U rvlPLC Travel TUI Annual Report & Accounts for the year ended 30 September 2009 We’re on a journey. nulRpr consfrteya ne 0Spebr2009 September 30 ended year the for Accounts & Report Annual It’s been a year of progress.

http://ara2009.tuitravelplc.com 10 reasons to invest in TUI Travel PLC

Experienced management team Our management team has a track record of delivering long term growth whilst managing the business through significant changes in consumer demand. We have real strength and depth throughout our management teams across the organisation. See Our Colleagues on page 22. Market-leading brands We have some of the most recognised and highly trusted brands in the industry, which drive customer retention, reduce the cost of customer acquisition and are attractive to our accommodation providers and distribution partners. See Distribution & Brands on page 15. Market-leading positions In the Mainstream Sector we are either the number one or number two positioned tour operator in almost all of our source markets, including the UK, , , , the and the Nordic countries. Market consolidation Consolidation in some of our key markets has improved the structure of the industry and has reduced the risk of profit volatility historically driven by oversupply of capacity. Competitive advantage We buy over 150 million bednights per year, making us one of the largest distributors of accommodation globally. Our scale gives us a competitive advantage when negotiating with suppliers, allowing us to offer excellent value to our customers. Flexible business model The inherent flexibility of our model means that we are able to carefully manage our capacity to react to changes in demand, reducing the volatility of our profitability through the cycle. Synergies We have identified £200m of synergy benefits as a result of the merger in 2007 and are highly confident of achieving this target. By 2009, we had delivered £120m of synergy benefits and have £80m still to come. See People & Operational Effectiveness on page 16. Turnaround potential Since the merger, we have successfully executed a number of strategic actions to improve margins in underperforming businesses including our scheduled flying operations in the UK and Germany and our Canadian tour operator. We have a number of businesses where margins continue to be diluted by strategic and business model issues and solving these represents an opportunity for substantial future margin improvement. Specialist Sectors In excess of one-third of our profits are generated by our portfolio of niche specialist businesses which enjoy high organic growth and margin characteristics and often display counter-seasonal profitability. Growth in these Sectors is augmented by our highly successful acquisition strategy, where we identify new market niches and build substantial market positions. This portfolio of businesses is unique and cannot be replicated, representing a clear differentiation from our competitors. See Product & Content on page 14. Emerging markets We have an existing presence in the four major emerging markets of , Brazil, China and . The growth potential of these markets is substantial and we are well positioned to take advantage of this, particularly in Russia. See Growth & Capital Allocation on page 17.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 01 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI income and expense income 44 Governance 44 Directors of Board 46 report Directors’ 48 responsibilities Directors’ of Statement 49 report Governance Corporate 53 report Remuneration 63 report Auditors’ Independent statements 64 Financial 64 statement income Consolidated 65 sheet balance Consolidated 66 cash flows of statement Consolidated 67 recognised of statement Consolidated 68 financial statements the consolidated to Notes 123 sheet balance Company 124 financial statements Company’s the to Notes 128 information Shareholder 128 financial history Three-year 129 discount Shareholder 130 Contacts and advisers 131 terms key of Glossary 132 Index Contents ifc at a glance Group ifc02 case The investment overview TUI Travel 04 structure Our 06 Highlights 08 overview Strategic 08 overview Market 10 statement Chairman’s 11 statement Executive’s Chief 12 interview Executive’s Chief 14 strategy Our 18 indicators performance Key 20 risks Principal 22 leadership Responsible 26 Sustainable development 30 performance Business 30 performance Group 34 Segmental42 performance trading Current

The Annual Report contains forward-looking statements that are subject to subject to are that statements contains forward-looking The Annual Report and business things, the economic with, amongst other associated factors risk which the in and Sectors time in countries time to from occurring circumstances in these statements expectations reflected the that It is believed operates. Group which could variables of wide range a by be affected may but they reasonable are anticipated. those currently from differ to results cause actual http://ara2009.tuitravelplc.com Report online at Report Find our 2009 Annual Find our 2009 Annual travel company. company. travel world’s leading leisure leading leisure world’s TUI Travel PLC is the is the PLC TUI Travel 02 TUI Travel PLC Annual Report & Accounts 2009

Group at a glance TUI Travel overview

Who we are TUI Travel PLC (TUI Travel or the Group) was created on 3 September 2007 from the merger of First Choice Holidays PLC and the Division of TUI AG. It is the world’s leading leisure travel company operating in over 180 countries with more than 30 million customers in 27 key source markets. TUI Travel has over 200 brands which are comprised of market- leading mainstream brands and specialist travel businesses. TUI Travel is focused on providing customers with a wide choice of differentiated and flexible travel experiences to meet their changing needs. TUI Travel is headquartered in the UK and employs approximately 50,000 people. It is listed on the in the FTSE100 and has the ticker code ‘TT.’.

Our strategy

Making travel vision experiences special

Creating superior shareholder value by being the leading global leisure travel group providing customers with a wide choice of differentiated and flexible travel Go to strategic goal experiences to meet their changing needs page 14

Product Distribution People & Growth & strategic & Content & Brands Operational Capital Go to imperatives Effectiveness Allocation page 14

Customer obsessed Value driven Playing to win Responsible leadership Go to values page 23

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 03 www.tuitravelplc.com Hayes & Jarvis operates in the UK source in the UK & Jarvis operates Hayes specialist holiday and creates market to travellers discerning for itineraries worldwide. 55 destinations www.hayesandjarvis.co.uk , to holidays offers Turchese and the area the Mediterranean in the Italian and operates market. source www.turchese.it TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI ailability database ailability LateRooms is the hotel industry’s is the hotel LateRooms av leading late 500,000 accommodation over offering across consumers to deals directly worldwide. and the UK www.laterooms.com business-to- is a leading Hotelbeds destination of business provider online and accommodation services and operators wholesalers, travel to organisers. travel www.r2.hotelbeds.com Nouvelles Frontières is the leading is the Frontières Nouvelles multi-specialist and multi-channel wide a offering in France operator tour and destinations. holidays of range www.nouvelles-frontieres.fr premier world’s The Moorings is the hire and offers company, charter yacht in North yachts its custom-designed of and Germany. America, UK, France www.moorings.com leading world’s Expeditions is the Quark voyages expedition cruise of operator Regions. the Polar to www.quarkexpeditions.com Luxembourg Netherlands Zealand New Poland Russia Ukraine Kingdom United Fritidsresor is a tour operator and operator is a tour Fritidsresor business in the Swedish retail package offering market source and the Mediterranean to tours worldwide. destinations www.fritidsresor.se Thomson is the leading UK tour Thomson is the leading UK flights offers which also operator and accommodation. www.thomson.co.uk TUI operates in the German source TUI operates tour market-leading and is the market brand. operator www.tui.com Our key brands Our key brands well-known our of A selection than 200 brands. more under operates Travel TUI The Moorings, Quark, Frontières, Nouvelles Fritidsresor, Thomson, TUI, include Turchese. & Jarvis and Hayes Hotelbeds.com, LateRooms.com, Australia Austria Belgium Canada China Czech Republic France Germany Hungary India Ireland Our 27 key source markets source 27 key Our Where we operate we Where operating global player is a truly Travel TUI additions The two markets. source in 27 key in entrances include market year last from Zealand. and New Ukraine 04 TUI Travel PLC Annual Report & Accounts 2009

Group at a glance Our structure

TUI Travel is organised and managed through four Sectors – Mainstream, Activity, Specialist & Emerging Markets and Accommodation & Destinations. The chart opposite illustrates the underlying operating profit mix by Sector for the year ended 30 September 2009.

Key activities

Mainstream Sector Mainstream is the largest Sector in terms of size, financial performance and employee numbers. It comprises For further information leading tour operators and ‘power’ brands and operates a fleet of 146 aircraft and circa 3,500 retail shops. see page 34 There are three divisions:

Northern Region Top selling brands* The Northern Region comprises the distribution, Thomson, First Choice tour operating businesses and in the UK and Ireland, the Nordic countries and Canada. The and Fritidsresor UK operates some of the best known and loved Customer numbers travel brands including the UK’s third largest , Thomson Airways. The Nordics comprises the 7.1m markets of Sweden, Norway, Denmark and Finland. Top three destinations* The Nordics has number one brands in all markets, except Finland where it is number two. In Canada Balearics, Greece and Turkey the brand positioning is being strengthened with the proposed strategic venture with Sunwing.

Central Europe Top selling brands* Central Europe comprises the distribution, tour TUI, 1-2-Fly and l’tur operating businesses and airline in the source markets of Germany, Austria, Switzerland and Customer numbers Poland. Germany is our largest source market*. 9.7m In Germany and Austria, TUI is the market-leading brand. The businesses are focused on providing Top three destinations* a unique service and great products at the best Spain, Germany and Turkey value to our customers.

Western Europe Top selling brands* Western Europe comprises the distribution, tour Jetair, Holland International operating businesses and airlines in France, Belgium and the Netherlands. In each country the brands and Marmara have market-leading positions based on quality Customer numbers of service and price. 5.2m Top three destinations* Spain, Greece and Turkey

*By customer numbers.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 05 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Top selling brands* Top selling brands* Top Top three destinations* three Top and Portugal Spain, UK Mostravel, Turchese and Turchese Mostravel, & Jarvis Hayes numbers Customer 2.0m & Ukraine) (including Russia destinations* three Top US, Egypt and Italy incoming of a number TUI (used by TUI España, agencies including and TUI Hellas), Hotelbeds.com LateRooms.com numbers/roomnights Customer 26.9m Crystal Ski, Moorings and Le Boat numbers Customer 1.1m destinations* three Top Austria and Italy France, *By customer numbers. customer *By Top selling brands* Top Mainstream Sector Mainstream Activity Sector Sector Markets Specialist & Emerging Sector & Destinations Accommodation ventures Joint 65.0% 3.1% 12.6% 6.7% 12.6% The Accommodation & Destinations Sector (A&D) Sector & Destinations The Accommodation in destination services of a range sells and provides clients, corporate agents, travel operators, tour to Services worldwide. the consumer to and direct excursions, transfers, accommodation, include hotel meetings, incentives, trips, organising round (MICE), cruise handling and events conferences our solutions for website as integrated well as business along key A&D is structured customers. Business (B2B) and Business lines – Business to (B2C). Consumer to The Specialist & Emerging Markets Sector is an Sector Markets The Specialist & Emerging businesses focusing travel of portfolio international experiences travel premium on specific destinations, segments demographic customer particular or product. exclusive and with differentiated often 40 businesses operating of consists The sector and, most recently, , Europe from and Ukraine. such as Russia markets emerging Key activities Key businesses travel 40 activity has over This Sector divisions – Marine, five under operate that these and Sport. Each of Ski, Student Adventure, The positions. divisions has market-leading customers more businesses take Adventure other than any destinations adventure iconic to leaders in The Sport businesses are operator. in Australia tours and rugby cricket supporter-led businesses while the Student and the UK, the traditional from everything encompass groups for holidays trek to France, school trip to also This Sector adults in the Himalayas. young of and in Europe brands yacht includes the leading ski operator. largest world’s the US and the For further information information further For see page 41 Accommodation & Accommodation Destinations Sector For further information information further For see page 40 Specialist & Markets Emerging Sector For further information information further For see page 39 Activity Sector 06 TUI Travel PLC Annual Report & Accounts 2009

Group at a glance Financial highlights

Revenue 09 £13,863m Flat £13,863m 08 £13,932m

Underlying operating profit 09 £443m +11% £443m 08 £398m

Underlying profit before tax 09 £366m +15% £366m 08 £319m

Underlying earnings per share 09 23.8p +17% 23.8p 08 20.4p

Dividend per share 09 10.7p +10% 10.7p 08 9.7p

The financial highlights are underlying results for the years ended 30 September 2009 and 30 September 2008. Underlying operating profit excludes separately disclosed items, amortisation of IFRS 3 intangibles, goodwill impairment and taxation of results of the Group’s joint ventures and associates. Underlying profit before tax also excludes separately disclosed financial expenses. Underlying earnings per share excludes the same items as excluded from underlying profit before tax, net of related taxation.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 07 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI through through on track on track despite significant despite in Germany between TUIfly between in Germany in high-growth niche in high-growth strong performance strong in synergy targets by 2011 by targets in synergy of financing through a convertible bond and a convertible financing through of 11 bolt-on acquisitions market-leading presence in Russia & CIS presence market-leading

Raised £490m facility additional bank specialist businesses a joint venture with S-Group Capital Management with S-Group venture a joint Announced significant transactions with Sunwing to deliver £200m to deliver venture strategic with the proposed and in Canada and Air economic headwinds economic • • Completed • a Building • • are we and well is progressing integration The merger • a delivered The Group Operational highlights Operational 08 TUI Travel PLC Annual Report & Accounts 2009

Strategic overview Market overview

The economic environment management have not survived. Those businesses It became clear in 2008 that the world’s financial that have market-leading brands, are financially system was in jeopardy as many of its leading banks secure and have flexible business models have were suffering liquidity issues and incurring losses, proven more resilient. TUI Travel has continued leading them to be significantly undercapitalised. to weather the challenging economic environment. In early 2009, all indicators pointed towards an The Group’s financial performance has continued increasingly challenging operating environment with to meet the Board’s and the market’s expectations. the deterioration of the world economy, financial Our business model allows us to closely align our uncertainty and low consumer confidence. supply to demand and we also have a high degree Additional challenges became apparent with the of flexibility which allows us to manage and adapt continued volatility of currency and fuel prices as quickly to changing market conditions and well as the outbreak of the H1N1 virus. customer needs. More than one year on from the banking crisis we The political climate are seeing some indications of economies beginning Tourism is one of the most heavily regulated to bottom out but economic data is still mixed. industries. As a global organisation TUI Travel has There appear to be signs that the government’s a public affairs team that works with governments intervention in the banking crisis is starting to take across our key source markets to address issues effect and there is improving consumer confidence that impact our industry and our customers. and an increasing willingness to spend. However, unemployment is predicted to rise to 11% in the The Package Travel Directive is one issue that has UK in the second half of 2010 and although there come to the fore following the collapse of a number has been recent improvement in the US, of airlines including XL Airways and one on which unemployment remains at 9% (Oxford Economic we have been campaigning across our key markets. Forecasting September 2009). In Germany and The Package Travel Directive came into effect in France, unemployment is expected to continue 1990 and its provisions were introduced into UK to rise in 2010, remaining high until 2012. During law through the Package Travel Regulations in 1992. 2009, the US and the major European economies The Package Travel Directive set out travel organisers’ (UK, Germany and France) have seen some responsibilities to their customers in the event that quarterly increases in GDP. However, annual GDP an operator fails. In the EU, anyone who offers growth is not expected to resume until 2010. package holidays must comply with the Package Travel Directive. The leisure travel market Following campaigning by TUI Travel and the Historically, tourism has shown resilience in industry, the European Commission has recognised deteriorating economic situations, such as the that the Package Travel Directive needs to be recession in the early 1990s and short term shocks updated in line with the significant changes that such as 9/11 and the SARS health scare. However, have taken place in the industry over the last after a period of strong growth, tourism has not 17 years, most notably the use of the internet been immune to the current financial crisis. for booking holidays. We are ensuring that TUI According to the United Nations World Tourism Travel’s views on this regulation and the protection Organisation (UNWTO), the number of international customers should expect are heard. As part of tourist arrivals worldwide reached 500 million in the this, Peter Long has met with the European first seven months of 2009, down from 540 million Commissioner for Consumer Affairs to submit in the same period of 2008. Economic conditions, our recommendations. combined with the uncertainties brought about by the H1N1 virus, are expected to continue to impact The sustainability challenge tourism demand in the short term though the rate Travel and tourism accounts for 11% of the world’s of decline is anticipated to ease during the remainder GDP and 12% of its exports.1 of 2009 and international tourism is forecast to decrease by 5% for the full year 2009. The UNWTO Around 50 of the world’s least developed countries expects moderate growth for 2010. rely largely on tourism for economic development. However, travel and tourism are responsible for Over the past couple of years, we have seen around 5% of global carbon dioxide emissions.2 consolidation of the major European players. The mergers of TUI Tourism and First Choice As a leading tour operator TUI Travel aspires to and Thomas Cook and My Travel have delivered lead the travel and tourism sector and to lobby for consolidation, primarily in the UK market. There sustainability to be embraced as a business issue have also been several high profile collapses of on which the future health of the industry depends. airlines and tour operators globally. Businesses As a tourism group we take our responsibilities very with weak financial models and poor capacity seriously and are working to ensure that sustainable www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 09 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Satellite Accounts (TSA). Accounts Satellite Meteorological and World (UNEP) Programme Environment Nations Tourism: Change and 2007) Climate (WMO) (October Organization Global Challenges. Madrid. to Responding 2 United (UNWTO), Organisation Tourism World Nations United 1Tourism (UNWTO) Organisation Tourism World Nations United Market outlook Market in the booking later are Although customers is still a strong there climate, economic current main holiday. their for customers our demand from will remain conditions market that anticipate We to booking pattern challenging and expect the later In the long term year. in the next financial continue the demand that believe to reason is every there strongly grow to will continue travel international for downturn economic the current of the effects after market in emerging particularly receded, have capture to placed well are we and economies, this growth. Emerging markets Emerging we mature markets mainstream traditional As our During growth. for markets new to look to continue & CIS in Russia investing to committed we year, the Capital S-Group partner, venture joint with our & CIS to TUI Russia aim is for Management. Our an also have position. We a market-leading achieve China and India and in Brazil, existing presence and evaluated being investigated are these markets & See Growth opportunities. growth further for Capitalon page 17. Allocation We continue to listen to our customers by creating by customers our to listen to continue We their meet and beat to experiences holiday new expectations. Destinations including Egypt non-EU countries of A number in popularity strongly grow to continued Turkey and customers our of The number in 2008/2009. but these has decreased the Eurozone to travelling including the Balearics, mainland destinations top our still remain and Greece Spain, Portugal haul destinations long For short haul destinations. United and the the Dominican Republic, popular are that resorts provide continually States swine the impact of Despite money. for value and investments following well has recovered flu, attract to the local Government by and incentives destinations New the resorts. to back tourists and Canada. in 2009 included introduced Our customers continue to look forward to their to forward look to continue customers Our travel to want to continue They annual holiday. and cultures countries, new experience abroad, seeing the following are We climates. sunnier trends: customer strength Brand established, reputable, to loyal are Customers seek as they brands’) (’power brands high-quality with a tour and book holidays their de-risk to We financial protection. full gives that operator and highly the most recognised some of have See Distribution the industry. in brands trusted on page 15. & Brands and development innovation Product in their discerning be more to continue Customers products differentiated wanting decisions, holiday a portfolio developing are We money. for value and can no competitor that products exclusive of include to which is tailored and replicate or match customers our that and facilities additional services on information further For holiday. on their want & Content see Product products differentiated on page 14. packages all inclusive towards seen a trend have We and seeking financial certainty customers due to is going holiday their what exactly know to wanting a 33% experienced have we In the UK, cost. to a 50% increase in demand and in Germany increase 2008. versus in 2009 has also products travel our of The flexibility with an requirement customer a key become holidays, 11-night 10 or in demand for increase flights from and dates departure of choices wider airports. regional and about the environment care customers Our be addressing to operator tour expect a quality See Sustainable behalf. these issues on their on page 26. In the largest Development and the UK, Germany markets, mainstream featuring brochures launched green have we meet the highest social and that holidays only criteria. environmental Consumer sentiment development aligns with the Group’s key strategic key with the Group’s aligns development understand our how challenge is to priorities. Our and can optimise its social, economic industry TUI all concerned. benefits for environmental travel make is to this respect goal in Travel’s cause that holidays providing special by experiences the culture impact, respect minimal environmental economic real and offer destinations and people of See Sustainable local communities. benefit to on page 26. Development 10 TUI Travel PLC Annual Report & Accounts 2009

Strategic overview | Chairman’s statement Growing in strength

We have again delivered a strong set of results against a backdrop of challenging economic conditions and exceptional cost inflation from jet fuel prices and currency movements. Our performance in 2009 proves that the flexibility and diversity of our model works and is testament to the strength of our management team and our market-leading brands.

Dr Michael Frenzel Non-Executive Chairman

Two years on from the formation of TUI Travel, we Board have made substantial progress in implementing Christoph Mueller resigned as Aviation Director our strategic imperatives and delivering our roadmap. and subsequently left the Board in May 2009. We are on track to achieve our synergy target and In October 2009, Horst Baier was appointed as a have successfully resolved a number of key strategic Non-Executive Director. The Board is composed of issues identified at the time of the merger. Some a majority of independent Non-Executive Directors. underperforming businesses remain and we are confident that we can turn these around. We are Colleagues focusing increasingly on the significant growth Providing special holiday experiences to our opportunities identified within both the Mainstream customers is down to the hard work and enthusiasm and Specialist Sectors, which I believe will deliver of our colleagues. Our colleagues are at the heart of superior and sustainable long term growth. achieving our objectives and successes and we have outstanding talent at every level of the business. Results I thank them on behalf of the Board. The Group has achieved an 11% increase in underlying operating profit to £443m, (2008: Sustainable development £398m) on slightly lower revenue of £13,863m Sustainability is important to our customers, (2008: £13,932m). Underlying profit before tax colleagues and ultimately our shareholders. We are is up 15% to £366m, (2008: £319m). Underlying aware of our responsibility to manage our impacts earnings per share increased by 17% to 23.8p, on the environment and people. Climate change is (2008: 20.4p). The Group statutory loss before the greatest environmental challenge facing humanity taxation was £52m (2008: £267m). and we recognise that we contribute to global carbon emissions, particularly through our aircraft Dividends operations. We work hard to reduce this impact and The Board is recommending a final dividend of 7.7p I am pleased to report that our emissions compare per share. On 19 May 2009, the Board recommended favourably with our peers. an interim dividend of 3.0p per share, thereby resulting in a full year dividend of 10.7p per share (previous year 9.7p). The Group has a progressive Dr Michael Frenzel dividend policy and will look to maintain underlying Non-Executive Chairman dividend cover at just over two times.

Total Shareholder Return 350 TUI Travel PLC shares listed 03.09.07 TUI Travel PLC v FTSE 100 & FTSE 30-300 300

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100 TUI Travel PLC FTSE 100 FTSE 30-100 30.09.04 30.09.05 30.09.06 30.09.07 30.09.08 30.09.09

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 11 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Peter Long Peter Executive Chief TUI Travel’s clear strategic goal is to create superior create is to goal strategic clear Travel’s TUI leading world’s being the by value shareholder with the customers providing group travel leisure and flexible travel differentiated of widest choice This changing needs. meet their to experiences and growth on delivering focused have we year Mainstream our growing by value shareholder of portfolio and building our businesses’ margins made substantial have specialist businesses. We we and these targets both in delivering progress come. to growth is more there confident are not could year this achievements our all of Finally, dedication and work without the hard happened have thank to like would and I 50,000 colleagues our of contribution. their for them personally Long Peter Executive Chief Chief Executive’s statement Executive’s Chief | View the CEO’s interview online online at interview the CEO’s Watch http://ara2009.tuitravelplc.com We are very proud that TUI Travel is the world’s is the Travel TUI that proud very are We 30 taking over company travel leading leisure million produced have We year. each on holiday customers this financial results with good set of year, another profit operating in underlying a £45m increase in underlying £443m and an improvement to 3.2%. 30 basis points to of margin operating as it has impressive is particularly performance Our cost of levels the higher of in spite been achieved backdrop, and the challenging economic inflation unemployment higher in both which has resulted in all source confidence and declines in consumer flexible business model and The Group’s markets. have we management has meant capacity careful manage the businesses successfully been able to brands, strong Our this difficult period. through and innovation with ongoing product together have we also meant that have development, positions and maintain market-leading to continued customers. for experiences holiday new deliver to the most talked- change has been one of Climate travel and in the leisure year this about topics the largest one of without doubt it is industry is the first major Travel TUI face. we challenges targets carbon reduction to commit to operator tour discuss with business leaders to met and I have climate to response the business community’s commitment with our will continue change. We it aligns that ensure to and strive sustainability to priorities. strategic with our Welcome to TUI Travel PLC’s 2009 annual report. This year we have taken the step of putting the taken have we This year annual report. 2009 PLC’s to TUI Travel Welcome ongoing commitment to sustainable our our Annual Report fully online reflecting & Accounts it electronically will be receiving 70% of our shareholders that over and the fact development achievements. hearing about TUI Travel’s and reading enjoy hope you We this year. Strategic overview overview Strategic goal strategic A clear 12 TUI Travel PLC Annual Report & Accounts 2009

Strategic overview | Chief Executive’s interview An interview with Chief Executive, Peter Long

What are the highlights of this year for you? There is evidence that consumer confidence in the UK is improving as we’re seeing strong demand for late bookings this winter. Furthermore, I am encouraged In what has been a very economically challenging by our booking pattern for Summer 2010. year in the global market place, where we have experienced the deepest and longest post-war In Germany and, to a lesser or greater extent, our recession, rising unemployment, loss of consumer other European source markets, we think it could confidence and increased cost pressures, I am be slightly different. The fiscal measures put in delighted that TUI Travel has achieved strong results. place in these countries means that they have not experienced the unemployment levels that we have For me, if there is one thing that really stands out seen in either the US or the UK. Once these it is the dedication and commitment of all our measures cease we may see unemployment rise. colleagues at TUI Travel. We are, therefore, planning cautiously for next year I believe that we have the best management team in these source markets although there are positive in the industry and this is borne out by the way signs in a number of these countries. businesses perform in times of adversity. It is one thing to perform well when the trading environment is positive or benign but it is quite another thing to What steps have you taken to further produce good performance when times are tough. improve the Group’s business performance?

We also have a good mix of tour operator and We have experienced both lower demand and functional experts across the Group which creates significant cost inflation across the Group which the right balance to successfully manage what is we managed through our flexible business model. a huge, complex international business. Carefully aligning capacity with demand allowed It is not only about the team at the top though. us to achieve our required load factors and also We have identified our talent pool and considerable ensured that there was no excessive discounting time and commitment is going into developing our in the lates market despite the later booking trend. leaders of tomorrow. I have had the opportunity We have identified a number of businesses across of spending time with them this year and what the Group that were or are underperforming and a fantastic group of colleagues they are. It is both a we have taken or are taking appropriate steps to privilege and reassuring to know that as the business address these. grows we will have the right team to grow with it. In Germany, we have concluded a transaction with who will take over our City Pairs business. How are the different markets responding to This allows us to exit an operation which made the current economic climate? significant losses in 2008. This deal makes strategic sense for both us and Air Berlin. We are also It’s been very interesting to see the reactions of improving our product mix in Germany which will our customers within our different source markets deliver higher margins and have plans in place to during this period of economic uncertainty. increase our controlled distribution. The first market where we saw a marked reaction In France, within Nouvelles Frontières, we are was in the United States. The sub-prime mortgage rationalising the product range to ensure that we issue was a significant factor and unemployment operate programmes of significant scale to key rose much more quickly than in our other source destinations. Corsair, our long haul scheduled markets and consumer confidence was lower much airline, was hit by a series of socio-political events earlier. We experienced a marked drop in bookings in a number of its key destinations and we are across a number of our businesses. Having taken continuing to review its business model and the pain earlier, however, the US market is now strategy. Our retail operation in both Nouvelles coming back strongly and the businesses are Frontières, where we were sub-scale, and Marmara, performing accordingly. where we relied heavily on third party agents, needed to be addressed. We are now selling In the UK, we have experienced a later booking Marmara product through our Nouvelles Frontières pattern – if someone is concerned about whether and Havas retail operations and the transaction they will have a job or not, it’s not surprising that with Carlson Wagonlit Travel after the year end they delay booking their annual summer holiday. gives us the scale we require. They did, however, eventually book and, because we had ensured that we aligned capacity with In Canada, which is an extremely competitive demand, although they were booking later, we market with significant over-capacity, we have a weren’t having to discount the price. weak market position and made a loss of £24m in 2009. Having reviewed the strategic alternatives for www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 13 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI What are the challenges TUI Travel is facing? is the challenges TUI Travel What are The new generation of aircraft, like the 787, like aircraft, of generation The new afield to further even fly to customers our will allow fuel more are that in aircraft destinations new less are and comfort greater efficient, offer aircraft. than today’s the environment damaging to we and if changing industry in a constantly are We customers put our will be left behind. We standwe still deliver only do and not we everything the heart of at in innovate to but continue today want they what tomorrow. want will they what deliver to order deal we challenges and different face we year Every or disasters geo-political, natural with them, be they challenges key two are me there But for economic. and reduction one is carbon addressing, are we that is regulation. the second Although industry. in a high carbon operate We also we first and foremost, operator, a tour are we customers our take to 150 aircraft a fleet of have is no there today and, unfortunately, on holiday second of Mass production jet fuel. to alternative viable, which seem more bio-fuels, generation We, off. years of number still a considerable are our reduce can to we do all to have therefore, making and are emissions ourselves carbon dioxide the like technology in new a significant investment our reducing to committed have Boeing 787. We 2014. 6% by fleet by our carbon emissions from in aviation the inclusion of of supportive are We but Scheme (ETS) Trading Emissions the European should be a global emissions trading there believe which channels monies aviation for framework into auctioning emissions allocations from raised coffers. than national solutions rather environmental industry see the aviation to want also don’t We in governments national by both being hit twice, ETS. schemes and also by raising tax we and regulated heavily are we operator As a tour an do have we What with that. an issue have do not in the same competitors is that with, however, issue and the the same customers for competing market way in the same same business, should be regulated that the fact welcome the case. We and this isn’t the revising Commission is looking at the European for which has been in place Directive Travel Package consideration into take and does not years 20 nearly has changed, market travel the leisure way the with the years seven or six in the last particularly agents. Financial and online travel carriers cost low in especially be addressed also needs to protection we that airline failures of the number the light of see. to continue well seen and may have How do you see the leisure travel market travel see the leisure do you How in the future? developing How will your strategy and business model strategy will your How years? couple of the next over develop Travel and tourism is the world’s largest industry largest world’s is the and tourism Travel the last over and changed rapidly and has grown 270 million international were In 1979 there years. 30 a billion nearly this has risen to arrivals, tourist 2020 is 1.6 billion. for and the prediction today opened customers’ operators tour The mainstream and own country one’s beyond travel safe to eyes with It started today. adventurous more people are and confident more are customers Spain, but now the Turkey, Egypt, like destinations go to will happily about only not It’s and Mexico. Dominican Republic Group’s our of many a sun and beach holiday, like go on experiential holidays to want customers Polar or safaris in the Himalayas, sailing, trekking to will continue expedition cruising and these popular. more even become advantage of the competitive advantage this brings us. advantage the competitive of advantage a unique have we Specialist Sectors, Within our and our replicate to is impossible that portfolio in our growth organic will be on driving focus the existing businesses and maximising further will We have. we opportunities integration merger with specialist markets source new expand into in Germany. with Le Boat did we just as products, niches that market new identify to continue We can easily we where and potential high-growth offer and Ukraine, establish In Russia a significant position. as existing platforms our and grow will leverage we other of the potential further as investigating well markets. emerging haul programme. Being the European launch customer Being the European haul programme. full take we that will ensure we the Boeing 787, for For us it’s all about delivering sustainable all about delivering longer us it’s For flexible and efficient business and our growth term do. we what to key model remains those improve to on continuing will be focusing We underperforming, are the business that of areas product and exclusive differentiated our increasing distribution controlled of and getting the right mix Sector. Mainstream our whole of the across long shape our we how at closely will also look We Canada, we recently announced a strategic venture a strategic announced recently we Canada, in Canada. operator with Sunwing, a leading tour Thewill strengthen completed, once transaction, and bring position in the Canadian market our a number to and financial benefits strategic of the Group. View the CEO’s interviewView the online online at interview the CEO’s Watch http://ara2009.tuitravelplc.com 14 TUI Travel PLC Annual Report & Accounts 2009

Strategic overview | Our strategy Strategic imperatives

We have a clear strategic goal to create superior shareholder value by being the world’s leading leisure travel group providing customers with the widest choice of differentiated and flexible travel experiences to meet their changing needs. In order for us to achieve our strategy we are focused on four areas – Product & Content, Distribution & Brands, People & Operational Effectiveness and Growth & Capital Allocation. We measure the delivery of these four areas by our key performance indicators. See KPIs on page 18.

Imperative 1: Product & Content

Summary Differentiated content is a central pillar of our • Different products to our competitors product and content strategy. We are developing a and unique in the marketplace portfolio of exclusive products that no competitor can match or replicate and which is tailored to • High customer retention and repeat include additional services and facilities that booking rates customers want on their holiday. Every one of our • Earlier booking trends businesses offers products that are tailored to meet the holiday needs and tastes of its customers. In the Mainstream Sector, the level of differentiated product has increased over the last year and currently represents 37% of total holidays. We have specific targets in each Sector to continue to increase this level of differentiation and are constantly reviewing and evolving product content. The Mainstream differentiated products in the UK include Sensatori, designed for couples, and First Choice Holiday Villages, designed for families. In Germany we offer Sensimar, a 5-star spa concept for couples and Robinson Clubs for families. In the Nordics our Blue Villages offer an excellent experience for families. The portfolio of differentiated content not only increases our competitive advantage by distinguishing us from the competition, it also drives higher margins, underpinning our plans to improve underlying operating margins. Differentiated products have an earlier booking profile which increases yields and removes pressure in the lates market, while customers also benefit from a more added-value, unique experience. Feedback shows that customers appreciate the quality and value of these products, and higher satisfaction levels drive repeat bookings and customer retention.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 15 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Our highly trusted brands provide excellent excellent provide brands trusted highly Our and loyalty customer and drive money for value brands market-leading have bookings. We repeat Thomson, TUI, including Sector in the Mainstream Holland Fritidsresor, Jetairfly, First Choice, and Frontières Nouvelles Arke, International, have we In the Specialist Sectors Marmara. market-leading have that niche brands well-known & Jarvis, Sovereign, positions including Hayes CrystalThe Moorings, Ski, LateRooms.com Citalia, and Hotelbeds.com wide choice with a customers provide aim is to Our and preferences, meet their options that holiday of securing booking options. By of range a convenient can manage and we customers, to access direct booking from experience whole holiday the deliver via one shops, online or travel with an agent in our and after-sales in-resort to call centres, our of and satisfaction whilst driving customer service, loyalty. customer ultimately products the distribution of market In each source preferences customer different reflect to is tailored has its market dynamics. Each source and market reduce aims to which own distribution strategy, distribution through building controlled by costs shops, the use of retail of the efficient operation and by and booking tool research as a the internet call centres. of the utilisation leading brands businesses our In the Mainstream distribution controlled bookings through drive main channels; three which is made up of capability 3,500 shops, an online circa of network a retail and call brands all major for booking capability is a there where instance, for In the UK centres. invested have we online, purchase to high propensity increase In addition, to capability. web in heavily launched have we and online sales, late of control maximise to and continue website a latedeals.co.uk utilising the down channels by our of the efficiency virtual as a work to enable staff time in shops to propensity is a higher there In France call centre. agents travel traditional more through purchase to both network retail expanding our are we and have agencies. We owned and franchise through the distribution for controlled also increased offering building its internet by brand Marmara Nouvelles of network our and selling it through stores. retail Voyages shops and Havas Frontières Distribution & Brands Distribution & and quality • relationships Building our customer • value provide that brands Highly trusted • choice customer Broadening Imperative 2: Imperative Summary 16 TUI Travel PLC Annual Report & Accounts 2009

Strategic overview | Our strategy Strategic imperatives continued

Imperative 3: People & Operational Effectiveness

Summary Our tour operators actively manage capacity • Our colleagues are key to our success through sophisticated capacity and yield management systems. The UK Mainstream business • Flexible business model that can react has a market-leading yield system to plan and to demand changes manage capacity allowing us to analyse profitability • Development of sophisticated capacity for Thomson and First Choice by creating a detailed and yield management systems picture of profitable capacity by individual flight. This allows us to determine optimum seat capacity • Underlying operating profit margin up by each UK airport and to ensure that we maintain 30 basis points from 2.9% to 3.2% the most appropriate aircraft fleet size and type. • Integration progressing well with total This has enabled us to leverage the strength of synergies upgraded to £200m both these brands by improving efficiency with fewer aircraft and less risk, driving an improvement in margins. Our other businesses are also beginning The skills and expertise of our colleagues are the to implement this system; in the Activity Sector, key to our success. Across the Group we have a the ski business has fully implemented the same unique breadth and depth of experience with yield management tool driving further improvements innovative entrepreneurs in our specialist in margin. businesses, skilled tour operators in Mainstream, The cost synergies arising from the integration functional experts at the centre and a highly of First Choice and Thomson and further synergy experienced and respected international benefits in France, Austria and the UK ski management team. Our aim is to motivate and businesses and Accommodation & Destinations, engage our teams to deliver outstanding customer will contribute significantly to our profitability. experiences and results for our businesses. Talent We have made excellent progress to date delivering across the Group is reviewed regularly with a focus synergies of £120m in 2009 and expect to deliver on retaining and developing individuals to drive the further synergies of £60m in 2010, maintaining business forward. See Our Colleagues on page 22. our target of £200m in 2011. In addition to the We have a flexible business model that allows us to delivery of these cost synergies, the businesses are react to demand changes. Significant operational continually working to leverage their market-leading flexibility is retained through maintaining low positions and scale to maximise their cost bedstock commitments (71% is uncommitted), competitiveness and rationalise the cost base third party flying arrangements (accounting for 28% further through the continual improvement of of all tour operator capacity) and the asset leasing business processes and systems. We are also further profiles of our shops and aircraft (46% of aircraft reviewing options to reduce the number of leases and 36% of shop leases will expire in the reservation and back office systems in the next three years). This allows us to manage capacity Mainstream businesses. in response to changes in the trading environment.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 17 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI and return and return We continue to believe that the Boeing 787 that believe to continue We to opportunity a fantastic represents Dreamliner only Not the Group. for growth long term deliver distances, enabling us to greater fly will it be able to our to destinations non-stop of range wider a offer will but it today, aircraft than equivalent customers and additional efficiency fuel with greater do so and operational use the customer plan to We comfort. as a key position the long haul offering benefits to a develop allowing us to in Europe differentiator market. position in the long haul charter pre-eminent delivery take to will be the first company Travel TUI expecting to are We the Boeing 787 in Europe. of 2012. in early the first aircraft of delivery receive and typically business model an asset-right have We waterway inland yachts, in assets such as invest only us provide cruisers and expedition cruise ships that and enable us advantage competitive with greater asset- our of As a result margins. earn premium to strategic against our right business model, delivery enhancement driving underlying margin imperatives we £200m, benefits of synergy of and delivery medium term our delivering of confident remain conditions economic tough Despite targets. margin these in realising made significant progress have we by margins operating improving objectives, key 3.2% (2008: 2.9%) 30 basis points to In the mainstream markets we have identified have we markets In the mainstream in participate capital to allocate to opportunities competitive our and strengthen consolidation market underperforming of position, driving the turnaround year, During the Sector. businesses in the Mainstream our for alternatives the strategic reviewed have we in September Canadian business and announced, with Sunwing, a leading venture 2009, a strategic with venture The strategic in Canada. operator tour in this market. position our will strengthen Sunwing the of the profitability of with a share us It provides benefits for strategic of and has a number venture the fragmented of including consolidation the Group, efficiencies operational improved Canadian market, profitability and counter-cyclical and synergies seasons. winter and summer between that by bringing together the skills and knowledge bringing together by that Capital Management and S-Group Travel TUI of a leading can create we partner) venture joint (our markets. travel leisure & CIS position in the Russian China and in Brazil, an existing presence have We understanding of build our to India and continue our determine to markets travel these leisure each market. for strategy optimal participation on invested capital to 9.2% (2008: 8.4%). 9.2% (2008: capital to on invested Growth & Capital Allocation Growth to 9.2% to through a proposed strategic venture venture strategic a proposed through with Sunwing £443m to Russia & CIS Russia businesses in Specialist Sectors customer offering in the Dutch and Belgian markets. in the Dutch offering customer a strong experienced have markets Emerging As the leading travel. leisure in demand for increase excellently are we group travel leisure international have We this opportunity. benefit from to placed and market research customer careful undertaken can we which in understand the markets analysis to within Russia strategy Our value. add to participate and our focus of & CIS has been the main area confident are We well. progressing plans are growth Further organic long term growth will be achieved growth long term organic Further some of of introduction the continued through in the Specialist & Emerging Specialist brands our European new into Sectors and Activity Markets including distribution strength, utilising our markets 3,500 circa of estate retail pan-European our launching the best of are we example, For branches. Cruising products and Polar Marine, Adventure our and Ukraine. Russia by followed Germany, into within Le Boat launch of the successful Following will position this we operation, German retail our of the acquisition of complementary businesses and complementary of the acquisition of have existing businesses. We in our growth organic (11 in the year this 12 acquisitions completed bolt-on make to will continue and Specialist Sectors) The Specialist businesses. in targeted acquisitions present at is strong acquisitions potential pipeline of in the investment of the level envisage we and years. recent to be similar to medium term are creating market-leading positions by a combination positions by market-leading creating are We have identified a number of market segments market of identified a number have We These growth. drive capital to can allocate we where Specialist within our segments, primarily market target and present and high-margin, high-growth are Sectors, leading create us to for opportunities excellent These segments markets. positions in fragmented we and growth further for significant potential offer • up 11% profit Underlying operating • capital on invested in return Increase • the Canadian market Consolidation of • niche high-growth 11 Acquired • in well progressing plans are Growth Imperative 4: Imperative Summary 18 TUI Travel PLC Annual Report & Accounts 2009

Strategic overview Key Performance Indicators (KPIs)

KPI rationale Performance

Financial We believe that improving our financial To measure our financial progress we have two performance will allow us to invest in the future financial KPIs: (i) operating margin % and (ii) return of our business for the benefit of shareholders, on invested capital (ROIC). colleagues and customers. Our main strategic In the year, despite the tough economic conditions, objective is to improve the Group’s profitability operating margins improved by 30 basis points to and to enhance returns on investment. 3.2%, primarily driven by the delivery of merger synergies. ROIC increased from 8.4% to 9.2% driven by improved profitability.

