoint
stephanie draper director 
of system innovation at forum 
for the future comments 
‘’this plan recognises the need 
to combine external engagement 
with internal performance… 
this approach shows the 
increasing maturity of tui 
travel’s sustainability journey 
– differentiating themselves 
through sustainability in tricky 
times and starting to shape the 
market for a better future’’
wwwforumforthefutureorg 
eu air traffic project
tuifly is a strategic partner 
in the eu’s sesar single 
european skies project – an 
ambitious initiative to reform 
the architecture and efficiency 
of european air traffic 
management the goal of sesar 
is to enable a 10 reduction in 
the environmental impact of 
european aviation by 2020 wwwtuitravelplccom
tui travel plc annual report  accounts 2012  33
strategic overview
tt11  ar 2012  20122012  proof 5
strategic  overview
    carbon efficiency measured through tui travel airlines’   average carbon emissions per revenue passenger kilometre   co 2 rpk
    carbon footprint covers scope 1 direct emissions and   scope 2  3 indirect emissions this data has been third party   verified by arqum an independent environment consultancy   based in germany
we have developed collaborative partnerships with   many stakeholders whose insight and guidance   continue to help us develop our position on   aviation and climate change examples include   carbon disclosure project sustainable aviation   fuel users group safug sustainable aviation   forum for the future in the uk aviation initiative   for renewable energy in germany aireg and   platform sustainable aviation in the netherlands
tui travel airlines carbon efficiency in 201112 
measured by co
2
 per rpk
arkefly      752g
corsair  international        908g
jetairfly        752g
thomson airways        706g
tuifly        665g
tuifly  nordic        654g
tui travel airlines average      730g
carbon
travel and tourism is responsible for around 5 of   global  co
2
 emissions unep 2011 climate change   impacts the attractiveness weather and comfort of   our holiday destinations which are critical factors in   the quality of the holiday experiences we deliver
in 201112 tui travel airlines’ total carbon   emissions were 5248262 tonnes as a leading tour   operator our challenge is to prepare for a low   carbon future by further reducing our   environmental impacts and helping those in our   value chain do the same
we are embedding carbon management into our   key business practices to limit our contribution to   climate change both now and in the future to drive   cost efficiency and to be well prepared for   associated regulatory proposals   goal by 2015 we will operate europe’s most   fuelefficient airlines and save more than 20000   tonnes of carbon from our ground operations
we will measure this through tui travel airlines’   average carbon emissions per revenue passenger   kilometre  co
2
rpk and co
2
 saved from our   major premises retail outlets brochure paper   production differentiated hotels and fleets of   vehicles against 2011 baseline
key achievements in 201112 include
•  co
2
 per revenue passenger kilometre rpk   across tui travel airlines in 201112 of 730g an   improvement of 63 since 200708 – making   us one of the most efficient airlines in europe   and beyond
•  89 of our aircraft are now fitted with fuel
saving winglets reducing fuel burn by up to 5
•  a third of our modern coach fleet in spain has   been fitted with the latest euro v engine   technology to further improve fuel efficiency   reducing fuel burn by 8
•  our mainstream german austrian and swiss   businesses have partnered with myclimate to   offset the carbon emissions from all customer   rental cars from summer 2013
•  intercruises shoreside  port services achieved   the iso 14001 environmental management   standard for their head offices in barcelona
•  quark expeditions has offset the emissions of   the ocean diamond its newest ship thereby   offering the first carbon neutral voyage in polar   travel history
•  the moorings achieved the sailors of the sea   clean regattas certification for its 31st interline   regatta held annually in the british virgin islands   recognising its commitment to responsible sailing
•  carbon emissions have been reduced by   77 yearonyear across the tui uk  ireland   retail estate
905
41
07
06
36
05
tui travel airlines 
and aviation
water transport
ground transport
major premises
differentiated hotels
other indirect 
emissions including 
business travel by air
breakdown of tui travel’s carbon footprint 
in 201112
stakeholder engagement 
in destinations
as an industry we need to 
understand the socioeconomic 
impacts of tourism better in 
201112 we worked with 
sustainable travel international 
and oxford university to 
understand the longterm 
sustainability issues in three 
destinations key to tui travel 
turkey cape verde and 
tunisia destination stakeholder 
workshops took place and we are 
now planning and implementing 
our operational response
tuifly most fuelefficient 
charter airline
tuifly was ranked the most 
fuelefficient charter airline 
worldwide for shorthaul and 
longhaul flights in the 2012 
airline index published by the 
german environmental ngo 
atmosfair indicating how tuifly’s 
investment in modern more 
fuelefficient aircraft and focus 
on efficient aeronautical 
procedures are yielding results 
thomson airways came second 
for most efficient charter airline 
for short haul flights wwwtuitravelplccom
34  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
strategic  overview
sustainable development continued
•  investment in clean energy and energy efficiency   projects in key destinations are set to deliver   1 million tonnes of co
2
 savings by 2014 we have   exclusively funded two wind farms in turkey which   bring renewable energy to coastal communities
•  tui deutschland partnered with the german   government development agency giz to support   a major project in tunisia which focuses on training   hotel managers and hotel schools and promoting   tourism employment opportunities for women
•  we are a key partner in the travel foundation’s   taste of fethiye project in turkey – working with   farmers’ cooperatives to increase the amount of   local produce supplied to our hotels
•  we continue to work with the travel foundation   and overseas development institute on research   and pilot projects to understand and improve the   socioeconomic impact of our unique hotels
•  as part of our measures to protect biodiversity   we support sea turtle projects in turkey greece   and mexico for example we are working with   karisma hotels to help conserve sea turtles   along the riviera maya
we are conscious of the pressures that tourism     can place on local populations and resources and   therefore work collaboratively with communities   governments and a range of other partners to   support sustainable management of destinations   examples include the tour operators initiative   global  sustainable  tourism  council  sustainable  travel international dutch association of travel   agents  tour operators deutscher reiseverband   giz association of british travel agents the   overseas development institute the travel   foundation and born free
colleagues
colleagues tell us our commitment to sustainability   is important and it helps us attract new talent we   want to make sustainable development a real priority   for each and every colleague within our business   we communicate regularly about the progress   we are making on securing a sustainable future for   our industry we build sustainability into induction   and training programmes including development   programmes for managers our core value   of responsible leadership is being built into   behaviour and performance measurements
goal by 2015 our colleagues will rate tui travel   as a leader in sustainability
we will measure this through the leadership   voice survey and your voice global opinion   survey results – aiming to meet high performing   scores for responsibility towards the environment   and  community  destinations
tui travel has a global supply chain the   businesses that supply us have a significant role     in managing our impact on the local community   economy and environment we are already helping   many of them save money through ecoefficiencies   which ultimately give customers better value for   money our challenge is to extend our influence     to all suppliers and to monitor their progress
we do not believe sustainability has to mean giving   up on luxuries and we are building our business   around the idea of unique hotels and holiday   experiences we are prioritising bringing more   hotels into credible sustainability certifications     and environmental management systems to     ensure they embark on a journey of continuous   improvement
we want our holidays to benefit local livelihoods   and protect the environment to maintain the   quality viability and desirability of our products     for years to come we are involved in hundreds of   projects that support communities and reduce   environmental impacts our projects cover the   following  areas  carbon  reduction  supporting  communities saving water reducing waste   protecting biodiversity animal welfare protecting   children  and  investing  in  training
goal by 2015 we will deliver 10 million ‘greener     and fairer’ holidays
we will measure this by the number of customers   we take to hotels with credible sustainability   certifications from 2012 to 2014 eg sustainability   certifications working with the global sustainable   tourism council such as travelife and international   environmental management standards such as     iso 14001 and emas   key achievements in 201112 include
•  we featured over 850 hotels with sustainability   certifications at the end of september 2012
•  over 15 million customers stayed in hotels which   had sustainability certifications at the end of   september  2012
•  29 of our unique hotels had an environmental   management standard such as iso 14001 or   emas
•  we organised sustainability supplier conferences   in germany rhodes turkey and the caribbean   islands of bonaire curacao and aruba
•  environmental consultancy projects were   initiated with 60 of tui uk  ireland’s hotels and   43 of tui nordic’s blue star hotels to achieve   best practice sustainability standards
•  we are actively working to develop international   animal welfare industry best practice guidance   with the association of british travel agents   abta
lanzarote leading the way
lanzarote is leading the way in 
sustainable tourism according to 
the global sustainable tourism 
council’s gstc destination 
criteria designed to improve  
the sustainable management of 
tourist destinations hotelbeds 
in lanzarote is also playing its 
part by developing a unique  
hop onhop off coach excursion 
running on sustainable biofuel 
which brings local economic 
benefits to many communities
fair trade tourism 
holiday package
tui nederland is the first major 
travel company in the 
netherlands to develop a fair 
trade tourism holiday package 
all accommodations and 
activities during this holiday are 
fair trade tourism certified by 
fair trade in tourism south 
africa fttsa this means  
fair wages and good working 
conditions for owners and 
employees strategic overview
wwwtuitravelplccom
tui travel plc annual report  accounts 2012  35
strategic overview
tt11  ar 2012  20122012  proof 5
goal by 2015 customers will regard tui travel   as a leader in delivering more sustainable holidays
we will measure this by our performance in   consumer research in our key source markets
key achievements in 201112 include
•  sawadee won the 2011 green feather   sustainable tourism award for their water and   plastic saving initiatives involving customers
•  businesses  within  the  specialist    activity  sector  are leading the way by developing brochure apps   for customers and reducing printed materials
•  tui nordic’s 55 programme gives customers   the opportunity to donate 5 swedish krona   which we then match and invest into carbon   and water projects via plan vivo and water aid   to date over €15m has been raised
•  we are developing an online platform called   spreading smiles to bring our sustainability   initiatives to life engaging customers and   colleagues through reallife stories on the ground
•  an estimated 250000 children were engaged   in sustainable tourism through the uk schools’   ecotraveller education programme in 201112   the programme developed in collaboration with   the national schools partnership teaches children   how they could make a difference on holiday   wwwthomsoncoukblog201206  holidaysforevertuiecotravellers
charitable giving 
in the last year our businesses supported many   source market and destination charities key   achievements  in  201112  include
•  tui travel is the biggest corporate funder of     the travel foundation a charity which helps the   travel industry understand manage and take   effective action on sustainable tourism since   2004 we have raised more than £33 million   wwwthetravelfoundationorguk
•  we are the largest corporate sponsor of the   family holiday association fha a charity that   provides holidays to disadvantaged children and   their families since 2009 we have raised more   than £15 million wwwfhaonlineorguk
•  street child world cup has been selected as   the specialist  activity sector’s chosen charity   with a target to raise over £400000 by 2014   the charity helps vulnerable children living   on the streets around the world colleagues   have been involved in raising funds through   various challenges and a charity ball     wwwstreetchildworldcuporg
key achievements in 201112 include
•  organisation of sustainability awarenessraising   initiatives at head offices and overseas for   example tui deutschland organised a green   day for their 1800 colleagues in hanover   themed ‘treasures of the earth’ and tui uk    ireland’s colleagues and customers supported   the travel foundation’s ‘make holidays greener’   month in june
•  community volunteering programmes are   developing across the group with great feedback   from colleagues and communities for example   150 accommodation  destination colleagues in   palma de mallorca volunteered as part of their   charity rock concert event supporting caritas   mallorca and attracting over 4500 people
•  tui nederland’s green loyalty programme for   travel agencies based on the sales of green   accommodation raised over €53000 for   biodiversity and social projects
•  tui travel was the lead sponsor of the taking   responsibility for tourism conference held at   south africa house london in june 2012 the   conference reflected on progress since 2002 and   declared priorities for responsible tourism over   the next 10 years with tui travel directors   taking part in panel discussions
we have developed a number of core questions   relating to responsible leadership and sustainable   development that businesses and sectors include   in colleague opinion surveys our 2012 your voice   survey for all colleagues confirmed that
•  74 agree that our company acts responsibly     on environmental matters
•  68 agree that our company is socially   responsible it brings benefits to the   communities in which it operates
we also gather feedback from colleagues on   sustainability issues through focus groups
customers
to help achieve many of our goals we need our   customers’ support through the purchases they   make and the personal actions they take our   research shows that customers value our approach   to the environment and communities – we are   working to increase their awareness in this respect   and to promote and increase demand for   responsible  holiday  choices
we are encouraging holidaymakers to engage in   sustainable tourism through our kids’ club   activities school education initiatives customer   donation schemes and sustainable tourism   campaigns  green ideas factory
in 2012 we launched the green 
ideas factory competition giving 
colleagues the chance to get 
creative about sustainability and 
submit their ideas on how we can 
be more ‘green’ whilst improving 
our business 120 ideas came in 
from 18 countries with nearly 
1500 colleagues voting for their 
favourite concepts 10 finalists 
developed their ideas with the 
help of mentors from tui travel 
and forum for the future a 
sustainable development think 
tank one of the competition 
winning ideas focused on 
replacing airside cars with 
electric vehicles at airports 
jetairfly
sustainable tourism 
food project
the taste of fethiye project in 
turkey creates linkages between 
tourist hotels and local farmers 
the project is run by the travel 
foundation and supported by 
tui uk  ireland and other 
industry partners in its first 
season of production more  
than 570 tonnes of high quality 
competitively priced and 
sustainably produced fresh fruit 
and vegetables were produced 
by 22 taste of fethiye farmers 
across five villages wwwtuitravelplccom
36  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
this was driven by strong performances in the uk   nordic region belgium and canada as well as the   delivery of £42m cost savings through the business   improvement programme however these positive   results were partially offset by the retranslation of   fourth quarter eurozone profits into sterling the   inclusion of magic life winter losses investment in   accommodation ota and corsair weakness   a reconciliation of underlying operating profit to   statutory operating profit is as follows
     2012  2011
year ended 30 september      £m  £m
underlying operating profit   490  471
separately disclosed items     92  74
predecessor accounting for magic life  –  17
acquisition related expenses    62  82
impairment of goodwill      20  39
impairment of available     for sale financial asset      10  –
interest and taxation on results     of joint ventures and associates    5  4
statutory operating profit   301  255  group revenue declined by 2 from the prior year   at £14460m 2011 £14687m this result was   driven by organic growth of 2 and a foreign   currency translation impact of 4 organic   revenue growth was driven by higher volumes and   average selling prices in many source markets
the main drivers of the yearonyear improvement   in underlying operating profit are
£m
2011 underlying operating profit     471
magic life winter losses        17
2011 underlying operating profit  
incl magic life winter losses     454
trading        54
flooding in thailand – nordics      13
investment in accommodation ota     11
business  improvement        42
2012 underlying operating profit  
at constant currency      526
fx translation        36
2012 underlying operating profit      490
underlying operating profit improved by £72m to   £526m in 2012 on a constant currency basis and   including the magic life winter losses   business and financial review
group performance
year ended 30 september
  underlying  results
1
  statutory results
    £m  2012  2011  change   2012  2011
revenue  14460  14687  2  14460  14687
operating profit  490  471  4  301  255
profit before tax  390  360  8  201  144
free cash flow  240  451  47  240  451
basic eps pence  258  236  9  125  77
dividend per share pence  117  113  4  117  113
1    underlying operating profit excludes separately disclosed items amortisation of business combination intangibles acquisition related   expenses impairment of goodwill and available for sale financial assets predecessor accounting for magic life in 2011 and interest and   taxation of results of the group’s joint ventures and associates
william waggott
chief  financial  officer tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
tui travel plc annual report  accounts 2012  37
business and financial review
business and financial review
dividends
the board is recommending a final dividend of 83p   per share 2011 80p on 8 may 2012 the board   recommended an interim dividend of 34p per   share 2011 33p making a full year dividend of   117p per share 2011 113p the final dividend     will be paid on 10 april 2013 to holders of relevant   shares on the register at 8 march 2013
the group’s policy is to maintain underlying   dividend cover at around two times we intend to   continue to operate a dividend reinvestment plan   as an alternative to receiving a cash dividend
cash and liquidity
the net debt position cash and cash equivalents   less loans overdrafts and finance leases at 30   september 2012 was £108m 30 september 2011   net cash of £4m the two main impacts in the     year were advances under finance leases for three   aircraft totalling £83m and fx retranslation effect   of £70m of net debt balances in the eurozone   this consisted of £830m of cash and £70m of   current interestbearing loans and liabilities and   £868m of noncurrent interestbearing loans and   liabilities as at 30 september 2012 undrawn   committed borrowing facilities totalled £1018m   2011 £1044m
cash flow conversion is 75 of underlying profit   before tax excluding the net predelivery   payments on aircraft of £53m 2011 £34m free   cash flow deteriorated by 47 to £240m 2011   £451m analysed as follows
     2012  2011       £m  £m
underlying operating profit   490  471
depreciation  and  amortisation    included  within  underlying    operating profit      152  172  underlying ebitda
1
     642  643  working capital movement     60  218  capital expenditure net of disposals  262  162
other
2
     200  248
free cash flow     240  451  1    earnings before interest tax depreciation and amortisation
2    includes pension funding tax interest and cash impact of   separately disclosed items
acquisitions  investments
the group invested £16m in acquisitions in 2012
in september 2012 the accommodation    destinations  sector  acquired  malaprontacom  brazil’s fourth largest accommodationonly ota   with a strong reputation and brand positioning   malaprontacom has achieved 117 compound   annual revenue growth in the past seven years   growing to its current level of more than 130000   room nights sold last year the acquisition of   malaprontacom is part of the accommodation   ota strategy to build its offering and positioning   globally particularly in the emerging markets
taxation
underlying profit before tax for the year was £390m   the effective tax rate on these profits is 27   based on the current structure of the business     and existing local taxation rates and legislation     it is expected that the underlying tax rate will be   maintained at this level in the medium term the   actual tax rate for the year ended 30 september   2012 is 33 this differs from the underlying tax   rate due to the tax effect of separately disclosed   items and nonrecognition of deferred tax assets   in certain loss making territories
the cash tax rate is expected to be lower than the   underlying income tax rate as we utilise our   deferred tax assets generated from restructuring   expenditure and trading losses in the coming year   we envisage a cash tax rate of approximately 20   of underlying profit before tax
earnings per share
underlying basic earnings per share was 258p   2011 236p basic earnings per share was 125p   2011 77p wwwtuitravelplccom
38  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
business and financial review
group performance  continued
we remain satisfied with our funding and liquidity   position we have three main sources of longterm   debt funding as at 30 november 2012 – these   include the external bank revolving syndicated   credit facilities totalling £1020m which mature in   june 2015 a £350m convertible bond due october   2014 and a £400m convertible bond due april   2017 the external bank revolving facility is used to   manage the seasonality of the group’s cash flows   and  liquidity
separately disclosed items sdis
separately disclosed items net to a £92m expense   in the year 2011 £74m expense the following   table provides a breakdown of these items
     2012  2011        £m  £m
restructuring costs      102  137  pension      –  63
incremental costs caused by     volcanic ash disruption in 2010    –  7
other      10  7  total sdis     92  74  restructuring costs of £102m were incurred in the   year the largest items by division were as follows
•  £66m in france in relation to the ongoing   restructuring of the tour operator and airline
•  £5m relating to the restructure of the moroccan   airline  jet4you
•  £7m credit in germany in relation to an unused   restructuring provision
•  £24m in the specialist  activity and ad   sectors
the remaining costs related primarily to group   head office companies
further information is included within note 4 tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
tui travel plc annual report  accounts 2012  39
business and financial review
business and financial review
segmental performance
segmental performance is based on underlying financial information which excludes certain items   including separately disclosed items acquisition related expenses and predecessor accounting for magic   life in 2011
mainstream
the mainstream sector reported an underlying operating profit of £420m 2011 £370m on a constant   currency basis underlying operating profit increased by 22 to £451m   mainstream      2012  2011  change 
customers ‘000
1
northern region      6660  6867  3
central europe      7382  7282  1
western europe      6067  6101  1
total     20109  20250  1
revenue £m
northern region      4743  4671  2
central europe      4544  4841  6
western europe      3031  3151  4
total     12318  12663  3
underlying operating profit £m
2
northern region      295  250  18
central europe      101  103  2
western europe      24  17  41
total     420  370  14
1    customer figures have been restated for 2011 to reflect redefined product reporting following the implementation of a new system
2    underlying operating profit excludes separately disclosed items amortisation of business combination intangibles acquisition related   expenses impairment of goodwill and available for sale financial assets predecessor accounting for magic life and interest and taxation   of results of the group’s joint ventures and associates wwwtuitravelplccom
40  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
marketing the dreamliner
the latest marketing campaign 
has been designed to showcase 
the thomson brand by putting 
our innovative new 787 
dreamliner at the heart of our 
advertising being the first uk 
airline to receive this stateof
theart plane the campaign 
shows how thomson is ‘bringing 
you a new way to fly on holiday’ 
the messages focus on being first 
to fly as well as all the benefits 
the aircraft brings including 
greater cabin space reduced 
jetlag and quieter flight plus 
significantly improved efficiency 
and environmental impact
first choice is now 
allinclusive
summer 2012 saw the first 
customers enjoying the new 
‘home of allinclusive’ holidays 
from first choice in this 
fastgrowing sector first choice 
is unique and offers the most 
comprehensive range of 
allinclusive holidays including 
the flagship holiday villages  
and splashworld resorts
northern region
the northern region reported an underlying operating profit of £295m 2011 £250m most 
divisions improved yearonyear with a particularly strong performance by the uk increasing 
underlying operating profit by 32 to £197m
the main drivers of the yearonyear change in underlying operating profit are summarised in the   following  table
    nordic      northern
£m  uk  region  canada  hotels  region
2011  149 70 18 13 250 
magic life winter losses  –  –  –  17  17
2011 incl magic life winter losses  149 70 18 4 233 
trading  44  16  3  8   71  flooding in thailand – nordics  –  13  –  –  13
business  improvement  4  –  –  –  4  fx translation  –  2  –  2  –  2012  197 71 21 6 295
  northern region      2012  2011  change 
customers ‘000
uk  ireland      5158  5440  5
nordic  region      1502  1427  5
total     6660  6867  3
revenue £m
uk  ireland      3634  3588  1
nordic  region      1084  1054  3
canada      –  –  –
hotels      25  29  14
total     4743  4671  2
underlying operating profit £m
1
uk  ireland      197  149  32
nordic  region      71  70  1
canada      21  18  17
hotels      6  13  54
total     295  250  18
1    underlying operating profit excludes separately disclosed items amortisation of business combination intangibles acquisition related   expenses impairment of goodwill and available for sale financial assets predecessor accounting for magic life and interest and taxation   of results of the group’s joint ventures and associates
business and financial review
segmental performance  continued tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
tui travel plc annual report  accounts 2012  41
business and financial review
business and financial review
blue village aegean 
park rhodes
part of the unique holidays 
strategy for rhodes was to 
develop a new tailormade 
highend family adapted blue 
village the hotel was designed 
as co
2
 emissionfree challenging 
all previous knowledge in building 
resorts in rhodes and this was  
a key message in the marketing 
campaign the hotel itself 
combined this with 35 swim  
up rooms spacious pool areas 
beach location a unique interior 
design a choice of food and 
beverage outlets and nordic 
adapted entertainment which 
resulted in the most profitable 
hotel with the highest customer 
satisfaction in the nordic region
solar heating in crete
in spring 2012 two blue village 
hotels caldera beach and creta 
paradise were equipped with 
800m
2
 of solar panels that supply 
the energy used in hot water 
production to optimise the 
efficiency of the solar heating 
systems they were equipped 
with energy meters and datalog 
monitoring which register  
the energy production the 
outcomes achieved were optimal 
efficiency and a resulting saving 
on fossil fuels reduced co
2
 
emissions and a reliable 
benchmarking tool for other blue 
village hotels this project saves 
money and the environment
nordic region
the nordic region achieved an improved underlying   operating profit of £71m 2011 £70m delivering   an operating margin of 65 for the year one of   the highest in the group the region delivered a   broadly flat performance over the year despite a   £13m negative impact during the first half of 2012   as a result of flooding in bangkok which adversely   affected consumer demand to thailand and   reduced  yields
unique holidays differentiated and exclusive   product combined accounted for 92 of total   holidays in 2012 up five percentage points on 2011   this increase in unique content was partly driven   by two new blue villages blue village exotic in   thailand that launched during the winter season   and blue village bodrum imperial in turkey that   launched  in  the  summer
the nordic region continues to successfully   implement its online strategy with online bookings   accounting for 65 of the total in 2012 up four   percentage points on 2011 direct distribution   increased by one percentage point versus the prior   year to 87 in 2012   canada
the strategic venture with sunwing in canada   continues to perform well delivering an improved   operating profit of £21m 2011 £18m the result   was driven by a strong trading performance as a   result of improved margins and volumes during   the period
hotels
the hotels division comprises hotel management   companies and joint ventures in hotel assets   the division delivered underlying operating profit   of £6m in 2012 2011 £13m the result was   impacted by the inclusion of winter losses for the   magic life companies acquired in july 2011 that   were not incurred in the prior year the underlying   likeforlike trading position including magic life   winter losses in both years moved forward by   £8m excluding fx this improvement was driven   by changes in a number of hotel concepts and the   winter closure of unprofitable hotels
uk  ireland
the uk  ireland businesses delivered a £48m   improvement in underlying operating profit to   £197m 2011 £149m as a direct result of the   strategy of focusing on higher margin unique   holidays differentiated and exclusive product   combined distributed increasingly online this   improvement in profit led to record underlying   operating profit margins for the uk business   of 54   unique holidays differentiated and exclusive   product combined such as sensatori splashworld   and couples continues to drive value for our   business unique holidays accounted for 79 of   total holidays in 2012 up four percentage points     on 2011 we continue to grow a number of our   concepts including couples which offers childfree   hotels within the programme and small and   friendly a collection of intimate hotels which   complements our core offering   online sales grew by five percentage points to 44   of bookings in 2012 more customers now book   using our websites than by any other distribution   channel thomson remains one of the top most   visited travel websites in the uk further   enhancements were made to the first choice   website to improve navigation and enhance   content which has resulted in a higher conversion   rate of visits to the website direct distribution   increased by five percentage points versus the     prior year to 87 in 2012
the uk business delivered £4m of efficiency   savings towards the business improvement   programme in the year   wwwtuitravelplccom
42  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
sensimar couples resorts
sensimar hotels  resorts is our 
very popular unique holiday brand 
in germany specifically targeting 
couples looking for relaxation 
these hotels operate under the 
motto ‘time for the two of us’ 
and making sure this tui quality 
happens for our customers is the 
sensimar goal in keeping with 
this a consistent concept has 
been created for the hotels all 
properties offer four to five star 
comfort a maximum of 250 rooms 
and are located with a sea view 
in the front row on the beach 
spaciousness with numerous 
areas for peace and quiet modern 
wellness facilities as well as a high 
quality stylish atmosphere are all 
part of the hotel concept
business and financial review
segmental performance  continued
central europe
central europe delivered underlying operating profit of £101m 2011 £103m
this result was delivered despite an adverse foreign exchange impact of £18m due to the retranslation   of eurozone profits into sterling during the fourth quarter the main drivers of the yearonyear change   in underlying operating profit are summarised in the following table
       central  £m  germany  austria  switzerland  poland  europe
2011  89  11  5  2  103  trading  1  1  1  –  1  business  improvement  14  –  –  1  15  fx translation  15  2  1  –  18
2012  87 10 5 1 101
  central europe      2012  2011  change 
customers ‘000
germany
1
     6425   6424   flat
austria      525   543   3
switzerland
1
     211   149   42
poland      221   166   33
total     7382   7282   1
revenue £m
germany      3917   4235   8
austria      308   333   8
switzerland      207   184   13
poland      112   89   26
total     4544   4841   6
underlying operating profitloss £m
2
germany      87   89   2
austria      10   11   9
switzerland      5   5   flat
poland      1  2  50
total     101  103   2
1    customer figures for germany and switzerland have been restated for q1 2011 to reflect redefined product reporting following the   implementation of a new system
2    underlying operating profitloss excludes separately disclosed items amortisation of business combination intangibles acquisition   related expenses impairment of goodwill and available for sale financial assets and interest and taxation of results of the group’s joint   ventures and associates tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
tui travel plc annual report  accounts 2012  43
business and financial review
business and financial review
other central european businesses
the other central european businesses of austria   switzerland and poland performed largely in line   with the prior year austria reported underlying   operating profit of £10m 2011 £11m an increase   in underlying trading was offset by the adverse   impact of foreign currency translation in   switzerland underlying operating profit was £5m   in line with last year 2011 £5m in poland the   underlying operating loss was £1m 2011 £2m   loss the polish business delivered £1m of   business improvement in the year
germany
in germany underlying operating profit was £87m   2011 £89m this included a £15m adverse impact   from foreign currency translation partly offset by   £14m of efficiency savings from the business   improvement programme on a constant currency   basis the underlying operating profit increased by   30 despite absorbing the impact from a   turbulent greek political and economic situation   unique holidays differentiated and exclusive   product combined maintained a share of 47 of   total holidays in 2012 we launched several new   concept hotels during the year including brands   such as best family puravida and sensimar   online bookings accounted for 18 of the total     in 2012 whilst in the mainstream business online   bookings accounted for 4 of bookings a new tui
com website was launched during the year as part   of a strategy to focus on and improve online sales   in the mainstream business
the german business delivered £14m of efficiency   savings towards the business improvement   programme in the year the savings related to our   get 2015 programme focusing on cost reduction   and growth and were delivered through back office   restructuring
supporting tourism 
in tunisia
tui deutschland has partnered 
with the german government 
development agency giz to 
support a major project in tunisia 
to foster and develop tourism in a 
socially sustainable manner the 
project focuses on the economic 
integration of women in the 
regions of hammamet sousse 
and port el kantaoui the project 
has three areas of activity firstly 
a further training initiative for 
hotel managers for improving 
working conditions and the 
working environment as well 
as covering ecological and social 
sustainability secondly the 
improvement of the training 
quality in the hotel colleges 
and thirdly the continuation of 
tunisian traditional arts and crafts wwwtuitravelplccom
44  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
business and financial review
segmental performance  continued
western europe
western europe reported an underlying operating profit of £24m 2011 £17m
the main drivers of the yearonyear change in underlying operating profit are summarised in the   following  table
        southern  western
£m    france  netherlands  belgium  europe  europe
2011   53  22   50   2  17  trading    6  1   5   2  2
business  improvement    14   –   8   –   22  fx translation    2  3  8  –   13
2012    47 20  55  4 24
  western europe      2012  2011  change 
customers ‘000
france      1956   2057   5
netherlands      1455   1360   7
belgium      2528   2541   1
southern europe      128   143   10
total     6067   6101   1
revenue £m
france      1263   1363   7
netherlands      839   783   7
belgium      840   902   7
southern europe      89   103   14
total     3031   3151   4
underlying operating lossprofit £m
1
france      47  53  11
netherlands      20   22   9
belgium      55   50   10
southern europe      4  2  100
total     24   17   41
1    underlying operating lossprofit excludes separately disclosed items amortisation of business combination intangibles acquisition   related expenses impairment of goodwill and available for sale financial assets and interest and taxation of results of the group’s joint   ventures and associates
france
france reported an underlying operating loss of £47m 2011 loss of £53m an improvement of £6m versus   the prior year the decreased loss was driven by an improved performance by the french tour operators   and offset by an increased loss in the airline corsair
france      2012  2011  change 
underlying operating loss £m
1
tour  operator      32   43  26
airline      15  10  50
total     47  53  11
1    underlying operating loss excludes separately disclosed items amortisation of business combination intangibles acquisition related   expenses impairment of goodwill and available for sale financial assets and interest and taxation of results of the group’s joint ventures   and associates
jetair offers azores as 
part of growth strategy
this year tui belgium’s airline 
jetairflycom announced that it 
is operating belgium’s only direct 
flights to ponta delgada in the 
azores tui belgium’s leading 
tour operator jetair supports 
this new service offering 
holidays and activities across  
the azores islands this new 
destination adds value and 
differentiated content to tui 
belgium’s offering whilst 
highlighting the continuing 
search for new exclusive and 
original destinations for the 
belgium market
reaching west coast 
of usa with arkefly
as of june 2012 tui 
netherlands’ airline arkefly 
started to operate flights to  
las vegas los angeles and  
san francisco this has made 
america’s west coast the fastest 
growing and bestselling 
destination for the airline  
by offering competitive  
prices arkefly has made this 
destination affordable for its 
customers which has resulted in 
a fivefold increase in passengers 
and a market share of 74 on 
these longhaul flights tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
tui travel plc annual report  accounts 2012  45
business and financial review
business and financial review
netherlands
the netherlands delivered underlying operating   profit of £20m 2011 £22m reflecting a more   challenging market a number of new destinations   were launched during the year including western   usa and zanzibar for our longhaul routes and   venice croatia and israel in our midhaul routes   belgium
underlying operating profit in belgium increased by   £5m to £55m 2011 £50m despite absorbing an   £8m adverse fx impact the performance reflects   a record winter that saw volumes increase by 10   and better airline utilisation   direct distribution increased by three percentage   points during the period to 62 whilst sales   through the online channel rose by six percentage   points to 43   our moroccan low cost airline jet4you was   consolidated into the belgian business from 1 april   2012 this is a natural fit as jet4you is currently   owned and operated by the belgian business and   jetairfly is our lowest cost airline this helped drive   internal synergies and the business improvement   programme delivered an £8m improvement in the   year from jet4you
southern europe
southern europe which consists of tour operators   based in the italian and spanish source markets   reported an underlying operating loss of £4m   2011 loss of £2m this reflects the heavy reliance   on north africa much of which was disrupted   during the same period last year
france
the tour operator reported a reduced loss of £32m   2011 loss of £43m the improvement of £11m   versus the prior year was driven by the successful   delivery of £8m of efficiency savings towards the   business improvement programme in the year and   stronger late summer trading this was partially   offset by continued lower demand for north   african destinations the tour operator is   particularly reliant on these destinations –   historically egypt tunisia and morocco have made   up around 40 of their capacity in total and   around 65 for marmara alone whilst trading   conditions remain very challenging we saw demand   pick up for both tunisia and morocco particularly   in the later part of the summer season   progress to consolidate the businesses of the   french tour operators continues with the aim of   creating a single business with a longterm viable   future the legal merger was completed in january   2012 and the integration timetable for this   restructuring is progressing to plan
the airline result reported a loss of £15m 2011   loss of £10m reflecting the continuing competitive   market place a reduction in capacity on certain   routes and an increase in fuel prices which could   only partially be passed on to the customer   however the business improvement programme is   progressing as planned delivering £6m of efficiency   savings in the year   we are continuing to evaluate our strategic   participation options in the chinese and indian   market in india our tour operating and retail   business tui india was relaunched with an   increased focus on targeting the more affluent   consumer segments with a range of new products   including family clubs in goa and mauritius driving   controlled distribution more aggressively and a   focus on online with the launch of a rebranded   website in china we continue to assess our market   participation options and have been further   developing our plans in the outbound segment     via tui china our joint venture cooperation     with china travel service cts
emerging markets
emerging markets reported an underlying operating loss of £15m in the year 2011 loss of £12m the   result for this sector reflects our continued investment in brand and distribution in russia and the cis and   the continued impact of unrest in egypt during the year we consolidated our existing businesses into a   single brand tui featuring all destinations establishing a strong platform for the future the sector now   has close to 600000 customers up 15 on the prior year
emerging markets share of joint ventures      2012  2011  change 
underlying operating loss £m
1
     15  12  25
1    underlying operating loss excludes separately disclosed items amortisation of business combination intangibles acquisition related expenses   impairment of goodwill and available for sale financial assets and interest and taxation of results of the group’s joint ventures and associates
in the 201213 financial year the emerging markets   sector will no longer exist emerging markets will   be included in the mainstream sector but reported   separately while india and china will sit within and   be reported in the accommodation  destinations   sector
launch of first social 
media campaign
tui india has launched its first 
social media campaign which is 
now live on facebook tui india 
is focusing on providing advice 
on destinations and tours using 
four travel experts to answer 
customer questions – vicky the 
vacationer sonya the desi 
nomad jai the euro tripper and 
yash mr high life each 
character has its own preferred 
holiday style with an individual 
profile page including overviews 
of trips offered including 
recommendations hints and tips 
tui india now has over 170000 
facebook fans and 3000 
engaged users talking about tui 
india and sharing comments
airline launch
in the russian market tui has 
historically bought seat capacity 
from a variety of airlines which 
has given us no cost advantage 
no brand awareness and a varying 
degree of service this year we 
have taken the lead in the market 
by branding our aircraft with 
tui and delivering a service in line 
with tui european standards 
this is unique in the market place 
and gives us a strong competitive 
advantage we have signed a 
threeyear contract with a 
russian airline to deliver this 
which has also given us significant 
cost savings the results of this 
summer have shown excellent 
customer feedback wwwtuitravelplccom
46  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
business and financial review
segmental performance  continued
roomnights for accommodation ota increased by   7 due to a good performance from laterooms   and asiarooms accommodation ota ttv grew by   4 to £447m including asiarooms growth of 25   laterooms showed yearonyear room night and   commission growth partly driven from offline   marketing to drive brand awareness and development   of mobile offering to meet changing consumer   channel  preferences the expansion and roll out   of the asiarooms brand is on track with significant   market share gains in both malaysia and singapore   local language traffic now represents the largest   single source of traffic we entered the brazilian   market through the acquisition of malaprontacom   in september 2012
inbound services
the inbound services business delivered underlying   operating profit of £31m 2011 £38m reflecting     a reallocation of costs from the emerging markets   sector to the accommodation  destinations sector   and the adverse impact of foreign currency translation   inbound services remains the market leader in a   fragmented market we have simplified the way we   present ourselves to third party providers through   the launch of the brands destination services and   worldcome we are also looking at opportunities with   the independent traveller segment of this market
incoming passenger volumes were flat over the   prior year in cruise handling the number of port   calls handled increased by 12
accommodation  destinations
accommodation  destinations ad delivered an underlying operating profit of £66m 
2011 £72m this included an £11m investment in accommodation ota a £4m adverse 
impact of foreign currency translation and a £3m impact relating to the reallocation of  
costs from the emerging markets sector to the accommodation  destinations sector 
the main drivers of the yearonyear change in underlying operating profit are summarised in the   table  below
      online  inbound  accommodation  £m      accommodation  services   destinations
2011     34  38  72
trading      14  2  12
investment in ota      11  –  11
reallocation of costs – emerging markets      –  3  3
fx translation      2  2  4
2012     35 31 66
 
