Thomas Cook Group Corporate Strategy

Transcription

1 Thomas Cook Group Corporate Strategy Investor Day Presentation Royal Opera House, London 10 March 2010

2 Disclaimer and cautionary statement This presentation does not constitute an invitation or inducement to underwrite, subscribe for or otherwise acquire or dispose of (or engage in any other investment activity in relation to) any Thomas Cook Group plc ( the Company ) shares or other securities. This presentation contains certain forward-looking statements and forecasts (based on information known to the Company on the date shown) with respect to future matters, including strategies, initiatives and targets, the financial condition, results and operations of the Company. These statements and forecasts involve risks and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts, including factors that are outside of the Company s control. This presentation does not constitute a commitment by the Company to proceed with a certain transaction or business practice in the future. Except as required by its legal or regulatory obligations, the Company does not undertake any obligation to update or revise publicly any forward-looking statement or forecast, whether as a result of new information, future events or otherwise. The reader should, however, consult any future disclosures that the Company may publish via the Regulatory News Service. Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser. Neither the Company nor anyone acting on its behalf makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this presentation. Neither the Company nor any person acting on its behalf shall have any liability whatsoever for loss, howsoever arising, directly or indirectly, from use of the information contained within this presentation. 10 March 2010 Page 2

3 Welcome and Introduction Manny Fontenla-Novoa, Group CEO

4 Agenda Welcome and Introduction Manny Fontenla-Novoa Strategic Progress Case Studies Management Team Strategy for Growth Paul Hollingworth, Jürgen Büser Refreshments Growth Strategy Case Studies Management Team Summary and Wrap-up Manny Fontenla-Novoa Q&A Management Team Lunch Page 4

5 What we are going to cover in this section Senior management team introductions Thomas Cook in 2007 recap of our objectives Progress review against those objectives Case studies of how we solved key strategic challenges Summary of where we are today Page 5

6 Page 6 Senior management team introductions

7 Thomas Cook management team presenting today Segment Heads Functional Heads Sam Weihagen, CEO Northern Europe¹ Paul Hollingworth, Group CFO Ian Derbyshire, CEO UK & Ireland Pete Constanti, CEO Group Destination Management Thomas Döring, CEO West/ East Jürgen Büser, Group Strategy Director Peter Fankhauser, CEO Central Europe Simon Breakwell, Ecommerce Advisor Michael Friisdahl, CEO North America Ralf Teckentrup, CEO Airlines Germany Note: ¹ Also Deputy Group CEO Page 7

8 Page 8 Thomas Cook in 2007

9 Thomas Cook in 2007 Merger with MyTravel announced February 2007, completed June 2007 Led industry consolidation and created one of the world s largest travel groups Over 30k employees in 15 source markets and two distinct cultures to integrate A single majority shareholder (Arcandor with 52%) Strong management individuals with a track record of turning around businesses A set of industry leading travel brands, under the Thomas Cook umbrella Provided a number of strategic challenges and opportunities Page 9

10 We developed a strategy for long term growth Vision Strategic objectives Strengthening our business and investing for growth Growth drivers Maximise value of mainstream Become a leading independent travel provider Become the leading travel-related financial services provider Capture growth and value through M&A and partnerships Enablers Product Technology Customer insight Brands Financial rigour Values P R O U D Pioneering our future Results orientated Obsessed with customer service United as one team Driving robust decisions Note: Version shown is strategy as of FY09, this has not materially changed since 2007 Page 10

11 We set some challenging objectives to achieve by 2010 Create a single, customer-focused, Group culture Develop management into an industry leading and united team Maximise the value of mainstream through margin and capacity management Increase independent travel revenues by 50% Significantly grow travel-related financial services Grow through M&A, with a focus on consolidation and emerging markets Integrate two businesses and deliver 200m of synergies Significantly grow top line, profit and margin Page 11

12 Page 12 Progress since the merger

13 Since 2007 we ve seen unprecedented market conditions Economy at 60-year low, says Darling Oil rises past $140 Credit crisis fells Lehman Brothers Jobless highest level for 17 years Pound nears parity with the Euro Surge in last-minute foreign holidays Pound hits Eight-year low against dollar Despite this backdrop, we ve made significant progress Page 13

14 Created a single Group culture People highlights Employee engagement score Vision and Values rolled out Group-wide Single Group culture developed >180 companies Top decile Thomas Cook score: 3.83 Very high employee engagement 3.2 Score in top 10% of cross industry benchmark¹ 2.8 Employee satisfaction increased year-on-year Bottom decile ETS Benchmark Note: ¹Based on benchmark of 180 companies Source: ETS (Expert Training Systems) ECHO employee engagement survey FY09 Page 14

15 Strengthened and streamlined senior team Major changes since merger Reduced CEO direct reports from 25 to 13 Created new Group functional roles Destination Management Ecommerce Operations Brought in experienced external hires Paul Hollingworth, CFO Simon Breakwell, Ecommerce Advisor New senior management team structure Geographic Segments Group UK CE CO W/E NE NA Finance, Treasury, M&A Destination Management Operations Ecommerce Human Resources Strategy Derek Woodward, Company Secretary Page 15

16 Maintained high customer satisfaction in all markets Primary local market customer satisfaction measure (in %) 96% 96% FY08 FY09 91% 91% 80% 81% UK & Ireland Northern Europe 72% 73% North America 87% 88% Central Europe Western Europe Page 16 Source: Thomas Cook local market customer satisfaction surveys

17 Received extensive trade and consumer recognition Page 17

18 Enhanced our leading portfolio of travel brands Global umbrella brand Major local brands Other local brands Page 18

19 Made material progress in maximising mainstream Increased mainstream travel revenues by 11%, despite capacity cuts Grew mainstream travel EBIT margin by over 30% Increased online distribution to more than 60% in some markets Grew controlled distribution to more than 80% in some markets Strengthened strategic destinations, particularly medium haul Focused product on 4/5*, all inclusive and exclusive & differentiated concepts Source: Management analysis and estimates Page 19

20 Grew independent revenues by over 50% Increased independent travel revenues by over 50% Created one of the leading wholesale travel businesses Hotels4U, Gold Medal and TriWest deals strengthened position Continued to be a leader in cruise retail Built thomascook.com into a top travel website with 3m users a month¹ Strengthened position in scheduled package market through acquisitions Note: ¹Monthly unique users in the UK Source: Management analysis and estimates Page 20

21 Extracted value from financial services Acquired India s largest travel and foreign exchange business Thomas Cook India with over 50% foreign exchange market share¹ Entered airport Forex market in UK (winning last 2 tenders) and India Increased UK foreign exchange market share by ~75% since 2008 Moved to a single Group-wide insurance underwriter But, curtailed ambitions in credit card business due to market conditions Page 21 Note: ¹ Share of the regulated market Source: Management estimates; YouGov

22 M&A strengthened position & solved key challenges Successfully completed and integrated 14 acquisitions: 450m consideration, 5-7x EBITDA paid depending on profile Bolstered mainstream and significantly enhanced independent Addressed key markets such as France, Canada and the UK Grew in emerging markets, reacquiring Thomas Cook India and Egypt Created value with ROIC to exceed cost of capital overall Page 22

23 Delivered on our integration promises Integration highlights Merger synergies delivered/ expected Successfully merged the two groups Cultural and physical integration complete Exceeded synergy targets 142m 205m 215m 2010 target 155m¹ Thomas Cook brand in all source markets Delivered everything ahead of schedule FY08 FY09 FY10e Delivered Expected Note: ¹ target was set in Euros at the time ( 200m) Page 23

24 Significantly grew revenue, profit and margin Revenue in m EBIT p.e. in m EBIT margin in % +18% +70% +45% 9,269 8,754¹ 7, % 4.5% % FY07 FY08 FY09 FY07 FY08 FY09 FY07 FY08 FY09 Note: 1 Revenue restated in 2009 Annual Report Page 24

25 In summary, how did we do? Create a single, customer-focused, Group culture Develop management into an industry leading and united team Maximise the value of mainstream through margin and capacity management Increase independent travel revenues by 50% Significantly grow travel-related financial services Grow through M&A, with a focus on consolidation and emerging markets Integrate two businesses and deliver 200m of synergies Significantly grow top line, profit and margin Page 25

26 Strategic progress case studies

27 Key strategic challenges we faced in 2007 North America How to succeed in a market with no barriers to entry and huge overcapacity? France How to restructure a loss making business with a weak market position? Germany How to make profits in an unconsolidated and highly competitive market? Northern Europe How to defend market leading margins of 8-9%? Page 27