Product Differentiated content is a central pillar of our In the year, we increased the differentiated product product and content strategy across all our mix by 4 percentage points, including investment in & Content businesses. Differentiated product earns superior Sensimar, a new 5-star spa concept in the German margins, achieves higher customer satisfaction source market and further development of the and delivers higher customer retention. Sensatori concept in the UK source market after its successful launch in 2008. We expect to continue to increase the number of units under these concepts over the next five years.

Distribution Our portfolio of market-leading brands helps to We have increased our controlled distribution mix increase the direct distribution mix by driving in the year in all source markets, with the most & Brands bookings through our controlled channels. Increasing significant increases in the Nordic region and the direct distribution mix is a key driver to improve Germany. The increase in the Nordic region was customer retention, reduce our distribution costs driven by the online channel, which now distributes and enhance customer relationships. over half of all holidays sold. In Germany, the increase was due to increased sales through our own retail network and through direct brands.

Specialist Maintaining a substantial mix of operating profits The proportion of operating profit contribution Sectors from our Specialist Sectors as a proportion of our from the Specialist Sectors has remained flat in Group result is a strategic priority. The Specialist the year. Sectors are a major point of differentiation and a key source of the Group’s future growth. These Sectors add significant value to the Group as they enjoy higher margins and growth characteristics, often exhibit counter-seasonal profitability and are virtually impossible to replicate as we have crucial first-mover advantage.

Responsible We are experiencing greater consumer awareness Our airlines’ carbon efficiency compares favourably Leadership of sustainability and believe that creating more with both scheduled and low-cost airlines. Carbon sustainable holidays will help protect our product into emissions from TUI Travel’s airlines decreased by the future and also support product differentiation, 3.75% in the financial year, saving over 220,000 brand loyalty and competitive advantage. tonnes of carbon dioxide. However, the total number of revenue passenger kilometres flown decreased in the same period, resulting in a very slight increase

in our fleet average CO2/RPK (carbon dioxide emissions per revenue passenger kilometre).

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 19 /RPK 2 2008 8.4% CO www.tuitravelplc.com 2008 77.9g ROIC 2009 9.2% TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI /RPK 2 /RPK 2 2008 2008 2008 2008 35% 2.9% 33% 53% CO 35% costs. central *Before through measured carbon efficiency, Aircraft CO airlines’ fleet average TUI Travel 2009 78.1g 2009 58% profit* operating of Group The proportion by our Specialist Sectors generated 2009 Differentiated product mix as a proportion mix as a proportion product Differentiated Sector holidays of total Mainstream 2009 37% distribution mix as a proportion Controlled Sector holidays of total Mainstream Operating margin % margin Operating 2009 3.2% The Group has committed to reducing its direct reducing to has committed The Group 2013/2014 (against 6% by carbon emissions by carbon total of 2007/2008) in terms a baseline of carbon emissions, based as relative well emissions as and plans. structure on 2008/2009 operational We expect the mix of profits from the Specialist from profits of expect the mix We due to in the medium term increase to Sectors characteristics, underlying growth superior their the synergy year although, in the next financial the reduce may Sector in the Mainstream delivery the Specialist Sectors. from profit of proportion We are targeting a controlled distribution mix of distribution mix a controlled targeting are We Sector. Mainstream in our than two-thirds greater We are targeting a differentiated product mix mix product a differentiated targeting are We Sector. Mainstream 50% in our over of Target to set out a roadmap we 2008, In January 2.0% from margins operating Travel’s TUI increase 4.7%. to the Group’s doubling of also set out a target We are in 2007. We achieved the 5.4% from ROIC the improved can achieve we that confident targets these implied by financial performance roadmap. improvement margin our delivering by Indicators Performance Key 20 TUI Travel PLC Annual Report & Accounts 2009

Strategic overview Principal risks

Managing risk Review and agree Effective risk management is key to the delivery of It is the responsibility of senior management teams our business objectives and strategic goals. We have and Sector Boards across the Group to review, established a risk framework to facilitate the early challenge and agree the risk profile for their area of identification and evaluation of risk to ensure responsibility and start to consider how to allocate challenges are prioritised and managed accordingly. resource effectively to manage risk. The objective of the framework is to reduce the risk exposure of all of our businesses in line with Decide response method the Group’s risk appetite and to achieve excellence The most appropriate means of response through managing risk effectively throughout (terminate, reduce, accept, or pass-on) is identified, the Group. where necessary taking into consideration the outcome of any cost benefit analysis, to ensure the The risk framework which has been developed and activity giving rise to the risk is managed within implemented across the Group has been closely justifiable and tolerable levels and in line with the linked to the strategic planning process. Over 120 overall Group appetite. active risk workshops have taken place to date, conducted at divisional and functional levels and Develop and implement actions facilitated by a dedicated Group Risk Management Existing controls are documented along with any team to ensure consistency in the methodology further action plans and delivery dates to treat applied. The framework is fully supported by a web- the risk appropriately. Processes are established based risk reporting system which is used to collect, to ensure clear action ownership and to monitor analyse and monitor risk status. progress to help ensure the risk responses are carried out effectively. The risk management approach is periodically reviewed to ensure the most effective means for Review risk status understanding, evaluating and managing risk are in The businesses are responsible for reviewing and place. We are continuously striving to improve our updating their risk profiles on a quarterly basis to risk management capabilities and work is underway ensure the Group has clear visibility of what its risks to further enhance and embed the framework across are and how they are being responded to. the Group during the forthcoming financial year. Reporting and governance The process The Board is responsible for risk management Objectives and strategic goals and delegates tasks to the Audit Committee, The Group considers four types of risk when Group Risk Management and Group Audit Services. identifying potential events that could affect the In addition to the quarterly reviews conducted delivery of business objectives and strategic goals. by the businesses, Group Risk Management Risks are considered in the context of: consolidates and aggregates all risks identified across the Group to create the Group Risk Profile. • Longer term strategic and emerging threats; This is presented to the Audit Committee on a half- • Medium term challenges associated to business yearly basis for review and is also closely monitored change programmes; by the Group Risk Management team to ensure • Shorter term risks triggered by the changing that progress in relation to management of risk external environment; and is sound and effective. • Shorter term risks in relation to internal As the responsibility for managing risk clearly operations. resides within the businesses, the Audit Committee invite the individual senior management teams to Identify and evaluate present and discuss their risk profile on a rotational The nature of the risk is fully understood and basis. Additionally, the Group Risk Management evaluated by considering the impact and likelihood. team reports on progress of the development and Tools and techniques have been developed to implementation of the framework. understand the relative priority of risk at varying levels throughout the Group. The output is then Group Audit Services play a key role in ensuring used as a basis for determining the order in which that the businesses adhere to the risk management risks should be managed. framework. They review and test the evaluation of reported risks, ensuring that identified controls are operating effectively and that actions have been validated to appropriately mitigate risks reported.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 21 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI demand with only 29% of group bedstock committed and third party flying accounting for 28% for flying accounting party and third committed bedstock group 29% of with only demand capacity operator all tour of years in the next three expire leases due to operations ground properties and flagship hotel transport ground premises, major transport, water airlines, from costs variable the Group plans across recovery disaster obtained and used guidance incidents to financing aviation banking community • changes in to in response adjust capacity to in order Flexible model (beds and aircraft) business • shop leases and 36% of all aircraft leases. 46% of and shops on operating aircraft of Majority • control on cost focus Strong • benefits post-merger scale supplier Competitive • Group across aligned strategy Robust, • finance lines of and secured sheet balance Strong • efficient models fuel more with new, aircraft older Replacing • the Boeing 787 like technology in new Significant investment • in engineering, and flight planning and management, maintenance measures efficiency Fuel • gas emissions greenhouse the Group’s reduce to in development Carbon management strategy • change on climate proposals regulatory for Preparing • and activities products Group for due diligence Health and Safety to approach Risk-based • high risk of areas out for carried reviews quality Destination-based • guidance and provide set policy to the centre at expertise employed Industry-leading • need market source to tailored Group sharing across Best practice • the Group across in place management systems airline safety Robust •Treasury Group by and monitored controlled markets, all source across Hedging policies in place • to fixed and transitioning reduction cost on fixed focus base and strong Flexible cost • increases cost control suppliers to with key contracts and relationships Strong • meeting Committee GMB Mainstream the monthly at Standing agenda item • the business significant parts of for technology supported centrally Robust, • post-merger testing plans and reliance recovery in disaster Investment • and business continuity of support the development established to team project Dedicated • be switched to capacity allowing for agreements Flexible supplier • minimise concentration to mix destination of Balance • and government associations industry bodies and travel with local tourism relationships Strong • respond to plans in place out and operational established and rolled Crisis management policy • post-incident assessments conducted risk Health and Safety • and monitored reported cash balances Daily • capital the centre working management at on focus Strong • the Group across implemented cash management system Centralised • team central by control and investment reviews counterparty Daily •with banking and financing partners relationships Strong • until mid 2012 expire do not finance lines of Key • schedule loan repayment shareholder of Renegotiation • Bond Offering Convertible through liquidity Increased • chain suppliers value key across financial commitments of Spread • suppliers with key established relationships Well • and managed accordingly monitored levels Service • areas procurement key for functions purchasing Centralised • and sustainability quality assess health and safety, to providers service key inspections of Regular • providing institutions of group establishedwith diverse well partnerships Long and • and investment with aviation supports status performance operating Continued strong • possible where deferral or cancellation through book order Reduced • deliveries current of financing and sale and leaseback for rates best market Sourcing of financial investments of commitments finance contract Aviation operating) (External and manage capital funding adequate secure to Ability effectively aircraft of cost Supply chain / product failure Supply chain / product operating) (External on reliant heavily are we suppliers that key of Failure loss or experience customer cause negative which could exposure and negative impact on destination desirability impact on destination and negative exposure Liquidity and cash management operating) (Internal portfolio diverse cash position over Group Management of financing of cost to risk and potential and trade / pandemic catastrophes Geopolitical / natural operating) (External and global outbreak catastrophes natural volatility, Political and/or certain destinations Swine flu (H1N1) affecting of causing disruption to operate we where markets source safety potential experience, and customer programme of the economic conditions the economic of Business interruption / technology reliability operating) (Internal due trading or business operations resume to Inability selling on key reliance (heavy failure critical systems to our of any at scenario business interruption or systems) service to ability our affecting critically locations, key due diligence process or supplier negligence supplier or process due diligence Hedging and cost base increases operating) (External of volatility from impact on margin negative Potential unhedged affecting prices and fuel exchange foreign as a result base increases cost general and other balances Health and Safety operating) (Internal colleagues our of any being caused to injury or Accident in our failure of as a result care, whilst in our customers or Climate change emerging) and (Strategic warming global to contribution the Group’s Reducing industry in a carbon-intensive whilst operating Macro economic Macro operating) (External impact on consumer and potential Decline in the economy commitments demand and capacity Some of the principal risks that the Group is currently managing are: managing is currently the Group risks that the principal Some of risk faced of / Nature Risk type Business response 22 TUI Travel PLC Annual Report & Accounts 2009

Strategic overview Responsible leadership

Our team Group Management Board Strategy The strategic direction of the Group is set by the The aim of our Human Resources strategy is to 1. Peter Long Group Management Board (GMB) in conjunction build the most capable, engaged teams to deliver Chief Executive with the Board. See Governance on page 44. the best results for our business. We support 2. Paul Bowtell The GMB consists of tour operating and function this through: Chief Financial Officer experts drawn from across the Group. This highly Colleague engagement experienced international team manages and Engaging colleagues in our goals and successes and 3. Dermot Blastland executes TUI Travel’s day-to-day operations and is Managing Director, UK & Ireland involving them in matters affecting them. responsible for the overall performance of the Group. 4. Dr Volker Böttcher Leadership capability Managing Director, Central Europe Our colleagues Developing our leaders through talent management, TUI Travel employs approximately 50,000 colleagues succession planning and personal development as 5. Bart Brackx Managing Director, Western Europe in over 200 travel businesses around the world. They they play a key role in creating and leading high- are key to our success and we are proud of their performance teams. commitment and professionalism as they continue 6. Andrew John Organisation effectiveness Group Legal Director to deliver outstanding customer experiences and Supporting the business through organisation and Company Secretary results for the Group. design and resource management to meet the 7. Bill Logan medium and long term needs of the Group. Group Human Resources Director Diversity As an international business, we operate in many Colleague engagement 8. Johan Lundgren diverse cultures and accept our responsibility to We share one vision and one set of values across Managing Director, Northern Region rule out discrimination on any grounds including the Group and have developed winning behaviours ethnicity, gender, sexual orientation, disability and 9. Richard Prosser to support them. We involve our colleagues in age. We continue to develop policies on non- Managing Director, business matters that affect them and respond Specialist & Emerging Markets discrimination and inclusiveness in line with best to feedback received through employee surveys, practice and, where possible, they are incorporated employee forums and as part of the performance 10. Joan Vilà into training for line managers as a key part of Managing Director, review cycle. Accommodation & Destinations induction programmes. Unfair treatment of any colleague is not tolerated and confidential reporting The performance review cycle gives every colleague 11. William Waggott mechanisms are available through which colleagues the opportunity to meet their line manager at least Commercial Director can confidentially raise matters of this nature which once annually to discuss their performance and to 12. John Wimbleton may concern them. make plans for development in the coming year. Managing Director, Activity

12 3 4 5 6 www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 23 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Special Experiences Collection first Special our produced we In September magazine to web-based Collection, a Experiences across colleagues of experiences and stories showcase working daily in their values living the the Group, colleagues the examples highlighted of Many lives. service. customer exceptional who provided in working a Belgian colleague Wolfs, ‘Barteline when work into way on her the Costawas del Sol some clients needed her that say a call to she got in the third herself found assistance. Barteline the hotel reach and unable to the day jam of traffic option than parking the no other in time. She saw shoes and running the mile to her taking off car, when amused faces many were There the hotel. impressed’. very were and the clients she arrived through in Slovenia wedding booking their couple ‘A specific very shops had some Thomson our one of – including black special day their for requirements Europe scoured Wareing, Kate advisor, Travel roses. said Kate down a supplier, tracked and eventually that’s if little bit further, go that just need to ‘You that concerned was as I as far wanted they what get’. going to were they what was GMB members the Group, to In businesses new TUI Spirit in a embed to work teams and their example, For each business. to timescale appropriate been shared have values our and Ukraine, in Russia to activity of programme will be a further and there embed them in Spring 2010. 789101112 Bringing our values to life Bringing our values in values these adapted businesses have Our and requirements suit their to ways different called Blue are they TUI Nordics In circumstances. the part of are they & Ireland TUI UK Spirit and in Be Special. brand internal Markets and Specialist & Emerging In the Activity individuals and nominated colleagues Sectors, TUI Deutschland, In TUI Spirit awards. for teams help to selected been TUI Spirit champions have TUI Spirit into incorporate further to ways develop life. working day every TUI Spirit – our vision and values TUI Spirit – our vision the us across unite values vision and common Our vision is TUI Spirit. Our call this our we and Group four our Special and Experiences Travel Making are: values • leadership; Responsible • obsessed; Customer • and driven; Value •win. to Playing help to been developed have Winning behaviours in a life working day in every values embed these truly us to allow These behaviours ways. of number performance and optimise our work engage in our – as individuals and as a business. 24 TUI Travel PLC Annual Report & Accounts 2009

Strategic overview Responsible leadership continued

Living our values – Responsible leadership Leadership Voice results highlights Our people are vital to achieving our sustainable • 79% response rate from the 679 senior development goals. Responses to internal surveys managers invited to participate; show us that colleagues are motivated by knowledge • 91% favourable responses to ‘I believe in the of the Group’s commitment to sustainable goals and objectives of TUI Travel’; development and that our record in this area is • 88% agreed ‘TUI Travel’s values are clear to me’; becoming increasingly important to recruitment and and retention. 73% of TUI Travel’s senior leaders agree that ‘my business acts responsibly on environmental • 72% stated ‘My business does a good job of matters’ and 66% agree that ‘my business acts developing management expertise’. responsibly in the local communities in which we operate’ (Leadership Voice, October 2008). Engaging and developing leadership capability Living our values – Customer obsessed Developing our managers and senior managers An example of how this value has been brought to is key to our success and we continue to invest life is in our UK Mainstream business. Over 10,000 in developing our leaders. Our future business colleagues, working in overseas destinations, retail, performance is dependent on good succession customer service and head office roles have planning for senior management roles. We aim to attended a training module called Be a Dream develop our own people targeting as many senior Maker with a focus on how to deliver a special appointments from within the organisation as experience to external and internal customers. possible. We have continued the investment in our 80% of attendees said they had seen a positive leaders this year through a number of programmes impact on their own performance after participating including Costa Rica and TUI Horizons. in the training. Be a Dream Maker has now been Costa Rica integrated into the induction programme for all This year, as part of our leadership development new colleagues. The positive effect on customer programme, 75 senior managers from across the satisfaction was also clear through the 2009 Group had the opportunity to attend a four-day summer season with ratings improving considerably offsite development programme in Costa Rica. The compared to the previous year. programme was designed by Group Management Development working in collaboration with i-to-i, Employee surveys – measuring one of our Activity businesses. Each cohort engagement completed building work and made business Colleague engagement is closely linked with improvements in a small eco-tourism business in our business success. We aim to measure the the rainforest. The eco-tourism business formed a engagement and satisfaction of our colleagues live case study where delegates applied the Group’s regularly, conducting employee surveys at least Managing for Value framework to identify every two years. opportunities to improve business processes. Working with an international supplier, we also Participants practised their leadership skills in a conducted our first Leadership Voice survey of challenging, culturally diverse and unfamiliar setting, 679 senior leaders in TUI Travel PLC, published in working with peers and members of the local October 2008. The survey gathered opinion on a community who run the Heliconias Lodge in Costa range of topics including Engagement, Vision & Rica. A positive business outcome was that a number Values, Leadership Effectiveness and Business of cross-Group projects were initiated by participants Direction & Strategy. The results helped us to who had identified opportunities to work together understand the progress made in embedding TUI while in Costa Rica. The project was completed Spirit and our strategy in different parts of the successfully in September 2009 and we are now Group. We were also able to identify opportunities investigating a number of destinations and new for improvement. project ideas to offer a similar development programme for our senior managers in 2010.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 25 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Reward programmes Reward programmes reward competitive operate We colleague overall and support our reinforce to variable In addition, engagement strategy. annual and longer of in the form compensation the high performance helps drive incentives term demonstrate. results our that an aligned incentive introduced we year This leaders throughout most senior our for programme financial rewards The programme the Group. which the individual the business in of performance into will also take In 2010, the programme works. by achieved was performance that how account our actions to mapping the individual leader’s talent and of aid retention To winning behaviours. value shareholder term on longer focus ensure the annual bonus of least one-quarter at creation, for shares PLC Travel TUI into is deferred achieved more. or years three in local participate colleagues our of The majority benefit including retirement benefit programmes In the UK, discounts. holiday schemes and generous in the Group shares purchase able to are colleagues one provides Plan that Incentive Share our through purchased. shares four every for share free Organisation effectiveness Organisation through effectiveness support organisation We processes. talent and recruitment management at regularly is reviewed the Group across Talent and on retaining focused are we and level Board the business forward. drive individuals to developing top- our move we meet seasonal demands, To retail, between colleagues frontline performing and airline cabin crew representation overseas a multi-skilled This develops possible. where roles delivering of experience year-round with workforce customers. our to service methods in recruitment use the most effective We and encourage operate we which in the countries suit both skills and knowledge to the sharing of our As part of colleagues. the business and our career promote actively we approach, recruitment the mix enhance to the Group across opportunities management skills. and general professional of Recruiting for our long term success Recruiting for Management Scheme Graduate International Our the and develop recruit to strategy our is part of of success the long term ensure right people to on take 18 months, trainees business. Over our lasting the Group parts of assignments in different additional also receive months and three/four and support during this time. personal training offered are trainees the scheme, our At the end of possible. where permanent positions – Belarus, nine countries from trainees Twelve the India, Hungary, Germany, China, France, – participated and the UK Netherlands, Sweden scheme Trainee Management in the International were who trainees This included seven in 2009. trainees five the scheme in 2009 and into recruited who joined the scheme in 2008. joined the Group have trainees three year, This Manager as Sales & Retail in permanent roles, & in UK Manager Incentives Staff in Germany, for Manager and Project Mainstream Ireland in Russia. Markets Specialist & Emerging TUI Horizons for programme TUI Horizons is a development as been identified who have middle managers take to management talentwith the potential across management positions general up senior the Group. business school, using virtual TUI Horizons is run as a specialists internal experts and external of a number business topics covering the Group across from Business Environment, and the Tourism including During 2009, the programme and Finance. Strategy with 65 managers participating. times, three ran TUI of the scope extend plan to we In 2010, we modules, the core Horizons. In addition to classes master one-day of a number will offer ongoing will provide on specific subjects that learning and networking. for opportunities 26 TUI Travel PLC Annual Report & Accounts 2009

Strategic overview Sustainable development

Throughout the year, sustainable development has Sustainable development strategy continued to be an important part of the business During 2008/2009, we developed a Group agenda for TUI Travel. We aspire to lead in sustainable sustainable development policy in conjunction with development within the leisure travel industry. In key colleagues, articulating our vision and approach the long term, we believe this goal will help build to sustainable development. The Group Code of shareholder value for TUI Travel and contribute to Conduct covers a wide range of sustainability operating a strong business now and in the future. issues, including human rights, business ethics and transparency and commits TUI Travel to upholding • TUI Travel is listed on the FTSE4Good Index the principles of the UN Global Compact. in recognition of its transparency and for Saving fuel with winglets meeting strict social, environmental and TUI Travel’s sustainable development strategy is governance standards. based on consideration of the key issues affecting TUIfly Nordic was one of the first • It is the highest placed travel company, at 16, the Company, now and in the future. It has been airlines in the world to fit winglets to in the 2008 Good Companies Guide – The developed in consultation with internal and the Boeing 767s in its fleet. Aircraft external stakeholders. with winglets – wing-ends that curve Observer’s annual ethical ranking of upwards – can reduce fuel burn by up FTSE350 companies. We encourage all TUI Travel businesses to develop to 5%, depending on flight distance. • TUI Travel’s first full Sustainable Development their own sustainable development strategy, All seven TUI Travel airlines have Report was published in July 2009, with aligning with Group priorities. At the end of fuel-saving winglets fitted to some independent verification of our targets by 2008/2009, 73%* of TUI Travel businesses had or all of the aircraft in their fleets. Bureau Veritas. their own sustainable development strategy. • For the second consecutive year, we have been *Weighted by employee numbers. included in the Carbon Disclosure Leadership Policy and mitigation for Groupwide risks relating Index, which highlights the top 10% of to sustainability are facilitated by the Group Risk FTSE350 companies that have displayed Management and Sustainable Development the most professional approach to climate Departments, with responsibility for managing such change disclosure. risks also shared by the businesses themselves. TUI Travel businesses received several sustainable For further details, see the Risk section on page 20. development-related awards during 2008/2009. For details, see www.tuitravelplc.com/sustainabledevelopment

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 27 www.tuitravelplc.com Fair trade excursion trade Fair trade TUI Nederland launched a fair in the Dominican excursion chocolate in partnership developed Republic, development with the Dutch and PASEO, Cordaid organisations the additional income for generate to local farmers Ten local cacao farmers. have women than 30 local and more as guides on the tour. been trained TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Managing sustainable development Managing sustainable has maintained enhanced and the Group year, This sustainable development. for structure its governance time-equivalent 40 full over now are There on sustainableworking development colleagues within TUI Travel. the of Managing Director Lundgren, Johan is responsible Northern Region, Sector, Mainstream the sustainable on to development reporting for Managing Blastland, Dermot Board. PLC Travel TUI for responsibility has & Ireland, TUI UK of Director the Group on sustainable to development reporting Management Board. Dermot by chaired Committee, Steering A Group and long term direction Blastland, sets the strategic The sustainable development. for objectives Managing Sector of is composed Committee year. a least once and meets at Directors the capacity increased Travel TUI During 2008/2009, Sustainable Development Group its dedicated of The people. four to three Department from sustainability drive is to role department’s FTSE100 towards the Group across performance in key leadership industry forge and to best practice to remit issues. It also has a particular sustainability sustainable development & Ireland’s TUI UK guide and activities. strategy has a Sustainable Development Each Sector and implement develop to with a remit Coordinator within their sustainable strategy development have Coordinators the Sector year, This Sector. support them champions to of a network appointed sustainable and Sector Group of in the delivery strategy. development Destinations Our customers Our colleagues Carbon management Our four strategic priorities strategic Our four for sustainable development are: sustainable development for We share best practice among marketing among marketing best practice share We in engage customers to colleagues them sustainability issues and encourage options. sustainable holiday choose more to Colleagues meet regularly to tackle key tackle key to Colleagues meet regularly (for sustainability issues in destinations example, sustainability auditing of hotels) social and optimise the environmental, impact of our holidays. and economic We share best practice in order to promote promote to in order best practice share We knowledge of sustainable development change within behaviour and positive the Company. Groups of key colleagues (for example, fuel (for colleagues of key Groups identify possible reduc- managers) meet to aviation, tions in our carbon emissions from ground major premises, transport, water properties. and flagship hotel transport Each strategic priority has a Board-level sponsor has a Board-level priority Each strategic to commitment our and is underpinned by way the sustainable into development integrate operates. TUI Travel 28 TUI Travel PLC Annual Report & Accounts 2009

Strategic overview Sustainable development continued

Carbon management Destinations Climate change affects our destinations and When managed well, tourism supports conservation therefore our product and we acknowledge that and preserves natural heritage. The tourism value the Group’s greenhouse gas emissions contribute to chain – accommodation, catering, retail, excursions, global warming. TUI Travel has a carbon management transfer and airport services – provides employment strategy in development to reduce this contribution, and training opportunities and stimulates local covering aviation, water transport, major premises, enterprise to the extent that, in 2008, tourism ground transport and flagship hotel properties. accounted for 30% of the world’s exports of services (UNWTO World Tourism Barometer). In 2007/2008, TUI Travel’s direct carbon footprint The Climate Project (from diesel, gas, kerosene and petrol) was Our sustainability impact in destinations is largely 6,564,026 tonnes, a reduction of 8% since indirect, particularly through our accommodation Simon O’Kelly, General Manager 2006/2007. This reduction is attributable to aircraft suppliers, and we assume a level of responsibility of Peregrine and Gecko Adventures, fleet consolidation following the September 2007 for encouraging them to improve in this area. 77%* has been selected as a presenter merger, as well as fuel conservation measure across of TUI Travel businesses are actively engaging with for The Climate Project, the TUI Travel airlines. suppliers on environmental issues. In addition, www.theclimateproject.org. Simon TUI Travel is involved in hundreds of projects was trained by Al Gore and other We have committed to reducing TUI Travel’s direct designed to improve the livelihoods of local people facilitators to give the climate carbon emissions by 6% by 2013/2014 (against a in destinations. For further information on how change presentation from the film baseline of 2007/2008) in terms of total carbon ‘An Inconvenient Truth’ and has we have embedded sustainability into our emissions as well as relative carbon emissions, based committed to sharing it with as accommodation practices. See Suppliers on on 2008/2009 operational structure and plans. many colleagues as possible. page 29. TUI Travel is monitoring and preparing for *Weighted by employee numbers. regulatory proposals on climate change that could have a fiscal impact. By addressing our carbon This year, we have also developed Groupwide impacts and putting measures in place to reduce policies on animal welfare in excursion locations and current and future carbon emissions, we are in a the protection of children in tourist areas. We also good position to respond to carbon legislation. initiated a project to gain a better understanding of the socio-economic impacts of our operations in Carbon emissions from aviation developing destinations, particularly in relation to We aim to reduce the environmental impact of our the growing all-inclusive holiday market. fleet of aircraft by replacing older aircraft with new, more fuel-efficient models and by pursuing a fuel Our colleagues conservation programme to ensure that our airlines We seek to make sustainable development central are as fuel efficient as possible. In 2008/2009, TUI to the way we run and manage TUI Travel. This is Travel airlines’ fleet average emissions were 78.1g articulated through one of our TUI Spirit values, of carbon dioxide per revenue passenger kilometre Responsible leadership: ‘We are committed to sustainable development and to making a positive (CO2/RPK). TUI Travel airlines’ carbon efficiency compares very favourably with both global impact on society.’ In order to achieve this, we work scheduled airlines and low-cost airlines. closely with Human Resources and Marketing teams Gold Standard carbon to embed sustainability principles into their work. offsetting TUI Travel airlines saved over 34,000 tonnes of carbon dioxide in 2008/2009 through the Groupwide TUI Travel’s senior management are regular public TUI Travel has invested in five fuel conservation programme. The savings were advocates for more sustainable tourism in the media, exclusive renewable energy and made by implementing fuel efficiency measures at industry and governmental events, and with other energy efficiency projects that are in engineering, flight planning and management, audiences. See Our Colleagues on page 22 for scheduled to deliver 500,000 tonnes maintenance and ground operations. further details on how senior management view their of carbon offsets by the end of 2012. businesses sustainable development performance. The projects are all designed to the Gold Standard, an independent organisation that verifies the delivery of robust carbon reduction and additional community benefits.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 29 www.tuitravelplc.com Quality-centred consultation Quality-centred by preferred are High-quality hotels to loyalty and generate customers spring Since brand. operator the tour 2009, TUI Deutschland has offered quality consultation to professional their identifying operators, hotel Demand improvement. for potential and TUI Quality Support is strong, for genuine added offer these services has enabled many The team value. substantial quality achieve to hotels within a short improvements the customer increasing timeframe, considerably. appeal of these hotels TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI (www.travelife.co.uk) has been adopted by a number by has been adopted in the businesses of and Western Northern Region Sector Mainstream Markets & Emerging and in the Specialist Europe well- with its is continuing Europe Central Sector. Champion (’Environment TUI Umwelt recognised its 100 most environmentally for award Champion’) hotels. friendly a sustainable has introduced & Ireland TUI UK accommodation all addendum as part of development must initiate each hotelier This means that contracts. programme, a sustainability develop) to continue (or their environment, impacts on the managing their This is an the local community. and employees operations. tour mainstream UK first for industry the year, the next financial of the course Over the contracting will be embedded into addendum Northern Sector the Mainstream of processes and in the Specialist Europe and Western Region Sector. Markets & Emerging Our suppliers owners and hotel principal suppliers are Our providers. and excursion and transport operators regular undertake teams and destination UK Our and transport accommodation, inspections of just health not assess suppliers to excursion and sustainability. but also quality and safety, of suppliers on a cycle with our work We suppliers fall and if improvement continuous them from remove we expectations, our below programmes. our System Sustainability Travelife The Charitable giving and policy charity a Groupwide developed have We charitable in our transparency ensure guidelines to on annually report enable us to activities and to the year, charitable giving. During the Travel’s TUI £290,799 made charitable of donations Group made no political The Group (2008: £236,200). (2008: £nil). year during the contributions *Weighted by employee numbers. employee by *Weighted Our customers more demand for customer that believe We customers Our will grow. sustainable holidays sustainable of aware increasingly becoming are issues and expect businesses – development be tackling – to company holiday including their them. to matter the issues that effective that experience from know We and social impacts environmental management of a better but provides money, saves only not our between – the correlation experience customer and the best- scores satisfaction holiday customers’ audit in the sustainability hotels performing this. of is evidence programme Travel TUI this demand, 86%* of to In response communicating are they that businesses confirm on sustainable issues. development with customers a offer businesses currently Travel TUI 75%* of we and, in 2008/2009, customers carbon offset to guidance communications Groupwide developed on this issue. 30 TUI Travel PLC Annual Report & Accounts 2009

Business performance Group performance

Year ended 30 September 2009 Underlying results1 Statutory results £m 2009 2008 Change 2009 2008 Revenue 13,863 13,932 Flat 13,863 13,932 Operating profit/(loss) 443 398 +11% 37 (184) Profit/(loss) before tax 366 319 +15% (52) (267) Basic earnings/(loss) per share (p) 23.8p 20.4p +17% (1.0)p (24.4)p

1 Underlying operating profit and underlying profit before tax are from continuing operations and exclude separately disclosed items, amortisation of business combination intangibles, goodwill impairment and taxation of results of the Group’s joint ventures and associates. Underlying profit before tax also excludes separately disclosed financial expenses. Underlying earnings per share excludes the same items, net of related taxation.

Group revenue for 2009 was slightly lower than the A reconciliation of underlying profit before tax prior year at £13,863m (2008: £13,932m). Capacity to statutory loss before tax is as follows: reductions reduced underlying revenue by 14%, 2009 2008 partially offset by 4% higher selling prices, resulting Year ended 30 September £m £m in an organic revenue decline of 10%. Foreign Underlying profit before tax 366 319 currency translation increased revenue by 9% due Separately disclosed items to Sterling weakness and revenue from acquisitions – operating (Note 3) (340) (380) resulted in a 1% increase over the prior year. Separately disclosed items The Group achieved a £45m improvement in – financial expenses (Note 4) (12) (4) underlying operating profits to £443m in 2009 Impairment of goodwill (7) (112) (2008: £398m). This improvement has primarily Amortisation of business been achieved by the delivery of integration combination intangibles (56) (87) synergies and the recovery of scheduled flying Taxation on profits of joint losses in the UK and Germany. The improvement ventures and associates (3) (3) was partially offset by the adverse impact on our Statutory loss before tax (52) (267) French business of weaker demand and socio- political events in the French West Indies and Separately disclosed items Madagascar, and weaker demand and excess Separately disclosed items within the operating market capacity in Canada. result for the year were £340m (2008: £380m). The main drivers of the year-on-year improvement The majority of these items were non-cash in in underlying operating profit are: nature, relating to accounting impairments and £m write offs. Out of the £340m total, £142m were FY08 underlying operating profit 398 cash items. Separately disclosed items in the Incremental synergies +85 year included: Scheduled flying +19 • Costs of £143m incurred to achieve the Impact of FY08 sale and leasebacks -10 synergy benefits; France – Nouvelles Frontières/Corsair trading -26 • An impairment charge of £124m in respect Canada trading -19 of write downs of Boeing 747 aircraft operated Other trading +1 by Corsair; Swine flu -10 Acquisitions +5 • Restructuring expenses of £40m, which relate FY09 underlying operating profit 443 primarily to the closure of the Sunsail Clubs in Turkey and ongoing restructuring in Nouvelles Frontières; and • Costs of £32m relating to the transaction between TUIfly and Air Berlin.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 31 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Sale and leaseback transactions the sale and completed successfully we year, In the in acquired were that aircraft all seven of leaseback held for were that aircraft as four well the period as the four for 2008. Proceeds 30 September sale at the period the start owned at of were that aircraft £90m. were in deliveries planned aircraft any have do not We 2010. ending 30 September year the This venture strengthens our position in the our strengthens venture This the that believe we and Canadian market and strategic of a number delivers transaction the In particular, the Group. financial benefits to the of the profitability of will earn a share Group the losses than 100% of rather venture, strategic operations. the current by generated which clearance, regulatory This deal is subject to shortly. receive expect to we TUIfly – Air Berlin Transaction our TUIfly, between the transaction As part of TUI Berlin, and Air in Germany, airline operations shares. Berlin’s Air 9.9% of has acquired Travel & CIS Russia has venture & CIS joint Russia our As described above, in certain a 75% stake of the acquisition completed complete businesses and expects to two assets of business shortly. a further of the acquisition In the year, the Group completed 12 acquisitions, completed the Group year, In the niche segments of within high-growth including 11 of with its strategy in line market travel the leisure with the businesses of acquisitions making ‘bolt-on’ and high margins premium generate to ability acquired were The 12 businesses earnings growth. comparison, £89m. For of consideration a total for made we 2008, ended 30 September year in the £109m. of consideration a total for 16 acquisitions significant three a further announced we In addition, £8m in our invested We year. in the investments a 9.9% & CIS, £30m for in Russia venture joint between the transaction Berlin as part of in Air stake and Air Germany), in airline operations (our TUIfly c.£55m in will invest we that Berlin and announced with Sunwing in Canada. venture a strategic in Canada venture Strategic with Sunwing, venture a strategic agreed have We terms the in Canada. Under operator a leading tour its Canadian will contribute Travel TUI the deal, of will plus C$101m and Sunwing operations venture. the strategic to its operations contribute in the strategic a 49% interest will receive Travel TUI 51%. receiving owners with Sunwing’s venture, some time been both has for The Canadian market of The profitability challenging and fragmented. has been affected in this market operations our to year and in the capacity market the excess by a loss of 2009 the business made 30 September £5m). £24m (2008: loss of considerationTotal Cruise operator 2008 November Kingdom United £89m Acquisitions CompanyActivity Sector Sport AbroadTravel Teamlink Edwin DoranYachting Master The Piste Off AustraliaTours Adventure GroupTravel Williment ExpeditionsZegrahm Language CentresEAC Sector Markets Specialist & Emerging Description Sports tours AdventuresTravel sports tours Student tours Adventure & Destinations Sector Accommodation 2008 October chartersTours Yacht sports toursAragon Student Sports tours – Northern Region Sector Mainstream 2008 November ski Student April 2009 2008 October cruising Adventure Kingdom United Language school Date Kingdom United 2008 November 2009 June Kingdom United 2009 May Germany Australia 2009 July travel Student 2008 December USA Kingdom United Zealand New Country Cruise handling Kingdom United 2008 October USA 2009 May Kingdom United 32 TUI Travel PLC Annual Report & Accounts 2009

Business performance Group performance continued

Taxation Cash and liquidity Underlying profit before tax excluding joint ventures The net debt position (cash and cash equivalents and associates for the year was £351m (2008: less loans, overdrafts and finance leases) at the £304m). The effective tax rate on these profits is year end was £338m (2008: £136m). This consisted 28.0% (2008: 28.0%). Based on the current structure of £790m of cash and £1,128m of interest-bearing of the business and existing local taxation rates and loans and liabilities. legislation, it is expected that the underlying tax rate The increase in net debt has arisen primarily due to: will reduce to a level of around 27%. • The cash impact of costs incurred to deliver the Statutory loss before tax for the year less the share synergy benefits; of profit in joint ventures and associates was £61m (2008: loss of £279m). The tax credit on this loss • A working capital outflow driven by capacity was £42m (2008: £nil) representing an effective tax reductions and the later booking curve; rate of 69% (2008: £nil). This rate differs from the • Acquisitions made in the year; and underlying effective tax rate due to the tax effect of • An adverse impact arising on the translation separately disclosed items, amortisation of business of foreign currency denominated debt. combination intangibles, goodwill impairment charges and the recognition for the first time in the On 29 September 2009, we announced a number current year of deferred tax assets for losses arising of financing measures, including: in prior periods in certain territories. • An issue of £350m of convertible bonds due The cash tax rate is expected to be lower than the in October 2014; underlying income statement tax rate as we utilise • Additional revolving credit facilities of £140m, our deferred tax assets generated from restructuring maturing in June 2012; and expenditure and tax losses. In the coming year, we • Deferral to April 2011 of €160m of the shareholder envisage a cash tax rate of approximately 15% of loan, beyond the 2011 seasonal peak in net debt, underlying profit before tax. as part of a rescheduling of the repayment profile of the loan. Earnings per share Underlying basic earnings per share was 23.8p In accordance with the new repayment schedule, (2008: 20.4p), an improvement of 17%. Basic loss we repaid €100m of our shareholder loan on per share from continuing operations was 1.0p 30 September 2009 and the outstanding balance (2008: 24.4p). is now €919m. The new repayment schedule is set out below: Dividends €m The Board is recommending a final dividend of 7.7p 1 April 2010 250 1 per share (2008: 6.9p). On 19 May 2009, the Board 1 December 2010 509 recommended an interim dividend of 3.0p per 30 April 2011 160 share (2008: 2.8p), making a full year dividend of 1 Adjusted for any further movements in the balance due prior to 10.7p per share (2008: 9.7p). This represents a that date. payout ratio of 45% of underlying basic earnings In addition to the above, we have a £770m per share. The final dividend will be paid on 1 April revolving credit facility which matures in June 2012. 2010 to holders of relevant shares on the register Given the Group’s current facilities and current cash at 12 March 2010. flow forecasts, the Board remains satisfied with the The Group’s policy is to maintain underlying Group’s funding and liquidity position. Fixed charges dividend cover at around two times. We intend to cover and the ratio of net debt to EBITDA, which continue to operate a dividend re-investment plan we believe to be the most useful measures of cash as an alternative to receiving a cash dividend. generation and gearing, were 2.0x and 0.5x respectively at the year end (2008: 2.1x and 0.2x respectively). Fixed charges cover is defined as EBITDA before operating lease rentals charge divided by net interest plus operating lease rentals. EBITDA is defined as earnings before interest, tax, depreciation and amortisation and is calculated on an underlying basis.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 33 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Treasury policies Treasury ensure to has established a framework The Board policies, procedures has adequate the Group that manage the financial successfully to and controls the Company’s part of These form it faces. risks that See page 20. Management Framework. Risk in are the Company by financial risks faced The key price fuel rate, interest currency, foreign to relation has implemented Treasury Group and liquidity. risks specific cover policies to individual treasury The procedures unit. each business by faced dealing applied to authority of the levels stipulate be may the financial instruments that and approve All significant manage these exposures. used to the businesses of on behalf transactions treasury Treasury. Group by and executed undertaken are hedge underlying to only undertaken are Transactions traded, not Financial instruments are exposures. positions taken. speculative are nor Accounting policies Accounting policies in accounting been no changes have There to continues The Group year. during this financial changes impact and timing of the potential monitor which Standards Financial Reporting International to years. in future the Group will be applicable to Pension deficit Pension year the deficit at pension The net accounting The £253m). £500m (2008: to end has increased in the a reduction by primarily driven was increase value the present calculate used to rate discount 5.5% in the UK. 6.9% to liabilities from future of lower was rate discount the reduced The basis for yields. bond corporate the fund to cash contributions anticipate We annum in 2010 will be c.£70m per pension deficit in the medium term. this level at remain will and 34 TUI Travel PLC Annual Report & Accounts 2009