accommodation  destinations      2012  2011  change 
customers ‘000
accommodation  wholesaler  roomnights          13
accommodation ota roomnights online          7
incoming passenger volumes          flat
revenue £m     664  652  2
underlying operating profit £m
1
online accommodation      35  34  3
inbound services      31  38  18
total     66  72  8
1    underlying operating profit excludes separately disclosed items amortisation of business combination intangibles acquisition related expenses   impairment of goodwill and available for sale financial assets and interest and taxation of results of the group’s joint ventures and associates
ttv for the sector increased by 8 to £28bn   2011 £26bn this was driven by growth in   hotelbeds and bedsonline in accommodation   wholesaler  by  lateroomsasiarooms  in  accommodation ota and by our cruise handling   business  intercruises
the accommodation  destinations sector   divisions will now be described as follows
•  online accommodation includes accommodation   wholesaler  and  accommodation  ota  •  inbound services businesses that provide   transfers  excursions  tours  tailormade  products cruise handling services and meetings   and events
online accommodation
the online accommodation business delivered a   £1m improvement in underlying operating profit to   £35m 2011 £34m the result included a trading   improvement of £14m offset by a £11m investment   in accommodation ota and a £2m adverse impact   of foreign currency translation   roomnights  for  the  accommodation  wholesaler  increased by 13 due to strong organic growth from   the brands hotelbeds and bedsonline where the   key  area  of  focus  remains  on  international  expansion  particularly  in  the  americas  and  asia  accommodation  wholesaler ttv grew by 13 to £14bn
asiaroomscom brand 
development campaign
following the launch of five 
language sites asiaroomscom 
launched a panregional brand 
development campaign to  
drive sales and increase brand 
awareness the campaign 
entitled ‘the right room for 
you’ focused on the uniqueness 
of each traveller and their travel 
preferences and delivered good 
results with singapore and 
malaysia site visits growing by 
over 49 and 132 respectively 
in the year to date
hotelbeds 10 years 
10 causes
as part of its 10year 
anniversary celebrations 
hotelbeds launched the ‘10  
years 10 causes’ campaign this 
initiative engaged over 6000 
hotelbeds’ colleagues from 
around the world to propose and 
participate in local initiatives 
related to different causes 
– health integration education 
sustainable tourism youth 
sharing giving back 
biodiversity cultural diversity 
and children the initiatives and 
activities that took place can be 
found at www10causescom tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
tui travel plc annual report  accounts 2012  47
business and financial review
business and financial review
the north american specialist division saw an   improvement in underlying operating profit driven   by a switch in mix towards higher margin products   offered by operators such as starquest private jet   tours and quark polar expeditions and improved   cost control the sport division benefited from the   olympics and the 2012 uefa european   championships
specialist  activity 
specialist  activity reported a profit of £48m 2011 £65m down £17m due to declines in the 
adventure and education divisions partly offset by north american specialist and sport divisions 
this included £1m adverse impact from foreign currency translation and £2m adverse impact of 
unrest in the middle east and north africa the business improvement programme delivered a  
£1m improvement in the year 
specialist  activity      2012  2011  change 
customers ‘000     1586  1500  6
revenue £m     1478  1372  8
underlying operating profit £m
1
     48  65  26
1    underlying operating profit excludes separately disclosed items amortisation of business combination intangibles acquisition related expenses   impairment of goodwill and available for sale financial assets and interest and taxation of results of the group’s joint ventures and associates
adventure was impacted by the unrest in the   middle east and north africa and the reduction     in demand to australia due to the global financial   crisis and a strengthening australian dollar the   result also reflected the consolidation of firsthalf   losses from our strategic venture with intrepid   travel education continued to be impacted by a   reduction in party sizes and demand for gap year   travel due to the downturn in the uk economy     and rise in university tuition fees the high cost     of accommodation in london due to the 2012   olympics and strength of sterling also impacted   demand in our language school businesses we     are making progress with the restructuring of the   education division as outlined last year to reduce   back office costs drive operational efficiencies and   have simplified the management structure   sawadee gets international 
recognition for sustainability
sawadee won the ‘best carbon 
reduction initiative’ category at 
the responsible travel awards 
during the 2012 world travel 
market in london sawadee 
received the award for 
identifying effective ways of 
reducing carbon footprints of 
their trips they have identified 
that changing to direct 
‘pointtopoint’ flights results in 
a reduction in carbon emissions 
by an average of 10
around the world 
partnership with four 
seasons
seattlebased tcs  starquest 
expeditions partnered with the 
four seasons for an exclusive 
aroundtheworld journey 
priced from 66950 per person 
the 22day programme features 
tcs’ signature private jet 
experience combined with 
accommodations at four 
seasons properties around  
the globe and enhanced by  
a dedicated four seasons’ 
concierge the partnership  
was so popular that more 
departures will follow in 2013 wwwtuitravelplccom
48  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
business and financial review
current trading and outlook
in germany bookings are up 2 against a capacity   decline of 3 longhaul continues to perform well   average selling price is up 6 sales of unique   holidays differentiated and exclusive product   combined are up 8 compared with this time last   year accounting for 55 of holidays sold to date   up five percentage points on the prior year booked   load factor is currently 56
in france we have reduced capacity by 34 with   sizeable reductions in lossmaking capacity to   egypt and a number of longhaul destinations as     a result of this bookings are down 28 which is     in line with our expectations booked load factor     is currently 55
in ad bookings are up 12 and sales ttv are   up 20 versus the prior year this was driven by   both accommodation wholesaler where bookings   are up 14 and accommodation ota where   bookings increased by 7   sales in specialist  activity are down 3 driven   by the education and sport divisions trading in the   education division reflects the challenging market   place and in the sport division trading is down   following tough comparatives from the same period   last year due to the irb rugby world cup   summer 2013
it is still early in the bookings cycle for summer   2013 however trading to date has been very   encouraging in those markets on sale
in the uk bookings are up by 12 ahead of a 3   increase in capacity whilst it is early in the booking   cycle we are significantly outperforming a flat   market average selling prices are up by 3 sales   of unique holidays differentiated and exclusive   product combined are up by 18 compared to     the same period last year accounting for 83 of   holidays sold to date up by two percentage points   online sales account for 32 of summer holidays   booked in line with the prior year to date 20 of   the programme has been sold   as a result of our new mainstream sector structure   announced in april 2012 where the regional   structure was disbanded from 1 october 2012 we   are now reporting mainstream sector trading in     the format below with a focus on our four largest   markets
winter 201213
strong trading momentum from summer 2012     has continued into winter 201213 across all major   markets with the exception of france our focus on   unique holidays distributed online is delivering very   pleasing yearonyear volume growth with margins   that are in line with expectations
in the uk bookings are up by 1 against a flat   capacity average selling price is up 4 partly   reflecting the successful passthrough of   inflationary cost increases of circa 23 sales     of unique holidays differentiated and exclusive   product combined are up 5 compared with this   time last year and account for 78 of holidays sold   to date up three percentage points on the prior   year online sales continue to grow accounting     for 44 of winter holidays booked up by three   percentage points on the prior year booked load   factor is currently 49
in the nordic region bookings are up by 5 in line   with its capacity increase average selling price is up   5 sales of unique holidays differentiated and   exclusive product combined are up 5 compared   with this time last year accounting for 83 of   holidays sold to date in line with the prior year   online sales continue to grow accounting for 63   of winter holidays booked up by two percentage   points on the prior year booked load factor is   currently 73
current trading
1
  winter 201213  risk only
      total  total  total
  asp
2
  sales
2
  customers
2
  capacity
3
  left to sell
3
yearonyear  variation  
mainstream
uk  4  5  1  flat  2
nordic  region  5  10  5  4  3
germany   6  8  2  3  14
france tour operators  8  22  28  34  35
other
4
  1  flat  1
total mainstream 4 3 1  
specialist  activity  na 3 na  
accommodation  destinations
5
  7 20 12  
1    these statistics are up to 25 november 2012 and are shown on a constant currency basis
2    these statistics relate to all customers whether risk or nonrisk
3    these statistics include all risk capacity programmes
4    other includes austria belgium netherlands poland and switzerland
5    these statistics refer to online accommodation businesses only sales refer to total transaction value ttv   and customers refers to roomnights tt11  ar 2012  20122012  proof 5
wwwtuitravelplccom
tui travel plc annual report  accounts 2012  49
business and financial review
business and financial review
outlook
overall trading remains positive across all our   major source markets with the exception of france   where the environment remains extremely   challenging strong trading momentum from   summer 2012 has continued into winter 201213   particularly in the uk and the nordics where our   unique holidays differentiated and exclusive   product combined are selling well and growth in   our direct distribution channels continues to have     a positive effect on margins while still early in the   booking cycle the summer 2013 programme in the   uk nordics and germany is showing strong signs   of growth with additional capacity in the uk and   nordics
our strategy of increasing our unique holiday   differentiated  and  exclusive  product  combined  offering selling through direct distribution channels   with a focus on online and driving continued   operational efficiency throughout the business   is paying dividends our strong business models   which have evolved through a deep understanding   of the leisure travel market and the needs of   our customers lay the foundations for continued   success and longterm sustainable growth   we have set out a road map for growth over the   next five years and will deliver improved customer   experiences and increased shareholder value   roadmap for growth
our new roadmap for growth enables us to   provide updated guidance for the future prospects   of the group we believe that tui travel has the   ability to deliver an underlying operating profit   cagr of between 7 to 10 over the next five   years this includes growing customer numbers   while enhancing the margin within the mainstream   business growth in our specialist  activity   portfolio as well as positive contributions from   our fast growing online accommodation business
in the nordic region bookings are up 16 and   average selling prices up 3 sales of unique   holidays differentiated and exclusive product   combined are up by 18 compared to the same   period last year accounting for 94 of holidays   sold to date up by two percentage points online   sales continue to grow accounting for 60 of   summer holidays booked up by two percentage   points on the prior year to date 12 of the   programme has been sold
in germany the summer 2013 programme   launched very recently we are encouraged by early   trading with bookings up by 9 and average selling   prices up by 3 to date 10 of the programme   has been sold
fuelforeign exchange
we have hedged the majority of our fuel and   currency requirements for the seasons currently on   sale which gives us certainty of costs when planning   capacity and pricing the following table shows   the percentage of our forecast requirement that is   currently hedged for euros us dollars and jet fuel   as previously indicated jet fuel costs account for   approximately 10 of our cost base and at current   market rates we estimate our fuel costs would   increase by circa 10 for 2013
      winter  summer
      201213  2013
euro      96  86
us dollars      76  87
jet fuel      93  81
as at 29 november 2012
business improvement programme
we announced at the start of our financial year   that we expected to deliver £107m of business   improvement in broadly even tranches over the   next three years we have delivered £42m of   operational efficiency savings through the business   improvement programme in the last 12 months   current trading
1
  summer 2013  risk only
      total  total  total
  asp
2
  sales
2
  customers
2
  capacity
3
  left to sell
3
year on year variation 
uk  3  15  12  3  1
nordic  region  3  20  16  4  3
germany  3  12  9  flat  1
1    these statistics are up to 25 november 2012
2    these statistics relate to all customers whether risk or nonrisk
3    these statistics include all risk capacity programmes 1 2 3
7 8 9
10 11 12
13 14 15
4 5 6
governance
board of directors
as at 30 september 2012
wwwtuitravelplccom
50  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5 governance
wwwtuitravelplccom
tui travel plc annual report  accounts 2012  51
governance
tt11  ar 2012  20122012  proof 5
of heathrow airport limited for five years as well as the   chairman of heathrow express she is also currently     a nonexecutive director at two other publiclyquoted   companies kingfisher plc and portmeirion group plc   in addition janis is a nonexecutive director of network   rail and visitbritain as well as a nonexecutive board   member of copenhagen airports as she stood down   as chairman of the board of trustees of forum for the   future in july 2012 after six years
11 coline mcconville 
independent nonexecutive director age 48
coline mcconville joined the board of tui travel plc on   21 september 2011 her background is in management   marketing and consulting she spent 10 years at clear   channel international limited where as chief executive   for europe she was responsible for operations across   58 countries including the uk france italy and spain   coline began her career in management consultancy   working with both mckinsey  co in london and the   lek partnership in munich she is a law graduate with   an mba from harvard coline was appointed as a   nonexecutive director of wembley national stadium   limited on 29 march 2012 and of utv media plc with   effect from 21 november 2012
12 minnow powell
independent nonexecutive director age 58
minnow powell became a nonexecutive director of tui   travel plc in april 2011 during his 35 years at deloitte   he became a senior partner and concentrated on looking   after deloitte’s major clients including baa hammerson   reed elsevier anglo american and bskyb he was also   a member of the uk’s audit practices board for six years   minnow was appointed as a nonexecutive director   of supergroup plc with effect from 1 december 2012
13 dr erhard schipporeit
independent nonexecutive director age 63
dr erhard schipporeit joined the board of tui travel   plc as a nonexecutive director on 29 october 2007   he started his career in 1979 in the bosch group and   in 1981 he joined varta agvarta battery ag at   that time a leading european battery company where   he became chief financial officer in 1990 and chief   executive and chairman of the executive board in 1993   after the successful restructuring of varta the next   move in his career brought him to the munich based   conglomerate company viag ag as cfo viag merged   in 2000 with veba ag to form the new eon ag one   of the world’s leading utility companies erhard was   cfo and executive board member of eon from 2000   until his resignation in november 2006 from 2007   to 2010 he was senior advisor for bnp paribas sa   erhard is currently a nonexecutive director of a number   of companies including sap ag deutsche boerse ag   talanx ag and hanover rueckversicherung ag
14 dr albert schunk
independent nonexecutive director aged 71
dr albert schunk joined the board of tui travel plc   as a nonexecutive director on 29 october 2007   albert studied economics at university and carried out   a research project for the german government in latin   america after joining igmetall he has served on the   supervisory board of volkswagen and other german   companies since 1976 in 1994 he became a member   of the european economic and social council in brussels   and has recently been advising the riu group in spain
15 harold sher
independent nonexecutive director age 65
harold sher joined the board of tui travel plc as a   nonexecutive director on 29 october 2007 he studied   commerce at university and started his career as a   chartered accountant harold moved to industry early   in his career holding a range of executive positions   before being appointed chief executive of amalgamated   metal corporation plc in 1992 a position he still holds   he has served as president of a major north american   steel services group and together with his role at   amalgamated metal corporation this has provided     him with broad international commercial experience
chief financial officer of tui travel plc in november   2010 will spent the early part of his career with coopers    lybrand and courtaulds textiles plc where he   performed various senior group finance and divisional   director roles he entered the leisure travel industry   when he joined airtours plc and held a number of   positions including uk leisure group finance director   prior to joining thomson travel group in 2001 he     then went on to become chief financial officer of tui   tourism in 2006
6 dr volker böttcher
managing director german specialist 
businesses age 53
volker böttcher joined the board of tui travel plc   on 19 june 2007 and is responsible for the german   specialist businesses after an early career in law volker   joined touristik union international in 1987 as a legal   adviser having occupied various management positions   he became head of tui’s special programmes division   in 1996 which included responsibility for longhaul   destinations city tours and the eastern mediterranean   in 2003 volker was appointed chairman for central   europe for tui ag being responsible for all tourism   activities in the source markets of germany austria   switzerland and poland he was appointed to the board   of tui deutschland gmbh in april 2000 following   the restructuring of tui’s business model in germany   he was appointed ceo of tui deutschland gmbh     in july 2001
7 horst baier 
nonexecutive director age 55
horst baier joined the board of tui travel plc as     a nonexecutive director on 13 october 2009 he   commenced his professional career in the treasury   department of continental ag the german tyre   manufacturer between 1994 and 1996 horst was   responsible for group financing for the fürthbased   schickedanz group in 1996 he took over responsibility   for the treasury accounting and tax department at     tui ag since 2001 horst has been responsible for   accounting  reporting for tui ag and in november   2007 was appointed to the executive board of tui ag   with responsibility for the controlling function in   february 2010 horst was appointed chief financial   officer of tui ag
8 tony campbell
independent nonexecutive director age 62
tony campbell became a nonexecutive director   of first choice holidays plc in april 1997 and joined   the board of tui travel plc on 28 june 2007 as a   nonexecutive director tony was deputy chief   executive of asda stores limited until march 2001 he   is currently the chairman of t m lewin group limited   the white company uk limited and eat limited a   nonexecutive director of the original factory shop and   a director of data transfer  communications limited
9 rainer feuerhake
nonexecutive director age 68
rainer feuerhake joined the preussag group   now tui ag in 1968 and by 1980 was responsible   for group accounting rainer was appointed as chief   financial officer of preussag ag in november 1988   and subsequently tui ag following a resolution to   rename preussag ag on 1 july 2002 in this position   rainer was responsible for the departments of   accounting  reporting finance investor relations   tax affairs mergers  acquisitions destination   management and the shared service centre he   resigned as chief financial officer in february 2010   and is now acting as a consultant for tui ag he joined   the board of tui travel plc on 28 june 2007
10 janis kong
independent nonexecutive director age 61
janis kong joined the board of tui travel plc on 29   may 2012 as a nonexecutive director janis brings a   wealth of experience to the group having had a 33year   career with baa where she held numerous operational   positions including managing director at gatwick   airport before leaving baa in 2006 janis was chairman   1 dr michael frenzel
nonexecutive chairman age 65
dr michael frenzel joined the board of tui travel plc   on 28 june 2007 as nonexecutive chairman     michael studied law at ruhr university in bochum and   completed his doctorate whilst working at the university   as a scientific assistant he joined westdeutsche   landesbank westlb düsseldorf in 1981 where he   was promoted to various managerial positions and   became manager of the industrial holdings department   in 1983 and overall manager of westlb’s equity   holdings division in 1985 – including holdings in     banking leasing and real estate
in 1988 he became a member of the preussag ag   executive board being responsible for trading and   logistics michael has held the position of chief   executive and chairman of the executive board of     tui ag formerly preussag ag since january 1994   overseeing its extensive acquisition programme in the   late 1990s which resulted in the acquisitions of tui ag’s   stake in hapaglloyd and of leading tourism businesses   such as thomson travel and nouvelles frontières   michael is also currently a member of the supervisory   board of a number of companies including axa konzern   ag and awd holding ag
2 sir michael hodgkinson 
nonexecutive deputy chairman and 
senior independent director age 68   sir michael hodgkinson joined the board of first choice   holidays plc as a nonexecutive director in january   2004 and became chairman in march 2004 he joined   the board of tui travel plc on 28 june 2007 as   nonexecutive deputy chairman and is the senior   independent director following an early career in the   automotive industry he was appointed chief executive   of grand metropolitan’s european food division in 1986   and in 1992 he joined baa plc becoming chief executive   in 1999 a post from which he retired in june 2003
sir michael was senior nonexecutive director at royal   mail and chairman of post office limited until   september 2007 a director of bank of ireland plc from   may 2004 until july 2006 a nonexecutive director of   dublin airport until november 2011 and a nonexecutive   director of transport for london and crossrail limited   until june 2012 he has been chairman of keolis uk   limited since 11 october 2011
3 peter long
chief executive age 60
peter long joined the board of tui travel plc on     28 june 2007 as chief executive in november 1996 he   was appointed group managing director of first choice   holidays plc and became chief executive in september   1999 prior to joining first choice he was chief   executive of sunworld holidays
from february 2001 to june 2005 peter was a   nonexecutive director of rac plc and from april 2006   to july 2009 he was a nonexecutive director of   debenhams plc peter was appointed as a nonexecutive   director of rentokil initial plc in 2005 and is currently   the senior independent nonexecutive director
4 johan lundgren
deputy chief executive age 45
having worked in the tourism industry for 26 years   johan is the deputy chief executive of tui travel plc   responsible for the mainstream sector and was   appointed to the board of tui travel plc on   21 december 2007 prior to his appointment as deputy   chief executive in october 2011 he was managing   director of the northern region of tui travel’s   mainstream sector which includes source markets uk   and ireland canada sweden norway denmark and   finland prior to the merger of first choice holidays plc   and the tourism division of tui ag johan was chief   executive of tui nordic and also took responsibility for   tourism sales in the source markets of italy and russia
5 william waggott
chief financial officer age 49
william waggott joined the board of tui travel plc on   28 june 2007 as commercial director he was appointed   wwwtuitravelplccom
52  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
suppliers are conducted due to the nature of the group’s operations   and in common with the industry as a whole payments are often   made in advance for the provision of goods and services the group   does not follow any code or statement on payment practice but it is   group policy that payments to suppliers whether in advance or after   the provision of the goods or services are made on the basis of the   terms that have been agreed with them
the company had no trade creditors at 30 september 2012 2011 £nil   and consequently creditor days have not been presented where the   company is the recipient of goods or services payment of suppliers   is conducted by one of the group companies in accordance with   the policy set out above the group’s trade creditor days as at   30 september 2012 were 37 days 2011 33 days
charitable giving and political donations
during the year the group made charitable donations of £376054   2011 £380680 for further details see page 35 the group made     no political contributions during the year 2011 £nil
directors and their interests
details of directors and their biographies can be found in a separate   section called ‘board of directors’ on page 50 and directors’ interests   are given in the remuneration report on page 77
powers for the company issuing or buying back its 
own shares 
the company was authorised by shareholders at the agm held in   february 2012 to purchase in the market up to 10 of the company’s   issued share capital as permitted under the company’s articles   no shares have been bought back under this authority during the   year ended 30 september 2012 this standard authority is renewable   annually and the directors will seek to renew this authority at the   agm to be held on 7 february 2013 the directors were granted   authority in 2012 to allot relevant securities up to maximum nominal   amount of £7453404460 that authority will apply until the   conclusion of the 2013 agm   at the agm in february 2013 shareholders will be asked to   grant an authority to allot shares in the capital of the company   up to a maximum nominal amount of £7453404460 representing   the abi guideline limit of approximately 66 of the company’s   issued ordinary share capital of this amount 372670223 shares   representing approximately 33 of the company’s issued ordinary   share capital can only be allotted pursuant to a rights issue the   power will last until the conclusion of the agm in 2014 or if earlier   on 7 may 2014 the directors have no present intention of exercising   this authority but they consider it appropriate to maintain the   flexibility that this authority provides   a special resolution will also be proposed to renew the directors’   authority to repurchase the company’s ordinary shares in the market   the authority will be limited to a maximum of 111801067 ordinary   shares and sets the minimum and maximum prices which will be paid   this authority will expire at the end of the agm held in 2014 or if   earlier on 7 may 2014
director’s indemnity arrangements
throughout the financial year and at the date of approval of these   financial statements the company has purchased and maintained   directors’ and officers’ liability insurance in respect of itself and its   directors whether in their capacity as directors of the company or   associated companies the directors also have the benefit of   indemnity provisions in the company’s articles of association these   provisions are qualifying third party indemnity provisions as defined   in section 234 of the companies act 2006
the directors submit their report and the audited consolidated financial   statements of the company and the group to the members of tui   travel plc the company for the year ended 30 september 2012
principal activity
the principal activity of the tui travel plc group of companies   the group is that of an international leisure travel business and   the principal activity of the company is that of a holding company   the group provides a broad and diverse range of leisure travel   experiences to more than 30 million customers in 31 key source   markets for further information see tui travel overview page 2
annual general meeting
the annual general meeting agm will be held on thursday   7 february 2013 at 1030am at the offices of herbert smith   freehills exchange house primrose street london ec2a 2hs   an explanation of the business to be transacted at the agm has   been circulated to shareholders and can be found on the website   httpwwwtuitravelplccominvestorsmedia  business performance
a summary of the business performance for the year ended   30 september 2012 prepared in accordance with the companies   act 2006 is set out on pages 36 to 47 and forms part of the   directors’  report  results and dividends
the group profit before taxation for the year ended 30 september   2012 was £201m 2011 £144m the directors recommend a final   dividend of 83 pence per ordinary share 2011 80p payable on   10 april 2013 to holders on the register at the close of business   on 8 march 2013 when taken with the interim dividend of 34 pence   per ordinary share paid on 3 october 2012 2011 33p this gives a   total dividend of 117 pence per share 2011 113p relating to the year   ended 30 september 2012 for further information on dividends   please see note 9 in the notes to the consolidated financial statements
key performance indicators and principal risks 
and uncertainties
see page 18 for the key performance indicators and page 20 for   the principal risks
corporate governance report
the corporate governance report for the year ended 30 september   2012 prepared in accordance with rule 72 of the fsa’s disclosure and   transparency rules is set out on pages 56 to 60 and forms part of   the directors’ report
suppliers
tui travel benefits from both its economies of scale and application   of purchasing power our principal suppliers are hotel owners and   operators and aircraft suppliers amongst others our key strategic   relationships are with hotel chains such as riu fiesta atlantica and   aircraft manufacturers such as boeing each source market has local   and overseas teams to engage in effective procurement strategies   to deliver optimum benefits to the group cooperative working is   fundamental to our relationships with key suppliers to ensure that   the highest standards in terms of health and safety and quality are   maintained suppliers falling below these expectations are removed   from our programmes
the operating units within the group are responsible for agreeing the   terms and conditions under which business transactions with their   governance
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•  the free float of the company is less than 30 of the issued   ordinary shares for at least five consecutive dealing days where   the free float is a all outstanding ordinary shares of the company   less those held by or on behalf of tui ag its associates and any   persons acting in concert with it and b the ordinary shares   underlying the outstanding secured exchangeable bonds due 2013   issued by nero finance limited on 16 january 2008
£400 million 490 convertible bonds
in april 2010 the company issued £400 million of 490 convertible   bonds with a conversion price set at 38234 pence per share the   settlement took place on 27 april 2010 the convertible bonds contain   terms which give the bondholders the right to redeem the bonds at   their principal amount together with accrued and unpaid interest     up to the date of redemption if a change of control occurs for   the  purpose of the convertible bonds a change of control occurs if
•  following a takeover offer to acquire all or a majority of the shares   in the company being declared unconditional in all respects or   becoming effective the offeror andor its associates have or will   have more than 50 of the voting rights in the company or   •  the free float of the company is less than 30 of the issued   ordinary shares for at least five consecutive dealing days where     the free float is a all outstanding ordinary shares of the company   less those held by or on behalf of tui ag its associates and any   persons acting in concert with it and b the ordinary shares   underlying the outstanding secured exchangeable bonds due 2013   issued by nero finance limited on 16 january 2008
tui ag subscribed at the issue price for 50 of the convertible bond   offering to prevent the potential dilution of its majority shareholding   £80 million of bonding facility agreements
agreements between a number of surety companies and the   company relating to bonding facilities of £80m currently provided   to the company contain terms which give the sureties the right to   cancel  all  commitments  to  the  company  and  to  declare  all  outstanding  bonds immediately due and payable if a change of control occurs   for the purpose of this agreement a change of control occurs if
•  any person or group of persons acting in concert gains control   of the company or
•  tui ag and any persons acting in concert with it acquires or acquire   75 or more of the voting shares in the company
£275m partnership arrangements 
in may 2011 the company entered into a limited liability partnership   arrangement and a scottish limited partnership arrangement with   three of its uk defined benefit pension schemes to address the   ongoing funding and management of the pension schemes under   the partnership arrangements the company committed to making   payments of up to £275 million in 2026 if and to the extent that   the pension schemes remain in deficit at that time the partnership   agreements contain terms which give the pension schemes the   right to windup the partnerships and require an injection of up to   £275 million by the company if there is a restructuring or reorganisation   of the assets of the company which results in a reduction of the   company’s consolidated net assets to less than £1100 million   following the occurrence of a change of control for the purposes   of the partnership agreements a change of control occurs if
•  following a takeover offer for the company a person or group   of persons acting in concert acquire more than 30 of the voting   rights in the company or
•  tui ag and any persons acting in concert with it acquires or acquire   75 or more of the voting rights in the company andor the   company’s listing is cancelled
significant agreements – change of control
the companies act 2006 requires us to disclose any significant   agreements that take effect alter or terminate on a change of control   of the company
relationship agreement with tui ag
the relationship agreement between tui ag and tui travel dated   29 june 2007 includes the principle that tui travel will operate   independently of tui ag and records the understanding between tui   ag and tui travel regarding the relationship between them and the   governance of tui travel the relationship agreement will remain in   force until either the shares in tui travel are no longer traded on the   london stock exchange or tui ag has less than 10 of the rights to vote   at general meetings in addition in the event that another party acquires   control of tui ag during the term of the relationship agreement tui   ag will lose certain rights under the relationship agreement including   its rights in respect of the composition of the board
the relationship agreement contains restrictions on the acquisition   by tui ag of additional shares in tui travel which result in the   increase of its shareholding to more than 55 of the voting rights   on a fullydiluted basis save where tui ag makes a general offer   to acquire all tui travel shares in issue a number of bonds are   held on tui ag’s behalf and if converted at the conversion price set   on the launch date would give rise to 52309463 new shares on a   fullydiluted basis if shares held by all bondholders were converted   tui ag had a holding of 5150 as at 30 september 2012 as a   percentage of shares in issue tui ag’s holding as at 30 september   2012 was 5626
tui ag has antidilution rights in respect of further issues of shares   in tui travel other than on a preemptive basis tui travel has also   agreed that certain matters will require the prior approval of 80   of the directors present at the meeting of the board at which such   matter is considered including material changes to the business of any   group company acquisitions and disposals of a value which exceeds   £10m the entry into variation or redemption prior to their due date   of any borrowing facilities and the approval of the annual budget
£1155 million bank revolving credit facility agreement
an agreement dated 17 may 2011 between a number of relationship   banks and the company relating to a £1155m bank revolving credit   facility currently provided to the company contains terms which   give the lending banks the right to cancel all commitments to the   company and to declare all outstanding credits and accrued interest   immediately due and payable if a change of control occurs for the   purpose of this agreement a change of control occurs if
•  any person or group of persons acting in concert gains control   of the company or
•  tui ag and any persons acting in concert with it acquires or acquire   75 or more of the voting shares in the company
£350 million 60 convertible bonds
in september 2009 the company issued £350 million of 60   convertible bonds with a conversion price set at 34930p per share   the settlement took place on 5 october 2009 the convertible bonds   contain terms which give the bondholders the right to redeem the   bonds at their principal amount together with accrued and unpaid   interest up to the date of redemption if a change of control occurs   for the purpose of the convertible bonds a change of control occurs if
•  following a takeover offer to acquire all or a majority of the shares   in the company being declared unconditional in all respects or   becoming effective the offeror andor its associates have or will   have more than 50 of the voting rights in the company or   wwwtuitravelplccom
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directors’ report continued
other information
other information relevant to the directors’ report can be found     in the following sections of the annual report
information  location in annual report
our people  page  28
sustainable  development  page  32
charitable  and  political  donations  page  35
outlook  page  49
board and committee membership  page  50
financial risk management  page  130
pension schemes  financial statements – note 6c
acquisitions  financial statements – note 13
post balance sheet events     financial statements – note 34
share capital  financial statements – note 23
the directors’ report was approved by a duly authorised committee   of the board of directors on 3 december 2012 and signed on its   behalf by andrew john the company secretary
by order of the board
andrew john
company  secretary
3 december 2012
company number 6072876
restrictions on the transfer of shares 
at 30 september 2012 233366705 ordinary shares of the company   representing 2087 of the company’s share capital on an undiluted   basis had previously been sold by tui ag to two independent special   purpose companies and were restricted from being transferred tui   ag remains entitled to receive the dividend yields of these shares and   also has the voting rights attached to these shares tui ag is entitled   to repurchase 146399656 of these shares by april 2013 at the latest   and 86967049 of these shares by july 2014 at the latest   in april 2010 the company issued a £400m fixed rate 49 convertible   bond of which antium finance ltd an independent single purpose   company subscribed for 50 tui ag entered into a forward purchase   agreement with antium finance ltd for these £200m convertible   bonds in order to prevent dilution of its majority shareholding tui   ag is entitled to receive the interest coupon on these bonds and to   repurchase these bonds by july 2014 at the latest
significant shareholders 
at the date of approval of the annual report  accounts 2012   the company had been notified of the following holdings in excess   of 3 in its issued share capital   shareholder     number of shares  percentage 
tui ag    630988003  5644
monteray enterprises     60053493  537
blackrock    36667683  328
going concern 
after making appropriate enquiries the directors have reasonable   expectation that the company and group have adequate resources   to continue operations for the foreseeable future for this reason   they continue to adopt the going concern basis in preparing the   financial  statements
a further summary of funding and liquidity is included in note 1bv   to the consolidated financial statements
post balance sheet events
details of post balance sheet events are included in note 34 of the   consolidated  financial  statements  contractual arrangements
the group has contractual arrangements with numerous third parties   in support of its business activities
auditors
a resolution to reappoint pricewaterhousecoopers llp will be   proposed at the annual general meeting tt11  ar 2012  20122012  proof 5
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governance
directors’ responsibilities statement
the directors are responsible for the maintenance and integrity of   the company’s website legislation in the united kingdom governing   the preparation and dissemination of financial statements may differ   from legislation in other jurisdictions   each of the directors whose names and functions are listed on   page 51 confirm that to the best of their knowledge
•  the group financial statements which have been prepared in   accordance with ifrss as adopted by the eu give a true and fair   view of the assets liabilities financial position and profit of the   group  and
•  the directors’ report includes a fair review of the development     and performance of the business and the position of the group   together with a description of the principal risks and uncertainties   that it faces
the directors also confirm that
•  so far as they are aware there is no relevant audit information of   which the company’s auditors are unaware and
•  they have taken all the steps that they ought to have taken as a   director in order to make themselves aware of any relevant audit   information and to establish that the company’s auditors are aware   of that information
the directors’ responsibilities statement was approved by a duly   authorised committee of the board of directors on 3 december 2012   and signed on its behalf by william waggott chief financial officer
william waggott
chief financial officer
3 december 2012
the directors are responsible for preparing the annual report the   directors’ remuneration report and the financial statements in   accordance with applicable law and regulations
company law requires the directors to prepare financial statements   for each financial year under that law the directors have prepared   the group financial statements in accordance with international   financial reporting standards ifrss as adopted by the european   union and the parent company financial statements in accordance   with united kingdom generally accepted accounting practice united   kingdom accounting standards and applicable law under company   law the directors must not approve the financial statements unless   they are satisfied that they give a true and fair view of the state of   affairs of the group and the company and of the profit or loss of the   group for that period in preparing these financial statements the   directors are required to
•  select suitable accounting policies and then apply them   consistently
•  make judgements and accounting estimates that are reasonable   and  prudent
•  state whether ifrss as adopted by the european union and   applicable uk accounting standards have been followed subject to   any material departures disclosed and explained in the group and   parent company financial statements respectively
•  prepare the financial statements on the going concern basis unless   it is inappropriate to presume that the company will continue in   business
the directors are responsible for keeping adequate accounting   records that are sufficient to show and explain the company’s   transactions and disclose with reasonable accuracy at any time the   financial position of the company and the group and enable them to   ensure that the financial statements and the directors’ remuneration   report comply with the companies act 2006 and as regards the   group financial statements article 4 of the ias regulation they are   also responsible for safeguarding the assets of the company and the   group and hence for taking reasonable steps for the prevention and   detection of fraud and other irregularities wwwtuitravelplccom
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corporate governance report
board proceduresresponsibilities
the board meets regularly including away days and is responsible for   the overall leadership strategy and control of the group the schedule   of matters specifically reserved to it for decision includes   •  determining the strategy of the group   •  amendments to the structure and capital of the group   •  approval of financial reporting   •  oversight of the group’s internal controls
•  approval of capital and revenue expenditure of a significant size   •  acquisitions disposals and share dealings   •  board membership and appointments   •  approval of remuneration of directors and certain senior management
•  corporate governance matters and   •  approval of group policies and risk management strategies   the board has overall responsibility for ensuring the effectiveness   of the group’s system of internal control and risk management   framework and this has been developed in accordance with the   code this system of control is designed to manage and mitigate   rather than eliminate the risk of failure to achieve business objectives   in pursuing these objectives internal controls – which include   financial operational and compliance controls – and risk management   can only provide reasonable and not absolute assurance against   material loss
the role of management is to implement board policies on risk and   control and the board has delegated the daytoday management   of the company to the chief executive and through him to the   other executive directors and the group management board gmb   the key elements of the control framework and review processes   in place across the group are as follows   •  the board sets corporate strategy and business objectives   the gmb and sector management integrate these objectives   into their operational and financial business plans   •  the gmb meets regularly together with other senior executives   to consider group operational and financial performance and   business development the chief executive reports to the board   on behalf of the gmb on significant changes in the business and   the external environment the chief financial officer provides the   board with financial information which includes key performance   and risk indicators
•  the group operates a risk management process which is   integrated within the short and longterm business planning   processes see page 20
•  the treasury position of the group including cash foreign   exchange and fuel hedging exposure is managed centrally in   accordance with policies appropriate for each sector and is the   responsibility of the chief financial officer and group treasurer
•  financial forecasts providing predicted results with sensitivity   analysis are prepared routinely throughout the year for review   by the gmb and the board these forecasts also include details   of the group’s ongoing compliance with its regulatory and   banking  requirements  •  the group has established investment appraisal and authorisation   procedures and its capital expenditure is reviewed against budgets   which have been approved by the board
•  the group also routinely assesses the capability of its people   to deliver the business objectives set and responds accordingly   this is supported by the three lines of defence
the company has complied with all relevant provisions of the uk   corporate governance code “the code” except in the areas detailed   in the report and set out on page 60
the board 
the company is controlled through its board of directors – the   directors at year end and the date of this report are
director’s name  title
horst  baier  nonexecutive  director
dr volker böttcher  managing director german specialist businesses
tony  campbell  independent  nonexecutive  director
rainer  feuerhake  nonexecutive  director
dr michael frenzel  nonexecutive chairman
sir michael hodgkinson    independent nonexecutive deputy chairman      senior independent director
janis kong  independent nonexecutive director
peter long  chief executive
johan lundgren  deputy chief executive
coline  mcconville  independent  nonexecutive  director
minnow powell  independent nonexecutive director
dr erhard schipporeit  independent nonexecutive director
dr albert schunk  independent nonexecutive director
harold  sher  independent  nonexecutive  director
william waggott  chief financial officer
johan lundgren was appointed deputy chief executive with effect   from 20 october 2011 and clare chapman resigned on 19 october   2011 janis kong was appointed as an independent nonexecutive   director on 29 may 2012   following an announcement made by tui ag in july 2012 tui travel   announced that dr michael frenzel will retire from his position as   chairman of the board in september 2013   as at 30 september 2012 the board comprised four executive   directors and 11 nonexecutive directors including the chairman   biographical details of all the directors are set out on page 51
in accordance with the code all directors will be subject to annual   reelection by shareholders to enable shareholders to make an   informed decision the 2013 notice of the annual general meeting   agm includes biographical details and a statement as to why the   company believes the directors should be reelected the chairman   intends to confirm at the agm that the performance of each individual   continues to be effective and demonstrates commitment to the role   the board recommends to shareholders the reappointment of all   directors retiring at the meeting on the basis that they are all effective   directors of the company and demonstrate the appropriate level of   commitment in their respective roles   the terms of the directors’ service contracts are disclosed in the   remuneration report commencing on page 66 directors’ interests     in the shares of the company are disclosed on page 77
directors’ service contracts and the letters of appointment of the   nonexecutive directors are available for inspection at the company’s   registered office and will be available at the agm which is scheduled   to take place on thursday 7 february 2013   following the appointment of any new director the chairman in   conjunction with the company secretary ensures that a full formal   and tailored induction to the company is made available the   company secretary is on hand to answer any questions which may   arise all directors have been given a detailed induction and training   manual during the year coline mcconville and janis kong have been   given specific overviews on certain parts of the business as part of   their induction programme and other nonexecutive directors are   invited to join these briefings tt11  ar 2012  20122012  proof 5
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tui travel plc annual report  accounts 2012  57
governance
governance
directors’ conflicts of interests 
under the companies act 2006 the directors have a statutory duty   to avoid a situation where they have or could have a direct or indirect   interest that conflicts or possibly may conflict with the interests of   the company directors of public companies may authorise conflicts   and potential conflicts where appropriate if the articles of association   contain a provision to this effect   the company’s articles of association permit the board to authorise   actual or potential conflicts of interest the company has established   formal procedures for the disclosure and review of any conflicts or   potential conflicts of interest which the directors may have and for   the authorisation of such conflict matters by the board in deciding   whether to authorise a conflict or potential conflict the directors must   have regard to their general duties under the companies act 2006   the authorisation of any conflict matter and the terms of authorisation   may be reviewed at any time and will be reviewed formally by the   board on an annual basis the board believes that the procedures   established to deal with conflicts of interest are operating effectively
board effectiveness and individual performance of directors 
an effectiveness survey of the board and its committees audit   remuneration  nomination was undertaken during junejuly 2012   the survey comprised a series of questions in relation to the running   of and business conducted at board meetings and the performance   of individual directors including the chairman the survey was   undertaken online and was facilitated and the responses collated   by an external provider which has no connection with the company   each director was asked to place a score against a variety of   questions and the directors were able to make additional comments   where  appropriate
summary reports were produced by the external facilitator following   analysis of the responses by broad category and by reference to a   trafficlight system showing the number of red amber and green   scores these reports which included conclusions reached by the   facilitator were presented to a meeting of the board in september   2012 on an anonymous basis and were considered and debated   various action points were agreed
independence of nonexecutive directors
the chairman dr michael frenzel did not meet the independence   criteria laid out in the provisions of the code at the time of his   appointment this is because dr frenzel is the chief executive of tui ag   – a 5626 shareholder of the company as at 30 september 2012
details of the chairman’s other significant commitments are given in   his biography on page 51 the chairman does have a number of other   external roles but the board is satisfied that these do not interfere   with the performance of his duties as chairman of the company
of the other 10 nonexecutive directors two are not considered to   be independent – horst baier is also an executive director of tui ag   and rainer feuerhake was a member of tui ag’s executive board   until his resignation in february 2010   the nonexecutive directors considered to be independent are sir   michael hodgkinson tony campbell janis kong coline mcconville   minnow powell dr erhard schipporeit dr albert schunk and harold sher   the board recognises that the code requires that at least half the   board excluding the chairman should be independent nonexecutive   directors the company was compliant with provision b11 of the   code throughout the year ended 30 september 2012 the board   is committed to ensure that its membership is refreshed regularly
processes are in place to ensure appropriate action is taken where   necessary to remedy any deficiencies identified through the group’s   internal control and risk management processes
these key elements of effective risk management are reviewed and   monitored at the group risk management committee grmc 
the grmc is chaired by the chief executive and comprises members   of the gmb the director of group audit services the director of   financial reporting  control and the chief information officer   meetings of the grmc are held four times a year and membership   is reviewed annually   the grmc’s core duties are to assist the board in fulfilling its   responsibilities  through
•  providing an oversight of the framework for managing risk   throughout  the  group  •  reviewing the effectiveness of the group’s risk management   framework and internal control systems for managing risk
•  determining the nature and extent of the significant risks the   group is willing to take
•  monitoring performance and changes in the group risk profile and
•  identifying the most significant risks to the group and agreeing   responsibility for appropriate mitigating strategies
the audit committee on behalf of the board has reviewed the   effectiveness of internal controls during the year and confirms that
•  there is an ongoing process for identifying evaluating and   managing the significant risks faced by the group   •  this has been in place for the year under review and up to the   date of approval of the annual report and accounts   •  the process is regularly reviewed by the board and   •  the process accords with the code   the division of responsibilities between the chairman and chief   executive is clearly established has been agreed by the board and   is reviewed by the company secretary on a regular basis the board   approves any necessary changes to reflect changes in legislation   policy and practices
all directors have access to the advice and services of the company   secretary and can take independent professional advice if necessary   at the company’s expense to the company secretary’s knowledge   no such advice was sought by any director during the year   the company secretary is responsible for ensuring board procedures   are followed including the formal minuting of any unresolved concerns   that any director may have in connection with the operation of the   company during the year there were no such unresolved issues
during the year an ipadbased paperless meeting system was   introduced with the intention of replacing hard copy packs for board   meetings with electronic papers in the first instance it was rolled out   to the tui travel plc board and its committees and subsequently   to the group management board gmb and other sector boards   and committees the plan had been to introduce the ipad gradually   alongside hard copy board papers but it became clear that this would   not be required as the board welcomed paperless meetings from the   start and were impressed with the speedy delivery of papers and ease   of use during meetings this supports tui travel’s online drive across   the group and is consistent with reducing the impact of our   operations on the environment
the terms of reference for the board and its committees are   available for inspection on the group’s website wwwtuitravelplccom   and will be available at the agm wwwtuitravelplccom
58  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
governance
corporate governance report continued
committee and remuneration committee due to commitments made   prior to her appointment to the tui travel plc board
nomination committee 
the  nomination  committee  comprises  three  independent  nonexecutive  directors and two shareholder directors the latter being appointed   in accordance with the relationship agreement   as at 30 september 2012 the committee comprised three independent   nonexecutive directors and two shareholder directors the chairman   is sir michael hodgkinson and the other members are minnow powell   independent harold sher independent dr michael frenzel   shareholder and rainer feuerhake shareholder clare chapman   independent resigned on 19 october 2011 and minnow powell and   harold sher were both appointed on 2 december 2011
the committee did not comply with the provision that a majority of   the directors be independent following jeremy hicks’ resignation in   january 2011 and clare chapman’s resignation in october 2011 until   the appointments of minnow powell and harold sher in december   2011 dr frenzel and mr feuerhake being shareholder directors are   not  considered  independent  meetings 
four meetings of the nomination committee took place during the   year – in october and december 2011 and may and september 2012   these meetings were in respect of the appointments of   johan  lundgren as deputy chief executive sir michael hodgkinson as   a  member of the remuneration committee following clare chapman’s   resignation bill dalton’s appointment as chairman of the remuneration   committee the appointments of minnow powell and harold sher as   members of the nomination committee the appointment of coline   mcconville to the audit and remuneration committees and the   appointment of janis kong as a nonexecutive director in september   2012 the committee focused on succession planning and talent   management across the group
nomination committee effectiveness survey
in the nomination committee effectiveness survey some suggestions   were made in respect of refining the processes through which the   committee operates and the chairman of the committee is   implementing  these
see page 61 for full details of the nomination committee and work   during the year
meetings of the nonexecutive directors
a meeting of the nonexecutive directors was scheduled to take   place in february 2012 with dr frenzel in the chair unfortunately   due to a sudden illness dr frenzel was unable to attend and the   senior independent director – sir michael hodgkinson – took the   chair the main focus of the meeting was to discuss meetings that   had been held with shareholders prior to the annual general meeting   in march 2012 a further meeting of the nonexecutive directors led   by sir michael and without the chairman being present was held to   appraise the chairman it was concluded that the chairman manages   meetings well and allows full and open debate two meetings have   been scheduled for 2013 and others will be held as the need arises   attendance of directors at meetings of the board  
and its committees 
    nomination  audit  remuneration
  board  committee  committee  committee
  meetings  meetings  meetings  meetings
horst baier nonexecutive  88  –  –  –
dr volker böttcher md german     specialist  businesses  78  –  –  –
tony campbell independent nonexecutive  88  –  1011  67
clare chapman independent nonexecutive  01  01  –  11
bill dalton independent nonexecutive  46  –  47  56
rainer feuerhake nonexecutive  68  34  –  67
dr michael frenzel nonexecutive chairman  78  44  –  67
sir michael hodgkinson deputy chairman      senior independent director  88  44  1011  66
janis kong independent nonexecutive  22  –  12  11
peter long chief executive  88  –  –  –
johan lundgren deputy chief executive  88  –  –  –
coline  mcconville  independent  nonexecutive  78  –  69  45
minnow  powell  independent  nonexecutive  88  22  1111  –
erhard  schipporeit  independent    nonexecutive  68  –  –  –
dr albert schunk nonexecutive  78  –  –  –
harold sher nonexecutive  88  12  –  –
will waggott chief financial officer  88  –  –  –
figures in brackets indicate the maximum number of meetings during the year in which the   individual was a board member
dr frenzel was unable to attend the annual general meeting and   the board meeting in february 2012 due to a sudden illness which   prevented him from flying
coline mcconville was not present for two of the three meetings   of the audit committee which were held to approve announcements   she was unable to attend the may meetings of the board audit   tui travel plc
nomination committee remuneration committee audit committee
delegated authorities
sets remuneration and incentives for the executive 
directors approves and monitors remuneration 
and incentive plans for the group
members
coline mcconville chairman
dr m h f frenzel
r feuerhake
sir michael hodgkinson
janis kong
delegated authorities
ensures that the board and committee 
composition has the optimum balance of 
skills knowledge and experience by nominating 
suitable candidates for approval by the board 
to fill executive and nonexecutive vacancies
members
sir michael hodgkinson chairman
dr michael frenzel
rainer feuerhake
minnow powell
harold sher
delegated authorities
monitors the group’s integrity in financial 
reporting and reviews the effectiveness 
of the risk management framework
members
minnow powell chairman
janis kong
sir michael hodgkinson
coline mcconville
board governance structure  tt11  ar 2012  20122012  proof 5
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tui travel plc annual report  accounts 2012  59