28 How to succeed in a Canadian market with no barriers to entry and huge overcapacity? Michael Friisdahl CEO North America Page 28

29 North America objectives Strengthen leadership position in leisure travel market Reduce risk stemming from mainstream overcapacity Achieve 5% margin Page 29

30 Canadian leisure travel market overview Canada leisure travel by segment Market characteristics CAD $b 20 CAGR FY % Destinations: USA, Europe, Mexico, Caribbean Winter focus Mex/ Carib, summer focus Europe Overcapacity in mainstream and no entry barriers Independent (56%) 6.0% Highly fragmented retail distribution Independent larger more stable market Independent Wholesale (23%) 6.0% Mainstream (21%) % Three major players in the overall leisure market Thomas Cook, Transat, Sunwing/ TUI Transat and Sunwing/TUI mainstream focused Thomas Cook Focus Source: Euromonitor, management estimates Page 30

31 2007 Canadian strategic review Thomas Cook situation Mainstream focus, with some independent Seasonal business, loss-making in summer EBIT margin of 1.3% in FY07 Provides winter utilisation for UK aircraft Options: Exit North America market Market environment No barriers to entry consolidation difficult Significant price competition in TO market Fragmented retail distribution Independent wholesale market attractive Consolidate mainstream Refocus business Page 31

32 Implementation of strategy Strategic review 1 ID TriWest Due Diligence Deal completed Aug Integration 3 Continued profit improvement Three key steps in the process Page 32

33 1 Target identified TriWest TriWest a leader in independent wholesale, with two main brands (Fun Sun, Intair) FY07 revenues of CAD$172m, EBIT of CAD$13m, total staff of 565 high synergy potential Strength in markets where Thomas Cook had limited presence, especially Quebec Company with year round profitability and a wider destination reach FIT¹ Wholesaler Non-risk Strength in Western Canada Air, hotel, transfers, car, cruises, attractions Flexible departure dates Flexible duration Air Consolidator Largest Canadian air consolidator National presence, strength in Quebec Net rates, published fares 70 airline partners Market leading web booking engine Note: ¹ Flexible Independent Travel Source: Management estimates Page 33

34 1 Deal gave Thomas Cook a market leading position Independent wholesale Market share Independent wholesale & mainstream Market share Transat 64% 25% 6% 5% TCNA Tour East Jade Other 33% 6% 8% 23% 10% 17% TCNA Sunwing TUI ACV WJV 3% Other Thomas Cook a leading player in Canadian leisure travel Source: Management estimates, FY09 Page 34

35 2 Integration approach Centre of service excellence & cost leadership Product preference Channel preference Service Product Technology Hotels & Resorts Customer Service Sales & Marketing Accounting Group Commercial Cultural integration Single contracting team Joint product development Leverage joint volume Leverage Group buying power Our People Common infrastructure Product Gateway Dynamic packaging Mainstream package Independent component Independent dynamic package GDS Call Centre Web Travel Agent Consumer Thomas Cook Vision and Values 3 year growth in employee survey scores Financial Services Other Delivered CAD $16.5m in synergies Source: Management estimates Page 35

36 3 Profits increased by CAD $20m and margin by 3.2%pts FY08 CAD $m FY09 CAD $m Winter Summer Total Winter Summer Total EBIT margin: 1.6% 4.8% Significantly grown profits and smoothed seasonality Page 36 Note: Winter refers to H1, Summer refers to H2

37 Future growth Leverage the Thomas Cook brand to drive consumer awareness and revenue growth Grow independent travel through Thomas Cook online strategy (including B2C) Improve mainstream profitability through product exclusivity and cost savings Continue to develop and leverage service excellence and cost leadership Grow Thomas Cook Financial Services Maintain market leading margins Page 37

38 How to restructure a loss making French business with a weak market position? Thomas Döring CEO West/East Europe Page 38

39 France objectives Focus on mainstream travel: Turnaround loss making French business Create a platform for future profitable growth Page 39

40 West and East Continental Europe background context Netherlands Belgium France Focus of case study Other West/ East markets Poland Czech Hungary Hungary West/ East key facts (FY09) Passengers 3.3m Sales 2,139m EBIT p.e. 99m EBIT margin 4.6% Employees (FTE) 3,400 Controlled distribution 51% Internet distribution 13% Retail outlets 1,102¹ Aircraft (A320) 6 Note: ¹Own shops and franchisees combined (Thomas Cook with 574 own shops and 528 franchisees) Page 40

41 France market characteristics Market dynamics Competitor overview (FY09)¹ Domestic largest part of the travel market 5b TO market; mainly international travel French speaking destinations most popular High proportion of long haul Top 4 players account for ~50% of market Strong high street distribution Retail outlets² Turnover ( m) Aircraft Thomas Cook TUI 490 1,090 8 Fram Look/VAT Thomas Cook is: Number 1 in retail Number 2 in TO Note: ¹ Club Med excluded as considered as an integrated hotelier ² Own shops and franchisees combined (Thomas Cook with 305 own shops and 355 franchisees) 41 Page 41

42 FY04 to FY06 a period of low profitability Gross retail sales in m EBIT p.e. in m FY04 FY05 FY06 FY04 FY05 FY06 Low profitability due to: Business dominated by retail, only small Tour Operator presence Barriers to change: Three consecutive top management changes in five years Two unsuccessful restructures and social plans Page 42

43 Transformation plan launched in FY06 1 Restructure existing business 2 Grow Tour Operator Growth of in-house Thomas Cook Tour Operator Acquisition of Jet Tours Page 43

44 1 Restructure existing business Overhead cost reduction ( m) Restructuring FY06 FY Overhead costs reduced by 25% Tour operator and retail costs Merger synergies e.g. IT and Finance FTE s reduced by > TO Retail IT Finance Other Total Retail efficiency 14% increase in average sales per FTE In-house TO sales rose from 25% to 47% Page 44

45 2 Tour Operator growth Growth of in-house Tour Operator Change in market share 16% pa growth between FY06 and FY08 Focus on captive distribution Focus on concept hotels Built up our online proposition 13% Jet Tours 6% Acquisition of Jet Tours Thomas Cook becomes No 2 in France Fully integrated within 12 months Achieved synergies ahead of expectations 5% FY07 Thomas Cook 7% FY09 Note: Club Med excluded from market share calculations as considered as an integrated hotelier Page 45

46 Created a much stronger business In-house distribution (47% of total) Tour operating Third party flying Concept hotels Air France Clubs XL Airways 23 Transavia 28 3 rd party distribution Europe Airpost 21 5 Strong base in all parts of the value chain 46 Page 46

47 Substantial EBIT and margin increase Net sales in m EBIT p.e. in m 31% % ` FY04 FY05 FY06 FY07 FY08 FY09 FY04 FY05 FY06 FY07 FY08 FY09 CAGR FY06-09 EBIT Margin 0.3% 5.0% Page 47 Note: FY06 and prior years based on internal management information

48 Future growth Growth of Thomas Cook online Growth of Jet Tours by leveraging restructured third party distribution Growth and margin through more and new club products e.g. Maintain cost leadership and drive further efficiency improvements Page 48

49 How to make profits in an unconsolidated and highly competitive German market? Peter Fankhauser CEO Central Europe Page 49

50 Germany objectives Turnaround a 160m loss making business Become the most profitable German travel company Create platform for future profitable growth Page 50

51 Germany is Europe s largest, but most fragmented, market Thomas Cook in Germany A leading player, with 4 major brands German travel market characteristics Europe s largest travel market; 50m pax p.a. Retail brand Up-market Tour Operator Value for money brand Mass market Tour Operator Last minute brand Highly competitive and fragmented market Full price transparency; high price competition Capacity pressure from aggressive smaller carriers Highly fragmented retail landscape Airline Page 51

52 Thomas Cook is the most profitable player EBIT margins by company FY09 in % Thomas Cook TUI 1.6 Rewe¹ Alltours FTI Öger 0.8 <1.0 <1.0 ~1.0 Tour Operator only Tour operator plus airline EBIT margin as reported EBIT margin estimated Note: ¹ Margin 07/08, no later figures available Page 52

53 Turnaround was driven by four key initiatives 1 Changing the business model, refocusing the Airline and Tour Operator 2 Developing a more flexible purchasing strategy 3 Significantly reducing costs in the Tour Operator, cost leadership 4 Improving airline efficiency Page 53

54 1 Airline and Tour Operator refocused Rationale for change: Level of integration much lower (one third in-house) 28 airports; Condor focus on the 10 most profitable Pricing Market rates Airline Organisation Separate teams Strong links Tour Operator Capacity Condor first right of refusal Page 54