Business performance Segmental performance

Mainstream Sector

Proportion of Group revenue Underlying operating profit bridge UK & Northern £m Ireland Nordics Canada Region £11.7bn £11.8bn 2008 133 49 (5) 178 Scheduled 09 £11.7bn flying losses 9 – – 9 Greener Holidays e-brochure 08 £11.8bn Sale and leaseback transaction (5) – – (5) In April 2009, First Choice published Swine flu (9) – – (9) The Mainstream Sector reported an underlying Greener Holidays, the first brochure Trading (10) (3) (19) (33) operating profit of £305m in 2009, an in the UK market to promote more Acquisitions 2 – – 2 improvement of £28m (2008: £277m). This sustainable mainstream holidays. The Synergies 64 – – 64 online brochure features only those represents 65% of Group underlying operating hotels that have earned a Travelife profit before central costs (2008: 65%). 2009 184 46 (24) 206 award for their commitment to the Northern Region 2009 2008 Change % environment, their employees and Mainstream 2009 2008 Change % the local community, and provides Underlying operating Customers (’000) an easy way for customers to make profit (£m) UK & Ireland 5,687 6,978 -19% a more sustainable choice. Northern Region 206 178 +16% Nordic 1,177 1,313 -10% www.firstchoice.co.uk/greener- Canada 240 279 -14% holidays Central Europe 66 62 +6% Western Europe 33 37 -11% Total 7,104 8,570 -17% Total 305 277 +10% Revenue (£m) Underlying operating UK & Ireland 3,257 3,433 -5% margin (%) Nordic 797 766 +4% Northern Region 4.9% 4.1% +80bps Canada 168 178 -6% Central Europe 1.4% 1.3% +10bps Total 4,222 4,377 -4% Western Europe 1.2% 1.4% -20bps Underlying operating Total 2.6% 2.3% +30bps profit/(loss) (£m) UK & Ireland 184 133 +38% Northern Region Nordic 46 49 -6% Canada (24) (5) n/a The Northern Region comprises the distribution and tour operating businesses in the source Total 206 178 +16% markets of UK and Ireland, the Nordic countries Underlying operating and Canada. Brands include Fritidsresor, the Nordic margin (%) tour operator and retailer, First Choice and UK & Ireland 5.6% 3.9% +170bps Thomson, the leading UK high street brands and Nordic 5.8% 6.4% -60bps Signature Vacations, the tour operator in Canada. Canada (14.3)% (2.8)% -1,150bps The Northern Region achieved a 16% improvement Total 4.9% 4.1% +80bps in underlying operating profit to £206m in 2009 (2008: £178m). The improvement was largely driven UK & Ireland by incremental merger synergies of £64m and UK & Ireland delivered a £51m improvement in reduced scheduled flying losses in the UK, offset by underlying profits to £184m in 2009 (2008: £133m). weaker trading in Canada and Ireland, the weaker Winter programme for Thailand in the Nordics and The UK delivered synergies of £93m in 2009, an the adverse impact of the swine flu outbreak in increase of £64m over prior year synergies of £29m. Mexico on the UK performance. Significant achievements during the year included the full integration of the Thomson and First Choice cabin crews and pilots from 1 May onwards, further consolidation of the core IT systems and infrastructure with Summer 2009 running off a single reservation system, and the successful integration of Island Cruises with Thomson Cruises.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 35 www.tuitravelplc.com Nordics Blue Village Nordics family-oriented Blue Village offers the sea, close to located hotels for designed and planned exclusively is on The focus market. the Nordic with a wide with children, families and childcare selection of facilities 13 hotels, have currently options. We destinations principally in European such as Spain, and in Thailand. and also one hotel Cyprus TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Canada reported an underlying operating loss of an underlying operating Canada reported The Canadian £5m). £24m in 2009 (2008: loss of challenging time been both some has for market and significant over-capacity and fragmented, erosion and margin in deep discounting resulted participants in 2009. all market for the for alternatives the strategic reviewed have We we 2009 Canadian business and on 29 September venture a strategic agreed have we that announced This in Canada. operator with Sunwing, a leading tour in the Canadian market position our deal strengthens and financial benefits strategic of and has a number regulatory This deal is subject to the Group. to shortly. receive expect to we which clearance, Canada and excursions, and which are reported in our A&D in our reported are which and and excursions, the by generated margin the operating Sector, be c.7%. would business Nordics primarily was decline in profit year-on-year The the main long haul for demand reduced due to 2008/2009 Thailand in Winter of destination Winter in Bangkok. political upheaval following and lower were Thailand to volumes 2008/2009 in discounting due to affected further were margins a £10m loss. However, leading to market, the lates during in this destination a good recovery was there Thailand to volumes and 2009 season the Summer tour the only are We year. last ahead of were own airline flights on our direct offer to operator Thailand the airports to Nordic all major from position as the our which strengthens market, region. in the Nordic leading long haul operator well, very performed 2009 programme The Summer in the demand, particularly customer with strong percentage six by improved Load factor market. lates record to contributing year, the prior points over Summer business. the Nordics for profits Summer with the majority 12%, by reduced was 2009 capacity months. in the shoulder targeted reductions of product differentiated of During 2009, the level four by business increased the Nordics by offered the by driven was This 41%. points to percentage Village in Blue eco-friendly a new opening of Blue concept, a new of Rhodes and the creation in several with 20 small unique hotels Unique, destinations. charter percentage six by distribution increased Controlled in online growth by 85% in 2009, driven points to 52% in 2009 (2008: 46%). which reached sales and increased functionality web in Improvements the to online contributed products of availability year. in online sales during the significant growth Nordics underlying operating business reported The Nordics £49m) and an operating £46m (2008: of profits earned profits include to were we 5.8%. If of margin which includes transfers services, destination from Honduras. We now have a market leadership position leadership a market have now We Honduras. in the Mediterranean. cruise market 4-star in the 3 to when the Mexico flying programme resumed in May. resumed flying programme when the Mexico £3m losses by operating The Irish business increased a significant decrease due to year, the prior versus economic weak the from in demand resulting by decreased volumes Customer environment. in capacity. decrease with a similar 23% in 2009, reduced in the market all operators Additionally, eroded were and margins volumes, secure to prices review a strategic out carried have We as a result. operate will enable it to which the Irish business of in the in this challenging market profitably more including cost measures through year, coming rationalisation. capacity and further reductions three by distribution increased Controlled 78% in 2009, as improved points to percentage Thomson and First Choice the on both functionality The recently volumes. online greater drove websites is a personalised portallaunched ‘MyThomson’ that balances bookings, pay access to allows customers and select seats. differentiated high-quality on delivering The focus Thomson in 2009. continued and service product 2008 launch of successful built on the highly these 5-star of more with two in Crete Sensatori (opened May Mexico Sensatori hotels: concept 2010). (opening May 2009) and Sensatori Splash popular launched the hugely First Choice each offering with 13 Splash hotels brochure, The waterpark. an onsite to access free unlimited also expanded, Village portfolio Holiday First Choice and further unit in with an updated 2010. planned for openings (including Rhodes) are expansion: further also saw The cruise programme April sail from joined the fleet, to Thomson Dream in Cuba and destinations 2010, opening up new During the year, the business eliminated a eliminated the business year, During the scheduled flying loss-making significant amount of £9m of of in the reduction which resulted capacity, financial the previous from scheduled flying losses a supported reductions capacity Charter year. market in the lates environment pricing stronger through recovered was inflation and input cost selling prices. average higher in April 2009 swine flu in Mexico of The outbreak £9m in the second impact of in an adverse resulted and compensation repatriation 2009, due to of half load factors and lower cancellations increased costs, 36 TUI Travel PLC Annual Report & Accounts 2009

Business performance Segmental performance continued

Central Europe Central Europe 2009 2008 Change % Central Europe includes the source markets of Underlying operating Germany, Austria, Switzerland and Poland. In profit/(loss) (£m) Germany and Austria, TUI is the number one brand Germany 65 45 +44% with many different tour operator and distribution Switzerland – 4n/a activities. In Germany, the largest market, there Austria 8 9 -11% is a broad brand portfolio that reaches out to Poland (7) 4n/a all customer segments. TUI is the favourite brand Total 66 62 +6% of the German holidaymaker, 1-2-Fly appeals to Underlying operating Sensimar launch success price-conscious customers, while airtours is a brand designed for the luxury segment. margin (%) Germany 1.6% 1.1% +50bps A new hotel format called Sensimar Central Europe reported an underlying operating has been launched in order to reach Switzerland – 2.0% -200bps out specifically to the attractive and profit of £66m in 2009 (2008: £62m). As outlined Austria 2.0% 2.4% -40bps growing target market of high-income in the table below, the improvement of £4m is Poland (11.3)% 4.7% -1,600bps principally due to strong Summer 2009 trading in couples seeking quality products. In Total 1.4% 1.3% +100bps its first year of operation the concept the German tour operator (up £15m), the elimination was very successful and the first three of TUIfly losses (£10m), partially offset by weak hotels in Crete, Rhodes and Side in trading in Switzerland (down £4m) and Poland Germany Turkey achieved average occupancy (down £11m). Underlying operating profit for 2009 was £65m, rates of 75%. an improvement of £20m over the prior year (2008: Underlying operating profit bridge £45m). Strong Summer 2009 trading in the tour Switzer- Central operator led to an improvement of £18m in the £m Germany Austria land Poland Europe 2009 result. This was driven by a 17% cut in charter 2008 4594462capacity, which resulted in fewer holidays left to Scheduled sell than in the prior year, particularly in the lates flying losses 10 – – – 10 market. As a result, higher average selling prices Impact of sale were achieved which led to improved margins over and leasebacks (5) – – – (5) last year. Demand was also stimulated by passing Trading 15 (2) (4) (11) (2) on hotel rate renegotiations to the customer. The Synergies – 1 – – 1 capacity cuts were mainly in the short and medium 2009 65 8 – (7) 66 haul destinations of Balearics, Greece, Canaries and Mainland Spain, partly offset by increased customer Central Europe 2009 2008 Change % demand for destinations such as Turkey, Cape Customers (’000) Verde, Croatia and the US. Germany 8,775 10,056 -13% TUIfly also improved its result by cutting capacity Switzerland 286 324 -12% in its loss-making scheduled flying routes. Capacity Austria 565 682 -17% was cut by 16% in Summer 2009, which led to a Poland 104 141 -27% two percentage point improvement in load factors TUI Deutschland establishes Total 9,730 11,203 -13% for its Summer 2009 programme and resulted in new sustainability initiative a £10m improvement in margins over the prior Revenue (£m) year. During the year, we also announced that we Early in 2009, TUI Deutschland Germany 4,144 4,036 +3% entered into a strategic venture with Air Berlin, launched the industry sustainability Switzerland 185 196 -6% which will further de-risk the TUIfly business initiative Futouris which focuses on Austria 405 385 +5% through an exit of the scheduled flying operation climate and biodiversity protection Poland 62 85 -27% and will secure optimal capacity for the German and the promotion of educational Total 4,796 4,702 +2% programmes. The initiative supports tour operator. schools in Namibia and Nepal and farmers in Kenya. Following its establishment by TUI Deutschland, competitors have now also joined the initiative.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 37 www.tuitravelplc.com Jetairfly and Arkefly joint Jetairfly and Arkefly venture called Tec4Jets In 2008, a joint venture our Belgian between created was airline and Dutch airline Jetairfly completion of aircraft for Arkefly The combined efforts maintenance. of management and colleagues along of development with successful airlines the two across synergies significant both to contributed performance in on-time improvement airlines and higher customer both for levels. satisfaction Western TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI 686 +2% 759 -5% 2008 Change % 1,430 -11% 2,451 -10% 1,864 -4% 1,307 -6% 5,745 -8% 2,752 -4% 700 724 2009 1,274 2,217 1,790 1,228 Netherlands Netherlands Belgium Total 2,652 £m2008FWI/Madagascar (15)TradingAcquisitions France NetherlandsSynergies –2009 5 Belgium (12) (1) Europe Western Europe – 4 (’000) Customers (1) 8France (19) (15) 21 – 24Belgium 7Total 37 8 – (£m) Revenue 45 (1) France 4 33 5,281 Western Europe Western tour the market-leading comprises Europe Western distribution businesses in France, and operating as the well as Belgium and the Netherlands Jetairfly (France), airlines: Corsairfly following (Netherlands) and .com (Belgium), Arkefly largest it includes the two In France, (). and Marmara. Frontières Nouvelles operators: tour which is the largest Jetair, In Belgium, it comprises while in the in Belgium, and Sunjets, brand holiday with the TUI Nederland, Netherlands it comprises the latter and Arke, Holland International brands operator tour integrated vertically being the only market. source the Dutch for underlying operating reported Europe Western £33m in 2009 (2008: £37m). In France, of profits by impacted significantly was airline Corsairfly our Indies West the socio-political issues in the French was This quarter. in the second and Madagascar Belgium from performance strong very a offset by and reduced 2009 trading Summer robust due to costs. fuel bridge profit Underlying operating Poland reported an underlying operating loss of operating an underlying reported Poland was This decline £4m). of £7m in 2009 (2008: profit the Polish of weakening the significant by driven input costs which increased against the Euro Zloty demand for customer reduced and significantly 27% in by decreased Volumes destinations. Euro year. the prior 2009 over Poland Austria of profits underlying operating Austria reported was performance Trading £8m (2008: £9m). demand customer weaker by impacted adversely were although margins in the Austrian market, a decline which led to control capacity by protected volume The year. the prior 17% over of volumes in of in the destinations largely were decreases Tunisia. Spain and Greece, £4m of synergies The Austrian business delivered year the prior over £1m of in 2009, an increase through This has been achieved £3m. of figure TUI and First Choice the former of the integration on IT, businesses, including significant savings costs. and brochure advertising commission, Switzerland underlying a breakeven Switzerland reported £4m). of in 2009 (2008: profit result operating the prior 12% over by decreased volumes Customer as over well demand, as soft consumer due to year pricing by and aggressive in the market capacity In addition, share. market protect to competitors the unfavourable by affected adversely were prices against the Euro. the Swiss Franc for rate exchange Germany improved its controlled distribution by six by distribution its controlled improved Germany increased 46% in 2009, through points to percentage and direct network own retail our sales through l’tur. and & Meer Berge such as brands % in Germany margin The underlying operating but this 1.6% (2008: 1.1%), 50bps to by improved margin, forma The pro margins. target below remains residual eliminating the benefit of which reflects £275m of revenues £20m and associated losses of is 2.2%. in the scheduled flying operation, 38 TUI Travel PLC Annual Report & Accounts 2009

Business performance Segmental performance continued

Western Europe 2009 2008 Change % Republic, Kenya and Canada – using Nouvelles Underlying operating Frontières’ in-house flight capacity, which enabled profit/(loss) (£m) Marmara to offer these destinations at attractive France (19) 5n/aprices for the French customer. Netherlands 7 8 -13% We are focused on strategic solutions for all aspects Belgium 45 24 +88% of the Nouvelles Frontières and Corsairfly Total 33 37 -11% businesses, including: Underlying operating • Continuing to review the business model and margin (%) strategy for the Corsairfly business; TUI Nederland takes France (1.5)% 0.4% -190bps • Addressing our product strategy, including sustainable tourism to Netherlands 1.0% 1.2% -20bps travel agents revitalisation of our differentiated product Belgium 6.2% 3.2% +300bps offering and rationalisation of the product range TUI Nederland was the first Dutch Total 1.2% 1.4% -20bps to exit from unprofitable destinations; and travel organisation to launch a • Expanding distribution capability, including an sustainable tourism policy for its 220 France agreement with Carlson Wagonlit. travel agencies. During the year, the stores received training and practical Underlying operating profit bridge information on sustainable tourism. Nouvelles Netherlands A Group Travel Agencies Sustainable £m Frontières Corsair Marmara France Netherlands reported an underlying operating Development Report was also created 2008 (22) 10 17 5 profit of £7m in 2009 (2008: £8m). Summer 2009 and each store received its own FWI/Madagascar – (15) – (15) margins were slightly behind the prior year, as sustainability report. In January 2009, Trading 8 (19) (1) (12) average selling prices were under pressure in the TUI Nederland won the travel industry Acquisitions (1) – – (1) lates market due to the softer consumer demand award ‘Green Feather’ for its Synergies 2 – 2 4 and the later booking profile. Total capacity for 2009 sustainability activities. was reduced by 12% compared to the prior year, 2009 (13) (24) 18 (19) particularly to the destinations of Spain (down France reported an underlying operating loss of 15%) and Turkey (down 10%), with customer £19m in 2009 (2008: profit of £5m). Corsairfly, our volumes down 11%. French long haul scheduled airline, was significantly impacted by a series of socio-political events in Belgium the key destinations of French West Indies and Belgium achieved a strong improvement in Madagascar during the second quarter. Consumer underlying operating profits to £45m (2008: £24m). sentiment towards these destinations continued to This was driven by careful capacity management, be weak for the remainder of 2009 and passenger which resulted in higher occupancies and strong numbers to these destinations decreased by 15% pricing in the Summer 2009 lates market, combined versus the prior year. As a result, Corsairfly incurred with innovative up-selling, cost efficiencies and a repatriation costs, cancellations and weaker demand significant reduction in fuel costs. During 2009, the for these destinations, which led to a £15m impact business successfully launched a new web-based on operating profits. reservation platform, which improved operational efficiency and web capability. The airline also experienced softer consumer demand following the economic downturn. As a result of the softer demand, the average selling prices achieved were not sufficient to recover input costs. Controlled distribution improved by four percentage points in 2009 to 50%, driven by a redesign of our French websites and a series of marketing actions to strengthen brand awareness. France delivered synergies of £5m, an increase of £4m over the prior year synergies of £1m. These synergies were primarily generated by distributing Marmara products through the Nouvelles Frontières retail network and savings on seat rates for shared routes. In addition, Marmara launched four new long haul destinations – Mauritius, Dominican

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 39 www.tuitravelplc.com Quark Expeditions opens new routes Quark Expeditions has launched a which gives programme Greenland about learn more to the opportunity the ship, Once on board this area. illustrated given are customers wildlife on Greenland’s presentations its and can explore and geography in zodiacs and kayaks. fjords eastern accessible expeditions are Quark’s TUI Travel’s through worldwide including existing distribution network such as Peregrine brands adventure in the UK and, from Exodus Australia, in Germany. next year, TUI Marine award-winning catamaran the new Sunsail TUI Marine unveiled (Sunsail 384) at catamarans 38-foot 2009 Annapolis Boat the October built Show in the US. This model was a TUI Marine creating for exclusively position in leading and differentiated expanding segment of the fastest The new in the world. charter yacht been has already catamaran two a finalist for as nominated be competitions to prestigious in 2010. announced TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI The Marine division reported underlying profits of underlying profits The Marine division reported Additional synergies £19m in 2009 (2008: £19m). with the prior in 2009 in line delivered were £1m of merging by achieved savings cost through year, the Marine businesses. across operations office back the impact on mitigate able to was The business demand by consumer weaker of profitability saving and implementing cost capacity reducing some currency from and also benefited measures, in the Tortola, base in yacht The flagship gains. opened in officially was Islands, Virgin British 400 The marina is home to 2009. February excellent and mono-hulls and provides catamarans guests before for facilities and leisure recreation also During 2009, Le Boat charter. their and after TUI the through launched its products successfully Le Boat’s which is now network, Deutschland retail market. in that distributor largest underlying businesses reported The Adventure £13m in 2009 (2008: £14m). of profits operating plus the year, during the Businesses acquired year, made in the prior acquisitions of annualisation acquisition The in 2009. profit £2m of contributed group enabled the Australian in April 2009 ATA of the from synergies extract businesses to of In with its existing operations. ATA of integration will operate which Zegrahm, acquired we 2009, July cruise business to polar Quark with our closely joint marketing expand distribution and undertake The North American and Scandinavian initiatives. reduced saw businesses, however, Adventure down with revenue demand in 2009 customer year. the prior to 15% compared and Sport divisions increased The Ski, Student £10m to in 2009 by profits underlying operating strong The divisions delivered £27m (2008: £17m). year, prior versus in 2009 £3m of growth trading in in June 2009 and growth Tour the Lions by driven during businesses. Businesses acquired the Student acquisitions of plus the annualisation year, the made in 2009, profit £1m of contributed year, in the prior its position with the Sports division strengthening Williment, the leading of the acquisition through and the Student Zealand, sports business in New the substantial and rapidly division entering with the expanding language school market The Ski division delivered EAC. of acquisition £6m in 2009 of synergies additional integration the of the integration through year, the prior over ski and club businesses. Choice TUI and First former 14 -7% 1917 – +59% 50 +18% 239 – 142399 -8% +12% 780 +5% 2008 Change % 6.4% +80bps Ski, Student 13 19 27 240 131 445 2009 £780m 09 £816m 08 £780m Adventure Adventure margin (%) margin Total 7.2% Ski, Student and Sport Ski, Student Total 59 Underlying operating (£m) profit Marine Underlying operating Ski, Student and Sport Ski, Student Total 816 2009Activity (£m) Revenue Marine 19 13 27 59 Trading (1) (3) 3 (1) £m2008AcquisitionsSynergies Marine – Adventure 19 and Sport 1 Activity 2 14 – 1 17 6 50 3 7 Its Sport businesses are leaders in supporter-led Its Sport businesses are and the UK. in Australia tours and rugby cricket everything encompass businesses The Student young to France, school trip to the traditional from Moorings and The in the Himalayas. adults trekking and in Europe brands yacht the leading Sunsail are also includes Crysal Ski, the the US and this Sector ski operator. largest world’s operating underlying delivered Sector The Activity by £59m in 2009 (2008: £50m), driven of profits synergies £3m and integration of profits acquisition in broadly with underlying trading £7m, of growth year. with the prior line The Activity Sector has over 40 activity The Activity Sector has over in the market that operate businesses travel Ski, Student segments of Marine, Adventure, leader in adventure and Sport. It is market to iconic customers taking more travel, any other operator. destinations than adventure Activity Sector revenue of Group Proportion £816m 40 TUI Travel PLC Annual Report & Accounts 2009

Business performance Segmental performance continued

Specialist & Emerging Markets Sector

Proportion of Group revenue Specialist & Emerging Markets 2009 2008 Change % Underlying operating margin (%) £825m £819m Total 3.8% 3.2% +60bps 09 £825m Europe Driving growth in 08 £819m The Europe division reported underlying operating UK & Ireland profits of £16m in 2009 (2008: £14m), an increase The Specialist & Emerging Markets Sector is of £2m. The division delivered incremental synergies Over the last year the UK & Ireland an international portfolio of travel businesses of £3m in 2009, primarily due to the integration of specialist businesses have reduced the former Thomson and First Choice businesses in costs and improved efficiencies by focusing on specific destinations, premium moving 11 brands onto one platform travel experiences or particular customer the UK. The majority of the UK businesses are now for reservations, finance, HR, demographic segments often with on one common reservation platform and this has E-Commerce and IT. The benefits differentiated and exclusive product. significantly increased call centre and online conversion include a wider range of products and rates for the former Thomson businesses this year. flexibility, shared inventory, back This Sector consists of 40 businesses operating from Underlying trading decreased by £1m in 2009 office efficiencies and shared best nine source markets in North America, Europe and, compared to the prior year, primarily reflecting practice. The integration of all brands most recently, emerging markets such as Russia and softer trading in some markets where conditions onto one platform has driven growth Ukraine. Specialist travel experiences include around- were challenging. Volumes reduced by 44% and 26% for this division and will continue to the-world private jet expeditions, student educational add value to all of the brands as new in the Spanish and Irish businesses, respectively, tours and tailormade trips to the Far East, due to the significant weakening of the economies in developments are rolled out across or Australia. Brands include TCS & Starquest the single platform. these markets. Citalia, the Italian specialist business, Expeditions, the private jet tour operator, Sovereign suffered a 15% decrease in volumes due to the and Hayes & Jarvis, premium travel brands and Sterling weakening against the Euro which led to Turchese and Mostravel, destination specialists. customers switching to non Euro destinations. The Specialist & Emerging Markets Sector reported Hayes & Jarvis and Sovereign performed well, underlying operating profits of £31m (2008: £26m). however, with margins ahead of the prior year This was due to the delivery of incremental and volume growth of 8% and 14%, respectively. synergies of £3m and acquisition profits of £1m, with trading slightly ahead of the prior year. US The US division reported underlying operating £m Europe US Specialist profits of £15m in 2009 (2008: £12m), an increase 2008 14 12 26 of £3m. Underlying trading improved by £2m in Acquisitions – 1 1 2009 over the prior year and acquisitions contributed Synergies 3 – 3 an incremental £1m of profits in the year. Trading (1) 2 1 The luxury private jets segment performed very well Sustainable development 2009 16 15 31 in 2009 as its winter programme was fully sold before champions the recession fully impacted the US economy. This Specialist & Emerging Markets 2009 2008 Change % was partly offset by softer trading in the escorted During 2008/2009 the Specialist & Customers (’000) Emerging Markets Sector appointed tours businesses, as demand decreased for its Europe 530 634 -16% specialist premium products due to the weakening and trained a network of over 100 US 303 339 -11% sustainable development champions, of the US economy. each with specific targets to achieve Total 833 973 -14% in this area. Champions have already Emerging Markets delivered practical sustainability Revenue (£m) Our growth plans in Russia & CIS are progressing projects including I Viaggi del Europe 584 609 -4% well. During 2009, the TUI Russia & CIS joint Turchese’s ‘walk to school’ scheme, US 241 210 +15% venture completed the acquisition of a 75% stake saving carbon and strengthening ties Total 825 819 +1% in certain assets of VKO, a tour operator and travel with the local community, and agency group based in Russia and the acquisition of employee engagement activities such Underlying operating a 75% stake in certain assets of Voyage Kiev, a tour as the UK businesses’ sustainability- profit (£m) operator and group based in Ukraine. themed photography competition. Europe 16 14 +14% We expect the joint venture to complete the US 15 12 +25% acquisition of 75% of Mostravel shortly. The result Total 31 26 +19% for the Emerging Markets division is included within joint ventures and associates.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 41 www.tuitravelplc.com Ultramar Transport reduces Transport Ultramar coach fleet emissions part of TUI Transport, Ultramar transport ground España, provides in customers TUI Travel to services Ultramar serve. we the destinations to hard has been working Transport the emission reduce progressively of its fleet. Coaches profile years in the last three purchased and Euro-5 comply with Euro-4 emission Union vehicle European the most stringent in force, standards, engine latest the very representing technology. and fuel-saving AsiaRooms.com moves to AsiaRooms.com moves LateRooms.com model and AsiaRooms.com LateRooms.com brands market-leading our two are market. in the accommodation-only growth achieved already have We and in brands investing through and infrastructure shared content, a commission to AsiaRooms.com moving intend In 2010 we hoteliers. model for further by build on this growth to of reach expanding the geographic new into and entering brands both and Australia. in Europe markets TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI A&D delivered synergies of £5m in 2009, an increase of synergies A&D delivered These £2m. of synergies year the prior £3m over of the integration through delivered were synergies Destinations TUI and First Choice former the of Mexico in Dominican Republic, businesses, primarily be to continues process The integration and Spain. to integration with further ongoing in this Sector, and Greece. Turkey in Spain, Portugal, place take cruise three During 2008 and 2009, A&D acquired handling businesses and an online bedbank £1m in additional business, and these contributed year. the prior versus in 2009 profits the swine flu by impacted was The business presence in 2009, as customer in Mexico outbreak reduced, significantly was in the Mexican resorts revenue. and excursion lost transfer leading to £1m in 2009. of in lost contribution This resulted with the prior in line broadly was Underlying trading adversely were businesses The Destinations year. implemented reductions the capacity by impacted such as markets, in its core operators the tour by were volumes in 2009. Customer Spain and Greece, Additionally, year. the prior versus down 10% in 2009 in the agencies lower were revenues excursion the significant due to destinations based in Euro in-resort Sterling,which reduced of weakening visitors. UK spending by the due to well The online businesses performed Weaker the B2B and B2C portfolio. of diversity of destinations mature in the more performance environment the economic due to Spain and Portugal by compensated was pressure and competitive such as markets in demand in emerging growth also Asia and the Americas. LateRooms.com up 47% volumes with in 2009, well performed marketing its effective due to year the prior over in content. increase campaign and a strong LateRooms.es launch of the successful Following launched successfully was in 2008, LateRooms.it in 2009. market the Italian source into 57 +5% 502 +10% 2008 Change % +11.4% -50bps 60 552 2009 10.9% £502m 09 £552m 08 £502m Underlying operating Underlying operating (£m) profit margin (%) margin Revenue (£m) Revenue Incoming passenger volumes passenger Incoming -10% Accommodation & DestinationsAccommodation Customers B2B roomnightsB2C roomnights Change % +10% +17% Services include hotel accommodation, transfers, accommodation, include hotel Services meetings, organising roundtrips, excursions, (MICE), cruise and events conferences incentives, solutions website as integrated well handling as customers. our for online and offline of A&D has a portfolio TUI, – including brands businesses employing LateRooms.com, Bedsonline, Hotelopia, Hotelbeds, distribute – to and Intercruises AsiaRooms.com business along key A&D is structured its products. base and the the customer reflect which lines – segment particular that business model of (B2B) and Business to Business Business to (B2C). Customer underlying operating reported The A&D Sector The increase £57m). £60m in 2009 (2008: of profits £3m of synergies merger incremental due to was £1m, of acquisitions new from and contribution the swine impact of the adverse offset by partially £1m. of flu in Mexico The Accommodation & Destinations Sector The Accommodation of services a range (A&D) sells and provides travel in destination to tour operators, to the clients and direct agents, corporate consumer worldwide. Accommodation & Destinations Sector Accommodation revenue of Group Proportion £552m 42 TUI Travel PLC Annual Report & Accounts 2009

Business performance Current trading

Summer 2009 required prices and load factors and, as such, Trading for the Summer 2009 season finished we entered the season with reduced capacity in in line with our expectations. Despite the later anticipation of weaker demand and have leveraged booking trend, we achieved required load factors the flexibility in our model to further reduce supply and average selling prices demonstrating the in Germany, which is now down 9%. We retain flexibility of our business model and the strength flexibility to further adjust capacity to reflect of demand for the main summer holiday. This was changes in demand, although on the evidence of a pleasing performance against the backdrop of recent trading, we do not expect to alter capacity exceptional fuel and currency driven cost inflation significantly in either direction in the remainder of as well as the challenging economic environment. the season. Winter 2009/2010 Year-on-year customer booking variation % Booking volumes have improved since our previous Last Last Last Last trading statement on 29 September, 2009. Across 4 weeks 6 weeks 8 weeks 10 weeks Cumulative all source markets, recent booking volumes are UK -4 -6 -8 -9 -16 significantly ahead of the cumulative booking Nordics +14 +10 +12 +9 -15 position and ahead of capacity reductions. This Germany -7 -3 -4 -5 -15 trading pattern is similar to that experienced in the France +10 +18 +16 +10 -9 last two seasons, where booking volumes improved Belgium +13 +9 +9 +6 +1 throughout the season, reflecting a later booking Netherlands -6 -1 -2 -5 -12 trend. Our focus is on ensuring that we achieve In the UK, booking volumes have improved in recent weeks, reflecting similar trends to those seen in the Winter 2008/2009 and Summer 2009 seasons. In the last four weeks, booking volumes were down 4% compared to the cumulative position which is down Current trading1 Winter 2009/2010 16%. Capacity reductions mean that we now have Risk only 13% fewer holidays left to sell in the UK. Including mix benefits, average selling prices remain up 10%, To t a l To t a l To t a l Year-on-year variation % ASP2 Sales2 Customers2 Capacity3 Left to sell3 with margins flat year-on-year. Mainstream In the Nordics, booking volumes have been ahead Northern Region of prior year in recent weeks and the cumulative Short haul +6 -20 -25 booking position has improved significantly from Medium haul +7 -11 -18 -24% at our last trading update to -15%. The Long haul +9 -14 -21 improvement has been seen across all source UK +10 -8 -16 -15 -13 markets in the region, with particular strength in Nordic +3 -13 -15 -11 +4 Sweden and Finland which are our two largest Northern Region – Total +6 -13 -18 markets in the Nordics. Although we currently have Central Europe more product left to sell than last year, our rate of Germany Flat -15 -15 -9 +4 sale leaves us confident that we will achieve Austria -2 -27 -26 required load factors. Switzerland -6 -11 -5 In Germany, we have leveraged the flexibility in our Poland -7 -24 -18 model to reduce capacity by 9% to ensure that we Central Europe – Total Flat -15 -15 achieve required load factors and average selling Western Europe prices. We have reduced our prices to pass lower France -11 -19 -9 flying costs (driven by lower fuel prices) and Belgium -4 -3 +1 accommodation savings through to our customers, Netherlands +3 -10 -12 which should help to deliver our required volumes Western Europe – Total -8 -14 -7 without harming our margins. Specialist -13 -23 -11 In Western Europe, like our other source markets, Activity NA -19 NA cumulative booking volumes are down versus the Accommodation & Destinations4 -8 +20 +30 prior year but the trend has improved in recent weeks and volumes were ahead in Belgium and 1 These statistics are up to 22 November 2009. France. Belgium is trading particularly well, 2 These statistics relate to all customers whether risk or non-risk. continuing its strong performance in the Summer 3 These statistics include all risk capacity programmes. 2009 lates market, and has taken more bookings 4 These statistics refer to B2B Online businesses only and sales refer to total transaction value (TTV). than at the same time last year. www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 43 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Integration well progress to continues integration The merger £200m synergy our deliver to on track are we and date benefit to £120m of delivered have We target. in 2010. £60m a further deliver and expect to phasing Synergy £m benefitP&L benefit P&L Incremental +35Outlook +85 a taken have we climate, economic In the current +60 ensure planning to capacity to cautious approach +20 35 are we with demand and is in line supply that 120 booking position. current with our pleased FY08 180 FY09 seen stronger have we 2009/2010, Winter For 200 FY10which weeks, recent of the course bookings over FY11 in experience our to pattern a similar reflects us confidence 2008/2009, and this gives Winter load factors. required will achieve we that holiday the main summer demand for Consumer performance our by as evidenced strong, remains currently are 2009 season. We in the Summer in flat be approximately to capacity planning for 2010 season, the Summer for markets most source as adjust supply to flexibility retain we although businesses are In addition, our demand develops. pressures cost lower significantly benefiting from last unlike which means that, 2009 than Summer pass on substantial price to have do not we year, non-UK our of In many customers. our to increases lower by driven input costs, lower markets source without prices can reduce we mean that rates, fuel further expect this to We harming margins. demand. stimulate meet the to placed well us leaves the above All of ending year the expectations for Board’s 2010. 30 September Higher fuel prices resulted in $125m of extra costs extra in $125m of resulted prices fuel Higher 2008. Based on Summer versus 2009 in Summer rates, forward and current rates hedged achieved 2010 is currently Summer for rate fuel the effective our most of For terms. in local currency 20% lower with businesses this, coupled Continental European allows them to rates, cost accommodation lower whilst maintaining significantly prices reduce the however, market, source In the UK margins. offsets year-on-year) (+10% the Euro of strength savings. rate the fuel Winter Summer 2009/2010 2010 As at 20 November 2009 20 November As at EuroUSD FuelJet 75% 86% 93% 74% 78% 83% Fuel/foreign exchange Fuel/foreign fuel our of hedged a significant proportion have We with 2010 in line for exposure exchange and foreign hedging policy. our Summer 2010 the for the UK in with trading pleased remain We with bookings down 3%. 2010 programme, Summer the for capacity flat planning for currently are We year the prior versus is flat The load factor season. packages is of selling price 20% and the average at the shift reflects up 7%, although this partly now short haul and the from away mix in destination product. differentiated shift towards mix product Summer for market in the Nordics Initial trading with load factors 2010 has also been encouraging, up 3%. selling prices 15% and average at flat The Specialist and Activity Sectors have also have Sectors The Specialist and Activity seen have and booking trend a later experienced in demand in recent significant improvements Sector, Markets & Emerging In the Specialist weeks. prior on the flat are weeks bookings in the last four are volumes booking cumulative whereas year, has been seen across The improvement down 11%. a particularly with within the Sector, all divisions source in the US and Russian upturn marked sales in the last four Sector, In the Activity markets. with all year, the prior versus up 15% were weeks trends. year-on-year divisions showing positive bedstock of availability greater In the A&D Sector, suppliers accommodation by reductions and price (+30%) volumes in a significant growth has led to of wholesaler As a online B2B division. in our have transaction per margins our accommodation, transaction in average the fall despite flat remained means that growth volume and the strong values the for year the prior ahead of are margins total in our trends seeing similar are We season so far. in our growth with strong online B2C division, successfully have we business, and LateRooms a merchant from brand AsiaRooms our transitioned conversion model, driving higher a commissionable to margins. and improved rates 44 TUI Travel PLC Annual Report & Accounts 2009