governance
governance
antibribery  corruption 
following the implementation of the bribery act 2010 in july 2011   affecting uk companies their worldwide subsidiaries and associated   companies agents and suppliers tui travel has rolled out a   comprehensive antibribery and anticorruption training programme   the abc programme across all group companies led by the new   group legal  regulatory compliance function and implemented   by newlyrecruited sector compliance leads and human resources’   functions see ‘compliance at tui travel’ the abc programme   adopts a coso projectcompatible controlenvironment approach   with a consistent level of control across the group while also   recognising the requirements of the various jurisdictions in which   the company operates in august 2012 an abc checklist was sent   to all businesses across the group to assess the consistency of   baselevel operational legal  regulatory controls in place around   the group and the results are currently being analysed
all of the group reward population grp – our senior directors and   managers – pledged to support the abc programme and agreed to   communicate their commitment to their employees establishing tui   travel’s ‘tone from the top’ anticorruption culture the tui travel   plc board all sector boards group management board group   risk management committee all inhouse legal counsel the grp   and the majority of senior managers have undergone 15 hours of   riskfocused travelindustry specific facetoface legal training on   their specific responsibilities under antibribery legislation in addition   just under half circa 26000 of all of our employees have also   undertaken online ‘elearning’ training in abc issues with all   appropriate employees on target to complete this training by   31 december 2012   antibribery and gifts  hospitality policies have been communicated   across the group additional reporting channels consisting of a   compliance  information  line  compliancetuitravelcom  and  new  employee  hotlines  have  been  established  a  compliance  intranet  page  to give greater online visibility of our initiatives is in development   group audit services administer a yearly conflict of interest   declaration for 2000 senior managers which will extend to new joiners   in 201213 abc awareness is being added to induction procedures   around the group antibribery contractual clauses for supplier   contracts have also been rolled out across the group and a supplier   code of conduct detailing tui travel expectations of its suppliers’   abc procedures is in development abc issues specific to the travel   industry have been discussed at industry and government level and   tui travel continues to foster these relationships   audit committee 
the audit committee comprises four independent nonexecutive   directors  from 1 october 2011 until 31 january 2012 the membership of the   audit committee was minnow powell tony campbell bill dalton and   sir michael hodgkinson – all being independent nonexecutive directors   coline mcconville independent nonexecutive director was appointed   a member of the committee on 2 december 2011 and bill dalton   resigned with effect from 29 may 2012 janis kong independent   nonexecutive director was appointed on 26 july 2012 and tony   campbell resigned on 1 october 2012 therefore the company   complied with the provision that the audit committee should consist   of at least three independent nonexecutive directors throughout   the year the chairman chief executive chief financial officer   director of group audit services and the external auditor are invited   and routinely attend all meetings and other nonexecutive directors   may also attend
meetings
the audit committee met 11 times during the year – three of   these meetings were specifically called to review and approve draft   announcements results and trading statements of the company   audit committee effectiveness survey
no major concerns were raised in the survey
see page 62 for full details of the audit committee and work during   the year
remuneration committee
the  remuneration  committee  comprises  four  independent  nonexecutive directors and two shareholder directors the latter   being appointed in accordance with the relationship agreement   clare chapman was chairman of the remuneration committee until   her resignation on 19 october 2011 when she was replaced by bill dalton   coline mcconville was appointed a member of the committee on   2 december 2011 and replaced bill dalton as chairman following   his resignation on 29 may 2012 janis kong was also appointed as   a member of the committee on 26 july 2012 and tony campbell   will step down as a member of the committee with effect from   1 october 2012
meetings 
the remuneration committee met seven times during the year   see page 58
remuneration committee effectiveness survey
no major concerns were raised in the survey
see the remuneration report on page 66 for full details of the   remuneration committee and its work during the year wwwtuitravelplccom
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tt11  ar 2012  20122012  proof 5
governance
corporate governance report continued
as a result of the extensive investor feedback provided by the chief   executive the chief financial officer and those neds who did meet   with shareholders the remaining nonexecutive directors did not   consider it necessary to meet with other major shareholders during   the year they believe that they are kept aware of all issues which   are fed back to them at board meetings and therefore additional   meetings were not required however they would make themselves   available if any shareholder requested such a meeting
regular updates are produced by our brokers and circulated to   the board to keep them informed of market and industry views   the updates also include analyst views of tui travel’s position   in the market
there is an opportunity for shareholders to question the chairman   and  other  directors  including  the  chairmen  of  the  audit  remuneration  and nomination committees at the agm the agm also provides   a forum for the nonexecutive directors to discuss the views of   shareholders with them directly
in respect of general meetings of the company   •  the company prepares separate resolutions on each substantially   separate issue and does not combine resolutions together   inappropriately
•  proxy appointment forms provide shareholders with the   option to vote for against or to withhold their vote the proxy   form makes it clear that a ‘vote withheld’ is not a vote in law and   will not be counted
•  all postal proxy votes are returned to equiniti the company’s   registrar which is responsible for ensuring votes are properly   received and counted
•  proxy counts are displayed at the close of the agm and   the final poll results are posted on the company’s website     wwwtuitravelplccom following the closure of the meeting and
•  the annual report and accounts is laid before shareholders   at the agm   uk corporate governance code provisions
for the reasons disclosed within this annual report during the year   the company did not fully comply with the following provisions
•  code provision a22 the chairman should on appointment meet   the independence criteria set out in code a31 see page 57   •  code provision b21 the majority of members of the nomination   committee should be independent nonexecutive directors   following clare chapman’s resignation in october 2011 until the   appointment of minnow powell and harold sher both   independent on 2 december 2011 the majority of the members   was not independent dr michael frenzel and rainer feuerhake are   not considered independent for the reasons given on page 57
•  code provision d21 if the company chairman is a member of the   remuneration committee he must be considered independent on   appointment see page 57
andrew john
company  secretary
3 december 2012
whistleblowing 
employees in the uk germany usa canada poland switzerland   belgium the netherlands norway denmark sweden and finland   now have access to confidential whistleblowing hotlines and webmail   facilities austria bulgaria china france greece italy portugal   russia spain and the ukraine are currently going through the   approval process with each country’s data protection authority   together these confidential hotlines and webmail reporting facilities   cover 80 of our total employees and 98 of group revenue   hotlines and webmail reporting facilities have also been commissioned   to cover the remaining 20 of employees in all our jurisdictions   where the law permits by the end of the calendar year 2012
any matters arising from the use of the whistleblowing channels   are investigated and appropriate and a summary provided to the   audit  committee
the tui travel code of conduct the code of conduct makes it   clear that employees can approach senior executives or group audit   services to make reports and emphasises that anyone making a   report with honest intentions need not fear any adverse consequences   even if the information provided proves to be unfounded
communication with shareholders
the chief executive chief financial officer and members of   the investor relations’ team hold regular meetings with major   shareholders to review the group’s performance and prospects   the views of shareholders are communicated to all members   of the board following such meetings during the course of these   meetings the issue of governance is discussed presentations   to major shareholders are made at least twice yearly after the   announcement of the interim and preliminary results details   of which together with the group’s financial reports and other   announcements can be accessed via the group’s website     wwwtuitravelplccominvestorsmedia
the code recommends that the senior independent director   meets with a range of major shareholders to gain an understanding   of their views both sir michael hodgkinson senior independent   director and clare chapman former chairman of the remuneration   committee met with major shareholders during the course of   the year in december 2011 discussions covered business strategy   and remuneration philosophy an update was given on performance   measures applied to certain ltip schemes and the promotion   of johan lundgren to the role of deputy chief executive was   also covered
minnow powell had three meetings with major shareholders prior to   last year’s agm which was held in february 2012 the three meetings   were arranged to discuss the change of auditors and the group’s   control environment was also addressed
coline mcconville and sir michael hodgkinson have meetings   scheduled with several major shareholders for october 2012 to   introduce coline as chairman of the remuneration committee   explain the changes in the committee membership and to discuss   remuneration  policy  generally tt11  ar 2012  20122012  proof 5
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governance
diversity
the nomination committee’s objectives are to
•  achieve at least 25 female representation   among the board’s membership by 2015
•  ensure that at least half of the initial applicant   pool for board appointments consists of women
•  engage executive search firms who have signed   up to the voluntary code of conduct on gender   diversity and best practice
•  report annually against these objectives and   other initiatives taking place within the company   which promote gender international ethnic and   other forms of diversity and
•  report annually on the outcome of the board   evaluation the composition and structure of the   board as well as any issues and challenges the   board is facing when considering the diverse   makeup of the company
focus for 201213
the plan is to
•  ensure that the composition of the board is   refreshed by a rigorous selection process taking   into account all aspects of diversity and the   appropriate mix of skills
•  continue to support succession plans and the   development of the executive director team
•  ensure that talent is recognised and nurtured   across the organisation and that suitable   development programmes are in place for key   managers  •  review ongoing knowledge and training for all   directors on a continual basis and
•  assist the development of a pipeline of high
calibre candidates by encouraging a broad range   of senior individuals within the business to take   on additional roles to gain valuable board   experience
sir michael hodgkinson
chairman  senior independent director
3 december 2012
during the year we recommended two major   appointments to the board johan lundgren was   appointed deputy chief executive with effect from   20 october 2011 and janis kong was appointed     as an independent nonexecutive director on     29 may 2012 janis succeeds bill dalton following   his  retirement
prior to appointing janis a description of the role   and required capabilities was prepared the   composition of the board was reviewed in terms     of nationality gender background experience   independence skillsets and the collective   knowledge of the board to ensure that the right   mix was achieved consideration was also given to   whether janis would have sufficient time available   to devote to her duties we felt that janis’   experience in senior roles such as nonexecutive   director of network rail kingfisher royal bank of   scotland and baa together with executive roles   over 33 years with baa plc meant that she had a   wealth of experience behind her this experience   would be extremely beneficial and enable her to   effectively challenge and add value to the board’s   discussions  janis was given a comprehensive induction    training manual and has also received tailored   presentations on specific areas of the group during   the year further information on the company’s   induction programme can be found on page 56
the appointment of janis together with that of   coline mcconville in september 2011 means that   the percentage of women on the board has   increased from 67 in the prior year to 133
the composition of the committee was also   reviewed during the year minnow powell and   harold sher were both appointed to refresh its   membership and ensure the company’s compliance   with the code
we have focused on ensuring that succession is a   key agenda item and consideration was given to   this at a meeting held in september 2012 this was   in respect of the executive directors and senior   management team as well as the board over the   medium to longterm the meeting also considered   talent management across the group
governance
nomination committee
sir michael hodgkinson
chairman wwwtuitravelplccom
62  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
as chairman of the audit committee it is my   responsibility to ensure that the committee is rigorous   and effective in its role of monitoring and reviewing
•  the integrity of the financial statements of the   company  including  formal  announcements  relating to the company’s financial performance   and the significant financial reporting   judgements  contained  therein
•  the effectiveness of internal controls and   the risk management framework including   presentations from group sector regional   and  functional  management
•  the effectiveness of internal audit including   agreeing in advance the work of group audit   services and reviewing the results of the work   undertaken  •  the arrangements by which employees may   raise concerns regarding potential impropriety   in confidence and ensuring these concerns are   investigated  appropriately  and
•  the integrity of the group’s relationship with   the external auditors and the effectiveness of   the audit process including reviewing the policy   for the engagement of the external auditors   to supply nonaudit service considering the   appointment  reappointment  and  removal  and approving the remuneration and terms   of engagement of the external auditors
during the year we have continued to focus on   improving key financial controls processes and   procedures while i am pleased with the progress   we have achieved this year in fulfilling our   responsibilities there are still further significant   improvements to be implemented and embedded   across the group over the next two years   i am satisfied that the audit committee was   presented with papers of good quality during the   year provided in a timely fashion to allow due   consideration of the subjects under review i am   also satisfied that meetings were scheduled to   allow sufficient time to enable full and informed   debate we also reviewed our terms of reference   of the committee during the year and these were   approved by the board these are available on   wwwtuitravelplccominvestorsmedia  during the year we invited a number of members   of management to present to the committee on   key areas of risk and control i met individually and   in private with management in order to   understand more fully the context and challenges   of their business operations and thereby ensure   the committee’s time was used most effectively   we together and individually visited various parts   of the business and met informally with a number   of members of management below board level to   gain a deeper insight into areas relevant to the role   of the committee
the committee held private sessions with the   director of group audit services and also the lead   partner from our external auditors during the year   both without management present
the activities of the committee members during the   last year have enabled us to gain a good understanding   of the culture of the organisation the risks and   challenges faced and the adequacy and timeliness   of the action being taken to address them   we held eleven meetings during the year ending   september 2012 see page 58 and have reported   to the board on how we have discharged our   responsibilities
during the year activities of the committee   included  the  following
the integrity of financial reporting 
we reviewed the integrity of the financial   statements of the company and all formal   announcements relating to the company’s financial   performance this has included review and debate   over areas of significance in relation to integrity of   financial reporting taking into account the view of   the external auditors for instance we looked at
revenue recognition
we reviewed the judgements made in respect   of revenue recognition in one part of the   group the exercise involved a detailed review   to understand all factors and nuances relating   to the judgement in the context of the guidance   contained in ias18 as to whether the group   acts as a principal or an agent
we were satisfied that the indepth review validated   the approach taken historically by the group
going concern
we assessed our available facilities facility   headroom our banking covenants and the   sensitivity analyses on these items
we reviewed the management analysis which was   consistent with last year and included forecasts   governance
audit committee
minnow powell
chairman tt11  ar 2012  20122012  proof 5
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governance
governance
the effectiveness of internal controls and the risk 
management framework
we recognise that a robust and effective system of internal control   is critical to achieving reliable and consistent business performance   on behalf of the board we review the effectiveness of the risk   management and control systems in relation to material financial   operational and compliance controls we oversaw a number of   improvements in this area during the year we noted a good level of   sustained improvement in the financial control environments within   our uk  ireland and french businesses as well as the continued   management focus on the implementation of the coso framework   of internal control across the organisation the development of the   risk management methodology and application and the strengthening   of the three lines of defence whilst we are pleased with the progress   achieved there remains much still to do and work in these areas will   be ongoing in 2013   first line of defence
management 
we spent time with management below board level in order to   understand their concerns and the risks controls and challenges   in their respective business areas this included presentations   by them and discussions with them on
•  the financial control environment existing within each of the key   business areas with follow up presentations and debate on those   areas of greater concern and
•  significant projects being undertaken across the group eg financial   and reservations systems development
local compliance functions
we noted the investment in local compliance functions within our   key businesses during the year which will serve to strengthen the   control environment closer to the frontend of businesses across   the organisation as appropriate
second line of defence
risk management
we received a presentation from the group risk management   function on the risk management structure and approach as well   as an assessment of stakeholder engagement and effectiveness   by key business area we reviewed and approved proposed changes   to the risk approach and methodology designed to drive greater   transparency and accountability in the risk management process   across the organisation at every level these improvements have been   supported by the roll out of new risk management software we also   reviewed the findings of an independent audit on the effectiveness of   the group risk function we were satisfied that the recommendations   raised in this report had already been identified and were being   addressed by the group risk function in addition we have received   regular updates on the work of the group risk management   committee during the last year in relation to risk management   while significant improvements have been made in the year further   work to embed them into all our processes and procedures is planned   for  2013
adjusted for downturns in budgeted trading reduced customer   deposits were factored explicitly into the model and an assessment   of the degree of flexibility in the creditors’ ledger at the cash low   point in december was also taken into account
we were satisfied that the going concern basis of preparation   continues to be appropriate in the context of the group’s funding   and  liquidity  position
annual goodwill impairment review
during the year we also considered the judgements made in relation   to the valuation methodology adopted by management and the   model inputs used
we also reviewed and approved the sensitivities used by management   which were consistent with 2011 and ‘a reasonably possible’ change   to model inputs including the related disclosure as required by ias 36
aircraft maintenance provision
we considered the relative merits of two accounting bases of   estimation historically in use across the group in order to identify   the most appropriate and achieve consistency
due to the complex nature of the issue a joint review was initiated   with the external auditors and involved site visits to understand and   debate fully the two options available
the findings of this review were presented and discussed at the audit   committee where we approved the decision to adopt ‘next event’   based provisioning methodology ie where the provision relates to   the expected cost of the next event in an aircraft’s life representing   we believe the more appropriate estimation under international   accounting  standards  ias
provision for claims
we reviewed the risks relating to the main legal cases facing the group   and the adequacy of provisions made against them management   presented papers detailing the background to each case the latest   developments their assessment of the respective risks the mitigating   action taken and amounts provided   we agreed with the judgements reached by management in each of   the cases presented   separately disclosed items sdis
sdis are those significant items which in management’s judgement   are highlighted by virtue of their size or incidence to enable a full   understanding of the group’s financial performance we reviewed the   items proposed by management to be reported as sdis each quarter   to validate that it was appropriate for such items to be reported this   way and agreed with their judgement
tax
we reviewed and approved the group’s overall taxation strategy   during the year this covered the key factors for the group’s overall   tax position and forecasts for the future tax charge and cash taxes   we also considered the uk corporation tax legislation changes made   in 2012 that applied to asset backed contributions to uk defined   benefit pension schemes and concluded these had been appropriately   treated within the group’s accounts in addition we reviewed the   judgements together with any related provisions in respect of open   areas including the ongoing dispute with the spanish tax authorities wwwtuitravelplccom
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audit committee continued
processes
we welcomed the development of a riskranked auditable universe   which has enabled a more systematic approach to the development   of the annual audit plan and more informed discussions with   management as to the key risks facing the business it also enabled   a clear summary for management and the committee as to what   would be audited and why as well as what would not be audited and   why it provided clarity for management and the committee as to   the potential impact to the audit plan of flexing resource up or down   in addition we were pleased with the focus on control reporting   through the change of report rating criteria the focus on driving audit   reporting on a more timely basis and the focus on reporting on the   timeliness of closure of priority findings by sector and source market   we are looking to further improvements in the timeliness of issuing   reports and closing audit findings in 2013
systems
we were pleased to see the implementation of audit software and   analytical tools during the year which will drive greater consistency   and reliability in audit work performed thereby improving the   assurance  provided
people
we noted the focus placed on restructuring assessing and developing   the internal audit team as an essential element in building a   highperformance internal audit function   the effectiveness of internal audit
during the year we requested a review on the effectiveness of   internal audit the review covered internal effectiveness of the   function positioning processes systems and people benchmarked   against best practice as well as the external effectiveness of the   function as perceived by 14 key stakeholders senior management and   nonexecutive directors we noted that the issues raised from this   review had been identified in the transformation plan set out by the   director of group audit services which is currently being   implemented  the arrangements by which staff may raise concerns 
regarding potential impropriety in confidence and 
that these concerns will be investigated appropriately
we received updates during the year on the arrangements by which   the business encourages feedback from management and staff on   instances of potential impropriety this included the development     of the whistleblowing hotlines across the group
the integrity of the group’s relationship with 
external audit and the effectiveness of the 
external audit process
effectiveness of external audit
we requested a review of the effectiveness of external audit as   perceived by 14 senior financial personnel and senior management   closely involved in the yearend reporting process as well as members   of the audit committee we also requested a review of the results of   the audit inspection unit’s now called audit quality review team   assessment of the effectiveness of the external auditor relative to     its peers we were satisfied with the results of this review and the   actions noted   audit plan and approach
during the year we reviewed the effectiveness of the audit approach   and audit plan which took into account issues of size complexity and   the control environment   group compliance 
we noted the continued development and strengthening of the   group compliance functions during this year there are three group   compliance  teams  •  group financial compliance created in 2011 to provide assurance   that individual company balance sheets across the group are fairly   stated through a programme of site visit reviews to ensure that   companies in the group comply with existing and developing   financial  reporting  requirements
  –    we received feedback on the ongoing programme of education   communication and independent validation of the financial   minimum controls as well as feedback on quarterly self
assessment  returns  •  group legal  regulatory compliance was created in january 2012   to manage legal and regulatory risk across the group including   antibribery  corruption abc and whistleblowing
  –    we received feedback during the year on the progress being   achieved in relation to abc whistleblowing and governance   structures  •  group it compliance created in march 2012 to provide a compliance   framework across the group’s it function by producing andor   publicising  appropriate  standards  and  monitoring  compliance  to those standards using a mixture of selfassessment and a   programme of review visits
  –    we received reports on the group’s compliance with pci dss   along with updates on the effectiveness of business continuity   planning and disaster recovery and noted the need to build on   the existing contingency planning in this area
a group compliance steering committee csc has been created to   lead and coordinate compliance issues across the group and ensure   a consistent approach the csc includes the group directors of   financial reporting legal and audit services as well as the new group   heads of financial legal  regulatory and it compliance the csc   is also attended by the group heads of fraud and risk management   talent management 
we reviewed the talent pool of senior financial management during   the year noting the development of competency testing in   conjunction with korn ferry for key finance management and the   foundation of a finance academy to develop and train our employees   we also noted the development of detailed risk and control objectives   for group managing directors and financial directors across the   organisation changes were made in prioritising these objectives in   relation to the overall objectives in order to ensure a greater focus on   risk and control and ‘doing the right thing’   third line of defence
internal audit
we noted a number of improvements in the development and   effectiveness of the internal audit function during the year   we also noted the development of a closer collaboration between     the key control functions of group compliance internal and external   audit which is resulting in a more integrated approach to the provision   of risk and controls’ assurance
we received a presentation on the transformation plan set out by the   director of the internal audit function and have noted the progress   achieved against that plan during the last year   tt11  ar 2012  20122012  proof 5
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governance
reappointment of external auditors
we  have  reviewed  and  recommended  to  the  board  the  reappointment  of the external auditors now in their second year and have approved   the audit fees incurred   nonaudit services
we have sought to ensure that the provision of nonaudit services   does not impair the integrity independence and objectivity of the   company’s external auditor we have achieved this by adhering to   the accounting practices board ethical standard number 5 relating   to ‘nonaudit services provided to audited entities’ we have reviewed   and monitored the nature and extent of nonaudit services and have   challenged  it  where  appropriate  we have also reviewed the fees both individually and in aggregate   relative to the audit fee and management’s compliance with the   approval thresholds set out in the company’s nonaudit services policy
we acknowledge that in some circumstances the external auditors’   understanding of the business can be beneficial in improving the   efficiency and effectiveness of advisory work and therefore it has   been considered appropriate that the external auditors be engaged
in total £21m was spent on nonaudit services during the year   significant expenditure ie exceeding £250000 is outlined below
nonaudit services – significant expenditure
business  work  rationale for use   area  undertaken  of the external auditor  £000s
ad  restructuring  knowledge of the complex     efficiency project  business legal entity and         operational  structure  309
group hr  tax advice relating       to expats  won on competitive tender  300
uki  it consultancy   knowledge of the complex     relating to   and interrelated it systems     security architecture  and business processes  266
in addition fees totalling £189000 were paid to the external auditors   in respect of the half year and regulatory returns
minnow powell
chairman
3 december 2012 wwwtuitravelplccom
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i am pleased to be given the opportunity to   introduce the directors’ remuneration report   for the year ended 30 september 2012   the committee aims to ensure that remuneration   packages are offered which   •  set the total remuneration package at an   appropriate level to reflect the competitive   markets in which the group operates   •  link a substantial proportion of the total   remuneration package to the achievement   of demanding financial performance targets   •  structure the reward of senior management to   align their interests with those of shareholders   over the longterm   •  enable the retention and stability of the   management team and   •  reinforce a highperformance culture   throughout  the  group
during the year the committee refreshed its   membership and sought to improve the overall   balance of independence i was appointed chairman   following  bill  dalton’s  resignation  in  may  2012  janis  kong was appointed a member of the committee   in july 2012 and tony campbell stepped down   from the committee in october 2012   the committee is strongly committed to open   and  transparent  dialogue  with  shareholders  on remuneration matters we believe that it   is important to meet regularly with our key   shareholders to understand their views on our   remuneration arrangements and discuss our policy   going forward during the year we consulted with   the company’s largest shareholders and the main   shareholder representative bodies as a result of   which we have made certain improvements to the   operation of our ongoing remuneration policy   in particular the committee considered the   application of the company’s policy on   remuneration for executives leaving the group   and committed to ensuring a consistent approach   to the application of our policy in future to ensure   that we do not pay more than is necessary   sir michael hodgkinson has been the senior   independent director of tui travel for over five   years some concerns have been raised that his   tenure as a nonexecutive director should include   the period when he was chairman of first choice   holidays plc our major shareholders have   confirmed that they wish sir michael to continue   as deputy chairman and senior independent   director particularly given the retirement of the   chairman later in 2013
william waggott’s role expanded during the year   to include additional commercial responsibilities   having taken account of the increase awarded   to william at the time of his promotion to chief   financial officer in december 2010 and his   outstanding performance in this expanded role   to date the committee decided to increase his   base salary by 12 in december 2011 no other   increases to executive director salaries are   anticipated in the year ending 30 september 2013   no changes were made to the performance   measures used under our incentive plans following   the changes described in last year’s remuneration   report and we have made no increases to incentive   plan  quantum  this is a year in which there has been much   public debate about executive remuneration and   governance in april 2012 we responded to the   consultation document issued by the department   for business innovation and skills bis on   executive remuneration in anticipation of the   revised reporting regulations and in line with   evolving best practice we have provided additional   disclosures in this remuneration report in advance   of being required to do so   on behalf of the committee i hope that you find   the report comprehensive clear and informative   coline mcconville
remuneration  committee  chairman
3 december 2012
governance
remuneration report
coline mcconville
chairman tt11  ar 2012  20122012  proof 5
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•  approval of the directors’ remuneration report for the year ended   30 september 2011   •  consideration of the outcome of the agm vote on the directors’   remuneration report and shareholder feedback
•  consideration of market trends in executive remuneration and   corporate  governance  •  review of the executive shareholding guidelines and their   application
•  consideration of remuneration benchmarking and review and   agreement of executive director and gmb remuneration
•  agreement of the annual bonus performance share plan and   deferred annual bonus scheme performance targets for the year   ended 30 september 2012
•  approval of changes to the rules of the performance share plan   deferred annual bonus scheme and deferred annual bonus   longterm incentive scheme to ensure compliance with disguised   remuneration  legislation
•  review of the outcome of the annual effectiveness survey of the   committee  •  consultation with shareholders and external bodies on our   remuneration  policy  advisers
material advice or services were provided to the committee during   the year by   deloitte llp deloitte
herbert smith freehills llp herbert smith freehills
andrew john – company secretary
peter long – chief executive
jacky simmonds – group human resources director
tim taylor – group reward director
the group hr director has direct access to the chairman of the   committee and together with the group reward director advised   the committee on reward matters relating to the executive directors   and members of the gmb they also advised the committee on   broader group hr strategy and policy   the chief executive attends meetings of the committee to make   recommendations relating to the performance and remuneration of   his direct  reports  and  the  company  secretary  acts  as  secretary  to  the   committee the chief executive company secretary and group hr   director are not in attendance when their own remuneration is   considered  the committee is authorised by the board to seek any information   that it requires from any employee of the group the committee is   also authorised to require the attendance of any executive at any of   its meetings
deloitte provided independent advice to the committee on all aspects   of senior management remuneration deloitte is a founding member   of the remuneration consultants group and adheres to its code in   relation to executive remuneration consulting in the uk deloitte also   provides as required taxation services to the group
herbert smith freehills advised the committee on various legal issues   relating to the company’s share schemes herbert smith freehills also   provides as required other legal services to the group as a whole
the directors’ remuneration report for the financial year ended   30 september 2012 has been prepared on behalf of the board by the   remuneration committee it complies with the requirements of the   companies act 2006 and schedule 8 of the large and medium sized   companies and groups accounts and reports regulations 2008   this report will be presented to shareholders for approval at the   annual general meeting on thursday 7 february 2013   remuneration committee
the role of the remuneration committee ‘the committee’ is to   •  set and review the company’s executive remuneration principles   and framework and
•  determine the remuneration arrangements of the company’s   chairman chief executive executive directors and members of   the group management board ‘gmb’
the activities of the committee are governed by its terms of reference   to reflect best practice and legal developments the terms of reference   were amended by the board on 29 may 2012 the updated terms of   reference can be found on our website   httpwwwtuitravelplccominvestorsmediacorporategovernance
managementandcommitteescommittees
the committee is currently comprised of five nonexecutive   directors three of which the board deems to be wholly independent   coline mcconville – independent chairman
sir  michael  hodgkinson  independent
dr  michael  frenzel
rainer feuerhake
janis  kong  independent
clare chapman resigned in october 2011 bill dalton was appointed   chairman of the committee in her place until his resignation from   the board in may 2012 coline mcconville was appointed a member   of the committee in december 2011 and was appointed chairman in   may 2012 janis kong was appointed in july 2012 and tony campbell   stepped down as a member of the committee in october 2012   dr michael frenzel and rainer feuerhake are not considered by the   company to be independent dr frenzel is a member of the executive   board of tui ag and rainer feuerhake was a member of tui ag’s   executive board until his resignation in february 2010   tui ag is a 5626 5150 on a fullydiluted basis shareholder   of tui travel plc as at 30 september 2012 the appointments of   dr michael frenzel and rainer feuerhake are pursuant to the   relationship agreement between tui ag and the company   no member of the committee has any personal financial interest   other than as a shareholder in the matters to be decided by the   committee the three independent members of the committee have   no conflicts of interest arising from crossdirectorships and none of   the members of the committee participate in any bonus schemes   pension plans share awards or any employee share schemes   members of the committee have no daytoday involvement in the   running of the company   the committee met seven times during the year details of attendance   can be found in the corporate governance report during the year   the committee carried out the following activities
•  assessment of the achievement of executive directors’ and gmb   members’ performance against their annual bonus objectives   •  assessment of performance for the vesting of the 2008   performance share plan and deferred annual bonus scheme awards wwwtuitravelplccom
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governance
remuneration report continued
group performancerelated measures are chosen carefully to ensure   a strong link between reward and underlying financial performance   individual performance is measured through an assessment of   comprehensive business unit deliverables financial targets and the   achievement of specific objectives the weightings of the annual bonus   measures for the financial year ended 30 september 2012 were
    group    group  average  sector  sector  individual    profit  headroom  profit  average  business    cash  cash  cash  net debt  objectives
peter long  50  30      20
johan lundgren  50  30      20
william waggott  50  30      20
dr volker böttcher  20    35  25  20
at a minimum the individual performance of the executive directors   is assessed on an annual basis   when determining executive remuneration the committee considers   the pay and conditions of employees across the group and executives   employed by companies of a similar size and complexity to tui travel   factors taken into account when determining the appropriate   benchmark group of organisations include size industry and global   scope the data used is provided by deloitte
remuneration policy – executive directors and 
senior executives
different elements of executive reward are delivered over the   short and longerterms our remuneration policy approach is   summarised  below
fixed remuneration
base salary
performance related remuneration
shortterm
annual
performance
bonus
longterm
deferred annual
bonus scheme
and performance
share plan 
benefits
pension contribution
uk all employee share plan
gmb shareholding guidelines
the policy is designed to provide the appropriate balance between   fixed remuneration and variable ‘atrisk’ reward which is linked to   the performance of both the group and the individual the average   remuneration mix is
•  fixed salary and benefits  30
•  annual bonus  10
•  longterm incentives lti ie deferred annual bonus scheme     and performance share plan  60
the graph below illustrates for the financial year ended   30 september 2012 the split of total remuneration for the   executive directors at target performance
policytargetpeter
long
johan
lundgren
william
waggott
volker
böttcher
target lti target annual bonus target fixed remuneration
0
20
40
60
80
100 tt11  ar 2012  20122012  proof 5
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governance
governance
summary of remuneration policy
no changes to policy are anticipated for the financial year ending 30 september 2013
element purpose operation opportunity
base salary   t o attract and retain   executives of  the right   calibre
t o reflect the executive’s   skills experience and   role  within the group   salaries are paid monthly  in cash and are reviewed annually   in october   salaries are benchmarked against companies of  a similar  size   complexity and international scale   internal relativities are also taken into account
changes to salaries during the  year are   described below   no salary  increases are anticipated for  the   financial  year ending 30 september  2013
pension and   benefits
t o attract and retain   executives of  the right   calibre
the executive directors’ benefits include pension medical   insurance life assurance car  provision holiday  and travel   concessions
the executive directors currently  have   pension entitlements of  between 25 and   50 of  base salary   no changes  were made to the pension and   benefits policy  or  quantum during the  year
annual  performance  bonus
t o encourage and   reward the attainment   of challenging financial   and strategic   performance targets   during a oneyear   period
stretching financial and business performance targets are set     by the committee at the beginning of  each financial  year
these measures closely  align the strategy  of  the business   and shareholder   value creation
for the financial  year ended 30 september   2012 the maximum bonus opportunity  as a   percentage of  salary  was 175 for  peter  long   140 for  johan lundgren and william waggott   and 120 for  dr   volker böttcher   no changes  were made to the annual   performance bonus policy  or  quantum during   the  year and none are anticipated for  the   financial  year ending 30 september  2013
deferred  annual bonus   scheme
t o directly  align short
term and longterm   reward through   compulsory deferral   of annual bonus into   shares
t o drive and reward   delivery of  sustained   longterm performance
t o align executive and   shareholder interests
deferral of  at least 25 and up to 50 of  any  annual   performance bonus award into shares for  three  years
matching awards are then provided  which are subject to   continued employment and the satisfaction of  stretching   performance conditions over  a threeyear  period earnings per   share eps growth relative to the uk  retail prices index  rpi   50 relative  t otal shareholder  return tsr 25 and   improvement in return on invested capital roic 25
no matching shares  will  vest unless the ratio of  the company’s   roic to the company’s weighted average cost of  capital   wacc measured on average over  a period of  three financial   years exceeds one
the performance measures have been selected to ensure a strong   link between reward underlying group financial performance and   shareholder returns
matching sharebased awards of  up to four   times the deferred amount
no changes  were made to the annual   deferred annual bonus scheme policy  or   matching ratio during the  year
performance  share plan
annual awards to   incentivise longterm   value creation
t o align interests   of executives and   shareholders
t o support the retention   of key  senior  executives
performance is measured over  a threeyear  period   awards  are  subject  to  continued  employment  and  the  satisfaction  of the same stretching performance conditions as dabs   matching awards over  a threeyear  period likewise no shares  will  vest unless the company’s roic to wacc ratio exceeds one
the performance measures have been selected to ensure a   strong link  between reward underlying group financial   performance and shareholder  returns
for the financial  year ended 30 september   2012 the maximum psp  opportunity  as a   percentage of  salary  was 200 for  peter   long 120 for  johan lundgren and william   waggott and 100 for  dr   volker böttcher   no changes  were made to the performance   share plan policy  or  quantum during the  year
it is anticipated that the maximum psp   opportunity as a percentage of  salary for   the financial  year ending 30 september  2013   will be 200 for  peter  long and 120 for   johan lundgren and william waggott an   award is not planned for  dr   volker böttcher
uk all   employee  share plan
t o encourage   employees to build a   shareholding in the   company
the hmrcapproved share incentive plan is open to all uk  eligible   employees including executive directors and gmb members   employees can allocate part of  their  pretax  salary  to purchase   shares in the company shares purchased are held in  trust prior   to transfer  to participating employees
participants currently  receive a matching share for  every  four   shares bought under  the plan matching shares are not subject   to performance conditions   the  maximum  amount  that  can  be  purchased  is £1500 in any  one tax   year  no changes  were made to the uk  all   employee share plan policy  or  quantum   during the  year wwwtuitravelplccom
70  tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
incentive plans 
deferred annual bonus scheme dabs matching awards and 
performance share plan psp awards made after 1 october 2011
•  up to half of awards will vest based on growth in the company’s   reported earnings per share eps in excess of growth in the uk   retail price index rpi as follows
average annual eps growth   in excess of rpi growth  proportion of award that vests
less than 4  0
between 4 and 13 inclusive  between 10 and 100 inclusive     straightline basis
greater than 13  100
•  up to onequarter of awards will vest based on the group’s total   shareholder return tsr performance relative to an average of   the tsr performance of an index of international travel and leisure   companies which are considered the most relevant peers in terms   of size global scope business type and exposure to external factors
the companies included in the index are
1  aer lingus group  13  international consolidated airlines group
2  air berlin  14  kuoni reisen holding
3  air franceklm  15  national express group
4  carnival  16  norwegian air shuttle
5  club mediterranee  17  pierre  vacances
6  deutsche lufthansa  18  pricelinecom
7  easyjet  19  royal caribbean cruises
8  expedia  20  ryanair  holdings
9  finnair  21  stagecoach group
10  firstgroup  22  thomas  cook  group
11  flight centre  23  wotifcom holdings
12  hertz  global  holdings
    the vesting schedule for the portion of awards subject to tsr   performance is as follows
tui travel plc’s tsr performance  proportion of award that vests
below index  0
between index and index 8  between 15 and 100     per annum  straightline basis
exceeding index 8 per annum  100
•  up to onequarter of the awards will vest based on the company’s   roic performance over the performance period
average annual roic  proportion of award that vests
below 141  0
between 141 and 156  between 15 and 100       straightline basis
greater than 156  100
    a performance hurdle of roic requiring roic to be on average   at least equal to wacc measured over three years is used to   ensure that the longterm incentive awards pay out only when   shareholder value is being created over the performance period if   the roicwacc performance hurdle is not met no shares will vest   the committee assesses the eps and the roic tests based on   audited information independent calculations of tsr performance   for outstanding awards are performed by deloitte
base salary 
peter long’s base salary has not been increased since 1 october   2008 as the committee wants to continue to leverage his longterm   reward to align his interests with shareholders
as announced last year johan lundgren was promoted to the role of   deputy ceo on 20 october 2011 johan has overall responsibility for   the mainstream  sector  of  the  group  which  represented  approximately   84 of revenues and 86 of underlying profits during the year   taking a unified approach across the mainstream business is already   delivering improved financial results to reflect this progression and   broadened responsibilities johan’s salary was increased to £700000   as disclosed in last year’s annual report no salary increase or other   changes to his package are anticipated during this financial year
following william waggott’s excellent performance in his expanded   role as chief financial officer with additional commercial responsibility   for the hotels division the committee decided to increase his salary   from £490000 to £550000 effective december 2011 – an increase   of 12 this increase reflects the fact that his salary was increased   by 4 at the time of his appointment as cfo with a view to allowing   him to establish himself before fully adjusting his salary the new   salary has been set at a level that reflects the expanded nature of   his responsibilities and external market conditions no salary increase   is anticipated during this financial year and there are no changes to   the rest of his package
as a result of the mainstream sector changes dr volker böttcher’s   role has been reduced in scope to reflect his new responsibilities   the committee deemed that it was appropriate to reduce his   remuneration package on a phased basis no psp award will be   made in december 2012 furthermore dr böttcher will be awarded   a reduced quantum of matching shares for the financial year ending   30 september 2013 from october 2013 his salary will be reduced   his maximum bonus potential will be decreased and a lower psp   award may be granted
during 2012 annual salary increases were awarded to some   employees across the group these typically ranged from 253   and were determined in line with local conditions and legislation
benefits
in addition to the items outlined in the summary of remuneration   policy johan  lundgren  received  education  benefits  and  tax  assistance   as part of the ongoing support relating to his relocation to the uk   from sweden on 1 august 2009
the group’s uk pension policy for executive directors and other   members of the gmb is that in the event that a participant in a   registered pension scheme may reach or exceed hmrc lifetime or   annual thresholds and therefore chooses not to accept further   registered pension contributions a contribution to an unregistered   longterm investment scheme or a nonpensionable cash payment   equivalent to the group’s contribution to the registered pension   scheme will be offered in lieu pension scheme participants will not   be compensated for any adverse tax consequences of exceeding the   hmrc lifetime allowance limit   in the event of death in service the arrangements for the executive   directors and other members of the gmb provide lump sums for   the purchase of dependants’ pensions of the greater of eight times   salary or the value of the pension fund in addition to which a lump   sum of four times salary is payable following the changes to the tax   rules from april 2006 any dependant’s pension may be paid as an   additional lump sum subject to hmrc limits   dr volker böttcher participates in separate pension arrangements   in germany at a cost to the company of 25 of base salary
governance
remuneration report continued tt11  ar 2012  20122012  proof 5
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tui travel plc annual report  accounts 2012  71
governance
governance
the graph below compares the tsr performance of tui travel plc   assuming dividends are reinvested with the tsr performance of   an index of international travel and leisure companies this index is   considered by the committee to be the most appropriate benchmark   for comparison purposes from october 2011 this index has also been   used for performance measurement under the company’s longterm   incentive schemes for additional reference the tsr performance of   the ftse 100 and ftse 250 indices and the company’s main uklisted   competitor have also been shown
shareholding guidelines
within five years of their appointment executive directors are   expected to build and then maintain a holding of shares in the   company as set out below
chief executive  200 of base salary
other executive directors  150 of base salary
other members of the gmb are expected to build and then maintain   a holding equal to 100 of their base salary
to qualify for inclusion the shares must have vested ie have become   unconditional and be held beneficially by the executive or the   spouse of the executive   executive directors’ external appointments 
executive directors are able to accept nonexecutive appointments   outside the company as long as this does not lead to a conflict of   interest with the consent of the board as such appointments can   enhance their experience and add value to the company any fees   received excluding positions where the director is appointed as the   company’s representative are retained by the director   for the year ended 30 september 2012 peter long received and   retained nonexecutive directors’ fees in respect of an appointment   with rentokil initial plc of £63750 2011 £75000 no other executive   director currently holds an external nonexecutive director post
deferred annual bonus scheme dabs matching awards and 
performance share plan psp awards made before 1 october 2011
for dabs awards made before october 2011 up to threequarters   of awards will vest based on growth in the company’s adjusted eps   in excess of growth in rpi and up to onequarter of awards will vest   based on relative tsr performance for psp awards made before   october 2011 up to half of awards will vest based on growth in the   company’s adjusted eps in excess of growth in rpi and up to half   will vest based on relative tsr performance the eps and tsr   performance schedules are as follows
•  growth in the company’s adjusted eps in relation to the growth in rpi   average annual eps growth   in excess of rpi growth  proportion of award that vests
less than 4  0
between 4 and 13  between 10 and 100     straightline basis
greater than 13  100
•  the company’s tsr performance ranking relative to the tsr   performance of the companies in the ftse 100 ranked 30th   to 100th by market capitalisation as at the date of the award   as shown in the table below
tsr ranking  proportion of award that vests
below median  0
between median and upper quartile  between 15 and 100       straightline basis
above upper quartile  100
no new shares were issued during the year and therefore the company   has remained within its headroom limits for the use of new shares   under share incentive schemes all share incentive awards made and   all future share incentive awards will normally be settled with shares   purchased in the market   schedule 8 to the large and mediumsized companies and groups   accounts and reports regulations 2008 requires that the company   must provide a graph comparing the tsr performance of a   hypothetical holding of shares in the company with a broad equity   market index over a fiveyear period   tui travel plc
ftse 100
ftse 250
international travel 
 leisure excl tui
thomas cook group
source datastream
tui travel plc
total shareholder return
120
100
80
40
60
20
30 sept
2007
30 sept
2008
30 sept
2009
30 sept
2010
30 sept
2011
30 sept
2012 wwwtuitravelplccom
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governance
remuneration report continued
remuneration policy – nonexecutive directors
nonexecutive directors including the chairman do not have service   contracts and do not participate in the group’s pension scheme   annual bonus scheme or longterm incentive schemes   nonexecutive directors have letters of appointment which can be   terminated by either party by serving three months’ notice with the   exception of horst baier whose initial term expired in october 2012   and provided for six months’ notice his new letter of appointment is   on the same terms as the other nonexecutive directors ie three   months’ notice by either party   in accordance with the requirements of the uk corporate governance   code all directors will be subject to reelection at the annual general   meeting on thursday 7 february 2013            number period by either   nonexecutive director  effective date of contract  company or director
dr michael frenzel  3 september 2012  3 months
sir michael hodgkinson  3 september 2012  3 months
horst baier  13 october 2012  3 months
tony campbell  3 september 2012  3 months
coline mcconville  21 september 2011  3 months
rainer feuerhake  3 september 2012  3 months
janis kong  29 may 2012  3 months
minnow powell  4 april 2012  3 months
harold sher  29 october 2012  3 months
dr erhard shipporeit  29 october 2012  3 months
dr albert schunk  29 october 2012  3 months
nonexecutive directors are paid a fee which is approved by the   board on the recommendation of the chairman and the executive   directors having taken account of the fees paid in other companies   of a similar size and complexity and the skills and experience of the   individuals the chairman’s fee is approved by the remuneration   committee excluding the chairman
nonexecutive  director  annual  fee
chairman  £300000
deputy chairman also the senior independent director  £200000
basic fee for nonexecutive director   £55000
additional fee for chairman of the audit committee  £15000
additional fee for chairman of the remuneration committee  £10000
contracts of service
the committee’s policy is for executive directors to have rolling   contracts with a 12month notice period   peter long johan lundgren william waggott and dr volker böttcher   currently have service agreements with a 12month notice period   it is intended that all new appointments will also have 12month notice   periods however on occasion to complete an external recruitment   successfully a longer initial period may be used reducing to 12 months   following guidance in the uk corporate governance code       number of months’         notice by either   executive director  effective date of contract  company or director
peter long  19 february 2008  12
johan lundgren  20 march 2009  12
william waggott  22 april 2008  12
dr volker böttcher  25 july 2012  12
exit payments policy
the committee has considered the company’s policy on   remuneration for executives leaving the group we are committed   to ensuring a consistent approach to the application of our policy   in this area in order to ensure that we do not pay more than is   necessary our policy for service contracts is in line with general   market practice
•  notice periods are limited to 12 months’ base pay and contractual   benefits subject to mitigation   •  payment in lieu of notice is payable where 12 months’ notice is not   given to the director or when the director gives 12 months’ notice   and the company does not wish them to serve notice if a notice   period is served the compensation is reduced in the event that a   director is terminated for cause the company may terminate the   contract with no compensation payable   •  there is no provision for additional compensation on termination   following a change of control   •  there is no provision for liquidated damages of any kind in the   event of an early termination of a contract the policy is to seek   to minimise any liability   •  incentives
  –    bonus with the exception of termination for cause resignation   and gardening leave executive directors are only eligible subject   to performance for the bonus relating to the proportion of the   financial year worked
  –    performance share plan leaver provisions were approved by   shareholders when they approved the plan for good leavers   awards generally vest after three years prorated for time and   subject to performance awards are generally forfeited where   departure is for other reasons for example resignation and   termination for cause
  –    deferred annual bonus scheme leaver provisions were   approved by shareholders when they approved the plan   on termination unvested shares representing deferred annual   bonus shall vest other than on dismissal for cause for good   leavers matching awards generally vest after three years   prorated for time and subject to performance matching awards   are generally forfeited where departure is for other reasons   for example resignation and termination for cause tt11  ar 2012  20122012  proof 5
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governance
governance
remuneration for the year ended 30 september 2012
the information provided in the following pages of this report has been audited by pricewaterhousecoopers llp
directors’ remuneration 
        total remuneration           excluding  pensions
     