55 2 Flexibility from purchasing strategy Benefits of new strategy De-risks overall capacity Fewer guarantees and deposits Limited ownerships Percentage of hotel bed commitments 16.1% -70% Gives competitive advantage Average market levels much higher Less need for discounting Better margins as a result FY03 4.9% FY09 Page 55

56 3 Significant reduction in Tour Operator cost base Major overhead cost cutting initiatives Key drivers of cost reduction Project Diamant Project 54 Launched m of savings Realised within 2 years Launched m of savings Realised within 2 years Product portfolio cut by ~15% Reduction of FTEs and OPEX Streamlining of processes Commission reductions ( 16m p.a.)¹ Project Fokus Started m of savings Targeted for FY 2010 Ongoing Note: ¹ Based on FY09 costs Page 56

57 4 Airline improved productivity and cost position Block hours/aircraft/day Seat load factor (%) Passengers per FTE +26% +6% +28% ,299 2,939 FY03 FY09 FY03 FY09 FY03 FY09 Profit improvement programmes: FY03 profit improvement programme with total impact of 160m FY08 new programme COMPETE launched with target of 100m Page 57

58 Result turnaround and ongoing profit improvement Net sales ( m)¹ EBIT p.e. ( m)¹ ,371 3, ,916 2, FY03² FY09 FY03² FY09 Airline Tour Operator Margin -4.7% 3.3% Page 58 Note: ¹ Tour Operator sales plus external Condor Sales, Tour Operator EBIT plus Condor EBIT ² Adjusted and pro forma figures, not directly comparable, EBITA basis

59 Future growth Extend mainstream live pricing model to drive growth Expand online share, introduce epackaging and grow OTA business Extend exclusive and differentiated concepts like Continue to drive cultural change through Group values Centralise overseas purchasing and functions to reduce costs Continue to look for opportunities to consolidate the market Page 59

60 How to defend market leading margins of 8-9% in Nordic markets? Sam Weihagen CEO Northern Europe Page 60

61 Northern Europe objectives Defend industry leading margins in mainstream Strengthen market leading position Create platform for future growth Page 61

62 Market leading position in mainstream travel Nordic mainstream travel market (%) 100% 100% 100% 100% 100% Market dynamics 3 major players; consolidated market Limited dependency on third party travel agents High online penetration Most local LCCs¹ regional only or loss making Kuoni buying smaller players TUI adding capacity recently Nordics Sweden Norway Denmark Finland Page 62 Thomas Cook TUI Kuoni Primera Finnair Others Note: ¹ LCCs = Low Cost Carriers Source: Company financial statements; Thomas Cook Management analysis and estimates

63 Six key success factors to maintain margin advantage 1 Highly integrated business model 2 Leading brands and customer experience 3 Exclusive and differentiated concepts 4 Channel shift from offline to online 5 Customer focused organisation 6 Cost efficient airline Maintain industry leading margins of 8-9% Page 63

64 1 Highly integrated business model Vertically integrated Tour Operator Destinations & Hotels Airline Distribution % exclusive product 25% own concept hotels Number one or two in all major destinations 85% in-house flying 83% controlled 54% online Captures more of the value chain Page 64

65 2 Market leading brands and customer experience Market leading brands Differentiated customer experience Ving biggest travel brand in Sweden and Norway Spies biggest travel brand in Denmark Tjäreborg highly trusted brand in Finland Ving.se voted the best travel website in Sweden¹ Positive customer feedback year after year Over 96% customer satisfaction 96% customers recommend us to friends Loyalty driven by exclusive hotel concepts Page 65 Page 65 Note: ¹ also voted best overall website in Sweden

66 3 Exclusive and differentiated concepts 27 unique concept hotels under three brands Focus on key destinations that we control 40% higher margins driven by: Customer loyalty Earlier bookings Price premium achieved Page

67 4 Online sales growth Channel shift offline to online Online sales as a % total Online sales from 18% in 2003 to 54%¹ Retail presence reduced from >100 to 11 shops Award winning web platform Tailor made reservation system drives yields Denmark Finland Norway Sweden Note: ¹ Total Thomas Cook Northern Europe Page 67

68 4 New customer friendly website Page 68

69 5 Customer-focused organisation Functional excellence Local distribution Hotels & Resorts Rooms produced to defined concept standards Food and beverage sales Minishop sales Services Contracting hotel room capacity Quality management and H&S Resort operations Hotel capacity optimisation Sweden Airline Seats produced at lowest cost Seat at defined service standard Tax free sales to passengers Group Yield Contracting of flight seats Flight planning optimisation Coordinate price curves Coordinate supplements Overhead allocation at standard cost Norway Denmark Sales & marketing Customers IT and systems Development of common websites Capacity planning & yield systems Owner of all IT systems/ equipment IT operation and maintenance Finland Page 69

70 6 Cost efficient airline Indexed cost per available seat kilometre A330 = A330 B767 A320 Operate three A s the world s most cost efficient mid-haul aircraft Highly integrated with the tour operator with 72% in-house flying World class duty free sales revenue 57 per passenger Page

71 Result continued industry leading margins EBIT Margin (%) EBIT/ Passenger (SEK) N/A¹ N/A¹ FY08 FY09 FY08 FY09 Thomas Cook TUI Kuoni Note: ¹ Kuoni FY 2009 results not available at time of writing Source: Company financials Page 71

72 Future growth to protect number one position Increase controlled distribution from 83% to 90% and online from 54% to 80% Increase share of concept hotels from 25% to 30% of total bed capacity Improve value proposition to grow the family and 50+ segments Grow independent travel business, focusing on major destinations Continue cost efficiencies, reducing overheads and commissions Continue focus on duty free sales in the airline Deliver top line growth and maintain 8-9% margins Page 72

73 Summary Manny Fontenla-Novoa Group CEO Page 73

74 We have made considerable progress so far Successfully completed integration and turnarounds Further increased industry leading EBIT margins to 4.5% and profits by 70% Grown top line, including over 50% increase in independent travel Acquisitions continued consolidation and drove independent/ emerging markets growth Created a single Group culture and a truly united management team Continued to put the customer at the heart of everything we do Source: Management analysis and estimates Page 74

75 We have the strategy, structure, people, brands, scale and ambition to significantly grow top and bottom lines Page 75

76 Strategy for Growth

77 What we will cover in this section Key trends in our market place Our strategy for growing top and bottom line Case studies of major strategic initiatives Summary of our medium term growth potential Page 77

78 Key trends in our market place Jürgen Büser Group Strategy Director Page 78

79 Economic environment is improving Real GDP quarterly growth Unemployment rate 2% 12% 1% Germany 10% Euro zone 0% Euro zone 8% UK -1% UK 6% Germany -2% 4% -3% 2% -4% 0% 2004 Q Q Q Q Q Q Q Q Q Q Q Q4 Page 79 Source: IMF; OECD

80 However significant uncertainty lies ahead Debt Price stability Health of consumer Health of financial services Household debt levels remain high Financial institutions debt declines to below pre-crisis levels Early signs of inflation in emerging markets Europe & US outlook uncertain Unemployment and tight consumer credit dampen consumption Retirement benefits still under pressure Significant disparity in capital cushions Impact of tax and deregulation currently unclear Trade balances Trade imbalances continue, though reduced in UK and US Sovereign debt Public debt at historical high in developed countries Higher taxes and austerity packages likely Page 80

81 Our core markets account for ~30% of global travel spend Japan 3.0% World leisure travel market 820bn¹ US 8.4% Rest of World 22.1% BRICs 8.7% Netherlands, UK, Belgium, France, Germany 25.8% Other Europe 24.4% Corporate Leisure Nordics 4.8% Canada 2.8% Thomas Cook core markets² Canada UK Belgium Germany Netherlands France Nordics³ Corporate Corporate Leisure Leisure Thomas Cook core markets Other markets Note: ¹Excludes spend on food, drink, fuel, entertainment, shopping, etc; ² These ten markets account for over 90% of total Group revenues; ³Sweden Norway, Finland, Denmark Source: UNWTO; Euromonitor, Thomas Cook Management analysis and estimates Page 81

82 How we define our addressable market place Leisure travel market Asset light Travel intermediaries Intermediaries between capacity suppliers and consumers Mainstream travel Pre-packaged holidays, primarily charter packages Independent travel + Individual components + or dynamically created packages Travel-related Financial Services Travel money Travel assurance Travel finance Asset heavy Direct suppliers Asset owners supplying capacity direct to consumers or intermediaries Thomas Cook Group focus Page 82