Governance Board of Directors

123

456

789

10 11 12

13 14 15

16 17

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 45 www.tuitravelplc.com 12. Jeremy Hicks 12. Jeremy (Age 56) Director Non-Executive of Director Hicks became a Non-Executive Jeremy 2005 and joined March in PLC Holidays First Choice is on 28 June 2007. He PLC Travel TUI of the Board business of a number with Accountant a Chartered services. marketing in the field of particularly interests finance of world in the experience He has extensive as Chief and most recently Banker as an Investment plc, a leading UK-based Aegis Group of Financial Officer which from group, services marketing multi-national in April 2007. he resigned 13. Giles Thorley (Age 42) Director Non-Executive First of Director became a Non-Executive Thorley Giles the 2006 and joined in February PLC Holidays Choice Board of TUI Travel PLC on 19 March 2007. He is currently March on 19 PLC Travel TUI of Board plc. After Taverns Punch of Officer Executive the Chief at career he had an early qualifying as a Barrister, plc and has been in his current International Nomura 2001. plc since Taverns Punch of Executive Chief post of the IPO and Punch’s led he successfully At Punch, to and Spirit Group Pubmaster of subsequent acquisition in the UK. pub company position as the largest its current Sher 14. Harold (Age 62) Director Non-Executive as a PLC Travel TUI of joined the Board Sher Harold 2007. He studied on 29 October Director Non-Executive as a his career and started university at commerce early industry to moved Harold Accountant. Chartered positions before executive of holding a range in his career Metal Amalgamated of Executive Chief being appointed in 1992, a position he still holds. He PLC Corporation North American a major of as president has served at his role with and, together Group Services Steel this has provided Metal Corporation, Amalgamated experience. commercial international with broad him 15. Dr Albert Schunk (Aged 68) Director Non-Executive as PLC Travel TUI of joined the Board Albert Schunk Dr 2007. Albert on 29 October Director a Non-Executive a out and carried university at economics studied in Latin German Government the for project research joining IG-Metall, on the served he has America. After German and other Volkswagen of board supervisory 1976. In 1994 he became a member Companies since and Social Council in Brussels Economic the European of in Spain. been advising the Riu Group and has recently Schipporeit 16. Dr Erhard (Age 60) Director Non-Executive Travel TUI of the Board joined Schipporeit Erhard Dr 2007. on 29 October Director as a Non-Executive PLC and in 1979 in the Bosch Group his career He started at AG, Battery AG/VARTA VARTA in 1981 he joined where company, battery time a leading European that and Executive in 1990 and Chief he became CFO the in 1993. After Board the Executive Chairman of in his the next move VARTA of restructuring successful the Munich-based conglomerate him to brought career with in 2000 merged VIAG as CFO. AG VIAG company world’s the one of E.ON AG, the new form to VEBA AG and CFO was Erhard companies. leading utility until his 2000 E.ON from of Member Board Executive was 2006. In 2007 he in November resignation SA and is Paribas BNP for Advisor Senior appointed a number of director a non-executive also currently Deutsche Boerse AG, AG, including SAP companies of AG. Rueckversicherung and Hanover AG Talanx Baier 17. Horst (Age 53) Director Non-Executive as PLC Travel TUI of joined the Board Horst Baier 2009. He on 13 October Director a Non-Executive Treasury in the career his professional commenced Continental the German tyre AG, Department of was 1994 and 1996 Horst Between manufacturer. the Fürth-based Financing for Group for responsible responsibility over In 1996, he took Group. Schickedanz Department at Tax and Accounting Treasury, the for for 2001, Horst has been responsible Since TUI AG. and, in November TUI AG for & Reporting Accounting TUI AG of Board the Executive to appointed was 2007, function. the Controlling for with responsibility TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI 6. Dr Volker Böttcher 6. Dr Volker 50) (Age Europe Central Managing Director, on PLC Travel TUI of Board joined the Böttcher Volker Europe Central for 19 June 2007 and is responsible in law, career an early After Sector. in the Mainstream in 1987 as Union International Touristik joined Volker management various occupied Having a legal advisor. Special Programmes TUI’s of positions, he became head for which included responsibility Division in 1996 and the Eastern tours city long haul destinations, Chairman appointed was Volker In 2003 Mediterranean. all for being responsible TUI AG, for Europe Central for Germany, of markets activities in the source tourism to appointed was He Austria, Switzerland and Poland. Deutschland GmbH in April 2000. TUI of the board business model in TUI’s of the restructuring Following TUI Deutschland CEO of appointed was he Germany, 2001. GmbH in July 7. Johan Lundgren (Age 43) Northern Region Managing Director, TUI of the Board to appointed was Lundgren Johan 2007. He is responsible on 21 December PLC Travel which includes all Mainstream the Northern Region for Sweden, Canada, and Ireland, sales in the UK tourism in worked has and Finland. Johan Denmark Norway, 14 of years, almost 20 for industry tourism the Nordic 1999 Between been as a Managing Director. which have in Vacations Sunquest of President was and 2001, he of Executive Chief become on to went Canada. Johan tourism for responsibility and also took TUI Nordic Russia. and Italy of markets sales in the source 8. Rainer Feuerhake (Age 65) Director Non-Executive TUI (now Group Preussag joined the Feuerhake Rainer group for responsible was 1980 1968 and by in AG) Financial Chief as appointed was Rainer accounting. 1988 and in November AG Preussag of Officer rename to a resolution following TUI AG subsequently 2002. In this position Rainer on 1 July AG Preussag & Accounting the departments of for responsible was Affairs, Tax Relations, Investor Finance, Reporting, Management and Destination & Acquisitions, Mergers TUI of He joined the Board Centre. Service the Shared on 28 June 2007. PLC Travel Campbell 9. Tony (Age 60) Director Non-Executive of Director a Non-Executive Campbell became Tony in April 1997 and joined the PLC Holidays First Choice on 28 June 2007 as a Non- PLC Travel TUI of Board of Executive Chief Deputy was Tony Director. Executive 2001. He is currently until March Limited Asda Stores Hobbs Holding No 1 Limited, the Chairman of (UK) Company The White Limited, M Lewin Group T Limited. Group and Ultralase Limited Chapman 10. Clare (Age 49) Director Non-Executive of Director Chapman became a Non-Executive Clare 2003 and joined the in March PLC Holidays First Choice is the on 28 June 2007. Clare PLC Travel TUI of Board NHS and Social Care, for Workforce of General Director Group was this, she to Health. Prior Department of on serves In addition, Clare Tesco. at Director Personnel Plus; is an advisory Jobcentre of the Audit Committee Business School the Judge Institute, for Member Board the of Cambridge; and a Fellow of the University for Personnel. of Institute 11. Bill Dalton (Age 65) Director Non-Executive First of Director a Non-Executive became Bill Dalton 2004 and joined the in October PLC Holidays Choice was 2007. He on 19 March PLC Travel TUI of Board HSBC Holdings plc, of director an executive previously plc and Global Head HSBC Bank of Executive Chief the HSBC Group. for Financial Services Personal of deal he has amassed a great During his banking career, expertise and is also a non-executive international of and North American UK of a number of director Electric & Gas including Associated companies (AEGIS), AEGIS Managing Agency Services Insurance (UK), HSBC North America Holding Inc, Limited Inc. Inc and US Cold Storage Energy Talisman 28 June 2007 as Chief Financial Officer. He was appointed was He Financial Officer. 28 June 2007 as Chief in September PLC Holidays First Choice of the Board to the previously was and Director Finance 2004 as Group Centrica of British Gas, a subsidiary of Director Finance to 2002. Prior January he had been since where plc, he held a where with W H Smith plc was he that, the becoming before roles centre corporate of number business. He is an Retail the UK of Director Finance Accountants Chartered of the Institute of Associate was 2007 Paul In November in and . PLC. SThree of director as a non-executive appointed 5. William Waggott (Age 46) Director Commercial PLC Travel TUI of joined the Board William Waggott He spent the Director. on 28 June 2007 as Commercial and with Coopers & Lybrand his career part of early various he performed where plc, Textiles Courthaulds director and divisional finance finance group senior Leisure plc in 1992 as UK William joined Airtours roles. Travel Thomson joining to prior Director, Finance Group Chief become on to went in 2001. He then Group Tourism. TUI of Financial Officer 1. Dr Michael Frenzel 1. Dr Michael (Age 62) Chairman Non-Executive PLC Travel TUI of joined the Board Michael Frenzel Dr Chairman. Michael as Non-Executive on 28 June 2007 Bochum and completed in University Ruhr at law studied as a the university at working whilst his doctorate Landesbank scientific assistant. joined Westdeutsche He promoted was he where in 1981 Düsseldorf, (WestLB), positions and became manager managerial various to Holdings Department in 1983 and the Industrial of Holdings Division Equity WestLB’s of manager overall in 1985 – holdings in banking, including real leasing and Executive Chief has held the position of Michael estate. TUI AG of Board the Executive and Chairman of 1994, overseeing January since AG) Preussag (formerly 1990s, in the late programme acquisition its extensive in stake TUI AG’s of in the acquisitions which resulted businesses such leading tourism and of Hapag-Lloyd Michael Frontières. and Nouvelles Travel Thomson as board the supervisory of a member is also currently including Norddeutsche companies of a number of AG. Volkswagen and AG Landesbank, AXA Konzern 2. Sir Michael Hodgkinson Deputy Chairman and Senior Non-Executive (Age 65) Independent Director First of Michael Hodgkinson joined the Board Sir in Director as a Non-Executive PLC Holidays Choice 2004. in March 2004 and became Chairman January on 28 June 2007 PLC Travel TUI of He joined the Board Chairman and is the Senior Deputy as Non-Executive in the career an early Following Independent Director. Executive Chief appointed was he industry, automotive Division in Food European Metropolitan’s Grand of Chief 1986 and in 1992 he joined BAA plc, becoming in June which he retired in 1999, a post from Executive at Director Non-Executive Senior was Michael 2003. Sir until Limited Office Post of Mail and Chairman Royal a non-executive 2007 and is currently September Dublin Airport London Limited, for Transport of director Bank of also a director was He Limited. and Crossrail 2006. 2004 until July May plc from Ireland of Long 3. Peter (Age 57) Chief Executive on PLC Travel TUI of Long joined the Board Peter 1996 he In November Executive. 28 June 2007 as Chief First Choice of Managing Director Group appointed was in September Executive and became Chief PLC Holidays Executive Chief was he Choice, joining First to 1999. Prior been Finance previously having Holidays, Sunworld of operating the tour of Executive then Chief Director From Group. Leisure the International division of a non-executive was June 2005 Peter 2001 to February 2009 July April 2006 to plc, and from RAC of director Debenhams plc. of director a non-executive was he of director as a non-executive appointed was Peter the Senior Initial Plc in 2005 and is currently Rentokil Director. Independent Non-Executive Bowtell 4. Paul (Age 41) Chief Financial Officer on PLC Travel TUI of joined the Board Bowtell Paul 46 TUI Travel PLC Annual Report & Accounts 2009

Governance Directors’ report

The Directors submit their report to the members of TUI Travel PLC Significant agreements – change of control (the Company) for the year ended 30 September 2009. The Companies Act 2006 requires us to disclose any significant agreements that take effect, alter or terminate on a change of control Principal activity of the Company. The principal activity of the TUI Travel PLC group of companies (the Group) is that of an international leisure travel business. It provides Relationship Agreement with TUI AG a broad and diverse range of leisure travel experiences to more than The Relationship Agreement between TUI AG and TUI Travel, dated 30 million customers in 27 different source markets. For further 29 June 2007, includes the principle that TUI Travel will operate information see TUI Travel overview on page 2. independently of TUI AG and records the understanding between TUI AG and TUI Travel regarding the relationship between them and the Annual General Meeting governance of TUI Travel. The Relationship Agreement will remain in The Annual General Meeting (AGM) will be held on Tuesday force until either the shares in TUI Travel are no longer admitted to 9 February 2010 at 10.30am at the offices of Deutsche Bank, trading on the London Stock Exchange, or TUI AG has less than 10% Winchester House, 1 Great Winchester Street, London EC2N 2DB. of the rights to vote at general meetings. In addition, in the event that An explanation of the business to be transacted at the AGM has another party acquires control of TUI AG during the term of the been circulated to shareholders and can be found on the website Relationship Agreement, TUI AG will lose certain rights under the www.tuitravelplc.com Relationship Agreement including its rights in respect of the composition of the Board. Business performance The Relationship Agreement contains restrictions on the acquisition The Business performance for the year ended 30 September 2009, by TUI AG of additional shares in TUI Travel which result in the prepared in accordance with the Companies Act 2006, is set out on increase of its shareholding to more than 55% of the voting rights pages 30 to 43 and forms part of the Directors’ report. (save where TUI AG makes a general offer to acquire all TUI Travel shares in issue). TUI AG has anti-dilution rights in respect of further Results and dividends issues of shares in TUI Travel other than on a pre-emptive basis. The Group loss before taxation for the year ended 30 September 2009 TUI Travel has also agreed that certain matters will require the prior was £52m (2008: £267m). The Directors recommend a final dividend approval of 80% of the Directors present at the meeting of the Board of 7.7p per ordinary share (2008: 6.9p), payable on 1 April 2010 to at which such matter is considered, including material changes to the holders on the register at the close of business on 12 March 2010. business of any Group company, acquisitions and disposals of a value When taken with the interim dividend of 3.0p per ordinary share paid which exceeds £10m, the entry into, variation or redemption prior to on 1 October 2009 (2008: 2.8p), this gives a total dividend of 10.7p their due date of any borrowing facilities and the approval of the (2008: 9.7p) relating to the year ended 30 September 2009. annual budget. Corporate Governance report £770m bank revolving credit facility agreement The Corporate Governance report for the year ended 30 September An agreement dated 29 June 2007 between a number of relationship 2009, prepared in accordance with rule 7.2 of the FSA’s Disclosure and banks and the Company relating to a £770m bank revolving credit Transparency Rules, is set out on pages 49 to 52 and forms part of the facility currently provided to the Company, contains terms which Directors’ report. give the lending banks the right to cancel all commitments to the Company and to declare all outstanding credits and accrued interest Policy and practice on payment of suppliers immediately due and payable if a change of control occurs. For the The operating units within the Group are responsible for agreeing the purpose of this agreement a change of control occurs if: terms and conditions under which business transactions with their i any person or group of persons acting in concert gains control of suppliers are conducted. Due to the nature of the Group’s operations, the Company; or and in common with the industry as a whole, payments are often made in advance of the provision of goods and services. The Group ii TUI AG and any persons acting in concert with it acquires or acquire does not follow any code or statement on payment practice but it is 75% or more of the voting shares in the Company. Group policy that payments to suppliers, whether in advance or after £140m bank revolving credit facility agreement the provision of the goods or services, are made on the basis of the An agreement dated 29 September 2009 between a number of terms that have been agreed with them. relationship banks and the Company relating to a £140m bank The Company had no trade creditors at 30 September 2009 (2008: £nil) revolving credit facility currently provided to the Company, contains and consequently creditor days have not been presented. Where the terms which give the lending banks the right to cancel all commitments Company is the recipient of goods or services, payment of suppliers is to the Company and to declare all outstanding credits and accrued conducted by one of the Group companies in accordance with the interest immediately due and payable if a change of control occurs. policy set out above. For the purpose of this agreement a change of control occurs if: Directors’ and Officers’ insurance i any person or group of persons acting in concert gains control of the Company; or The Company has purchased, and maintained throughout the year, Directors’ and Officers’ Liability insurance and the level of cover is ii TUI AG and any persons acting in concert with it acquires or acquire regularly reviewed. 75% or more of the voting shares in the Company.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 47 www.tuitravelplc.com 49, 50 20 overview and Strategic TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Substantial shareholdings authorised Committee a duly by approved was report The Directors’ on its 2009 and signed on 30 November Directors of the Board of Secretary. the Company John, Andrew by behalf 128 profiles Shareholder the Board of order By John Andrew Secretary Company 2009 30 November Number: 6072876 Company Auditors In in office. continue willing to KPMG Audit Plc, are The auditors, 2006, a resolution the Companies Act with Section 489 of accordance the Company of KPMG Audit Plc as auditors of the re-appointment for AGM. the forthcoming at proposed be is to of as to disclosure Directors Statement of the to auditors information is there each aware, are as they so far that, confirm The Directors are auditors the Company’s which of audit information no relevant she he or that all the steps has taken and each Director unaware; aware herself or himself make to as a Director taken have ought to establish the Company’s that and to audit information relevant any of information. that of aware are auditors Other information in the can be found report the Directors’ to relevant information Other the Annual Report: sections of following Information colleaguesOur Social responsibilitySustainable developmentCharitable and political donationsSuppliers developmentsFuture leadership 29 Responsible Membership and Committee Board 26 leadership Responsible report Governance Corporate leadership 22 Responsible managementFinancial risk leadership 22 Responsible in Annual Report Location after events sheet balance Post 200930 September 43 Business performance capital – authorised and issuedShare 51 report Governance Corporate 23 – Note Financial statements leadership 29 Responsible 34 – Note Financial statements the Company; or the Company; in the Company. shares voting the of more 75% or will have or have its associates and/or the offeror in the Company, or rights in the Company; voting the than 50% of more the (where dealing days consecutive least five at for shares ordinary less the Company of shares is (a) all outstanding ordinary Float Free persons and any its associates TUI AG, of on behalf or those held by underlying the shares with it and (b) the ordinary acting in concert Nero 2013 issued by Bonds due Exchangeable outstanding Secured 2008). on 16 January Limited Finance Contractual arrangements Contractual parties third with numerous arrangements has contractual The Group The on page 29). its business activities (see Suppliers in support of those third of about any information of in this report disclosure the an understanding of for necessary considered parties is not businesses. the Group’s position of or performance development, Going concern reasonable have enquiries, the Directors making appropriate After resources adequate have and Group the Company expectation that this reason, For future. the foreseeable for operations continue to the basis in preparing adopt the going concern to continue they financial statements. the 1 to is included in Note and liquidity funding of summary A further financial statements. consolidated £40m bonding and letter of credit facility agreement facility of credit £40m bonding and letter bank a relationship 2009 between 29 September dated An agreement credit of a £40m bonding and letter to relating and the Company which give contains terms the Company, to provided currently facility the Company to all commitments cancel the right to the lending bank with together credit of letters all outstanding bonds or declare and to change of a if due and payable immediately fees issuance accrued control change of a this agreement purpose of the For occurs. control if: occurs iof gains control persons acting in concert of group person or any ii acquire or with it acquires persons acting in concert and any TUI AG Bonds £350m 6.0% Convertible 2009, the Company end on 30 September year the Subsequent to place The settlement took Bonds. 6.0% Convertible issued £350m of which give Bonds contain terms The Convertible 2009. on 5 October principal their the bonds at redeem the bondholders the right to of the date up to and unpaid interest with accrued amount, together described in fully As more occurs. control a change of if redemption, Bonds the Convertible the purpose of for and conditions, the terms if: occurs control a change of i the shares of a majority all or acquire to offer a takeover following ii the issued is less than 30% of the Company of Float the Free upon terminate or alter effect, take which agreements No other bid are a takeover following the Company of control a change of impact on the potential their of be significant in terms to considered whole. a as the Group business of 48 TUI Travel PLC Annual Report & Accounts 2009

Governance Statement of Directors’ responsibilities in respect of the Annual Report and the financial statements

The Directors are responsible for preparing the Annual Report and the Directors’ responsibility statement TUI Travel PLC group of companies (the Group) and parent company Each of the Directors, the names of whom are set out on page 49 of financial statements in accordance with applicable law and regulations. this Annual Report, confirms that to the best of his or her knowledge: Company law requires the Directors to prepare Group and parent • The financial statements, prepared in accordance with the company financial statements for each financial year. Under that law applicable set of accounting standards, give a true and fair view of they are required to prepare the Group financial statements in the assets, liabilities, financial position and the profit or loss of the accordance with International Financial Reporting Standards (IFRS) Company and the undertakings included in the consolidation taken as adopted by the EU and applicable law and have elected to prepare as a whole; and the parent company financial statements in accordance with UK • The Directors’ report includes a review of the development and Accounting Standards and applicable law (UK Generally Accepted performance of the business and the position of the issuer and Accounting Practice). the undertakings included in the consolidation taken as a whole, Under company law the Directors must not approve the financial together with a description of the principal risks and uncertainties statements unless they are satisfied that they give a true and fair view that they face. of the state of affairs of the Group and parent company and of their The Statement of Directors’ responsibilities was approved by a duly profit or loss for that period. In preparing each of the Group and authorised Committee of the Board of Directors on 30 November parent company financial statements, the Directors are required to: 2009 and signed on its behalf by Paul Bowtell, Chief Financial Officer. • Select suitable accounting policies and then apply them consistently; Paul Bowtell • Make judgements and estimates that are reasonable and prudent; Chief Financial Officer • For the Group financial statements, state whether they have been 30 November 2009 prepared in accordance with IFRS as adopted by the EU; • For the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the parent company financial statements; and • Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ report, Directors’ Remuneration report and Corporate Governance report that complies with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 49 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Following the appointment of any new Director, the Chairman, in the Chairman, Director, new any of the appointment Following formal a full, that ensures Secretary, with the Company conjunction The Company is provided. the Company induction to and tailored arise. All which may questions any answer to is available Secretary Manual. Training a detailed been given Induction and have Directors procedures/responsibilities Board the strategy review to days, including away meets regularly, The Board it for to reserved specifically matters The schedule of the Group. of the Group; of and control the strategy decision include: determining of approval the Group; and capital of the structure amendments to internal the Group’s of oversight and controls; financial reporting a significant of expenditure capital and revenue of approval controls; membership dealings; Board disposals and share size; acquisitions, and certain Directors of remuneration of and appointments; approval of and approval matters; governance management; corporate senior management strategies. policies and risk Group the Chairman and Chief between responsibilities The division of the Board. by established and has been agreed is clearly Executive the Company of and services the advice to access have All Directors advice, independent professional can take and all Directors Secretary sought by was expense. No such advice the Company’s at necessary, if year. during the Director any procedures ensuring Board for is responsible Secretary The Company concerns unresolved any minuting of including the formal followed are the of with the operation in connection have may Directors that issues. no such unresolved were there year, During the Company. available are and its Committees the Board for Reference of Terms The the AGM. at will be available and website inspection on the Group’s for of interests conflicts Directors’ a statutory became subject to 2008, the Directors 1 October From they where a situation avoid the Companies Act 2006 to under duty or conflicts, that interest indirect or a direct have, could or have, Directors the Company. of with the interests conflict, may possibly conflicts and potential authorise conflicts may public companies of contain a provision association the articles of if appropriate, where this effect. to 2008 to in March association amended its articles of The Company interest of on conflicts things, the provisions with, amongst other deal has established formal The Company in the Companies Act 2006. potential or conflicts, any of and review the disclosure for procedures the and for have may which the Directors interest of conflicts, whether In deciding the Board. by matters such conflict of authorisation must have the Directors conflict potential or authorise a conflict to The the Companies Act 2006. duties under general their to regard authorisation, of and the terms matter, conflict any of authorisation the by formally will be reviewed time and any at be reviewed may the procedures that believes The Board on an annual basis. Board effectively. operating are interest of with conflicts deal established to of Directors and individual performance effectiveness Board and its individual the Board of the performance An assessment of effectiveness The Board’s year. during the commenced was Directors was which a detailed questionnaire means of assessed by was each Director. by and completed Secretary the Company designed by setting for including the processes 16 areas covers The questionnaire business performance, monitoring the Company, of the strategy Directors, the Executive of and the effectiveness governance corporate (including the Chairman) and the Board’s Directors Non-Executive the Chairman and a full to back fed were The results Committees. 2009. the end of before in the Board place take is scheduled to debate and Senior Independent Director and Senior All Directors detailed above served throughout the year with the with year the throughout served detailed above All Directors 2009. on 13 October appointed was who Horst Baier of exception 2009. on 27 May as a director resigned Mueller Christoph Executive five comprised 2009, the Board 30 September As at (including the Chairman). Directors and 11 Non-Executive Directors as a Non-Executive appointed was 2009 Horst Baier On 13 October set out on page 45. are all the Directors details of Biographical Director. of intervals at shareholders by re-election subject to are All Directors Association with the Articles of in accordance years than three no more will retire members the Board of one-third year each and, therefore, themselves and offering rotation by retiring The Directors rotation. by on 9 February Meeting (AGM) the Annual General at re-election for Chapman, Rainer Campbell, Clare Tony Michael Frenzel, Dr 2010 are will offer who, all being eligible, Lundgren and Johan Feuerhake been appointed having Horst Baier, re-election. for themselves enable To re-election. for himself will also offer the last AGM, since the of decision, the 2010 Notice an informed make to shareholders as to details and a statement includes additional biographical AGM should be Directors the Non-Executive believes the Company why the that the AGM at confirm to The Chairman intends re-elected. and be effective to each individual continues of performance the role. to commitment demonstrates all six of the re-appointment shareholders to recommends The Board all effective are they the meeting on the basis that at retiring Directors of level appropriate the and demonstrate the Company of Directors roles. respective in their commitment disclosed in the are contracts service the Directors’ of The terms interests on page 53. Directors’ commencing report Remuneration disclosed on page 62. are the Company of in the shares the appointment of of and the letters contracts service Directors’ the Company’s inspection at for available are Directors Non-Executive which is scheduled the AGM at will be available and office registered 2010. on 9 February place take to William Waggott Director Commercial Director’s nameDirector’s Horst Baier BöttcherVolker Dr BowtellPaul CampbellTony Europe Central Managing Director, Title ChapmanClare Bill Dalton Director Non-Executive FeuerhakeRainer Michael FrenzelDr Financial Officer Chief Director Non-Executive HicksJeremy Director Non-Executive Michael HodgkinsonSir Director Non-Executive Chairman Non-Executive Chairman Deputy Non-Executive Director Non-Executive Director Non-Executive The Board – Directors of its Board through is controlled The Company are: this report of the date at the Directors LongPeter LundgrenJohan Schipporeit Erhard Dr Albert SchunkDr Director Sher Non-Executive Harold Northern Region Managing Director, Giles Thorley Executive Chief Director Non-Executive Director Non-Executive Non-Executive Director Corporate Governance report Governance Corporate 50 TUI Travel PLC Annual Report & Accounts 2009

Governance Corporate Governance report continued

An assessment of each individual Director’s performance is undertaken Meetings of the Non-Executive Directors annually. The performance of each Director is measured against The Chairman met with the Non-Executive Directors twice during the 12 criteria with peers being requested, confidentially, to rate that year – in February and May. A meeting has been scheduled for 2010 Director’s performance by reference to the criteria. The Chairman then and others will be held as the need arises. In the February meeting discusses the overall result for each Director with him or her and any there was general agreement that, since the September 2007 merger, concerns are addressed. the Chairman and the Chief Executive Officer had co-operated well in establishing a successful corporate culture which gave confidence in Independence of Non-Executive Directors the Company’s ability to trade well through a period of unprecedented The Chairman, Dr Michael Frenzel, did not meet the independence economic turbulence. The May meeting focused on the refinancing criteria laid out in the provisions of the Combined Code at the time of requirements of the business. his appointment. This is because Dr Frenzel is the Chief Executive of TUI AG – a 52% shareholder of the Company as at 30 September 2009. A meeting of the Non-Executive Directors, led by the Senior Independent Director, took place during the year to appraise the Details of the Chairman’s other significant commitments are given in Chairman’s performance. After debate, it was concluded that Board his biography on page 45. The Chairman does have a number of other meetings are chaired effectively in an open and constructive manner external roles but the Board is satisfied that these do not interfere which encourages contribution from all Non-Executive Directors. with the performance of his duties as Chairman of the Company. Attendance of Directors at meetings of the Board and its Committees Of the other 11 Non-Executive Directors, two are not considered to Scheduled Audit Remuneration be independent – Rainer Feuerhake and Horst Baier who are also Board Committee Committee Executive Directors of TUI AG. Meetings Meetings Meetings The Non-Executive Directors considered to be independent are Dr Volker Böttcher (MD Central Europe) 7(7) N/A N/A Sir Michael Hodgkinson, Tony Campbell, Clare Chapman, Bill Dalton, Paul Bowtell (Chief Financial Officer) 7(7) N/A N/A Jeremy Hicks, Dr Erhard Schipporeit, Dr Albert Schunk, Harold Sher Tony Campbell (Non-Executive Director) 6(7) 7(8) 7(7) and Giles Thorley. Clare Chapman (Non-Executive Director) 5(7) N/A 6(7) Bill Dalton (Non-Executive Director) 6(7) 6(8) 6(7) The Board recognises that the Combined Code requires that at least Rainer Feuerhake (Non-Executive Director) 7(7) N/A 6(7) half the Board, excluding the Chairman, should be independent Non- Dr Michael Frenzel (Chairman) 6(7) N/A 5(7) Executive Directors. The Board had 17 members up to 27 May 2009 Jeremy Hicks (Non-Executive Director) 7(7) 8(8) N/A (when Christoph Mueller resigned), of whom nine were deemed to be Sir Michael Hodgkinson (Deputy Chairman) 7(7) N/A N/A independent. From 28 May 2009 to 30 September 2009, the Board Peter Long (Chief Executive) 7(7) N/A N/A had 16 members of whom nine were also deemed to be independent. Johan Lundgren (MD Northern Region) 6(7) N/A N/A Therefore the Company was compliant with provision A3.2 of the Christoph Mueller (Aviation Director) 5(5) N/A N/A Combined Code throughout the year ended 30 September 2009. Dr Albert Schunk (Non-Executive Director) 7(7) N/A N/A Following the appointment of Horst Baier, the Board reverted to Harold Sher (Non-Executive Director) 7(7) N/A N/A 17 members of which nine were deemed independent. Erhard Schipporeit (Non-Executive Director) 5(7) N/A N/A The Board is committed to seek to ensure that its membership is Giles Thorley (Non-Executive Director) 6(7) 7(8) N/A regularly refreshed. Will Waggott (Commercial Director) 7(7) N/A N/A Figures in brackets indicate the maximum number of meetings during the year in which the individual was a Board member. The Nomination Committee did not meet during the year.

Board governance structure TUI Travel PLC

Remuneration Committee Nomination Committee Audit Committee

Delegated authorities Delegated authorities Delegated authorities Sets remuneration and incentives for the executive Ensures that the Board and Committee Monitors the Group’s integrity in financial reporting directors; approves and monitors remuneration and composition has the optimum balance of skills, and reviews the effectiveness of the risk incentive plans for the Group. knowledge and experience by nominating suitable management framework. candidates for approval by the Board to fill executive and non-executive vacancies.

Members Members Members C M Chapman Chairman Sir Michael Hodgkinson Chairman J D Hicks Chairman L A Campbell C M Chapman L A Campbell W R P Dalton J D Hicks W R P Dalton Dr M H F Frenzel Dr M H F Frenzel G A Thorley R Feuerhake R Feuerhake

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 51 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Company’s internal control and risk management systems. and risk control internal Company’s Audit Services, Group of with the Director meetings through function of and the review plans work annual of in advance the agreement undertaken. work the of the results and remuneration their of and the approval auditors the external of engagement. their of terms The in force. in 2007 and remains approved was non-audit services cases, the provision in some that, concluded has Audit Committee which does not the incumbent auditors, by non-audit services of statutory primary their in providing independence impact on their the to and this has been communicated is appropriate audit role, by safeguarded are and objectivity independence Auditor Board. appropriate, where and approving, monitoring the Audit Committee non-audit paid for fees of and the level work the of the nature paid. audit fees the total of as a proportion services into objectives these management integrate The GMB and Sector for areas and financial business plans. Where operational their identified, the are control internal of in the system improvement and the the GMB made by the recommendations considers Board Audit Committee. and and financial performance operational Group consider to the Board to reports Executive The Chief business development. the GMB on significant changes in the business and of on behalf the provides Financial Officer The Chief environment. the external performance key which includes with financial information Board indicators. and risk • and the financial controls internal Company’s the Reviewing • Audit Services Group Company’s the of effectiveness the Monitoring • and removal appointment, re-appointment the of The consideration • supply to auditors the external the engagement of for A policy review effectiveness Audit Committee year during the conducted was the effectiveness An assessment of members of to Secretary the Company sent by a questionnaire by the from Results executives. and relevant the Audit Committee is scheduled and the Committee been collated have questionnaires 2009. the end of the findings before and debate review to and risk control Internal internal of system the Group’s for responsibility has overall The Board management of while the role its effectiveness, reviewing and for control and control. policies on risk implement Board is to manage and mitigate is designed to control internal of The system business objectives. achieve to failure of the risk than eliminate rather which include financial, – controls internal In pursuing these objectives, management can only – and risk controls and compliance operational against material assurance absolute, and not reasonable, provide of the effectiveness has reviewed Board The loss. or misstatement year. during the controls internal identifying, for is an ongoing process there that confirms The Board that the Group; by and managing the significant risks faced evaluating the date and up to review under year the for this has been in place is this process that and Accounts; Report the Annual of approval of with accords the process and that the Board; by reviewed regularly framework the control elements of The key Guidance. Turnbull the as follows: are the Group across in place processes and review • and business objectives. strategy sets corporate The Board • executives senior with other together The GMB meets regularly and formal announcements relating to the Company’s financial the Company’s to relating announcements and formal the significant financial reporting and reviewing performance, judgements contained in them. All members of the Committee are considered to be independent. to considered are the Committee All members of that is satisfied with the Combined Code, the Board In accordance financial experience’. and relevant Hicks has ‘recent Jeremy Audit Services Group of and the Director Financial Officer The Chief including the Directors, meetings and other to invited normally are also attend. may Directors, and the Non-Executive Executive Chief auditors with the external also meets the Committee The Chairman of without management present. include: year, during the discharged were which duties, The Committee’s • the Company of the financial statements of the integrity Monitoring Audit Committee Nomination Committee and is chaired Directors Non-Executive five comprises The Committee Director). Independent Michael Hodgkinson (the Senior Sir by on appointed was who Horst Baier, the appointment of to In relation capabilities and required the role 2009, a description of 13 October the Committee the appointment. A meeting of to prior prepared was Deputy Michael Hodgkinson (Non-Executive Sir by – chaired his other the role, for suitability Horst’s Chairman) – considered the and the existing skills and knowledge of significant commitments turnover the Group’s of whole. As a significant percentage as a Board expertise and additional that believed was it in Germany, is generated accounting German and UK between in the differences experience the leisure in experience Horst’s that felt was It required. was practices his previous and TUI AG, of director as an executive industry travel a financial nature, of work involving a long career over experience an excellent make and enable him to assist the Board would deemed not was it this reason, For its deliberations. to contribution to open advertising or consultancy search an external for appropriate no that view the of was this appointment as the Board be used for the specific knowledge and match be able to would candidate other this role. expertise Horst brings to membership and the current At the meeting held in October, agreed was also discussed and it was the Committee of effectiveness and appropriate remained the Committee of the composition that effective. Remuneration Committee Remuneration the details full of on page 53 for report See the Remuneration year. during the work and its composition Committee, Remuneration review effectiveness Committee Remuneration members Committee and August 2008, the Remuneration During July members’ Committee of in an independent survey participated the of An analysis Deloitte. by conducted was which performance, at considered August 2008 and the end of at produced was results the support for unanimous was There 2008. a meeting in October that The analysis indicated the Committee. of effectiveness overall be further could effectiveness where certain areas were there these address actively to resolved and the Committee enhanced discussions and undertook reports considered The Committee points. had been they 2009 and concluded points in March on the relevant is process evaluation performance full A new addressed. fully 2010. in January commence scheduled to 52 TUI Travel PLC Annual Report & Accounts 2009

Governance Corporate Governance report continued

• Group Risk Management have designed a framework for risk on financial reporting or other matters. Any reports received are management for TUI Travel PLC in line with Turnbull guidance, passed direct to Group Audit Services which acknowledges receipt and integrated with the short and long term business planning periodically reports back on a confidential basis to the independent processes. They review the progress in line with this framework third party on any action taken. Within its regular report to the Audit and report on the Group risk profile on a quarterly basis, providing Committee, Group Audit Services provides a summary of any a consolidated Group risk profile to the Audit Committee on a confidential reports received and actions taken. A monthly report half-yearly basis. Additionally, at each Audit Committee meeting, is also produced which includes a summary of all calls received the framework development is reported and individual Sector highlighting any issues raised. For further information see Risk management teams are invited to review and discuss their risk Management on page 20. profile on a rotational basis. • The Audit Committee, with assistance from certain related Communication with shareholders management committees, oversees key risks, such as financial The Chief Executive and Chief Financial Officer hold regular meetings risk, health and safety, corporate and social responsibility and the with major shareholders to review the Group’s performance and environment, where such risks apply across all Sectors. The Board prospects. The views of shareholders are communicated to all believes that, in order to be effective, risk management processes members of the Board following such meetings. During the course must be driven down to each operating unit. Accordingly, each of these meetings the issue of governance is discussed. Presentations Sector Board now addresses risk management as a standing to major shareholders are made at least twice yearly, after the agenda item and is responsible for ensuring that the risks facing announcement of the interim and preliminary results, details of which, that Sector’s businesses are identified and that related action plans together with the Group’s financial reports and other announcements, are implemented. Sectors formally report their risk profile on a can be accessed via the Group’s website www.tuitravelplc.com quarterly basis. The Combined Code recommends that the Senior Independent • The Group Audit Services function independently reviews the risk Director meets with a range of major shareholders to gain an identification procedures and control processes implemented by understanding of their views. In practice and, as a result of the management and reports its findings at each Audit Committee extensive investor feedback provided by the Chief Executive and the meeting, or more frequently if appropriate. Chief Financial Officer, the Senior Independent Director and other • The Audit Committee reviews the proposed work plans of the Non-Executive Directors believe that they are aware of such issues Group Audit Services function; reports issued by Group Audit and therefore considered that it was not necessary to arrange Services; progress made on addressing findings arising from these meetings with major shareholders for this purpose during the year. reports; as well as reports on systems; and controls from the external However, they would make themselves available if any major auditors covering material weaknesses. The Chairman of the Audit shareholder requested such a meeting. Committee reports to the Board on the outcome of the Audit There is also an opportunity for shareholders to question the Committee meetings held and the Board receives the minutes Chairman and other Directors (including the Chairmen of the Audit, of all such meetings. Remuneration and Nomination Committees) at the Annual General • The Treasury position of the Group, including cash, foreign exchange Meeting. This forum also provides Non-Executive Directors with the and fuel hedging exposure, is managed centrally in accordance with opportunity to discuss the views of shareholders with them directly. policies appropriate for each Sector and is the responsibility of the At general meetings: Chief Financial Officer and Group Treasurer. Reports and forecasts are submitted monthly to the GMB and to each Board meeting. • The Company prepares separate resolutions on each substantially Weekly meetings on liquidity and fuel hedging take place attended separate issue and does not combine resolutions together by the Chief Executive, Chief Financial Officer, Group Treasurer and inappropriately; other senior managers as deemed necessary. • A schedule of proxy votes cast is made available for inspection at • Financial forecasts, providing predicted results with sensitivity the conclusion of the proceedings; and analysis, are prepared routinely throughout the year for review • The Annual Report and Accounts is laid before shareholders at the by the GMB and the Board. These forecasts also include details Annual General Meeting. of the Group’s ongoing compliance with its regulatory and banking requirements. The Group has established investment appraisal and Combined Code Provisions authorisation procedures and its capital expenditure is reviewed For the reasons disclosed above and in the Remuneration report on against budgets which have been approved by the Board. page 53, during the year the Company did not fully comply with the Processes are in place to ensure appropriate action is taken where following provisions: necessary to remedy any deficiencies identified through the Group’s • Code Provision A2.2. The Chairman should on appointment meet internal control and risk management processes. the independence criteria set out in Code A3.1; There are policies and procedures for the reporting by employees and • Code Provision B2.1. The Remuneration Committee should all be the resolution of suspected fraudulent activities. It is the policy of the independent Non-Executive Directors; and Group to employ staff and management of high integrity, to train • Code Provision D1.1. The Senior Independent Director should meet them appropriately and to require compliance with all relevant laws, with a range of major shareholders to listen to their views in order regulations and internal policies. The Group has independent third to help develop a balanced understanding of the issues and party reporting mechanisms that allow employees to raise concerns concerns of major shareholders.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 53 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI the competitive market in which the Group operates; which the Group in market the competitive targets; demanding financial performance of the achievement and the long term; over the shareholders with those of Policy on remuneration of Executive Directors and Directors of Executive on remuneration Policy senior executives packages are remuneration that ensure aims to The Committee which: offered • reflect to level an appropriate package at remuneration Set the total • package to remuneration the total of a substantial proportion Link • interests align their management to senior of the reward Structure • the Group. throughout culture the high-performance Reinforce Policy on remuneration of Non-Executive Directors of Non-Executive on remuneration Policy service have including the Chairman, do not Directors, Non-Executive pension scheme, in the Group’s participate and do not contracts schemes. Non-Executive incentive term long annual bonus scheme or by which can be terminated appointment of letters have Directors is subject Each appointment months’ notice. serving six party either the of Association the Articles of under rotation by retirement to every least once at shareholders, by and re-election Company, years. three the Board by which is approved paid a fee are Directors Non-Executive taken having Directors, the Executive of on the recommendation complexity a similar of companies paid in other the fees of account the for The base fee the individuals. of and the skills and experience and Deputy is £55,000 but the Chairman Directors Non-Executive paid are Independent Director) Chairman (who is also the Senior The Chairman additional responsibilities. their reflect to fees higher a fee Chairman receives £300,000 and the Deputy of fee a receives and the Chairman the Audit Committee The Chairman of £200,000. of £15,000 of an additional fee receive Committee the Remuneration of and £10,000 respectively. Bill Logan has direct access to the Chairman of the Committee and he, the Committee the Chairman of to access Bill Logan has direct on all aspects of House, advised the Committee with David together Long Peter year. during the policies and structures reward the Group’s recommendations make to Committee the of meetings attends reports his direct of and remuneration the performance to relating the to as Secretary acts Secretary) (Company John and Andrew John Bill Logan and Andrew Bowtell, Long, Paul Peter Committee. is considered. own remuneration their when in attendance not are succeeded who Deloitte, appointed the Committee year, During the independent provide to organisations, consultancy external both Mercer, Deloitte remuneration. management senior of on all aspects advice the to services and tax benchmarking information salary also provides performance the relative of verification time and time to from Group Plan and Deferred Share the Performance attached to conditions Annual Bonus Scheme. the Company’s to legal issues relating various Herbert Smith advised on the Group. to legal services other provides schemes and also share Remuneration Committee Remuneration the following comprised the Committee year, During the Directors: Non-Executive Chapman – Chairman Clare Campbell Tony Bill Dalton Michael Frenzel Dr Feuerhake Rainer independent Non- are the Committee the members of of Three not are Feuerhake and Rainer Michael Frenzel Dr Directors. Executive and Rainer Frenzel be independent. Dr to the Company by considered – a 52% TUI AG of Board the Executive members of are Feuerhake 2009 – and their 30 September as at PLC Travel TUI of shareholder between Agreement the Relationship to pursuant appointments are the Company. and TUI AG personal financial interest, has any the Committee of No member in shares in the interests (as disclosed than as a shareholder other the Committee. be decided by to table on page 62), in the matters no conflicts have the Committee of independent members The three and members’ cross-directorships Committee arising from interest of bonus in any participate the Committee the members of none of schemes share employee any or awards schemes, pension plans, share no day- have the Committee Members of the Company. of in respect the Company. in the running of involvement to-day was Michael Frenzel year. times during the met seven The Committee and Chapman, Bill Dalton and Clare occasions on two attend unable to due to all on one occasion, attend to unable were Feuerhake Rainer commitments. prior policy. remuneration on overall advises the Board The Committee with and the Board, of on behalf also determines, The Committee the consultants and members of external from advice the benefit of the Executive of Department, the remuneration Human Resources The Management Board. the Group members of and other Directors Reference, of Terms its by governed are the Committee activities of on the and can be found the Board by been approved which have www.tuitravelplc.com at website Travel TUI during the Committee to provided were services or advice Material by: the year Consulting (Mercer) Human Resource Mercer (Deloitte) LLP Deloitte (Herbert Smith) Herbert Smith LLP Executive Long – Chief Peter Financial Officer – Chief Bowtell Paul Director Human Resources Bill Logan – Group Director Reward House – Group David The Remuneration Committee (the Committee) formulates and formulates Committee) (the Committee The Remuneration the prevailing to with consideration policy applies the Company and which it operates within economies in the major climate economic leadership responsible which cultivate values its core within the spirit of the Consequently social environment. and internal in its external sustained performance the Company’s considers closely Committee all for future and a secure value shareholder in building both its stakeholders. has been and Committee the by has been prepared This report and the Large with Schedule 8 of It complies the Board. by approved and Reports) (Accounts and Groups Medium Sized Companies approval for shareholders will be put to This report 2008. Regulations 2010. be held on 9 February Meeting to the Annual General at Remuneration report Remuneration 54 TUI Travel PLC Annual Report & Accounts 2009