         for the  for the
      basic    year ended  year  ended
        salaries  annual    30 september  30  september
        and fees  bonus¹  benefits²  2012  2011
        £000  £000  £000  £000  £000
executive directors
peter long        850  729  24  1603  1618
johan lundgren        695  485  88  1268  1037
william waggott        540  381  18  939  848
dr volker böttcher
3
      453  255  18  726  769
nonexecutive directors
dr michael frenzel chairman        300  –  –  300  300
sir michael hodgkinson deputy chairman        200  –  –  200  200
horst baier        55  –  –  55  55
tony campbell        55  –  –  55  55
coline mcconville        58  –  –  58  2
rainer feuerhake        55  –  –  55  55
janis kong        19  –  –  19  –
minnow powell        70  –  –  70  35
harold sher        55  –  –  55  55
dr erhard schipporeit        55  –  –  55  55
dr albert schunk        55  –  –  55  55
clare  chapman        3  –  –  3  65
bill dalton        43  –  –  43  55
total      3561  1850  148  5559  5259
1    annual bonus figures include bonus awards in cash in respect of participation in the annual bonus plan but exclude bonus awards in deferred shares details of which are set out in the   longterm incentives section
2    benefits incorporate all tax assessable benefits arising from the individual’s employment for peter long and william waggott this relates in the main to the provision of a car allowance and   private healthcare cover and for dr volker böttcher the provision of a fully expensed company car in addition to the provision of a car allowance and private healthcare cover johan lundgren   received education benefits and tax assistance as part of the ongoing support relating to his relocation to the uk from sweden on 1 august 2009
3    in calculating remuneration for dr volker böttcher payments made during the year in eur have been converted at 12035 to 1 gbp being the average exchange rate for the period 1 october   2011 to 30 september 2012 wwwtuitravelplccom
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governance
remuneration report continued
longterm incentives
deferred annual bonus scheme dabs
the executive directors participated in the deferred annual bonus   scheme during the year ended 30 september 2012 50 of their   annual performance bonus awards will be deferred into share based   awards for three years it is anticipated that awards will be granted by   6 december 2012 as follows     value of december 2012 award
executive director  £000
peter long  729
johan lundgren  485
william waggott  381
dr volker böttcher  255
total  1850
the dabs shares awarded on 28 november 2008 were released   on 5 december 2011 the vesting of the matching shares was subject   to three performance conditions and continued employment
•  a performance hurdle of roic requiring roic to be on average   at least equal to wacc this condition was satisfied
•  growth in the company’s adjusted eps in relation to the growth in   rpi this applied to 75 of the allocation and was achieved at 100
•  the company’s ranking of total shareholder return tsr   performance relative to the tsr performance of the companies   in the ftse 100 ranked 30th to 100th by market capitalisation   as at the date of the award this applied to the remaining 25   of the allocation the condition performed at 0
therefore the overall result was that 75 of the shares vested   the share price on the release date was 1664 pence per share
pension
  accruals in respect of       pension  contributions  or  allowance      for the year ended 30 september 2012
executive director  £000
peter long  425
johan lundgren  229
william waggott  178
dr volker böttcher  113
total  945
total pension contributions or allowances accrued in respect of   the year ended 30 september 2012 were £945000 of this amount   payments totalling £520000 have been made as at the date of this   report in calculating these totals payments made in eur have been   converted at 12035 to 1 gbp being the average exchange rate for   the period 1 october 2011 to 30 september 2012
william waggott has deferred pension entitlements under the defined   benefit section of the tui pension scheme uk he ceased to be an   active member of the defined benefit section on 3 september 2007   and therefore no increase in accrued benefit has occurred during   the year additional information is as follows   •  the accrued benefits including deferred revaluation to   30 september 2012 are a pension of £5794043 per annum   payable from age 60
•  the transfer value as at 30 september 2012 calculated on the   current basis is £1503860
•  the transfer value as at 30 september 2011 calculated on the   basis in force at that time was £1164159 the cash equivalent   transfer value cetv basis in the tui pension scheme uk   was changed with effect from 1 october 2011
•  the only change in accrued benefits over the financial year is   another year of deferred revaluation fixed at 5 per annum   the accrued benefits at the start of the year were £5518136 per   annum so there has been an increase in pension of £275907 per   annum over the year
•  there have been no contributions by mr waggott over the financial   year into the tui pension scheme uk the change in transfer   value is £339701
annual performance bonus
the performance of each of the executive directors has been   reviewed by the committee against the stretching financial and   business performance targets which were established and agreed   at the start of the year the bonuses awarded were as follows
executive director  bonus award as a  of potential
peter long  98
johan lundgren  99
william waggott  99
dr volker böttcher  94 tt11  ar 2012  20122012  proof 5
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governance
deferred annual bonus scheme
awards made under the dabs and which remain outstanding at 30 september 2012 are       dabs shares      dabs shares        dabs shares      maximum
    awarded    vested     released    value  based
    during      during        during    maximum  on  share
  dabs shares  the year    market  the year  market    planned  the year     dabs shares  price of     held at  ended    price per  ended  price per  market  actual  ended    held at  2341p at
  1 oct  30 sept  award  share at  30 sept  share at  value at  vesting  30 sept  release  30 sept  28 sept
directors  2011  2012  date  award  2012  vesting  vesting £  date  2012  date  2012  2012 £
peter long  172472
1 3
    281108  20525p        021209  172472  281111  –  –
  1169304
2
    281108  20525p  876978  16640p  1459291  051211  876978  051211  –  –
  154592
1 3
    021209  24330p        021209      154592  361900
  1048088
2
    021209  24330p        041212      1048088  2453574
  324781
1
    061210  22900p        061213      324781  760312
  1299124
2
    061210  22900p        061213      1299124  3041249
    451578
1
  071211  16470p        071214      451578  1057144
    1806312
2
  071211  16470p        071214      1806312  4228576
t otal  4168361  2257890      876978    1459291    1049450    5084475  11902755
johan lundgren  79913
1 3
    281108  20525p        021209  79913  281111  –  –
  541784
2
    281108  20525p  406338  16640p  676146  051211  406338  051211  –  –
  62459
1 3
    021209  24330p        021209      62459  146217
  423452
2
    021209  24330p        041212      423452  991301
  158515
1
    061210  22900p        061213      158515  371084
  634060
2
    061210  22900p        061213      634060  1484334
    220400
1
  071211  16470p        071214      220400  515956
    881600
2
  071211  16470p        071214      881600  2063826
t otal  1900183  1102000      406338    676146    486251    2380486  5572718
william waggott  57490
1 3
    281108  20525p        021209  57490  281111  –  –
  389768
2
    281108  20525p  292326  16640p  486430  051211  292326  051211  –  –
  52137
1 3
    021209  24330p        021209      52137  122053
  353472
2
    021209  24330p        041212      353472  827478
  123144
1
    061210  22900p        061213      123144  288280
  492576
2
    061210  22900p        061213      492576  1153120
    208257
1
  071211  16470p        071214      208257  487530
    833028
2
  071211  16470p        071214      833028  1950119
t otal  1468587  1041285      292326    486430    349816    2062614  4828580
dr  volker  104809
1
    281108  20525p  104809  16640p  174402  051211  104809  051211  –  –
böttcher  419236
2
    281108  20525p  314427  16640p  523207  051211  314427  051211  –  –
  101819
1
    021209  24330p        041212      101819  238358
  407276
2
    021209  24330p        041212      407276  953433
  121568
1
    061210  22900p        061213      121568  284591
  486272
2
    061210  22900p        061213      486272  1138363
    170306
1
  071211  16470p        071214      170306  398686
    681224
2
  071211  16470p        071214      681224  1594745
t otal  1640980  851530      419236    679609    419236    1968465  4608176
grand total 9178111  5252705   1994878  3319476  2304753  11496040 26912229
1    deferred award the deferred element of annual bonus subject to forfeiture for gross misconduct bankruptcy or certain other circumstances in accordance with the scheme rules
2    matching award a multiple of the deferred award subject to continued employment to the release date and performance conditions over the threeyear vesting period as specified in this   report and in accordance with the scheme rules
3    during the financial year ended 30 september 2010 these directors and the company agreed to enter into a joint election pursuant to section 4311 of the income tax earnings and   pensions act 2003 in respect of this award consequently the remuneration committee agreed to vest this award early and release sufficient shares to satisfy the tax liability arising from   the joint election the remaining shares were held as restricted shares subject to clawback conditions and were released after the third anniversary of the award date in accordance with the   scheme rules
•  a performance hurdle of roic requiring roic to be on average at   least equal to wacc this condition was satisfied
•  growth in the company’s adjusted eps in relation to the growth in uk   rpi this  applied  to  50  of  the  allocation  and  was  achieved  at  100
•  the company’s ranking of total shareholder return tsr   performance relative to the tsr performance of the companies   in the ftse 100 ranked 30th to 100th by market capitalisation   as at the date of the award this applied to the remaining 50   of the allocation the condition performed at 0
therefore the overall result was that 50 of the shares vested   the share price on the release date was 1664 pence per share
performance share plan psp
it is anticipated that awards will be granted by 6 december 2012 as follows
  value of december 2012 award
executive director  £000
peter long  1700
johan lundgren  840
william waggott  660
total  3200
the psp shares awarded on 28 november 2008 were released on   5 december 2011 the vesting of the shares was subject to three   performance  conditions wwwtuitravelplccom
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performance share plan psp
awards made under the performance share plan and which remain outstanding at 30 september 2012 are
    maximum      psp shares      psp shares        psp shares      maximum
    awarded    vested     released    value  based
  maximum  during      during        during    maximum  on  share
  psp shares  the year    market  the year  market    planned  the year     psp shares  price of     held at  ended    price per  ended  price per  market  actual  ended    held at  2341p at
  1 oct  30 sept  award  share at  30 sept  share at  value at  vesting  30 sept  release  30 sept  28 sept
directors  2011  2012  date  award  2012  vesting  vesting £  date  2012  date  2012  2012 £
peter long  828258    281108  20525p  414129  16640p  689111  051211  414129  281111  –  –
  698725    021209  24330p        041212    051211  698725  1635715
  742358    061210  22900p        061213      742358  1737860
    1032179  071211  16470p        071214      1032179  2416331
t otal  2269341  1032179      414129    689111    414129    2473262  5789906
johan lundgren  287106    281108  20525p  143553  16640p  238872  051211  143553  281111  –  –
  248664    021209  24330p        041212    051211  248664  582122
  264192    061210  22900p        061213      264192  618473
    850030  071211  16470p        071214      850030  1989920
t otal  799962  850030      143553    238872    143553    1362886  3190515
william waggott  209500    281108  20525p  104750  16640p  174304  051211  104750  281111  –  –
  176736    021209  24330p        041212    051211  176736  413739
  256769    061210  22900p        061213      256769  601096
    400728  071211  16470p        071214      400728  938104
t otal  643005  400728      104750    174304    104750    834233  1952939
dr  volker  221829    281108  20525p  110914  16640p  184561  051211  110914  051211  –  –
böttcher  203639    021209  24330p        041212    051211  203639  476719
  202615    061210  22900p        061213      202615  474322
    283843  071211  16470p        071214      283843  664476
t otal  628083  283843      110914    184561    110914    690097  1615517
grand total 4340391 2566780   773346  1286848  773346  5360478 12548877
governance
remuneration report continued tt11  ar 2012  20122012  proof 5
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governance
governance
directors’ shareholdings
as noted previously the executive directors are subject to a   shareholding obligation peter long is expected to hold shares   at least equal to 200 of his base salary the remaining executive   directors are expected to hold shares at least equal to 150 of base   salary using the midclosing share price on friday 28 september 2012   of 2341 pence the levels of share ownership as a percentage of   pay were
  shareholding as at  shareholding as a   executive director  30 september 2012  percentage of salary
peter long  3774589  1040
johan lundgren  882964  295
william waggott  675962  288
dr volker böttcher  376762  195
as at 30 september 2012 the nonexecutive directors’ interests in   ordinary shares of the company were
  shareholding as at
executive director  30 september 2012
horst baier  –
tony campbell  49980
rainer feuerhake  –
dr michael frenzel chairman  –
sir michael hodgkinson deputy  chairman  20000
janis kong  15000
coline mcconville  –
minnow powell  6891
dr erhard schipporeit  –
dr albert schunk  –
harold sher  –
the company’s register of directors’ interests which is open to   inspection at the registered office contains full details of directors’   shareholdings and will be available for inspection before and during   the annual general meeting on thursday 7 february 2013   during the year the price of the company’s ordinary shares ranged   between 1367 pence and 2341 pence and the midclosing price on   friday 28 september 2012 was 2341 pence
on 3 october 2012 william waggott and tony campbell were   allocated 53 and 691 additional shares respectively under the   dividend reinvestment plan open to all shareholders under the same   terms no further changes took place between 30 september 2012   and the date of approval of the report and accounts   the remuneration report was approved by a duly authorised   committee of the board of directors on 3 december 2012 and signed   on its behalf by   coline mcconville
remuneration  committee  chairman
3 december 2012 wwwtuitravelplccom
78  tui travel plc annual report  accounts 2012
opinion on other matter prescribed by the 
companies act 2006
in our opinion the information given in the directors’ report for the   financial year for which the group financial statements are prepared   is consistent with the group financial statements   matters on which we are required to report 
by exception
we have nothing to report in respect of the following   under the companies act 2006 we are required to report to you if   in  our  opinion  •  certain disclosures of directors’ remuneration specified by law   are not made or   •  we have not received all the information and explanations we   require for our audit
under the listing rules we are required to review   •  the directors’ statement set out on page 54 in relation to   going  concern  •  the part of the corporate governance statement relating   to the company’s compliance with the nine provisions of the   uk corporate governance code specified for our review and
•  certain elements of the report to shareholders by the board   on directors’ remuneration
other matter
we have reported separately on the parent company financial   statements of tui travel plc for the year ended 30 september 2012   and on the information in the directors’ remuneration report that     is described as having been audited
roger de peyrecave senior statutory auditor
for and on behalf of pricewaterhousecoopers llp   chartered accountants and statutory auditors
london
3 december 2012
we have audited the group financial statements of tui travel plc for   the year ended 30 september 2012 which comprise the consolidated   income statement the consolidated statement of comprehensive   income the consolidated balance sheet the consolidated statement   of changes in equity the consolidated statement of cash flows and   the related notes the financial reporting framework that has been   applied in their preparation is applicable law and international financial   reporting standards ifrss as adopted by the european union   respective responsibilities of directors and auditors
as explained more fully in the directors’ responsibilities statement     set out on page 55 the directors are responsible for the preparation   of the group financial statements and for being satisfied that they   give a true and fair view our responsibility is to audit and express   an opinion on the group financial statements in accordance with   applicable law and international standards on auditing uk and ireland   those standards require us to comply with the auditing practices   board’s ethical standards for auditors   this report including the opinions has been prepared for and only   for the company’s members as a body in accordance with chapter 3   of part 16 of the companies act 2006 and for no other purpose   we do not in giving these opinions accept or assume responsibility   for any other purpose or to any other person to whom this report   is shown or into whose hands it may come save where expressly   agreed by our prior consent in writing
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and   disclosures in the financial statements sufficient to give reasonable   assurance that the financial statements are free from material   misstatement whether caused by fraud or error this includes an   assessment of whether the accounting policies are appropriate to   the group’s circumstances and have been consistently applied and   adequately disclosed the reasonableness of significant accounting   estimates made by the directors and the overall presentation   of the financial statements in addition we read all the financial   and nonfinancial information in the annual report  accounts to   identify material inconsistencies with the audited financial statements   if we become aware of any apparent material misstatements   or inconsistencies we consider the implications for our report
opinion on financial statements 
in our opinion the group financial statements   •  give a true and fair view of the state of the group’s affairs as at   30 september 2012 and of its profit and cash flows for the year   then  ended  •  have been properly prepared in accordance with ifrss as adopted   by the european union and   •  have been prepared in accordance with the requirements of the   companies act 2006 and article 4 of the las regulation
financial  statements
independent auditors’ report to the members of tui travel plc
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tui travel plc annual report  accounts 2012  79
financial statements
         year ended  year  ended           30 september  30  september           2012  2011          note  £m  £m
revenue        3  14460  14687  cost of sales              12965 13351
gross profit          1495   1336  administrative  expenses         1199  1094
share of profits of joint ventures and associates            12  5   13  operating profit         301   255  analysed as   
underlying operating profit            3  490   471  separately disclosed items            4  92  74
predecessor accounting for magic life              –   17
acquisition related expenses            13a  62  82
impairment of goodwill            10  20  39
impairment of available for sale financial asset            12  10   –  taxation on profits and interest of joint ventures and associates        12  5  4
         301   255  financial  income            5  96   83  financial  expenses        5  196  194
net financial expenses         100  111
profit before tax              201   144  taxation  charge        8  64  57
profit for the year         137   87  attributable to   
equity holders of the parent              138   85  noncontrolling  interests              1  2  profit for the year          137   87           year ended  year  ended
         30 september  30  september
         2012  2011
         pence  pence
basic and diluted earnings per share for profit attributable  
to the equity holders of the company during the year
basic earnings per share            32  125  77
diluted earnings per share            32  123  76
financial  statements
consolidated income statement
for the year ended 30 september 2012
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80  tui travel plc annual report  accounts 2012
financial  statements
consolidated statement of comprehensive income
for the year ended 30 september 2012
         year ended  year  ended
         30 september   30  september
         2012  2011
        note  £m  £m
profit for the year         137   87  other comprehensive expenseincome   
foreign exchange translation              160  18
actuarial losses arising in respect of defined benefit pension schemes        6c  172  89
tax on actuarial losses            8iii  32   7
cash flow hedges      – movement in fair value            25j  42  85  – amounts recycled to the consolidated income statement          25j  30  4
tax on cash flow hedges            8iii  15   22
available  for  sale  financial  assets    – movement in fair value            12  4  2
– amounts recycled to the consolidated income statement          12  10   1  other comprehensive loss for the year net of tax        351  56
total comprehensive lossincome for the year        214  31  total comprehensive lossincome for the year   
attributable to    
equity holders of the parent              211  26  noncontrolling  interests              3  5  total         214  31  tt11  ar 2012  20122012  proof 5 wwwtuitravelplccom
tui travel plc annual report  accounts 2012  81
financial statements
financial  statements
consolidated balance sheet
at 30 september 2012
         30 september   30  september
         2012  2011
        note  £m  £m
noncurrent assets   
intangible  assets        10  4482   4642  property plant and equipment            11  1096   1001  investments in joint ventures and associates            12  258   242  other  investments        12  66   72  trade and other receivables            16  225   202  retirement benefit asset            6c    –   1  derivative financial instruments            25i    21   30  deferred tax assets            14  125   138           6273   6328  current assets   
inventories        15  61   69  other investments             17b  19   22  trade and other receivables            16  1312   1472  income tax recoverable              15   62  derivative financial instruments            25i   98   185  cash and cash equivalents            17a  830   902  assets classified as held for sale            18  13   13           2348   2725  total assets         8621   9053  current liabilities   
interestbearing loans and borrowings            19  70  96
retirement  benefits            6c   2  3
derivative financial instruments            25i   125  133
trade and other payables            20  4549  4622
provisions for liabilities            21  300  317
income tax payable              39  133
         5085  5304
noncurrent liabilities   
interestbearing loans and borrowings            19  868  802
retirement  benefits            6c   646  511
derivative financial instruments            25i    20  18
trade and other payables            22  48  56
provisions for liabilities            21  316  353
deferred tax liabilities            14  29  71
         1927  1811
total liabilities         7012  7115
net assets         1609   1938  equity   
called up share capital            23  112   112  convertible bond reserve            24  88   85  other  reserves        24  2627   2846  accumulated  losses            24  1262  1155
total equity attributable to equity holders of the parent       24  1565   1888  noncontrolling interests        24  44   50  total equity        24  1609   1938  the financial statements on pages 79 to 146 were approved by a duly authorised committee of the board of directors on 3 december 2012 and   signed on its behalf by
peter j long william h waggott
chief executive  chief financial officer
company number 6072876
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82  tui travel plc annual report  accounts 2012
      other reserves
  