83 Our market place in 2009 Leisure travel market b 96b Travel Intermediaries 96b FS 5b Other 9b Fly-drive 7b Cruise 6b City break 7b Accom only 11b Thomas Cook definition Financial Services Independent travel Direct Suppliers 178b Flight only 22b Package holiday 29b Mainstream travel Travel market Travel intermediary market Page 83 Source: Euromonitor

84 Key trends affecting our market place 1 Major travel markets continue to grow faster than the general economy 2 Intermediaries continue to capture around a third of total expenditure 3 Mainstream travel market will continue to be large and to grow in value terms 4 Independent travel to drive majority of the growth in the intermediary market 5 Online growth will be faster than offline; growth in both mainstream and independent 6 Thomas Cook key destinations will continue to grow fast 7 Consumers will continue to drive change in the industry Page 84

85 1 Tourism has grown faster than GDP in spite of shocks 350 Current global financial crisis /11 Intl. tourist arrivals Real world GDP Global economic slowdown SARS '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 Notes: Numbers indexed to year 1980 Source: UNWTO World Tourism Barometer, IMF World Economic Outlook Page 85

86 1 Travel forecast to continue to grow faster than GDP Real major European travel markets growth CAGR (06-14) 3.0% 110 EU Real GDP growth 1.1% Notes: Numbers indexed to 2006 Source: Euromonitor; IMF World Economic Database and Outlook Page 86

87 2 Intermediaries to continue to capture a third of the market Leisure travel market 274b 96b 312b Intermediaries 110b CAGR (09-14)¹ 2.7% 2.8% 178b Direct Suppliers 202b 2.6% Note: ¹ Growth rates are real growth Source: Euromonitor Page Intermediaries: 35% 35%

88 3&4 Mainstream remains large; Independent drives growth Travel intermediary market 96b 4b 110b FS 5b CAGR (09-14)¹ 2.8% 1.1% Growth (09-14)¹ 14.1b 0.3b 63b Independent 73b 3.2% 10.6b 29b Mainstream 32b 2.1% 3.2b Note: ¹ Growth rates are real growth Source: Euromonitor Page 88

89 5 Online growth will be faster than offline Travel intermediary market 96b 4b 24b 110b FS 5b Online 34b CAGR (09-14)¹ 2.8% 1.1% 7.3% TCG market share FY09² ~9% ~6% 68b Offline 72b 1.1% ~11% Online as a %: 25% 31% Note: ¹ Growth rates are real growth; ²TCG market share figures are management estimates Source: Euromonitor Page 89

90 5 Online growth in both mainstream and independent Online travel intermediary market 34b CAGR (09-14)¹ 7.3% TCG market share 09² ~6% 24b Mainstream 8b 6.0% ~20% 6b 18b Independent 26b 7.7% ~2% Note: ¹ Growth rates are real growth; ²TCG market share figures are management estimates Source: Euromonitor Page 90

91 6 Strategic destinations continue to grow International Tourist Arrivals (m) Turkey Egypt Spain % +410% +68% '90 '00 '08 '14e '90 '00 '08 '14e '90 '00 '08 '14e Note: ¹ Includes Mainland Spain, Balearics & Canary Islands Source: UNWTO; Euromonitor; Management estimates Page 91

92 7 Other major consumer trends Consumer confidence Consumer confidence will increase as economic environment improves Big ticket main holiday will continue to be top spending priority Product preferences Travel preferences Distribution channel Continued popularity of All Inclusive products Growth in destinations outside of Euro zone (such as Egypt & Turkey) Consumers expect ever greater product variety, flexibility and security Holiday length, regional flying, exclusive/differentiated hotels Emphasis on ATOL-protection following non-bonded company collapses Higher awareness of green issues, but limited effect on booking behaviour Further internet growth; used for research, booking and reviews Consumers increasingly comfortable with dynamic packaging Source: Thomas Cook Management Page 92

93 In summary, implications for Thomas Cook Overall travel markets to return to growth, although economy may impact short term Mainstream travel stable in passenger terms, but growing in value Strong growth in independent travel Considerable growth in online distribution Mainstream growth enhanced by channel shift from offline to online Independent growth from channel shift and OTA market share gain Continued growth in medium haul destinations, All Inclusive and 4/5* Thomas Cook strategy addresses all these points Page 93

94 Medium Term Growth Strategy Paul Hollingworth Group CFO Page 94

95 Observations Operations large complex business focused on the customer People wealth and depth of experience Finance renewed focus on cash management Corporate fairly new to public company life Open to change ambitious change programme; sign of greater organisational maturity Lots of energy, lots to do, lots of opportunity Page 95

96 Our strategy continues to serve us well Vision Strategic objectives Strengthening our business and investing for growth Growth drivers Maximise value of mainstream Become a leading independent travel provider Become the leading travel-related financial services provider Capture growth and value through M&A and partnerships Enablers Product Technology Customer insight Brands Financial rigour Values P R O U D Pioneering our future Results orientated Obsessed with customer service United as one team Driving robust decisions Page 96

97 There is top line growth in our model 9.3b Financial Services Independent travel Mainstream travel Mergers & Acquisitions New high growth and/or high margin markets (e.g. BRIC markets) Bolt-on/ consolidation opportunities Continued growth from completed acquisitions Travel-related financial services New markets and product line extensions Maximising distribution and cross-sell opportunities Independent travel OTA market Online third party largely a new market for TCG Greater wholesale distribution to third party agents Growth of scheduled packages (e.g. Thomas Cook Signature) FY 2009 Group Revenue Mainstream travel ASP increases from better product mix and pricing activities Share gain from smaller operators Channel shift into faster growing online channel Page 97

98 We also have a large cost base to go after 8.9b Commission/ Other Fuel Commission & Other 0.6b Greater control of distribution and commission rate reductions Reduced agent costs in-destination Aviation excl. fuel Aviation and fuel 3.3b Better buying of aviation services across the Group Best practice sharing between airlines e.g. on fuel efficiency Accommodation Accommodation costs 3.1b Better buying process and use of Group buying power Co-ordination of activities and best practice sharing Other Opex Personnel FY 2009 Group Costs Cost of providing tourism services Operating expenses 1.8b Operating leverage; spread fixed costs over higher volumes Adopt a common approach to airline, personnel, IT etc. Operating expenses Page 98

99 We have the initiatives in place to realise our plans Mainstream travel Area Cost efficiencies ASPs and trading margin growth Distribution gains Independent travel Financial services M&A Example initiatives Airline synergies Group Destination Management GLOBE and other IT savings Product and mix improvements Better buying and pricing processes Channel shift offline to online Third party agent commission reductions European OTA growth Scheduled package growth Foreign exchange market growth Improved cross-sell rates Additional consolidation Emerging markets Stage of delivery Started Progressed Advanced Case study topics Covered in UK case study Page 99

100 Medium term margin growth potential Mainstream travel Independent travel Financial services M&A Margin pressure Cost efficiencies European OTA growth Forex growth New acquisitions Market development ASP and trading margin growth Scheduled package growth New product launches Disposals of non-core assets Execution risk Distribution gains Wholesale growth Improved crosssell rates = = = = = bps bps bps N/A ~(150) bps Total bps Note: Basis points improvement applies to total Group medium term revenue Page 100

101 Medium term objectives and tracking Mainstream travel Targeting modest sales growth Improve margins Independent travel Financial services Increasing proportion of Group sales Development of OTA business Deliver higher margins than mainstream Grow revenue and profits Going forward, we will: Update regularly on progress Enhance our reporting Make it easier to track M&A and partnerships Selective acquisitions in emerging markets Consolidation/ bolt-ons in existing markets Grow sales and margin and increase our cash conversion ratio Page 101

102 M&A continues to be part of our strategy Capture growth and value Maximise value in current business New initiatives in existing markets Entry in other emerging markets Page 102

103 Opportunities remain in emerging markets Outbound travel market growth YoY International tourism expenditure ($bn) 20% UK % 15% 10% 15% China Russia Brazil % India 9.6 Poland 9.3 Mexico 8.5 China Russia Brazil India BRIC countries offer largest potential: Taiwan Malaysia Indonesia Higher average GDP growth rates Growing middle classes Markets still fragmented Thailand Argentina South Africa Turkey Source: UNWTO; Management analysis and estimates Egypt 2.9 Page 103

104 Russia opportunity Market overview Fastest growing BRIC travel market 20m passengers p.a. (international and domestic) Only 5% of population travels abroad for leisure Similar product to W. European mainstream Beach, especially Turkey and Egypt Our vision in Russia Leading Tour Operator with strong distribution Multi-destination Tour Operator Retail focus on Moscow and key regions Leveraging core destinations Leverage existing expertise Brand Bed banks Strong positions in key destinations Source: UNWTO; Management analysis and estimates Page 104 Sources: Russian Federal Tourism Agency, expert estimates