Governance Remuneration report continued

The Group has performance-related reward policies. These are designed During the year, the Committee decided that it was not appropriate to to provide the appropriate balance between fixed remuneration and increase fixed remuneration in the current climate. Consequently, the variable ‘at-risk’ reward which is linked to the performance of both the Executive Directors’ base salaries were not increased at the normal Group and the individual. Group performance-related measures are annual review in October 2009 and will remain at 2009 levels during chosen carefully to ensure a strong link between reward and true the financial year to 30 September 2010. In addition, the Committee underlying financial performance. Individual performance is measured does not anticipate undertaking the next normal annual review prior through an assessment of comprehensive business unit deliverables, to 1 October 2011. modelling the Group’s values and the achievement of specific objectives. Benefits are provided to Executive Directors in accordance with the At a minimum, the individual performance of the Executive Directors is practice applying to other executives in their geographic location. assessed on an annual basis. In assessing levels of pay and benefits, TUI Travel compares the Annual performance bonus packages offered by different groups of comparator companies. Within the Annual Bonus Plan, challenging performance goals are set These groups are chosen having regard to: and these must be achieved before the maximum bonus becomes payable. The Annual Bonus Plan measures are weighted heavily to • Financial size – turnover, profits and market capitalisation; the Group’s financial performance and the balance to personal • Scale of business – the number of people employed; objectives. The maximum bonus opportunity for each Executive • Diversity and complexity of businesses; Director varies by individual but will not exceed 175% of annual base • Geographical spread of businesses; salary. The maximum bonus opportunity is greater than the maximum bonus for the financial year ending 30 September 2009 (150%). This • Industry type; and change, combined with not increasing fixed remuneration, implements • Relevance as: a policy decision to increase the portion of total remuneration that is – a potential source for candidates for roles within the Group; and performance related. This will have the benefit of helping to manage – a potential threat in respect of attracting TUI Travel executives. the Group’s fixed cost base and improve the alignment between External consultants are used to advise the Committee on the executive reward and the value created for shareholders. structure and level of pay and benefits in TUI Travel’s markets. Long term incentives Deferred Annual Bonus Scheme Fixed remuneration All Executive Directors also participate in the Deferred Annual Bonus Annual incentive Scheme (DABS) which requires a minimum of 25% and a maximum Long term incentive of 50% of any annual performance bonus payable to be deferred into awards of shares. Matching shares may also be awarded up to four times the deferred amount and are subject to the achievement of stretching performance conditions. 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. The normal policy for Executive Directors is that, using ‘target’ or ‘expected value’ calculations, long term performance drives 60% For awards of matching shares made during the year, no shares will of total annual remuneration (excluding benefits) and the total vest unless the annual average of the ratio of the Group’s return on proportion of performance-related remuneration (including annual invested capital (ROIC) to the weighted average cost of capital (WACC) bonus) is 70%. 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 The main components of remuneration in the Company are: term incentive awards pay out only when shareholder value is being • Fixed remuneration created over the performance periods. If the ROIC/WACC hurdle is met, – base salary shares will only vest to the extent to which two further performance – benefits conditions are satisfied over the three-year period as follows: – pension contribution • Up to three-quarters of the matching shares will vest based on • Performance-related remuneration growth in the Group’s earnings per share (EPS), before amortisation – annual bonus of goodwill and merger intangibles, goodwill impairment and – long term incentives separately disclosed items, in relation to the growth in the UK Retail Price Index (RPI) as shown in the table below: Base salary Average annual EPS growth in excess of RPI growth Proportion of matching shares vesting The salary for each Executive Director is based on individual performance and on information from independent professional Below 4% 0% sources on the salary levels for similar jobs in groups of comparable Between 4% and 13% On a straightline basis companies. This approach is consistent with that used to determine between 10% and 100% salary and benefit levels for all employees within the Group. Internal 13% or above 100% relativities and salary levels in the wider employment market are also taken into account.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 55 Maximum value of aggregate aggregate of value Maximum www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI All-employee share schemes share All-employee in the participate eligible to are based in the UK Directors Executive share which is an all-employee Plan Incentive Share HMRC-approved on preferential in the Company shares acquire to scheme enabling staff in the Company, shareholding employee encourage further To terms. four every for share a matching Plan provides Incentive the Share are shares the plan. Matching a participant under bought by shares conditions. performance subject to not guidelines Shareholding years within five build, to will be expected Directors The Executive equal in maintain, appointment, and then a shareholding their of the times in the case of two or basic salary 1.5 times their to value Executive. Chief the Company and therefore year issued during the were shares No new shares new the issue of limits for within its headroom has remained made, and awards incentive schemes. All share incentive share under with shares be settled will normally awards, incentive share all future in the market. purchased Director Böttcher Volker Dr BowtellPaul LongPeter LundgrenJohan William Waggott vest will which cash and shares, of combination will be a The awards shown below: as years, three over tranches in three 1 (2007/2008):Tranche 2 (2008/2009):Tranche cash and 50% shares; 50% 3 (2009/2010):Tranche and 50% shares; 50% cash and will be shares will be paid annually, cash entitlement While any cash. 100% period. the three-year until the end of deferred base salary) (% of award the achievement will be subject to the annual tranches of vesting The The release period. the three-year over targets annual performance of 225% three-year overall a further subject to will be elements the share of target. performance 330% a target been set at have targets performance three-year The overall 330% with will occur) vesting which no (below value synergistic £100m of of 450% 330% £150m. In of level a ‘stretch’ scale up to vesting and a payment below targets margin set annual profit have addition, the Committee will occur. vesting or which no payment vesting the proportion annual performance, and stretch At target In the will be 50% and 100% respectively. each annual tranche under achieved, is not target performance three-year the overall that event the cash to paid in relation been previously have net amounts that any the Company. to 1 and 2 must be repaid Tranches elements of shares provided that stretching performance targets are satisfied. satisfied. are targets performance stretching that provided shares based on the are the Committee, set by targets, The performance First Choice of the merger of objectives synergistic the of achievement Tourism and the Limited) Holidays First Choice (now PLC Holidays TUI AG. Division of are: Directors Executive for awards The maximum aggregate between 10% and 100% 10% and between 15% and 100% between between 15% and 100% between TSR performance relative to companies ranked 30th to 100th by 30th to ranked companies to relative performance TSR as shown in the the award of the date capitalisation as at market table below: Group’s ranking of total shareholder return (TSR) performance (TSR) return shareholder total of ranking Group’s capitalisation market 100th by 30th to ranked companies to relative in the table as shown below: the award of the date as at At or above upper quartile upper above At or the performance Plan lapse if Share the Performance under Awards met. not are conditions performance the key are TSR EPS and that considers The Committee indicator EPS is a key the Group. to most relevant are that conditions 100% is a relative TSR whilst underlying financial performance the Group’s of least being at ROIC, of A hurdle creation. value shareholder of measure incentive long term the relevant that ensure is used to WACC, equal to the over is being created value when shareholder out only pay awards periods. performance Plan Synergy Creation Value which is a one-off Plan (VCSP), Synergy Creation Value the Under will and eligible participants Directors plan, Executive three-year cash and of a combination by will be satisfied which an award receive Below medianBelow quartile median and upper Between basis On a straightline 0% TSR RankingTSR vesting shares of Proportion 13% or above13% or • of ranking based on the Group’s vest will the shares of half Up to 100% Average annual EPS growth in excess of RPI growth of in excess annual EPS growth Average 4%Below vesting shares of Proportion 4% and 13%Between basis On a straightline 0% Matching share awards lapse if the performance conditions are not met. not are conditions the performance lapse if awards share Matching Plan Share Performance and Directors Plan (PSP) allows Executive Share The Performance the satisfaction subject to awards, share receive eligible participants to normally which are the Committee, set by conditions, performance of made annually normally are period. Awards a three-year over measured times two exceed will not circumstances, in exceptional and, except Directors. Executive for annual salary unless the annual vest will no shares year, made during the awards For meets or the WACC to ROIC the Group’s of the ratio of average period. the three-year one over exceeds to the extent to vest will only is met, shares hurdle ROIC/WACC the If the three- over satisfied are conditions performance further which two period as follows: year EPS, in the Group’s based on growth vest will the shares of half Up to intangibles, goodwill and merger goodwill of amortisation before the growth to in relation disclosed items, impairment and separately table RPI as shown in the below: in the UK At or above upper quartile upper above At or 100% TSR RankingTSR medianBelow quartile and upper median Between basis On a straightline 0% vesting shares matching of Proportion • based on the vest will shares matching the of one-quarter Up to 56 TUI Travel PLC Annual Report & Accounts 2009

Governance Remuneration report continued

Policy on pensions Contracts of service Each of the UK-based Executive Directors and senior executives Executive Directors participates in a defined contribution retirement plan. The Remuneration Committee’s policy is for Executive Directors to The Group’s pension policy is that, in the event that a participant in have rolling contracts with a 12-month notice period. a registered pension scheme may reach or exceed HMRC lifetime or Volker Böttcher, Paul Bowtell, Peter Long, Johan Lundgren and William annual thresholds, and therefore chooses not to accept further Waggott currently have service agreements with a 12-month notice registered pension contributions, a contribution to an unregistered period and it is intended that all new appointments will also have long term investment scheme or a non-pensionable cash payment, 12-month notice periods. However, on occasion, to complete an equivalent to the Group’s contribution to the registered pension external recruitment successfully, a longer initial period may be used scheme, will be offered in lieu. Pension scheme participants will not reducing to 12 months, following guidance in the Combined Code. be compensated for any adverse tax consequences of exceeding the HMRC lifetime allowance limit. No provisions for compensation for termination following change of control, or for liquidated damages of any kind, are included in the Executive Directors, and senior executives outside of the UK, current Directors’ contracts. In the event of any early termination participate in local pension plans. of an Executive Director’s contract, the policy is to seek to minimise any liability. Policy on external appointments Effective date Unexpired term/ The Company recognises that its Directors may be invited to become Executive Director of contract notice period non-executive directors of other companies and that such duties can Dr Volker Böttcher 5 September 2007 12 broaden experience and knowledge and benefit the business. Subject Paul Bowtell 7 April 2008 12 to the approval of the Board, Executive Directors are, therefore, Peter Long 19 February 2008 12 allowed to accept non-executive appointments and to retain the fees Johan Lundgren 20 March 2009 12 received (excluding positions where the Director is appointed as the William Waggott 22 April 2008 12 Company’s representative) as long as this is not likely to lead to a conflict of interest. Non-Executive Directors Effective date Unexpired term/ For the year ended 30 September 2009, Peter Long received and Non-Executive Director of appointment notice period retained non-executive directors’ fees in respect of two appointments Horst Baier 13 October 2009 6 (Debenhams PLC to 1 August 2009 and Rentokil Initial plc – FTSE 250 Tony Campbell 3 September 2007 6 and FTSE 100 respectively) of £97,500 (2008: £105,000). Paul Bowtell Clare Chapman 3 September 2007 6 received and retained non-executive director fees in respect of his Bill Dalton 3 September 2007 6 appointment as a non-executive director of SThree plc (a small cap Rainer Feuerhake 3 September 2007 6 company) of £40,000 (2008: £36,667). Dr Michael Frenzel 3 September 2007 6 Jeremy Hicks 3 September 2007 6 Performance graph Sir Michael Hodgkinson 3 September 2007 6 TUI Travel shares were listed on the London Stock Exchange on Giles Thorley 3 September 2007 6 3 September 2007. Since December 2007, the Company has been Dr Erhard Schipporeit 29 October 2007 6 a member of the FTSE 100 Index. The graph below measures the Dr Albert Schunk 29 October 2007 6 performance of First Choice Holidays PLC up to the merger, and Harold Sher 29 October 2007 6 subsequently the performance of TUI Travel PLC, assuming dividends are reinvested, compared with the TSR performance achieved against the constituent companies of the FTSE 100 Index and separately those ranked 30 to 100 by market capitalisation. The latter Index is considered to be the most appropriate benchmark for comparison purposes and is used within the performance measures of the Company’s long term incentive schemes.

Total Shareholder Return 350 TUI Travel PLC shares listed 03.09.07 TUI Travel PLC v FTSE 100 & FTSE 30-300 300

250

200

150

100 TUI Travel PLC FTSE 100 FTSE 30-100 30.09.04 30.09.05 30.09.06 30.09.07 30.09.08 30.09.09

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 57 55 65 55 55 70 50 50 50 55 743 750 835 300 200 2008 £000 ended 2,402 9,878 1,005 2,029 1,109 For the year the For 30 September 55 65 55 55 70 55 55 55 55 881 300 200 891 445 2009 £000 excluding pensions excluding Total remuneration Total ended 7,849 1,053 2,122 1,437 For the year For 30 September www.tuitravelplc.com 2 Benefits 1 TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI eived relocation, housing and education benefits. housing and education relocation, eived d VCSP. Mr Lundgren achieved 86.3% of the maximum for annual the maximum for 86.3% of achieved Lundgren Mr VCSP. d remuneration, payments made during the year in EUR have been in EUR have year made during the payments remuneration, being the average exchange rate for the period 1 October 2008 to the period 1 October for rate exchange being the average being the average exchange rate for the period 1 October 2008 the period 1 October for rate exchange being the average n Synergy Plan but exclude bonus awards in deferred shares, details shares, in deferred bonus awards Plan but exclude n Synergy y car or car allowance. In addition to the provision of a fully expensed a fully of provision the In addition to allowance. car or car y ott, this relates in the main to the provision of a fully expensed company a fully of the provision in the main to this relates ott, 474597 405426 567 12 273 19 £000 £000 £000 4,287 3,192 371 and fees payments Basic salaries Performance 3 5 4 of which are set out on page 59. Messrs Böttcher, Bowtell, Long and Waggott achieved the maximum level for both annual bonus an both for the maximum level achieved Long and Waggott Bowtell, set out on page 59. Messrs Böttcher, which are of VCSP. bonus and the maximum for 2009. 31 July 31 August 2009. 2008 to the period 1 October for rate exchange being the average 1 GBP, 1.15 units to at converted car or car allowance and private healthcare cover, and for Messrs Böttcher and Mueller the provision of a fully expensed compan a fully of the provision and Mueller Messrs Böttcher and for cover, healthcare and private allowance car or car on 1 August 2009 and rec the UK to Sweden from relocated Lundgren Mr cover, healthcare and private allowance car or car company 2009. 30 September to 1 Creatio Value in the Annual Bonus Plan and the participation of in cash in respect include bonus awards payments’ ’Performance 2 Long and Wagg Messrs Bowtell, For employment. the individual’s arising from assessable benefits all tax ’Benefits’ incorporate 5 his In calculating redundancy. on 31 August 2009 due to employment 2009 and ceased on 27 May as a Director resigned Mueller Mr Former Directors Former Total Executive Directors Executive Böttcher Volker Dr 3 1 GBP, 1.15 units to at been converted in EUR have year made during the payments Böttcher, Mr for remuneration In calculating The information provided in the following pages of this report has been audited by KPMG Audit Plc. by has been audited this report pages of in the following provided The information remuneration Directors’ 4 1 GBP, 12.19 units to at been converted have in SEK year made during the payments Lundgren, Mr for remuneration In calculating Paul BowtellPaul William Waggott Directors Non-Executive CampbellTony ChapmanClare Bill Dalton FeuerhakeRainer (Chairman) Michael Frenzel Dr HicksJeremy Chairman) Michael Hodgkinson (Deputy Sir Schipporeit Erhard Dr Albert SchunkDr SherHarold Giles Thorley 490 200 430 547 300 55 435 65 16 55 55 55 16 70 55 55 55 Peter LongPeter Lundgren Johan Mueller Christoph 850 1,238 35 58 TUI Travel PLC Annual Report & Accounts 2009

Governance Remuneration report continued

Directors’ pensions The Group makes a contribution of 50% of base salary for Peter Long. During the year, contributions have been paid partly into a self-invested personal pension and, mindful of the HMRC lifetime allowance limit, partly as a non-pensionable cash payment (subject to tax and national insurance) equivalent to the Company pension contribution. The Group makes contributions of 25% and 50% of base salary into a defined contribution pension scheme for the benefit of Paul Bowtell and William Waggott respectively. In addition, 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. The normal retirement date for the UK-based Executive Directors and senior executives is 65. In the event of death in service, the Executive Directors’ and senior executives’ pension arrangements 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 of 25% of base salary. Johan Lundgren participated in a separate pension arrangement in Sweden at a cost of 33% of base salary. Christoph Mueller participated in separate pension arrangements in Germany at a cost of 35% of base salary until his employment ceased. The Company made an additional pension contribution of €46,813 in accordance with his contractual termination arrangements. Pension contributions for Directors Pension contributions or allowance for the year ended 30 September 2009 Executive Director £000 Dr Volker Böttcher 118 Paul Bowtell 123 Peter Long 425 Johan Lundgren 200 Christoph Mueller1 190 William Waggott 208 Total 1,264

1 Christoph Mueller ceased employment on 31 August 2009. Total pension contributions or allowances for the year ended 30 September 2009 were £1.264m. In calculating this total, payments made in EUR and SEK have been converted at 1.15 and 12.10 units to 1 GBP respectively, being the average exchange rates for the year ended 30 September 2009. Long term incentives Deferred Annual Bonus Scheme (DABS) Messrs Böttcher, Bowtell, Long, Lundgren and Waggott participated in the DABS during the year ended 30 September 2009 and are expected to receive an award on 2 December 2009 as follows: Estimated value of award Director £000 Dr Volker Böttcher 237 Paul Bowtell 294 Peter Long 638 Johan Lundgren 258 William Waggott 215 Awards made under the DABS, and which remain outstanding at 30 September 2009, are given in the table on page 59.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 59 Maximum value based value 854,998 2,176,825 826,206 2,103,521 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI ess of the rate of inflation and b) performance to the 3rd to and b) performance inflation of the rate ess of ies of the FTSE Mid-250 index (excluding Investment Trusts) Trusts) Investment (excluding Mid-250 index the FTSE ies of xcess of the rate of inflation and b) performance to the to and b) performance inflation of the rate of xcess ies of the FTSE Mid-250 Index (excluding Investment Trusts) Trusts) Investment (excluding Mid-250 Index the FTSE ies of ies of the FTSE 100 index ranked 30 to 100 by market 100 by 30 to ranked 100 index the FTSE ies of upper quartile. upper being released for upper quartile. upper for being released ed for upper quartile. The ROIC/WACC hurdle was achieved, achieved, was hurdle The ROIC/WACC quartile. upper ed for ed for upper quartile. upper ed for excess of the rate of inflation; and b) performance to the 3rd to and b) performance inflation; of the rate of excess accordance with the scheme rules these matching awards were awards with the scheme rules these matching accordance e the entire award was released on 14 December 2008. on 14 December released was award e the entire mpanies of the FTSE 100 index ranked 30 to 100 by market 100 by 30 to ranked 100 index the FTSE mpanies of excess of the rate of inflation and b) performance to the 3rd to and b) performance inflation of the rate of excess released for 13% per annum in excess of inflation and b) ranking and b) ranking inflation of annum in excess 13% per for released released for 13% per annum in excess of inflation and b) ranking and b) ranking inflation of annum in excess 13% per for released the award to be released. The number of shares released is graded released shares of The number be released. to the award the award to be released. The number of shares released is graded released shares of The number be released. to the award accordance with the scheme rules these deferred awards were released in full. released were awards with the scheme rules these deferred accordance released for 39% in excess of inflation and b) ranking of the of and b) ranking inflation of 39% in excess for released o be achieved for any of the award to be released. The number The number be released. to the award of any for o be achieved r any of the award to be released. The number of shares released released shares of The number be released. to the award of any r ed employment to the release date. the release to ed employment ed employment to the release date. the release to ed employment nd 75% of the award released for 39% in excess of inflation and inflation of 39% in excess for released the award nd 75% of 234.70p234.70p 127,717234.70p 129,247234.70p 01.09.09 245,987 01.09.09 82,981 01.09.09 01.09.09 – – – – – – – – 218.62p 178,014 15.12.08 –218.62p 381,455 15.12.08 – – – 7 8 7 8 1 1 19.12.0719.12.07 270.40p28.11.08 270.40p28.11.08 205.25p 54,417 205.25p 55,069 19.12.07 104,809 19.12.07 35,356 270.40p28.11.08 270.40p28.11.08 205.25p 205.25p 19.12.10 19.12.10 28.11.11 73,558 294,230 28.11.11 187,279 97,442 749,110 389,768 248,087 992,349 28.11.0828.11.08 205.25p 205.25p13.02.0719.12.07 260.00p19.12.07 270.40p28.11.08 270.40p28.11.08 205.25p 205.25p19.12.0719.12.07 270.40p28.11.08 270.40p28.11.08 205.25p 205.25p 28.11.11 28.11.11 134,470 537,880 342,361 1,369,442 13.02.10 19.12.10 326,155 19.12.10 138,288 28.11.11 830,391 553,150 28.11.11 352,081 292,326 1,408,320 1,169,304 2,977,048 19.12.10 744,262 19.12.10 28.11.11 67,431 269,723 28.11.11 135,446 171,679 686,715 541,784 344,846 1,379,382 19.12.0719.12.07 270.40p28.11.08 270.40p28.11.08 205.25p 205.25p13.02.0719.12.07 260.00p19.12.07 270.40p 270.40p 19.12.10 19.12.10 28.11.11 60,432 241,729 28.11.11 104,809 153,860 615,442 419,236 266,844 1,067,375 13.02.10 19.12.10 156,923 19.12.10 67,599 399,526 270,394 172,107 688,423 5 6 5 6 6 5 6 5 6 5 6 5 97,442 104,809 419,236 389,768 537,880 541,784 419,236 104,809 134,470 292,326 135,446 1,169,304 DABS sharesDABS shares DABS Maximum price on share 3 4 3 4 2 3 4 3 4 3 4 2 3 4 2008 2009 date Award award at 2009vesting at £ date vesting 2009 £ held at endedyear the price Market endedyear the price Market at Value held at 30 September 67,599 1 October 30 September share per 30 September share per vesting Planned/actual 30 September 2009 294,230 138,288 553,150 269,723 241,729 270,394 217,666 156,923 326,155 DABS sharesDABS during awarded during vested shares DABS 254.6p at of released early subject to pro-ration for time elapsed and performance to cessation of employment. of cessation to time elapsed and performance for pro-ration subject to early released anniversary of the award date where the performance measure relates to the Company’s TSR ranking against the constituent compan against the constituent ranking TSR the Company’s to relates measure the performance where date the award of anniversary of any for must also be achieved WACC the of being in excess the ROIC of hurdle A performance date. the award at as calculated award the and 75% of inflation of annum in excess 4% per for being released the award with 7.5% of a) EPS growth, to according being releas the award median and 25% of for being released the award with 2.5% of group, against the comparator the Company of quartile therefor in the upper was ranking TSR and the Company inflation of annum in excess than 13% per greater was EPS growth anniversary of the Award date where the performance measure relates to the Company’s TSR ranking against the constituent compan against the constituent ranking TSR the Company’s to relates measure the performance where date the Award of anniversary of any for must also be achieved the WACC of being in excess the ROIC of hurdle A performance date. the Award at as calculated award the and 75% of inflation of annum in excess 4% per for being released the award with 7.5% of a) EPS growth, to according being releas the award median and 25% of for being released the award with 2.5% of group, against the comparator the Company of 3rd anniversary of the Award date where the performance measure relates to the Company’s TSR ranking against the constituent co the constituent against ranking TSR the Company’s to relates measure the performance where date the Award of anniversary 3rd must als the WACC of being in excess on ROIC the return of hurdle A performance date. the award at capitalisation as calculated a inflation of 12% in excess for being released the award with 7.5% of a) EPS growth, to according is graded released shares of the award median and 25% of for being released the award with 3.75% of group, against the comparator the Company of b) ranking compan against the constituent ranking TSR the Company’s to relates measure the performance where date the award of anniversary fo must also be achieved the WACC of being in excess the ROIC of hurdle A performance the date. at capitalisation as calculated the award and 75% of inflation of 12% in excess for being released the award with 7.5% of a) EPS growth, to according is graded for being released the award median and 25% of for being released the award with 3.75% of group, against the comparator Company 3 continu to 2006/2007 and is subject only Year Financial the Annual Bonus entitlement for element of is the deferred This award 4 in e (EPS) growth to relates measure the performance where 2010 30 September to is based on a) performance award This matching 7 and in his departure of the terms Under redundancy. 31 August 2009 due to from with effect employment ceased Mueller Christoph 8 and in his departure of the terms Under redundancy. 31 August 2009 due to from with effect employment ceased Mueller Christoph Grand totalGrand 1 in EPS growth to relates measure the performance where 2008 30 September to based on a) performance was award This ‘roll-over’ 3,047,604 4,346,510 505,560 1,145,401 6,342,077 16,146,929 Total 367,788 487,210 TotalWilliam Waggott 73,558 272,083 524,045 249,651 585,932 – – Total MuellerChristoph 54,417 337,154 677,230 1,014,384 2,582,622 Total LundgrenJohan 67,431 1,192,076 1,461,630 174,483 381,455 2,479,223 6,312,102 Total LongPeter 174,483 576,342 672,350 14.12.05 229.25p 174,483 81,426 178,014 1,167,266 2,971,859 Total 302,161 524,045 Paul BowtellPaul 81,426 14.12.05 229.25p 81,426 2 in EPS growth to relates measure the performance where 2009 30 September to is based on a) performance award This ‘roll-over’ Directors Böttcher Volker Dr 60,432 Deferred Annual Bonus Scheme (DABS) Annual Bonus Scheme Deferred 5 continu to 2007/2008 and is subject only Year Financial the Annual Bonus entitlement for element of is the deferred This award 6 in exc EPS growth to relates measure the performance where 2011 30 September to is based on a) performance award This matching 60 TUI Travel PLC Annual Report & Accounts 2009

Governance Remuneration report continued

Performance Share Plan (PSP) During the year ended 30 September 2009 there were four cycles in operation. The award made in respect of each cycle and the maximum pre-tax number of ordinary shares due if performance targets are achieved in full are: Maximum Maximum value based Maximum PSP shares PSP shares Maximum on share price PSP shares awarded during vested during PSP shares of 254.6p at held at the year ended Market price the year ended Market price Value at held at 30 September 1 October 30 September per share 30 September per share vesting Planned/actual 30 September 2009 2008 2009 Award date at award 2009 at vesting £ vesting date 2009 £ Directors Dr Volker Böttcher 39,444 03.09.07 285.50p 39,4441 219.28p 86,493 15.12.08 – – 78,8882 – 03.09.07 285.50p – 13.02.10 78,888 200,849 129,2093 – 13.09.07 273.00p – 01.12.10 129,209 328,966 221,8294 28.11.08 205.25p – 28.11.11 221,829 564,777 Total 247,541 221,829 39,444 86,493 429,926 1,094,592 Paul Bowtell 38,168 14.12.05 229.25p 38,1681 219.28p 83,695 15.12.08 74,0392 – 13.02.07 260.00p – 13.02.10 74,039 188,503 202,1983 – 13.09.07 273.00p – 01.12.10 202,198 514,796 286,4794 28.11.08 205.25p – 28.11.11 286,479 729,376 Total 314,405 286,479 38,168 83,695 562,716 1,432,675 Peter Long 92,476 14.12.05 229.25p 92,4761 219.28p 202,781 15.12.08 173,0782 – 13.02.07 260.00p – 13.02.10 173,078 440,657 586,0813 – 13.09.07 273.00p – 01.12.10 586,081 1,492,162 828,2584 28.11.08 205.25p – 28.11.11 828,258 2,108,745 Total 851,635 828,258 92,476 202,781 1,587,417 4,041,564 Johan Lundgren 65,174 03.09.07 285.50p 65,1741 219.28p 142,914 15.12.08 130,3482 – 03.09.07 285.50p – 13.02.10 130,348 331,866 104,7733 – 13.09.07 273.00p – 01.12.10 104,773 266,752 192,3073 19.12.07 270.40p – 19.12.10 192,307 489,614 287,1064 28.11.08 205.25p – 28.11.11 287,106 730,972 Total 492,602 287,106 65,174 142,914 714,534 1,819,204 Christoph Mueller 55,221 03.09.07 285.50p 55,2211 220.50p 121,762 15.12.08 – – 110,4432 – 03.09.07 285.50p 43,4655 234.70p 102,012 01.09.09 – – 129,2093 – 13.09.07 273.00p 38,7915 234.70p 91,042 01.09.09 – – 217,7594 28.11.08 205.25p 19,6225 234.70p 46,053 01.09.09 – – Total 294,873 217,759 157,099 360,869 – – William Waggott 122,343 03.09.07 285.50p 122,3431 220.50p 269,766 15.12.08 – – 244,6852 – 03.09.07 285.50p – 13.02.10 244,685 622,968 146,5203 – 13.09.07 273.00p – 01.12.10 146,520 373,040 209,5004 28.11.08 205.25p – 28.11.11 209,500 533,387 Total 513,548 209,500 122,343 269,766 600,705 1,529,395 Grand total 2,714,604 2,050,931 514,704 1,146,518 3,895,298 9,917,430

1 This ‘roll-over’ award was based on performance from 1 November 2005 to 30 September 2008 where the performance measure related to EPS growth in excess of the rate of inflation and a performance hurdle of the ROIC being in excess of the WACC. The number of shares released is graded according to EPS growth, with 10% of the award being released for 4% pa in excess of inflation and the entire award released for 13% per annum in excess of inflation. The ROIC/WACC hurdle was achieved and EPS growth was greater than 13% per annum in excess of inflation therefore the entire award was released on 14 December 2008. 2 This ‘roll-over’ award is based on performance from 1 November 2006 to 30 September 2009 where the performance measure relates to EPS growth in excess of the rate of inflation and a performance hurdle of the ROIC being in excess of the WACC. The number of shares released is graded according to EPS growth, with 10% of the award being released for 4% per annum in excess of inflation and the entire award released for 13% per annum in excess of inflation. 3 This award is based on a) performance to 30 September 2010 where the performance measure relates to EPS growth in excess of the rate of inflation and b) performance to the 3rd anniversary of the Award date where the performance measure relates to the Company’s TSR ranking against the constituent companies of the FTSE 100 index ranked 30 to 100 by market capitalisation as calculated at the Award date. A performance hurdle of the ROIC being in excess of the weighted average cost of capital (WACC) must also be achieved for any of the award to be released. The number of shares released is graded according to a) EPS growth, with 5% of the award being released for 12% in excess of inflation and 50% of the award released for 39% in excess of inflation and b) ranking of the Company against the comparator group, with 7.5% of the award being released for median and 50% of the award being released for upper quartile. 4 This award is based on a) performance to 30 September 2011 where the performance measure relates to EPS growth in excess of the rate of inflation and b) performance to the 3rd anniversary of the Award date where the performance measure relates to the Company’s TSR ranking against the constituent companies of the FTSE 100 index ranked 30 to 100 by market capitalisation as calculated at the Award date. A performance hurdle of the ROIC being in excess of the WACC must also be achieved for any of the award to be released. The number of shares released is graded according to a) EPS growth, with 5% of the award being released for 12% in excess of inflation and 50% of the award released for 39% in excess of inflation and b) ranking of the Company against the comparator group, with 7.5% of the award being released for median and 50% of the award being released for upper quartile. 5 Christoph Mueller ceased employment with effect from 31 August 2009 due to redundancy. Under the terms of his departure and in accordance with the scheme rules these awards were released early subject to pro-ration for time elapsed and performance to cessation of employment.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 61 600 168 253 600 309 220 £000 £000 Maximum value based value s in the eing Value of award of Value xpected to xpected 09. A of bonus of Limited), % per annum % per calculated calculated ess of RPI ess of Estimated value of award of value Estimated www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI accordance with the scheme rules these awards were released were with the scheme rules these awards accordance ust also be achieved for any of the award to be released. The number be released. to the award of any for ust also be achieved e below £100m and all of the award being released for £150m synergistic £150m for being released the award £100m and all of e below 234.70p 93,350 01.09.09 – – 2 28.11.08 205.25p28.11.08 205.25p28.11.08 – 205.25p28.11.08 – 205.25p28.11.08 – 205.25p28.11.08 – 39,774 205.25p 28.11.11 – 78,606 28.11.11 200,131 123,264 28.11.11 313,830 292,326 28.11.11 744,262 148,990 379,329 28.11.11 107,186 272,896 1 1 1 1 1 1 VCSP sharesVCSP shares VCSP Maximum price on share 2008 2009 date Award award at 2009vesting at £ date vesting 2009 £ held at endedyear the price Market endedyear the price Market at Value held at 30 September 1 October 30 September share per 30 September share per vesting Planned/actual 30 September 2009 VCSP sharesVCSP during awarded during vested shares VCSP 254.6p at of in excess of inflation; of in excess quartile; and upper for released early subject to pro-ration for time elapsed and performance to cessation of employment. of cessation to time elapsed and performance for pro-ration subject to early of shares released is graded according to synergistic value achieved with none of the award being released for synergistic valu synergistic for being released the award with none of achieved value synergistic to according is graded released shares of more. or value Peter Long Peter Director Five-year long term cash plan Five-year Holidays First Choice (now PLC Holidays Long and First Choice Peter between cash bonus agreement long term the five-year Under in exc growth EPS £600,000, subject to a maximum of receive Long is eligible to Peter company, that of the 2005 AGM at approved as Trusts) Investment (excluding Mid-250 Index the FTSE of companies against the constituent ranking TSR the Company’s growth, 20 30 September the period to over the Committee by as determined personal objectives of and the achievement date, the award at The amount be payable. the bonus to of any for must also be achieved the WACC of in excess being the ROIC of hurdle performance to: according is graded payable 13 • for released the award and 35% of inflation of annum in excess 4% per for being released the award with 3.5% of growth, EPS b • the award median and 50% of for being released the award with 5% of group, against the comparator the Company of ranking TSR • personal objectives. of the achievement for the Bonus being payable 15% of The remaining wa ranking TSR the Company inflation, of annum in excess than 13% per greater was EPS growth achieved, was hurdle The ROIC/WACC Grand totalGrand m hurdle 1 performance margin 2007/2008. A profit Year Financial for VCSP the 1 of Tranche element of is the deferred This award 828,978 39,774 93,350 750,372 1,910,448 TotalWilliam WaggottTotal2 and in his departure of the terms Under redundancy. 31 August 2009 due to from with effect employment ceased Mueller Christoph 107,186 78,606 107,186 39,774 – 93,350 – 107,186 – 272,896 Johan LundgrenJohan Total MuellerChristoph 148,990 78,606 148,990 – 148,990 379,329 Total LongPeter Total 292,326 123,264 292,326 – – 123,264 313,830 292,326 744,262 Directors Böttcher Volker Dr Total BowtellPaul 78,606 123,264 78,606 – 78,606 200,131 Awards made under the VCSP, and which remain outstanding at 30 September 2009, are given in the table given below. 2009, are outstanding 30 September at remain which and VCSP, the made under Awards receive a deferred share award on 2 December 2009 as follows: 2 December on award share a deferred receive Bowtell Paul Long Peter Lundgren Johan William Waggott paid. was the award all of therefore in full achieved were quartile and personal objectives upper Executive Director Executive Böttcher Volker Dr Value Creation Synergy Plan (VCSP) Synergy Creation Value e 2009 and are ended 30 September year during the VCSP in the participated and Waggott Long, Bowtell, Lundgren Messrs Böttcher, 62 TUI Travel PLC Annual Report & Accounts 2009

Governance Remuneration report continued

Directors’ interests in ordinary shares of the Company As at 30 September 2009, the Directors’ interests in ordinary shares of the Company were: Ordinary shares of 10p each Director’s name Title as at 30 September 2009 Horst Baier Non-Executive Director – Dr Volker Böttcher Managing Director, Central Europe 37,577 Paul Bowtell Chief Financial Officer 424,625* Tony Campbell Non-Executive Director 43,268 Clare Chapman Non-Executive Director 10,000 Bill Dalton Non-Executive Director 10,000 Rainer Feuerhake Non-Executive Director – Dr Michael Frenzel Non-Executive Chairman – Jeremy Hicks Non-Executive Director – Sir Michael Hodgkinson Non-Executive Deputy Chairman and Senior Independent Director 20,000 Peter Long Chief Executive 2,428,235* Johan Lundgren Managing Director, Northern Region 27,297 Dr Erhard Schipporeit Non-Executive Director – Dr Albert Schunk Non-Executive Director – Harold Sher Non-Executive Director – Giles Thorley Non-Executive Director 25,000 William Waggott Commercial Director 103,061*

*Includes shares purchased under the Share Incentive Plan. 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 to be held on 9 February 2010. During the year, the price of the Company’s ordinary shares ranged between 174.8p and 279.25p and the mid-closing price on 30 September 2009 was 254.6p. On 1 October 2009, Tony Campbell was allocated 504 additional shares in respect of the Dividend Reinvestment Plan. The Remuneration report was approved by a duly authorised Committee of the Board of Directors on 30 November 2009 and signed on its behalf by:

Clare Chapman Chairman of the Remuneration Committee 30 November 2009

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 63 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI been properly prepared in accordance with the Companies Act with the Companies in accordance prepared been properly 2006; and with is consistent prepared are which the financial statements for the financial statements. been received not audit have our for adequate returns or company, us; or by visited not branches from with the agreement in not are audited be to Report Remuneration or and returns; records accounting made; or not audit. our for require and concern; the June 2008 of with the nine provisions compliance Company’s review. our Combined Code specified for Opinion on other matters prescribed by the prescribed matters Opinion on other Companies Act 2006 opinion: In our • has audited be to Report Remuneration Directors’ the The part of •year the financial for Report in the Directors’ given The information to report required are on which we Matters by exception the following: of in respect report to nothing have We if, you to report to required are we 2006 the Companies Act Under opinion: in our • the parent by kept been not have records accounting Adequate • the and the part of financial statements company The parent • are law specified by remuneration Directors’ of Certain disclosures •we and explanations all the information received not have We review: to required are we the Listing Rules Under • going to set out on page 47, in relation report, The Directors’ • the to relating report Governance the Corporate The part of Tant Oliver of and on behalf for Auditor) Statutory (Senior Auditor KPMG Audit Plc, Statutory Accountants Chartered Square 8 Salisbury London 8BB EC4Y 2009 30 November accordance with IFRSs as adopted by the EU; by with IFRSs as adopted accordance Accounting Accepted Generally with UK in accordance prepared and Practice; the the Companies Act 2006; and, as regards of the requirements the IAS Regulation. Article 4 of financial statements, Group the Group’s and of the parent company’s affairs as at 30 September as at affairs company’s the parent of and the Group’s then ended; year the loss for the Group’s 2009 and of • in prepared been properly have financial statements The Group • been properly have financial statements company The parent •with in accordance been prepared have The financial statements Opinion on financial statements opinion: In our • of the state of view true and fair a give The financial statements Scope of the audit of the financial statements Scope of the audit of the financial is statements financial an audit of of the scope A description of www.frc.org.uk/apb/scope/UKP. at web-site on the APB’s provided Respective responsibilities of Directors and of Directors responsibilities Respective Auditors Statement Responsibilities in the Directors’ fully As explained more the preparation for responsible are set out on page 48, the directors a true give they that being satisfied and for statements the financial of in audit the financial statements is to responsibility Our view. and fair on Auditing Standards and International law with applicable accordance with the comply us to require Those standards and Ireland). (UK Auditors. for Ethical Standards (APB’s) Board’s Auditing Practices We have audited the financial statements of TUI Travel PLC for the for PLC Travel TUI of the financial statements audited have We The 127. set out on pages 64 to 2009 ended 30 September year the preparation has been applied in that framework financial reporting financial (the Group) companies of group PLC Travel TUI the of Financial Reporting and International is applicable law statements The financial reporting the EU. by (IFRS) as adopted Standards the parent of has been applied in the preparation that framework Accounting UK and is applicable law financial statements company Practice). Accounting Accepted Generally (UK Standards in members, as a body, the Company’s to is made solely This report Companies Act the with sections 495, 496 and 497 of accordance might state we so that has been undertaken work audit 2006. Our state to required are we members those matters the Company’s to the fullest To purpose. no other and for report them in an auditors’ to responsibility assume or accept do not we law, by permitted extent members, and the Company’s than the Company other anyone to we the opinions for or this report, for work audit our for as a body, formed. have Independent Auditor’s report to the Members of TUI Travel PLC Travel of TUI the Members to report Auditor’s Independent 64 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Consolidated income statement for the year ended 30 September 2009

Year ended Year ended 30 September 30 September 2009 2008 Note £m £m Continuing operations Revenue 2 13,863 13,932 Cost of sales (12,705) (12,911) Gross profit 1,158 1,021 Administrative expenses (1,130) (1,217) Share of profit of joint ventures and associates 12 9 12 Operating profit/(loss) 37 (184)

Analysed as: Underlying operating profit 1, 2 443 398 Separately disclosed items 3 (340) (380) Amortisation of business combination intangibles 10 (56) (87) Impairment of goodwill 10 (7) (112) Taxation on profits of joint ventures and associates 12 (3) (3) 37 (184)

Financial income 4 72 122 Financial expenses 4 (161) (205) Net financial expenses 4 (89) (83) Loss before tax (52) (267) Taxation 7 42 – Loss for the year from continuing operations (10) (267) Discontinued operation Loss from discontinued operation 8 (14) – Loss for the year (24) (267)

Attributable to: Equity holders of the parent (25) (271) Minority interest 1 4 Loss for the year (24) (267)

Pence Pence Basic and diluted loss per share (pence) for loss attributable to the equity holders of the Company during the year – basic and diluted: from continuing operations 33 (1.0) (24.4) – basic and diluted: from discontinued operation 33 (1.3) –

Non-GAAP measures Reconciliation of underlying operating profit to underlying profit before tax £m £m Underlying operating profit 1, 2 443 398 Net underlying financial expenses 4 (77) (79) Underlying profit before tax 366 319

Pence Pence Underlying earnings per share (pence) for profit attributable to the equity holders of the Company during the year – basic 33 23.8 20.4 – diluted 33 23.5 20.2

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 5 65 (2) 29 56 17 48 51 29 £m (99) (89) (22) (50) 112 926 114 210 205 273 157 2008 (178) (235) (268) (149) (180) (270) (235) 9,327 2,596 4,429 6,005 1,653 3,322 2,749 2,591 2,596 1,130 (6,731) (1,167) (4,057) (4,682) (2,049) 30 September on its 3 1 (3) 30 77 13 51 36 £m (67) (59) (18) (97) 112 964 112 194 211 271 790 126 2009 (327) (284) (189) (801) (498) (108) (250) (604) 9,149 2,286 2,775 2,283 2,286 4,737 6,309 1,536 2,840 (6,863) (4,162) (5,091) (1,772) 30 September www.tuitravelplc.com 19 20 21 18 19 22 21 14 23 24 24 24 24 24 10 11 12 12 16 14 15 17 16 17 18 5(C) 5(C) 5(C) 25(I) 25(I) 25(I) 25(I) Note TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Paul Bowtell Paul Financial Officer Chief behalf by: behalf Total equity Total 2009 and signed on 30 November Directors of the Board of authorised Committee a duly by approved were The financial statements Retained deficit Retained interest Minority Total liabilities Total Net assets Current liabilities Current loans and borrowings Interest-bearing liabilities tax Deferred Equity capital Share Liabilities classified as held for sale Liabilities classified as held for Total assets Total Assets classified as held for sale Assets classified as held for Deferred tax assets tax Deferred Non-current assets Non-current Intangible assets Consolidated balance sheet balance Consolidated 2009 September 30 at Derivative financial instruments Derivative benefits Retirement financial instruments Derivative payables and other Trade payable tax Income financial instruments Derivative Provisions equity holders of the parent equity attributable to Total Property, plant and equipment Property, assets Current Inventories recoverable tax Income benefits Retirement Trade and other payables and other Trade reserves Other Provisions liabilities Non-current loans and borrowings Interest-bearing Investments in joint ventures and associates ventures in joint Investments investments Other receivables and other Trade asset benefit Retirement financial instruments Derivative investments Other receivables and other Trade Cash and cash equivalents 66 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Consolidated statement of cash flows for the year ended 30 September 2009