    called up   convertible          equity  non
    share  bond  merger  translation  hedging  accumulated  holders  controlling  total
    capital  reserve  reserve  reserve  reserve  losses  of parent  interests  equity
    £m  £m  £m  £m  £m  £m  £m   £m  £m
at 1 october 2010    112  83  2521  292  19  1014  1975  1  1976
profit for the year    –  –  –  –  –  85  85  2  87
other comprehensive lossincome for the year   –  –  –  3  56  112  59  3  56
total comprehensive lossincome for the year   –  –  –  3  56  27  26  5  31
transactions with owners
sharebased payment    –  –  –  –  –  19  19  –  19
acquisition of shares by employee benefit trust  –  –  –  –  –  7  7  –  7
dividends    –  –  –  –  –  122  122  2  124
capital increase in magic life    –  –  2  –  –  –  2  –  2
disposals to noncontrolling interests    –  –  –  3  –  4  7  46  39
change in deferred tax rate on equity     portion of convertible bond    –  2  –  –  –  –  2  –  2
at 30 september 2011   112 85 2523 286 37 1155 1888 50 1938
      other reserves
  
    called up   convertible          equity  non
    share  bond  merger  translation  hedging  accumulated  holders  controlling  total
    capital  reserve  reserve  reserve  reserve  losses  of parent  interests  equity
    £m  £m  £m  £m  £m  £m  £m   £m  £m
at 1 october 2011    112  85  2523  286   37   1155  1888   50   1938  profit for the year    –  –  –  –  –  138   138   1  137  other comprehensive loss for the year    –  –  –  157  62  130  349  2  351
total comprehensive lossincome for the year   –  –  –  157  62  8   211  3  214
transactions with owners
sharebased payment – charge for the year   –  –  –  –  –  16  16  –  16
sharebased payment – disposal on award of shares  –  –  –  –  –  5  5  –  5
dividends    –  –  –  –  –  125  125  3  128
acquisition of noncontrolling interests    –  –  –  –  –  1  1  –   1
change in deferred tax rate on equity portion   of convertible bond    –  3  –  –  –  –  3  –  3
at 30 september 2012   112 88  2523 129 25 1262 1565 44  1609 
details of reserve movements are set out in note 24 to the consolidated financial statements
financial  statements
consolidated statement of changes in equity
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financial statements
         year ended  year  ended
         30 september  30  september
         2012  2011
        note  £m  £m
profitloss for the year         137  87
adjustment for
depreciation  and  amortisation            1011  219  238
impairment of intangible assets and property plant and equipment        1011  22   30  impairment of goodwill            10  20   39  equitysettled sharebased payment expenses            6d  16   19  profitloss on sale of property plant and equipment          7  9  6  share of profit of joint ventures and associates            12  5  13
loss on foreign exchange             7  14   38  impairment of available for sale financial asset            12  10   –  dividends received from joint ventures and associates          12  4   7  pension curtailment gain recognised in consolidated income statement        6c  1  64
financial  income            5  96  83
financial  expenses        5  196   194  taxation        8  64   57  operating cash flow before changes in working capital and provisions       591   555  decreaseincrease in inventories              17   9
increase in trade and other receivables              55  68
increase in trade and other payables               126   140  decreaseincrease in provisions and retirement benefits            35  125  cash flows generated from operations         644   743  interest  paid           75  86
interest  received         15   9  income taxes paid              82  53
cash flows generated from operating activities        502   613  investing activities    
proceeds from sale of property plant and equipment            116   148  acquisition of subsidiaries net of cash acquired            13b  23  33
proceeds from other investments              1   3  investment in joint ventures associates and other investments         12  25  18
acquisition of property plant and equipment              287  257
acquisition of intangible assets            10  91  56
cash flows used in investing activities         309  213
financing activities   
proceeds from new loans and deposits taken              14   26  repayment of borrowings              43  556
repayment of finance lease liabilities              19  145
dividends paid to ordinary and noncontrolling interests          24  128  124
shares purchased by employee benefit trust            23  –   7
cash flows used in financing activities         176  806
net increasedecrease in cash and cash equivalents        17   406
cash and cash equivalents at start of the year             17  902   1304  effect of foreign exchange on cash held              89  4  cash and cash equivalents at end of the year        17  830   902  movements in cash and net debt are presented in note 26
financial  statements
consolidated statement of cash flows
for the year ended 30 september 2012
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impairment of goodwill and available for sale financial assets interest   and taxation of joint ventures and associates and separately disclosed   items included within the operating result
underlying earnings used in the calculation of underlying earnings   per share is profit after tax from continuing operations excluding   the impact of predecessor accounting acquisition related expenses   impairment of goodwill and available for sale financial assets and   separately disclosed items included within the operating result   for the purpose of this calculation an underlying tax charge is   used which excludes the tax effects of separately disclosed items   acquisition related expenses goodwill and available for sale financial   asset impairment charges and separately disclosable tax items
it should be noted that the definitions of underlying items being   used in these consolidated financial statements are those used by   the group and may not be comparable with the term ‘underlying’ as   defined by other companies within both the same sector or elsewhere
reconciliation of underlying operating profit to underlying profit 
before tax
   year ended  year  ended       30 september  30  september       2012  2011      note  £m   £m   underlying operating profit  3  490   471  net underlying financial expenses  5  100  111
underlying profit before tax   390   360  iii separately disclosed items
separately disclosed items are those significant items which in   management’s judgement are highlighted by virtue of their size or   incidence to enable a full understanding of the group’s financial   performance such items are included within the income statement   caption to which they relate note 4
iv business and performance review
the group’s business activities together with factors likely to affect   its future development performance and position are set out in the   business performance section in addition note 25 sets out the   group’s objectives policies and processes for managing its capital   financial risks financial instruments and hedging activities as well     as its exposures to credit and liquidity risk
v funding and liquidity
the board remains satisfied with the group’s funding and liquidity   position at 30 september 2012 the main sources of debt funding   included
•  a total of £970m syndicated bank revolving credit facilities which   mature in june 2015   •  £186m of drawn finance lease obligations with repayments up to   march 2022   •  £350m convertible bond due october 2014 and
•  £400m convertible bond due april 2017
the ratio of earnings before interest taxation depreciation   amortisation and operating lease rentals ebitdar to fixed charges   being the aggregate amount of interest and any other finance   charges in respect of borrowings and including all payments under   operating leases and the ratio of net debt to earnings before interest   taxation depreciation and amortisation ebitda which the board   believes to be the most useful measures of cash generation and   gearing as well as being the main basis for the group’s credit facility   covenants are well within the covenant limits at the date of the   balance sheet forecasts reviewed by the board including forecasts   adjusted for significantly worse economic conditions show continued   compliance with these covenants for both covenants earnings are   calculated on an underlying basis as described in note 1bii
1 accounting policies
the accounting policies adopted in the preparation of these   consolidated financial statements are consistent with those followed   in the preparation of the group’s consolidated financial statements   for the year ended 30 september 2011 except for the adoption of   the following amended international financial reporting standards   ifrs and interpretations that are applicable for the year ended   30 september 2012   •  ias 24 revised ‘related party disclosures’   •  amendment to ifrs 7 ‘financial instruments transfers of financial   assets’  •  amendment to ifric 14 ‘prepayments of a minimum funding   requirement’
•  annual improvements project 2010 partly applicable for the year   ended 30 september 2012
these amended standards and interpretations have no significant   impact on the consolidated results or financial position
the consolidated financial statements are presented in the group’s   presentation currency of sterling rounded to the nearest million
a statement of compliance
the consolidated financial statements for the year ended 30 september   2012 have been prepared and approved by the directors in accordance   with  international  financial  reporting  standards  and  ifric  interpretations  as adopted by the european union adopted ifrs and the companies   act 2006 applicable to companies reporting under ifrs the consolidated   financial statements were approved on 3 december 2012
b basis of preparation
the consolidated financial statements are prepared on the historical   cost basis other than derivative financial instruments financial   instruments held for trading and financial instruments classified as   available for sale which are stated at their fair value noncurrent   assets and disposal groups held for sale are stated at the lower of   their carrying amount and fair value less costs to sell   i parent company
tui travel plc the company is a company incorporated and domiciled   in england and wales and listed on the london stock exchange     the registered office of the company is tui travel house crawley   business quarter fleming way crawley west sussex rh10 9ql
the company has elected to prepare its parent company financial   statements in accordance with uk gaap
ii underlying measures of profits and losses
the group believes that underlying operating profit underlying profit   before tax and underlying earnings per share provide additional   guidance to statutory measures to help understand the underlying   performance of the business during the financial year the term   underlying is not defined under ifrs it is a measure that is used by   management to assess the underlying performance of the business   internally and is not intended to be a substitute measure for adopted   ifrs gaap measures the group defines these underlying measures   as follows
underlying operating profit is operating profit from continuing   operations stated before separately disclosed items the impact of   predecessor accounting acquisition related expenses impairment of   goodwill and available for sale financial assets and interest and taxation   on the group’s share of the results of joint ventures and associates   underlying profit before tax is profit from continuing operations   before taxation group and share of joint ventures and associates   the impact of predecessor accounting acquisition related expenses   financial  statements
notes to the consolidated financial statements
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or gains and losses being recognised in the consolidated income   statement when control is lost any remaining interest in equity   is remeasured to fair value and a gain or loss is recognised in the   consolidated income statement
iv transactions eliminated on consolidation
intragroup balances and any unrealised gains or income and   expenses arising from intragroup transactions are eliminated in   preparing the consolidated financial statements unrealised gains   arising from transactions with associates and jointly controlled   entities are eliminated to the extent of the group’s interest in the   entity unrealised losses are eliminated in the same way as unrealised   gains but only to the extent that there is no evidence of impairment
v acquisition in stages
where a group gains control of a subsidiary undertaking through   a step acquisition the existing interest owned is remeasured at fair   value with the difference between fair value and book value being   recognised in the income statement the accounting impact of   changes in share ownership which do not affect control is accounted   for through reserves
vi acquisition related expenses
acquisition related expenses comprise amortisation of business   combination intangibles other acquisition related expenses and   remuneration for postcombination services directly attributable   acquisition costs are expensed in the consolidated income statement   rather than included as part of the purchase price   vii contingent consideration
contingent consideration for business combinations  
up until 30 september 2009
contingent consideration is recognised when the payment amount   becomes probable and the amounts can be reliably measured   the purchase price is subsequently adjusted against goodwill or   negative goodwill as the estimate of the amount payable is revised
contingent consideration for business combinations  
from 1 october 2009
contingent consideration is accounted for at fair value at the   acquisition date with subsequent changes in the fair value being   recognised in the income statement contingent consideration   dependent upon continuing service of an employee is charged to   the income statement over the related service period
the term contingent consideration has been used throughout these   financial statements to describe the part of the overall consideration   paid to the former shareholders of businesses acquired on or after    
october 2009 that is contingent upon the future results of those   acquired businesses including where the payment is contingent on   those former shareholders undertaking employment with the group   for a predetermined period after the relevant business combination   ifrs 3 revised requires that these amounts are charged to the   consolidated income statement as a post acquisition employment cost   over the term of the relevant post combination employment period   the group includes the relevant income statement charge within   acquisition related expenses note 13 and which are included within   operating  profit  contingent consideration arising in a business combination that had   been accounted for in accordance with ifrs 3 2004 that has not   been settled or otherwise resolved at the effective date of ifrs 3   revised continues to be accounted for in accordance with ifrs 3   2004 contingent consideration is discounted to present value where   the time value of money is material
on the basis of its forecasts both base case and adjusted as   described above and available facilities the board has concluded that   the going concern basis of preparation continues to be appropriate   c basis of consolidation
the group financial statements consolidate those of the company   and its subsidiaries together referred to as the group and equity   accounts for the group’s interest in joint ventures and associates   the parent company financial statements present information   about the company as a separate entity and not about the group   accounting policies of subsidiaries joint ventures and associates are   amended where necessary to be consistent with those adopted by   the group where audited financial statements are not coterminous   with those of the group the financial information is derived from the   last audited accounts available and unaudited management accounts   for the period up to the group’s balance sheet date
i subsidiaries
subsidiaries are entities controlled by the group control exists   when the group has the power directly or indirectly to govern   the financial and operating policies of an entity so as to obtain   benefits from its activities in assessing control potential voting   rights that are currently exercisable or convertible are taken into   account the financial statements of subsidiaries are included in   the consolidated financial information from the date that control   commences until the date that control ceases
ii joint ventures and associates
joint ventures are jointly controlled entities whose activities the   group has the power to control jointly established by contractual   agreement associates are those entities in which the group has   the ability to exercise significant influence but not control over   the financial and operating policies the consolidated financial   statements include the group’s share of the total recognised income   and expense and changes in equity of joint ventures and associates   on an equity accounted basis from the date that joint control or   significant influence respectively commences until the date that it   ceases associates and joint ventures are recorded at cost as adjusted   for postacquisition changes in the group’s share of net assets of   the entity including goodwill net of accumulated impairment loss   when the group’s share of losses exceeds the carrying amount of   the joint venture or associate the carrying amount is reduced to   £nil and recognition of further losses is discontinued except to the   extent that the group has incurred legal or constructive obligations   or made payments on behalf of the joint venture or associate
iii noncontrolling interests
in the consolidated balance sheet the share of net assets attributable   to noncontrolling interests is disclosed as a separate component   of equity after share capital and reserves the consolidated income   statement discloses the amount of the result for the year attributable   to  noncontrolling  interests
where the group has a written put option in respect of a non
controlling interest and has an unavoidable obligation to purchase   the shareholding the obligation is recorded as a financial liability   at fair value rather than being reported as a separate component   of equity changes to the fair value of the financial liability are   recorded at each period end in the income statement within financial   income or financial expenses
on purchase or sale of a noncontrolling interest held in a group   subsidiary the group recognises increases or decreases in the value   of its interest directly in equity providing there is no overall change   in control as such these transactions do not result in goodwill   financial  statements
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retranslation have been recognised directly in equity in the translation   reserve a designated foreign exchange reserve since 1 january 2007   foreign exchange gains and losses arising from a monetary item   receivable from or payable to a foreign operation the settlement   of which is neither planned nor likely in the foreseeable future are   considered to form part of a net investment in a foreign operation   and are recognised directly in equity in the translation reserve   iii net investment in foreign operations
foreign currency differences arising on the retranslation of a financial   liability designated as a hedge of a net investment in a foreign   operation are recognised in the consolidated statement of   comprehensive income to the extent that the hedge is effective and   are presented within equity in the translation reserve to the extent   that the hedge is ineffective such differences are recognised in profit   or loss when the hedged part of a net investment is disposed the   relevant amount in the translation reserve is transferred to profit or   loss as part of the profit or loss on disposal
e financial instruments
i financial assets
financial assets are either classified as loans and receivables available   for sale financial assets or financial assets at fair value through profit   or loss financial assets include cash and cash equivalents trade   receivables loans trade and other investments derivative financial   instruments and other receivables but excludes financial deposits   prepayments and taxes the group determines the classification of its   financial assets at initial recognition financial assets are recognised   initially at fair value normally being the transaction price plus in the   case of financial assets not at fair value through profit or loss directly   attributable transaction costs the subsequent measurement of   financial assets depends on their classification as follows
loans and receivables
loans and receivables are nonderivative financial assets with fixed or   determinable payments that are not quoted in an active market such   assets are carried at amortised cost using the effective interest   method if the time value of money is significant gains and losses are   recognised in income when the loans and receivables are derecognised   or impaired as well as through the amortisation process this category   of financial assets includes trade and other receivables
available for sale financial assets
available for sale financial assets are those nonderivative financial   assets that are not classified as loans and receivables or financial   assets at fair value through profit or loss after initial recognition   available for sale financial assets are measured at fair value with     gains or losses recognised within other comprehensive income until   the investment is derecognised or until the investment is determined   to be impaired at which time the cumulative gain or loss previously   reported in other comprehensive income is included in the   consolidated income statement note 1wiv describes the basis   on which fair value is determined
financial assets at fair value through profit or loss
financial assets at fair value through profit or loss are measured at   fair value after initial recognition the gain or loss is included in the   consolidated income statement note 1wiv describes the basis   on which fair value is determined
cash and cash equivalents
cash and cash equivalents comprise cash balances and call deposits   which are readily convertible to known amounts of cash and which are   subject to insignificant risk of changes in value and have an original   maturity of three months or less bank overdrafts that are repayable   on demand and form an integral part of the group’s cash management   are included as a component of cash and cash equivalents for the   purpose only of the consolidated statement of cash flows
1 accounting policies continued
viii noncurrent assets held for sale
the group classifies noncurrent assets or disposal groups containing   a noncurrent asset as held for sale if their carrying amount will be   recovered principally through a sale transaction rather than through   continuing use to be classified as held for sale the assets must be   available for immediate sale in their present condition subject only   to terms that are usual and customary for the sale of such assets   and their sale must be highly probable sale is considered to be highly   probable when management are committed to a plan to sell the   assets and an active programme to locate a buyer and complete the   plan has been initiated at a price that is reasonable in relation to their   current fair value and there is an expectation that the sale will be   completed within one year from the date of classification   on initial classification as held for sale noncurrent assets and   disposal groups are measured at the lower of previous carrying   amount and fair value less costs to sell with any adjustments   taken to profit or loss the same applies to gains and losses on   subsequent  remeasurement
any impairment loss on a disposal group is allocated first to goodwill   and then to remaining applicable assets on a pro rata basis except no   loss is allocated to inventories financial assets deferred tax assets or   employee benefit assets which continue to be measured in accordance   with the group’s accounting policies
certain assets and liabilities are excluded from the measurement   basis of ifrs 5 including deferred tax assets ias 12 ‘income taxes’   assets arising from employee benefits ias 19 ‘employee benefits’   and financial assets within the scope of ias 39 ‘financial instruments   recognition and measurement’   ix business combinations between entities under common 
control
the results of business combinations between entities under common   control are incorporated as if the acquired entity had always been   combined this is also known as ‘predecessor accounting’ where     this applies all necessary comparatives for the prior year financial   statements are restated to reflect the inclusion of results from the   commencement of the earliest comparative period in accordance     with ias 8   d foreign currency
i foreign currency transactions
transactions in foreign currencies are translated at the foreign exchange   rate ruling at the date of the transaction monetary assets and liabilities   denominated in foreign currencies at the balance sheet date are   translated at the foreign exchange rate ruling at that date foreign   exchange differences arising on translation are recognised in the   income statement except for differences arising on the retranslation   of a financial liability designated as a hedge of the net investment   in a foreign operation or qualifying cash flow hedges which are   recognised directly in equity nonmonetary assets and liabilities   that are measured in terms of historical cost in a foreign currency are   translated using the exchange rate at the date of the transaction   nonmonetary assets and liabilities denominated in foreign currencies   that are stated at fair value are translated at foreign exchange rates   ruling at the dates the fair values were determined
ii foreign operations
the assets and liabilities of foreign operations including goodwill   and fair value adjustments arising on consolidation are translated to   sterling at the foreign exchange rates ruling at the balance sheet date
the revenues and expenses of overseas operations are translated at   rates approximating to the foreign exchange rates ruling at the dates   of the transactions foreign exchange differences arising on   financial  statements
notes to the consolidated financial statements continued
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iii derivative financial instruments
the group uses derivative financial instruments to hedge its exposure   to foreign exchange and fuel price risks arising from operational   financing and investment activities in accordance with its treasury   policy the group does not hold or issue derivative financial   instruments for trading purposes however derivatives that do not   qualify for hedge accounting are accounted for as trading instruments
derivative financial instruments are initially recognised at fair value   on the date a derivative contract is entered into and are subsequently   remeasured at fair value the method of recognising the resulting gain   or loss depends on whether the derivative is designated as a hedging   instrument and if so the nature of the item being hedged the gain     or loss on remeasurement to fair value on derivatives not designated   as a hedging instrument is recognised immediately in the income   statement against the opposite line of income or expense the   accounting policy for derivatives that qualify for hedge accounting     is included in note 1f
iv share capital
ordinary shares are classified as equity incremental costs directly   attributable to the issue of ordinary shares and share awards are   recognised as a deduction from equity net of any tax effects
f hedge accounting
the group designates certain derivatives as cash flow hedges of   highly  probable  forecast  transactions  on initial designation of the hedge the group formally documents the   relationship between the hedging instruments and hedged items   including the risk management objectives and strategy in undertaking   the hedge transaction together with the methods that will be used   to assess the effectiveness of the hedging relationship the group   makes an assessment both at the inception of the hedge relationship   as well as on an ongoing basis whether the hedging instruments are   expected to be ’highly effective’ in hedging cash flows during the   period for which the hedge is designated and whether the actual   results of each hedge are within a range of 80125 the transaction   being hedged should be highly probable to occur and should present   an exposure to variations in cash flows that could ultimately affect   reported net income   derivatives are recognised initially at fair value subsequent to initial   recognition derivatives are measured at fair value   where a derivative financial instrument is designated as a hedge of   the variability in cash flows arising from a recognised asset or liability   or a highly probable forecast transaction the effective part of any fair   value gain or loss on the derivative financial instrument is recognised   directly in the hedging reserve any ineffective portion of the hedge   is recognised immediately within the consolidated income statement
when the forecast transaction subsequently results in the recognition   of a nonfinancial asset or nonfinancial liability the associated   cumulative gain or loss is removed from the hedging reserve and is   included in the initial cost or other carrying amount of the nonfinancial   asset or liability if a hedge of a forecast transaction subsequently   results in the recognition of a financial asset or a financial liability   the associated gains and losses that were recognised directly in equity   are reclassified into the consolidated income statement in the same   period or periods during which the asset acquired or liability assumed   affects profit or loss
for cash flow hedges other than those covered by the preceding two   paragraphs the associated cumulative gain or loss is removed from   equity and recognised in the consolidated income statement in the   same period or periods during which the hedged forecast transaction   affects the consolidated income statement
derivatives
derivatives are accounted for in accordance with the policy in     note 1eiii
derecognition
the group derecognises a financial asset when the contractual   rights to the cash flows from the asset expire or it transfers the   rights to receive the contractual cash flows on the financial asset   in a transaction in which substantially all the risks and rewards   of ownership of the financial asset are transferred any interest   in transferred financial assets that is created or retained by the   group is recognised as a separate asset or liability
ii financial liabilities
financial liabilities are either classified as financial liabilities measured   at amortised cost or financial liabilities at fair value through profit   or loss financial liabilities include trade and other payables excluding   tax and social security and deferred income accruals finance debt   and derivative financial instruments the group determines the   classification of its financial liabilities at initial recognition financial   liabilities are recognised initially at fair value normally being the   transaction price plus in the case of financial liabilities not at fair   value through profit or loss directly attributable transaction costs   the subsequent measurement of financial liabilities depends on   their classification as follows
financial liabilities measured at amortised cost
all financial liabilities are initially recognised at fair value for   interestbearing loans and borrowings this is the fair value of the   proceeds received net of issue costs associated with the borrowing   after initial recognition financial liabilities other than those at fair   value through profit or loss are subsequently measured at amortised   cost using the effective interest method amortised cost is calculated   by taking into account any issue costs and any discount or premium   on settlement gains and losses arising on the repurchase settlement   or cancellation of liabilities are recognised respectively in interest   other revenues and finance costs this category of financial liabilities   includes trade and other payables
convertible bonds
convertible bonds are separated into three components liability   issuer call option and equity at inception each component is   recognised  separately
the initial fair value of the liability component of the convertible     bond is determined using the market interest rate for an equivalent   nonconvertible bond and is subsequently recorded at an amortised   cost basis using the effective interest method until extinguished on   conversion or maturity of the bonds the issuer call option is fair   valued using a valuation model and is measured at each balance sheet   date with changes in fair value recognised in the income statement   the remainder of the proceeds are recognised in shareholders’ equity   in a separate convertible bond reserve
issue costs are apportioned between the liability and equity   components of a convertible bond based on the allocation of   proceeds  to  the  liability  and  equity  components  when  the  instruments  are first recognised
derivatives
derivatives are accounted for in accordance with the policy in     note 1eiii
derecognition
the group derecognises a financial liability when the contractual   obligations to pay the contractual cash flows on the financial liability   are discharged cancelled or expire   tt11  ar 2012  20122012  proof 5 wwwtuitravelplccom
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notes to the consolidated financial statements continued
h expenses
i operating lease payments
payments made under operating leases are recognised in the   consolidated income statement on a straight line basis over the   term of the lease lease incentives received are recognised in   the consolidated income statement as an integral part of the   total lease expense over the term of the lease
ii finance lease payments
minimum lease payments are apportioned between the finance   charge and the reduction of the outstanding liability the finance   charge is allocated to each period during the lease term so as to   produce a constant periodic rate of interest on the remaining balance   of the liability
iii marketing and other direct sales costs
marketing advertising and other promotional costs including those   related to the production of brochures are expensed when the   benefit of the goods or services is made available to the group   in particular brochure and advertising costs are expensed to the   consolidated income statement when the group’s suppliers have   delivered  the  relevant  material  i employee benefits
i defined contribution plans
obligations for contributions to defined contribution pension plans   are recognised as an expense in the consolidated income statement     as incurred
ii defined benefit plans
the group’s net obligation in respect of defined benefit pension plans   is calculated separately for each plan by estimating the amount of   future benefit that employees have earned in return for their service   in current and prior periods that benefit is discounted to determine   its present value and any unrecognised past service costs and the fair   value of any plan assets is deducted in calculating the overall liability   the liability discount rate is the yield at the balance sheet date on   aa creditrated bonds denominated in the currency of and having   the same maturity dates approximating to the terms of the group’s   obligations the calculation is performed by a qualified actuary using   the projected unit credit method
where the calculation results in a benefit to the group the asset   recognised is limited to the present value of any future refunds from   the plan or reductions in future contributions to the plan which are   under the control of the group
when the benefits of a plan are amended the portion of the     increasedecrease in benefit relating to past services by employees   is recognised as an expenseincome in the consolidated income   statement on a straight line basis over the average period until   the benefits become vested to the extent that the benefits vest   immediately the expenseincome is recognised immediately in the   consolidated income statement
all actuarial gains and losses are recognised in the period they occur   through the consolidated statement of comprehensive income either   monthly or annual contributions are made to funded schemes the   current service cost is included in the consolidated income statement   as a personnel expense any change in the present value of pension   scheme liabilities relating to employee service in prior periods but   arising in the current period as a result of benefit amendments is   chargedcredited to operating expenses over the period during which   such amendments vest
the expected return on the schemes’ assets and the increase during   the period in the present value of the schemes’ liabilities arising from   the passage of time are included in financial income   1 accounting policies continued
prospective hedge testing is performed at the inception of the hedge   relationship and subsequently at each balance sheet date through   comparison of the critical terms of the hedged forecast transaction   and the hedging instrument using regression analysis retrospective   hedge testing is performed at each reporting date principally using   a dollar offset analysis comparing the cumulative changes in the fair   values of the forecast hedged transaction and the hedging instrument
when a hedging instrument no longer meets the criteria for hedge   accounting expires or is sold terminated or exercised or the entity   revokes designation of the hedge relationship hedge accounting is   discontinued prospectively if the hedged forecast transaction is still   expected to occur the cumulative gain or loss at that point remains in   equity and is recognised in accordance with the above policy when the   transaction occurs if the hedged transaction is no longer expected to   take place the cumulative unrealised gain or loss recognised in equity   is recognised in the consolidated income statement immediately
g revenue
revenue represents the aggregate amount earned from inclusive   tours scheduled and charter flying provision of incoming agency   destination services travel agency and intermediary commission   received and other services supplied to customers in the ordinary   course of business revenue excludes intragroup transactions and   is stated after the deduction of trade discounts and sales taxes   revenue is reported gross of fixed charges which are a liability of the   tour operator or airline these include air passenger duty and other   per passenger charges and levies including the atol protection   contribution in the uk
i revenue recognition
revenue is recognised in the consolidated income statement when   the significant risks and rewards of ownership have been transferred   to the buyer travel agency and intermediary commissions and other   revenues received from the sale of third party product are recognised   when they are earned typically on receipt of final payment revenue   in respect of inhouse product is recognised on the date of departure   revenue from individual travel modules directly booked by the   customer with airlines hotels and incoming agencies is recognised   when the customer departs or uses the respective service revenue   from the sale of travel insurance is recognised at the point of sale
no revenue is recognised if there are significant uncertainties   regarding recovery of the consideration due or associated costs
ii client monies received in advance deferred income
client monies received at the balance sheet date relating to holidays   commencing and flights departing after the year end are deferred   and included within trade and other payables
iii measurement of revenue
where the group acts as principal revenue is stated at the   contractual value of goods and services provided
where the group acts as an agent between the service provider and   the end customer revenue is presented on a net basis as the difference   between the sales price to the customer and the cost of the services   purchased and not the total transaction sales value businesses are   identified as intermediaries dependent on a number of criteria   principally  including  the  control  exercised  over  the  provision  of  service  inventory risk and customer credit risk
iv aircraft lease income
operating lease rental income is recognised in operating income as   earned on a straight line basis over the lease term   tt11  ar 2012  20122012  proof 5 financial statements
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financial statements
liabilities in a transaction that is not a business combination and   differences relating to investments in subsidiaries to the extent that   they will probably not reverse in the foreseeable future the amount   of deferred tax asset recognised is based on the expected manner   of realisation or settlement of the carrying amount of assets and   liabilities using the tax rate at which the asset or liability is expected   to reverse in future periods based on tax laws enacted or   substantively enacted at the balance sheet date
a deferred tax asset is recognised only to the extent that it is probable   that future taxable profits will be available against which the asset can   be utilised deferred tax assets are reduced to the extent that it is no   longer probable that the related tax benefit will be realised
l dividends
dividend distribution to the company’s shareholders is recognised   as a liability in the group’s financial statements in the period in which   the dividends are appropriately authorised and approved for payment   and are no longer at the discretion of the company interim dividends   are recognised when paid unpaid dividends that do not meet these   criteria are disclosed in the notes to the financial statements
m earnings per share
the group presents basic and diluted earnings per share eps data   for its ordinary shares basic eps is calculated by dividing the profit   or loss attributable to ordinary shareholders of the company by the   weighted average number of ordinary shares outstanding during the   period diluted eps is determined by adjusting the weighted average   number of ordinary shares outstanding for the effects of all dilutive   potential ordinary shares eps measures for continuing operations   have been presented in accordance with ias 33 the group also   presents a basic and diluted underlying eps measure based on   underlying earnings as defined in note 1bii above further details   of the eps calculation are presented in note 32
n investments
unless designated at fair value through profit and loss trade   investments are classified as available for sale assets and are   included under noncurrent assets they are recorded at fair value   with movements in value taken to other comprehensive income   any impairment to value is recorded in the income statement
short term investments in debt and equity securities which are held   for trading are classified as current assets and are stated at fair value   with any resultant gain or loss recognised in the income statement
o intangible assets
i goodwill
all business combinations are accounted for by applying the purchase   method
goodwill represents amounts arising on acquisition of subsidiaries   joint ventures and associates goodwill represents the difference   between the fair value of consideration paid or payable and the net   fair value of the identifiable assets liabilities and contingent liabilities   acquired identifiable intangibles such as brands and customer   relationships are those which can be sold separately or which arise   from contractual or legal rights regardless of whether those rights   are separable and the fair value can be reliably measured goodwill   is stated at cost less any accumulated impairment losses   goodwill is allocated to those cash generating units cgus expected   to benefit from the business combination and is not amortised but   tested annually for impairment impairment testing is based on assets   grouped at the lowest level at which goodwill is monitored for internal   management purposes in respect of joint ventures and associates   the carrying amount of goodwill is included in the carrying amount   of the investment in the joint venture or associate
iii sharebased payment transactions
the group’s share award programmes allow certain group employees   to acquire shares of the company these shares are awarded by the   company for equitysettled transactions the fair value of services   is measured by the fair value of the shares at the time awarded and   is recognised as an employee expense with a corresponding increase   in equity the fair value is spread over the period during which the   employee becomes entitled to the awards
for cashsettled transactions the resulting liability for the group is   charged to  expenses  at  its  fair  value  as  at  the  date  of  the  performance   of the service by the beneficiary until payment of this liability the   fair value of the liability is remeasured at every reporting date and   all changes are included in the consolidated income statement
for both types of sharebased payment transactions the fair value of the   awards is measured using option valuation models taking into account   the terms and conditions upon which the awards were made the amount   recognised as an expense is adjusted to reflect the actual number of   share awards that vest except where forfeiture is due only to market   based performance conditions not meeting the threshold for vesting
iv own shares held by the employee benefit trust 
transactions of the groupsponsored employee benefit trust the   trust are included in the group’s consolidated financial statements   in particular the trust’s purchase of shares in the company is debited   directly in equity to retained earningsaccumulated losses
v short term benefits
short term employee benefits are measured on an undiscounted   basis and are expensed as the related service is provided
j financial income and expenses
financial income comprises interest income on funds invested   including available for sale financial assets dividend income gains   on the disposal of available for sale financial assets and changes in the   fair value of financial assets or liabilities at fair value through profit or   loss interest income is recognised as it accrues in profit or loss using   the effective interest method dividend income is recognised in profit   or loss on the date the group’s right to receive payment is established   which in the case of quoted securities is the exdividend date   foreign currency gains and losses are reported on a net basis
financial expenses comprise interest expense on borrowings unwinding   of the discount on provisions and changes in the fair value of financial   assets or liabilities at fair value through profit or loss all borrowing   costs are recognised in profit or loss using the effective interest   method foreign currency gains and losses are reported on a net basis
k taxation
income tax comprises current and deferred tax income tax is   recognised in the consolidated income statement except to the extent   that it relates to items recognised in other comprehensive income or   directly in equity in which case the related tax is also recognised in   other comprehensive income or directly in equity as appropriate
i current tax
current tax is the expected tax payable on the taxable income for     the period using tax rates enacted or substantively enacted at the   balance sheet date and any adjustment to tax payable in respect     of previous periods
ii deferred tax
deferred tax is provided or recognised using the balance sheet liability   method providing for temporary differences between the carrying   amounts of assets and liabilities for financial reporting purposes and   the amounts used for taxation purposes the following temporary   differences are not provided for the initial recognition of goodwill   not deductible for tax purposes the initial recognition of assets or   tt11  ar 2012  20122012  proof 5 wwwtuitravelplccom
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notes to the consolidated financial statements continued
p property plant and equipment
i owned assets
items of property plant and equipment are stated at cost less   accumulated  depreciation  and  impairment  losses  cost  includes  the original purchase price of the asset and the costs attributable   to bringing the asset to its working condition for its intended use
where significant parts of an item of property plant and equipment   have different useful lives they are accounted for as separate items   of property plant and equipment
ii leased assets
leases in which the group assumes substantially all the risks and   rewards of ownership are classified as finance leases leased assets   acquired by way of a finance lease are stated at an amount equal to   the lower of their fair value and the present value of the minimum   lease payments at the inception of the lease less accumulated   depreciation and impairment losses lease payments are accounted   for as set out in note 1hii above
iii depreciation
depreciation is charged to the consolidated income statement on a   straight line basis over the estimated useful economic lives of each   part of an item of property plant and equipment freehold land is   not depreciated the useful economic lives are as follows
freehold properties  up to 50 years
short leasehold improvements   lease period or useful   economic life if shorter
owned aircraft  up to 18 years
finance leased aircraft and equipment    lease period or useful   economic life if shorter
aircraft spares  12 years
cruise ships  40 years
yachts  515 years
motor boats  1524 years
computer  equipment  including    retail computer equipment  35 years
retail fixtures and fittings  8 years
other assets  up to 7 years
the cost of major overhauls of owned airframes and engines is   capitalised and depreciated over the period until the next scheduled   major overhaul   the depreciation methods useful economic lives and residual   values are reassessed annually revisions to useful economic lives   and residual values are accounted for prospectively from the date   of change
assets under construction and advance payments including   capitalised borrowing costs for future aircraft are not depreciated   upon the delivery of the aircraft the advance payments are   recategorised to aircraft assets and depreciation is commenced
iv borrowing costs
in respect of borrowing costs relating to qualifying assets the group   capitalises borrowing costs directly attributable to the acquisition   construction or production of a qualifying asset as part of the cost   of that asset   the group has capitalised borrowing costs with respect to pre
delivery payments relating to aircraft
v sale and leaseback transactions
when a sale and leaseback results in a finance leaseback any gain   on the sale is deferred and recognised as income over the lease term   any loss on the sale is immediately recognised in the profit and loss   account if there is evidence that the asset’s carrying value exceeds   the fair value   1 accounting policies continued
fair value adjustments are made in respect of acquisitions if at the   balance sheet date the amounts of fair values of the acquiree’s   identifiable assets and liabilities can only be established provisionally   then these values are used any adjustments to these values are   taken as adjustments to goodwill and must be recorded within 12   months of the acquisition negative goodwill arising on an acquisition   is recognised in the income statement upon acquisition
ii computer software software in development and other 
intangible assets
computer software consists of all software that is not an integral     part of the related computer hardware and is stated at cost less   accumulated  amortisation  and  impairment  losses  costs associated with maintaining computer software programmes   are recognised as an expense as incurred development costs that   are directly attributable to the design and testing of identifiable and   unique software products controlled by the group are recognised   as intangible assets when the following criteria are met
•  it is technically feasible to complete the software product so that   it will be available for use
•  management intends to complete the software product and use   or sell it
•  there is an ability to use or sell the software product
•  it can be demonstrated how the software product will generate   probable  future  economic  benefits
•  adequate technical financial and other resources to complete the   development and to use or sell the software product are available   and
•  the expenditure attributable to the software product during its   development can be reliably measured
directly attributable costs that are capitalised as part of the software   product include the software development employee costs and an   appropriate portion of relevant overheads
other development expenditures that do not meet these criteria are   recognised as an expense as incurred development costs previously   recognised as an expense are not recognised as an asset in a   subsequent  period
separately acquired trademarks and licences are shown at historical   cost licences acquired in a business combination are recognised at   fair value at the acquisition date licences have a finite useful life and   are carried at cost less accumulated amortisation
iii brands and customer relationships
brands and contractual customer relationships acquired in a business   combination are recognised at fair value at the acquisition date   both intangibles have a finite useful life and are carried at cost less   accumulated  amortisation  iv amortisation
amortisation is charged to the consolidated income statement on a   straight  line  basis over  the  estimated  useful economic  life  of  each  type  of intangible asset as follows
computer software  310 years
brands  1520 years
order book at date of acquisition   over the period until travel occurs
customer  relationships    over the period during which value will be   obtained by the group up to 15 years
licences  over the term of licence
software in development is not amortised upon completion of   development and bringing the software into use the costs are   recategorised into computer software and amortisation commences
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impairment losses are recognised in profit or loss impairment losses   recognised in respect of cgus are allocated first to reduce the   carrying amount of goodwill allocated to the cgu and then to reduce   the carrying amount of other assets in the unit on a pro rata basis   an impairment loss in respect of goodwill is not reversed in respect   of other assets impairment losses recognised in prior periods are   assessed at each reporting date for any indications that the loss has   decreased or no longer exists an impairment loss is reversed if there   has been a change in the estimates used to determine the recoverable   amount an impairment loss is reversed only to the extent that the   asset’s carrying amount does not exceed the carrying amount that   would have been determined net of depreciation or amortisation   if no impairment loss had been recognised
r inventories
inventories are measured at the lower of cost or net realisable value   net realisable value is the estimated selling price less the estimated   costs incurred until the sale and the estimated variable costs required   to sell all inventories are written down individually where the net   realisable value of inventories is lower than their carrying amounts   the measurement method applied to similar inventory items is the   weighted average cost formula
s provisions
a provision is recognised in the consolidated balance sheet when the   group has a legal or constructive obligation as a result of a past event   it is probable that an outflow of economic benefits will be required   to settle the obligation and the outflow of economic benefits can be   reliably estimated if the effect is material provisions are determined   by discounting the expected future cash flows at a pretax rate that   reflects current market assessments of the time value of money and   the risks specific to the liability
i maintenance provision for leased aircraft
to reflect the legal obligations placed upon the group under   the terms of certain operating leases provision is made for the   maintenance overhaul and repair costs of operating leased airframes   engines and certain other components the provision is based   on the present value of the anticipated external costs of the next   maintenance event calculated by reference to costs experienced   and published manufacturers’ data the charge to the consolidated   income statement is calculated by reference to the number of hours   and cycles flown and by reference to the length of the full overhaul   cycle costs incurred are charged against the provision neither the   timing nor the value of the expenditure can be precisely determined   but they can be averaged over time and over a fleet the unwinding   of discounted values is charged to the consolidated income statement   as a financial expense
ii restructuring provision
a provision for restructuring is recognised when the group has   approved a detailed and formal restructuring plan and the   restructuring either has commenced or has been announced publicly   future operating costs are not provided for
iii onerous contracts
a provision for onerous contracts is recognised when the expected   benefits to be derived by the group from the contract are lower than   the unavoidable cost of meeting its obligations under the contract   the provision is measured at the present value of the lower of the   expected cost of terminating the contract and the expected net cost   of continuing with the contract before a provision is established the   group recognises any impairment loss on the assets associated with   that  contract  if the leaseback is classified as an operating lease then any gain   is recognised immediately if the sale and leaseback terms are   demonstrably at fair value otherwise the sale and leaseback     is accounted for as follows
•  if the sale price is below fair value then the gain or loss is   recognised immediately other than to the extent that a loss   is compensated for by future rentals at a belowmarket price   then the loss is deferred and amortised over the period that   the asset is expected to be used
•  if the sale price is above fair value then any gain is deferred   and amortised over the useful life of the asset
•  if the fair value of the asset is less than the carrying amount   of the asset at the date of the transaction then that difference   is recognised immediately as a loss on the sale
q impairments
i financial assets
a financial asset is assessed at each reporting date to determine   whether there is any objective evidence that it is impaired a financial   asset is considered to be impaired if objective evidence indicates that   one or more events have had a negative effect on the estimated   future cash flows of that asset
an impairment loss in respect of a financial asset is calculated as the   difference between its carrying amount and its recoverable amount   an impairment loss in respect of an available for sale financial asset   is calculated by reference to its fair value the recoverable amount   of the group’s receivables which are carried at amortised cost is   calculated as the present value of estimated future cash flows   discounted at the original effective interest rate ie the effective   interest rate computed at initial recognition of these financial assets   receivables with a short duration are not discounted   individually significant financial assets are tested for impairment   on an individual basis the remaining financial assets are assessed   collectively in groups that share similar credit risk characteristics
all impairment losses are recognised in profit or loss any cumulative   loss in respect of an available for sale financial asset previously   recognised in equity is transferred to profit or loss an impairment   loss is reversed if the reversal can be related objectively to an event   occurring after the impairment loss was recognised for financial   assets measured at amortised cost and available for sale financial   assets that are debt securities the reversal is recognised in profit   or loss for available for sale financial assets that are equity securities   the reversal is recognised directly in equity
ii nonfinancial assets
the carrying amount of the group’s nonfinancial assets other than   inventory and deferred tax assets are reviewed at each balance sheet   date to determine whether there is any indication of impairment if   such an indication exists the asset’s recoverable amount is estimated   for goodwill the recoverable amount is estimated at each balance   sheet date
an impairment loss is recognised whenever the carrying amount of   an asset or its cgu exceeds its recoverable amount the recoverable   amount of an asset or cgu is the greater of its value in use and fair   value less costs to sell in assessing value in use the estimated future   cash flows are discounted to their present value using a pretax   discount rate that reflects current market assessments of the time   value of money and the risks specific to the asset a cgu is the   smallest identifiable group of assets that generates cash inflows that   are largely independent of the cash inflows from other assets or   groups of assets the largest unit to which goodwill is allocated is   an operating segment level as defined in ifrs 8 before applying   aggregation  criteria
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notes to the consolidated financial statements continued
iii inventories
the fair value of inventories acquired in a business combination   is determined based on the estimated selling price in the ordinary   course of business less the estimated costs of completion and   sale and a reasonable profit margin based on the effort required   to complete and sell the inventories
iv investments in equity and debt securities
the fair value of financial assets at fair value through profit or loss   and available for sale financial assets is determined by reference to   their quoted closing bid price at the reporting date where available   if there is no market price available the fair value is calculated based   on other valuation techniques including assessments of future cash   flows estimated selling price and other available information the     fair value of held to maturity investments is determined on initial   recognition and thereafter for disclosure purposes only
v trade and other receivables
trade receivables are recognised at their fair value and subsequently   recorded at amortised cost using the effective interest method   as reduced by allowances for estimated irrecoverable amounts   an allowance for irrecoverable amounts is established when there is   objective evidence that the group will not be able to collect all amounts   due according to the original terms of the receivables the amount of   allowance is the difference between the asset’s carrying amount and   the present value of estimated future cash flows
vi trade payables
trade payables are recognised at their fair value and subsequently   recorded at amortised cost using the effective interest method
vii derivatives
the fair value of foreign currency contracts fuel forward contracts   and option contracts is their forward market price at the balance   sheet date based on external valuations or internal valuations using   market data   viii nonderivative financial liabilities
fair value which is determined for disclosure purposes is calculated   based on the present value of future principal and interest cash flows   discounted at the market rate of interest at the reporting date for   finance leases the market rate of interest is determined by reference   to similar lease agreements
ix sharebased payments
the fair value of the shares awarded is measured using option   valuation models taking into account the terms and conditions upon   which the awards were made the valuation basis is identical whether   the awards will be settled in cash or shares
x new standards and interpretations not yet adopted
the following standards are applicable to the group and will be   applied to the accounting period beginning on 1 october 2012
•  amendment to ias 12 ‘income taxes’ on deferred tax this new   amendment introduces an exception to the existing principle for   the measurement of deferred tax assets or liabilities arising on   investment property measured at fair value the amendment has   not yet been endorsed by the eu and is not expected to have a   significant impact on the group’s financial statements
•  amendment to ias 1 ‘presentation of financial statements on     oci’ requires items presented in the consolidated statement of   comprehensive income to be disclosed between those items that   are potentially reclassifiable to profit or loss at a later date and   those items that will not the amendment has been endorsed by   the eu and will only impact presentation disclosures in the group’s   financial  statements
1 accounting policies continued
t related parties
for the purpose of these consolidated financial statements parties are   considered to be related to the group if the group has the ability   directly  or  indirectly  to  control  the  party  or  exercise  significant  influence  over the party making financial and operating decisions or vice versa   or where the group and the party are subject to common control or   significant influence related parties may be individuals or entities
u segment reporting
an operating segment is a component of an entity that
•  engages in business activities from which it may earn revenues   and incur expenses including revenues and expenses relating   to transactions with other components of the same entity
•  whose operating results and financial position are regularly   reviewed by the chief operating decision maker to make decisions   about resources to be allocated to the segment and assess its   performance  and
•  for which discrete financial information is available
as described in note 3 all underlying operating items are allocated   to the segment’s underlying profit except central costs and net   financial  expenses
v use of estimates and judgements
the preparation of financial statements requires management to make   judgements estimates and assumptions that affect the application   of accounting policies and the reported amounts of assets liabilities   income and expenses actual results may differ from these estimates
estimates and underlying assumptions are reviewed on an ongoing   basis revisions to accounting estimates are recognised in the period   in which the estimates are revised and in any future periods affected   details of critical judgements significant estimates and assumptions   are disclosed in the relevant notes to the consolidated financial   statements the key accounting estimates and judgements are   described in note 2
w determination of fair values
a number of the group’s accounting policies and disclosures require   the determination of fair value for both financial and nonfinancial   assets and liabilities fair values have been determined for   measurement andor disclosure purposes based on the following   methods when applicable further information about the   assumptions made in determining fair values is disclosed in the   note specific to that asset or liability
i property plant and equipment
the fair value of property plant and equipment recognised as a result   of a business combination is based on market values the market value   of property is the estimated amount for which a property could be   exchanged on the date of valuation between a willing buyer and a willing   seller in an arm’s length transaction after proper marketing wherein     the parties had each acted knowledgeably prudently and without   compulsion the market value of items of plant equipment fixtures     and fittings is based on the quoted market prices for similar items
ii intangible assets
the fair value of intangible assets recognised as a result of a business   combination including brands customer relationships and the   customer order book at the date of acquisition is valued by reference   to external market values or incomebased methods incomebased   methods estimate the future economic benefits to be derived from   ownership of the asset by identifying quantifying and separating cash   flows attributable to the asset and capitalising their present value
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the amendment to ias 19 ‘employee benefits’ makes significant   changes to the recognition and measurement of defined benefit   pension expense and termination benefits and to the disclosures   for all employee benefits had the standard been applied in the   current financial year the group’s profit before tax would have   been £11m lower
ias 27 revised ‘separate financial statements’ includes the   provisions on separate financial statements that are left after the   control provisions of ias have been included in the new ifrs 10
ias 28 revised ‘investments in associates and joint ventures’   includes the requirements for joint ventures as well as associates   to be equity accounted following the issue of ifrs 11
the amendments to ias 32 and ifrs 7 on offsetting financial   instruments and liabilities clarify some of the requirements for   offsetting financial assets and financial liabilities on the balance sheet
the group continues to monitor the potential impact of these and   other new standards and interpretations which may be endorsed   by the european union and require adoption by the group in future   accounting  periods
2 key accounting estimates and judgements
the preparation of consolidated financial statements under adopted   ifrs requires the directors to make estimates and judgements that   affect the reported amounts of assets and liabilities the disclosure   of contingent assets and liabilities and the reported amount of   revenue and expenses during the year the directors evaluate the   estimates and judgements on an ongoing basis such estimates and   judgements are based upon historical experience and other factors   it believes to be reasonable under the circumstances actual results   may differ from estimates
management has discussed with the audit committee the   development selection and disclosure of the group’s critical   accounting policies and estimates and the applications of these   policies and estimates key estimates and judgements have been   made in respect of the following areas
a estimates
intangible assets – goodwill carrying value
a full impairment review has been performed of all goodwill together   with intangible and tangible balances held across the group on a cgu   basis in the current year the impairment review has been performed   on a ‘value in use’ basis for all cgus which requires estimation of   future net operating cash flows the time period over which they will   occur and appropriate discount and growth rates in the prior year   one cgu was valued using the ‘fair value less costs to sell’   methodology further details including sensitivity analysis are given   in note 10 and the accounting policy is set out in note 1qii
defined benefit pension plans
a qualified independent actuary undertakes the estimation of the   present value of the group’s obligations under defined benefit   pension schemes using assumptions taken from a range of possible   actuarial assumptions these assumptions may not be borne out in   practice especially due to the long timescales involved in particular   the valuation of scheme assets is based on the fair value at the   balance sheet date as these assets are not intended to be sold in the   short term their value may change significantly prior to realisation in   reviewing the work of the qualified independent actuary management   was required to exercise judgement to satisfy itself that appropriate   weight had been afforded to macroeconomic factors details of the   actual assumptions used including sensitivity analysis are set out in   note 6c
the following standards revisions and amendments to current   standards which have been issued and are considered applicable to   the group in future years are as follows none of these have yet been   endorsed by the eu with the exception of the revision to ias 19   ‘employee  benefits’
  effective date accounting     standard  periods commencing on or after   amendment to ifrs 7     ‘financial instruments disclosures’  1 january 2015
ifrs 9 ‘financial instruments’  1 january 2015
ifrs 10 ‘consolidated financial statements’  1 january 2013
ifrs 11 ‘joint arrangements’  1 january 2013
ifrs 12 ‘disclosure of interests in other entities’  1 january 2013
amendment to ifrs 10 11 and 12 on transition guidance  1 january 2013
ifrs 13 ‘fair value measurement’  1 january 2013
ias 19 revised 2011 ‘employee benefits’  1 january 2013
ias 27 revised 2011 ‘separate financial statements’  1 january 2013
ias 28 revised 2011 ‘investments in associates     and joint ventures’  1 january 2013
amendment to ifrs 1 ‘first time adoption on     government grants’  1 january 2013
amendments to ias 32 and ifrs 7     on financial instruments asset and   ifrs 7 amendment 1 january 2013   liability offsetting  ias 32 amendment 1 january 2014
annual improvements 2011  1 january 2013
the amendment to ifrs 7 ‘financial instruments’ requires additional   financial instruments disclosures on transition from ias 39 to ifrs 9   ifrs 9 ‘financial instruments’ including amendments to ifrs 9 since   its initial publication is the first step in the process to replace ias 39   ‘financial instruments recognition and measurement’ ifrs 9   introduces new requirements for classifying and measuring financial   assets financial liabilities and some contracts to buy or sell non
financial  items
ifrs 10 ‘consolidated financial statements’ establishes principles for   the presentation and preparation of consolidated financial statements   when an entity controls one or more other entities the ifrs   supersedes ias 27 ‘consolidated and separate financial statements’   and sic12 ‘consolidation – special purpose entities’ ias 27 revised   2011 ‘separate financial statements’ has therefore also been revised
ifrs 11 ‘joint arrangements’ establishes principles for financial   reporting by parties to a joint arrangement the ifrs supersedes   ias 31 ‘interests in joint ventures’ and sic13 ‘jointly controlled   entities – nonmonetary contributions by venturers’ the ifrs is   concerned principally with both the structure of the arrangement   and that an entity had a choice of accounting treatment for interests   in jointly controlled entities   ifrs 12 ‘disclosure of interests in other entities’ applies to entities   that have an interest in a subsidiary a joint arrangement an associate   or an unconsolidated structured entity the ifrs requires an entity   to disclose information that enables users of financial statements   to evaluate both the nature of and risks associated with its interests   in other entities and the effects of those interests on its financial   position financial performance and cash flows
the amendment  to  ifrs  10  11  and  12  on  transition  guidance  provides   additional transitional relief in ifrss 10 11 and 12 limiting the   requirement to provide adjusted comparative information to only the   preceding comparative period the amendment also requires certain   comparative disclosures under ifrs 12 upon transition
ifrs 13 ‘fair value measurement’ defines fair value sets out in a   single ifrs a framework for measuring fair value and requires   disclosures about fair value measurements
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financial  statements
notes to the consolidated financial statements continued
recoverable amounts of deposits and prepayments
judgements have been made in respect of the volumes of future   trading with hoteliers and the creditworthiness of those hoteliers   in order to assess the recoverable amounts of deposits and   prepayments made to those hoteliers
fair value measurements
management has to make judgements regarding the valuation of   some financial instruments that use inputs that are not observable   in active markets these are disclosed in note 25h   3 segmental information
ifrs 8 requires segmental information to be presented on the same   basis as that used for internal management reporting segmental   information is reported by the group’s business sectors to the group   management board gmb the gmb consists of tour operating and   functional experts drawn from across the group who execute tui   travel’s daytoday operations allocate resources to and assess the   performance of the operating segments consequently the gmb is   considered to be the chief operating decision maker for the purposes   of ifrs 8
group structure
the group presents segmental information in respect of its four   sectors for the year ended 30 september 2012 the four sectors are   divided into either regions mainstream sector or divisions sectors   other than mainsteam which are further subdivided into operating   segments aggregation criteria is then used to combine certain of   these operating segments into reported segments
the mainstream sector consists of three regions northern central   europe and western europe the northern region comprises the   distribution tour operating and airline businesses in the uk  ireland   canada the nordic countries comprising the markets of sweden   norway denmark and finland and the hotels division comprising   hotel management companies and joint ventures in hotel assets
central europe comprises the distribution tour operating businesses   and an airline in the source markets of germany austria switzerland   and  poland  western europe comprises the distribution tour operating and airline   businesses in france belgium the netherlands and southern europe   comprising spain and italy the moroccan based airline jet4you has   been integrated into belgium during the year with internal reporting   to the gmb being amended to reflect this change
each source market within each region represents an operating   segment for the purposes of segmental information
the specialist  activity sector operates under seven divisions   adventure education languages marine north american specialist   sport and specialist holidays group the sector has over 100   international specialist and activity brands delivering a range   of unique customer experiences the specialist  activity sector   is considered to be one operating segment in line with internal   management  reporting
the accommodation  destinations sector ad provides a range   of services in destinations to tour operators travel agents corporate   clients and direct to the consumer worldwide ad is structured along   the  following  divisions  accommodation  wholesaler  previously  known  as business to business b2b accommodation ota previously   known as business to customer b2c and specialist although the   ad sector in total is considered as one operating segment in line   with internal management reporting   2 key accounting estimates and  
judgements continued
derivative financial instruments
judgement is required in the assessment of prospective effectiveness   and specifically in the assessment of the probability of forecast   transactions both at hedge inception and during the period over   which hedge accounting is adopted the fair value of derivative   financial instruments can also involve judgement where appropriate   external valuations from financial institutions are undertaken to   support the carrying value of such items details of sensitivity analysis   are set out in note 25k
b judgements
separately disclosed items
separately disclosed items are those significant items which in   management’s judgement are highlighted by virtue of their size   or incidence to enable a full understanding of the group’s financial   performance such items are included within the income statement   caption to which they relate note 4
revenue recognition
in recognising revenue judgement is required in the consideration   of whether each individual business acts as a principal or agent and   whether revenues should be recognised on a gross or net basis in   accordance with ias 18 judgement is required when considering   the balance of risk and rewards of the sale including delivery and   nonperformance risk credit risk inventory risk and the ability to   establish prices   business combinations
in the case of business combinations judgement and estimation is   required in the identification and valuation of separable assets and   liabilities on acquisitions in particular judgement and estimation is   required in the identification and valuation of separable intangible   assets being brands orders books and customer databases and   determining appropriate useful economic lives for these assets   judgement and estimation is also required in determining contingent   consideration  payable  in  respect  of  acquisitions  details  of  acquisitions  are set out in note 13
liabilities
in accounting for provisions judgement is required in determining   occurrence probability maturity and level of risk judgement and   estimation is required in determining aircraft maintenance   restructuring legal and onerous lease provisions it is also required   to determine the provision methodology and for certain provisions   considering external information on which to base the amount of   provision due to the volume of transactions and the materiality   of period end accruals judgement is also required in respect of the   recognition and derecognition of airline and accommodation operating   accruals details of provisions made and the basis on which the   provisions have been calculated is disclosed in note 21 and the   accounting policy is set out in note 1s
taxation
the group has from time to time contingent tax liabilities arising   from trading and corporate transactions in the uk and overseas   jurisdictions after taking appropriate external advice the group   makes provision for these liabilities based on the probable level of   economic loss that may be incurred and which is reliably measurable   judgement is also required in the assessment of the future   recoverability of tax losses and recognition of deferred tax assets   details of unrecognised tax losses are given in note 14
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the emerging markets sector is a growing portfolio of travel   businesses currently focusing on the specific source markets of   russia and ukraine and is considered to be one operating segment
reportable and reported segments
under ifrs 8 the results of the uk  ireland and germany are   reported separately within the northern region and central europe   respectively due to the size and importance of these core markets   and both meeting the threshold of being individual reportable   segments the results of nordics are shown separately from other   northern region segments as it exceeds the quantitative threshold   defined in ifrs 8 canada and the hotels division have been reported   separately as these two segments do not meet the majority of the   aggregation criteria of ifrs 8
the results of austria switzerland and poland have been aggregated   into the rest of central europe segment as these are considered to   be economically similar over the long term and their activities are also   considered to be similar in nature under the aggregation criteria of   ifrs 8   the french airline corsair has been separately disclosed from the   rest of western europe because as a scheduled airline within the   group it has a different business model to the rest of the group’s   integrated tour operators following the integration of jet4you into   belgium during the year the results of jet4you are now included   within those of belgium belgium the netherlands southern europe   and the french tour operating businesses form the rest of western   europe as these segments meet the aggregation criteria
the specialist  activity sector is reported separately as this qualifies   as a reportable segment under ifrs 8 the results of accommodation    destinations and emerging market sectors are reported voluntarily   to be consistent with internal management reporting
segmental information for both the current and prior year has been   presented using this structure with the prior year information being   restated to reflect the inclusion of jet4you into belgium   corporate costs are in respect of central costs including finance   human resources legal facility costs and some information   technology costs that do not relate to each business segment and   hence are not allocated
information regarding the results of each reportable segment is   provided below segmental performance is evaluated based on   underlying operating profit and is measured consistently with   underlying operating profit or loss in the consolidated financial   statements and as defined in note 1bii   intersegmental sales and transfers reflect arm’s length prices as if   sold or transferred to third parties financial income and expenses are   not allocated to the reportable segments as this activity is managed   by the group’s treasury function which manages the overall net debt   position of the group
no one customer exceeds 10 of entity revenues in any segment   intangible asset impairment losses arising are detailed in note 10     and are recognised in the consolidated income statement   segment assets comprise capital expenditure as this is the only   measure of assets reported monthly to the gmb and represent the   amounts purchased in the year   tt11  ar 2012  20122012  proof 5 financial statements
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3 segmental information continued
segmental analysis 
year ended 30 september 2012
          underlying
      intersegmental  total external operating
     total revenue revenue revenue profitloss
sector       £m £m £m £m
uk  ireland          3756 122 3634  197 
canada       – – – 21
nordics          1085 1 1084  71 
hotels       191 166 25  6 
total northern region       5032 289 4743  295
germany       3932 15 3917  87 
rest of central europe          670 43 627  14 
total central europe       4602 58 4544  101 
french airline          403 43 360  15
rest of western europe          2702 31 2671  39  total western europe      3105 74 3031  24  total mainstream       12739 421 12318  420  specialist  activity           1479 1  1478  48  accommodation  destinations        859 195 664  66  emerging markets          – – –  15
all other segments and unallocated items          – – –  29
total group       15077 617 14460  490 
year ended 30 september 2011
          underlying
            intersegmental   total  external  operating
          total  revenue  revenue  revenue  profitloss
sector          £m  £m  £m  £m
uk  ireland          3648  60  3588  149
canada       –  –  –  18
nordics          1055  1  1054  70
hotels       184  155  29  13
total northern region       4887  216  4671  250
germany       4261  26  4235  89
rest of central europe          666  60  606  14
total central europe       4927  86  4841  103
french airline          426  70  356  10
rest of western europe          2805  10  2795  27
total western europe       3231  80  3151  17
total mainstream       13045  382  12663  370
specialist  activity          1373  1  1372  65
accommodation  destinations          879  227  652  72
emerging markets          –  –  –  12
all other segments and unallocated items          –  –  –  24
total group       15297  610  14687  471
reconciliation of group underlying operating profit to profit before tax
         year ended  year  ended
         30 september  30  september
         2012  2011
        note  £m  £m
group underlying operating profit         490   471  separately disclosed items            4  92  74
predecessor accounting for magic life              –   17
acquisition related expenses            13  62  82
impairment of goodwill            10   20  39
impairment of available for sale financial asset            12  10   –  taxation on profits and interest of joint ventures and associates        12  5  4
operating profit          301   255  net financial expenses            5  100  111
profit before tax         201   144  tt11  ar 2012  20122012  proof 5 financial statements
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other segmental information
        total depreciation of property           plant and equipment and
      capital  expenditure  amortisation of intangible assets
              2012   2011  2012   2011
       £m  £m  £m  £m   uk  ireland          231  103  79  83
nordics          5  12  3  5
hotels       9  18  14  11
total northern region       245  133  96  99
germany       32  15  13  13
rest of central europe          4  3  2  3
total central europe       36  18  15  16
french airline          70  58  15  19
rest of western europe          16  26  24  30
total western europe       86  84  39  49
total mainstream       367  235  150 164
specialist  activity           43  53  39  44
accommodation  destinations          30  25  29  30
all other segments and unallocated items          19  7  1  –
total group       459  320  219  238
total depreciation of property plant and equipment and amortisation of intangible assets of £219m 2011 £238m comprises £92m 2011 £101m   of amortisation of intangible assets as shown in note 10 and £127m 2011 £137m of depreciation of property plant and equipment as shown in   note 11
reconciliation of capital expenditure to amounts included in the financial statements
         year ended   year ended
         30 september  30  september
         2012  2011
        note  £m  £m
total group capital expenditure as shown above            459  320
analysed as
additions to intangible assets              88  53
additions to property plant and equipment              371  267
         459  320
reconciliation to the notes to the financial statements
additions to intangible assets in segmental analysis          88  53
additions to goodwill              3  –
intangible assets total additions        10  91  53
additions to property plant and equipment in segmental analysis          371  267
property plant and equipment total additions       11  371  267
entity wide disclosures
the uk is the group’s country of domicile revenues from external customers and noncurrent assets are split geographically as follows
  uk  germany  france  other europe  rest of the world  total
              2012  2011  2012  2011  2012  2011  2012  2011  2012  2011  2012  2011
  £m  £m  £m  £m  £m  £m  £m  £m  £m  £m  £m  £m
revenue from     external customers  4497 4454  3919 4248  1288 1396 3970 3883 786 706 14460 14687
noncurrent  assets  2767 2655  546 589 374 393 1088 1176 803 830 5578 5643
revenue is  classified  based  on  the  source  of  the  supply  in  addition  to  the  united  kingdom  revenue  relating  to  an  individual  country  is  separately   disclosed when it represents broadly 10 or more of total revenue other europe is defined as continental europe and eire excluding uk   germany and france noncurrent assets for the table above excludes all financial instruments deferred tax assets and postemployment   benefit assets in accordance with ifrs 8   tt11  ar 2012  20122012  proof 5 financial statements
notes to the consolidated financial statements continued
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98  tui travel plc annual report  accounts 2012
4 separately disclosed items
         year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
restructuring and other separately disclosed items            102   137  pension related credit              –   63
litigation  provisions         17   –  change in accounting estimates              27  –  items relating to the prior year              –   7  total prevolcanic ash              92   81  incremental costs caused by volcanic ash disruption            –   7
total         92   74  separately disclosed items within operating profit are included within the consolidated income statement as follows
         year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
cost of sales              –  6
administrative  expenses         92  80
total         92  74
restructuring and other separately disclosed items
mainstream restructuring costs account for £66m of the total incurred in the year ended 30 september 2012 and principally relate to the   restructuring programme in france where a single tour operating business tui france is being created and the airline is also being restructured   £66m in total the restructure of the moroccan airline jet4you £5m offset by a release of £7m of unused provision now that the german tour   operator restructuring programme has been completed
in addition there has been a total of £24m restructuring costs incurred across the specialist  activity and accommodation  destinations   sectors £8m of this total has arisen from restructuring actions taken in the adventure division £6m has arisen from the writedown of specific   ski chalet assets which are now being actively marketed for disposal and where transactions are expected to complete within 12 months £4m   has arisen from actions taken in the marine division and £3m from the finalisation of restructuring programmes in greece morocco and tunisia   a total of £12m of costs have been incurred in group head office companies being primarily to support the various restructuring programmes   around  the  group
included in the year ended 30 september 2011 were mainstream restructuring costs of £97m which principally related to a substantial   programme to reduce costs and improve efficiencies in the german business £32m the ongoing restructure of corsair the scheduled french   airline and the retail network of nouvelles frontières in france £35m in total and further restructuring initiatives in the uk £19m including   rationalising the retail distribution network in addition there was £15m of restructuring costs incurred in the specialist  activity sector £8m   in the accommodation  destinations sector and £17m of restructuring costs incurred in group head office companies
litigation provisions
at the year end the group has continued to assess the likely outcome of the legal actions it is involved in and in accordance with ias 37 has   recognised provisions where it is more likely than not that an outflow of resources will be required to settle the obligation due to the increasingly   litigious environment the group operates in this year the process has resulted in a charge to the income statement of £17m which due to its size   has been included as a separately disclosed item   change in accounting estimates
during the year ended 30 september 2012 the group reviewed the estimates used in calculating aircraft maintenance provisions and empty     leg provisions to ensure consistency of application of the latest estimates across the group this process resulted in a credit to the income   statement of £27m which due to its size has been included as a separately disclosed item   pension related credit
in the year ended 30 september 2011 the company engaged in a consultation process with the members of its defined benefit pension   schemes which resulted in a restriction to salary increases used under the rules of the pension schemes to calculate benefits to a maximum of   25 in any one year this change resulted in a reduction in accrued pension liabilities measured under ias 19 of £63m which under ias 19 was   recognised fully in the income statement in the period in which it occurred therefore a £63m credit was included in the consolidated income   statement in relation to this curtailment which was included as a separately disclosed item   tt11  ar 2012  20122012  proof 5 financial statements
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financial statements
items relating to the prior year
during the year ended 30 september 2011 two errors were identified which related to the balance sheet as at 30 september 2010 the omission   of an elimination of surplus sundry payables from the group balance sheet resulted in an overstatement of current liabilities of £38m this was   offset by an understatement of current liabilities within nouvelles frontières the french tour operator of £45m as both errors offset within cost   of sales and trade and other payables and did not materially change the profit net assets or overall financial position of the group the correction   of the errors was made through the profit and loss account in the year ended 30 september 2011
impact of volcanic ash
included previously in separately disclosed items were the incremental direct costs incurred by the group in respect of welfare costs to look   after the customers who were affected by the closure of european airspace in april 2010 these costs principally included hotel costs for   stranded inbound and outbound customers and the cost of repatriation of inbound customers in the year ended 30 september 2011 there     was a release of £7m of unused accruals as costs in relation to the disruption in 2010 were finalised with third party suppliers
5 net financial expenses
         year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
financial income
bank interest receivable              15  10
interest on pension scheme assets note 6c              72  73
other financial income              9   –
total         96  83
financial expenses
bank interest payable on loans and overdrafts              19  11
finance charges on convertible bond              62  62
interest on pension scheme liabilities note 6c            86  84
interest payable in respect of loans from parent             2  4
finance lease charges               7  10
unwinding of discount on provisions note 21              8  11
other financial expenses              12  12
total         196  194
net financial expenses         100  111
tt11  ar 2012  20122012  proof 5 financial statements
notes to the consolidated financial statements continued
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100  tui travel plc annual report  accounts 2012
6 employees
a average number of employees
the average monthly number of employees in the year in the group by sector including directors on service contracts and key management   was as follows
         year ended  year  ended
         30 september  30  september
         2012  2011
         number  number
by sector
mainstream         38235 39198
specialist  activity              6773 5686
accommodation  destinations              8732 8012
emerging  markets         – 5
corporate         350 346
total         54090 53247
b employee costs
         year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
wages and salaries              1412   1437  social security costs              252   249  pension costs  defined benefit pension scheme – curtailment gain disclosed in separately disclosed items       –   63
pension costs  defined benefit pension scheme cost            26   33  pension costs  defined contribution pension scheme cost            27   25  sharebased payments note 6d              17   20  total         1734   1701  included within wages and salaries are £35m 2011 £42m of wages and salaries and £16m 2011 £4m of social security costs in relation   to redundancy and integration costs that are included within separately disclosed items in note 4 in 2011 the curtailment gain of £63m     in relation to the changes in the uk pension schemes was also included within separately disclosed items in note 4
c pension costs
the group operates pension schemes for employees eligible and wishing to participate in the schemes these comprise both defined   contribution and defined benefit schemes pension obligations vary reflecting the different legal and market conditions in each country of   operation defined contribution schemes are funded by the payment of contributions to private and staterun organisations whilst defined   benefit schemes comprise both funded and unfunded schemes the assets of all the funded defined benefit schemes are held separately   from the assets of the group
defined contribution schemes for employees and directors 
current contributions are recognised as an expense in the year and once paid the group has no further liability pension costs of £27m   2011 £25m relating to defined contribution schemes were charged to the income statement
defined benefit pension schemes 
the movement of defined benefit pension obligations and assets is detailed below summarised as uk germany and other other includes   funded schemes in ireland the netherlands switzerland and norway whilst the main unfunded arrangements are in austria and france   almost all uk schemes are funded whilst german schemes are unfunded   tt11  ar 2012  20122012  proof 5 financial statements
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financial statements
the principal funded schemes in the uk are shown in the table below these are closed to new members with the exception of existing employees   working towards their entry qualification date
with effect from april 2011 the schemes’ future benefit accrual was amended as follows  1 the rate of increase in future pensionable salary was capped at 25 per annum for employees earning over £30000 per annum
2 normal retirement age was increased to age 65 where this was not already the case and the option to retire before normal retirement date   without actuarial reduction where it existed was removed
3 future index linked increases are linked to the consumer price index cpi instead of the retail price index rpi
in addition some employee contribution rates were increased
the group has established a pension funding partnership arrangement pfp including tui travel amber scot lp slp  tui travel amber   ew llp llp together the partnerships the partnerships the main operating brands of the uk business namely thomson and first   choice were transferred to the llp and three pension schemes subscribed for interests in the llp via the slp tui uk limited pays a royalty   to the llp for the use of the brands the britannia airways limited superannuation and life assurance scheme the tui pension scheme uk   and the thomson airways pension scheme in aggregate are entitled to an annual income distribution of approximately £17m the pfp has a life   of 15 years from inception after which the schemes will receive a payment equal to their outstanding funding deficit up to a maximum of £275m   in aggregate in return for their interest in the pfp
the partnerships are controlled by the group and their results are consolidated by the group there is no net impact on the group balance sheet   the ias 19 deficit or income statement the investment held by the pension schemes does not meet the definition of a scheme asset under ias 19   and is therefore not included within the fair value of scheme assets disclosed in the group financial statements the recognition of the brand   assets in the group financial statements remains unaffected by the establishment of the pfp although the thomson and first choice brands     the latter of which is recognised on the group balance sheet are now being held as security for the pfp see note 10 for more information     date of last full     average employee   scheme name  actuarial valuation  average group contribution rate  contribution rate
britannia  airways  limited  superannuation    and life assurance scheme  31 march 2010  56 plus £192m per annum deficit contribution plus £119m pfp income  119
tui pension scheme uk  31 march 2010  76 plus £44m per annum deficit contribution plus £41m pfp income  72
thomson airways pension scheme  31 march 2010  144 plus £19m per annum deficit contribution plus £05m pfp income  161
there was no full valuation of the new scheme all four predecessor schemes which were merged into this scheme had their previous valuations updated to 31 march 2010 to support the   merger and the pfp arrangement and for the purposes of implementing a new recovery plan
where there is more than a single class of membership contribution rates reflect weighted average values within the scheme contribution rates   are stated before adjustment for salary sacrifice arrangements where applicable
the principal unfunded schemes in germany are shown below these were all subject to a full actuarial valuation within three months preceding   the balance sheet date
scheme name  status
versorgungsordnung’ hapaglloyd fluggesellschaft gmbh  open to new members
versorgungsordnung’ tui deutschland gmbh  closed to new members
versorgungsordnung’ tui leisure travel gmbh  closed to new members
valuations of the schemes are made by qualified actuaries using market based valuations for the assets and the projected unit method for   the liabilities the group recognises all actuarial gains or losses in the consolidated statement of comprehensive income
the assets of each scheme have been taken at market value and liabilities in each territory have been calculated using the following principal   assumptions
    uk
1
 per annum  germany per annum  other
3
 per annum
            2012  2011   2012   2011  2012  2011
                  
rpi inflation      27  32  26  25  22  21
pensionable  salary  inflation      25  26
2
  25  25  27  28
discount rate      45 53 33 48 30 41
1    pension increases in payment across the uk schemes reflect either fixed increases or index linked increases subject to minimum and maximum limits applicable to each class of benefit
2  uk pensionable salary increase is capped at 25 for all employees earning over £30000   3  the assumptions for other are a weighted average
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102  tui travel plc annual report  accounts 2012
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the mortality assumptions underlying the value of the accrued liabilities for each territory are set out in the tables below the mortality   assumptions are based on relevant standard mortality tables in each territory
uk life expectancy weighted average
         2012  2011
         years  years
males
life expectancy in years for a pensioner retiring aged 65 on the balance sheet date        226  231
life expectancy in years for a pensioner retiring aged 65 20 years after the balance sheet date      239  242
females
life expectancy in years for a pensioner retiring aged 65 on the balance sheet date        245  255
life expectancy in years for a pensioner retiring aged 65 20 years after the balance sheet date      261  264
germany life expectancy
         2012  2011
         years  years
males
life expectancy in years for a pensioner retiring aged 65 on the balance sheet date        186  185
life expectancy in years for a pensioner retiring aged 65 20 years after the balance sheet date      213  212
females
life expectancy in years for a pensioner retiring aged 65 on the balance sheet date        227  226
life expectancy in years for a pensioner retiring aged 65 20 years after the balance sheet date      253  251
other life expectancy weighted average
         2012  2011
         years  years
males
life expectancy in years for a pensioner retiring aged 65 on the balance sheet date        216  207
life expectancy in years for a pensioner retiring aged 65 20 years after the balance sheet date      227  217
females
life expectancy in years for a pensioner retiring aged 65 on the balance sheet date        238  233
life expectancy in years for a pensioner retiring aged 65 20 years after the balance sheet date      249  237
the fair value of assets of the schemes in each territory are set out below
  uk  germany  other  total
          2012  2011  2012  2011  2012  2011  2012  2011
  £m  £m  £m  £m  £m  £m  £m  £m
equities  483  524  –  –  1  46  484  570
government debt  241  229  –  –  101  55  342  284
corporate bonds  222  196  –  –  –  1  222  197
property  70  15  –  –  –  1  70  16
cash and cash equivalents  6  10  –  –  9  10  15  20
other  174  103  –  –  36  32  210  135
total  1196  1077  –  –  147  145  1343  1222
the expected rates of return on each category of assets in each territory are as follows
    uk  germany  other
            2012  2011   2012   2011   2012   2011
                 