105 Our emerging markets presence today India Leading provider of foreign exchange and travel services Egypt #1 in outbound / financial services, significant potential in inbound Poland Leading profitability with strong position in outbound and retail Hungary Czech Republic Market leader in outbound leisure travel First footprint and strong growth >50% Page 105

106 In summary A leading global travel Group, substantially larger than today Mainstream will be more profitable and have grown the top line Independent travel will be the growth engine of the business (retail and wholesale) Online distribution channel to substantially increase Financial services to continue to be a significant contributor to Group profits Profit growth from emerging markets Successfully completed and integrated several strategic acquisitions Medium term margin potential of % Page 106

107 Page 107 Refreshments

108 Agenda Welcome and Introduction Manny Fontenla-Novoa Strategic Progress Case Studies Management Team Strategy for Growth Paul Hollingworth, Jürgen Büser Refreshments Growth Strategy Case Studies Management Team Summary and Wrap-up Manny Fontenla-Novoa Q&A Management Team Lunch Page 108

109 Growth strategy case studies

110 Focus on four key medium term strategic initiatives Airline synergies Drive further synergies across our international airlines Group Destination Management Leverage our Group buying power in destination management UK growth Drive significant top line and bottom line growth in the UK OTA growth Significantly grow online and establish a European OTA business Page 110

111 Drive further synergies across our international airlines Ralf Teckentrup CEO Airlines Germany Page 111

112 Airline synergies objectives Reduce overall costs of Group airlines through: Better Group-wide coordination Greater use of Group buying power Best practice sharing Working more closely together Note: Majority of benefits are in mainstream, although seat-only business part of independent Page 112

113 Thomas Cook Group today operates 94 aircraft 94 aircraft Northern Europe >17m passengers >6,200 employees Canada Cost base of 2.3b UK & Ireland Germany Belgium x No. of aircraft (summer season) Seasonal optimisation of aircraft Page 113

114 Historically limited cross-group airline cooperation Management focus up until 2008 Within individual Thomas Cook airlines UK merger of Thomas Cook and MyTravel airlines in 2007/2008 Condor merger talks with Air Berlin in FY08; TUIfly/ Germanwings in H2 08 Regular efficiency and cost cutting programmes, but priority within each airline High-level contact across Group airlines, however limited coordination Cross-Group cooperation/ synergies Transfer of aircraft between UK, Canada & Scandinavia (seasonal optimisation) Synergies realised case-by-case in an opportunistic way Opportunity to benefit from greater cooperation between airlines Page 114

115 Project started to realise benefits from greater cooperation Airline synergies project Phase I: Analysis H1 09 Phase II: Implementation H2 09 on Achieve full cost transparency & comparability Analyse performance parameters of all airlines Identify synergy opportunities from all areas: Implement identified synergy measures Build project structures to improve cooperation Continuously identify additional measures Sales Production, Capacity Handling, Ground Ops Fuel Purchasing Catering, Product IT & Systems Flight Ops, Fuel Saving Maintenance Optimise organisational setup of airlines (medium term) Page 115

116 Strong implementation organisation set-up to drive results TCG Airline Board CEOs of the five TCG airline operations Nine meetings per year Implementation review & approval Controlling Group Project Office Module support & financial tracking Module 1 Module 2 Module 8 UK Condor Scandinavia Belgium Canada Executives from all TCG airlines working together on project modules 1-8: Sales Production, Capacity Handling, Ground Ops Fuel Purchasing Catering, Product IT & Systems Flight Ops, Fuel Saving Maintenance Regular module meetings Responsible for implementation Share best practice Identify additional measures Page 116

117 The project has identified a further 35m of synergies Total airline synergies ( m) +103% New measures by Group airline In m In % Condor 16 45% UK 15 43% 34 Scandinavia 3 9% Belgium 1 3% Annual synergies already achieved prior to Additional annual synergies identified by project Total Total % Note: ¹ Synergies realised in Catering (5), Handling (8), Maintenance (6), A/C and Pax Insurance (5) & by seasonal optimisation of aircraft (10) Page 117

118 Top eight measures account for 22m of the total (62%) New measures by value Top eight measures Total = 35m 1 2 Fuel efficiency improvements Joint tender for catering supplier 3 Joint tenders/ contracts for rotables/ rotables support Further 27 measures 13.3m (38%) Top 8 measures 21.7m (62%) Joint negotiations ground handling contracts Best of breed IT applications/ harmonising systems Reduce hotel accommodation costs for travel crew 7 Better fuel purchasing conditions 8 Joint tender B757 C-checks 9 Further 27 measures Page 118

119 Around half the benefits will have a P&L effect in FY10 Cumulative phasing of synergies by year (in m) FY09 FY10 FY11 FY12 Main measures: Ground handling Excess baggage Overseas line maintenance Inbound catering HOTAC¹ Fuel purchasing Fuel efficiency Outbound catering Light-weight trolleys Rotables support C-Checks Optimised production Full potential of all other measures Note: ¹ Hotel and accommodation costs for travel crew Page 119

120 In summary Project generates significant additional benefits from airline cooperation Strong implementation organisation in place to deliver Target for FY09 met On track to hit targets in FY10 through to FY12 Hard to replicate Project structure will deliver more savings in the medium term Page 120

121 Leverage our Group buying power in destination management Pete Constanti CEO Group Destination Management Page 121

122 Group destination management objectives Unlock value through greater Group coordination Reduce accommodation costs Reduce other destination-related overheads Protect and enhance product portfolio Page 122

123 Introduction to destination management Source market passengers Content / data Photos & descriptions Local area info. Hotel allotments & rates Other information Destination Incoming agents Owned or third party agents Handling, transfers etc. Customer Service Customer facing teams/ reps Management of teams Accommodation Hotel rooms and bed rates Overseas purchasing Historically destination management performed by local markets Page 123

124 Key focus is reduction of accommodation costs Cost of providing tourism services FY09 m Destination management focus Accommodation costs a key focus Account for ~30% of total revenue Reduce overall levels to improve margin 801 2,548 3,124 Accommodation Aviation exc fuel Fuel Commission Other Also use savings to stimulate demand Other costs targeted Incoming agent spend Overseas customer service teams Content sourcing and management Page 124

125 Also opportunities to support top line growth Higher average prices More exclusivity agreements and access to higher margin product Defence of strategic destinations and key hotels Group approach to extending breadth of product range Increased in-destination revenue Best practice sharing on in-destination revenue generation Increased sales of tours, tickets, excursions, etc. Better conversion rates Better quality content in the right place at the right time Improved conversion rates from enhanced content management Page 125

126 Four major activities to unlock value 1 Move to a single incoming agent per destination 2 Create a single management structure for overseas teams 3 Take a Group approach to content sourcing and management 4 Take a more centralised approach to overseas purchasing Page 126

127 A new approach to activities in-destination 1 Incoming agents Move to a single handling agent in each major gateway/ destination Manage centrally to get best rates and protect & enhance product range 2 Overseas customer service & sales Create a single management structure for overseas teams Strengthen service proposition and share best practices 3 Content and data management Develop a Group-wide approach to content sourcing and management Remove duplication of activities and improve overall content quality Targeting savings of approximately 10m p.a. Page 127

128 More centralised approach to overseas purchasing 4 Overseas purchasing Group approach to: Key international hotel chains Strategically important destinations Local management of segment-specific properties and Lates buying Key aims are: Develop a consistent approach to destination strategies Achieve the best possible contractual rates Protect and extend key stock and exclusive products Initially targeting savings of 60-80m p.a. Page 128

129 Initially targeting a 60-80m accommodation cost saving Cost of providing tourism services Group Destination management remit FY09 m 3,124 Top 75 hotel partners Turkey & Egypt Top 75 hotel partners - 760m p.a. Turkey and Egypt hotels - 370m p.a. Like-for-like savings of 5-7% targeted 60-80m savings, assuming constant currency Segmentspecific hotels FY09 Accommodation costs Page 129

130 New organisation created CEO Group Destination Management Overseas Customer Service & Sales Directors Group Agency & Hotel Investments Director Group Content Management Director Group Hotel Contracting Directors Group Head of Health & Safety UK & Ireland Central Europe West/ East North America Northern Europe Group team working closely with local markets Page 130