Year ended Year ended 30 September 30 September 2009 2008 Note £m £m Loss for the year (24) (267) Adjustment for: Depreciation and amortisation 10, 11 287 331 Impairment of intangible assets and property, plant and equipment 10, 11 132 145 Equity-settled share-based payment expenses 5(D) 16 14 (Profit)/loss on sale of property, plant and equipment 6 (12) 71 Share of profit of joint ventures and associates 12 (9) (12) (Gain)/loss on foreign exchange 6 (23) 26 Dividends received from joint ventures and associates 12 10 9 Financial income 4 (72) (122) Financial expenses 4 161 205 Loss from discontinued operation 8 14 – Taxation 7 (42) – Operating profit before changes in working capital and provisions 438 400 Increase in inventories (2) (5) Decrease/(increase) in trade and other receivables 93 (235) (Decrease)/increase in trade and other payables (183) 265 (Decrease)/increase in provisions and employee benefits (23) 42 Cash flows from operations 323 467 Interest paid (68) (109) Interest received 6 53 Income taxes paid (43) (33) Cash flows from operating activities 218 378 Investing activities Proceeds from sale of property, plant and equipment 161 347 Proceeds from disposal of subsidiaries net of cash disposed of – 2 Acquisition of subsidiaries net of cash acquired 13(B) (48) (90) Acquisition of minority shareholdings (3) (20) Investment in joint ventures, associates and other investments (51) (9) Acquisition of property, plant and equipment and software (234) (277) Cash flows from investing activities (175) (47) Financing activities Proceeds from new loans and deposits taken 17 232 Repayment of borrowings (280) (1,411) Repayment of finance lease liabilities (22) (26) Ordinary and minority interest dividends paid 24 (110) (70) Acquisition of shares for share-based payments 24 – (7) Cash flows from financing activities (395) (1,282) Net decrease in cash and cash equivalents (352) (951) Cash and cash equivalents at start of the year 17 1,130 1,959 Reclassification of cash to assets classified as held for sale (4) – Effect of foreign exchange on cash held 16 122 Cash and cash equivalents at end of the year 17 790 1,130 Movements in cash and net debt are presented in Note 26. In accordance with IAS 7 Cash flow statements, the acquisition of shares for share-based payments has been restated in the comparative year to be presented as a financing activity rather than an operating activity.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 5 4 – 67 55 50 55 37 £m (62) 180 163 322 2008 (267) Year ended Year 30 September 2 (1) £m (24) (60) (81) 129 105 2009 (205) (203) (271) Year ended Year 30 September www.tuitravelplc.com 7 12 5(C) 25(J) 25(J) 25(J) Note TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Total Minority interest Minority Loss for the year the Loss for the year for (expense)/income recognised Total (203) Tax on items taken directly to equity to directly taken on items Tax to: Attributable the parent holders of Equity Foreign exchange translation exchange Foreign Consolidated statement of recognised income and expense income of recognised statement Consolidated 2009 30 September ended year the for Cash flow hedges: Cash flow –value in fair movement Actuarial (losses)/gains arising in respect of defined benefit pension schemes defined of arising in respect (losses)/gains Actuarial – statement the income to recycled amounts sale financial asset for available of value Changes in the fair in equity directly Net (loss)/income recognised (179) 68 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements

1. Accounting policies (iv) Business Performance Review The following accounting policies have been applied consistently to all The Group’s business activities, together with factors likely to affect years presented in these consolidated financial statements. its future development, performance and position are set out in the Business Performance Review. In addition, Note 25 sets out the The consolidated financial statements are presented in the Group’s Group’s objectives, policies and processes for managing its capital, presentational currency of Sterling, rounded to the nearest million. financial risks, financial instruments and hedging activities as well as its exposures to credit and liquidity risk. (A) Statement of compliance The consolidated financial statements for the year ended (v) Funding and liquidity 30 September 2009 have been prepared and approved by the The Board remains satisfied with the Group’s funding and liquidity Directors in accordance with International Financial Reporting position. The two main sources of debt funding are the shareholder Standards as adopted by the European Union (Adopted IFRSs). loan from TUI AG, which is €919m and is being repaid in instalments The consolidated financial statements were approved on over the period to April 2011 and the £910m of syndicated bank 30 November 2009. revolving credit facility which matures in June 2012. On 25 September 2009 the Group also agreed an annually renewable £40m bonding and (B) Basis of preparation letter of credit facility. In addition, on 1 October 2009, the Group (i) Parent Company offered £350m of senior unsecured convertible bonds due 2014. The TUI Travel PLC (the Company) is a company incorporated and coupon has been set at 6.0% per annum, and the conversion price has domiciled in England and Wales under the Companies Act 1985 and been set at 349.3p per share, which represents a premium of 33.0% listed on the London Stock Exchange. The Registered Office of the over the volume weighted average price of TUI Travel PLC’s ordinary Company is TUI Travel House, Business Quarter, Fleming Way, shares from launch to pricing. Settlement occurred on 5 October 2009. Crawley, West Sussex RH10 9QL. The ratio of Earnings Before Interest, Taxation, Depreciation, The Company has elected to prepare its parent company financial Amortisation and operating lease Rentals (EBITDAR) to fixed charges statements in accordance with UK GAAP. (being the aggregate amount of interest and any other finance charges in respect of borrowings and including all payments under operating (ii) Underlying measures of profits and losses leases) and the ratio of net debt to EBITDA, which the Board believes The Group believes that underlying operating profit, underlying profit to be the most useful measures of cash generation and gearing, as before tax and underlying earnings per share provide additional well as being the main basis for the Group’s credit facility covenants, guidance to statutory measures to help understand the underlying are currently well within the covenant limits. Forecasts reviewed by the performance of the business during the financial year. The term Board, including forecasts adjusted for significantly worse economic underlying is not defined under International Financial Reporting conditions, show continued compliance with these covenants. EBITDA Standards. It is a measure that is used by management to assess the is Earnings Before Interest, Taxation, Depreciation and Amortisation. underlying performance of the business internally and is not intended For both covenants earnings are calculated on an underlying basis as to be a substitute measure for Adopted IFRSs’ GAAP measures. The described in Note 1(B)(ii). Group defines these underlying measures as follows: On the basis of its forecasts, both base case and adjusted as Underlying operating profit is operating profit or loss from continuing described above, and available facilities, the Board has concluded that operations stated before separately disclosed items (Note 3), the going concern basis of preparation continues to be appropriate. amortisation of intangible assets acquired in business combinations, impairment of goodwill and taxation on the Group’s share of the (C) Basis of consolidation results of joint ventures and associates. The consolidated financial statements are prepared on the historical Underlying profit before tax is profit or loss from continuing cost basis other than derivative financial instruments, financial operations before taxation (Group and share of joint ventures and instruments held for trading, financial instruments classified as associates), amortisation of intangible assets acquired in business available for sale and liabilities for cash-settled share-based payments, combinations, impairment of goodwill and separately disclosed items which are stated at their fair value. Non-current assets and disposal included within both the operating result (Note 3) and net financial groups held for sale are stated at the lower of their carrying amount expenses (Note 4). and fair value less costs to sell. Underlying earnings used in the calculation of underlying earnings The Group financial statements consolidate those of the Company per share is profit after tax from continuing operations excluding and its subsidiaries (together referred to as the Group) and equity amortisation of intangible assets acquired in business combinations, account the Group’s interest in joint ventures and associates. The impairment of goodwill and separately disclosed items included within parent company financial statements present information about the both the operating result (Note 3) and net financial expenses (Note 4) Company as a separate entity and not about the Group. (net of related taxation). (i) Subsidiaries It should be noted that the definitions of underlying items being used Subsidiaries are entities controlled by the Group. Control exists when in these consolidated financial statements are those used by the the Group has the power, directly or indirectly, to govern the financial Group and may not be comparable with the term ‘underlying’ as and operating policies of an entity so as to obtain benefits from its defined by other companies within both the same sector or elsewhere. activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial (iii) Separately disclosed items statements of subsidiaries are included in the consolidated financial Separately disclosed items are those significant items which in information from the date that control commences until the date that management’s judgement are highlighted by virtue of their size or control ceases. 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 (Notes 3 and 4). www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 69 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI (D) Foreign currency (D) Foreign transactions currency (i) Foreign the foreign at translated are currencies in foreign Transactions assets Monetary the transaction. of the date ruling at rate exchange sheet the balance at currencies in foreign and liabilities denominated ruling at rate exchange foreign the at Sterling to translated are date are arising on translation differences exchange Foreign date. that arising on differences for (except statement in the income recognised the as a hedge of designated a financial liability of the retranslation hedges, qualifying cash flow or operation, in a foreign net investment and assets in equity). Non-monetary directly recognised which are in a foreign cost historical of in terms measured are liabilities that the of the date at rate using the exchange translated are currency in assets and liabilities denominated Non-monetary transaction. to translated are value fair at stated are that currencies foreign values the fair the dates ruling at rates exchange foreign at Sterling determined. were operations (ii) Foreign including goodwill operations, foreign The assets and liabilities of to translated are adjustments arising on consolidation, value and fair sheet date. the balance ruling at rates exchange the foreign at Sterling translated are operations overseas and expenses of The revenues the ruling at rates exchange the foreign to approximating rates at arising on differences exchange Foreign the transactions. of dates in the translation in equity directly been recognised have retranslation 2007. 1 January since reserve, exchange foreign a designated reserve, item a monetary gains and losses arising from exchange Foreign the settlement operation, a foreign to payable or from receivable are future, in the foreseeable likely planned nor which is neither of operation in a foreign a net investment part of form to considered reserve. in the translation in equity directly recognised and are operations in foreign (iii) Net investment differences currency foreign to accounting applies hedge The Group and operation the foreign of currency the functional arising between whether of regardless (Sterling) currency functional entity’s the parent parent. intermediate an through or is held directly the net investment a financial of arising on the retranslation differences currency Foreign in a foreign a net investment as a hedge of designated liability recognised of statement in the consolidated recognised are operation and are the hedge is effective that the extent and expense to income that the extent To reserve. in the translation within equity presented or in profit recognised are such differences the hedge is ineffective, the is disposed of a net investment loss. When the hedged part of or profit to is transferred reserve amount in the translation relevant loss on disposal. or the profit loss as part of (E) Financial instruments (i) Financial assets available and receivables, classified as loans either Financial assets are profit through value fair financial assets at sale financial assets, or for trade loss. Financial assets include cash and cash equivalents, or and derivative investments, loans, other receivables, other receivables, its of the classification determines The Group financial instruments. recognised Financial assets are initial recognition. financial assets at plus, in the price being the transaction normally value, fair at initially loss, directly or profit through value fair at financial assets not case of of The subsequent measurement costs. transaction attributable as follows: classification, financial assets depends on their (ii) Joint ventures and associates ventures (ii) Joint whose activities the Group entities controlled jointly are ventures Joint agreement. contractual established by control, jointly to has the power to has the ability which the Group those entities in are Associates the financial and over control, but not significant influence, exercise include the financial statements The consolidated policies. operating joint of and expense income recognised the total of share Group’s the date basis, from accounted on an equity and associates ventures until commences respectively significant influence or joint control that recorded are ventures and joint Associates it ceases. that the date share the Group’s changes in post-acquisition for adjusted as cost at accumulated of including goodwill net the entity net assets of of the losses exceeds of share impairment loss. When the Group’s the carrying associate, or venture the joint amount of carrying losses is further of nil and recognition to amount is reduced legal has incurred Group the that the extent to except discontinued the joint of behalf on made payments or obligations constructive or associate. or venture on consolidation eliminated (iii) Transactions and expenses income or gains unrealised and any balances Intra-group the in preparing eliminated are transactions, intra-group arising from gains arising from Unrealised financial statements. consolidated eliminated entities are controlled and jointly with associates transactions losses Unrealised in the entity. interest the Group’s of the extent to the to only gains, but as unrealised way in the same eliminated are impairment. of is no evidence there that extent (iv) Acquisition in stages (a ‘step purchases share is obtained in successive When control separately for is accounted each significant transaction acquisition’), liabilities acquired and the identifiable assets, liabilities and contingent the of value The fair is obtained. when control value fair at stated are liabilities may identifiable assets, liabilities and contingent acquiree’s adjustment Any transaction. each purchase of the date at be different acquirer the of held interests previously to relating values those fair to as a revaluation. for is accounted (v) Contingent acquisition consideration amount when the payment is recognised Contingent consideration The measured. and the amount can be reliably probable becomes negative against goodwill or adjusted is subsequently price purchase is revised. the amount payable of goodwill as the estimate sale assets held for (vi) Non-current carrying their if sale assets as held for classifies non-current The Group a sale transaction through principally will be recovered amount rather sale, the be classified as held for To use. continuing than through condition, present sale in their immediate for assets must be available such the sale of for and customary usual are that terms to subject only be to Sale is considered probable. sale must be highly assets, and their sell the a plan to to committed when management are probable highly the and complete a buyer locate to programme assets and an active their to in relation is reasonable that a price at plan has been initiated, will be the sale that is an expectation and there value, fair current Non-current classification. of the date from year within one completed balance on the Group’s carried sale are assets classified as held for less costs value amount and fair carrying their of the lower sheet at sell. to 70 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

Loans and receivables Derivatives Loans and receivables are non-derivative financial assets with fixed Derivatives are accounted for in accordance with the policy in 1(E)(iii). or determinable payments that are not quoted in an active market. Derecognition Such assets are carried at amortised cost using the effective interest The Group derecognises a financial liability when the contractual method if the time value of money is significant. Gains and losses are obligations to pay the contractual cash flows on the financial liability recognised in income when the loans and receivables are derecognised are discharged, cancelled or expire. or impaired, as well as through the amortisation process. This category of financial assets includes trade and other receivables. (iii) Derivative financial instruments Available for sale financial assets The Group uses derivative financial instruments to hedge its exposure Available for sale financial assets are those non-derivative financial to foreign exchange, interest rate and fuel price risks arising from assets that are not classified as loans and receivables or financial operational, financing and investment activities. In accordance with its assets at fair value through profit or loss. After initial recognition, treasury policy, the Group does not hold or issue derivative financial available for sale financial assets are measured at fair value, with gains instruments for trading purposes. However, derivatives that do not or losses recognised as a separate component of equity until the qualify for hedge accounting are accounted for as trading instruments. investment is derecognised or until the investment is determined to Derivative financial instruments are initially recognised at fair value on be impaired, at which time the cumulative gain or loss previously the date a derivative contract is entered into and are subsequently reported in equity is included in the consolidated income statement. remeasured at fair value. The method of recognising the resulting gain Note 1(Y)(iv) describes the basis on which fair value is determined. or loss depends on whether the derivative is designated as a hedging Cash and cash equivalents instrument and if so the nature of the item being hedged. The gain Cash and cash equivalents comprise cash balances and call deposits. or loss on remeasurement to fair value on derivatives not designated Bank overdrafts that are repayable on demand and form an integral as a hedging instrument is recognised immediately in the consolidated part of the Group’s cash management are included as a component income statement. Where derivatives qualify for hedge accounting, see of cash and cash equivalents for the purpose only of the consolidated Accounting Policy 1(F). statement of cash flows. (iv) Share capital Derivatives Ordinary shares are classified as equity. Incremental costs directly Derivatives are accounted for in accordance with the policy in 1(E)(iii). attributable to the issue of ordinary shares and share awards are recognised as a deduction from equity, net of any tax effects. Derecognition The Group derecognises a financial asset when the contractual rights (F) Hedge accounting to the cash flows from the asset expire, or it transfers the rights to The Group designates certain derivatives as either hedges of a receive the contractual cash flows on the financial asset in a transaction particular risk associated with a recognised asset or liability or a highly in which substantially all the risks and rewards of ownership of the probable forecast transaction (cash flow hedge) or a hedge of the financial asset are transferred. Any interest in transferred financial fair value of recognised assets or liabilities or a firm commitment assets that is created or retained by the Group is recognised as a (fair value hedge). separate asset or liability. On initial designation of the hedge, the Group formally documents the (ii) Financial liabilities relationship between the hedging instrument(s) and hedged item(s), Financial liabilities are either classified as financial liabilities measured including the risk management objectives and strategy in undertaking at amortised cost, or financial liabilities at fair value through profit or the hedge transaction, together with the methods that will be used to loss. Financial liabilities include trade and other payables, accruals, assess the effectiveness of the hedging relationship. The Group makes finance debt and derivative financial instruments. The Group determines an assessment, both at the inception of the hedge relationship as well the classification of its financial liabilities at initial recognition. Financial as on an ongoing basis, whether the hedging instruments are expected liabilities are recognised initially at fair value, normally being the to be ‘highly effective’ in offsetting the changes in the fair value or transaction price plus, in the case of financial liabilities not at fair value cash flows of the respective hedged items during the period for which through profit or loss, directly attributable transaction costs. The the hedge is designated, and whether the actual results of each hedge subsequent measurement of financial liabilities depends on their are within a range of 80-125%. For a cash flow hedge of a forecast classification, as follows: transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could Financial liabilities measured at amortised cost ultimately affect reported net income. All financial liabilities are initially recognised at fair value. For interest- bearing loans and borrowings this is the fair value of the proceeds Derivatives are recognised initially at fair value; attributable transaction received net of issue costs associated with the borrowing. After initial costs are recognised in profit or loss as incurred. Subsequent to initial recognition, financial liabilities other than those at fair value through recognition, derivatives are measured at fair value, and changes therein profit or loss are subsequently measured at amortised cost using the are accounted for as described below: 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 and other revenues and finance costs. This category of financial liabilities includes trade and other payables.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 71 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI (G) Revenue inclusive amount earned from the aggregate represents Revenue agency incoming of flying, provision scheduled and charter tours, and other received commission agency travel services, destination business. of course in the ordinary customers to supplied services the after and is stated transactions intra-group excludes Revenue is reported Revenue and sales taxes. discounts trade deduction of or operator the tour of a liability which are charges fixed of gross passenger per and other Duty Passenger include Air These airline. Contribution in Protection the ATOL and levies, including charges the UK. recognition (i) Revenue when the significant statement in the income is recognised Revenue the buyer. to been transferred ownership have of risks and rewards the sale from received revenues and other commissions agency Travel earned, typically are when they recognised are product party third of is in-house product of in respect Revenue final payment. of on receipt individual travel from Revenue departure. of on the date all recognised and with airlines, hotels the customer by booked modules directly uses departs or when the customer agencies is recognised incoming service. the respective significant uncertainties are there if is recognised No revenue or costs due, associated the consideration of recovery regarding goods. of possible return income) (deferred in advance (ii) Client monies received holidays to relating sheet date the balance at Client monies received and end is deferred year the and flights departing after commencing payables. and other within trade included of revenue (iii) Valuation the contractual at is stated acts as principal, revenue the Group Where provided. goods and services of value the of amounts on behalf acts as agent and collects the Group Where value the at is stated revenue services, goods or of principal provider value. sales transaction the total earned and not commissions the of provider the service between acts as intermediary the Group Where basis as the on a net is presented revenue and the end customer, of and the cost the customer to the sales price between difference identified as intermediaries Businesses are purchased. the services including: the control principally criteria, of dependent on a number risk, and customer inventory service, of the provision over exercised risk. credit lease income (iv) Aircraft income in operating recognised are incomes lease rental Operating the lease term. basis over as earned, on a straightline (H) Expenses lease payments (i) Operating in the income recognised leases are operating made under Payments the lease. Lease of the term basis over on a straightline statement as an statement the income in recognised are received incentives the lease. of the term lease expense over the total part of integral income income statement. income income statement in the statement income consolidated consolidated consolidated income statement immediately. statement income consolidated income statement. income consolidated consolidated consolidated consolidated When the forecast transaction subsequently results in the recognition results subsequently transaction When the forecast the associated non-financial liability, a non-financial asset or of and is the hedging reserve from loss is removed gain or cumulative the non- of amount carrying other or included in the initial cost transaction a forecast a hedge of If liability. financial asset or a a financial asset or of in the recognition results subsequently recognised were gains and losses that the associated financial liability, the into reclassified are in equity directly (ii) Fair value hedges value (ii) Fair as a hedge financial instrument is designated a derivative Where an or liability asset or a recognised of value in fair variability the of the of value all changes in the fair firm commitment, unrecognised statement. in the income immediately recognised are derivative the change by is adjusted the hedged item of value The carrying it if being hedged (even the risk is attributable to that value in fair gains value fair and any amortised cost) or cost at carried is normally recognised are the hedged risk of losses on remeasurement or would those gains if (even statement in the income immediately in equity). directly be recognised normally Prospective hedge testing is performed at the inception of the hedge of the inception at is performed hedge testing Prospective through sheet date, each balance at and subsequently relationship transaction the hedged forecast of the critical terms of comparison amount the maturity, are and the hedging instrument. Critical terms instrument the hedging to flows relating the cash of and currency is hedge testing Retrospective hedged transaction. and the forecast offset using a dollar principally date each reporting at performed the of values changes in the fair the cumulative analysis, comparing and the hedging instrument. hedged transaction forecast hedge for meets the criteria When a hedging instrument no longer the entity or exercised, or is sold, terminated or accounting, expires is hedge accounting the hedge relationship, of designation revokes is still transaction the hedged forecast If prospectively. discontinued in remains point that loss at gain or the cumulative occur, to expected when the policy with the above in accordance and is recognised equity to expected is no longer the hedged transaction If occurs. transaction in equity loss recognised gain or unrealised the cumulative place, take in the is recognised same period or periods during which the hedged forecast transaction which the hedged forecast periods during same period or the affects (i) Cash flow hedges of as a hedge is designated financial instrument a derivative Where liability, or asset a recognised arising from in cash flows variability the fair any part of the effective transaction, forecast probable a highly or financial instrument is recognised on the derivative loss gain or value the hedge portion of ineffective Any in the hedging reserve. directly within the immediately is recognised statement in the same period or periods during which the asset which periods during period or in the same statement loss. or profit assumed affects liability or acquired two the preceding by than those covered other hedges, cash flow For from loss is removed gain or cumulative the associated paragraphs, in the and recognised equity 72 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

(ii) Finance lease payments For cash-settled transactions, the resulting liability for the Group is Minimum lease payments are apportioned between the finance charged to expenses at its fair value as at the date of the performance charge and the reduction of the outstanding liability. The finance of the service by the beneficiary. Until payment of this liability, the fair charge is allocated to each period during the lease term so as to value of the liability is remeasured at every reporting date and all produce a constant periodic rate of interest on the remaining balance changes in the fair value are carried with an effect on results. of the liability. (iv) Own shares held by the Employee Benefit Trust (iii) Marketing and other direct sales costs Transactions of the Group-sponsored Employee Benefit Trust are Marketing, advertising and other promotional costs, including those included in the Group’s consolidated financial statements. In particular, related to the production of brochures, are expensed when the benefit the trust’s purchase of shares in the Company is debited directly in of the goods or services is made available to the Group. In particular, equity to retained earnings. brochure costs are expensed when the Group has access to the related advertising or promotional material. (v) Short term benefits Short term employee benefits are measured on an undiscounted basis (I) Employee benefits and are expensed as the related service is provided. (i) Defined contribution plans (J) Financial income and expenses Obligations for contributions to defined contribution pension plans are Financial income comprises interest income on funds invested recognised as an expense in the income statement as incurred. (including available for sale financial assets), dividend income, gains (ii) Defined benefit plans on the disposal of available for sale financial assets and changes in the The Group’s net obligation in respect of defined benefit pension plans fair value of financial assets or liabilities at fair value through profit or is calculated separately for each plan by estimating the amount of loss. Interest income is recognised as it accrues in profit or loss, using future benefit that employees have earned in return for their service the effective interest method. Dividend income is recognised in profit in current and prior periods. That benefit is discounted to determine or loss on the date that the Group’s right to receive payment is its present value and any unrecognised past service costs and the fair established, which in the case of quoted securities is the ex-dividend value of any plan assets is deducted in calculating the overall liability. date. Foreign currency gains and losses are reported on a net basis. The liability discount rate is the yield at the balance sheet date on AA Financial expenses comprise interest expense on borrowings, credit-rated bonds denominated in the currency of and having the unwinding of the discount on provisions, changes in the fair value of same maturity dates approximating to the terms of the Group’s financial assets or liabilities at fair value through profit or loss and obligations. The calculation is performed by a qualified actuary using impairment losses recognised on financial assets. All borrowing costs the projected unit credit method. are recognised in profit or loss using the effective interest method. Where the calculation results in a benefit to the Group, the asset Foreign currency gains and losses are reported on a net basis. recognised is limited to the present value of any future refunds from (K) Taxation the plan or reductions in future contributions to the plan which are Income tax comprises current and deferred tax. Income tax is under the control of the Group. recognised in the consolidated income statement except to the extent When the benefits of a plan are improved, the portion of the that it relates to items recognised directly in equity, in which case it is increased benefit relating to past services by employees is recognised recognised in equity. as an expense in the income statement on a straightline basis over the average period until the benefits become vested. To the extent that (i) Current tax the benefits vest immediately, the expense is recognised immediately Current tax is the expected tax payable on the taxable income for in the income statement. the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of All actuarial gains and losses are recognised in the period they occur previous periods. directly in equity through the consolidated statement of recognised income and expense. Either monthly or annual contributions are made (ii) Deferred tax to funded schemes. Deferred tax is provided or recognised using the balance sheet liability method, providing for temporary differences between the carrying (iii) Share-based payment transactions amounts of assets and liabilities for financial reporting purposes and The Group’s share award programmes allow certain Group employees the amounts used for taxation purposes. The following temporary to acquire shares of the Company; these shares are awarded by the differences are not provided for: the initial recognition of goodwill Company. For equity-settled transactions, the fair value of services is not deductible for tax purposes, the initial recognition of assets or measured by the fair value of the shares at the time awarded and is liabilities in a transaction that is not a business combination and recognised as an employee expense with a corresponding increase differences relating to investments in subsidiaries to the extent that in equity. The fair value is spread over the period during which the they will probably not reverse in the foreseeable future. The amount employee becomes entitled to the awards. of deferred tax asset recognised is based on the expected manner of The fair value of the awards is measured using option valuation realisation or settlement of the carrying amount of assets and liabilities, models, taking into account the terms and conditions upon which the using the tax rate at which the asset or liability is expected to reverse awards were made. The amount recognised as an expense is adjusted in future periods, based on tax laws enacted or substantively enacted to reflect the actual number of share awards that vest except where at the balance sheet date. forfeiture is due only to market-based performance conditions not meeting the threshold for vesting.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 73 www.tuitravelplc.com obtained by the Group (up to 15 years) 15 (up to the Group obtained by TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Computer softwareComputer Brands acquisition of date at book Order occurs period until travel the Over Customer relationshipsyears – 10 3 impairment. for annually amortised but is tested Goodwill is not will be value which the period during Over plant and equipment (Q) Property, (i) Owned assets years 15 – 20 less cost at stated plant and equipment are property, of Items and impairment losses. depreciation accumulated and equipment plant property, of item an significant parts of Where items as separate for accounted are they lives, useful different have plant and equipment. property, of (ii) Leased assets all the risks and assumes substantially which the Group Leases in leases. Leased assets classified as finance ownership are of rewards an amount equal to at stated lease are a finance of way by acquired the minimum of value and the present value fair their of the lower the lease, less accumulated of the inception at lease payments accounted are and impairment losses. Lease payments depreciation 1(H) above. as set out in Note for (P) Intangible assets (i) Goodwill applying the by for accounted are All business combinations method. purchase subsidiaries, of arising on acquisition amounts Goodwill represents the represents Goodwill entities and associates. controlled jointly and payable or paid consideration of value the fair between difference and contingent the identifiable assets, liabilities of value the net fair can be sold which those Identifiable intangibles are liabilities acquired. those whether of legal rights regardless which arise from or separately accumulated less any cost at Goodwill is stated separable. rights are generating those cash to impairment losses. Goodwill is allocated and is not the business combination benefit from to units expected is impairment. Impairment testing for annually amortised but tested which goodwill is at level the lowest at based on assets grouped joint of management purposes. In respect internal for monitored goodwill is included in amount of the carrying and associates, ventures associate. or venture in the joint the investment amount of the carrying the at If acquisitions. of made in respect adjustments are value Fair the acquiree’s of values fair the amounts of sheet date, balance be established provisionally, identifiable assets and liabilities can only taken are values these adjustments to used. Any are values then these within 12 months of must be recorded goodwill and as adjustments to the acquisition. in the income is recognised goodwill arising on an acquisition Negative upon acquisition. statement assets intangible and other software (ii) Computer part of an integral is not that all software of consists software Computer less accumulated cost at and is stated hardware computer the related and impairment losses. amortisation (iii) Amortisation on a straightline statement the income to is charged Amortisation each type of of life economic useful the estimated basis over intangible asset as follows: A deferred tax asset is recognised only to the extent that it is probable it that the extent to only asset is recognised tax A deferred which the asset can against will be available taxable profits future that it is no that the extent to reduced assets are tax be utilised. Deferred will be realised. benefit tax the related that probable longer (L) Dividends as recognised is shareholders the Company’s Dividend distribution to which the in the period in financial statements in the Group’s a liability and payment for authorised and approved appropriately dividends are Unpaid dividends that the Company. of the discretion at no longer are the financial to in the notes disclosed are meet these criteria do not statements. (M) Earnings per share (EPS) data share earnings per basic and diluted presents The Group dividing the profit by Basic EPS is calculated shares. its ordinary for the by the Company of shareholders ordinary loss attributable to or outstanding during the shares ordinary of number average weighted average weighted adjusting the by is determined EPS period. Diluted all dilutive of the effects outstanding for shares ordinary of number and continuing both for EPS measures shares. ordinary potential with in accordance been presented have operations discontinued underlying EPS and diluted a basic also presents The Group IAS 33. 1(B)(ii) earnings as defined in Note based on underlying measure 33. in Note presented are the EPS calculation details of Further above. sale assets held for (N) Non-current group a disposal asset or a non-current that IFRS 5 requires its sale if asset is classified as held for containing a non-current than sale rather through principally will be recovered amount carrying sale and sale is immediate for use, it is available continuing through year. within one probable highly assets and sale, non-current as held for On initial classification carrying previous of the lower at measured are disposal groups to adjustments taken with any sell to less costs value amount and fair gains and losses on subsequent The same applies to loss. or profit remeasurement. goodwill first to is allocated impairment loss on a disposal group Any no basis (except rata applicable assets on a pro remaining and then to assets or tax financial assets, deferred inventories, to loss is allocated in measured be to which continue benefit assets, employee policies). accounting with the Group’s accordance basis of the measurement from excluded Certain assets/liabilities are assets Taxes), assets (IAS 12 Income tax IFRS 5 including: deferred Benefits) and benefits (IAS 19 Employee employee arising from IAS 39 Financial Instruments: of within the scope financial assets and Measurement. Recognition (O) Investments sale assets and are for classified as available are investments Trade with value fair at recorded are They assets. non-current included under is value impairment to Any equity. to taken value in movements statement. in the income recorded held which are securities and equity in debt investments Short term value, fair at stated assets and are classified as current are trading for statement. in the income loss recognised gain or resultant with any 74 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

(iii) Depreciation (R) Impairments Depreciation is charged to the income statement on a straightline (i) Financial assets basis over the estimated useful economic lives of each part of an item A financial asset is assessed at each reporting date to determine of property, plant and equipment. Freehold land is not depreciated. whether there is any objective evidence that it is impaired. A financial The useful economic lives are as follows: asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated Freehold properties Up to 50 years future cash flows of that asset. Short leasehold improvements Lease period or useful economic life if shorter An impairment loss in respect of a financial asset is calculated as the Owned aircraft Up to 18 years difference between its carrying amount and its recoverable amount. Finance leased aircraft An impairment loss in respect of an available for sale financial asset is and equipment Lease period or useful economic calculated by reference to its fair value. The recoverable amount of the life if shorter Group’s receivables which are carried at amortised cost is calculated as Aircraft spares 12 years the present value of estimated future cash flows, discounted at the Cruise ships 20 years original effective interest rate (i.e. the effective interest rate computed Yachts 5-15 years at initial recognition of these financial assets). Receivables with a short Motor boats 15-24 years duration are not discounted. Computer equipment including Individually significant financial assets are tested for impairment on an retail computer equipment 3-5 years individual basis. The remaining financial assets are assessed collectively Retail fixtures and fittings 8 years in groups that share similar credit risk characteristics. Other assets 4 years All impairment losses are recognised in profit or loss. Any cumulative The cost of major overhauls of owned airframes and engines is loss in respect of an available for sale financial asset previously capitalised and depreciated over the period until the next scheduled recognised in equity is transferred to profit or loss. An impairment major overhaul. loss is reversed if the reversal can be related objectively to an event The depreciation methods, useful economic lives and residual values occurring after the impairment loss was recognised. For financial are reassessed annually. Revisions to useful economic lives and residual assets measured at amortised cost and available for sale financial values are accounted for prospectively from the date of change. assets that are debt securities, the reversal is recognised in profit or loss. For available for sale financial assets that are equity securities, Assets under construction are not depreciated. the reversal is recognised directly in equity. (iv) Borrowing costs (ii) Non-financial assets In respect of borrowing costs relating to qualifying assets, the Group The carrying amount of the Group’s non-financial assets, other than capitalises borrowing costs directly attributable to the acquisition, inventory and deferred tax assets, are reviewed at each balance sheet construction or production of a qualifying asset as part of the cost date to determine whether there is any indication of impairment. If of that asset. such an indication exists, the asset’s recoverable amount is estimated. The Group has capitalised borrowing costs with respect to pre-delivery For goodwill, the recoverable amount is estimated at each balance payments relating to aircraft. sheet date. (v) Sale and leaseback transactions An impairment loss is recognised whenever the carrying amount of an When a sale and leaseback results in a finance lease, any gain on the asset or its cash generating unit exceeds its recoverable amount. The sale is deferred and recognised as income over the lease term. Any recoverable amount of an asset or cash generating unit is the greater loss on the sale is immediately recognised as an impairment loss when of its value in use and fair value less costs to sell. In assessing value in the sale occurs. use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market If the leaseback is classified as an operating lease, then any gain is assessments of the time value of money and the risks specific to the recognised immediately if the sale and leaseback terms are asset. A cash generating unit is the smallest identifiable group of demonstrably at fair value. Otherwise, the sale and leaseback are assets that generates cash inflows that are largely independent of accounted for as follows: the cash inflows from other assets or groups of assets. If the sale price is below fair value then the gain or loss is recognised Impairment losses are recognised in profit or loss. Impairment losses immediately other than to the extent that a loss is compensated for recognised in respect of cash generating units are allocated first to by future rentals at a below-market price, then the loss is deferred reduce the carrying amount of goodwill allocated to the cash and amortised over the period that the asset is expected to be used. generating unit and then to reduce the carrying amount of other If the sale price is above fair value, then any gain is deferred and assets in the unit on a pro rata basis. amortised over the useful life of the asset. An impairment loss in respect of goodwill is not reversed. In respect If the fair value of the asset is less than the carrying amount of the of other assets, impairment losses recognised in prior periods are asset at the date of the transaction, then that difference is recognised assessed at each reporting date for any indications that the loss has immediately as a loss on the sale. 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.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 75 www.tuitravelplc.com financial statements, parties financial statements, consolidated consolidated TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI are considered to be related to the Group if the Group has the ability the Group if the Group to related be to considered are significant exercise or party the control to indirectly, or directly decisions, or making financial and operating the party over influence common subject to are and the party the Group where or versa, vice be parties may Related significant influence. common or control entities. other individuals or (W) Segment reporting is that Group the of A segment is a distinguishable component (business services or products related in providing engaged either within a particular services or products in providing segment), or which is subject to segment), (geographical environment economic segments. other those of from different are that risks and returns business the Group’s of in respect is presented Segment information segment for format primary The Group’s segments. and geographical 2, all segments. As described in Note is based on business reporting net financial costs, corporate segments except to allocated are items assets and liabilities. expenses, and corporate (X) Use of estimates make management to requires financial statements of The preparation of the application affect and assumptions that judgements, estimates assets, liabilities, amounts of policies and the reported accounting these estimates. from differ may results and expenses. Actual income on an ongoing reviewed and underlying assumptions are Estimates in the period recognised are estimates accounting to basis. Revisions periods affected. future and in any revised are which the estimates in and assumptions critical judgements, significant estimates Details of financial the consolidated to notes disclosed in the relevant are described in and judgements are estimates The key statements. 31. Note (U) Minority interest net assets attributable of sheet, the share balance In the consolidated of component as a separate is disclosed shareholders minority to a financial although it is neither capital and reserves, share after equity statement income The consolidated instrument. an equity nor liability attributable to year the for result the discloses the amount of shareholders. minority a minority of put option in respect written has a the Group Where the purchase to obligation and has an unavoidable interest as a financial liability is recorded interest the minority shareholding, of component as a separate reported than being rather value, fair at and instead shareholders minority is attributable to No result equity. each at recorded are the financial liability of value the fair changes to or financial income within statement period end in the income financial expenses. held in a shareholding interest a minority sale of or On purchase in its decreases or increases recognises the Group subsidiary, Group in equity. directly interest (V) Related parties these the purpose of For balance sheet when the sheet balance consolidated consolidated (S) Inventories value. net realisable or cost of the lower at measured are Inventories less the estimated selling price is the estimated value Net realisable required costs variable until the sale and the estimated incurred costs the net where down individually written are All inventories sell. to amounts. carrying than their is lower inventories of value realisable is the items inventory similar method applied to The measurement formula. cost average weighted (T) Provisions in the is recognised A provision Group has a legal or constructive obligation as a result of a past event, of as a result obligation constructive has a legal or Group to will be required benefits economic of an outflow that it is probable benefits can be economic of and the outflow settle the obligation determined are provisions is material, the effect If estimated. reliably that rate a pre-tax cash flows at future the expected discounting by money of value the time assessments of market current reflects the liability. and the risks specific to leased aircraft for provision (i) Maintenance the terms under upon the Group placed the legal obligations reflect To the maintenance, is made for leases, provision certain operating of engines and leased airframes, operating of costs and repair overhaul value is based on the present The provision components. certain other the of life economic the useful over costs external anticipated total of and published experienced costs to reference by asset calculated is calculated statement the income to The charge data. manufacturers’ reference flown and by hours and cycles of the number to reference by charged are Costs incurred cycle. overhaul the full the length of to the of value the the timing nor Neither against the provision. can be averaged but they determined can be precisely expenditure is values discounted of The unwinding a fleet. time and over over as a financial expense. statement the income to charged and engines is owned airframes of overhauls major of The cost the period until the next scheduled over capitalised and depreciated overhaul. major provision (ii) Restructuring has when the Group is recognised restructuring for A provision the plan, and restructuring a detailed and formal approved publicly. has been announced or has commenced either restructuring for. provided not are costs operating Future contracts (iii) Onerous when the expected is recognised contracts onerous for A provision than lower are the contract from the Group by be derived benefits to the contract. under meeting its obligations of cost the unavoidable the of the lower of value the present at is measured The provision net cost and the expected the contract terminating of cost expected is established, the a provision Before with the contract. continuing of with impairment loss on the assets associated any recognises Group contract. that 76 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