equities      71  78  na  na  70  79
government debt      26  38  na  na  26  43
corporate bonds      45  53  na  na  33  47
property      61  58  na  na  50  48
cash and cash equivalents      05  05  na  na  05  08
other      62  74  na  na  20  26
overall expected rate of return     55  62  na  na  24  48
the overall expected rate of return is calculated by weighting the individual rates in accordance with the anticipated balance in the schemes’   investment portfolio the fair values of the schemes’ assets are not intended to be realised in the short term and may be subject to significant   change before they are realised
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financial statements
changes in the fair value of scheme assets in each territory are as follows
  uk  germany  other  total
          2012  2011  2012  2011  2012  2011  2012  2011
  £m   £m  £m   £m  £m   £m  £m   £m
balance at beginning of year  1077  1073   –  –  145   142   1222   1215  expected return on scheme assets  67  67   –  –  5   6   72   73  company  contributions  56  50   –  –  4   5   60   55  member contributions  –   3   –  –  2   2   2   5  benefits paid  71  62  –  –  7  5  78  67
experience  gainslosses  67  54  –  –  9   8  76   62
foreign exchange  –   –   –  –  11  3   11  3  balance at end of year  1196  1077   –  –  147   145   1343  1222  actual return on scheme assets  134  13   –  –  14   2  148  11  employer contributions in the following year are expected to be £56m in respect of the uk and £3m in respect of other the uk value includes   £17m in respect of income distribution from the pfp   the composition of the fair value of scheme assets in each territory is as follows
  uk  germany  other  total
          2012  2011  2012  2011  2012  2011  2012  2011
  £m   £m  £m   £m  £m   £m  £m   £m
schemes with surplus of assets  –  –  –  –  9  9  9  9
schemes with deficit of assets  1196  1077  –  –  138  136  1334  1213
total  1196  1077  –  –  147  145  1343  1222
changes in the present value of defined benefit obligations in each territory are as follows
  uk  germany  other  total
          2012  2011  2012  2011  2012  2011  2012  2011
  £m   £m  £m   £m  £m   £m  £m   £m
balance at beginning of year  1436   1422   129   117   171   170   1736   1709  current service cost  14   19   7   8   6   6   27   33  interest cost on obligation  74   73   6   5   6   6   86   84  benefits paid  71  62  2  2  9  5  82  69
member contributions  –   3   –   –   2   2   2   5  curtailment  –   63  –   –    1  1  1  64
actuarial lossesgains   171   44   41   6  36   11  248   27  reclassification  –   –   –   8   1   –   1   8  foreign exchange  –   –   13  1  13  4   26  3  balance at end of year  1624  1436   168   129   199   171   1991   1736  the amounts recognised in the consolidated income statement for the years ended 30 september 2012 and 30 september 2011 for each   territory are as follows
  uk  germany  other  total
          2012  2011  2012  2011  2012  2011  2012  2011
  £m   £m  £m   £m  £m   £m  £m   £m   current service cost  14  19  7  8  6  6  27  33
curtailment  –  63  –  –  1  1  1  64
interest on defined benefit     pension scheme obligation  74  73  6  5  6  6  86  84
expected return on defined     benefit pension scheme  67  67  –  –  5  6  72  73
total  21  38  13  13  6  5  40  20
the prior year uk curtailment gain reflects the future growth in pensionsable salary being capped at 25 per annum for employees earning   more than £30000 per annum
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these amounts are included within the following expenseincome categories in the consolidated income statement
  uk  germany  other  total
          2012  2011  2012  2011  2012  2011  2012  2011
  £m   £m  £m   £m  £m   £m  £m   £m
cost of sales  6   33  6  7  4   2   16   24
administrative expenses  8   11  1  1  1   3   10   7
financial expenses  74   73   6  5  6   6   86   84  financial  income  67  67  –  –  5  6  72  73
total  21  38  13  13  6   5   40   20
the amounts recognised directly in equity for the year ended 30 september 2012 and for the year ended 30 september 2011 for each territory   are as follows
  uk  germany  other  total
          2012  2011  2012  2011  2012  2011  2012  2011
  £m   £m  £m   £m  £m   £m  £m   £m
cumulative losses brought forward  552  454  13   20   31   34   596  508  lossesgains  recognised    during the year  104  98  41   6  27   3  172  89  foreign exchange  –   –  3  1  3  –   6  1
cumulative losses carried forward  656  552  51   13   55   31   762   596  trend analysis information in respect of the uk germany and other territories is as follows
uk
      2012  2011  2010  2009   2008
      £m  £m  £m  £m  £m
present value of scheme liabilities        1624  1436  1422  1327  1015
fair value of scheme assets        1196   1077   1073   942   810  deficit      428  359  349  385  205
      2012  2011  2010  2009   2008
      £m  £m  £m  £m  £m
experience lossgain on scheme liabilities        2  22  3  23  14  change in actuarial assumption lossgain        169  22  51  249  170  total actuarial lossgain on scheme liabilities        171  44  54  272  184  experience gainloss on scheme assets        67   54  39   37   178
total actuarial lossgain       104  98  15  235  6  germany
      2012  2011  2010  2009   2008
      £m  £m  £m  £m  £m
present value of scheme liabilities        168  129  117  97  50
fair value of scheme assets        –   –   –   –   –  deficit        168  129  117  97  50
      2012  2011  2010  2009   2008
      £m  £m  £m  £m  £m
experience lossgain on scheme liabilities        1  –   3   3   1  change in actuarial assumption lossgain        40  6   19  16  7  total actuarial lossgain on scheme liabilities        41  6   16  13  8  experience gain on scheme assets        –   –   –   –   –  total actuarial lossgain      41  6   16  13  8  tt11  ar 2012  20122012  proof 5 financial statements
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other
      2012  2011  2010  2009   2008
      £m  £m  £m  £m  £m
present value of scheme liabilities        199  171  170  156  113
fair value of scheme assets        147   145   142   137   114  deficitsurplus      52  26  28  19  1        2012  2011  2010  2009   2008
      £m  £m  £m  £m  £m
experience lossgain on scheme liabilities        4  1  2   1   4
change in actuarial assumption lossgain        32  12   13  21  9  total actuarial lossgain on scheme liabilities        36  11   11  20  5  experience gainloss on scheme assets        9   8  –   3  15
total actuarial lossgain      27  3   11  23  10
total
      2012  2011  2010  2009   2008
      £m  £m  £m  £m  £m
present value of scheme liabilities        1991  1736  1709  1580  1178
fair value of scheme assets        1343   1222   1215   1079   924  deficit      648  514  494  501  254
      2012  2011  2010  2009   2008
      £m  £m  £m  £m  £m
experience lossgain on scheme liabilities        7  23  2    19  11  change in actuarial assumption lossgain        241  4  83  286  186  total actuarial lossgain on scheme liabilities        248  27  81  305  197  experience gainloss on scheme assets        76   62  39   34   193
total actuarial lossgain recognised in other comprehensive income   172  89  42  271  4  reconciliation of defined benefit obligations and scheme assets to values recognised in the balance sheet
  uk  germany  other  total
          2012  2011  2012  2011  2012  2011  2012  2011
  £m   £m  £m   £m  £m   £m  £m   £m
present value of unfunded     defined benefit obligations  1   1   168   129  17   18   186   148  present value of funded     defined benefit obligations  1623   1435   –   –  182   153   1805   1588  fair value of scheme assets  1196  1077  –   –  147  145  1343  1222
  428  359   168   129  52   26   648   514  unrecognised past service cost  –  –   –   –  –   1  –   1
recognised liability for     defined benefit obligation  428  359   168   129  52   25   648   513  analysed as        
retirement  benefit    noncurrent  assets  –   –   –   –  –   1  –   1
retirement  benefit    current  liabilities  –   –   2   2  –   1   2   3  retirement  benefit    noncurrent  liabilities  428   359   166   127  52   25   646   511  total  428   359   168   129  52   25   648   513  the sensitivity of the fair value of the defined pension deficit to the key financial and demographic assumptions is illustrated below
       uk germany other total
     2012 2012 2012 2012
     £m £m £m £m
decrease to deficit of increasing discount rate by 025        72 8 8 88
increase to deficit of reducing discount rate by 025        77  8  8  93 
increase to deficit of increasing all life expectancies by 1 year        48  3  6  57 
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d share award schemes
the company operates three principal share award schemes which are designed to link remuneration to the future performance of the group   the schemes are the performance share plan psp the deferred annual bonus scheme dabs and the deferred annual bonus longterm   incentive scheme dablis the dablis scheme is described below and the other two schemes are described in the remuneration report along   with the relevant vesting criteria
at 30 september 2012 the shares allocated and outstanding in respect of ordinary shares were as follows
share award scheme  number of shares  date due to vestdate vested
performance share plan  1864433  4 december 2012
  695082  19 march 2013
  1988854  6 december 2013
  3234113  7 december 2014
  193242  1 june 2015
deferred annual bonus scheme  3148956  4 december 2012
  3825685  6 december 2013
  5376936  7 december 2014
deferred annual bonus long term incentive scheme  1924199  4 december 2012
  2131122  6 december 2013
  3866944  7 december  2014
total  28249566
the number of share awards at the beginning and end of the year is as follows
         number of awards           30 september
          2012
outstanding at beginning of the year – excluding deferred shares            26346949 
forfeited during the year                4784495
reclassified as share appreciation rights                219552
exercised during the year                5882575
granted during the year                12789239
outstanding at the end of the year – excluding deferred and delayed shares       28249566
in addition to the above shares there are 2491300 2011 1310340 deferred shares outstanding in relation to the deferred annual bonus   scheme these are due to vest between 4 december 2012 and 7 december 2014
in respect of the deferred annual bonus longterm incentive scheme there are an additional 4406287 2011 2176746 deferred shares   these are due to vest between 4 december 2012 and 7 december 2014   the weighted average share price of the shares exercised was £166 no material awards have been made to date under the group’s hmrc   approved share incentive plan which is an allemployee share plan   the fair value of services received in return for shares awarded during the year is measured by reference to the fair value of the shares awarded   the fair value at the date the shares were awarded has been estimated using a binomial methodology for all schemes except where there is a   marketbased performance condition attached to vesting in which case a monte carlo simulation was used the principal assumptions required   by these methodologies were            2012  2011
information relating to fair values of shares awarded
fair value at measurement date            £085£146  £150£194
share  price         £166  £229
expected  volatility         361  561
award  life         3 years  3  years
expected  dividends         447  556
risk free interest rate              054  10
participants are  not  entitled  to  dividends  prior  to  vesting  expected  volatility  is  based  on  historic  volatility  adjusted  for  changes  to  future  volatility   indicated by publicly available information shares were awarded under a service condition
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employee expenses for the year
employee expenses for the current and prior year relating to sharebased schemes are
         year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
equitysettled         16  19
expense arising for share appreciation rights              1  1
total         17  20
share appreciation rights
certain participants other than board directors are eligible to receive their awards on a cash settled basis the calculation of which exactly   replicates the formal sharebased scheme   long term incentives
deferred annual bonus longterm incentive scheme
the deferred annual bonus longterm incentive scheme dablis is for participants below the gmb level and requires a 25 deferral of any   annual performance bonus award into shares matching shares may also be awarded up to four times the deferred amount and are subject to   the achievement of stretching performance conditions over a three year period awards of deferred and matching shares are subject to forfeiture   conditions until the release date the earliest point at which the shares are eligible for release is at the end of three years following deferral   for awards of matching shares made during the year no shares will vest unless the annual average of the ratio of the group’s return on invested   capital roic to the weighted average cost of capital wacc meets or exceeds one over the three year period a hurdle of roic being at least   equal to wacc is used to ensure that the relevant long term incentive awards pay out only when shareholder value is being created over the   performance periods if the roicwacc hurdle is met shares will only vest to the extent to which three further performance conditions are   satisfied over the three year period as follows
•  up to half of the matching shares will vest based on achievement of an aggregate ebita profit target for the participants’ sector over the   three year performance period
achievement of aggregate ebita target  proportion of relevant shares which may vest
at or below 75  0
between 75 and 100  on a straight line basis between 10 and 100
at or above 100  100
•  up to one quarter of the matching shares will vest based on growth in the group’s earnings per share eps in relation to the growth in the   uk retail price index rpi as shown in the table below
average annual eps growth in excess of rpi growth  proportion of matching shares vesting
below 4  0
between 4 and 13  on a straight line basis between 10 and 100
13 or above  100
•  in respect of awards made prior to 30 september 2011 up to one quarter of the matching shares will vest based on the group’s ranking of   total shareholder return tsr performance relative to companies ranked 30th to 100th by market capitalisation on the london stock   exchange as at the date of the award as shown in the table below
tsr ranking  proportion of matching shares vesting
below median  0
between median and upper quartile  on a straight line basis between 15 and 100
at or above upper quartile  100
in respect of awards made after 1 october 2011 up to one quarter of the matching shares will vest based on the group’s total shareholder   return tsr performance relative to an average of the tsr performance of an index of international travel and leisure companies deloitte   provides the group with the tsr measurement as required the index is considered to be the most appropriate benchmark for comparison   purposes the companies included in the index are
1  aer lingus group  9  finnair  17  pierre  vacances
2  air berlin  10  firstgroup  18  pricelinecom
3  air franceklm  11  flight centre  19  royal caribbean cruises
4  carnival  12  hertz  global  holdings  20  ryanair  holdings
5  club mediterranee  13  international consolidated airlines group  21  stagecoach group
6  deutsche lufthansa  14  kuoni reisen holding  22  thomas cook group
7  easyjet  15  national express group  23  wotifcom holdings
8  expedia  16  norwegian air shuttle
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tui travel’s tsr performance  proportion of matching shares vesting
below index  0
between index and index 8 per annum inclusive  on a straight line basis between 15 and 100
exceeding index 8 per annum  100
e remuneration of directors
         year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
emoluments         7  8
pensions and other retirement benefits              1  1
total         8  9
further information is provided in the audited section of the remuneration report
7 income expenses and auditors’ remuneration
         year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
included within operating profit in the consolidated income statement for the year are the following creditscharges    operating lease income aircraft              47  54
operating lease income land and buildings              2  4
operating lease rentals land and buildings              194   198  operating lease rentals aircraft and other equipment            425   460  depreciation of property plant and equipment              127   137  amortisation of intangible assets business combination intangibles          59   66  amortisation of intangible assets other intangibles            33   35  charge for sharebased payments               17   20  profitloss on sale of property plant and equipment            9  6  loss on foreign currency retranslation              14   38  impairment of goodwill and other intangibles              30   51  impairment of property plant and equipment              12   18  operating lease rentals land and buildings includes £10m 2011 £12m of costs included in separately disclosed items note 4 as provisions for   onerous leases primarily related to vacated properties in addition to the operating lease rentals disclosed above charges of £186m 2011 £184m   were incurred in respect of hotel accommodation rentals which are disclosed as operating leases under ifric 4 determining whether an   arrangement contains a lease
the group leases aircraft throughout the year and in certain circumstances subleases a number of such aircraft when it has the capacity to do   so in order to maximise operational efficiency up to 14 aircraft are ‘wet leased’ exclusively to another european airline company at fixed rates in   addition up to 13 aircraft are ‘wet leased’ to the sunwing travel group an associate of the group the aircraft leased to sunwing are winter only   leases and are at market rates the expected income from future minimum lease payments under noncancellable operating leases is as follows
          year  ended
         year ended  30  september
         30 september  2011           2012  restated
minimum lease payments under noncancellable operating leases expiring        £m  £m
within one year              38  40
between one and five years              64  92
later than five years              30  40
total         132  172
the prior year comparatives have been revised to reflect only minimum committed income under these contracts
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services provided by the company’s auditors and its associates
during the year the group including its overseas subsidiaries obtained the following services from the company’s auditor and its associates
         year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
fees payable to the company‘s auditors for the audit of the parent company and consolidated financial statements    1  1
fees payable to the company‘s auditors and its associates for other services
audit of the company’s subsidiaries pursuant to legislation             4  3
auditors‘ remuneration for audit services              5  4
other services provided to comply with legislation            1  1
audit and audit related services              6  5
all other services               2  2
 relate principally to the interim review and airline regulatory returns
8 taxation
the tax charge can be summarised as follows
i analysis of charge in the year
         year ended  year  ended
         30 september  30  september
         2012  2011
        note  £m  £m
current tax charge    
uk corporation tax on profitloss for the year              –   24  nonuk tax on profitloss for the year              70   50  adjustments in respect of previous years              42  3
         28   71  deferred tax chargecredit    
origination and reversal of temporary differences      current year uk              21   40
current year nonuk              9   41  changes in tax rates              11   14  adjustments in respect of previous years              5  29
         36   14
total income tax charge in consolidated income statement       14  64   57  following a review of the local tax positions in a number of the group’s major operating jurisdictions during the year certain tax balances have   been adjusted to reflect the position of the latest local statutory accounts and tax returns these adjustments in respect of prior years have   been reflected in the current year income statement tax charge
ii reconciliation of effective tax rate
the total tax charge 2011 charge for the year is higher 2011 higher than the standard rate of corporation tax in the uk of 25 2011 27   the differences are explained below
     year ended  year  ended
     30 september 2012  30 september 2011
              £m   £m  
profit before tax reported in the consolidated income statement      201    144   less share of profit in joint ventures and associates note 12      5   13         196    131  
income tax on profit before tax excluding share of profit of joint ventures     and associates at the standard rate of uk tax of 25 2011 27      49  25   35   27  expenses not deductible for tax purposes        23  12   29   22  income not taxable          10 5  14  11
tax losses not recognised as an asset          38  19   64   49  utilisation of tax losses not previously recognised        4 2  30  23
higher tax rates on overseas earningslosses          3  2   3  2
changes in tax rates          12  6   8   6  adjustments to taxation in respect of previous years        47 24  32  24
total income tax charge in consolidated income statement      64  33   57   44  tt11  ar 2012  20122012  proof 5 financial statements
notes to the consolidated financial statements continued
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110  tui travel plc annual report  accounts 2012
8 taxation continued
the underlying effective rate of taxation for the year ended 30 september 2012 is calculated based on the underlying profit before tax excluding   separately disclosed items acquisition related expenses and impairment charges and is calculated at 27 the actual tax rate of 33 differs from   the underlying effective tax rate due to the tax effect of the nonrecognition of tax losses in france the recognition of additional deferred tax   losses in austria and the successful conclusion of tax audits in morocco and turkey   iii deferred tax recognised outside of the consolidated income statement
the following taxation creditcharge has been recognised outside of the consolidated income statement            year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
tax relating to components of other comprehensive income  
cash flow hedges              15  22  defined benefit pension plans              32  3  other         –   4  total tax crediteddebited to other comprehensive income      47  29    
tax credited directly to equity
convertible  bonds         3  2
total         50  27  iv factors affecting future tax charge
a on 22 june 2010 the uk government announced a phased reduction in the main uk corporation tax rate from 28 to 24 with the first 1   reduction taking effect from 1 april 2011 having been substantively enacted on 20 july 2010 subsequent uk budget statements have announced   additional reductions in the main uk corporation tax rate to 26 taking effect from 1 april 2011 and 24 taking effect from 1 april 2012   at the balance sheet date the finance act 2012 had been substantively enacted confirming that the main uk corporation tax rate will be 23   from 1 april 2013 therefore at 30 september 2012 deferred tax assets and liabilities have been calculated based on a rate of 23 where the   temporary difference is expected to reverse after 1 april 2013   further proposals to reduce the main uk corporation tax rate to 22 on 1 april 2014 had not been substantively enacted at the balance sheet   date and are therefore not included in these financial statements
this may reduce the group’s future current tax charge accordingly it has not yet been possible to quantify the full anticipated effect of the   announced further 1 rate reduction although this should further reduce the group’s future current tax charge and reduce the group’s   deferred tax liabilitiesassets accordingly
b in the group’s financial statements for 2010 and 2011 it was disclosed that the spanish tax authorities were contesting the spanish corporate   income tax treatment of two transactions undertaken by two of the group’s spanish subsidiary companies during the period 2002 to 2006   throughout the tax audit process the group has engaged fully and openly with the spanish tax authorities and has supplied considerable   documentary support and spanish technical tax analysis to explain the commercial and economic rationale and spanish corporate income tax   treatment for the transactions these transactions were implemented after the group had taken specialist external advice
the position remains unresolved and earlier in 2012 became the subject of a formal judicial investigation into whether or not either or both of   the transactions may have amounted to a tax offence in spain this judicial investigation is expected to continue for a further 1218 months   following this investigation process it is possible that one or more prosecutions may ensue or the matter may be closed and returned to the tax   authorities for civil settlement
the original tax deduction arising from the transactions being challenged by the spanish tax authorities was approximately €28m in prior years   the directors recorded a tax creditor for their best estimate of the tax and interest that they believed may become payable in the event that the   spanish tax authorities are successful in their challenge this creditor continues to be held at 30 september 2012 within income taxes payable   if the current challenge instigated by the tax authorities is successful ultimately the group may be liable to further interest penalties and fines   the extent of which at this stage is uncertain to mitigate the extent of such potential penalties all of the disputed tax has now been either paid   or deposited in court on the basis of independent legal advice taken the group firmly believes that should the investigation result in a prosecution   or further civil claim by the tax authorities it could be defended robustly it is likely that the resolution of this matter will take a number of years   to reach a final conclusion
tt11  ar 2012  20122012  proof 5 financial statements
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financial statements
c during 2012 the german tax authorities issued new guidance on how certain items of expenditure should be treated for the purposes of   german trade tax there remains considerable uncertainty about the application of this guidance to certain tour operating activities and hence   further clarification of this guidance has been sought from the german tax authorities it is possible that the issue will have to be litigated   through the german tax courts and it could take a considerable amount of time to bring to a resolution   it is difficult to estimate accurately the potential liability should the german tax authorities challenge successfully the group’s interpretation of   the guidance due to the differing nature of the contracts which could be impacted by any such challenge as a result there is a range of possible   outcomes if the group is successful in its arguments there would be no exposure however it is possible that the liability over the last five years’   could be up to a total of approximately £64m although the group strongly believes that the guidance should not apply to standard tour   operating contracts and that any liability will be more likely to be substantially less than this
d other factors which may affect the future tax charge include the mix of jurisdictions with different tax rates in which profits and losses arise   changes in tax rates and the potential future recognition of tax losses for which a deferred tax asset has not been recognised at the year end   note 14
9 dividends
the following dividends which relate to ordinary shares have been deducted from equity in the year
         year ended  year  ended
         30 september  30  september
        pence  2012  2011
        per share £m  £m
dividends relating to the year ended 30 september 2010    
interim dividend paid october 2010            32  –  36
final dividend paid april 2011            78 –  86
        110 –  122
dividends relating to the year ended 30 september 2011    
interim dividend paid october 2011          33 36  –
final dividend paid april 2012            80 89  –
        113 125  –
the interim dividend in respect of the year ended 30 september 2012 of 34p per share was paid on 3 october 2012 and this dividend of £38m   will be recognised as a deduction from equity in the year ending 30 september 2013
subsequent to the balance sheet date the directors have proposed a final dividend of 83p per share 2011 final dividend of 80p per share   payable on 10 april 2013 to the holders of relevant shares on the register at 8 march 2013 the final proposed dividend amounts to £92m and   will after approval by shareholders be recognised in the consolidated financial statements for the year ending 30 september 2013 the final   ordinary dividend of 83p per share together with the interim dividend of 34p per share makes a total dividend of 117p per share relating to     the year ended 30 september 2012   a dividend reinvestment plan is in operation those shareholders who have not elected to participate in this plan and who would like to   participate with respect to the 2012 final dividend may do so by contacting equiniti directly on 0871 384 2030 or via the overseas helpline on   44 121 415 7047 the last day for election for the final proposed dividend is 25 march 2013 and any requests should be made in good time   ahead of that date
tt11  ar 2012  20122012  proof 5 financial statements
notes to the consolidated financial statements continued
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112  tui travel plc annual report  accounts 2012
10 intangible assets
      customer  computer    software in
  goodwill  brands  relationships  software  licences  development  other  total
  £m  £m  £m  £m  £m  £m  £m  £m
cost
at 1 october 2010   4478   447   200   422   36   27   163   5773  additions  –   –   1   47   1   3   1   53  acquisition  through    business combinations  57   9   –   2   –   –   7   75  disposals  18  –   –   24  2  –   –   44
reclassification  from  assets    held for sale  11   –   –   1   –   –   –   12  foreign exchange  20   3   2   2   1   –   –   28  reclassification of asset class  1   –   2   1  1   –   3  –  at 30 september 2011  4549   459   205   449   37   30   168   5897  additions  3   –   1   40   –   43   4   91  acquisition  through    business combinations  8   7   –   1   –   –   –   16  disposals  1  –   –   29  1  –   –   31
reclassification  to  assets    held for sale  –   –   –   –   8  –   –   8
foreign exchange  147  11  11  13  1  1  2  186
reclassification of asset class  1  –   –   11   1  10  1  –  at 30 september 2012  4413 455  195  459 26 62  169 5779 
accumulated amortisation  
and impairment losses 
at 1 october 2010   597  72  45  312  15  –  73  1114
amortisation for the year  –   30  14  47  1  –  9  101
impairment loss  39  6  1  –  1  4  –  51
disposals  –   –   –  24   1   –   –   25  reclassification  from  assets    held for sale  8  –   –   –   –   –   –   8
foreign exchange  2  1  1  1  –  1  –  6
at 30 september 2011  646  109  61  336  16  5  82  1255
amortisation for the year –   27  14  40  2  –  9  92
impairment loss  20  2  –   –   8  –   –   30
reclassification  to  assets    held for sale  –   –   –   –  7   –   –   7  disposals  –   –   –   28   –   –   –  28  foreign exchange  29    3   3   7   1   1   1   45  at 30 september 2012  637 135 72 341 18 4 90 1297
net book value
at 1 october 2010  3881   375   155   110   21   27   90   4659  at 30 september 2011  3903   350   144   113   21   25   86   4642  at 30 september 2012 3776  320  123  118  8  58  79  4482 
amortisation of intangible assets is recognised within cost of sales in the consolidated income statement amortisation of business combination   and other intangibles combined with depreciation of property plant and equipment is disclosed by segment in note 3   additions to computer software in development of £43m includes costs relating to a major it project within the uk  ireland segment to replace   the reservation and accounting systems licences totalling £8m have been impaired in the year £6m of which has arisen from the writedown of   specific ski chalet assets which are now being actively marketed for disposal and where transactions are expected to complete within 12 months   the remaining assets which relate to the specialist  activity sector have then been transferred to assets held for resale as they met criteria   set out in ifrs 5 the impairment charge to the consolidated income statement has been included within administrative expenses and is   included within separately disclosed items in note 4   tt11  ar 2012  20122012  proof 5 financial statements
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financial statements
in 2011 the group established a pension funding partnership arrangement pfp the main operating brands of the uk business namely thomson   and first choice were sold into the pfp and three uk pension schemes subscribed for interests in the pfp the recognition of the two brand assets   in the group financial statements remains unaffected by the establishment of the pfp although the thomson and first choice brands the latter of   which is recognised on the group balance sheet at a value of £101m 2011 £108m are now being held as security for the pfp   individual intangible assets other than goodwill that are considered material to the group are as follows
    brands  customer relationships   other intangible assets
            2012  2011  2012  2011  2012  2011
     £m  £m  £m  £m  £m  £m
first choice brand      101  108 –   –  –  –
marmara brand      27  32  –  – –   –
accommodation  destinations     accommodation  wholesaler  –  customer  relationships  –   –  70  84  –  –
landing slots      –  –  –  –  30  32
     128  140  70  84  30  32
the first choice and marmara brands are major brands of the uk  ireland and french businesses respectively and have a remaining amortisation   period of 15 years 2011 16 years the customer relationships within the accommodation  destinations accommodation wholesaler sector are   in respect of commercial contractual relationships with travel agents and have a remaining amortisation period of 10 years 2011 11 years the landing   slots are in respect of the uk  ireland business for airports in the uk and have a remaining amortisation period of 15 years 2011 16 years   goodwill impairment testing
ias 36 requires that impairment tests are carried out on cgus following the level at which the group’s management measures returns on operations
once every year or more frequently if events or a change in the economic environment indicate a risk of impairment the group assesses the   recoverable amount of goodwill allocated to its cgus as required by ias 36 ‘impairment of assets’ the recoverable value of goodwill for all cgus   has been determined to be ‘value in use’   the calculation of recoverable value for cgus based on value in use includes the following assumptions
•  cash flow projections based on the group’s latest approved five year business plan   •  cash flows beyond the plan period are extrapolated using an inflation only growth rate of between 1 and 39 2011 between 125 and 4   the growth rate used is less than or equal to third party estimates of the medium term gdp growth rates of the key geographic markets in   which the specific cgu operates at the time the projections are prepared   •  cash flows are discounted using the group’s wacc adjusted as appropriate for business specific factors such as geographic risk   •  cash  flows  exclude  planned  enhancement  capital  expenditure  together  with  the  associated  benefit  that  the  expenditure  is  expected  to  produce
•  cash flows include the impact of working capital in both the asset base and the impact on cash flows over the plan period
•  central group overheads are borne in full by cgus and are allocated pro rata to the cgu’s underlying operating profit   assumptions used in the five year plan take past experience into account with cgu specific and central contingencies in the five year plan being   allocated to all cgus   since determination of an appropriate group wacc is judgemental sensitivities also address how increases in the base group wacc might   impact the results of the impairment tests the group’s wacc is based on a capital asset pricing model calculation using a mixture of inhouse   data and externally available information
tt11  ar 2012  20122012  proof 5 financial statements
notes to the consolidated financial statements continued
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114  tui travel plc annual report  accounts 2012
10 intangible assets continued
an analysis of the aggregate and material carrying amounts of goodwill allocated to each principal cgu together with the growth rates being   applied to cash flows beyond the plan period and the pretax discount rates used for each cgu or group of similar cgus is as follows
      growth rate applied to
    goodwill  cash flows after five year plan  pretax discount rate used
          30 september  30 september      30 september  30  september
   2012  2011  2012  2011  2012  2011
sector  cgu  £m  £m        
mainstream – northern region  uk  ireland     1490  1495  23  20  10  10
mainstream – central europe   germany    364   409  15  20  11  11
accommodation     accommodation  destinations  wholesaler     354  398  20  20  12  11
mainstream – northern region  nordics    268  276  225  20  11  10
accommodation  destinations  accommodation ota    232  234  315  225  10  10
mainstream – western europe  france    180  205  18  20  11  11
specialist    education  languages   activity  formerly student    133  134  22  20  11  10
specialist  activity  adventure    131  134  325  30  11  10
specialist  activity  tui marine    105  109  21  21  11  10
all sectors  multiple cgus     519  509  1039  12540  1014  1013
total goodwill     3776  3903
the multiple cgus not separately listed above do not individually represent more than 3 of total group goodwill all of the group’s goodwill   has been allocated to each cgu and all cgus have been tested for impairment
goodwill impairment charges
if the recoverable amount of a cgu is estimated to be less than the total of its operating noncurrent assets goodwill and other intangibles an   impairment loss is recognised immediately in the income statement the impairment loss is allocated first to reduce the carrying amount of any   goodwill allocated to the cgu and then to the other assets on a pro rata basis the total impairment loss recognised in the year of £20m is equal   to the difference between the net book values and the recoverable amounts
impairment charges of £7m and £4m have been recognised in the year in respect of the italian and spanish cgus as a result of a deterioration   in forecast trading results compared to the prior year the impairment test for both of these cgus was based on the value in use calculation   both impairment charges are disclosed within administrative expenses and shown separately on the face of the consolidated income statement   the impairments arise since the cash flow model based on the current five year plan did not support the carrying amount of goodwill and all   other assets for these two cgus the pretax discount rate used for these two businesses was 11 for italy and 126 for spain and the growth   rates beyond the five year plan used were 1 for the italian cgu and 19 for the spanish cgu
a further £9m goodwill impairment has been recognised in respect of two small businesses that have been identified as noncore to the group   and the potential net proceeds in the event of a disposal have provided an indication in the current year that the goodwill attached to these   businesses is no longer supportable the value of goodwill assigned to these two businesses together with £2m of brands have been fully   impaired the board considers the disposal of these businesses to be the more likely option
in 2011 a £39m impairment charge was recognised in respect of the french cgu being that of the french tour operator following a   deterioration in the trading results of the french source market due to the political unrest in north africa   sensitivity analysis for goodwill
the calculation of recoverable amount is particularly sensitive to forecast future earnings and the discount rates used the directors have   considered the separate impacts of i increasing wacc by 05 ii a reduction in underlying earnings of 5 across all years and iii a reduction   in the long term percentage growth rate beyond the five year plan on all tour operating cgus to nil as being reasonably possible changes
        impact of a reasonably possible
        change in assumption
    
          reduction  in
              reduction in   the long term
            increase  in  underlying  percentage
            wacc of 05  earnings of 5  growth rate to nil
cgus where an impairment would arise following a reasonably possible change in assumptions     £m  £m  £m
italy – mainstream sector            2  2  2
spain – mainstream sector            –  –  1
sport – specialist  activity sector            3  6  10
tui marine – specialist  activity sector            15  9  54
        20  17  67
in addition to these sensitivities there is no remaining headroom in the goodwill impairment test of the accommodation ota cgu if the long   term growth rate after five years falls to 23 which is considered to be a reasonably possible change to this assumption   tt11  ar 2012  20122012  proof 5 financial statements
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financial statements
these sensitivities disclosed immediately above do not take account of any mitigating action that management would take should earnings decrease   no other impairments to goodwill would arise following these reasonably possible changes in these key assumptions   based on all of the calculations undertaken the directors consider that the recoverable amount of goodwill in each cgu exceeds its current   carrying value   11 property plant and equipment
       advance
       payment
      yachts motor    for future
    land and  boats and  aircraft and  delivery  computer  other
    buildings  cruise  ships  equipment  of  aircraft  equipment  equipment  total
    £m  £m  £m  £m  £m  £m  £m
cost
at 1 october 2010    354   352   934   137   176   491   2444  foreign exchange    13   1   8   1  3   3  21  acquisitions  through  business  combinations    1   –   –   –   2   3   6  transfers from inventory    –   –   30   –   –   –   30  additions    20   60   28   73   14   72   267  disposals    8  7  229  39  1  51  335
reclassifications    3   14   10   –   1   28  –  transferred fromto assets held for sale    1   1  52  –   –   –   52
at 30 september 2011    384   419   729   170   195   484   2381  foreign exchange    18  4  33  8  3  20  86
acquisitions  through  business  combinations    –   –   –   –   –   3   3  transfers from inventory    –   8   –   –   –   2   10  additions  12   32   109   133   10   75   371  disposals    34  20  96  80  12  29  271
reclassifications    16   1  9   –   2   26  –  transferred to assets held for sale  2  1  31  –   5  3  42
at 30 september 2012   358 433 687  215  187  486 2366 
accumulated depreciation and impairment
at 1 october 2010    183  111  648  –   155  324  1421
foreign exchange    3  –   4  –   3  1   9
acquisitions  through  business  combinations    –   –   –   –   2  2  4
transfer from inventory    –   –   21  –   –   –   21
provided in the year    14  22  51  –   8  42  137
disposals    6   –   154   –   –   27   187  impairments    2  12  4  –   –   –   18
reclassifications    3  7  –   –   –   10   –  transferred to assets held for sale    –   –  43   –   –   –   43  at 30 september 2011    199  152  531  –   168  330  1380
        
foreign exchange    9   2   23  –   3   12   49  provided in the year    16  21  43  –   12  35  127
disposals    28   11   94   –   12   21   166  impairments    1  –   6  –   –   5  12
reclassifications    10  –   –   –   1  11   –  transferred to assets held for sale  2   –   26   –   3   3   34  at 30 september 2012   187 160 437 –  163 323 1270
net book value
at 1 october 2010    171   241   286   137   21   167   1023  at 30 september 2011    185   267   198   170   27   154   1001  at 30 september 2012  171  273  250  215  24  163  1096 
tt11  ar 2012  20122012  proof 5 financial statements
notes to the consolidated financial statements continued
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116  tui travel plc annual report  accounts 2012
11 property plant and equipment continued
impairment charges
of the impairment charge in the year ended 30 september 2012 of £12m 2011 £18m £6m relates to the impairment of one aircraft     owned within the uk  ireland operating segment £5m relates to the impairment of motor vehicles within the specialist  activity sector     and £1m relates to the impairment of office lease holding improvements within the france tour operating segment   of the impairment charge of £18m in the year ended 30 september 2011 £12m related to the impairment of one owned ship within the     uk  ireland operating segment the ‘island escape’   additions to aircraft and equipment
additions of £109m 2011 £28m to aircraft and equipment relate to three aircraft 2011 none purchased on finance leases during the year     as well as fleet improvements and capitalised maintenance on owned aircraft   advance payments for future delivery of aircraft
additions of £133m 2011 £73m to advance payments for future delivery of aircraft were due to payments made for the future delivery     of 16 aircraft 2011 16 aircraft and interest of £9m 2011 £7m that has been capitalised during the year at a rate of 54 2011 54   the disposal of £80m 2011 £39m from advance payments for future delivery of aircraft arises because of the delivery and then sale and   leaseback of eight aircraft 2011 four aircraft and the delivery and sale of two 2011 one spare aircraft engines one 2011 one of which   was then subject to a leaseback
other disclosures
other equipment with a combined net book value as at 30 september 2012 of £163m 2011 £154m includes £101m 2011 £112m of fixtures   and fittings £42m 2011 £17m of property plant and equipment under construction and £20m 2011 £24m of motor vehicles
land and buildings comprise freehold and long leasehold properties with net book values of £120m 2011 £135m and short leasehold   properties with a net book value of £51m 2011 £50m respectively
the net book value of assets held under finance leases and hire purchase contracts at 30 september 2012 was £224m 2011 £146m this   includes £94m 2011 £103m of ships yachts and motorboats £115m 2011 £26m of aircraft £6m 2011 £8m of land and buildings and     £9m 2011 £9m of other assets mainly vehicles
the net book value of property plant and equipment with restrictions on title being pledged as security for bank loans amounted to £32m   2011 £29m
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financial statements
12 investment in joint ventures associates and other investments
the group’s equity investment in its joint ventures and associates is recorded in the consolidated financial statements as follows
            share of net  share of net  total
            assets of  assets of  share of
            joint ventures  associates  net assets
        £m  £m  £m
at 1 october 2010            86   125   211  share of lossesprofits before amortisation interest and tax for the year         3  23   20  share of interest and tax charge             4  –   4
share of amortisation for the year            –   3  3
additions        23   2   25  dividends  paid        2  5  7
at 30 september 2011            100   142   242  share of lossesprofits before amortisation interest and tax for the year         6  22  16  share of interest and tax charge             3  2  5
share of amortisation for the year            1  5  6
additions        25  –   25
dividends  paid        2  2  4
reclassifications and other movements            1  2  3
foreign  exchange        7  –   7
at 30 september 2012        105 153 258
the group’s share of joint venture and associate profit after interest and tax was £5m 2011 £13m
the principal joint ventures and associates and the proportion of voting rights are shown below
      proportion of     country of   name of company      voting rights held   nature of business   registrationincorporation
joint ventures
travco group holding sae        500  incoming agency   egypt  le passage to india tours and travels private limited      500   incoming agency   india  atlantica hellas sa        500   hotel operator   greece
atlantica hotels  resorts limited        499   hotel operator   cyprus  togebi holdings limited        490   tour operator   cyprus  associates
sunwing travel group inc        250  tour  operator  canada
tui infotec gmbh        499  it services  germany
subsequent to the year end the group acquired the remaining 501 shareholding in tui infotec gmbh that it did not already own with the   exception of sunwing travel group inc the group’s interest is in the ordinary share capital of each joint venture and associate in respect of   sunwing travel group inc the group holds a 100 interest in its class q non voting and class y nonvoting common shares and 25 interest   in its class z special voting shares
tt11  ar 2012  20122012  proof 5 financial statements
notes to the consolidated financial statements continued
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118  tui travel plc annual report  accounts 2012
12 investment in joint ventures associates and other investments continued
a summary of the group’s share of the results of its associates and joint ventures for the year ended 30 september 2012 and share of the   assets and liabilities at this date is shown below
     joint   joint
   ventures associates total  ventures  associates  total
     2012 2012 2012  2011  2011  2011
     £m £m £m  £m  £m  £m
revenue     405  121  526   359   398   757  operating costs    412 104 516  360  380  740
operating lossprofit      7 17  10   1  18   17  net interest payablereceivable     2 1  1  2  –   2
lossprofit before taxation     9 18  9   3  18   15  taxation    1 3 4  2  –   2
lossprofit after taxation for the year   10 15  5   5  18   13  noncurrent  assets      129  134  263   89   131   220  current assets      111  134  245   146   123   269  total assets      240  268  508   235   254   489  noncurrent  liabilities    88 105 193  104  86  190
current  liabilities    47 10 57  31  26  57
total liabilities      135 115 250  135  112  247
net assets     105  153  258   100   142   242  togebi holdings limited
the group has an agreement with sgroup capital management limited sgcm regarding togebi holdings limited a jointlyowned   investment holding company owned 51 by sgcm and 49 by the group the joint venture owns four subsidiary tour operators and travel   agency groups in russia and ukraine
all major decisions have to be agreed by both shareholders and under ias 31 ‘interests in joint ventures’ the entity is therefore accounted   for as a joint venture
sgcm is owned by a significant shareholder of tui ag and is therefore considered to be a related party togebi holdings limited and its   subsidiary undertakings are therefore considered to be related parties by virtue of sgcm being the joint venturer to this investment
details of loan and other balances with togebi holdings limited and its subsidiary undertakings are disclosed in note 30   sunwing travel group inc
the strategic venture with sunwing travel group inc is accounted for as an associate as the group does not control or jointly control this   business
other investments
        trade  non
        and  listed  consolidated
            investments  entities  total
        £m  £m  £m
at 1 october 2010            56   23   79  additions        –   1   1  disposals            4  –   4
investments consolidated for the first time            –   1  1
impairment during the year            –   2  2
change in the fair value of available for sale financial asset           1  –   1
at 30 september 2011            51   21   72  impairment  loss        4  –   4
foreign  exchange        1  1  2
at 30 september 2012        46  20  66 
trade and listed investments at 30 september 2012 represented the group’s 143 2011 143 shareholding in the airline group limited which   in turn has a 42 shareholding in national air traffic services limited a 44 2011 60 shareholding in air berlin plc and a 10 2011 10   shareholding in atlantica leisure group limited further disclosure regarding the valuation of the airline group is provided in note 25 h
the group’s investment in air berlin plc is carried at fair value determined by reference to its equity share price at the balance sheet date   due to the significant and prolonged decline in the equity share price of air berlin plc combined with its large operating losses and the   restructuring programme it has commenced it is considered that the investment is now impaired in accordance with ias 39 the diminution   in value of the investment of £10m £6m of which was previously charged to the consolidated statement of comprehensive income has now   been charged to the consolidated income statement   nonconsolidated entities are recorded at cost and reflect the group’s net investment held in circa 50 subsidiaries which due to the immaterial   size of their revenues result and financial position have not been consolidated balances between these entities and consolidated subsidiaries   have not been eliminated
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financial statements
13 investments
a acquisitions in the year ended 30 september 2012
acquisitions were made in the year for a total investment value of £16m in order to expand business operations in line with the group’s growth   strategy in accordance with the provisions of ifrs 3 revised incidental acquisition costs of £3m have been expensed within administrative   expenses and disclosed as an acquisition related expense in the consolidated income statement in the year these acquisitions gave rise to   provisional goodwill of £8m the one significant business acquired and its acquisition date was
business  description  date  country
accommodation  destinations sector
mala pronta viagens e turismo ltda ‘mala pronta‘  online accommodation  23 september 2012  brazil
the group acquired 9334 of the voting equity instruments of mala pronta other individually insignificant businesses acquired during the year   include 21 europeanbased travel agency businesses and a further 26 of boomerangreisen gmbh in addition to the 49 previously owned
the relative size of the acquisitions made is set out in the table below
         total  total
consideration            number  of  consideration  goodwill
£m        acquisitions  £m  £m
1 – 5             3  5  4
5 – 10            1  8  2
total        4 13 6
other individually insignificant businesses            21  3  2
total        25 16 8
excluding employmentlinked contingent consideration that is charged to the consolidated income statement over the service period the   consideration paid comprised entirely of cash the total provisional net assets acquired are set out below
          fair  value  of
          net  assets
          acquired
          £m
intangible  assets          8  property plant and equipment                3  trade  receivables          2  cash            3  current  liabilities            6
non  current  liabilities                2
total          8
total  consideration          16
less net assets acquired as above                8
total goodwill          8
all acquisitions have been accounted for using the purchase method as required by ifrs 3 revised certain nonsignificant fair value   adjustments have necessarily been prepared on a provisional basis due to the recent timing of certain acquisitions experience may result in   revisions to fair values in the subsequent accounting period no material amount of goodwill is expected to be deductible for tax purposes   there are no material accounting policy adjustments nor any significant differences between the book and fair values of assets and liabilities   acquired no single acquisition in the current year is considered material to goodwill
residual goodwill
a consistent process is undertaken at each acquisition to identify the fair value of separable assets and liabilities acquired including the fair   value of intangible assets such as brands order books licences customer relationships and other intangible assets that may exist the residual   goodwill on acquisition represents the value of assets and earnings that do not form separable assets under ifrs 3 revised but nevertheless   are expected to contribute to the future results of the group
residual goodwill in respect of current year acquisitions represents principally
•  market knowledge of and access to the brazilian travel market and
•  the ability to sell acquired product through existing channels and existing product through acquired channels
tt11  ar 2012  20122012  proof 5 financial statements
notes to the consolidated financial statements continued
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120  tui travel plc annual report  accounts 2012
13 investments continued
acquisition related expenses
ifrs 3 revised requires consideration that is contingent on future service by the vendor to be expensed over the service period and acquisition   costs to be expensed as incurred in this respect £3m 2011 £16m has been expensed in the year and included in the acquisition related   expenses in the consolidated income statement            year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
acquisition related expenses in operating profit  
amortisation of business combination intangibles            59  66
other acquisition related expenses              3  11
remuneration for postcombination services              –  5
total         62  82
consideration payable
movements in deferred and contingent consideration in the year were as follows
          deferred  contingent
          consideration  consideration  loan  notes  total
          £m  £m  £m  £m
at 1 october 2011          4   16   1   21  recognised in the year relating to current year acquisitions        –   1   –   1  adjustments to amounts recognised in respect of prior period acquisitions      2   5  –   3
cash paid          3  7  –   10
at 30 september 2012       3  5  1  9 
deferred and contingent consideration payable is dependent on the results of the businesses over a number of future periods and in some   cases is also dependent upon the previous owners or management of those businesses remaining in employment with the group during the   earn out period
adjustments to amounts recognised in respect of prior year acquisitions reflects changes in the expected amounts still to pay in future years   this follows the latest assessment of the range of projections to expected earnings figures by these acquired entities with the consideration   payable being based upon a multiple of the appropriate earnings figures   an estimate of the range of undiscounted amounts of contingent and deferred consideration payable for acquisitions in the current year and   in prior years where the consideration remains payable is listed below the amounts payable will be dependent on the results of the acquired   businesses over the following periods
  basis of calculation  financial year  period for calculation  range of consideration
acquisition   of consideration  of acquisition  of consideration  payable £m
lima tours sac  earnings and employment  2011  up to 30 june 2014  14
mala pronta  earnings and employment  2012  up to 31 march 2014  01
other individually insignificant  earnings alone and   considerations payable  earnings  employment  20082012  up to 31 march 2014  06
total of range of contingent consideration payable  
in respect of current and prior year acquisitions        111
the expected contingent consideration for all acquisitions above is calculated using multiples of underlying earnings with some amounts payable   dependent upon employment there have been no material changes to the amounts recognised in respect of previous years’ acquisitions during   the current year
b cash flows arising in respect of acquisitions
total cash flows relating to acquisitions in the year including amounts paid in respect of deferred and contingent consideration arising on prior   period acquisitions are as follows
         cash paid
         2012
         £m
acquisitions in the current year excluding acquisition related expenses        16  cash acquired with acquisitions                3
net cash outflow in the year relating to current year acquisitions            13  cash paid relating to prior period acquisitions                 10  net cash outflow in the year relating to acquisitions       23 
acquisition related expenses charged to the income statement             3  total cash outflows in the year relating to acquisitions         26
tt11  ar 2012  20122012  proof 5 financial statements
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tui travel plc annual report  accounts 2012  121
financial statements
c consolidated income statement
if the results of the acquired businesses had been included in these consolidated financial statements from 1 october 2011 until each of their   respective acquisition dates the group‘s revenue would have been approximately £5m higher there would have been no significant impact     on the group’s result after adjusting for amortisation of business combination intangibles had those intangible assets been recognised since     1 october 2011
as the more significant acquisitions were at the end of the group’s financial year the acquired businesses have had no material impact on the   group’s revenue or profit figures including amortisation of business combination intangibles
d acquisitions post balance sheet date
subsequent to 30 september 2012 the group acquired the remaining 501 of tui infotec gmbh that it did not previously own the accounting   for this acquisition has not yet been finalised but is not considered material to the group
e prior period revisions to fair values
in the year ended 30 september 2011 the group acquired various businesses for a total consideration of £69m the finalisation of the   acquisition balance sheets for these businesses has not led to a material adjustment to goodwill presented in the 2011 accounts and therefore   there is no restatement of the results for the year ended 30 september 2011 or balance sheet as at 30 september 2011 in respect of these   finalisations  f gains and losses in subsequent periods
the group has impaired the goodwill and brand of caradonna dive adventures by £5m and £1m respectively and the goodwill and brand of   pinnacle tours by £4m and £1m respectively in the comparative year the group impaired the brand of island escape by £5m and the customer   list of explorers travel by £1m   14 deferred tax assets and liabilities
    assets  liabilities  net
            year ended  year ended  year ended  year ended  year ended  year  ended
     30 september  30 september  30 september  30 september  30 september  30  september
     2012  2011  2012  2011  2012  2011
     £m  £m  £m  £m  £m  £m
intangible assets      7   21   147  93  140  72
finance lease transactions      –   –   2  2  2  2
property plant and equipment      77   85   38  40  39  45  financial instruments and foreign exchange      19   –   14  16  5  16
employee  benefits      105   88   –   –   105  88  other short term temporary differences      215   161   200  218  15  57
tax value of losses carried forward      74   81   –  –   74  81  total     497   436   401  369  96  67  set off of deferred tax within the same jurisdiction    372  298  372   298   –   –  net deferred tax assetsliabilities     125   138   29  71  96  67  the group has recognised deferred tax assets relating to tax losses in individual tax jurisdictions based on forecast future taxable profits
the deferred tax balance associated with the pension deficit has been adjusted to reflect the current tax benefit obtained in the current year   following the contribution in the previous year of the first choice and thomson brands into the pension schemes as explained in note 6c
unrecognised deferred tax assets
deferred tax assets have not been recognised in respect of the following items reported at the applicable tax rate
         30 september  30  september
         2012  2011
         £m  £m
capital  losses         2  3
other  losses         259  233
total losses         261  236
tt11  ar 2012  20122012  proof 5 financial statements
notes to the consolidated financial statements continued
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122  tui travel plc annual report  accounts 2012
14 deferred tax assets and liabilities continued
these assets have not been recognised principally because the directors are not certain of the timing of any benefits that might arise in the   future other losses includes £12m which are subject to a 4 year expiry period the balance of losses are not subject to time expiry and are   available for utilisation against profits arising in future periods in the territories in which they have arisen there are no other unprovided   deferred tax liabilities nor unrecognised deferred tax assets   movements in deferred taxation during the current year
        recognised
          charged in the  outside of the
  balance at        consolidated   consolidated    balance at
  1 october  arising on  extinguished    income  income   foreign  30 september
  2011  acquisition  on disposal  reclassification  statement  statement   exchange  2012
  £m  £m   £m  £m  £m  £m  £m  £m
intangible assets  72  –   –  72  2  –  6   140
finance lease transactions  2  –   –  –   –   –  –   2
property plant and equipment  45   –   –  –   8    2   39 
financial instruments and foreign exchange  16  –   4  –   –   15  2   5  employee  benefits  88   –   –  –   14  32  1  105  other short term temporary differences  57  1  –  72   8  3  6   15  tax value of losses carried forward   81   –   –  –   4  –  3  74  total  67   1  4  –   36  50  12   96  a provision against the recoverability of an intangible deferred tax asset of £72m has been reclassified from other short term temporary differences   to intangible assets to better reflect the category that is represented by the underlying asset
movements in deferred taxation during the prior year are analysed as follows
        recognised
          charged  charged
          recognised in the  outside of the
    balance at      consolidated   consolidated    balance at
    1 october  arising on  extinguished  income  income  foreign  30 september
    2010  acquisition  on disposal  statement  statement  exchange  2011
    £m  £m   £m  £m  £m  £m  £m
intangible assets    149  3  3  21  107  9  72
finance lease transactions    32  –  –  29  –  1  2
property plant and equipment    50  –  –  5  1  1  45
financial instruments and foreign exchange    5  –  2  12  20  1  16
employee  benefits    126  1  2  34  3  –  88
other short term temporary differences    9  1  3  39  110  1  57
tax value of losses carried forward    87  –  –  6  –  –  81
total    86  5  4  14  27  7  67
intangible asset temporary differences arise in respect of assets recognised on acquisition property plant and equipment temporary differences   principally relate to tax depreciation in the uk france and germany employee benefits temporary differences arise in respect of defined benefit   pension  scheme  liabilities  and  future  deductions  available  on  the  vesting  of  employee  awards  financial  instruments  and  foreign  exchange  temporary  differences arise in respect of financial instruments accounted for under ias 39 and principally reflect the fair value at 30 september 2012   of cash flow hedging derivatives that will be settled against future transactions other short term temporary differences relate to operating   expenses and related accruals and provisions for which a tax deduction has not yet been recognised   15 inventories
         30 september  30  september
         2012  2011
         £m  £m
marine  inventories         28  31
airline spares and operating equipment              19  24
other  operating  inventories              14  14
total         61  69
included within cost of sales in the year is a writedown of inventories by £7m 2011 £1m to net realisable value   tt11  ar 2012  20122012  proof 5 financial statements
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tui travel plc annual report  accounts 2012  123
financial statements
16 trade and other receivables
   30 september 2012  30 september 2011                 non      non
       current current total  current  current  total
       assets assets assets  assets  assets  assets
       £m £m £m  £m  £m  £m
trade receivables gross          548  – 548   568   –  568  less provision for impairment          49 – 49  58  –  58
      499  – 499   510   –  510  amounts owed by related parties note 30        52  34 86   48   –  48  interest bearing other receivables          –  12 12   –   13  13  other receivables          196  56 252   241   42  283         747  102 849   799   55  854  prepayments       565  123 688   673   147  820  total      1312  225 1537   1472   202  1674  other receivables include aircraft related receivables lease and security deposits derivative settlement receivables and various end of season   rebates due from suppliers
the maximum exposure to credit risk for financial assets as defined in note 1ei which are included within trade and other receivables by   geographic region was
         30 september  30  september
         2012  2011
         £m  £m
united  kingdom         191  199
germany         111  95
france         91  67
other european countries              216  213
rest of the world              101  119
total         710  693
trade receivables are disclosed net of provisions for bad and doubtful debts an analysis of which is shown below
         30 september  30  september
         2012  2011
         £m  £m
balance at the beginning of the year              58  55
foreign  exchange         –  1
charge to the consolidated income statement              9  25
utilisation of provision              18  21
total         49  58
the ageing of the financial assets included within trade and other receivables at the balance sheet date was
   30 september 2012  30 september 2011
          gross provision net  gross  provision  net
     £m £m £m  £m  £m  £m
not overdue      482  5 477   481  3  478
overdue 130 days      136  1 135   143  3  140
overdue 3190 days      65  6 59   64  2  62
overdue 91180 days    17  6 11   16  4  12
overdue more than 180 days      59  31 28   47  46  1
total      759  49 710   751  58  693
no individually material bad debt provision movements or charges have been recorded in the year based on past experience and the post balance   sheet period to the date of approval of these consolidated financial statements the group considers that the provision allowance recorded is   adequate within the provision there are no individually material amounts held trade receivables not overdue and not impaired include amounts   due from travel agencies tour operators and hoteliers in respect of mainstream specialist  activity and accommodation  destinations sectors   provisions for doubtful debts in respect of trade receivable balances are managed by each underlying business unit where the debts arise and   are based on local management experience factors considered include the age of the receivable previous experience with the counterparty and   the economic environment in which the counterparty is located   tt11  ar 2012  20122012  proof 5 financial statements
notes to the consolidated financial statements continued
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124  tui travel plc annual report  accounts 2012
16 trade and other receivables continued
credit exposure to individual passengers booking holidays directly is limited as full payment is required before the issue of tickets and holiday   departure in the case of travel services sold by third party agents the credit risk depends on the creditworthiness of those third parties but   this risk is also limited because of the relatively short period of credit the directors do not consider there to be significant concentration of   credit risk relating to trade and other receivables
the provision against overdue receivables of £44m 2011 £55m relates to gross receivables of £78m 2011 £77m   there are £199m of receivables that are overdue and not impaired at 30 september 2012 2011 £193m   amounts owed by related parties are disclosed further in note 30
17 cash and cash equivalents
a cash and cash equivalents
         30 september  30  september
         2012  2011
         £m  £m
cash in hand              21  20
cash at bank              265  267
deposits         544  615
cash and cash equivalents         830  902
cash and cash equivalents includes £34m 2011 £46m that is not available for immediate use by the group this is made up of monies held to   meet regulatory requirements together with cash balances on short term deposits held on a restricted basis by the group’s captive insurance   funds as part of their ongoing operations
b other investments
other current investments disclosed in the consolidated balance sheet comprise of £17m deposit balances 2011 £20m held to meet regulatory   requirements with a term exceeding three months and £2m 2011 £2m of other deposits with a maturity in excess of three months   18 assets classified as held for sale
         30 september  30  september
         2012  2011
         £m  £m
yachts and motor boats              1  –
land and buildings              –  1
aircraft         5  7
other         7  5
net assets classified as held for sale         13  13
assets held for sale are expected to be sold within 12 months further disclosure of assets being classified as held for sale within the year is included   in notes 4 and 10
19 interestbearing loans and borrowings
         30 september  30  september
         2012  2011
         £m  £m
current liabilities
amounts owed to related parties              –   26
bank  loans         6   11
loan  notes         –   1
finance leases and hire purchase contracts              23   19
other financial liabilities              41   39
total         70   96
other financial liabilities mainly comprise the fair value of two put options written by the group to the sole remaining noncontrolling interest   shareholder in l’tur tourismus ag that may require the group to purchase the noncontrolling interest shareholding totalling 30 the first   put option over 20 of the shares may be exercised at any time until 2015 a second put option written by the group to the same noncontrolling   interest shareholder for the remaining 10 shareholding has no time limit details of the fair value of these options are included in note 25h
tt11  ar 2012  20122012  proof 5 financial statements
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tui travel plc annual report  accounts 2012  125
financial statements
fair value changes in the put option liability are included within financial expenses or financial income
         30 september  30  september
         2012  2011
         £m  £m
noncurrent liabilities
amounts owed to related parties              10  10
bank  loans         17  19
loan  notes         1  –
finance leases and hire purchase contracts              163  113
convertible  bonds         675  654
other financial liabilities              2  6
total         868  802
the bank loans and loan notes are repayable
         30 september  30  september
         2012  2011
         £m  £m
within one year              6  12
between one and five years              18  19
total         24  31
certain loans are secured on the underlying assets of the company in whose name the borrowings are made including all finance leases which   are secured against their respective underlying assets
details of amounts owed to related parties are included in note 30
finance lease liabilities relate primarily to the leasing of aircraft boats and cruise ships group obligations under finance leases and hire purchase   contracts are payable as follows
     minimum lease payments
  