131 In summary A significant change to the way we do business Group hotel purchasing organisation for biggest hotel chains and strategic destinations Customer service organisation under a single management structure Single agent per gateway in major destinations Single content management system and process Group destination management working closely with the segments Leveraging our position through a world class approach Page 131

132 Drive significant top line and bottom line growth in the UK & Ireland Ian Derbyshire CEO UK & Ireland Page 132

133 UK & Ireland objectives Significantly grow top line & target industry leading margins Continue mainstream product focus & margin improvement Significantly grow independent travel online and offline Continue to build financial services business Page 133

134 We have significantly grown margins since 2007 Revenue in m EBIT p.e in m EBIT margin in % -1% +119% +117% 3,132 3,097 3, % 5.2% % FY07 FY08 FY09 FY07 FY08 FY09 FY07 FY08 FY09 Note: UK & Ireland results. These include India and Egypt in FY08 and FY09 Page 134

135 Five main drivers of UK & Ireland future growth 1 Maximise mainstream margin 2 Independent travel growth 3 Financial services development 4 Continued focus on cost reduction 5 Investment in our people Page 135

136 1 Maximise mainstream margin Main drivers of mainstream margin growth Continuing the strategy we started in 2007, improving product mix Growth of differentiated and exclusive product Protect and grow strategic destinations Automated yield management Leverage our vertically integrated model Page 136

137 1 Product mix Increase of: S07 S10 Target Margin growth relative to overall margin Thomas Cook vs other brands Medium haul vs short/long haul Other board types vs self catering 25% 36% 40% ~ 30/pax 58% 73% 80% ~ 15/pax 61% 75% 85% ~ 12/pax 4/5* ratings 37% 46% 55% ~ 30/pax Page 137

138 1 Product differentiation Increase of: S07 S10 Target Margin growth relative to overall margin Differentiated and exclusive stock 35% 40% 65% ~ 30/pax Starting point in 2007: Inherited unattractive exclusive stock Historically a high percentage of self catering units Mostly third line stock (i.e. not beach front product) Page 138

139 1 Differentiated stock For Summer 10 S10 Sales Margin growth relative to overall margin +87% ~ 30/pax +17% ~ 35/pax Exclusive product, eg LykiaWorld, Marmaris Palace +51% ~ 50/pax New for next year: growth in and and increase in resorts Page 139

140 1 Higher margin segments Thomas Cook beach air package market share 42%¹ Segment Price Band Current Share Value Affordable Premium 899-1,198 Share 44% Share 40% Share 35% Family Market Adult Market Overall Overall Share 34% Share 45% Source: ¹ LTM, based on Beach Air Packages Dec 2009 Page 140

141 1 Protect and grow key destinations Market Trend S09 vs S08 Pax 000 s TCG Trend TCG Share Total Balearic Islands -13% 1,283-17% 33% Total Greece -16% 1,210-3% 37% Total Turkey +11% % 50% Total Canary Islands -21% % 52% Total Mainland Spain -17% % 34% Total Cyprus -15% 441-4% 36% Total Egypt +34% % 39% Total Caribbean -14% 275-5% 47% Total Portugal -28% % 36% Total Tunisia +21% % 60% Source: LTM, based on Beach Air Packages Page 141 Key medium term destinations Other major destinations

142 1 Automated yield management Holiday combinations (~ 7m) analysed overnight for demand forecast and optimal price Where rate of sale is too low prices are lowered automatically Prices are also maximised where strong demand exists Automation of price changes directly in reservation system Frees up Yield team for more strategic interventions and value adding activities Page 142

143 1 Leverage vertical integration Board Basis S07 S10 Target In-house distribution 65% 77% 85% Retail productivity 38k / FTE 42k / FTE 50k / FTE In-house flying ~75% ~90% 85-90% Page 143

144 2 Independent travel platform - Wholesale B2B bed banks Number 1 B2B bed bank in the UK Significantly grow B2C through OTA Scheduled flight consolidator A leading scheduled flight consolidator Continue to grow volumes and offering Brands and products in place to drive significant growth Page 144

145 2 Independent travel platform B2C Scheduled packages Strengthened portfolio with Gold Medal acquisition Growth into new product areas Elegant Resorts acquisition - # 1 luxury long haul TO Leading provider of sports-related product Specialist businesses Exclusive Olympics 2012 sponsorship We are the largest TO in teaching people to sail Market leader in activity beach clubs Brands and products in place to drive significant growth Page 145

146 2 Independent travel passenger growth Board Basis No 1 Long Haul Tour Operator Package & Flights Target +100% Dynamic Packaging +250% Specialist Sales +50% UK&I independent EBIT Margin target of 7 10% Page 146

147 3 Financial services development based on Forex Target Retail FX market share 11 12% 13 14% 15 16% Airport FX locations ATMs CFX¹ customers ,000 Credit cards 160k 200k 350k Note: ¹ Corporate foreign exchange Source: Thomas Cook Financials and management estimates Page 147

148 3 Financial services development Insurance Target Insurance passengers 900k 1,100k 2,250k Acquisition of Essential Travel supports our strategy: Delivers an industry leading direct sell platform for UK and beyond Reengineered supply of travel insurance to in-house underwriter Supports aggressive expansion into travel related ancillary services Adds significant value to the UK business Page 148

149 4 Continued focus on cost reduction UK cost of providing tourism services UK overhead costs FY09 2,193m FY09 762m 15% 4% Accommodation 39% 41% Aviation exc fuel Fuel Other 47% 53% Staff Other Page 149 Group Destination Management driving bed cost savings Airline Synergies cost efficiencies from Group-wide airline coordination Procurement savings from Group negotiated contracts Project GLOBE IT & systems efficiencies Note: All costs are pre-exceptional items

150 5 Investing in our people is core to everything we do ECHO Survey driving employee engagement levels to 3.86 Excellent range range of e-learning and training programmes Inspire and Sustain senior management development programme Thomas Cook Vision rolled out across the UK&I to 17,000 employees Page 150

151 In summary We will continue to drive benefits from original mainstream strategy set in 2007 We will increase margin performance by securing differentiated & exclusive product Significant volume growth will continue in independent travel Redefining of our financial services proposition will drive growth Create the UK s leading travel business Page 151

152 Significantly grow online and establish a European OTA business Simon Breakwell Ecommerce Advisor Page 152

153 European OTA objectives Thomas Cook online to become a top 3 European OTA Targeting 3-3.5b incremental gross sales Significant profit to come from OTA growth Page 153

154 Four main types of player in the online travel market Online Travel Agents (OTAs) Online sale of third party components and epackages¹ Expedia/ Priceline European market leaders Tour Operators Online sale of in-house product as part of multi-channel offer Mainly a European dynamic with TCG/ TUI as market leaders Suppliers Direct Suppliers of travel components such as airlines, hotels, car hire etc. Major channel for airlines, hotels still reliant on agents Wholesalers Act as middleman, mainly B2B although some B2C brands Bed banks, flight consolidators, etc. Lines beginning to blur between different players Note: ¹ Packages created online by the user from various travel components (e.g. Flight + hotel + car hire bundle) OTAs also starting to sell traditional mainstream packages Page 154

155 Thomas Cook s historical focus has not been on OTA Online Travel Agents Agents (OTAs) Limited activities in the past Some third party sales on thomascook.com (UK), and.de (Germany) Tour Operators 80+ transactional websites with mainly a local market focus Suppliers Direct Distributing in-house Tour Operator product and components¹ Today over 20% of total sales online (up to 60% in certain markets) Also a leading wholesale capability (bed bank & flight consolidator) Wholesalers Thomas Cook online focus Note: ¹ Such as seat-only product sold by Thomas Cook airlines and hotel rooms from controlled concept hotels such as Sentido Page 155

156 Strategy going forwards Online Travel Agents (OTAs) Expand into European OTA market with Thomas Cook branded sites Retail sites selling in-house product & acting as agent for third parties Tour Operators Maintain online growth and channel shift of TO and Direct product Local sites for major brands (Ving, Neckermann, Airtours, Condor etc.) Suppliers Direct Wholesalers Build & strengthen wholesale capability Third party agent platforms, bed bank and flight consolidator Major focus is European OTA market entry Page 156

157 Thomas Cook can create a unique market position One customer view One proposition All travel needs Page 157

158 The OTA market is a major opportunity for Thomas Cook European OTA market is large and growing fast Barriers to entry are still relatively low OTA model offers a route into new source markets Significant online platform to build from Leverages existing Thomas Cook capabilities Thomas Cook can create a unique market position Targeting 3-3.5b of incremental gross sales in medium term Page 158