(Y) Determination of fair values (ix) Share-based payments A number of the Group’s accounting policies and disclosures require The fair value of the shares awarded is measured using option the determination of fair value, for both financial and non-financial valuation models, taking into account the terms and conditions upon assets and liabilities. Fair values have been determined for which the awards were made. The valuation basis is identical whether measurement and/or disclosure purposes based on the following the awards will be settled in cash or shares. methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to (Z) New Standards and interpretations not yet adopted that asset or liability. IFRS 8 Operating Segments has been endorsed by the European Union and will be effective for the year ending 30 September 2010. (i) Property, plant and equipment IFRS 8 introduces the ‘management approach’ to segment reporting The fair value of property, plant and equipment recognised as a result and will require presentation and disclosure of segment information of a business combination is based on market values. The market value to be based on the internal reports regularly reviewed by the Group’s of property is the estimated amount for which a property could be Chief Operating Decision Maker in order to assess each segment’s exchanged on the date of valuation between a willing buyer and a willing performance and to allocate resources to them. Currently the Group seller in an arms length transaction after proper marketing wherein presents segment information in respect of its business segments the parties had each acted knowledgeably, prudently and without (Note 2) and will continue to do so under the new standard. The compulsion. The market value of items of plant, equipment, fixtures Group is currently assessing the impact that this standard will have and fittings is based on the quoted market prices for similar items. on the disclosures presented for each segment. (ii) Intangible assets IFRS 3 (2008) Business Combinations supersedes IFRS 3 (2004) The fair value of intangible assets recognised as a result of a business Business Combinations and has been endorsed by the European combination, including brands, customer relationships and the Union and will be effective for all acquisitions completing on or after customer order book at the date of acquisition, is valued by reference 1 October 2009. There will be no retrospective application. to external market values or income based methods. Income based methods estimate the future economic benefits to be derived from IFRS 3 (2008) changes the treatment of incidental acquisition ownership of the asset by identifying, quantifying and separating cash expenses, the treatment of deferred consideration payments which flows attributable to the asset and capitalising their present value. are contingent on continued employment, the measurement of consideration payable, and the treatment of changes to the amount (iii) Inventories of consideration payable. It is likely to lead to items being expensed in The fair value of inventories acquired in a business combination is the income statement which would previously have been included as determined based on the estimated selling price in the ordinary part of the cost of investment in an acquired business. The financial course of business less the estimated costs of completion and sale, impact of this revised standard will be determined by the prospective and a reasonable profit margin based on the effort required to acquisitions undertaken by the Group. complete and sell the inventories. The following standards are also endorsed by the European Union but (iv) Investments in equity and debt securities are not expected to have a significant impact on the Group’s financial The fair value of financial assets at fair value through profit or loss and statements in future years: available for sale financial assets is determined by reference to their IAS 1 (2008) Presentation of Financial Statements has been quoted closing bid price at the reporting date, where available. The fair amended and will be applicable for the first time for the year ending value of held to maturity investments is determined on initial recognition 30 September 2010. The changes will have a presentational impact and thereafter for disclosure purposes only. only and will not affect the recognition or measurement of items in the financial statements. (v) Trade and other receivables Trade receivables are recognised at their fair value and subsequently IAS 32 (2008) Financial Instruments: Presentation clarifies the recorded at amortised cost using the effective interest method as treatment of puttable financial instruments and will be effective for reduced by allowances for estimated irrecoverable amounts. An the first time for the year ending 30 September 2010. allowance for irrecoverable amounts is established when there is IAS 39 (2008) Financial Instruments: Recognition and Measurement objective evidence that the Group will not be able to collect all is effective for the first time for the year ended 30 September 2010. amounts due according to the original terms of the receivables. The The revised standard allows reclassification of instruments into and amount of allowance is the difference between the asset’s carrying out of ‘at fair value through profit and loss’ in certain circumstances amount and the present value of estimated future cash flows. and clarifies the designation of hedges at a segment level. (vi) Trade payables IFRS 7 (2008) Financial Instruments: Disclosure is effective for the Trade payables are recognised at their fair value and subsequently first time for the year ending 30 September 2010 and introduces recorded at amortised cost using the effective interest method. further disclosure requirements in respect of fair value measurements and liquidity risk. (vii) Derivatives The fair value of foreign currency contracts, fuel forward contracts and The Group continues to monitor the potential impact of other option contracts is their forward market price at the balance sheet date, new standards and interpretations which may be endorsed by the based on external valuations or internal valuations using market data. European Union and require adoption by the Group in future accounting periods. (viii) Non-derivative 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. www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 77 (77) 398 319 443 366 ed in the gion. Segment asonable basis. www.tuitravelplc.com and Eliminations/ Total Ventures & Destinations Accommodation TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Specialist & Joint Specialist & Joint Total Emerging Total Emerging Accommodation Ventures Mainstream Sector Mainstream Mainstream Sector Mainstream 23411––56 12032481311– –––––– –3–3 –––––8 –––8 –2–215 –––8 ––––11747––92 –––––7 –––7 –––––– –3–3 – 71 – 71 9 58 3 – – 141 £m £m £m £m £m £m £m £m £m £m 6666 206 204 33 33 305 303 31 30 59 54 60 60 15 15 (27) 443 (27) 435 18 11547 (124) 71 9 154 18 272 6 5 33 36 13 9 (41) 3 37 14 340 £m £m £m £m £m £m £m £m £m £m (33) (80) (19) (132) – – (186) – 318 – Europe Region Europe Sector Sector Sector Sector Associates Corporate Group Central Northern Western Mainstream Markets Activity & Destinations and Eliminations/ Total Europe Region Europe Sector Sector Sector Sector Associates Corporate Group 4,829 4,302 2,671 11,802 825 816 738 – (318) 13,863 4,796 4,151 2,652 11,599 816 758 549 – – 13,722 Central Northern Western Mainstream Markets Activity Analysed as: Analysed Continuing operations Net financial expenses excluding separately disclosed items (Note 4) (Note items disclosed separately Net financial expenses excluding tax before Underlying profit (79) Acquired operations Acquired ventures and associates ventures profit/(loss)Underlying operating as: Analysed 62Continuing operations 178 37 62 277 178 26 37 50 277 26 57 15 42 (27) 57 398 15 (27) 390 – acquired operations – acquired revenue external Total (loss)/profitOperating business of Amortisation intangiblescombination 4,702 disclosed itemsSeparately goodwillImpairment of joint of on profits (113)Taxation 4,377 (104) 62 2,752 1 112 11,831 224 20 58 819 – (197) 15 2 780 1 301 – 61 502 112 17 (4) – 8 46 – 42 – 8 12 – 5 13,932 10 (38) – – (184) – 11 – – 380 – 87 112 Inter segment revenueInter revenue: External operations– continuing (12) 4,702 (155) 4,377 (1) 2,752 11,831 (168) 808 – 706 – 495 (199) – – – 367 13,840 – Year ended 30 September 2008 ended 30 September Year Revenue revenueTotal 4,714 4,532 2,753 11,999 819 780 701 – (367) 13,932 Underlying profit before tax before Underlying profit Acquired operations Acquired 4) (Note disclosed items separately Net financial expenses excluding ventures and associates ventures profit/(loss) Underlying operating Amortisation of business of Amortisation intangibles combination disclosed items Separately goodwill Impairment of joint of on profits Taxation Total external revenue external Total profit/(loss) Operating 4,796 4,222 2,652 11,670 825 816 552 – – 13,863 – acquired operations – acquired Year ended 30 September 2009 ended 30 September Year Revenue revenue Total revenue segment Inter results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a re can be allocated as those that well a segment as attributable to directly assets and liabilities include items results, liabilities. assets and net financial expenses, and corporate costs, corporate comprise items Unallocated (A) Sector analysis is includ each Sector A detailed of explanation structure. management and reporting based on the Group’s analysis is The Sector Review. Business Performance revenue: External operations – continuing 2. Segmental information re geographic by and secondly format) (the primary sectors business the Group’s by initially is presented Segmental information 78 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

Mainstream Sector Specialist & Joint Total Emerging Accommodation Ventures Central Northern Western Mainstream Markets Activity & Destinations and Total 30 September 2009 and Europe Region Europe Sector Sector Sector Sector Associates Corporate Group the year then ended £m £m £m £m £m £m £m £m £m £m Balance sheet Segment assets 1,272 3,701 1,223 6,196 631 979 1,405 112 (174) 9,149 Segment liabilities (1,574) (2,202) (978) (4,754) (213) (318) (490) – (1,088) (6,863) Other disclosures Capital expenditure 32 83 59 174 5 35 16 – 4 234 Total depreciation of PPE and amortisation 39 101 74 214 12 34 27 – – 287 Impairment of goodwill and other intangibles –––––7 –––7 Impairment of property, plant and equipment – – 124 124 – 1 – – – 125

Mainstream Sector Specialist & Joint Total Emerging Accommodation Ventures Central Northern Western Mainstream Markets Activity & Destinations and Total 30 September 2008 and Europe Region Europe Sector Sector Sector Sector Associates Corporate Group the year then ended £m £m £m £m £m £m £m £m £m £m Balance sheet Segment assets 1,231 3,636 1,184 6,051 598 814 1,252 114 498 9,327 Segment liabilities (1,610) (1,975) (934) (4,519) (266) (279) (469) – (1,198) (6,731) Other disclosures Capital expenditure 20 103 37 160 4 26 18 – – 208 Total depreciation of PPE and amortisation 45 173 60 278 10 21 22 – – 331 Impairment of goodwill and other intangibles 112 – – 112 – 2 – – – 114 Impairment of property, plant and equipment 5 18 – 23 – 8 – – – 31 The segmental assets and liabilities above do not include intercompany balances or investments that are eliminated at Group level, and therefore the analysis does not necessarily represent the net equity positions of the Sectors as if they were stand-alone entities. Assets shown under Corporate as at September 2009 includes a £710m negative cash balance (2008: nil) which is offset by positive cash balances in other Sectors as part of the Group’s cash pooling facility. Capital expenditure comprises additions to plant, property and equipment (Note 11) and computer software and licences (Note 10). (B) Geographical analysis of business In presenting information on the basis of secondary geographic segments, segment revenue is based on the geographic location of the customer that generated that revenue. Segment assets and capital expenditure are based on the geographical location of the assets. Other Europe is defined as Continental Europe and Eire excluding UK, Germany and France. UK Germany France Other Europe Rest of the World Total 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 £m £m £m £m £m £m £m £m £m £m £m £m Revenue from external customers 4,162 4,392 3,753 3,689 1,337 1,424 3,831 3,682 780 745 13,863 13,932 Segment assets 3,784 3,551 1,051 1,034 899 840 2,402 2,210 1,075 1,080 9,211 8,715 Capital expenditure 65 81 55 16 36 16 59 72 19 23 234 208 Segment assets exclude non-operating assets relating to corporate entities and the Group’s joint ventures and associates, totalling negative assets of £62m (2008: positive £612m).

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 79 65 12 £m £m 164 151 380 228 140 380 2008 2008 Year ended Year ended Year 30 September 30 September nting on the period ended bination bination rst Choice rst Choice n order to n order d deferred ote 25(I)), ote £8m for – eld for sale of eld for K head office K ion Share Plan ion Share st Choice Activity st Choice 40 and TUI Tourism £m £m lating to the to lating 143 157 340 209 131 340 2009 2009 t and the Corsair le and leaseback of le and leaseback Costs also related rkey and the rkey fees relating to the to relating fees nd professional fees. nd professional ail and The Moorings ail and ontinued hedge 4m impairment rst Choice and rst Choice Year ended Year ended Year 30 September 30 September www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Aircraft is a £12 2009 there ended 30 September year fleet. In the the aircraft of restructuring the continuing to relate costs Aircraft of First Choice and the TUI Tourism businesses. The principal items are £16m relating to the closure of the Sunsail Clubs in Tu the Sunsail Clubs in of the closure to £16m relating are The principal items businesses. Tourism TUI and the Choice First of and Frontières, Nouvelles operator, tour the French of the ongoing restructuring 2009), £13m for in March (announced Berlin PLC. Air to operation charter city TUIfly’s sale of the of as a consequence market the German source restructuring the Fi in both underway already were that programmes restructuring to relate 2008 ended 30 September year in the Costs incurred all Sectors. activities across as subsequent restructuring well as the business combination to businesses prior Tourism TUI and the Suns of included the integration projects restructuring Principal Group. the businesses into acquired of the integration to produc operator tour Frontières the Nouvelles of TUI Marine, the rationalisation in Le Boat of businesses and the restructuring assets. Thomson Alfresco the of in respect and an impairment charge in France scheduled flying programme re incurred were £32m 11). Costs of (Note Corsair by Boeing 747s operated downs of write asset of in respect principally charge disc from charge statement the income include These costs Berlin PLC. Air business to charter city TUIfly’s sell to transaction as legal a well penalties as cancellation contract various required, no longer which are hedges and currency on fuel accounting hedge accou discontinued £23m from a gain of been offset by £16m have hedging of book order on aircraft losses exchange Foreign arising on the sa 25(I). Net gains set out in Note which are details of further been cancelled, which have 10 Boeing 787 orders 18). sale (Note held for aircraft of value the carrying to relating £4m. £1m has been charged were aircraft h on aircraft write-downs £102m and losses of include sale and leaseback principally 2008, costs ended 30 September year In the hedging (N book order and losses on aircraft costs option premium currency and related include fuel items 11). Other £23m (Note costs. fleet reorganisation assumptions and other provision period maintenance prior adjustments to Restructuring expenses com the business to related not which are programmes restructuring to 2009 relate ended 30 September year in the Costs incurred Merger related integration costs integration related Merger Fi of the integration arise from costs of The majority businesses. the UK of integration of the costs to primarily These relate Revenue expenses Administrative Total Restructuring expenses Restructuring Aircraft Total as follows: statement the income within included are profit/(loss) within the operating items disclosed Separately sales Cost of U Mainstream A combined estate. retail one airline and an integrated of the formation from Thomson in the UK, and in particular Fir with the former Thomson Specialist businesses former bringing together Costs also arise from has been established in . First Choice separate Sector & Destinations In the Accommodation specialist brands. Ski and UK notably and Specialist Sectors, Spain. notably destinations, key of in a number been combined agencies have incoming Creat Value the of including the cost costs, remuneration and integration redundancy for provided Costs include amounts paid or professional as well as lease obligations, and onerous closures 5(D)), property (Note awards share First Choice over and rolled project. integration 2007 reduce 3 September deposits held at customer First Choice of adjustments in respect value fair IFRS 3 business combination 2008 and the ended 30 September year the for revenues statutory in reduction with a corresponding date, that £14m at by income 2008 i ended 30 September year the for items disclosed integration within separately is included This amount 2007. 30 September year. in that the Group of performance the underlying trading present better Merger related integration costs integration related Merger 3. Separately disclosed items disclosed 3. Separately 80 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

4. Net financial expenses Year ended Year ended 30 September 30 September 2009 2008 £m £m Financial income Bank interest receivable 6 42 Interest on pension scheme assets 64 68 Interest receivable in respect of loans to parent – 4 Other financial income 2 8 Total 72 122 Financial expenses Bank interest payable on loans and overdrafts (11) (45) Interest on pension scheme liabilities (81) (72) Interest payable in respect of loans from parent (42) (67) Finance lease charges on leases (10) (12) Unwinding of discount on provisions (5) (4) Other financial expenses (12) (5) Total (161) (205) Net financial expenses (89) (83)

Year ended Year ended 30 September 30 September 2009 2008 £m £m Net financial expenses (as above) (89) (83) Less separately disclosed financial expenses 12 4 Net underlying financial expenses (77) (79) The separately disclosed financial expenses relate to non debt items including the revaluation of a put option written by the Group in respect of a minority shareholder of L’TUR Tourismus AG. Further details are given in Note 19. 5. Employees Year ended Year ended 30 September 30 September 2009 2008 (A) Average number of employees Number Number By Sector Mainstream Sector 34,913 36,382 Specialist & Emerging Markets Sector 1,607 1,864 Activity Sector 4,659 4,199 Accommodation & Destinations Sector 7,673 6,951 Corporate 611 605 Total 49,463 50,001 The 2008 comparative numbers have been adjusted to ensure that they are in alignment with a revised method of allocating headcount to the various Sectors. There is no change to the total number of employees. Year ended Year ended 30 September 30 September 2009 2008 (B) Staff costs £m £m Wages and salaries 1,293 1,263 Social security costs 234 216 Pension costs 47 55 Share-based payments (Note 5(D)) 17 15 Total 1,591 1,549 Included within wages and salaries are £65m (2008: £82m) of redundancy and integration costs. These related staff costs are included within separately disclosed items (Note 3).

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 3 % 81 4.1 N/A 2008 Status 0.0-2.0 tely from tely cludes d per annum per ance. ance. sting 4 % st defined ethod for the ethod for nths preceding ntribution rates 1.9 4.8 2.9 2009 country of country of £20m of owing principal www.tuitravelplc.com 3 % N/A 2008 6.75 2.1-3.5 % 1.8 2.5 TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI 2009 5.25 ife Assurance Scheme which has assumed salary inflation of 3.7% of inflation which has assumed salary Scheme Assurance ife 2 5.1 3.6 6.9 2008 2 per annumper annum per Germany Other 1 %% 3.2 5.5 4.2 Date of last full last full of Date employee Average UK 2009 plus 0.8% (2008: 4.6% plus 0.8%) to reflect annual service increments. annual service reflect plus 0.8% (2008: 4.6% plus 0.8%) to Inflation Rate Discount 1 limits. minimum and maximum increase assumption, subject to inflation the general Schemes reflect in the UK increases Pension 2 and L Superannuation Limited the of with the exception Schemes all UK (2008: 5.1%) is applicable across 4.2% liabilities. The Group recognises all actuarial gains or losses in the consolidated statement of recognised income and expense. income recognised of statement losses in the consolidated gains or all actuarial recognises The Group liabilities. using the foll been calculated have and liabilities in each territory value market at been taken each scheme have The assets of assumptions: inflation Salary Valuations of the schemes are made by qualified actuaries using market-based valuations for the assets and the projected unit m the assets and the projected for valuations using market-based qualified actuaries made by are the schemes of Valuations Versorgungsordnung’ Hapag-Lloyd Fluggesellschaft mbH Hapag-Lloyd Versorgungsordnung’ TUI Deutschland GmbH Versorgungsordnung’ GmbHTravel TUI Leisure Versorgungsordnung’ 3 inflation. to relative increment assumption is a percentage inflation salary year the prior and Other In Germany 4 average. weighted a are Other The assumptions for members new Open to members new Closed to members new Closed to Scheme name Unijet Group Plc Final Salary Scheme Plc Final Salary Unijet Group within the scheme. Co values average weighted reflect rates contribution membership, than a single class of more is there Where 2006 1 November annum per 24.7% plus £1.3m 10.0% Scheme name Scheme Assurance Life and Superannuation Limited Britannia Airways Scheme (UK)TUI Pension 2006 31 March Benefits Scheme Retirement 2000 Limited Air annum plus £46.3m per 37.9% 9.6% 2006 1 November annum 26.4% plus £1.4m per 2005 31 March valuation actuarial 9.8% annum 11.8% plus £16.4m per rate contribution Group Average 5.3% rate contribution contribution and defined benefit schemes. Pension obligations vary reflecting the different legal and market conditions in each conditions legal and market the different reflecting vary obligations benefit schemes. Pension and defined contribution whil organisations, state-run and private to contributions of the payment by funded schemes are Defined contribution operation. held separa benefit schemes are defined all the funded The assets of schemes. and unfunded funded both benefit schemes comprise the Group. the assets of and Directors employees schemes for Defined contribution costs Pension liability. further has no paid the Group once and year, as an expense in the recognised are contributions Current statement. income the to charged were schemes defined contribution to (2008: £25m) relating schemes Defined benefit pension in Other and Other. summarised as UK, Germany detailed and assets is defined benefit pension obligations below, of The movement in Austria and Fr are arrangements whilst the main unfunded the Netherlands, Switzerland and Norway, schemes in Ireland, funded unfunded. whilst German schemes are funded schemes are Almost all UK exi of with the exception members, new closed to These are shown in the table below. are schemes in the UK The principal funded date: qualification entry their towards working employees applicable. where arrangements sacrifice salary adjustment for before stated are mo within three valuation actuarial a full all subject to were These shown below. are schemes in Germany The principal unfunded sheet date: the balance (C) Pension costs (C) Pension define both These comprise the schemes. in participate to wishing eligible and employees schemes for pension operates The Group 82 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

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: 2009 2008 UK life expectancy (weighted average) Years Years Males Life expectancy in years for a pensioner retiring aged 65, on the balance sheet date 22.9 22.9 Life expectancy in years for a pensioner retiring aged 65, 20 years after the balance sheet date 24.2 24.1 Females Life expectancy in years for a pensioner retiring aged 65, on the balance sheet date 25.2 25.3 Life expectancy in years for a pensioner retiring aged 65, 20 years after the balance sheet date 26.4 26.3

2009 2008 Germany life expectancy Years Years Males Life expectancy in years for a pensioner retiring aged 65, on the balance sheet date 18.2 18.0 Life expectancy in years for a pensioner retiring aged 65, 20 years after the balance sheet date 20.9 20.7 Females Life expectancy in years for a pensioner retiring aged 65, on the balance sheet date 22.3 22.1 Life expectancy in years for a pensioner retiring aged 65, 20 years after the balance sheet date 24.9 24.7

2009 2008 Other life expectancy (weighted average) Years Years Males Life expectancy in years for a pensioner retiring aged 65, on the balance sheet date 18.8 18.8 Life expectancy in years for a pensioner retiring aged 65, 20 years after the balance sheet date 20.2 20.0 Females Life expectancy in years for a pensioner retiring aged 65, on the balance sheet date 21.8 21.7 Life expectancy in years for a pensioner retiring aged 65, 20 years after the balance sheet date 22.5 22.4

The fair value of assets of the schemes in each territory are set out below: UK Germany Other Total 2009 2008 2009 2008 2009 2008 2009 2008 £m £m £m £m £m £m £m £m Equities 457 427 – – 46 38 503 465 Government debt 210 153 – – 37 33 247 186 Corporate bonds 129 115 – – 21 16 150 131 Property 15 15 – – 1 1 16 16 Cash and cash equivalents 45 82 – – 1 – 46 82 Other 86 18 – – 31 26 117 44 Total 942 810 – – 137 114 1,079 924

The expected rates of return on each category of assets in each territory are as follows: UK Germany Other 2009 2008 2009 2008 2009 2008 % % % % % % Equities 7.8 8.2 N/A N/A 8.0 8.0 Government debt 4.1 4.7 N/A N/A 4.2 4.3 Corporate bonds 5.5 7.3 N/A N/A 3.8 4.3 Property 6.0 8.2 N/A N/A 5.8 6.7 Cash and cash equivalents 0.5 5.0 N/A N/A 0.5 N/A Other 7.4 5.0 N/A N/A 2.5 2.5-4.7 Overall expected rate of return 6.2 7.0 N/A N/A 5.1 5.1 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.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 7 3 7 4 – 83 (1) (1) 72 31 72 31 34 68 71 16 93 20 £m £m £m £m (46) (68) (43) 994 924 831 924 2008 2008 2008 2008 (197) (193) (125) 1,289 1,178 h 7 1 7 – – – 81 81 27 44 27 64 92 98 34 19 12 18 29 £m £m £m £m (66) (64) (61) 305 924 2009 2009 2009 2009 1,178 1,580 1,067 1,079 1,079 s. www.tuitravelplc.com 5 5 4 2 4 1 2 6 2 1 4 – (1) (4) (5) (1) (6) (9) (3) 97 23 16 91 14 £m £m £m £m (15) 113 114 103 114 2008 2008 2008 2008 7 7 4 5 4 1 6 6 3 1 – – – – – (8) (6) (6) (3) 20 10 19 19 £m £m £m £m TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI 113 156 127 137 114 137 2009 2009 2009 2009 3 3 2 5 2 1 6 – – – – – – – – – – – – – – – – – – (2) (8) 48 50 £m £m £m £m 2008 2008 2008 2008 5 5 3 8 3 1 – – – – – – – – – – – – – – – – – (3) 13 50 97 18 10 £m £m £m £m 2009 2009 2009 2009 6 2 6 – – – – – – – 64 64 25 27 25 62 69 £m £m £m £m (40) (62) (40) 808 810 891 810 2008 2008 2008 2008 (184) (116) (178) 1,015 1,144 UK Germany Other Total UK GermanyUK Other Germany Total Other Total UK Germany Other Total 6 2 6 – – – – – – – 69 69 20 20 95 58 86 37 £m £m £m £m (55) (58) (55) 272 940 810 2009 2009 2009 2009 1,015 Interest on defined benefit pension Interest scheme obligation on defined benefit return Expected Interest cost on obligation cost Interest Benefits paid contributions Member losses/(gains)Experience Settlement and curtailment transfers Amounts arising from pension scheme Total 31 Current service cost service Current Gains on curtailments and settlements Balance at end of year at Balance disclosed in accrual previously were which benefits retirement early flight crew to relates within Germany The reclassification 1,327 Reclassification cost service Current exchange Foreign eac for 2008 2009 and 30 September ended 30 September years the for statement income in the consolidated The amounts recognised as follows: are territory Balance at beginning of year beginning of at Balance Changes in the present value of defined benefit obligations in each territory are as follows: are in each territory defined benefit obligations of value Changes in the present Schemes with surplus of assets surplus of with Schemes assets deficit of with Schemes Total 942 The composition of the fair value of scheme assets in each territory is as follows: is as scheme assets in each territory of value the fair of The composition Actual return on scheme assets return Actual Other. of and £5m in respect the UK of be £89m in respect to expected are year in the next contributions Employer Foreign exchange Foreign end of year at Balance 942 Expected return on scheme assets return Expected contributions Company contributions Member Benefits paid gains/(losses)Experience transfers Amounts arising from Balance at beginning of year beginning of at Balance Changes in the fair value of scheme assets in each territory are as follows: are each territory scheme assets in of value Changes in the fair 84 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

These amounts are included within the following expense/(income) categories in the consolidated income statement: UK Germany Other Total 2009 2008 2009 2008 2009 2008 2009 2008 £m £m £m £m £m £m £m £m Cost of sales 10 15 2 1 3 2 15 18 Administrative expenses 10 10 1 1 1 1 12 12 Financial expenses 69 64 5 3 7 5 81 72 Financial income (58) (62) – – (6) (6) (64) (68) Total 31 27 8 5 5 2 44 34

The amounts recognised directly in equity for the year ended 30 September 2009 and for the year ended 30 September 2008 for each territory are as follows: UK Germany Other Total 2009 2008 2009 2008 2009 2008 2009 2008 £m £m £m £m £m £m £m £m Cumulative losses/(gains) brought forward 204 210 (8) – (1) (10) 195 200 Losses/(gains) recognised during the year 235 (6) 13 (8) 23 10 271 (4) Foreign exchange – – – – 2 (1) 2 (1) Cumulative losses/(gains) carried forward 439 204 5 (8) 24 (1) 468 195

Trend analysis information in respect of the UK, Germany and Other territories is as follows: UK 2009 2008 2007 2006 2005 UK balance sheet £m £m £m £m £m Fair value of scheme assets 942 810 891 781 698 Present value of scheme liabilities (1,327) (1,015) (1,144) (1,125) (1,181) Deficit (385) (205) (253) (344) (483)

2009 2008 2007 2006 2005 UK experience adjustments £m £m £m £m £m Experience gain/(loss) on scheme assets 37 (178) (7) 11 69 Experience (loss)/gain on scheme liabilities (272) 184 95 108 (240)

Germany 2009 2008 2007 2006 2005 Germany balance sheet £m £m £m £m £m Fair value of scheme assets – –––– Present value of scheme liabilities (97) (50) (48) (53) (49) Deficit (97) (50) (48) (53) (49)

2009 2008 2007 2006 2005 Germany experience adjustments £m £m £m £m £m Experience gain/(loss) on scheme assets – –––– Experience (loss)/gain on scheme liabilities (13) 8 11 (1) (2)

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 7 4 – 85 (1) (4) £m (46) 253 293 2008 1 44 10 18 £m (97) 500 271 253 2009 s. www.tuitravelplc.com 2 – (2) (2) (8) (2) (2) 10 £m 2008 164(3) 51410(4) 5 – – – (8) (2) £m £m£m £m £m£m £m £m £m£m £m £m £m £m £m £m 18 23 £m TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI (15) (1) – 3 197 120 117 (246) 114 103 91924 77 994 872 775 2008 20072008 2006 2007 2005 2008 2006 2007 2005 2008 2006 2007 2005 2006 2005 2009 (113) (97) (87) (80) (254) (295) (393) (535) (193) (8) 11 72 (1,178) (1,289) (1,265) (1,310) 5 1 6 – (2) (8) (3) 50 48 £m 34 £m £m £m £m (20) 2008 137 2009 2009 2009 2009 (156) (305) 1,079 (1,580) 8 1 (3) 97 50 13 10 18 £m 2009 – – – – (6) £m (42) 205 253 2008 UK Germany Other Total – – – 31 £m (86) 205 235 2009 The reclassification within Germany relates to flight crew early retirement benefits which were previously disclosed in accrual previously were which benefits retirement early flight crew to relates within Germany The reclassification Foreign exchange Foreign end of year at Balance 385 Balance at beginning of year beginning of at Balance The movement in the net deficit for pensions is as follows: in the net deficit for The movement All Territories’ experience adjustments All Territories’ on scheme assets gain/(loss) Experience on scheme liabilities (loss)/gain Experience Fair value of scheme assets of value Fair scheme liabilities of value Present Deficit (501) Total balance sheet All Territories’ Other experience adjustments assets on scheme (loss)/gain Experience liabilities on scheme (loss)/gain Experience Reclassification year used during the Provisions transfers Amounts arising from in and out (gain)/loss recognised Actuarial in equity Fair value of scheme assets of value Fair scheme liabilities of value Present Deficit/surplus (19) Other Other balance sheet Provisions made during the year made during the Provisions 86 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

Reconciliation of defined benefit obligations and scheme assets to values recognised in the Balance Sheet: UK Germany Other Total 2009 2008 2009 2008 2009 2008 2009 2008 £m £m £m £m £m £m £m £m Present value of funded defined benefit obligations 1,326 1,014 – – 139 100 1,465 1,114 Fair value of scheme assets (942) (810) – – (137) (114) (1,079) (924) Present value of unfunded defined benefit obligations 1 1 97 50 17 13 115 64 385 205 97 50 19 (1) 501 254 Unrecognised past service cost – – – – (1) (1) (1) (1) Recognised liability for defined benefit obligation 385 205 97 50 18 (2) 500 253

Analysed as: Retirement benefit non-current assets – – – – (1) (17) (1) (17) Retirement benefit current liabilities – – 3 2 – – 3 2 Retirement benefit non-current liabilities 385 205 94 48 19 15 498 268 Total 385 205 97 50 18 (2) 500 253 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 2009 2009 2009 2009 £m £m £m £m (Decrease) in deficit from increasing discount rate by 0.25% (59) (6) (7) (72) Increase in deficit from reducing discount rate by 0.25% 627776 Increase in deficit from increasing all life expectancies by 1 year 387449

(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 Value Creation Synergy Plan (VCSP). All three schemes are described in the Remuneration Report along with the relevant vesting criteria. At 30 September 2009 the shares allocated and outstanding in respect of ordinary shares, were as follows: Share award scheme Number of shares Date due to vest Performance Share Plan 425,739 13 February 2010 1,208,158 13 February 2010 1,076,195 13 February 2010 1,822,352 13 September 2010 618,046 19 December 2010 2,848,557 19 December 2010 131,840 19 May 2011 1,045,662 28 November 2011 6,341,589 28 November 2011 Deferred Annual Bonus Scheme 846,090 13 February 2010 2,642,069 19 December 2010 4,681,760 28 November 2011 Value Creation Synergy Plan 1,926,629 28 November 2010 Total 25,614,686 The number of share awards at the beginning and end of the year is as follows: Number of awards 30 September 2009 Outstanding at beginning of the year – excluding deferred shares 14,540,872 Forfeited during the year (1,481,168) Exercised during the year (2,412,082) Granted during the year 14,967,064 Outstanding at the end of the year 25,614,686 In addition to the above shares, there are 1,830,960 (2008: 714,937) deferred shares outstanding in relation to the Deferred Annual Bonus Scheme. These are due to vest between 19 December 2010 and 28 November 2011.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 2 6 6 1 1 – 87 14 15 13 24 12 13 11 £m £m £m 2008 2008 2008 Year ended Year ended Year m) is 30 September 30 September 30 September lan. ept where 7 1 9 1 4 5 – al assumptions 16 17 16 25 10 11 £m £m £m e awarded after e awarded 2009 2009 2009 ue of the shares ue of Year ended Year Year ended Year 2008 2007 30 September 30 September 30 September www.tuitravelplc.com 3.6% 3.8% hanges to future volatility future hanges to 3 years 3 years £1.05-£2.42 £1.09-£2.71 £2.51-£2.70 £2.60-£2.86 4.52%-4.75% 5.05%-5.35% 30.4%-34.8% 25.7%-28.4% TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI 2009 3.8% £2.05 2.73% 44.9% 3 years £1.34-£1.82 Award life Award Further information is provided in the Remuneration Report. in the Remuneration is provided information Further Emoluments benefits retirement and other Pensions Total Total Trust. Benefit Employee the Group’s held by were (2008: 11,875,944 shares) 2009, 10,842,908 shares At 30 September of Directors (E) Remuneration Equity-settled these accounts. of the date 2009, £6m (2008: £9 30 September ended year in the schemes incurred share-based to expenses relating employee the £17m total Of integration. post-merger for incurred remuneration specific to 3) as relating (Note disclosed items within separately included is: schemes outstanding 30 September at award share expense for estimated The future year within one be incurred To year than one more after be incurred To Included in the charge for equity awards made in 2009 is £3m relating to the VCSP. The shares this charge corresponds to will b to corresponds this charge The shares VCSP. the to made in 2009 is £3m relating awards equity for Included in the charge Shares awarded in 2009 awarded Shares rights appreciation share Expense arising for Total Shares awarded in 2006 awarded Shares Participants are not entitled to dividends prior to vesting. Expected volatility is based on historic volatility adjusted for c for adjusted volatility historic is based on volatility Expected vesting. to dividends prior entitled to not are Participants Risk free interest rate interest free Risk The fair value of services received in return for share awards granted during the year is measured by reference to the fair val the fair to reference by is measured year during the granted awards share for in return received services of value The fair all schemes exc for using a binomial methodology has been estimated awarded were the shares the date at value The fair awarded. The princip used. was Carlo simulation vesting,a Monte which case in attached to condition performance is a market-based there were: these methodologies by required awarded of shares values fair to relating Information date measurement at value Fair price Share condition. a service under awarded were Shares information. available publicly by indicated the year expenses for Employee schemes are: share-based to period relating and prior year the current expenses for Employee in 2007 awarded Shares in 2008 awarded Shares No material awards have been made to date under the Group’s HMRC-approved Share Incentive Plan which is an all-employee share p share which is an all-employee Plan Incentive Share HMRC-approved Group’s the under date been made to have awards No material Expected volatility Expected dividends Expected 88 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

6. Income, expenses and auditors’ remuneration Year ended Year ended 30 September 30 September 2009 2008 Included in the consolidated income statement for the year are the following (credits)/charges: £m £m Operating lease income, aircraft (18) (6) Operating lease rentals, land and buildings 163 167 Operating lease rentals, aircraft and other equipment 408 327 Depreciation of property, plant and equipment 184 206 Amortisation of intangible assets 103 125 Charge for share-based payments 17 15 (Profit)/loss on sale of property, plant and equipment (12) 71 (Gain)/loss on foreign currency retranslation (23) 26 Impairment of goodwill and other intangibles 7 114 Impairment of property, plant and equipment 125 31 Operating lease rentals, land and buildings, includes £8m (2008: £19m) of costs included in separately disclosed items (Note 3) as provisions for onerous leases, primarily related to the closure of Sunsail Clubs in Turkey (£4m) and integration of the UK Thomson/First Choice retail estate (£4m). Also within separately disclosed items is £1m of costs in relation to aircraft leases. In addition to the operating lease rentals disclosed above, charges of £71m (2008: £77m) were incurred in respect of hotel accommodation rentals which are disclosed as operating leases under IFRIC 4: Determining whether an arrangement contains a lease. Year ended Year ended 30 September 30 September 2009 2008 £m £m Auditors’ remuneration Auditors’ remuneration for these financial statements and other Group subsidiary financial statements pursuant to legislation 2 2 Other services pursuant to legislation (including regulatory reporting) 1 1 Other services 1 1 Auditors’ remuneration refers to fees paid to the Group’s auditors, KPMG Audit Plc, and its associates and does not include fees paid to other auditors who audit subsidiaries of the Group. Other services are principally in respect of defined benefit pension scheme advice and tax compliance work in respect of certain overseas subsidiaries.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 4 1 – – – – 89 54 58 62 55 £m £m (43) (12) (55) 2008 2008 Year ended Year ended Year 30 September 30 September 1– –– –– –– Year ended Year (3) 1 (1) (3) (5) 39 (14) 44 (16) £m % 41 17 £m £m culated at 28%. at culated (12) (81) 29 losses from prior losses from ore tax (excluding tax ore (65) (39) (21) (11) (43) (59) 2009 2009 (267) (279) (105) 30 September 2008 30 September ncome and ncome 9%). The differences amortisation of IFRS 3 of amortisation Year ended Year Year ended Year 30 September 30 September www.tuitravelplc.com 3 (5) (9) (4) 6 (1) 2 (8) 13 (1) 2 Year ended Year £m % TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI (52) (14) 23 (61) (17) 28 30 September 2009 30 September Defined benefit pension plans Other Total Cash flow hedges Cash flow Non-UK tax on loss for the year the on loss for tax Non-UK income statement in consolidated income tax (credit) Total bef profit based on the underlying 2009 is calculated ended 30 September year the taxation for of rate The underlying effective and is cal intangibles and goodwill impairment charges) IFRS 3 business combination of amortisation disclosed items, separately disclosed items, separately of effect the tax due to rate tax the underlying effective from 69% differs of rate tax The actual assets on tax deferred of year in the current and the recognition intangibles, goodwill impairment charges business combination utilisation. their timing and method of in the certainty of degree a greater due to years, in equity directly tax recognised (iii) Deferred i recognised of statement within the consolidated in equity directly has been recognised taxation (credit)/charge The following expense: (42) 69 Adjustments to taxation in respect of previous periods previous of in respect taxation Adjustments to Loss before tax reported in the consolidated income statement income in the consolidated reported tax Loss before 12) (Note and associates ventures in joint profit of Less share Total income tax (credit) in consolidated income statement in consolidated income tax (credit) Total tax rate of effective (ii) Reconciliation 28% (2008: 2 of in the UK tax corporation of rate the standard than (2008: lower) is higher year the for (credit) tax The total (42) Adjustments in respect of previous years previous of Adjustments in respect Adjustments in respect of previous years previous of Adjustments in respect explained below: are (i) Analysis of (credit)/charge in the year (i) Analysis of (credit)/charge tax charge Current year the on loss for tax corporation UK 7. Taxation be summarised as follows: can (credit)/charge The tax Expenses not deductible for tax purposes tax deductible for Expenses not taxable not Income Income tax on loss before tax excluding share of profit of joint ventures ventures joint of profit of share excluding tax on loss before tax Income 28% (2008: 29%) of tax UK of rate the standard at and associates losses tax of (Utilisation)/non-utilisation Higher tax rates on overseas earnings on overseas rates tax Higher Lower tax rates on overseas earnings on overseas rates tax Lower Deferred tax (credit) Deferred timing differences: of and reversal Origination UK year Current non-UK year Current 90 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

8. Discontinued operation The business of Société d’Investissement Aérien S.A., trading as Jet4You, is the Group’s airline operation in Morocco and has been presented as a discontinued operation as it was acquired on 30 June 2008 exclusively with a view to its subsequent resale. The business is also presented as a disposal group held for sale (Note 18). Year ended Year ended 30 September 30 September 2009 2008 £m £m Revenue 80 26 Operating costs (86) (25) Loss before tax of discontinued operation (6) 1 Ta x – (1) Loss after tax of discontinued operation (6) – Provision for loss on disposal (8) – Loss for the year from discontinued operation (14) – The provision for loss on disposal is based on the Directors’ assessment of the fair value less costs to sell of the disposal group based on current sale negotiations. 9. Dividends The following dividends relate to ordinary shares which have been deducted from equity in the year: Year ended Year ended 30 September 30 September Pence 2009 2008 per share £m £m Dividends relating to the year ended 30 September 2007 Interim dividend (paid September 2007) 2.5 – – Initial interim dividend (paid April 2008) 5.9 – 65 8.4 – 65 Dividends relating to the year ended 30 September 2008 Interim dividend (paid October 2008) 2.8 31 – Final dividend (paid April 2009) 6.9 76 – 9.7 107 – The interim dividend in respect of the year ended 30 September 2009 of 3.0p per share was paid on 1 October 2009 and this dividend of £33m will be recognised as a deduction from equity in the year ending 30 September 2010. Subsequent to the balance sheet date, the Directors have proposed a final dividend of 7.7p per share (2008: final dividend of 6.9p per share) payable on 1 April 2010 to the holders of relevant shares on the register at 12 March 2010. The final proposed dividend amounts to £85m and will, after approval by shareholders, be recognised in the consolidated financial statements for the year ending 30 September 2010. The final ordinary dividend of 7.7p per share, together with the interim dividend of 3.0p per share, makes a total dividend of 10.7p per share relating to the year ended 30 September 2009. 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 2009 final dividend, may do so by contacting Equiniti direct on 0871 384 2030. The last day for election for the final proposed dividend is 18 March 2010 and any requests should be made in good time ahead of that date.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 91 ment relates eful economic eful during the year during the losed by segment losed by es are disclosed es are www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI –––––83 Customer Computer in Software ion combined with amortisation of other intangible assets is disc other of with amortisation ion combined 2222––8 ––––––(7) £m £m £m £m £m £m £m £m Goodwill Brands relationships software Licences development Other Total At 30 September 2008At 30 September 2009At 30 September statement. income sales in the consolidated of within cost intangible assets is recognised of Amortisation closed were which and Antigua Turkey in operations hotel Sunsail Clubs to in 2009 relates The goodwill impairment loss incurred impairment charg Both airline in Germany. the Group’s TUIfly, to primarily in 2008 relate whilst the impairment losses incurred statement. income the consolidated of on the face expenses and shown separately within administrative 3,639 3,927 state income the consolidated of £56m (2008: £87m) shown on the face intangibles totalling business combination of Amortisation us The remaining relationships. and customer above) within other (shown book the order brands, of the amortisation to primarily years. 18 these assets is up to of life 392 393 intangibles and depreciat business combination of Amortisation 2. segment is also disclosed in Note plant and equipment and intangible assets by property, 2. Impairment of in Note 187 176 91 117 22 23 18 29 80 72 4,737 4,429 At 30 September 2009At 30 September Net book value 2007At 1 October (603) (48) 3,463 (35) 360 (278) 159 (19) 90 – 16 (65) (1,048) 4 125 4,217 Reclassification of asset class of Reclassification – – (1) (15) 16 – – – Disposals sale assets held for to Reclassification exchangeForeign (17) (21) (14) 288 exchangeForeign 2008At 30 September –year the for Amortisation (3)Impairment loss 26Disposals sale – assets held for to Reclassification exchangeForeign (4) 23 (555) – (23) – (1) – (23) 19 (1) (15) (25) (7) (16) (1) (41) 5 (1) – (17) (2) (218) (60) (2) (47) – – – – (35) (3) (4) (3) 4 (4) – – (14) – 365 (22) – (58) 14 – (10) (905) (1) 2 (103) – (29) – – 3 (60) 19 Reclassification of asset class of Reclassification 2009At 30 September Amortisation and impairment losses 2007At 1 October year the for Amortisation –Impairment lossDisposals 4,530 – 441 – (420) 211 – (112) (20) (2) 395 30 – – (14) (2) 42 (18) (38) (180) – – (12) 29 (27) (4) – 1 137 – – – (2) – 5,785 – (49) (8) – 1 (125) (639) – – (114) – 2 Foreign exchangeForeign 2008At 30 September Additions business combinations through Acquisition 62 4,194 21 230 415 23 3 203 19 309 – 6 57 – 6 18 55 – 138 4 5,334 2 23 286 – 85 Cost 2007At 1 October Additions business combinations through Acquisition 82Disposals 30 3,883 23 362 2 (3) 161 – – 270 – 6 1 43 (1) – 34 (1) 4 3 3 133 (1) 144 4,856 18 (4) – – (10) 58 10. Intangible assets 92 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