       30 september      30  september
     principal interest 2012  principal  interest  2011
     £m £m £m  £m  £m  £m
in respect of aircraft yachts and equipment payable within
one year      23 6 29  19  5  24
one to five years      66 25 91  71  13  84
after five years      97 16 113  42  14  56
total     186 47 233  132  32  164
convertible bonds
         30 september  30  september
         2012  2011
         £m  £m
£350m convertible bond 60 october 2014              326  315
£400m convertible bond 49 april 2017              349  339
total         675  654
the group has two convertible bonds in issue details of which are as follows
•  a £350m fixed rate 6 bond was issued in october 2009 raising £341m net of issue costs the bond is convertible at the option of the holder   before or upon maturity in october 2014 conversion into ordinary shares will occur at a premium of 33 to the group’s share price on the   date of issuance
•  a £400m fixed rate 49 bond was issued in april 2010 raising £391m net of issue costs the bond is convertible at the option of the holder   before or upon maturity in april 2017 conversion into ordinary shares will occur at a premium of 33 to the group’s share price on the date   of issuance
the group holds an issuer call option to redeem the convertible bonds at their principal amounts together with accrued interest upon   fulfilment of certain predetermined criteria the fair value of this option was negligible at 30 september 2012 the equity portion of the bonds   of £114m 2011 £114m gross of deferred tax of £26m 2011 £29m is included in the convertible bond reserve
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19 interestbearing loans and borrowings continued
reconciliation of face value to carrying amount
        £350m  £400m  total
            convertible  convertible  convertible
        bond  bond  bonds
        £m  £m  £m
convertible bond –  face  value        350  400  750
issue  cost        9  9  18
cash  received        341  391  732
equity  portion            48  66  114
interest accretion in prior years            18  13  31
issue costs amortised in prior years            4  1  5
carrying amount at 30 september 2011            315  339  654
interest  accretion            9  9  18
amortisation of issue costs            2  1  3
carrying amount at 30 september 2012        326 349 675
20 current trade and other payables
         30 september  30  september
         2012  2011
         £m  £m
trade  payables         1058  1360
deferred and contingent consideration note 13a            4  10
other  payables         105  140
amounts owed to related parties note 30              94  99
other taxes and social security costs              98  87
accruals and deferred income              1521  1222
client money received in advance              1669  1704
total         4549  4622
further disclosure of amounts owed to related parties is included in note 30   21 provisions for liabilities
       aircraft
          maintenance  restructuring  other  total
          £m  £m  £m  £m
at 1 october 2011          435   60   175   670  provided in the year          149   51   62   262  released in the year          28  15  12  55
unwinding of discounted amount note 5          6   –   2   8  costs incurred          149  27  63  239
foreign exchange          15  6  9  30
at 30 september 2012       398  63  155  616 
analysed as
noncurrent          235   2   79   316  current          163   61   76   300         398  63  155  616 
     
at 30 september 2011        analysed as
noncurrent          263   29   61   353  current          172   31   114   317         435   60   175   670  tt11  ar 2012  20122012  proof 5 financial statements
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aircraft maintenance
in respect of aircraft provision is made for maintenance overhaul and repair costs of operating leased airframes engines and certain other   components based on the anticipated external costs of the next maintenance event calculated by reference to costs experienced and published   manufacturers’ data the charge to the consolidated income statement is calculated by reference to the number of hours and cycles flown and   by reference to the length of the full overhaul cycle costs incurred are charged against the provision neither the timing nor the value of the   expenditure can be precisely determined but they can be averaged over time and over the number of aircraft in the fleet
during the year the group reviewed the estimates for aircraft maintenance to ensure consistency of application of the latest estimates across   the group the impact has due to its size been presented in separately disclosed items note 4   restructuring
restructuring which includes severance payments relates to provisions arising as a result of reorganisation and restructuring plans that are   irrevocably committed further details of restructuring projects in the current year are set out in note 4   the provision is expected to be utilised within 18 months of the balance sheet date
other
other provisions relate to litigation including provisions for contingent liabilities recorded on the merger of first choice obligations under   denied boarding compensation requirements onerous lease contracts that have been entered into in the ordinary course of business and other   future obligations the amount or timing of which is uncertain a significant portion of the provision is anticipated to be utilised within 12 months   of the balance sheet date while the remainder is expected to be utilised within one to four years of the balance sheet date although the timing   and payments related to individual litigation claims are estimated and are inherently uncertain
the group has a policy to mitigate the financial risk of litigation and disaster through insurance with third party providers and the use of captive   insurance companies the group’s exposure to risk is capped by single event and aggregate limits with insurance in place for exposures above   these limits   the group provides for outstanding claims including settlement expenses using a consistent methodology based upon historical claims   patterns average claims amounts external legal advice and future expectations
22 noncurrent trade and other payables
         30 september  30  september
         2012  2011
         £m  £m
deferred and contingent consideration note 13a            4   10
other  payables         28   13
amounts owed to related parties              1   –
accruals and deferred income              13   33
client money received in advance              2   –
total         48   56
23 called up share capital
         30 september  30  september
         2012  2011
         £m  £m
issued and fully paid
1118010670 2011 1118010670 ordinary shares of 10p each            112  112
total         112  112
as described more fully in note 35 the ultimate parent company tui ag is the beneficial owner of 5626 2011 5547 of the company’s   issued ordinary share capital as at 30 september 2012
at 30 september 2012 9545591 shares 2011 12700211 shares were held by the group’s employee benefit trust based on 30 september 2012   share price of £234 2011 £149 the value of shares held was £22336683 2011 £18961415   during the year ended 30 september 2012 the group’s employee benefit trust did not acquire any shares in the year ended 30 september 2011   the group’s employee benefit trust acquired 3m shares at market value for consideration of £7m   details of dividends debited to equity in the year are set out in note 9
whilst the company has the authority to purchase its own shares it has not done so in either the current or prior years
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24 capital and reserves
      other reserves
  
     convertible      equity  non
    called up  bond  merger  translation  hedging  accumulated  holders  controlling  total
    share capital  reserve  reserve  reserve  reserve  losses  of parent  interests  equity 
  note  £m  £m  £m  £m  £m  £m  £m  £m  £m
balance at 1 october 2010      112  83  2521  292   19  1014  1975   1   1976  profit for the year     –  –  –  –   –   85   85   2   87  other comprehensive loss 
income for the year           
foreign exchange translation    –   –   –   3  3  15  21  3  18
actuarial losses   6c  –   –   –   –   –   89  89  –   89
tax on actuarial losses  8iii  –   –   –   –   –   7  7  –   7
cash flow hedges
– movement in fair value  25j  –   –   –   –   85   –   85   –   85  –   amounts recycled to the     consolidated income statement  25j  –   –   –   –   4  –   4  –    4
tax on cash flow hedges  8iii  –   –   –   –   22  –   22  –   22
available for sale financial assets          
– movement in fair value    –   –   –   –   –   2  2  –   2
–   amounts recycled to the consolidated     income statement    –   –   –   –   –   1   1   –   1  other comprehensive loss   income for the year     –  –  –  3  56  112  59   3   56  total comprehensive loss   income for the year     –  –  –  3  56  27   26   5   31 
transactions with owners                    
sharebased payment – charge     for the year     –  –  –  –   –   19   19   –   19  acquisition of shares by employee     benefit trust    –  –  –  –   –   7  7  –   7
dividends  9  –  –  –  –   –   122  122  2  124
capital increase in magic life     –  –  2  –   –   –   2   –   2  disposals to noncontrolling interest    –  –  –  3  –   4  7  46   39  change in deferred tax rate on equity portion   of convertible bond    –  2  –  –   –   –   2   –   2  at 30 september 2011     112  85  2523  286   37  1155  1888   50   1938 
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      other reserves
  
     convertible      equity  non
    called up  bond  merger  translation  hedging  accumulated  holders  controlling  total
    share capital  reserve  reserve  reserve  reserve  losses  of parent  interests  equity 
  note  £m  £m  £m  £m  £m  £m  £m  £m  £m
balance at 1 october 2011     112  85  2523  286   37  1155  1888   50   1938 
profit for the year     –   –   –      –   138   138   1  137  other comprehensive loss 
income for the year          
foreign exchange translation    –   –   –   157  5  4   158  2  160
actuarial losses   6c  –   –   –   –   –   172  172  –   172
tax on actuarial losses  8iii  –   –   –   –   –   32   32  –   32  cash flow hedges
– movement in fair value  25j  –   –   –   –   42  –   42  –   42
–   amounts recycled to the     consolidated income statement  25j  –   –   –   –   30  –   30  –   30
tax on cash flow hedges  8iii  –   –   –   –   15   –   15   –   15  available for sale financial assets          
– movement in fair value  12  –   –   –   –   –   4  4  –   4
–   amounts recycled to the     consolidated income statement  12  –   –   –   –   –   10   10   –   10  other comprehensive loss for the year     –   –   –   157  62  130  349  2  351
total comprehensive loss   income for the year    –   –   –   157  62  8   211  3  214
transactions with owners           
sharebased payment –     charge for the year     –   –   –   –   –   16   16   –   16  sharebased payment –     disposal on award of shares    –   –   –   –   –   5  5  –   5
dividends  9  –   –   –   –   –   125  125  3  128
acquisition of noncontrolling interest    –   –   –   –   –   1  1  –   1
change in deferred tax rate on equity   portion of convertible bond    –   3   –   –   –   –   3   –   3 
at 30 september 2012     112   88   2523   129   25  1262  1565   44   1609 
convertible bond reserve
the convertible bond reserve comprises the equity element of the convertible bonds and the related portion of the bonds’ issue costs see note 19   the equity element is calculated in accordance with the accounting policy described in note 1eii and is presented net of deferred tax   other reserves
details of dividends to equity holders of the parent debited to equity in the year are set out in note 9
exchange gains or losses arising on the translation to the group’s reporting currency are recorded in the translation reserve the hedging reserve   records the portion of the cumulative gains or losses on hedging instruments in cash flow hedges that are determined as effective gains or losses   arising on cash flow hedges are initially recorded in the hedge reserve and are recycled to the consolidated income statement in accordance with   the accounting policy in note 1f
the group also has a capital reserve of £01m at 30 september 2012 2011 £01m the capital reserve is nondistributable
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25 financial instruments
a treasury risk overview
the group is exposed to a variety of financial risks
•  market risk in respect of foreign currency rate risk jet fuel price risk and interest rate risk
•  liquidity risk in respect of the group’s ability to meet its liabilities   •  credit risk in respect of recovery of amounts owing to the group and
•  capital risk in respect of its capital structure and cost of capital
the group’s key financial market risks are in relation to foreign currency rates and jet fuel prices currency risk results from the substantial   crossborder element of the group’s trading and arises on sales purchases and borrowings that are denominated in a currency other than the   functional currencies of individual group businesses the risk is managed by the use of foreign exchange forward swap and option contracts   the group’s exposure to jet fuel prices results from the aircraft fleet operations and is managed using commodity swaps and options
the group is exposed to interest rate risk that arises principally from the group’s floating rate aircraft leases and floating rate bank loans and   cash balances certain finance leases and loans have fixed interest rates
credit risk and liquidity risk are considered in notes 25d and 25f respectively capital management including capital risk and cash conversion   is  considered in notes 26b and 33
the board of directors has overall responsibility for the establishment and oversight of the group’s risk management framework and for   ensuring that the group has adequate policies procedures and controls to successfully manage the financial risks that it faces these form   part of the group’s overall risk management framework the framework   incorporated within the framework’s terms of reference are the determination of all treasury policies and the monitoring of the effectiveness   of those policies group treasury implements the agreed policies on a daytoday basis the procedures also stipulate the levels of authority   applied to approving and to dealing the types of hedging financial instrument used to manage these exposures transactions are only   undertaken to hedge underlying exposures financial instruments are not traded nor are speculative positions taken
the treasury position of the group including liquidity foreign exchange and fuel hedging exposure is managed centrally in accordance with   policies appropriate to cover specific risks faced by each business unit and is the responsibility of the chief financial officer and group   treasurer
group treasury conducts regular reviews of financial risks with business unit management teams and receives regular cash flows and where   relevant jet fuel usage forecasts from each business unit to ensure hedging instruments match the currency or fuel requirements of each   operating business reports and forecasts for the group showing hedging instruments and forecast requirements are submitted monthly   to the gmb and to each board meeting of tui travel plc
in line with its established policy the group has monitored throughout the year its counterparty exposure with individual financial institutions   such counterparty risk can arise by way of cash deposited or derivative instruments traded
b currency risk management
the group is exposed to currency risk on sales purchases and borrowings that are denominated in a currency other than the functional   currencies of individual group businesses which are principally sterling us dollar euro and swedish krona   the group hedges its foreign currency exposures on a seasonal basis that is winter and summer with each season comprising a sixmonth   period at the start of a season the group will have hedged substantially all of its foreign currency exposure forecast sales and purchases   and related assets and liabilities for that season using predominantly forward exchange contracts and option based instruments most with   a maturity of less than one year from the reporting date   in respect of other monetary assets and liabilities denominated in foreign currencies the group ensures that its net exposure is kept to an   acceptable level principally by using forward contracts in respect of nonsterling denominated airline maintenance provision balances loan   balances and deposits
the group publishes its consolidated financial statements in sterling and as a result it is also subject to foreign currency exchange translation   risk in respect of the translation of the results and underlying net assets of its foreign operations into sterling
the following significant exchange rates to the group’s sterling presentation currency excluding the impact of hedged transactions are   illustrative of the rates applied during the current and prior year
      average rate  midspot rate
              year ended  year  ended
       30 september  30 september  30 september  30  september
£1 gbp equivalent          2012  2011  2012  2011
us dollar          1589 1573 1620 1558
euro       1203 1158 1253 1154
swedish krona          10635 10657 10588 10683
as at 30 september 2012 the group has hedged forecast transactions for 41bn 2011 39bn and €18bn 2011 €16bn for periods up until   winter 2014 principally relating to winter 2012 and summer 2013   tt11  ar 2012  20122012  proof 5 financial statements
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25 financial instruments continued
c commodity risk
fuel commodity risk arises from the group’s operation of aircraft
the group hedges its fuel commodity exposures on a seasonal basis being winter and summer with each season comprising a sixmonth   period at the start of a season the group will have hedged substantially all of its fuel commodity exposure for that season using predominantly   commodity swaps or options most with a maturity of less than one year from the reporting date   as at 30 september 2012 the group has hedged transactions for fuel of 20m metric tonnes 2011 18m metric tonnes for periods up until   winter  2013
details of fuel forward derivative instruments are set out in note 25i
d credit risk
credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group credit risk arises   from cash balances including bank deposits and cash and cash equivalents and derivative financial instruments as well as credit exposures to   customers including outstanding receivables financial guarantees and committed transactions credit risk is managed separately for treasury   and operating related credit exposures   the group minimises its financial credit risk through the application of risk management policies approved and monitored by the board while   counterparties are limited to major banks and financial institutions group policy ensures that individual counterparty limits are adhered to and   that there are no significant concentrations of credit risk the group monitors the credit ratings of its counterparties where applicable as part   of its ongoing assessment of its credit exposure financial instruments are only transacted with major financial institutions with strong credit   rating of a1p1   loans and other receivables exposures are managed locally in the operating units where they arise and credit limits are set as deemed   appropriate for the customer there is no material concentration of credit risk with respect to trade and other receivables as the group has a   large number of internationally dispersed customers   the carrying amount of financial assets represents the maximum credit exposure the maximum exposure to credit risk at the balance sheet   date was
         carrying value  carrying value
         30 september  30  september
         2012  2011
         £m  £m
trade and other receivables note 16              710  693
cash and cash equivalents note 17a              830  902
derivatives – contracts used for hedging note 25i            119  215
trade and listed investments note 12              46  51
other investments note 17b              19  22
total         1724  1883
the maximum exposure to credit risk for total trade and other receivables at the balance sheet date and by geographic region as well as their   ageing is disclosed in note 16 trade and other receivables are shown net of provision for bad and doubtful debts of £49m 2011 £58m
cash cash equivalents and other investments principally comprise money market deposits and other short term investments the investments   are with counterparties with a strong credit rating of a1p1 at 30 september 2012 approximately 27 2011 31 of the group’s unrestricted   cash  and  cash  equivalents  were  invested  with  counterparties  based  in  the  united  kingdom  and  53  2011  53  were  based  with  counterparties  based in the republic of ireland   trade and other receivables exclude prepaid accommodation and other prepayments which do not meet the definition of a financial instrument   prepayments for hotel accommodation whilst not meeting the definition of a financial asset under ias 39 give rise to a risk similar to credit   risk due to the inherent risk of the group not recovering the prepayment through full delivery of the related goods and services from time   to time prepayments can concentrate risk with specific counterparties which are based overseas the carrying amount of prepayments which   are presented within current and noncurrent assets forms the maximum credit exposure before taking into account any security or collateral   held by the group where appropriate the group obtains security collateral over the related accommodation property to mitigate credit risk   at 30 september 2012 prepaid accommodation which is recoverable after more than one year was £122m 2011 £140m   tt11  ar 2012  20122012  proof 5 financial statements
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e interest rate risk
the group has exposure to interest rate risk arising principally on sterling us dollar and euro floating interest rates that are attached to the   group’s floating rate aircraft leases and floating rate bank loans and cash balances
the group does not account for any fixed rate financial liabilities at fair value through profit and loss   the group’s loans and borrowings are measured at amortised cost with the exception of the other financial liabilities which are carried at fair   value as follows
         carrying carrying
       amount   amount
         30 september  30  september
        nominal       2012   2011  financial instrument  currency       interest rate   year of maturity   £m  £m
convertible bonds note 19  sterling      49 – 60  2014 – 2017  675  654
shareholder  loan  eur      43  2012  –  26
secured bank loans  sterling      20 – 32  2013 – 2018  18  14
  eur      50 – 58  2012 – 2017  2  2
  usd        2012  –  1
unsecured  bank  loans  eur      14 – 70  2012 – 2016  3  11
  usd        2012  –  2
         23  30
finance leases  eur      10 – 84  2012 – 2046  80  100
  usd      45 – 90  2012 – 2022  101  29
  mad      59 – 65  2014 – 2017  2  2
  aud      72 – 118  2012 – 2015  3  1
         186  132
loan notes  usd      65 – 66  2016  1  1
amounts owed to related parties  usd      59  2016  10  10
other financial liabilities  eur      0 – 50  2012 – 2014  43  45
total interestbearing liabilities         938  898
analysed between
fixed rate instruments            817  714
variable rate instruments            121  184
         938  898
f liquidity risk
liquidity risk is the risk that the group will not be able to meet its financial obligations as they fall due the group’s approach is to ensure that     it will have sufficient liquidity to meet its liabilities when due under both normal and stressed circumstances   the group’s liquidity peaks in july and august during the european summer holiday season with the liquidity low point being in december and   january to manage the liquidity position the group is able to draw cash advances under its existing bank facilities which at 30 september 2012   principally comprised the following main sources of long term debt funding
•  the external bank revolving syndicated credit facilities totalling £970m 2011 £970m plus bonding and letter of credit facilities totalling   £185m 2011 £185m which all mature in june 2015 from these facilities £162m has been utilised for letter of credit purposes at 30   september 2012 2011 £111m
•  a £350m convertible bond due october 2014 issued in october 2009 and
•  a £400m convertible bond due april 2017 issued in april 2010
the external bank revolving credit facility is used to manage the seasonality of the group’s cash flows and liquidity cash positions liquidity     and available facility headroom are monitored daily by the group treasury department
the board remains satisfied with the group’s funding and liquidity position fixed charges cover and the ratio of net debt to ebitda which the   board believes to be the most useful measures of cash generation and gearing as well as being the main basis for covenants in the external   credit facilities were met at the year end and throughout the year fixed charges cover is defined as earnings before interest tax depreciation   amortisation and operating lease rentals charge ebitdar divided by net interest plus operating lease rentals ebitda is defined as earnings   before interest tax depreciation and amortisation both covenants are measured on an ‘underlying basis’ as defined in note 1bii
in respect of the delivery of new aircraft the group’s established strategy is to refinance new aircraft in advance of their delivery dates and   therefore the group does not forecast to use internal cash resources for new aircraft purchases details of aircraft purchase commitments at   the year end are given in note 28
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the following are the undiscounted contractual cash flows of financial liabilities including interest payments calculated using interest rates in   force at each balance sheet date
      between  between
   carrying  contractual within one and two and more than
   amount cash flows one year two years  five years five years
30 september 2012    £m £m £m £m £m £m
nonderivative financial liabilities
convertible bonds      675 901 41 41 819 –
secured  bank  loans      20 21 4 12 5 –
unsecured  bank  loans      3 4 – 4 – –
finance leases      186 233 29 23 68 113
loan notes      1 1 – – 1 –
related parties      10 11 – – 11 –
other financial liabilities      43 44 44 – – –
trade and other payables      2618 2618 2581 37 – –
derivative financial liabilities
contracts used for hedging      145 138 125 13 – –
total     3701 3971 2824 130 904 113
        between    between
      carrying   contractual  within  one and  two and  more than
      amount  cash flows  one year  two years   five years  five years
30 september 2011       £m  £m  £m  £m  £m  £m
nonderivative financial liabilities
convertible bonds      654  941  41  41  440  419
shareholder  loan      26  27  27  –  –  –
secured  bank  loans      17  18  3  3  12  –
unsecured  bank  loans      13  14  8  3  3  –
finance leases      132  164  24  26  58  56
loan notes      1  1  1  –  –  –
related parties      10  11  –  –  11  –
other financial liabilities      47  48  48  –  –  –
trade and other payables      2191  2191  2178  13  –  –
derivative financial liabilities
contracts used for hedging      151  127  116  11  –  –
total      3242  3542  2446  97  524  475
the actual repayment of revolving credit facilities will vary the timing reflected in the tables is based on the first date that the group can be   required to settle the liability
trade and other payables exclude customers’ monies received in advance deferred income contingent consideration and other noncontractual   payables
at 30 september 2012 the group had available undrawn committed borrowing facilities of £1018m 2011 £1044m comprising letters of credit   guarantees and revolving floating rate credit facilities for cash borrowings any noncompliance with covenants underlying the group’s financing   arrangements could if not waived constitute an event of default with respect to any such arrangements the group was in full compliance with   its financial covenants throughout each of the periods presented
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undrawn facilities are analysed as follows
         30 september  30  september
         2012  2011
         £m  £m
expiring
in more than one year but less than five years              1018  1044
g analysis of total financial assets and financial liabilities
the tables below set out the group’s ias 39 classification for each of its financial assets and liabilities
   financial  derivative
   assets and  financial
   liabilities at fair  instruments   financial
   value through  used in hedge available for sale loans and liabilities at total
   profit and loss accounting financial assets receivables amortised cost carrying value
at 30 september 2012   £m £m £m £m £m £m
cash and cash equivalents      –  –  –  830  –  830 
borrowings due within one year      38 –  –  –  32 70
borrowings due after more than one year      –  –  –  –  868 868
derivative assets      17 102  –  –  –  119
derivative liabilities      21 124 –  –  –  145
other financial assets      30  –  16  729  –  775
other financial liabilities      3 –  – –  2615 2618
total     15 22 16  1559  3515 1977
      financial   derivative
      assets  and   financial
      liabilities at fair   instruments      financial  restated
      value through   used in hedge  available for sale  loans and  liabilities at  total
      profit and loss  accounting  financial assets  receivables  amortised cost  carrying value
at 30 september 2011      £m  £m  £m  £m  £m  £m
cash and cash equivalents      –  –  –  902  –  902
borrowings due within one year      39  –  –  –  57  96
borrowings due after more than one year      –  –  –  –  802  802
derivative assets      42  173  –  –  –  215
derivative liabilities      61  90  –  –  –  151
other financial assets      30  –  22  715  –  767
other financial liabilities      4  –  –  –  2191  2195
total     32  83  22  1617  3050  1360
other financial assets comprise trade receivables other receivables which are receivable within and after more than one year as well as other   investments due within one year other financial liabilities comprise trade payables accruals and other financial liabilities which are payable   within and after more than one year
interest payable on financial instruments carried at amortised cost comprising bank loans loans from parent and finance lease liabilities is   disclosed in note 5
derivatives presented under held for trading under ias 39 classifications are analysed in note 25i between cash flow hedges and derivatives   not hedge accounted
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h fair values of financial assets and financial liabilities
the fair values of financial assets and liabilities together with carrying amounts shown in the consolidated balance sheet at 30 september 2012   and at 30 september 2011 are as follows
     30 september 2012  30 september 2011
              carrying fair  carrying  fair
       amount value  amount  value
       £m £m  £m  £m
cash and cash equivalents     830  830  902   902  borrowings    
convertible bond          675 750  654  544
shareholder  loan          –  –   26  26
bank loans           23 23  30  30
loan notes          1 1  1  1
finance lease liabilities          186 191  132  131
other financial liabilities          43 43  45  45
amounts owed to related parties          10 10  10  10
derivative financial instruments    
forward exchange contracts used for hedging         – assets          75  75   161   161   – liabilities          129 129  100  100
commodity contracts used for hedging         – assets          44  44   54   54   – liabilities          16 16  51  51
other financial assets    
trade and other receivables        710  710   693   693  trade and listed investments          46  46   51   51  other investments          19  19   22   22  other financial liabilities    
current trade and other payables          2581 2581  2180  2180
noncurrent trade and other payables        37 37  15  15
total       1977 2057  1361  1250
the basis for fair value measurement of financial assets and liabilities is set out in note 1w
fair value measurements
ifrs 7 requires enhanced disclosures about fair value measurements of financial instruments through the use of a three level fair value   hierarchy that prioritises the valuation techniques used in fair value calculations
the levels can be broadly described as follows
•  level 1 – use of unadjusted quoted prices in active markets for identical assets or liabilities
•  level 2 – use of observable inputs other than quoted prices included within level 1 such as quoted prices for similar assets or liabilities     in active markets
•  level  3  –  use  of  inputs  not  based  on  observable  market  data  but  reflecting  management’s  own  assumptions  about  pricing  the  asset  or  liability
the group maintains policies and procedures to value instruments using the most relevant data available if there are multiple inputs available   that fall into different levels of the hierarchy the instrument is categorised on the basis of the lowest level input
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the group’s financial assets and liabilities excluding finance lease liabilities measured at fair value at 30 september 2012 are categorised as follows
        total
     level 1 level 2 level 3  fair value
at 30 september 2012      £m £m £m £m
assets
trade and listed investments          10  –  36  46 
derivative financial instruments          –  119  –  119 
total assets          10  119  36  165 
liabilities
derivative financial instruments          –  145 –  145
other financial liabilities          –  –  41 41
total liabilities          –  145 41 186
total       10  26 5 21
          total
          level 1  level 2  level 3   fair value
at 30 september 2011           £m  £m  £m  £m
assets
trade and listed investments          14  –  37  51
derivative financial instruments          –  215  –  215
total assets          14  215  37  266
liabilities
derivative financial instruments          –  151  –  151
other financial liabilities          –  –  43  43
total liabilities          –  151  43  194
total       14  64  6  72
the movements in level 3 instruments measured on a recurring basis for the year ended 30 september 2012 are as follows
        trade  other  total
            and other  financial  level 3
            investments  liabilities  instruments
        £m  £m  £m
at 1 october 2011            37   43  6
cash settlement of deferred consideration            –   3   3  adjustment of deferred consideration through goodwill          –   2  2
foreign  exchange        1  1   –  at 30 september 2012        36  41 5
trade and listed investments
as at 30 september 2012 £36m 2011 £37m of trade and other investments were categorised as level 3 instruments these consist of the   group’s investment in the airline group limited £30m and other trade investments in the equity of unlisted companies £6m the group’s   investment in the airline group limited is valued by a third party using a discounted cash flow methodology the key assumptions include   estimates of future operating results and the level of future contributions to the pension schemes the level of future pension contributions     are currently a key uncertainty in the valuation
the level 1 trade investment mainly consists of the group’s holding in air berlin plc see note 12 for further details of investments
derivative assets and liabilities
derivatives are valued in the market using discounted cash flow techniques
these techniques incorporate inputs at level 2 such as interest rates and foreign currency exchange rates these market inputs are used in the   discounted cash flow calculation incorporating the instrument’s term notional amount volatility discount rate and taking credit risk into account
as significant inputs to the valuation are observable in the markets these instruments are categorised as level 2 in the hierarchy
other financial liabilities
the put options to acquire the remaining equity stake in l’tur tourismus ag £38m 2011 £39m are classified as an other financial liability   with changes in fair value included in operating profit they have been valued using the minimum price stipulated in the contracts plus adjustments   based on estimated operating results in the three years preceding any exercise of the options deferred consideration £3m 2011 £4m is also   measured at fair value based on the relevant contracts   there are no reasonably possible changes in assumptions which would materially alter the value of these level 3 financial instruments
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i derivative instruments
at the balance sheet date the fair value of the group’s derivative financial assets and liabilities was as follows
   30 september 2012  30 september 2011
          assets liabilities total  assets  liabilities  total
     fair value fair value fair value  fair value  fair value  fair value
     £m £m £m  £m  £m  £m
cash flow hedges
foreign exchange forwards      58  108 50  119  39  80  commodity  options      5  2 3   3  8  5
commodity swaps      39  14 25   51  43  8       102  124 22  173  90  83  derivatives not hedge accounted      
foreign exchange forwards      17  21 4  42  61  19
total     119  145 26  215  151  64  analysed as      
current      98  125 27  185  133  52  noncurrent      21  20 1   30  18  12  total     119  145 26  215  151  64  the following table indicates the periods in which the cash flows associated with derivatives are expected to occur future cash flows have been   estimated based on spot rates and prices at 30 september 2012 the net cash flows are shown net for each instrument
    projected cash flows
  
      between between
     less than one and two and  over
     one year two years five years five years
30 september 2012     £m £m £m £m
derivative financial assets
foreign exchange forwards          72  6  –  – 
commodity swaps          50  19  1  –
commodity  options          3  –  –  – 
       125  25  1  – 
derivative financial liabilities
foreign exchange forwards          121 13 –  – 
commodity swaps          4 –  –  – 
       125 13 –  – 
total       –  12  1  – 
        projected cash flows
  