159 1 European OTA market large and growing fast European online travel market gross sales in b¹ OTA² TO CAGR (06-11) 10% 14% 9% Direct³ 9% Note: Source: Page ¹ Wholesale market excluded to avoid double counting of totals ² Tour Operators excluded from OTA market, but are not estimated to comprise a large part 3 Direct suppliers include Rail, Car, Air & Hotels etc. PhoCusWright European Online Travel market 5 th Edition

160 2 Less consolidated than the US fewer barriers to entry OTA market gross sales (2008)¹ European market dynamics versus US 100% ($36B) Orbitz Travelocity Priceline Expedia 100% ( 22B) Others Orbitz Opodo Travelocity Priceline Expedia More local/ national brands Online channel in earlier growth phase Relatively fragmented market City destinations important Sun destinations also key: dominated by TOs Multi-channel important to customers US Top 4 players Europe Note: ¹ Third party sales on Tour Operator websites excluded from OTA market, but are not estimated to comprise a large portion Source: PhoCusWright European Online Travel Market 5 th Edition and US Online Travel Market 9 th Edition Page 160

161 3 OTA model offers a route into new source markets European OTA market gross sales in b, 2008 New source markets Size of markets 1.3 Scandinavia UK 4.8 France Germany 3.0 Rest of Europe Spain Italy Source: PhoCusWright European Online Travel Market 5 th Edition Page 161

162 4 Thomas Cook has a significant platform to build from UK total monthly unique users Thomas Cook vs. top OTAs (in million; January 2010) Expedia¹ 3.6 Lastminute (Travelocity) Thomascook.com Booking.com (Priceline) Opodo 0.9 Ebookers (Orbitz) 0.5 Note: ¹ Unique visitors to Expedia.co.uk and.com, excludes non-expedia branded sites such as Trip Advisor, Hotels.com, etc. Source: ComScore Media Metrix January 2010 Page 162

163 5 We have many of the capabilities required to succeed European OTA Key success factors Thomas Cook situation Brand Thomas Cook in all markets; one of world s most trusted travel brands Scale 22m passengers out of 21 source markets Distribution Multi-channel: Stores & call centres to support online offer People Considerable in-house expertise, enhanced with external hires Inventory Market leading sun inventory, need to build up city hotels a Building Technology Existing online platforms; some investment required b capability Page 163

164 5 Building up inventory and technology capabilities a Building up city hotel inventory b OTA technology platform investment In the short term we ve partnered with Expedia Enhance presentation layer (site look & feel) Gives immediate access to 80k+ city hotels Streamline booking path (search & select) In parallel building our own inventory Upgrade core infrastructure Setting up city hotel purchasing organisation Hotel procurement platform Content management systems Investment levels no more than 20m p.a. Continuous improvement activities Page 164

165 6 Thomas Cook can create a unique market position Thomas Cook unique OTA proposition Thomas Cook online objectives Top 3 market position 3 3.5b gross sales m revenues One customer view One proposition All travel needs Margins on a par with market leaders Page 165

166 Thomas Cook online implementation plan New organisation Bridge solution UK site refresh Major upgrade of UK platform Planning for European roll-out European rollout New market entry strategy Building up inventory (city hotel focus) Continuous improvement of customer experience and technology March 2010 Page 166

167 In summary OTA market offers a major growth and margin opportunity Thomas Cook can build a unique position in this market In the medium term we are targeting a top 3 position and over 400m revenues Entry will primarily leverage existing assets and capabilities Work is well underway, with thomascook.com¹ UK sales already up 30% YoY Note: ¹Independent product sales Page 167

168 Summary and wrap-up Manny Fontenla-Novoa, Group CEO

169 Thomas Cook in summary One of the world s leading travel and leisure companies Highly talented and experienced management team Strong market positions and great brands in all major source markets Track record of delivering against strategy Ability to successfully complete and integrate acquisitions Market leading margins and clear path for continued top & bottom line growth Page 169

170 We have the strategy, structure, people, brands, scale and ambition to significantly grow top and bottom lines Page 170

171 Page 171 Thank you

172 Q&A

173 Notes Page 173

174 Notes Page 174

175 Notes Page 175

176 Notes Page 176

177 Appendix General segment information Strategic initiatives detail Other supporting information Page 177

178 Page 178 General segment information

179 Group financials Revenue -( m) EBIT ( m) and margin (%) 7,879 8,754 9,269 +9% CAGR % CAGR EPS*and DPS (p) progressive dividend policy payout 40-50% EPS* FY 07 FY 08 FY 09 FY 07 FY 08 FY 09 FY 07 FY 08 FY 09 * pre-exceptional EPS Operating cash flow** ( m) FY 07 FY 08 FY 09 Investments and buy back ( m) FY 07 FY 08 FY (56) (69)(47) (141) (186) (248) (296) Net capex Net acquisitions/disposals Share buy back Net cash/(debt) ( m) 30 Sep Sep 2008 (292) 30 Sep 2009 (675) ** Definition: cash generated by operations Page 179

180 Segment financials Segment Revenue % Revenue EBIT EBIT margin UK and Ireland, India and Middle East 3,098m 2008: 3,097m 33.4% 162m 2008: 143m 5.2% 2008: 4.6% % EBIT ** 36.8% Continental Europe 4,000m 2008: 3,620m 43.2% 127m 2008: 106m 3.2% 2008: 2.9% 28.8% Northern Europe 1,059m 86m 8.2% 2008: 972m 11.4% 2008: 86m 2008: 8.9% 19.6% North America 370m 18m 4.8% 2008: 384m 4.0% 2008: 6m 2008: 1.6% 4.1% Airlines Germany 1,061m 2008: 978m 8.0% * 47m 2008: 45m 4.5% 2008: 4.6% 10.7% * The percentage of Group revenue for Airlines Germany has been calculated using the external revenue figure of 741m. ** The contribution to Group has been based on the profit from operations figure of 441m, which excludes corporate costs of 26m. Page 180

181 Thomas Cook UK Highly integrated and higher margin business Distribution Controlled distribution: ~80% Retail outlets: 796 In-house flying Thomas Cook airline Aircraft: summer winter Accommodation Exclusive & differentiated Destination castles c.92% 33 NB, 11 WB 27 NB, 10 WB c.40% Turkey No.1 50% share Egypt No.2 39% share Tunisia No.1 60% share Drivers of margin performance Strong retail, travel and foreign exchange brand Flexibility in capacity and destination Focus on higher margin products: Medium haul, 4* & 5* and all inclusive Exclusive and differentiated Focus on destination castles Yield management improvements Growing strong independent Travel proposition Strengthening financial services position Product mix focus on higher margin Capacity (%) FY09 FY08 Medium haul 72% 65% 4* and 5* 45% 41% All inclusive 41% 31% Note: NB narrow body; WB wide body Page 181

182 Thomas Cook Northern Europe Highly integrated and highest margin business Distribution Controlled distribution: 84% Internet distribution 54% Retail outlets: 11 In-house flying Thomas Cook airline c.85% Aircraft: summer 8 NB, 3 WB winter 8 NB, 4 WB Accommodation Concept hotels 25% Exclusive hotels 90% Destination castles Majorca No.1 50% share Gran Canaria No.1 45% share Tenerife No.1 40% share Rhodes No.1 35% share Antalya No.1 25% share Drivers of margin performance Leading market position and No.1 brands Stable, rational market Volume concentrated to destinations where most Nordic customers travel Unique concept hotels (40% higher margin) Growth of online bookings (FY09: 54%, FY08 46%) Controlled distribution (FY09: 83%, FY08: 79%) On board tax free sales Most cost efficient aircraft Product mix focus on higher margin Capacity (%) FY09 FY08 4* and 5*¹ 49% 48% Of which Concept hotels 27% 26% Note:¹Based on hotel utilisation Page 182

183 Thomas Cook Central Continental Europe Asset light business Distribution Controlled distribution: 27% Internet distribution: 7% Retail outlets: 1254 (1054 franchise) Transport Condor Car Accommodation Exclusive hotels 24% 43% of flight holidays 33% of holidays Drivers of margin performance Strong brand awareness - Neckermann Improving retail positioning Dynamic packaging Flexibility in capacity and destination Focus on differentiated product: Links to 300 concept hotels Strategic partnerships (Sentido, Iberostar) Consolidation opportunities Outbound destination castles Balearics No.1 32% share (S10) Canaries No.2 24% share (S10) Turkey No.2 13% share (S10) Egypt No.2 14% share (W09/10) Product mix focus on higher margin Total Capacity (%) FY09 FY08 4* and 5* 64% 64% All inclusive 32% 32% Exclusive hotels 24% 25% Page 183