        between  between
          less than  one and  two and   over
          one year  two years  five years  five years
30 september 2011          £m  £m  £m  £m
derivative financial assets
foreign exchange forwards          129  22  1  –
commodity swaps          50  3  –  –
       179  25  1  –
derivative financial liabilities
foreign exchange forwards          86  2  –  –
commodity  options          3  –  –  –
commodity swaps          27  9  –  –
       116  11  –  –
total       63  14  1  –
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138  tui travel plc annual report  accounts 2012
25 financial instruments continued
ineffectiveness
ineffectiveness in respect of cash flow hedges has been recognised in the consolidated income statement for the year ineffectiveness for the year   ended 30 september 2012 comprised a credit of £3m 2011 credit £1m relating to fuel hedging and this is included within underlying operating   profit in respect of foreign exchange hedging ineffectiveness this comprised a debit of £2m 2011 £nil which is included in the underlying   operating profit in the consolidated income statement
j amounts recognised in equity
the following amounts have been recognised in equity during the year
         year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
hedging reserve
effective portion of changes in fair value of cash flow hedging instruments          42  85  fair value of cash flow hedges transferred to the consolidated income statement        30  4
         72  81  deferred tax on the above items recognised outside of the consolidated income statement is shown in note 8iii
k sensitivity analysis
the sensitivity analysis is for illustrative purposes only and should not be considered a projection of likely future events and gains or losses
the sensitivity analysis includes the following assumptions
•  changes in market interest rates only affect interest income or expense of variable financial instruments
•  changes in market interest rates only affect interest income or expense in relation to financial instruments with fixed interest rates if these   are recognised at fair value
•  changes in market interest currency and fuel rates affect the fair value of derivative financial instruments designated as hedging instruments   and the majority of hedges are expected to be highly effective and   •  changes in the fair value of derivative financial instruments and other financial assets or liabilities are estimated by discounting the future   cash flows to net present values using appropriate market rates prevailing at the year end
the group has used a sensitivity analysis technique that measures the estimated change to the consolidated income statement and equity of a   1 100 basis points difference in market interest rates or a 10 strengthening or weakening in sterling against all other currencies and in fuel   prices from the rates applicable at the balance sheet date with all other variables remaining constant these being considered to be reasonably   possible changes to interest rates sterling rates and fuel prices
interest rate risk
under the above assumptions a 100 basis points increase in interest rates would result in an increase in interest expense in the     consolidated income statement and equity of £3m 2011 immaterial increase a 100 basis points reduction in interest rates is not     considered reasonably possible
currency risk
similarly under the above assumptions a 10 strengthening or weakening of sterling against all principal exchange rates would have reduced   profit before tax by £5m 2011 reduced profit before tax by £6m or increased it by £6m 2011 increased profit before tax by £8m respectively   equity before tax would have decreased by £207m 2011 £217m or increased by £253m 2011 £265m respectively   fuel price risk
the sensitivity analysis is based on a 10 increase or decrease in fuel prices and the sensitivity will differ correspondingly if the fuel markets are   more or less volatile under these assumptions with a 10 increase or decrease in the unit price of fuel profit before tax would neither increase   nor decrease materially because of the fuel price hedging policy and appropriate pricing adjustments equity before tax would increase by   £110m 2011 £105m or decrease by £109m 2011 £109m respectively
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financial statements
26 movements in cash and net debt and cash conversion
a movements in cash and net debt
  cash    amounts due        other
  and cash   convertible  to related  bank  loan  finance  financial
  equivalents  bonds  parties  loans  notes  leases  liabilities  total
  £m  £m  £m  £m  £m  £m  £m  £m
at 1 october 2010  1304  633  575  36  2  269  38  249
cash movement  406  –  530  5  1  145  6  269
noncash movement  –  21  –  –  –  7  1  29
foreign exchange  4  –  9  1  –  1  –  13
at 30 september 2011  902   654  36  30  1  132  45  4  cash movement  17   –   23   5   –   19   1   65  noncash movement  –   21  –   –   –   83  3  107
foreign exchange  89  –   3   2   –   10   4   70
at 30 september 2012  830  675 10 23 1 186 43 108
the 2012 and 2011 noncash movement of £21m per annum in convertible bonds relate to the accretion of the equity portion of the convertible   bonds  b cash conversion
the group targets conversion of underlying profit before tax to free cashflow of at least 70 ‘underlying’ as a measure of operating profit is   defined in note 1bii ‘free cashflow’ is defined as the movement in cash net of debt during the year before dividend payments acquisitions   and business disposal proceeds and acquisitions of shares for sharebased payments calculations for the current and prior year are
         year ended  year  ended
         30 september  30  september
         2012  2011
        note  £m  £m
underlying operating profit   consolidated income statement   490   471  net financial expense  5  100  111
underlying profit before tax    390   360  movement in cash net of debt  26a  65   269  add      dividends paid to ordinary and noncontrolling interests  consolidated statement of cash flows   128   124  acquisition of subsidiaries net of cash acquired  consolidated statement of cash flows   23   33  investment in joint ventures associates and other investments  consolidated statement of cash flows   25   18  proceeds from other investments  consolidated statement of cash flows   1  –  shares purchased by employee benefit trust  consolidated statement of cash flows   –   7  free cashflow    240   451  cash conversion    62  125  27 operating lease commitments
total group obligations under noncancellable operating lease contracts are payable as follows
        aircraft ships    aircraft  ships
       land and yachts and  land and  yachts and
       buildings equipment  buildings  equipment
       30 september 30 september  30  september  30  september
       2012 2012  2011  2011
       £m £m  £m  £m
total commitments under noncancellable operating leases expiring
within one year        245 366  355  378
between one and five years          496 725  548  847
later than five years          209 201  243  194
total       950 1292  1146  1419
operating lease commitments in respect of land and buildings comprise commitments in respect of the group’s retail estate its hotel estate   including those commitments that are required to be disclosed as leases under ifric 4 and its office premises
the future commitment under the group’s floating rate aircraft operating leases at 30 september 2012 was £100m 2011 £108m and is   included within the table above
in total the group operates 129 aircraft on operating leases at 30 september 2012 2011 137 aircraft a minority of which contain purchase   options yachts are held on operating leases in tui marine as part of the group’s sunsail and the moorings fleets whilst cruise ships are held   on operating leases in the uk source market
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28 capital commitments
the group’s capital commitments are as follows
        30 september  30  september
        2012  2011
        £m  £m
contracted but not provided for
property plant and equipment              –  1
intangible  assets         6  1
total         6  2
in addition to the above items at the year end the group had contracted to purchase 31 2011 40 aircraft with initial deliveries to start in the   last quarter of the calendar year 2012 at list price the total order value was us4067m 2011 us4634m before escalations and discounts
the group intends to finance these aircraft in advance of their delivery dates and therefore does not expect to use its own cash resources for   their  purchase
the group’s joint ventures and associates had no material capital commitments at 30 september 2012 2011 £nil
29 contingent liabilities
the group is at any time defending a number of actions against it arising in the normal course of business provision is made for these actions   where this is deemed appropriate the directors consider that adequate provision has been made for all known liabilities see note 8 for more   details on contingent tax exposures and note 21 for details on provisions
30 related party transactions
apart from with its own subsidiaries which are included in the consolidated financial statements the group in carrying out its ordinary business   activities maintained direct and indirect relationships with related parties including consolidated or related companies of its ultimate parent   company tui ag these companies either purchased or delivered services to companies in the group
shareholder loan
a shareholder loan was advanced to the company by tui ag on 13 july 2011 in respect of acquiring magic life the loan bore interest at   euribor plus a margin of 275 per annum the principal element of the loan at 30 september 2011 excluding interest was €30m in   accordance with the repayment schedule the loan was fully repaid by 30 september 2012   convertible bond
in april 2010 the company issued a £400m fixed rate 49 convertible bond of which antium finance ltd an independent special purpose   company subscribed for 50 tui ag entered into a forward purchase agreement with antium finance ltd for these £200m convertible bonds   in order to prevent dilution of its majority shareholding tui ag is entitled to receive the interest coupon on these bonds and to repurchase   these bonds by july 2014 at the latest
trademark licence agreement
the trademark licence agreement incorporates trademark licences granted from tui ag to members of the tui tourism group in relation     to tui tourism’s use of the tui name and logo and other trademarks from within tui ag’s portfolio of trademarks used in the former tui   tourism’s business licence fees payable under each licence are an annual fee equal to 002 percent of the average annual gross turnover of the   relevant licensee under the relevant trademarks measured over a three year period total licence fees charged for the year ended 30 september   2012 were £3m 2011 £3m each licence’s standard terms are for five years with an option for the relevant licensee to extend for a further five   years on the same terms
hotel framework agreement
tui deutschland has signed an exclusivity agreement with tui ag’s robinson hotel portfolio under the terms of the agreement tui   deutschland paid €8m in the financial year ended 30 september 2012 and must pay €10m in the financial year ending 30 september 2013 and   €12m per year thereafter the contract also contains performance related elements linked to occupancy rates under which either more can be   paid or refunds received
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financial statements
details of transactions with related parties and balances outstanding at the balance sheet date are set out in the tables below
      income  expenses  including  interest
                 restated
       year ended  year ended  year ended  year  ended
       30 september  30 september  30 september  30  september
       2012  2011  2012  2011
       £m  £m  £m  £m
related party
ultimate parent tui ag          7  6  6  34
hotel and resort subsidiaries of tui ag          8  11  332  319
other subsidiaries of tui ag          4  –  2  –
joint ventures and associates of tui ag          13  10  73  74
joint ventures of the group          47  27  75  82
associates of the group          17  15  24  32
total       96  69  512  541
income earned from tui ag includes airline revenue of £3m 2011 £4m and recharges of administrative costs of £3m 2011 £3m   income earned from hotels and resort subsidiaries of tui ag joint ventures and associates of tui ag and joint ventures of the group includes   accommodation and destination services provided by the group to the related entities the income relating to the group’s joint ventures   includes £35m 2011 £25m from togebi holdings limited the group’s joint venture in russia and its subsidiaries   income received from associates of the group principally represents aircraft sublease income from sunwing as detailed in note 7
expenses paid to tui ag includes interest expense of £2m 2011 £4m the remaining expenses paid to tui ag of £4m 2011 £30m relates   to aircraft lease costs and licence fees   in addition to the amounts disclosed above £10m 2011 £10m of the interest payable in the year in respect of the group’s convertible bonds   has been paid to antium finance ltd a special purpose company which purchased £200m of the group’s 49 convertible bond tui ag   remains entitled to receive the interest on these bonds from antium finance ltd   expenses relating to hotels and resort subsidiaries of tui ag joint ventures and associates of tui ag and joint ventures and associates     of the group relate to travel related services primarily made up of accommodation and destination services costs
related party receivables
   30 september 2012  30 september 2011
          current noncurrent  total  current  noncurrent  total
     assets assets assets  assets  assets  assets
     £m £m £m  £m  £m  £m
related party            
subsidiaries of tui ag      11  –  11   5   –   5  joint ventures and associates of tui ag      5  –  5   8   –   8  joint ventures of the group      30  34  64   33   –   33  associates of the group    6  –  6   2   –   2  total     52  34  86   48   –   48  receivables due from related parties are reported in note 16 amounts owed from subsidiaries of tui ag of £11m 2011 £5m are in respect   of current trade and other receivables   amounts owed by joint ventures of the group that are due after more than one year of £34m 2011 £nil include a loan of us12m equating   to £7m 2011 £nil from tui travel holdings limited a direct subsidiary of the company to togebi holdings limited this loan is unsecured   bears interest at a rate of 7 and is repayable by february 2017 the remaining balance due after more than one year principally comprises   hotel prepayments made to the atlantica leisure group of companies   amounts owed by joint ventures that are due within one year of £30m 2011 £33m include accommodation costs due from togebi holdings   limited and its subsidiaries of £16m 2011 £14m which were non interest bearing balances the remaining balance due within one year   principally comprises current hotel prepayments made to the atlantica leisure group of companies
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related party payables
   30 september 2012  30 september 2011
          current noncurrent  total  current  noncurrent  total
     liabilities liabilities liabilities  liabilities  liabilities  liabilities
     £m £m £m  £m  £m  £m
related party         
ultimate parent tui ag      8  –  8   45   –   45  hotel and resort subsidiaries of tui ag      45  –  45   37   –   37  other subsidiaries of tui ag      –  –  –   2   –   2  joint ventures and associates of tui ag      19  –  19   13   –   13  joint ventures of the group      10  11  21   11   10   21  associates of the group      12  –  12   17   –   17  total     94  11   105   125   10   135  payables outstanding from related parties are reported in notes 19 20 and 22
the above balances exclude £200m nominal value of the group’s convertible bonds 49 april 2017 which have been sold to antium finance   ltd tui ag is entitled to receive the interest coupon on these bonds and to repurchase these bonds by july 2014 at the latest further details   of the convertible bonds are given in note 19 included within the amount payable to tui ag of £8m 2011 £45m is a shareholder loan of £nil   2011 £26m
amounts owed to joint ventures of the group due after more than one year include a us15m loan equating to £10m 2011 £10m to tui   travel holdings limited from borublita holdings limited a subsidiary of togebi holdings limited the loan is unsecured bears interest at a rate   of 5 plus usd 12 month libor and is conditionally repayable in september 2016
amounts payable to hotels and resorts of tui ag and joint ventures and associates of tui ag are in respect of current trade payables primarily   associated with accommodation and destination services costs   details on interest rate and liquidity risks in respect of balances with related parties are included in notes 25e and 25f respectively
key management compensation 
in accordance with ias 24 key management functions within the group the gmb and the directors of the company were related parties whose   remuneration had to be listed separately the compensation paid in respect of key management personnel including directors was as follows
         year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
short term employee benefits              9  8
termination  benefi ts         1  1  postretirement  benefi ts         1  2
sharebased  payments         9  10
total         20  21
details of directors’ remuneration are given in the remuneration report   tt11  ar 2012  20122012  proof 5 financial statements
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financial statements
31 principal operating subsidiaries
other than as stated below all the principal operating subsidiaries listed are wholly owned principal operating subsidiaries are those which in   the opinion of the directors significantly affected the sector’s results and net assets during the year a full list will be included in the company’s   next annual return to companies house the directors consider that those companies not listed are not significant in relation to the sector   specified tui uk limited is presented within the mainstream sector – northern region to reflect its principal operations but the company also   includes certain uk specialist  activity businesses at 30 september 2012
subsidiary  country  nature  of  business
mainstream sector
mainstream – northern region
falcon leisure group overseas limited   united kingdom  tour operator
fritidsresor ab  sweden  tour operator
oy finnmatkat ab  finland  tour operator   star  tour  as  denmark  tour  operator
startourstjernereiser  as  norway  tour  operator
suntopia otel hizmetleri turizm ve ticaret anonim sirketi  turkey  hotel operator
thomson airways limited  united kingdom  airline
tui uk limited  united kingdom  tour operator
tui uk retail limited  united kingdom  travel agent
tuifly  nordic  ab  sweden  airline
mainstream – central europe
berge  meer touristik gmbh  germany  tour operator
l’tur tourismus ag 70  germany  tour operator
tui suisse ag  switzerland  tour operator
tui austria holding gmbh  austria  tour operator
tui aviation gmbh  germany  leasing company
tui  deutschland  gmbh  germany  tour  operator
tui leisure travel gmbh  germany  travel agent
tui poland sp zoo  poland  tour operator
tuifly gmbh  germany  airline
mainstream – western europe
corsair sa  france  airline
tui france sas  france  tour operator
jetair nv  belgium  tour operator
société d’investissement aérien sa  morocco  airline
tui airlines belgium nv  belgium  airline
tui airlines nederland bv  netherlands  airline
tui  nederland  nv  netherlands  tour  operator
accommodation  destinations sector
ad peru company limited sa  peru  tour operator
asiarooms pte ltd  singapore  online accommodation
beds on line slu  spain  online accommodation
blue travel partner services sa 99  dominican republic  destination services
club turavia sa de cv  mexico  accommodation wholesaler
hotelbeds  dominicana  sa  dominican  republic   accommodation  wholesaler
hotelbeds product slu  spain  online accommodation
hotelbeds  slu  spain  accommodation  wholesaler
hotelbeds  spain  slu  spain  accommodation  wholesaler
hotelbeds uk limited  united kingdom  accommodation wholesaler
hotelbeds usa inc  usa  accommodation wholesaler
intercruises shoreside  port services inc  usa  cruise handling
intercruises shoreside  port services slu   spain  cruise handling
late rooms limited  united kingdom  online accommodation
pacific world singapore pte limited  singapore  destination services
tantur turizm seyahat anonim sirketi   turkey  destination services
transfaragencia de viagens e turismo unipessoal lda  portugal  destination services
tui hellas travel tourism and airlines ae  greece  destination services
tui portugalagencia de viagens e turismo sa  portugal  destination services
tui españa turismo sa   spain  destination services
ultramar express transport sa  spain  destination services
tt11  ar 2012  20122012  proof 5 financial statements
notes to the consolidated financial statements continued
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144  tui travel plc annual report  accounts 2012
31 principal operating subsidiaries continued
subsidiary  country  nature  of  business
specialist  activity sector
adventure tours australia group pty ltd 60  australia  tour operator
brightspark travel inc  usa  tour operator
crown blue line limited  united kingdom  tour operator
crown travel limited  united kingdom  tour operator
eac language centres uk limited  united kingdom  language teaching
elc english limited  united kingdom  language teaching
exodus travels limited 60  united kingdom  tour operator
fanfirm pty limited  australia  tour operator
first choice sailing inc  usa  tour operator
gullivers sports travel limited  united kingdom  tour operator
hayes  jarvis travel limited  united kingdom  tour operator
intrepid travel pty ltd 60  australia  tour operator
mariner international travel inc  usa  tour operator
peregrine adventures pty ltd 60  australia  tour operator
porter and haylett limited  united kingdom  boat owning company
quark expeditions inc  usa  tour operator
real travel limited  united kingdom  tour operator
ski bound limited  united kingdom  tour operator
specialist holidays travel limited  united kingdom  tour operator
sportsworld group limited  united kingdom  tour operator
sunsail limited  united kingdom  tour operator
sunsail worldwide sailing limited  united kingdom  tour operator
tcs and starquest expeditions inc  usa  tour operator
the moorings limited  british virgin islands  tour operator
thomson sport uk limited  united kingdom  tour operator
travcoa  corporation  usa  tour  operator
travel turf inc  united kingdom  tour operator
trek america travel limited 60  united kingdom  tour operator
ttss limited  united kingdom  tour operator
williment travel group limited  new zealand  tour operator
world challenge expeditions limited  united kingdom  tour operator
world challenge expeditions pty limited  australia  tour operator
your man tours inc  usa  tour operator
zegrahm expeditions inc  usa  tour operator
 all subsidiaries except those marked with an asterisk are held indirectly by the company   in addition to the ownership of 100 of the ordinary shares of the above listed principal operating subsidiaries the group also owns the   following shares in these companies
principal operating subsidiary  additional classes of shares
porter and haylett limited  180000 £1 redeemable ordinary shares
ski bound limited  167502 £1 ‘a’ ordinary shares
club turavia sa de cv  2317133 mxp1 variable shares
tt11  ar 2012  20122012  proof 5 financial statements
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financial statements
32 earnings per share
the basic earnings per share is calculated by dividing the result attributable to ordinary shareholders by the applicable weighted average number   of shares in issue during the year excluding those held in the employee benefit trust the diluted earnings per share is calculated on the result   attributable to ordinary shareholders divided by the adjusted potential weighted average number of ordinary shares which takes account of the   outstanding share awards and the impact of the conversion of the convertible bonds where their conversion is dilutive the additional underlying   earnings per share measures have been presented to provide the reader of the accounts with a better understanding of the results
basic and diluted earnings per share are as follows
        weighted    weighted
      average no earnings    average no  earnings
     earnings  of shares per share  earnings  of shares  per share
     2012 2012  2012  2011  2011  2011
     £m millions pence  £m  millions  pence
basic earnings per share     138  1108 125  85  1107  77
            effect of dilutive options      – 10   –  11
diluted earnings per share     138  1118 123  85  1118  76
for the statutory measure of diluted earnings per share the effects of including the convertible bonds are antidilutive in both years and   therefore this is not included within the calculation   alternative measures of earnings per share
      weighted    weighted        average no earnings    average no  earnings
     earnings of shares per share  earnings  of shares  per share
     2012 2012  2012  2011  2011  2011
     £m millions pence  £m  millions  pence
basic earnings per share     138  1108 125  85   1107  77
acquisition related expenses and impairments      92  –   121   –  predecessor accounting for magic life      –  –   17   –  separately disclosed items       92  –   74   –  tax base difference      36 –   36  –  basic underlying earnings per share   286  1108 258  261   1107  236
effect of dilutive options      –  10   –   11  effect of convertible bond net of tax      47  205   45   205  diluted underlying earnings per share     333  1323 252  306   1323  231
the tax base difference primarily represents the difference between the actual charge in the consolidated income statement and the group’s   underlying tax charge as disclosed in note 8 the dilutive effect of the convertible bonds is included solely to calculate diluted underlying   earnings per share
reconciliation of profit for the year from continuing operations attributable  
to ordinary shareholders from continuing operations
         year ended  year  ended
         30 september  30  september
         2012  2011
         £m  £m
profit attributable to ordinary shareholders from continuing operations          138   85
result attributable to noncontrolling interests from continuing operations          1  2
profit for the year from continuing operations        137  87
nongaap measure
reconciliation of underlying operating profit to underlying earnings
         year ended  year  ended
         30 september  30  september
         2012  2011
        note  £m  £m
underlying operating profit         490  471  net underlying financial expenses            5  100 111
underlying profit before tax         390  360  underlying tax charge at 27 2011 27              105 97
underlying profit for the year         285  263  attributable  to  ordinary  shareholders              286  261  attributable to noncontrolling interests              1 2  underlying profit for the year         285  263  tt11  ar 2012  20122012  proof 5 financial statements
notes to the consolidated financial statements continued
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146  tui travel plc annual report  accounts 2012
33 capital management
the capital structure of the group consists of debt cash and cash equivalents and equity attributable to the parent company the board’s   policy has been to maintain a strong capital base in order to maintain investor creditor and market confidence and to sustain future   development of the business the board’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern   in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure this includes   maintaining the level of dividends at a level commensurate with underlying operating profitability of the group and obtaining sufficient long   and short term debt facilities that are appropriate for the seasonality of the business   the group has a roadmap to deliver sustainable long term value to shareholders with a return on invested capital roic greater than the   group’s pretax weighted average cost of capital progress in achieving this objective has been made during this year by improving underlying   operating profit which increases roic to 122 2011 113
the group is required to comply with external banking credit facility covenants with compliance being tested twice a year the group has   complied with these covenants throughout the year and up to the date of signing these financial statements further information on these   covenants is provided in note 1bv
roic is defined as ‘underlying nopat’‘average invested capital’ underlying nopat is underlying net operating profit after tax charge at the   effective annual rate ‘underlying’ as a measure of operating profit is defined in note 1bii
average invested capital comprises an average of the net assets at the start and end of the year of the group adjusted to add back net debt   cumulative goodwill impairment charges and defined benefit pension scheme net deficits there is also an adjustment to adjust net debt to   reflect a seasonal average cash balance calculations for the current and prior years are
         year ended  year  ended
         30 september  30  september
         2012  2011
return on invested capital        note  £m  £m
underlying operating profit   consolidated income statement   490   471  taxation at the underlying effective rate of 27 2011 27    132  127
underlying nopat   358   344  net assets  consolidated  balance  sheet  1609   1938  net debtcash   26a  108   4
seasonal net debt adjustment    400   300  cumulative goodwill impairment charge    190   170  defined benefit pension net deficit  6c  648   513  invested capital   2955   2917  average invested capital    2936   3033  roic    122  113  the board seeks to maintain a balance between the levels of debt borrowings undertaken and the advantages and security afforded by a sound   capital position an analysis of net debt at the year end is in note 26
certain subsidiaries have external capital requirements as a result of applicable travel industry regulations in their jurisdictions compliance   with these regulations is mandatory for the relevant operating businesses in those countries in order that they are able to continue trading   key countries with such mandatory capital requirements are france belgium the netherlands germany and australia the capital requirements   in these countries stipulate maintaining minimum equitynet asset levels in operating subsidiaries all such capital requirements were complied   with as at 30 september 2012 none of these requirements are individually or collectively significant to the overall group and do not place any   significant restriction on the group’s funding or operations
34 post balance sheet events
details of acquisitions since the balance sheet date are set out in note 13
on 13 november 2012 the company entered into a further committed borrowing facility of £50m with one of the group’s relationship   banks which matures on 30 june 2015 along with the main £1155m syndicated revolving credit facility the terms and conditions applying   to this additional facility are identical to those of the existing facility
35 ultimate parent company
the ultimate parent company is considered to be tui ag a company registered in berlin and hanover federal republic of germany   at 30 september 2012 tui ag was the beneficial owner of 5626 of the ordinary share capital of the company   in addition a number of bonds are held indirectly by tui ag and if converted this would give rise to 52309463 of new shares on a fully   diluted basis if all bonds were converted tui ag’s shareholding would be 5150 at 30 september 2012
tui ag prepares consolidated financial statements which include the results of the group tui ag is the parent undertaking of the smallest   and largest group to consolidate these financial statements the accounting reference date of tui ag is 30 september copies of the tui ag   financial statements are publicly available and can be obtained from the registered office of this company situated at karlwiechertallee 4   30625 hanover federal republic of germany
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financial statements
financial  statements
independent auditors’ report to the members of tui travel plc
opinion on other matters prescribed by the  
companies act 2006 
in  our  opinion  •  the part of the directors’ remuneration report to be audited has   been properly prepared in accordance with the companies act   2006 and   •  the information given in the directors’ report for the financial year   for which the parent company financial statements are prepared   is consistent with the parent company financial statements   matters on which we are required to report 
by exception 
we have nothing to report in respect of the following matters where   the companies act 2006 requires us to report to you if in our opinion   •  adequate accounting records have not been kept by the parent   company or returns adequate for our audit have not been received   from branches not visited by us or   •  the parent company financial statements and the part of the   directors’ remuneration report to be audited are not in agreement   with the accounting records and returns or   •  certain disclosures of directors’ remuneration specified by law are   not made or   •  we have not received all the information and explanations we   require for our audit   other matter 
we have reported separately on the group financial statements   of tui travel plc for the year ended 30 september 2012
roger de peyrecave senior statutory auditor
for and on behalf of pricewaterhousecoopers llp
chartered accountants and statutory auditors
london
3 december 2012
we have audited the parent company financial statements of tui   travel plc for the year ended 30 september 2012 which comprise the   parent company balance sheet and the related notes the financial   reporting framework that has been applied in their preparation is   applicable law and united kingdom accounting standards united   kingdom generally accepted accounting practice
respective responsibilities of directors and auditors 
as explained more fully in the directors’ responsibilities statement     set out on page 55 the directors are responsible for the preparation   of the parent company financial statements and for being satisfied   that they give a true and fair view our responsibility is to audit and   express an opinion on the parent company financial statements   in accordance with applicable law and international standards on   auditing uk and ireland those standards require us to comply   with the auditing practices board’s ethical standards for auditors   this report including the opinions has been prepared for and only   for the company’s members as a body in accordance with chapter 3   of part 16 of the companies act 2006 and for no other purpose   we do not in giving these opinions accept or assume responsibility   for any other purpose or to any other person to whom this report is   shown or into whose hands it may come save where expressly agreed   by our prior consent in writing
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and   disclosures in the financial statements sufficient to give reasonable   assurance that the financial statements are free from material   misstatement whether caused by fraud or error this includes   an assessment of whether the accounting policies are appropriate   to the parent company’s circumstances and have been consistently   applied and adequately disclosed the reasonableness of significant   accounting estimates made by the directors and the overall   presentation of the financial statements in addition we read all   the financial and nonfinancial information in the annual report    accounts to identify material inconsistencies with the audited financial   statements if  we  become  aware  of  any  apparent  material  misstatements   or inconsistencies we consider the implications for our report
opinion on financial statements 
in our opinion the parent company financial statements   •  give a true and fair view of the state of the company’s affairs as   at 30 september 2012
•  have been properly prepared in accordance with united kingdom   generally accepted accounting practice and   •  have been prepared in accordance with the requirements of the   companies act 2006   tt11  ar 2012  20122012  proof 5 wwwtuitravelplccom
148  tui travel plc annual report  accounts 2012
         30 september  30  september
         2012  2011
        note  £m  £m
fixed assets   
investments        d  1255   1430  current assets   
derivative financial instruments              –   1  debtors        e  156   384  cash at bank              250   33           406   418  creditors amounts falling due within one year      f  197  398
net current assets          209   20  total assets less current liabilities        1464   1450  creditors amounts falling due after more than one year       g  950  926
provision for liabilities            h  18  24
net  assets         496   500  capital and reserves   
called up share capital            i  112   112  profit and loss account            j  263   277  convertible bond reserve            j  88   85  other  reserves        j  33   26  total shareholders’ funds        j  496   500  the financial statements were approved by a duly authorised committee of the board of directors on 3 december 2012 and were signed on its   behalf by
peter j long william h waggott
chief executive  chief financial officer
company number 6072876
the notes on pages 149 to 153 form part of these financial statements
financial  statements
company balance sheet
at 30 september 2012
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financial statements
financial  statements
notes to the company’s financial statements
derivative financial instruments
derivative financial instruments are stated at fair value the gain or   loss on remeasurement to fair value is recognised immediately in   the income statement however where derivatives qualify for hedge   accounting recognition of any resultant gain or loss depends on the   nature of the item being hedged
convertible bonds
the convertible bonds are split into two components a debt   component and a component representing the embedded derivatives   in the bond the debt component represents the group’s liability   for future interest coupon payments and the redemption amount   the embedded derivatives represent the value of the option that   bondholders have to convert into ordinary shares of the company   these derivatives were valued on inception and recognised in the   convertible bond reserve in equity
the debt component of the convertible bonds is measured at   amortised cost and therefore increases as the present value of the   interest coupon payments and redemption amount increases with a   corresponding charge to finance cost the debt component decreases   by the cash interest coupon payments made the embedded   derivatives are measured at fair value at each balance sheet date   and changes in fair value are recognised in the income statement   issue costs are apportioned between the liability and derivative   components of the related convertible bond based on the allocation   of proceeds to the liability and derivative components when the   instruments are first recognised
sharebased payments
the company operates sharebased payment schemes for the   employees of the company and its subsidiaries the fair value of     shares awarded to employees is an employee expense and is borne     by fellow group subsidiaries the fair value is measured at the award   date and is spread over the period during which the employee becomes   unconditionally entitled to the awards calculating the fair value takes   into account various factors including the expected volatility of the   shares the dividend yield and the risk free interest rate   the company makes awards of its own shares to the employees     of its subsidiaries and as such recognises an increase in the cost     of investment in its subsidiaries equivalent to the equitysettled   sharebased payment charge recognised in its subsidiaries’ financial   statements with the corresponding credit being recognised directly in   equity the increase in investments and credit to equity for the year   ended 30 september 2012 is £11m net of deferred tax 30 september   2011 £19m further information on the share schemes is provided     in note 6d to the consolidated financial statements
transactions of the company’s employee benefit trust are included     in the company’s financial statements in particular the trust‘s   purchases and sales of shares in the company are debited and   credited directly to equity   related parties
for the purpose of these financial statements parties are considered   to be related to the company if the company has the ability directly   or indirectly to control the party or exercise significant influence over   the party making financial and operating decisions or vice versa or   where the company and the party are subject to common control   or common significant influence related parties may be individuals   or entities the company has taken advantage of the exemption   contained within frs 8 and has not therefore disclosed transactions   or balances with entities which are whollyowned subsidiaries
a accounting policies 
basis of preparation
the following accounting policies have been applied consistently in   dealing with items which are considered material in relation to the   company’s financial statements
accounting convention
the financial statements have been prepared in accordance with   applicable uk accounting standards and under the historical cost   convention as modified for derivative financial instruments   convertible bonds and sharebased payments the financial   statements have been prepared on the going concern basis which   assumes that the company will continue in operational existence   for the foreseeable future the company has taken advantage of   the exemption under section 408 of the companies act 2006 from   presenting its own profit and loss account the profit after tax   included in the financial statements of the company determined   in accordance with the act was £114m 2011 £174m
the company has taken advantage of the exemption contained   within frs 29 and has not provided the required financial   instruments disclosure on the basis that the group’s consolidated   financial statements include consolidated ifrs 7 disclosures which   are compliant with the requirements of frs 29
foreign currencies
transactions in foreign currencies are translated at the foreign   exchange rate ruling at the date of the transaction monetary assets   and liabilities denominated in foreign currencies at the balance sheet   date are translated to sterling at the foreign exchange rate ruling   at that date foreign exchange differences arising on translation   are recognised in the income statement nonmonetary assets and   liabilities that are measured in terms of historical cost in a foreign   currency are translated using the exchange rate at the date of the   transaction  nonmonetary  assets  and  liabilities  denominated  in  foreign currencies that are stated at fair value are translated to   sterling at foreign exchange rates ruling at the dates the fair values   were  determined
investments
investments in subsidiaries are stated at cost less provision for   impairment dividends received and receivable are credited to the   company’s profit and loss account
interestbearing borrowings
interestbearing borrowings are recognised initially at fair value less   attributable transaction costs subsequent to initial recognition   interestbearing borrowings are stated at amortised cost with any   differences between cost and redemption value being recognised     in the income statement over the period of the borrowings on an   effective interest rate basis
classification of financial instruments issued
financial instruments issued by the company are treated as equity   only to the extent that they meet the following conditions they include   no contractual obligation upon the company to deliver cash or other   financial assets or to exchange financial assets or financial liabilities   with another party under conditions that are potentially unfavourable   to the company and where the instrument will or may be settled in   the company’s own equity instruments it is either a nonderivative   that includes no obligation to deliver a variable number of the   company’s own equity instruments or is a derivative that will be   settled by the company exchanging a fixed amount of cash or other   financial assets for a fixed number of its own equity instruments
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150  tui travel plc annual report  accounts 2012
additions in the year of £147m comprise the following increases   in investments £132m increase in the cost of investment into tui   france sas during the year previously named tt holdings france   sa for the purposes of recapitalising the group’s french business   and £15m of sharebased payment liabilities incurred the costs   of the sharebased schemes which are operated for employees of   the company’s subsidiaries are borne by the subsidiaries subject   to local accounting standards the company recognises an increase   in the investment in the subsidiary and a credit to other reserves in   accordance with frs 20 ‘sharebased payments‘
details of the principal operating subsidiaries held directly and   indirectly by the company in the year ended 30 september 2012 can   be found in note 31 of the consolidated financial statements   included within the total impairment charge of £320m is a £20m   impairment charge of the investment in world challenge holdings   limited following the receipt of a £14m dividend from this subsidiary   combined with a group restructure of that company’s subsidiaries   during the year an impairment of £300m 2011 £10m has been   charged in the year in respect of the cost of investment into tui   france sas following the recapitalisation during the year and the   outcome from the group’s annual impairment exercise
the investment into tui france sas principally relates to two cgus   that are the same as those used in the group’s annual impairment   test these two cgus are the french tour operator and the french   airline corsair detailed disclosure of the impairment test and the   basis for calculation have been set out in note 10 of the consolidated   financial statements the cost of investment has been compared   against the value in use of corsair and the french tour operator using   discounted cash flows as a basis of measurement   the calculation of recoverable value for these two cgus use the   following  assumptions
•  cash flow projections based on the group’s latest approved five   year business plan   •  cash flows beyond the plan period are extrapolated using an   inflationary only growth rate of 18 2011 2   •  cash flows include the impact of working capital in both the asset   base and the impact on cash flows over the plan period and
•  cash flows are discounted using the group’s wacc adjusted as   appropriate for business specific factors such as business risk     the riskadjusted pretax wacc for these two cgus was 11   2011  11
financial  statements
notes to the company’s financial statements continued
taxation
the charge for taxation is based on the profit or loss for the period   and takes into account taxation deferred because of timing   differences between the treatment of certain items for taxation and   accounting purposes except as otherwise required by accounting   standards full provision without discounting is made for all timing   differences which have arisen but not reversed at the balance sheet   date timing differences arise when items of income and expenditure   are included in tax computations in periods different from their   inclusion in the financial statements
dividends on shares presented within shareholders’ funds
dividends distributed to the company’s shareholders are recognised   as a liability and deducted from equity in the group’s financial   statements in the period in which the dividends are appropriately   authorised and approved for payment and are no longer at the   discretion of the company unpaid dividends that do not meet these   criteria are disclosed in the notes to the financial statements
auditors’ remuneration
the company’s 2012 audit fee was £25000 2011 £25000
b directors’ remuneration and employees
details of directors’ remuneration gains made by them on vesting of   share awards amounts receivable by them under long term incentive   schemes and pension entitlements in the current and prior years are   contained in the audited section of the remuneration report and in   note 6 of the consolidated financial statements the company had   eight employees 2011 seven in the year details of all share awards   issued by the company are given in note 6d of the consolidated   financial statements all directors’ remuneration is borne by   subsidiary  companies
c dividends
details of dividends paid and proposed by the company in the   current and prior year and details of dividends proposed subsequent   to the balance sheet date are given in note 9 of the consolidated   financial  statements
d investments
  shares in
  subsidiaries
  £m
cost
at 1 october 2011  1444  additions  147
disposals  2
at 30 september 2012  1589
provision for impairment
at 1 october 2011  14
impairment  320
at 30 september 2012  334
net book value
at 30 september 2011  1430
at 30 september 2012  1255
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e debtors
         30 september  30  september
         2012  2011
         £m  £m
amounts owed by group undertakings              50   281
corporation tax recoverable              98   78
other  debtors         –   14
prepayments         8   11
total         156  384
amounts owed by group undertakings
amounts owed by group undertakings at 30 september 2012 are unsecured and comprise £6m 2011 £nil that bears interest at lloyds bank   5year swap rate plus a margin of 225 and has no fixed date of repayment and £44m that bears no interest has no fixed date of repayment   and is repayable on demand
as at 30 september 2011 amounts owed by group undertakings included £26m which bore interest at 43 and £130m that bore interest at   6month euribor plus a margin of 19 both amounts have been received in full during the current year   other debtors
other debtors includes £nil 2011 £14m of cash held in an escrow account as required for the group’s external borrowing facilities
f creditors amounts falling due within one year
         30 september  30  september
         2012  2011
         £m  £m
bank  loans         1   –
deferred and contingent consideration              1   3
amounts owed to ultimate parent company              –   38
amounts owed to group undertakings              176   338
accruals and deferred income              19   19
total         197  398
amounts owed to ultimate parent company
as at 30 september 2011 amounts owed to ultimate parent comprised a shareholder loan of €30m equating to £26m of which €20m was   repaid on 30 april 2012 and €10m was repaid on 31 august 2012 and a current account of £12m which was repaid during the current year   amounts owed to group undertakings
amounts owed to group undertakings include £28m 2011 £24m that bears interest at the three month sterling libor rate plus 185 basis   points and is repayable on demand subject to the borrower or the lender giving seven days‘ notice all other amounts owed to group   undertakings are unsecured interest free have no fixed date of repayment and are repayable on demand   g creditors amounts falling due after more than one year
         30 september  30  september
         2012  2011
         £m  £m
convertible  bonds         675   654
bank  loans         5   –  deferred and contingent consideration              –   2
amounts owed to group undertakings              270   270
total         950  926
details of the convertible bonds are given in note 19 of the consolidated financial statements the accounting under uk gaap and ifrs is the same
amounts owed to group undertakings comprise a loan of £269m 2011 £269m and interest payable of £1m 2011 £1m the loan bears   interest at libor plus a margin of 5 per annum is unsecured and is not repayable in the immediate future with the latest repayment date   of 31 march 2026   tt11  ar 2012  20122012  proof 5 wwwtuitravelplccom
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financial  statements
notes to the company’s financial statements continued
h provision for liabilities
          £m
deferred tax 
other  timing  differences          18
total provision for liabilities          18
at 1 october 2011                24
deferred tax charge to profit and loss account                7
deferred tax credit to equity                1
at 30 september 2012          18
other timing differences comprise the deferred tax charge on the equity portion of the convertible bonds and sharebased payments   i called up share capital
         30 september  30  september
         2012  2011
         £m  £m
issued and fully paid
1118010670 2011 1118010670 ordinary shares of 10p each            112  112
total         112  112
as described more fully in note 35 the ultimate parent company tui ag is the beneficial owner of 5626 2011 5547 of the company’s   issued ordinary share capital as at 30 september 2012
at 30 september 2012 9545591 shares 2011 12700211 shares were held by the group’s employee benefit trust based on 30 september   2012 share price of £234 2011 £149 the value of shares held was £22336683 2011 £18961415   during the year ended 30 september 2012 the group’s employee benefit trust did not acquire any shares in the year ended 30 september   2011 the group’s employee benefit trust acquired 3m shares at market value for consideration of £7m   details of dividends debited to equity in the year are set out in note 9 of the consolidated financial statements whilst the company has the   authority to purchase its own shares it has not done so in either the current or prior years
j capital and reserves
        called up         total
        share  profit  and  convertible  other  shareholders’
        capital  loss account  bond reserve  reserves  funds          £m  £m  £m  £m  £m
at 1 october 2010        112    227   83  23    445   acquisition of shares by employee benefit trust        –   –   –   7  7
disposal on award of shares        –   –   –   9  9
sharebased payment costs net of deferred tax      –   –   –   19   19  profit for the financial year        –   174   –   –   174  foreign exchange on net investment hedge        –   2  –   –   2
effect of rate change on convertible bond        –   –   2  –   2  dividends paid        –   122  –   –   122
at 30 september 2011        112  277  85 26  500 
disposal on award of shares        –  9 –  4  5
sharebased payment costs net of deferred tax      –  –  –  11  11 
transfer from sharebased payment reserve to retained earnings    –  8  –  8 – 
profit for the financial year      –  114  –  –  114 
foreign exchange on net investment hedge      –  2 –  –  2
effect of rate change on convertible bond      –  –  3 –  3 
dividends paid      –  125 –  –  125
at 30 september 2012     112 263  88 33 496 
the sharebased payment costs for the year ended 30 september 2012 of £15m 2011 £19m has an associated deferred tax charge of £4m   2011 £nil
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k contingent liabilities
there were contingent liabilities at 30 september 2012 in respect of guarantees and indemnities entered into as part of the ordinary course of   the group’s business these guarantees cover payables by the company’s subsidiaries for items such as insurance and credit facilities car leases   aviation fuel ground handling and airport services the company has also guaranteed the contractual obligations of various subsidiary   companies in respect of the supply of a number of the group’s aircraft fleet no material losses are currently expected to be incurred by the   company from such contingent liabilities   where the company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its group the company   considers these to be insurance arrangements and accounts for them as such in this respect the company treats the guarantee contract as   a contingent liability until such time as it becomes probable that the company will be required to make a payment under the guarantee at   30 september 2012 the company had contingent liabilities in respect of counterguarantees for letters of credit amounting to £162m 2011 £111m
under the terms of guarantees given to the civil aviation authority and other relevant authorities by the company in respect of certain   subsidiaries in the event of default the company could be held liable to the extent of the subsidiaries’ net trading liabilities at the time of default
no amount is recognised in the company’s balance sheet in respect of any of the above guarantees as it is not probable that there will be an   outflow of resources
the company may be required to recapitalise direct subsidiaries in certain countries where there is a legal requirement to do so in the event     that the net assets or reserves fall below a determined level where recapitalisation is required the recapitalisaton will be accounted for as an   increase in the cost of investment in that subsidiary and subsequently tested for impairment see note d
the company and its subsidiaries is at any time defending a number of actions against it arising in the normal course of business provision is   made for these actions where this is deemed appropriate the directors consider that adequate provision has been made for all known liabilities
l related party transactions
apart from with its own subsidiaries which are included in the consolidated financial statements tui travel plc in carrying out its ordinary   business activities had transactions with its ultimate parent company tui ag which delivered services to companies in the group
details of transactions with related parties and balances outstanding at the balance sheet date are set out in the tables below
      interest received  expenses and interest payable
              year ended  year ended  year ended  year  ended
      30 september  30 september  30 september  30  september
       2012  2011  2012  2011
       £m  £m  £m  £m
ultimate parent tui ag          –  2  2  6
total       –  2  2  6
      creditors
     
         30 september  30  september
         2012  2011
         £m  £m
ultimate parent tui ag              –  38
total         –  38
in addition to the above balances antium finance ltd purchased £200m nominal value of the company’s convertible bond 49 april 2017   antium finance ltd is a special purpose entity independent of tui ag tui ag entered into a forward purchase agreement with antium finance   ltd for these £200m convertible bonds in order to prevent dilution of its majority shareholding tui ag is entitled to receive the interest coupon   on these bonds from antium finance ltd amounting to £10m per annum and to repurchase these bonds by july 2014 at the latest further   details of the convertible bonds are given in notes 19 and 30 of the consolidated financial statements   m post balance sheet events
on 9 october 2012 the company received a €200m dividend from a subsidiary company leibnizservice gmbh equating to £161m   on 25 november 2012 the company injected €70m of capital into tui france sas equating to £56m to fund seasonal requirements
on 13 november 2012 the company entered into a further committed borrowing facility of £50m with one of the group’s relationship banks   which matures on 30 june 2015 along with the main £1155m syndicated revolving credit facility the terms and conditions applying to this   additional facility are identical to those of the existing facility
details of post balance sheet events relevant to the group are given in note 34 of the consolidated financial statements
tt11  ar 2012  20122012  proof 5 wwwtuitravelplccom
154  tui travel plc annual report  accounts 2012
ad 
accommodation  destinations sector
agm
annual general meeting
apac
asia pacific region
asp
average selling price
assetright
optimum mix of owned and leased assets
b2b
businesstobusiness
b2c
businesstoconsumer
bn 
billion
cagr
compound annual growth rate
cis
commonwealth of independent states
co
2
rpk
carbon dioxide emissions per revenue   passenger  kilometre
controlled distribution
owned and franchised retail shops   call centre and website
coso
the committee of sponsoring   organizations of the treadway commission
dabs 
deferred annual bonus scheme
direct distribution 
retail call centre and website
eps
earnings per share
ets 
european emissions trading scheme   gdp 
gross domestic product
gmb 
group management board
ifrs 
international  financial  reporting  standards
jv 
joint  venture
kpis 
key performance indicators
lccs 
low cost carriers
load factor 
passenger volumes as a percentage   of capacity
m 
million
merger 
the business combination of the tourism   division of tui ag excluding certain hotel   assets and first choice holidays plc
ota 
online travel agent
psp 
performance share plan
pwc 
pricewaterhousecoopers  llp
roic 
return on invested capital
rpi 
retail price index
sas
specialist  activity sector
sector
subset of tui travel plc whose   businesses share similar characteristics
summer season 
may to october
the board 
tui travel plc board of directors
the company 
tui travel plc
the group 
the tui travel plc group of companies
tsr 
total  shareholder  return
ttv 
total transaction value
tui ag 
tui travel plc’s majority shareholder
unique holidays
includes hotels and products that have   been tailored to offer additional services   and facilities to our customers
unwto 
united nations world travel organisation
vcsp 
value creation synergy plan
wacc 
weighted average cost of capital
winter season 
november to april
contacts and advisers
secretary and registered office
a l john
tui travel house
crawley business quarter
fleming way
crawley
west sussex rh10 9ql
telephone 01293 645700
facsimile 01293 645704
registered number 6072876
independent auditors
pricewaterhousecoopers  llp
1 embankment place
london
wc2n 6rh
financial adviser
lazard
stockbrokers
barclays
bank of america merrill lynch
solicitors
herbert smith freehills
bankers
hsbc bank plc
unicredit  bank
barclays bank plc
citigroup  na
royal bank of scotland plc
société  générale
registrars and transfer office
equiniti  limited
aspect house
spencer  road
lancing bn99 6da
shareholder contact centre no     0871 384 2030
international 44 0 121 415 7047
website  wwwshareviewcouk
company website
wwwtuitravelplccom
shareholder information
financial calendar
annual general meeting  7 february 2013
interim results  may 2013
preliminary results  december 2013
glossary of key terms
tt11  ar 2012  20122012  proof 5 wwwtuitravelplccom
tui travel plc annual report  accounts 2012  155
exodus
best land only price on the wwwexoduscouk website plus a further   5 discount per adult
quark expeditions
best land only price on the wwwquarkexpeditionscom website plus   a further 5 discount per adult
skibound
best price on the wwwskiboundholidayscouk website plus a further   discount of £20 per adult to a maximum of £40 per booking on all our   french club hotel destinations
    discounts are not valid on accommodationonly bookings and cannot be used in   conjunction with any discretionary discounts group savings or other promotional offers
    discounts are not valid on accommodation or flightonly bookings and cannot be used in   conjunction with other promotional offers including but not restricted to group discounts   valid on charter flights to european destinations only
in order to qualify for the discount private shareholders including   those holding through a nominee account must hold at least 500   ordinary shares in the company on the date of booking the holiday   and must have been on the register of shareholders for a minimum   period of one year on that date
to register for your discount call the equiniti tui travel shareholder   discount line on 0871 384 2810 or 44 121 415 0124 if you are calling   from outside the united kingdom opening hours are monday to   friday 08301730hrs you will be required to provide details to   confirm you are an eligible shareholder – in the case of a nominee   account this would normally be a letter from the registered   shareholder once confirmed you will be given a unique code
to make a booking call us on 0844 800 3104 monday wednesday   and friday 09001800hrs tuesday 10001800hrs and saturday   09001230hrs you will be asked for your unique code and your   discount will be applied
share dealing service
an executiononly sharedealing service for the purchase and sale of   tui travel plc shares is available from equiniti equiniti is authorised   and regulated by the financial services authority and is a member of   the london stock exchange and plus   for details please contact    equiniti share dealing service
suite 11   3 minster court
mincing  lane
london ec3r 7dd
telephone 0808 208 4433
find out more
tui travel plc has a corporate website which can be accessed   through  wwwtuitravelplccom  shareholder information
shareholder discount
eligible shareholders are entitled to the following discounts which   are subject to change when booking holidays through our dedicated   shareholder discount line the shareholder must  be the lead name   on the booking
best price on the dedicated website plus a further discount of £20 per   adult to a maximum of £40 per booking cruise shortmediumhaul   destinations or £40 per adult to a maximum of £80 per booking   longhaul destinations for the following
first choice  wwwfirstchoicecouk
thomson  wwwthomsoncouk
thomson  worldwide  wwwthomsonworldwidecom
citalia  wwwcitaliacom
jetsave  wwwjetsavecouk
meon villas  wwwmeonvillascom
sovereign  wwwsovereigncom
hayes  jarvis  wwwhayesandjarviscouk
thomson  lakes    mountains  wwwthomsonlakescouk
thomson  ski    snowboarding  wwwthomsonskicouk
crystal ski  wwwcrystalskicouk
crystal  summer  wwwcrystalsummercouk
thomson airways
best price on the wwwthomsoncouk website plus a further discount   of £10 per person for a return journey shortmediumhaul destinations   or £20 per person for a return journey longhaul destinations
hotelopia
best price on all hotels on the wwwhotelopiacouk website plus an   additional  14  discount
trek america
best price on the website wwwtrekamericacom plus an additional   10  discount
the moorings
best price on the wwwmooringscom website plus a further discount   of £20 per adult to a maximum of £40 per booking shorthaul   destinations or £40 per adult to a maximum of £80 per booking   longhaul  destinations
sunsail
best price on the wwwsunsailcouk website plus a further discount   of £20 per adult to a maximum of £40 per booking shorthaul   destinations or £40 per adult to a maximum of £80 per booking   longhaul  destinations
le boat
best price on the wwwleboatcouk website plus a further discount   of £20 per adult to a maximum of £40 per booking on all destinations
real gap
inspired breaks
best price on the wwwrealgapcouk website plus a further discount   of 10
tt11  ar 2012  20122012  proof 5 wwwtuitravelplccom
156  tui travel plc annual report  accounts 2012
index
a
accommodation      destinations sector  4 46
accounting policies  84 149
acquisitions   37 119
annual general meeting   52
audit committee   59 62
auditors   54
b
balance sheet   81 148
board committees   58
board of directors   50
brands  3
business and financial review  36
business  models  15
c
chairman’s statement   8
charitable giving  35
chief executive’s statement  9
company balance sheet  148
consolidated balance sheet  81
consolidated income statement  79
consolidated  statement    of cash flows  83
consolidated  statement    of changes in equity  82
consolidated  statement    of comprehensive income  80
contacts and advisers  154
corporate governance report   56
current  trading  48
d
directors’ biographies  51
directors’ remuneration  66
directors’ report  52
directors’  responsibilities  55
dividends   37 111
e
earnings per share   37 145
emerging markets sector  4 45
f
financial  calendar   154
financial highlights   6
financial statements  79 148
g
governance  56
group management board  28
group overview  2
group performance   36
h
health  safety  30
i
independent auditors’ report  78 147
investment case  ifc
k
key performance indicators   18
m
mainstream sector  4 39
market overview  12
n
nomination committee   61
notes to the consolidated     financial statements  84
o
operational highlights  6
outlook  49
p
pensions   100
people  28
principal  operating  subsidiaries  143
principal risks  20
r
remuneration  committee  67
remuneration report  66
s
segmental performance  39
separately disclosed items  38 98
shareholder  discount  155
specialist  activity sector  4 47
strategic drivers   14 15 16 17
strategic  overview  8
strategy  16
suppliers  34 52
sustainable  development  32
t
tax   109 121
total  shareholder  return  71
tui travel at a glance  10
w
where we operate  3
who we are  2
tt11  ar 2012  20122012  proof 5 tt11  ar 2012  20122012  proof 5
designed by boone design   produced by magenta digital
printed by wwwcousinukcom     on amadeus primo silk fsc
®
  certified paper
amadeus primo silk is certified   fsc and is made using ecf pulp   is  manufactured  according  to    iso 9001 and iso 14001
100 of the inks used are   vegetable oil based 95 of press   chemicals are recycled for further   use and on average 99 of     any waste associated with this   production will be recycled
photography supplied by     tui travel plc businesses
wwwtuitravelplccom tui travel plc
tui  travel house
crawley business quarter
fleming way
crawley
west sussex
rh10 9ql
t elephone 0044 01293 645700
wwwtuitravelplccom
tt11  ar 2012  20122012  proof 5


Summary:
 wwwtuitravelplccom
6 tui travel plc annual report  accounts 2012
tt11  ar 2012  20122012  proof 5
•	 	 record	year	of	profit	and	improved	operational	efficiency
 operating profit increase of 12 to £526m on a constant currency basis  
underlying operating profit of £490m 2011 £471m an increase of 4
 record mainstream underlying operating profits on a constant currency basis  
in all markets with the exception of france and southern europe
 outstanding performance in the uk with a record underlying operating profit  
of £197m 2011 £149m and operating profit margins of 54 up from 42  
in the prior year
 business improvement programme outperformance with £42m delivered in the year
 strong underlying earnings per share growth of 9 to 258p 2011 236p  
statutory earnings per share grew by 62 to 125p 2011 77p
 final dividend increase of 4 to 83p per share 2011 80p resulting  
in a full year dividend of 117p per share 2011 113p
•	 	 modern	mainstream	strategy	delivering	results
 sales of higher margin unique holidays increased by three percentage points  
to 65 of mainstream holidays
 online sales up three percentage points to 33 of mainstream sales  
direct distribution up two percentage points to 65 of mainstream sales
•	 	 significant	international	expansion	across	online	accommodation
 online accommodation profits up 3 to £35m including an £11m investment  
in our accommodation ota 
 accommodation wholesaler continues to consolidate its global leadership  
position ttv growth of 13 to £14bn
 accommodation ota continues its investment in high growth markets  
ttv growth of 4 to £447m including asiarooms growth of 25
•	 	 clear	strategy	continuing	to	drive	strong	trading	momentum
 very encouraging winter 201213 trading
 strong summer 2013 bookings in the uk nordics and germany  
significant growth in profitable market share in the uk
 clear roadmap for sustainable future growth with an annualised underlying  
operating profit growth rate of between 7 to 10
 constant currency basis calculated by translating the 2012 results at 2011 exchange rates
group overview
operational	and	financial	highlights group overview
wwwtuitravelplccom
tui travel plc annual report  accounts 2012 7
group overview
tt11  ar 2012  20122012  proof 5
revenue 
12 £14460m
 
2
11 £14687m
underlying operating profit 
12 £490m
 
4
11 £471m
underlying profit before tax
12 £390m
 
8
11 £360m
free cash flow
12 £240m
 
47
11 £451m
basic underlying earnings per share
12 258p
 
9
11 236p
dividend per share
12 117p
 
4
11 113p
 underlying results
1
 statutory results
  
 2012 2011 change 2012 2011 
year ended 30 september £m £m  £m £m
revenue 14460	 14687 2	 14460	 14687
operating profit 490	 471 4	 301	 255
profit before tax 390	 360 8	 201	 144
free cash flow 240	 451 47	 240	 451
basic earnings per share pence 258	 236 9	 125	 77
dividend per share pence 117	 113 4	 117	 113
1  underlying operating profit excludes separately disclosed items amortisation of business combination intangibles acquisition related 
expenses impairment of goodwill and available for sale financial assets predecessor accounting for magic life in 2011 and interest and 
taxation of results of the group’s joint ventures and associates