184 Thomas Cook West/ East Continental Europe Partially integrated, diverse businesses Distribution Controlled distribution: 51% Internet distribution: 13% Retail outlets: 1,102 In-house flying Belgium only Aircraft: Car (528 franchise) 58% of flight holidays 6 NB 42% of holidays Drivers of margin performance Brand strength in all markets Flexibility in capacity and destination Focus on higher margin products: Differentiated hotels Increasing exclusive content Belgium benefit of high vertical integration France transformative acquisition (Jet Tours) Accommodation Differentiated & Exclusive hotels 42% Outbound destination castles Belgium France Netherlands Antalya 29% 14% 15% Djerba 40% 23% 21% Monastir 30% 23% 19% Crete 42% 13% 20% Product mix focus on higher margin Capacity (%) FY09 FY08 4* and 5* 64% 63% All inclusive 36% 34% Page 184

185 Thomas Cook North America Mainstream - partially integrated Distribution Controlled distribution: 14% Internet distribution: 38% Retail outlets: 52 In-house flying Thomas Cook airline 49% Aircraft: winter 8 WB summer - Accommodation Differentiated and exclusive hotels 70% Mainstream destination trends (% of volume) Mexico - 40% Dominican Republic - 21% Cuba - 25% Drivers of margin performance Year round profitable volume Product differentiation (hotel exclusivity) Group buying power Continual aircraft utilization improvements Service excellence and cost leadership Responsible capacity growth Strong brands, including TC brand (Jan 2011) Independent strength, less reliant on mainstream Independent destination trends (% of volume) USA - 70% Europe - 10% Sun destinations - 13% Note: NB narrow body; WB wide body Page 185

186 Thomas Cook Airlines Germany Condor business model Strong, profitable stand alone airline Arms length transactions with German TO Balanced seat sales allow optimum yields Low cost base, ongoing efficiency programmes (airline synergies) Concentrated airport hubs (reduced from 22 to 10) No. 1 leisure carrier in Frankfurt Peak airport slots Sales split by Sold sales (%) 35% 59% 33% 21% 20% 32% Operating statistics Sold Seats FY09: 5.9m Aircraft: 25 narrow-body Airport bases: 10 9 wide-body Average load factor FY09: 87.1% Daily block hours/aircraft FY09: 10.8 Summer season weekly flights: >350 S10 destinations: 28 continental 29 intercontinental Most frequented destinations: Palma de Mallorca (80 flights per week) Antalya (60 flights per week) FY04 FY09 Seat only 3P tour operator TC TO Page 186

187 Page 187 Strategic initiatives detail

188 Mainstream travel strategic initiatives Cost efficiencies ASPs and trading margin Distribution Opportunities: Bed costs Agency and reps spend Hotel participations Airline and fuel costs IT systems costs Other purchasing Average price increases Higher margin products 4/5* and All Inclusive Longer haul lengths Exclusive/ differentiated UK a key opportunity Third party commissions Control of distribution Pricing Merchandising Channel shift to online UK a key opportunity Initiatives: Destination management Net trading margin Control of distribution Airline synergies Product mix Channel shift GLOBE and other IT Haul mix New direct TO sites Centralised purchasing Buying/ pricing processes Online investments Yield management Page 188

189 Independent travel strategic initiatives European OTA market Wholesale growth Scheduled package growth Opportunities: New market for TCG Sales to third parties New product lines Fast growth Unconsolidated Reduce spend on third party wholesalers New destinations Offline and online Entry to new markets UK a key opportunity E.g. Italy, Spain Initiatives: European OTA launch Wholesale platforms Scheduled product growth Bed banks Product development Flight consolidators Merchandising Agent platforms Page 189

190 Financial services strategic initiatives Foreign exchange growth New product launches Cross sell rates Opportunities: New airports Money transfer Insurance New geographies In-resort ATMs Other products Market share gain Pre-paid products Greater cross-sell Dynamic Currency Conversion Direct Insurance Initiatives: FX growth FS innovation pipeline Cross-sell drive Best practice sharing Sales force training Global insurance sourcing Page 190

191 M&A and partnerships strategic initiatives Opportunities: New acquisitions Consolidation/ synergies High growth markets High margin businesses Disposal of non-core assets Hotel assets Non-core businesses Initiatives: Consolidation (Germany) Emerging markets/ BRIC Direct insurance Disposals programme Note: ¹ Revenue and cost synergies, primarily in the UK Page 191

192 Page 192 Other supporting information

193 Thomas Cook Group Executive Board Group CEO Manny Fontenla-Novoa¹ Segment Heads Functional Heads Deputy Group CEO CEO Northern Europe Sam Weihagen¹ CEO North America Michael Friisdahl Group CFO Paul Hollingworth¹ Group Strategy Director Jürgen Büser CEO UK & Ireland Ian Derbyshire CEO Central Europe Peter Fankhauser CEO Group Operations Ludger Heuberg Group HR Director Paul Wood CEO West/ East Thomas Döring CEO Airlines Germany Ralf Teckentrup CEO Group Destination Management Pete Constanti Group Company Secretary Derek Woodward Ecommerce Advisor Simon Breakwell Note: ¹ PLC Board Member Page 193

194 The Thomas Cook management team (1 of 4) Experience in travel industry: Thomas Cook roles: Manny Fontenla Novoa Group CEO Sam Weihagen Deputy Group CEO CEO Northern Europe 38 years 34 years 16 years (company FD) Group CEO since 2007 Group CEO Thomas Cook AG since 2005 Previous roles include: CEO Thomas Cook UK & Ireland Deputy Group CEO since Nov 2009 CEO Northern Europe since 2001 Paul Hollingworth Group CFO Group CFO since Jan 2010 Other roles: Co-founder of Sunworld CEO MyTravel Northern Europe CFO Mondi Group Group Finance Director of BPB plc Group Finance Director of De La Rue plc Group Finance Director Ransomes plc Page 194

195 The Thomas Cook management team (2 of 4) Michael Friisdahl CEO North America Ralf Teckentrup CEO Airlines Germany Ian Derbyshire CEO UK & Ireland Experience in travel industry: 26 years 23 years 26 years Thomas Cook roles: CEO North America since 2005 CEO Condor since 2004 Other roles: President MyTravel N. Am. in 2000 Partner and CEO of The Holiday Network - acquired by Airtours in 2000 Board Member Thomas Cook AG Previous roles include: Group IT Management Group Purchasing A number of senior roles at Lufthansa including Senior Vice President Network Management, IT and Purchasing CEO UK & I since Nov 2009 Previous roles include: CEO UK&I Independent Travel Director of Sales Previous roles at: Holiday Autos Rank Group Co-Op travel Page 195

196 The Thomas Cook management team (3 of 4) Dr Thomas Döring CEO W/E Europe Dr Peter Fankhauser CEO Central Europe Pete Constanti CEO Group Destination Management Ludger Heuberg CEO Group Operations Experience in 9 years 21 years 28 years 8 years travel industry: Thomas Cook roles: CEO West/ East since 2006 Previous roles include: Corporate Development M&A CEO Central Europe since 2006 Chairman Thomas Cook AG Previous roles include: Chief Product Officer role Other roles: Partner, Roland Berger Executive Board Member of Kuoni Reisen Holding AG CEO of LTU Group CEO Destination Management since Nov 2009 Previous roles include: CEO, Mainstream, UK&I HR Director Sunworld HR Director ILG CEO Group Ops since 2008 Board member TC AG Previous roles include: Group CFO CFO of Lufthansa Cargo AG, CFO of Kolbenschmidt-Pierburg Director of Mauser Waldeck AG Page 196

197 The Thomas Cook management team (4 of 4) Simon Breakwell Ecommerce Advisor Dr Jürgen Büser Group Strategy Director Derek Woodward Group Company Secretary Paul Wood Group HR Director Experience in travel industry: 23 years 7 years 25 years (Company Secretary) 20 years (HR & reward) Thomas Cook roles: Ecommerce advisor since 2009 Group Strategy Director since Nov 2009 Other roles: President Expedia Europe EVP Sales & Marketing Expedia Group Business Manager Microsoft Travel Business Unit Previous roles include: Group CFO CFO UK & Ireland Head of Controlling & M&A Director Operations, Siemens Financial Services Engagement Manager, Booz Allen & Hamilton Group Company Secretary since April 2008 Assistant Company Secretary, B.A.T Industries plc Company Secretary, Allied Zurich plc Head of Secretariat, Centrica plc, Group HR Director since 2009 Previous roles include: Group Head of reward Group Head of reward MyTravel Reward Director at Clifford Chance LLP Page 197