The aggregate carrying amounts of goodwill allocated to each principal cash generating unit (CGU) are as follows: 30 September 30 September 2009 2008 CGU Sector £m £m UK and Ireland Mainstream Northern Region 1,507 1,501 Accommodation & Destinations Accommodation & Destinations 671 547 Germany Mainstream Central Europe Region 406 352 Nordics Mainstream Northern Region 273 243 Marmara & Nouvelles Frontières Mainstream Western Europe 230 200 Multiple CGUs All Sectors 861 805 Total goodwill 3,948 3,648 Of which: Goodwill included within intangible assets 3,927 3,639 Goodwill included in assets held for sale (Note 18) 21 9 3,948 3,648 Goodwill included in assets held for sale principally relates to the Canadian business and Jet4You. 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 based on value in use. The multiple CGUs not separately listed above do not individually represent more than 3% of total Group goodwill. All CGUs have been tested for impairment. IAS 36 requires that impairment tests are carried out on CGUs, following the level at which the Group’s management measures returns on operations. The calculation of recoverable amount uses 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 between 1% and 3%. 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 weighted average cost of capital, adjusted as appropriate for business specific factors of sector risk, business size and geographic risk. • Since determination of an appropriate Group weighted average cost of capital was judgemental, sensitivities also addressed how increases in the base Group weighted average cost of capital might impact the results of the impairment tests. The Group’s weighted average cost of capital was based on a selection of third party financial institutions with significant knowledge of the Group’s operations. • Central group overheads are borne in full by CGUs and are allocated pro rata to the CGU’s underlying operating profit. • Where draft 2010 budgets indicated lower or higher underlying operating profit than the five-year business plan for any CGU, cash flow projections were re-run based on the revised operating profit information to obtain a more up to date value in use. The calculation of recoverable amount is sensitive to forecast future earnings and, particularly, the discount rates used: • A percentage decrease of up to 20% in future planned earnings for both the year ending 30 September 2010 and the year ending 30 September 2011 would still result in significant headroom positions for all the principal CGUs detailed in the table above. • In addition to the decreased earnings noted above, an increase for the principal CGUs detailed above of up to 1.5 percentage points in the discount rates used would not change the conclusion that the carrying value of goodwill is supported by its recoverable amount. The sensitivities disclosed immediately above do not take account of any mitigating action that management would take should earnings decrease.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information % 93 11 11 13 8.5 9.5 9.5 10.5 10.5 11.5-12.5 10.75-12.5 s are UIfly. the remaining 30 September 2008 30 September ctivity, rrying value rrying flying capacity ot to reopen the reopen to ot sell of TUIfly sell of German source . ations during the ations non-current and non-current Pre-tax discount rate used rate discount Pre-tax 8. This reclassification e. The impairment % 11 12 13 10 11 11 11 12.5 12.5 www.tuitravelplc.com 12-13 30 September 2009 30 September Pre-tax discount rate used rate discount Pre-tax TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI 1 1 1 1 1 Sport, Adventure, Student and Ski businesses Student Sport, Adventure, Other CGUs Other American Specialist businesses Germany Nordics Frontières & Nouvelles Marmara Specialist & Emerging MarketsSpecialist & Emerging Specialist businesses European Impairment charges combination post business restructuring the Group’s of a result as year and prior arisen in the current have Impairment charges 1 Multiple individual CGUs. its ca exceeds in each CGU goodwill amount of the recoverable that consider the Directors undertaken, Based on the calculations Accommodation & DestinationsAccommodation & Destinations Accommodation Specialist & Emerging Markets and Accommodation & Destinations Sectors. The forecast earnings of these newly-acquired businesse these newly-acquired earnings of The forecast Sectors. & Destinations and Accommodation Markets Specialist & Emerging timeframes. these judgemental over more inherently as follows: are CGUs similar of group or each CGU used for rates discount The pre-tax SectorMainstream and Ireland UK units (CGUs) Cash generating below. the impairments noted subject to Sunsail Clubs Sunsail Clubs’ oper of the majority of the closure arisen following £7m has of an impairment charge Sector, Within the Activity 2009 and it has been decided n of opened in the Summer not were clubs summer Turkish the In particular, year. financial current in use of value based on the calculated has been The goodwill impairment charge 2009/2010. Antiguan Colonna Club during Winter 13% (2008: 12.5%). of rate business using a discount TUIfly airline in the the Group’s TUIfly, to relating recorded was goodwill in Germany of in respect In 2008 a £112m impairment charge Sector. Mainstream European the Central part of market, 30 June 200 sale as at held for as a disposal group TUIfly of the reclassification of as a result The goodwill impairment arose provide to continue would undertakingwhich venture joint a new the airline into dispose of based on the plan to undertaken was to less costs value based on the fair calculated was The goodwill impairment charge operator. tour market the German source to arms length basis. on a commercial was which arrangement, venture the planned joint of the terms under ongoing within the Group’s sale and reclassified held for declassified as a disposal group was TUIfly 2008, 30 September As at probabl sufficiently considered no longer was a disposal transaction on the basis that was This assets and liabilities. current T of review then ongoing strategic 2008, based on management’s 30 September at reversed not was year during the recorded charge Other key assumptions are in respect of the short and medium term post-acquisition earnings of acquired operations within the A operations acquired earnings of post-acquisition term the short and medium of in respect assumptions are key Other Activity Marine businesses 94 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

11. Property, plant and equipment Advance Yachts, payments for Land and motor boats and Aircraft and future delivery Computer Other buildings cruise ships equipment of aircraft equipment equipment Total £m £m £m £m £m £m £m Cost At 1 October 2007 277 164 1,581 – 154 364 2,540 Foreign exchange 21 10 107 – 5 33 176 Acquisitions through business combinations 15 – – – 1 8 24 Additions 31 10 45 – 15 51 152 Disposals (15) (9) (749) – (3) (29) (805) Transferred to assets held for sale – (5) (103) – – (16) (124) At 30 September 2008 329 170 881 – 172 411 1,963 Foreign exchange 36 8 87 2 8 41 182 Acquisitions through business combinations 2 74 – – 1 6 83 Transfers – – – 80 – 22 102 Additions 16 14 31 33 5 53 152 Disposals (30) (22) (75) (7) (14) (25) (173) Reclassifications 5 1 11 – (3) (14) – Transferred (to)/from assets held for sale (19) (4) 32 – (1) 1 9 At 30 September 2009 339 241 967 108 168 495 2,318 Depreciation and impairment At 1 October 2007 (140) (41) (698) – (112) (232) (1,223) Foreign exchange (12) (2) (20) – (10) (14) (58) Acquisitions through business combinations (11) ––––(3)(14) Provided in the year (16) (8) (119) – (18) (45) (206) Disposals 9 3 396 – 4 20 432 Impairments – (1) (23) – – (7) (31) Transferred to assets held for sale – 2 48 – – 13 63 At 30 September 2008 (170) (47) (416) – (136) (268) (1,037) Foreign exchange (19) (3) (41) – (7) (26) (96) Acquisitions through business combinations (1) (36) – – – (4) (41) Provided in the year (17) (16) (99) – (14) (38) (184) Disposals 18 12 66 – 11 22 129 Impairments (1) – (124) – – – (125) Reclassifications – 3 (2) – (1) – – Transferred to/(from) assets held for sale 15 – (17) – 1 1 – At 30 September 2009 (175) (87) (633) – (146) (313) (1,354) Net book value At 1 October 2007 137 123 883 – 42 132 1,317 At 30 September 2008 159 123 465 – 36 143 926 At 30 September 2009 164 154 334 108 22 182 964

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 95 m (2008: nd and to resentation . for aircraft for ransferred £61m) respectively. ns were motor vehicles. motor isposal. The ons in the year ons in the fleet strategy. fleet strategy. September 2008, September o Property, plant o Property, ted to £29m to ted ng the recognition tely disclosed item tely s held for sale at sale at s held for craft at a rate of 6%. of a rate at craft www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI and equipment. A full depreciation charge has been recorded in the year. in the has been recorded charge depreciation and equipment. A full £27m) of and £30m (2008: construction plant and equipment under property, of and fittings, £47m (2008: £20m) fixtures £95m) of £152m (2008: £193m) was 2009 30 September at contracts purchase leases and hire finance assets held under of value The net book loans, amoun bank for on title, being pledged as security with restrictions plant and equipment property, of value The net book (2008: £39m). Other disclosures (2008: £143m) includes £103 £182m 2009 of 30 September as at value net book with a combined plant and equipment property, Other £108m (2008: £98m) and £56m (2008: of values with net book and short leasehold properties freehold Land and buildings comprise Assets held for sale Assets held for t 2008 has been reclassified 30 September sale at asset held for classified as a non-current 2009, one aircraft At 30 September During the year ended 30 September 2009, there have been 11 aircraft sale and leaseback transactions. Seven of these transactio of Seven transactions. sale and leaseback been 11 aircraft have 2009, there ended 30 September year During the Sale and leaseback transactions Other equipment – advance payments for maintenance of owned aircraft of owned maintenance payments for Other equipment – advance been transferred 2008 and have September 30 at disclosed as prepayments were owned aircraft of maintenance for payments Advance buildings relating to Sunsail Clubs, £1m (2008: nil). The impairment charges are disclosed within cost of sales and as a separa sales of within cost disclosed are The impairment charges nil). Sunsail Clubs, £1m (2008: to buildings relating 2. in Note is presented charge the impairment 3). Segmental analysis of (Note 30 at aircraft of delivery future for payments advance £80m of were There year. and equipment in the current plant property, to p align the Group’s to been undertaken The changes have prepayments. within current and £7m prepayments within non-current £73m materiality. of on the basis has been recorded financial information comparative to No restatement company. with its parent air of delivery future for payments the advance to in relation year has been capitalised £2m (2008: nil) during the of Interest payments advance £22m of were There year. equipment in the current within other construction plant and equipment under property prepayments. within non-current 2008, all 30 September at maintenance classified a were year, during the prior purchased which had been aircraft, four the remaining year; within the conducted fully transacti and leaseback Net gains arising on the sale year. in the current then sold and leased back were 2008 and 30 September 3). (Note disclosed items within separately and also sales of within cost which is included £4m were 2009 ended 30 September aircraft its leases as part of on operating 24 aircraft sold and leased back 2008, the Group ended 30 September year During the as a d for accounted was plant and equipment and the sale within Property, owned and held previously were 20 these aircraft, Of £102m, includi of The loss on sale and leasebacks year. within the sold and leased back purchased, were aircraft four remaining 3). (Note disclosed items within separately sales and also of within cost is included provisions, opening maintenance of 27. disclosed in Note leases are fleet operating aircraft of in respect commitments Future Advance payments for future delivery of aircraft future for payments Advance been t 2008 but have ended September year in the disclosed as prepayments were aircraft of delivery future for payments Advance Impairment charges and La £124m (2008: £23m) Aircraft, for £125m (2008: £31m) and are 2009 total ended 30 September year the in Impairment charges 96 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

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 Cost At 1 October 2007 64 12 76 Share of profits before tax for the year 15 – 15 Share of tax charge (3) – (3) Increase in investment 9–9 Dividends paid (7) (2) (9) Foreign exchange 718 At 30 September 2008 85 11 96 Share of profits before tax for the year 8 4 12 Share of tax charge (2) (1) (3) Acquisitions –88 Disposals (30) – (30) Dividends paid (8) (2) (10) Reclassifications and other movements (3) (4) (7) Foreign exchange 7310 At 30 September 2009 57 19 76 Goodwill At 1 October 2007 12 4 16 Foreign exchange 112 At 30 September 2008 13 5 18 Acquisitions 9312 Disposals (4) – (4) Reclassifications and other movements – 7 7 Foreign exchange 213 At 30 September 2009 20 16 36 Net book value At 1 October 2007 76 16 92 At 1 October 2008 98 16 114 At 30 September 2009 77 35 112 The Group’s share of joint venture and associate profit after tax was £9m (2008: £12m). During the year, the Group acquired a 49.9% shareholding in TUI InfoTec GmbH and a 49% shareholding in Togebi Holdings Limited for consideration of £11m and £9m respectively. The disposal relates to the Group acquiring the remaining 50% shareholding in Sunshine Cruises Limited for a consideration of £30m on 4 October 2008. From this date, Sunshine Cruises ceased to be equity accounted and is instead fully consolidated as a subsidiary. The principal joint ventures and associates and the proportion held are shown below: Country of registration/ Name of company % proportion held Nature of business incorporation Joint ventures Travco Group Holding SAE 50.0 Incoming agency Egypt Le Passage to India Tours and Travel Pvt Ltd 50.0 Incoming agency India Atlantica Hellas SA 50.0 Hotel operator Greece Atlantica Hotels and Resorts Ltd 50.0 Hotel operator Cyprus Togebi Holdings Limited 49.0 Tour operator Cyprus Associates Turismo Asia Company Limited 49.0 Incoming agency Thailand TUI InfoTec GmbH 49.9 IT Services Germany Togebi Holdings Limited operates in Russia and Ukraine.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 97 pect of the pect of reholding in reholding listed this transaction 3 aircraft on wet on 3 aircraft to the immaterial to nt ventures and nt ventures imited. ated subsidiaries ated has been www.tuitravelplc.com –33 ––44 (2) (2) (9)(2) – – (9) (2) (3)(3) (1) (2) (4) (5) 2336 33 3 56 39 18 13 31 23 30 53 £m £m £m £m £m £m 47 30 77 1512 12 10 27 22 (75) (11) (86) 182140322 34 62 96 216 202 418 459 346 805 117 36 153 (441) (333) (774) (130)(205) (49) (60) (179) (265) investments entities Total Joint venturesJoint Associates Total Trade and listedTrade Non-consolidated TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI Other investments entities. and non-consolidated investments and listed trade £77m comprise of investments Other has a 42% sha which in turn Limited, The Airline Group in 14.3% shareholding the Group’s represent investments and listed Trade At 30 September 2008 At 30 September Additions Disposals loan notes of Repayment the first time for consolidated Investments year Impairment during the sale financial asset for available of value Change in the fair these entities and consolid between Balances been consolidated. not have and financial position, result revenues, their size of been eliminated. not have L Group a 10% holding in the Atlantica Leisure and Berlin PLC in Air a 9.9% shareholding Limited, Services Traffic Air National As part of PLC. Berlin its German airline (TUIfly) and Air between cooperation a strategic announced the Group year, During the and This is included in trade a 9.9% shareholding. to €33m equating of Berlin PLC in Air investment an equity prepaid the Group authorities in res the German competition from received was clearance 2009, full 2009. On 3 October 30 September at investments value fair to investment PLC Berlin the Air of a £1m loss on revaluation year, During the Berlin PLC. in Air investment Group’s year. in the been recorded have these investments of value changes in the fair material No other in equity. recognised 1 comprising Berlin PLC, Air to transferred TUIfly of operation charter 2009 the city end, on 24 October year the Subsequent to lease contracts. (1) – – (8) (1) (8) Foreign exchange Foreign 2009 At 30 September which, due 100 subsidiaries held in circa net investment Group’s the and reflect cost at recorded entities are Non-consolidated Foreign exchange Foreign At 1 October 2007 At 1 October Total liabilities Total Net assets Non-consolidated entities Total assets Total liabilities Current Profit after taxation for the year for taxation after Profit assets Current associates is shown below: associates profit Operating payable Net interest taxation before Profit Taxation assets Non-current liabilities Non-current 100% values Revenue costs Operating A summary of the results for the year ended 30 September 2009 and of the assets and liabilities at this date of the Group’s joi the Group’s of this date assets and liabilities at the 2009 and of ended 30 September year the for the results of A summary 98 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

13. Investments Acquisitions (A) Acquisitions in the year ended 30 September 2009 Acquisitions were made in the year for a total of £92m, including £2m of acquisition expenses. These acquisitions gave rise to provisional goodwill of £58m. The principal acquired businesses and their acquisition dates were: Business Description Date Country Mainstream Sector – Northern Region Sunshine Cruises Limited (trading as Island Cruises Ltd) Cruise vessel operator October 2008 Specialist & Emerging Markets Sector Travel Adventures, Inc Tour operator October 2008 USA Activity Sector Sport Abroad (UK) Limited Tour operator October 2008 United Kingdom Teamlink Travel Limited Tour operator October 2008 United Kingdom Edwin Doran Limited Tour operator November 2008 United Kingdom Master Yachting GmbH Tour operator November 2008 Germany Student Skiing Limited1 (trading as Off The Piste Limited) Tour operator December 2008 United Kingdom Adventure Tours Australia Group Pty Limited Tour operator April 2009 Australia Williment World Travel Limited Tour operator May 2009 New Zealand Zegrahm Expeditions, Inc Tour operator June 2009 USA EAC Language Centres (UK) Limited Language Teaching July 2009 United Kingdom Accommodation & Destinations Sector Aragon Tours Limited Cruise services May 2009 United Kingdom

1 Formerly On The Piste.com Limited. In addition to the above, the Group acquired 15 individually insignificant businesses for a total consideration of £3m. The Group acquired 100% of the voting equity instruments in respect of each acquisition completed during the year with the exception of Sunshine Cruises Limited (trading as Island Cruises), where the Group previously held 50% and acquired all the remaining shares in the year. The relative size of the acquisitions made is set out in the table below: To t a l To t a l Consideration Number of consideration goodwill £m acquisitions £m £m 0 – 5 61514 5 – 10 32019 10 – 15 22321 >15 1311 Total of businesses listed above 12 89 55 Other individually insignificant businesses 15 3 3 Total 27 92 58

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 1 2 2 4 99 67 20 90 92 £m 34 62 92 58 (30) (34) Fair value value of Fair e subsequent tain acquisitions value value adjustments on intangible assets www.tuitravelplc.com 34 – – 34 61 – 3 64 TUI Travel PLC Annual Report & Accounts 2009 2009 Accounts & Report Annual PLC Travel TUI prior toprior policyvalue Fair (liabilities) acquisition adjustments adjustments acquired Book valueBook Accounting net assets/ Note £m £m £m £m comprising principally brands (Note 10). (Note brands principally comprising Deferred consideration Deferred Contingent consideration Total consideration Total Loan notes issued Loan notes Expenses Cash Total consideration Total cer timing of the recent basis due to on a provisional prepared been necessarily have consideration contingent of value and the in th values fair to in revisions result may Experience payable. become may consideration which contingent and the periods over period. accounting arise from: adjustments principally value and fair policy Accounting 1 IFRS 3 business combinati of value the fair and inclusion of acquisition sheets at goodwill existing in balance of Elimination All acquisitions have been accounted for using the purchase method, as required by IFRS 3. It should be noted that certain fair that It should be noted IFRS 3. by method, as required using the purchase for been accounted have All acquisitions Goodwill reclassified from investments in joint ventures on ventures in joint investments from Goodwill reclassified Sunshine Cruises Limited of acquisition of acquisitions goodwill in respect Total Total (as above) Less net assets acquired previously owned as a joint venture owned as a joint previously Interest-bearing liabilitiesInterest-bearing (3) – – (3) Current liabilities (excluding debt) (excluding liabilities Current provision tax Deferred debt) liabilities (excluding non-current Other Sunshine Cruises Limited of share of value carrying for Adjusted goodwill arising Provisional 5 3 (7) (53) 4 – (1) – (3) – – (10) (54) (2) (2) Net assets/(liabilities) acquired assetsIntangible fixed plant and equipmentProperty, cash) assets (excluding Current Cash 2 3 1 53 34 3 (1) 2 – (10) – 18 42 36 21 The total net assets/(liabilities) acquired are set out below: are net assets/(liabilities)The total acquired The consideration payable is made up of: payable The consideration 2 ship assets in Sunshine Cruises. to relating plant and equipment principally property, of valuation Fair 3 costs. operating and associated recognition revenue alignment for policy Accounting 4 adjustments, including intangible assets recognised. other to taxation liabilities relating deferred of Recognition 5 Expeditions, Inc. on Zegrahm lease contract onerous for Provision 100 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

(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: 2009 2009 Maximum Paid £m £m Acquisitions in the year 67 67 Deferred and contingent consideration arising and loan notes issued 23 – Acquisition expenses paid in the year 22 Total consideration 92 69 Cash acquired with acquisitions (34) Cash paid relating to prior period acquisitions (excluding loan notes) 13 Net cash outflow in the year relating to acquisitions 48 Maximum consideration payable represents the maximum consideration that the Group would be obliged to pay if all contingent consideration were to become due. Movements in deferred and contingent consideration in the year were as follows: Deferred Contingent Loan consideration consideration notes Total £m £m £m £m At 1 October 2008 29 40 8 77 Recognised in the year relating to current year acquisitions 1 20 2 23 Adjustments to amounts recognised in respect of prior period acquisitions – (10) – (10) Cash paid (11) (2) (6) (19) Foreign exchange 1326 At 30 September 2009 20 51 6 77 Further details of deferred and contingent consideration payable in less than one year and after more than one year is given in Notes 20 and 22 respectively. The contingent consideration payable arising in the year is in respect of the acquisitions listed below. It is dependent on the results of the businesses over the following periods or the balance of working capital at the acquisition date, and the Directors believe the amounts provided reflect the most likely outcome in each case: Basis of Period for calculation calculation Maximum of contingent of contingent contingent Acquisition consideration consideration consideration Sport Abroad (UK) Limited Earnings Up to 9 Oct 2011 GBP 1m Master Yachting GmbH Earnings Up to 31 Dec 2013 EUR 1m Adventure Tours Australia Group Pty Limited Earnings Up to 30 Sep 2010 AUD 7m Williment World Travel Limited Earnings Up to 31 Dec 2011 NZD 14m Zegrahm Expeditions, Inc Earnings Up to 31 Dec 2011 USD 11m EAC Language Centres (UK) Limited Earnings Up to 30 Sep 2010 GBP 3m Total contingent consideration recognised in respect of current year acquisitions GBP 20m

(C) 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, being brands, order books, licences, customer relationships and other intangible assets. The residual goodwill on acquisition represents the value of assets and earnings that do not form separable assets under IFRS 3 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 particular geographic areas; • Knowledge of particular market segments, for example sports travel and language training; • Involvement of existing management and employees and transfer of their knowledge of the operation of the business model; • Integration synergies particularly within UK Mainstream and the Activity Sector; and • The ability to sell acquired product through existing channels and existing product through acquired channels, in all Sectors.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 6 3 – (4) (1) (3) 58 48 12 64 £m 101 (23) (30) (30) 142 145 2008 2008 (187) 8m). 30 September 30 September s. s combination 1 October 4 5 – – ngibles) of £6m. ngibles) of of the of 36 48 37 77 42 £m (24) t arise in the 117 114 114 147 189 2009 2009 (186) ounts, and therefore xable profits. in the territories in in the territories 30 September 30 September www.tuitravelplc.com – – – (7) (4) (9) (8) 47 (50) (14) 2008 (282) (235) (190) 30 September – – – (5) (80) (10) (45) (25) (44) (97) 324 2009 TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI (421) (212) 30 September 6 6 4 3 27 62 57 11 64 12 (47) 252 205 2008 30 September Assets Liabilities Net 4 5 1 85 46 93 81 77 26 117 2009 (324) 30 September Financial instruments and foreign exchange Financial instruments and foreign Inventories loans and borrowings Interest-bearing benefits Retirement differences temporary short term Other Property, plant and equipment Property, assets and other Receivables Total 535 Other losses Other losses Total migh benefits that any the timing of certain of not are because the Directors principally been recognised not These assets have The accounting under IFRS 3 (revised) for this acquisition has not yet been finalised. yet has not this acquisition for IFRS 3 (revised) under The accounting values to fair (F) Prior period revisions The finalisation £109m. of consideration a total businesses for various acquired Group 2008, the ended 30 September year In the in the 2008 acc presented were that values the fair to revisions led to these businesses has not sheets for balance acquisition in these account 2008 has been presented 30 September sheet as at balance 2008 or 30 September to the results of no restatement Capital losses periods arising in future against profits utilisation for available and are time expiry to subject not These losses are future. assets. tax deferred unrecognised liabilities nor tax deferred unprovided no other are There arisen. have which they The Group has recognised deferred tax assets relating to tax losses in individual tax jurisdictions based on forecast future ta future jurisdictions based on forecast in individual tax losses tax to assets relating tax deferred has recognised The Group tax assets deferred Unrecognised rate): the applicable tax at (reported items the following of in respect been recognised not assets have tax Deferred Set off of deferred tax within the same jurisdiction tax deferred of Set off Net tax assets/(liabilities) 211 Tax value of losses carried forward losses carried of value Tax Intangible assets 14. Deferred tax assets and liabilities 14. Deferred 2008, Group revenue and loss after tax would have been increased by £38m and £2m respectively including amortisation of busines of amortisation including £38m and £2m respectively by been increased have would tax and loss after revenue 2008, Group tax. intangibles of net inta combination business of (including amortisation tax after and profit £141m of revenues businesses contributed The acquired balance sheet date (E) Acquisitions post 14m (GBP AUD of maximum consideration a total for Ltd Pty Select World has acquired 2009, the Group 30 September Subsequent to lease transactions Finance (D) Consolidated income statement (D) Consolidated income since the Group 2009 had been part of ended 30 September year the times during various at acquired were the businesses that If 102 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

Movements in temporary differences during the current year: Balance at Recognised/ Recognised/ Balance at 1 October Arising on (charged) in (charged) in Foreign 30 September 2008 acquisition income equity exchange 2009 £m £m £m £m £m £m Intangible assets (187) (1) 15 1 (14) (186) Finance lease transactions 12 – (35) – (1) (24) Property, plant and equipment (3) – 41 – (1) 37 Receivables and other assets (4) – 3 – 1 – Financial instruments and foreign exchange (23) – (10) 39 (1) 5 Inventories 6 – (2) – – 4 Interest-bearing loans and borrowings (1) – 39 – (2) 36 Employee benefits 58 – (7) 65 1 117 Other short term temporary differences 48 (1) (2) – 3 48 Tax value of losses carried forward 64 – 17 – (4) 77 Total (30) (2) 59 105 (18) 114 Movements in temporary differences during the prior year are analysed as follows: Balance at Recognised/ Recognised/ Balance at 1 October Arising on (charged) in (charged) in Foreign 30 September 2007 acquisition income equity exchange 2008 £m £m £m £m £m £m Intangible assets (190) (18) 22 – (1) (187) Finance lease transactions 7 – 3 – 2 12 Property, plant and equipment (32) – 32 – (3) (3) Receivables and other assets (2) – (1) – (1) (4) Financial instruments and foreign exchange 42 – (4) (58) (3) (23) Inventories 5 – – – 1 6 Interest-bearing loans and borrowings (3) – 1 – 1 (1) Employee benefits 59 – (3) (4) 6 58 Other short term temporary differences 57 – (12) – 3 48 Tax value of losses carried forward 41 – 17 – 6 64 Total (16) (18) 55 (62) 11 (30) 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 2009 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 2009 2008 £m £m Marine inventories 17 16 Airline spares and operating equipment 21 20 Other operating inventories 13 15 Total 51 51 No inventory amounts are expected to be recovered after more than 12 months. The write-down of inventories to net realisable value amounted to £3m (2008: £1m). The write-downs in 2009 and 2008 are both included within underlying operating profit in cost of sales.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 2 – (1) 35 36 53 34 21 £m £m £m 103 (36) 287 184 174 385 173 115 2008 2008 2008 Gross 1,016 1,239 1,203 1,203 30 September 30 September 30 September 30 September he post t impaired p’s policy that policy p’s recorded is recorded Activity and Activity 10 23 36 59 £m £m (10) 993 276 132 132 331 122 993 2009 2009 30 September 30 September www.tuitravelplc.com 30 September 2008 30 September £m £m £m 630133340550 – 2 98 110 630 135 438 660 assets assets assets 1,653 210 1,863 1,103 100 1,203 Current Non-current Total 30 September 2009 30 September 5020 (3) (3) 47 17 £m £m £m 750125107 (1) (8) 749 (44) 117 63 TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI Gross Provision Net 1,052 (59) 993 30 September 2009 30 September 26 – 26 £m £m £m 658266950586 – 43 43 151 658 309 993 737 assets assets assets Current Non-current Total Foreign exchange Foreign statement income the consolidated to Charge Total and t Based on past experience year. in the been recorded changes have or movements provision bad debt material No individually Overdue more than 180 days more Overdue debts bad and doubtful for Provisions Not overdue Not 1 – 30 days Overdue the impairment allowance that considers the Group financial statements, these consolidated of the date sheet period to balance and no overdue not receivables Trade amounts held. material no individually are there Within the impairment allowance adequate. Markets, Specialist & Emerging Mainstream, of in respect and hoteliers operators agencies, tour travel include amounts due from the Grou by is limited directly individual passengers booking holidays to exposure Credit Sectors. & Destinations Accommodation departure. and holiday tickets the issue of before is required payment full Utilisation of provision of Utilisation Total was: sheet date the balance at receivables trade The ageing of Balance at the beginning of the year the the beginning of at Balance Trade and other receivables are disclosed net of provisions for bad and doubtful debts, an analysis of which is shown below. an analysis of debts, and doubtful bad for provisions disclosed net of are receivables and other Trade Rest of the World of Rest Total United Kingdom United Totalwas: region geographic by date the reporting at loans and receivables total for risk credit to The maximum exposure 1,536 194 1,730 Amounts owed by related parties related by Amounts owed receivables Other Prepayments Germany France countries European Other 31 – 90 days Overdue 91 – 180 days Overdue Trade receivables Trade 16. Trade and other receivables 16. Trade 104 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

17. Cash and cash equivalents 30 September 30 September 2009 2008 £m £m Cash in hand 34 12 Cash at bank 304 396 Deposits 452 722 Cash and cash equivalents 790 1,130 Cash and cash equivalents includes £60m (2008: £46m) that is not available for immediate use by the Group. This is made up of monies held to meet regulatory requirements plus cash balances on short term deposits held on a restricted basis by the Group’s captive insurance funds as part of their ongoing operations. Other current investments disclosed on the consolidated balance sheet comprise deposit balances held to meet regulatory requirements with a term exceeding three months. 18. Assets classified as held for sale 30 September 30 September 2009 2008 £m £m Yachts and motor boats 4 3 Land and buildings 9 1 Aircraft 16 126 Disposal groups – assets 93 24 Other 4 3 Total assets classified as held for sale 126 157 Disposal groups – liabilities (59) (22) Net assets classified as held for sale 67 135 The disposal group assets and liabilities held for sale comprise the Canadian Mainstream business at 30 September 2009 and Société d’Investissement Aérien S.A. (Jet4You) at 30 September 2009 and 30 September 2008. Jet4You is included within the Western Europe segment and the Canadian Mainstream Business is included in the Northern Region. The Canadian Mainstream business is classified as held for sale on the basis of the announced joint venture transaction with Sunwing Travel Group Inc. Jet4You is presented as held for sale at the current and prior year end, based on the active disposal process for the business which is progressing and which the Directors expect to complete within 12 months. Aircraft held for sale relate to the Northern Europe and Central Europe Mainstream segments. In the year ended 30 September 2009, an impairment charge of £1m (2008: £31m) has been taken to record these property, plant and equipment assets at the lower of their carrying value and fair value less costs to sell. The impairment charge is included within separately disclosed restructuring expenses and aircraft items (Note 3). During the prior year, four aircraft were purchased but were not sold and leased back until the first quarter of the current year ended 30 September 2009. The four aircraft were therefore classified as held for sale at 30 September 2008 until their disposal for a total of £90m in the current year. The disposal proceeds are included within ‘Proceeds from sale of property, plant and equipment’ on the consolidated cash flow statement. Assets held for sale are expected to be sold within 12 months. 19. Interest-bearing loans and borrowings 30 September 30 September 2009 2008 £m £m Current liabilities Amounts owed to related parties 229 – Bank loans and overdrafts 31 31 Loan notes 3 3 Finance leases (and hire purchase contracts) 25 20 Other financial liabilities 39 45 Total 327 99 Other financial liabilities comprise the fair value of two put options written by the Group to the sole remaining minority shareholder in L’TUR Tourismus AG (L’TUR) that may require the Group to purchase the minority shareholding. During the year, the Group increased its shareholding from 51% to 70% on the exercise of part of one of the options. The remainder of this put option over 20% of the shares may be exercised at any time until 2015. A further put option at a fixed price with no time limit has been written by the Group during the year to the same minority shareholder for the remaining 10% shareholding.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 6 4 20 77 58 34 £m £m £m 105 233 840 154 167 156 194 2008 2008 2008 lease 1,142 1,033 1,494 4,057 1,167 Minimum payments 30 September 30 September 30 September 30 September 3 – 99 23 20 34 23 57 £m £m £m 232 134 611 167 801 2009 2009 2009 1,005 1,363 1,306 4,162 e purchase contracts are contracts e purchase 30 September 30 September 30 September www.tuitravelplc.com 9–9 20 9 29 £m £m £m 158 15 173 187 24 211 Principal Interest 2008 lease TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI Minimum payments 30 September 3–3 25 8 33 £m £m £m 164 6 170 Principal Interest 2009 Other payables Other parties related to Amounts owed costs and social security taxes Other income and deferred Accruals Client money received in advance received Client money Total One to five years five One to payables Trade 13(B)) (Note consideration and contingent Deferred Total and other payables trade 20. Current 192 14 206 In respect of aircraft, yachts and equipment payable within: and equipment payable yachts aircraft, of In respect One year years five After Total made. are whose name the borrowings in the company underlying assets of on the secured Certain loans are years. within five all repayable were loans party 2008, the related 2009 and 30 September At 30 September leases and hir finance under obligations Group and boats. aircraft the leasing of to primarily lease liabilities relate Finance Within one year Within one years five After The bank loans and loan notes are repayable: are notes loans and loan The bank Bank loans Bank Loan notes contracts) purchase leases (and hire Finance Total years one and five Between follows: as payable Non-current liabilities Non-current parties related to Amounts owed Fair value changes in the put option liability are included within financial expenses or financial income. within financial expenses or included are liability changes in the put option value Fair 106 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

21. Provisions for liabilities and charges Aircraft maintenance Restructuring Other Total £m £m £m £m At 1 October 2008 204 46 165 415 Provided in the year 240 24 93 357 Released in the year (15) – (25) (40) Unwinding of discounted amount 4 – 1 5 Costs incurred (188) (41) (85) (314) Foreign exchange 91616 At 30 September 2009 254 30 155 439

Analysed as: Non-current 205 2 43 250 Current 49 28 112 189 254 30 155 439 At 30 September 2008

Analysed as: Non-current 154 1 25 180 Current 50 45 140 235 204 46 165 415

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 total anticipated costs over the useful economic life of the asset calculated by reference to costs experienced and published manufacturers’ data. The charge to the 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 cost of major overhauls of owned airframes and engines is capitalised and depreciated over the period until the next scheduled major overhaul. Restructuring Restructuring relates to provisions arising as a result of reorganisation and restructuring plans that are irrevocably committed and includes severance payments. Further details of restructuring projects in the current year are set out in Note 3. Other Other provisions relate to litigation (including provisions for contingent liabilities recorded on acquisition of First Choice), 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. The majority 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 is estimated and is inherently uncertain. 22. Non-current trade and other payables 30 September 30 September 2009 2008 £m £m Trade payables – 1 Deferred and contingent consideration (Note 13(B)) 48 49 Other payables 5 6 Accruals and deferred income 55 93 Total 108 149

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information – £m 107 200 200 112 112 2008 f shares f 30 September rimarily the rimarily a specific d cash m). remaining number of number – ued ordinary £m nd the Tourism nd the 200 200 112 112 he remaining 50% he remaining 2009 in accordance ities had not been ities had not , TUI Hellas Travel Gains or losses Gains or 30 September www.tuitravelplc.com (65) (65) (5) (70) (16) (16)(12) (2) (12) (18) (1) (13) TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI (107) (107) (3) (110) Retained –––––1616–16 –––– – 128 (102) (231) (205) 2 (203) –––––1414–14 ––––(7)(7)–(7) ––––(8)(8)–(8) –––– – 187 134 (271) 50 5 55 –––– –––– £m £m £m £m £m £m £m £m Share Merger Translation Hedging earnings holders Equity Minority capital reserve reserve reserve (deficit)/ parent of interest Total Share-based payment Share-based Dividends Share-based payment Share-based own shares of Acquisition in stagesAcquisition Dividends arising on cash flow hedges are initially recorded in the hedging reserve and are recycled to the consolidated income statement income the consolidated to recycled and are in the hedging reserve recorded initially hedges are arising on cash flow 1(F). in Note policy with the accounting £0.2m (2008: £0.2 of reserve 2009 (2008: £0.1m) and a revaluation 30 September £0.1m at of also has a capital reserve The Group is non-distributable. The capital reserve Other reserves reserve. in the translation recorded are currency reporting the Group’s to losses arising on the translation gains or Exchange Acquisition of own shares Acquisition of own o The number equity. to debited was which £7m for own shares its purchased 2008, the Company ended 30 September year During the Acquisition in stages t of acquisition the Group’s for in stageswere acquisitions to 2008 relating September ended 30 year in the adjustments Equity Acquisition of minority interest a of in respect shareholding interest the minority of a proportion acquired 2009, the Group ended 30 September year During the Merger reserve Merger a (First Choice) PLC Holidays First Choice Travel), (TUI PLC Travel TUI of on the business combination arose reserve The merger is non-distributable. reserve The merger 2007. on 3 September TUI AG Division of 19) (Note AG Tourismus in L’TUR shareholdings interest the minority of in respect were The principal acquisitions subsidiaries. TUI Bulgaria OOD. and Airlines AE and Tourism and the Sector Mainstream Europe Western within the operator a hotel Hotelière, Promotion Polynésienne in Société shareholding net liabil of which a share entities for accounted equity previously were airline. Both a Moroccan Jet4You, of 60% shareholding IAS 28 and IAS 31. under recognised The associate 5(D). 2008 is disclosed in Note 30 September 2009 and at 30 September at (EBT) Trust Benefit the Employee held by as a financing cash flow. presented was outflow Acquisition of minority interest minority of Acquisition 2009At 30 September 112 2,490 360 (75) (604) 2,283 3 2,286 Acquisition of minority interest minority of Acquisition year the for income/(expense) recognised Total At 1 October 2007At 1 October year the for income/(expense) recognised Total 112 2,490 45 (107) 83 2,623 7 2,630 24. Capital and reserves Total iss the Company’s 52.54% of of is the beneficial owner TUI AG, company, parent 35, the ultimate in Note fully As described more Total fully paid called up and Allotted, 10p each of shares ordinary 1,118,010,670 (2008: 1,118,010,670) capital. share P prices. depends on market these purchases the timing of on the market; its own shares purchases time the Company time to From made on and sell decisions are Buy programme. award share Company’s the under issuing shares be used for to intended are shares plan. buy-back a defined share have does not the Company the Board; basis by transaction 2008At 30 September 112 2,490 232 27 (270) 2,591 5 2,596 Authorised 10p each of shares ordinary 1,999,500,020 (2008: 1,999,500,020) each £1 of shares preference 49,998 (2008: 49,998) redeemable 23. Share capital 23. Share 108 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

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, 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 price. Currency risk results from the substantial cross-border 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, liquidity risk and capital risk are considered in Notes 25(D), 25(F) and 25(K) respectively. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework and to ensure 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. 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 day-to-day basis. The procedures also stipulate the levels of authority applied to dealing and to approving 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 flow forecasts from each business unit to ensure hedges match the currency or fuel requirements of each operating business. Reports and forecasts for the Group, showing hedges and forecast requirements, are submitted monthly to the Group Management Board 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, Euro, US Dollar, Canadian Dollar and Swedish Krona). The Group hedges its foreign currency exposures on a seasonal basis, that is, winter season and summer season with each season comprising a six-month 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, 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 non-Sterling 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 Mid-spot rate Year ended Year ended 30 September 30 September 30 September 30 September £1 GBP equivalent 2009 2008 2009 2008 US Dollar 1.560 1.992 1.600 1.801 Euro 1.149 1.324 1.094 1.256 Canadian Dollar 1.822 1.991 1.717 1.885 Swedish Krona 12.101 12.374 11.181 12.301 As at 30 September 2009, the Group has hedged forecast transactions for $3.5bn and €1.2bn for periods up until Winter 2010 principally relating to Winter 2009 and Summer 2010.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 23 29 £m 109 321 2008 1,203 1,130 2,706 Carrying value Carrying 30 September ng a ximum credit cial asset instrument. October s up until nvestments nce sheet nce s unrestricted espect of espect of Board. While Board. well as their well 47 36 £m y for treasury and treasury for y 993 790 284 2009 easonal basis, included in y collateral over collateral y dit exposures to dit exposures erparties which ember 2009, ember deemed season, using 2,150 the Group has a large the Group strong credit ratings credit strong are adhered to and to adhered are applicable) as part of the prepayment el price volatility volatility el price 30 September Carrying value Carrying www.tuitravelplc.com he Group. Credit risk arises risk Credit he Group. TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI Trade and listed investments (Note 12) (Note investments and listed Trade Trade and other receivables exclude prepaid accommodation and other prepayments which do not meet the definition of a financial meet the definition of which do not prepayments and other accommodation prepaid exclude receivables and other Trade Cash and cash equivalents (Note 17) (Note Cash and cash equivalents hedging used for – contracts Derivatives 17) (Note investments Other Total as region geographic and by sheet date balance the at receivables and other trade total for risk credit to The maximum exposure 16. ageing is disclosed in Note The i investments. short term deposits and other market money comprise principally investments and other Cash, cash equivalents the Group’ 51% (2008: 48%) of 2009, approximately A1/P1. At 30 September of rating credit with a strong with counterparties are Kingdom. based in the United with counterparties invested were cash and cash equivalents a finan meet the definition of do not Whilst such prepayments accommodation. hotel for prepayments makes In addition, the Group recovering not the Group of risk the inherent due to risk credit to similar a risk rise to give IAS 39, such prepayments under with specific count risk time can concentrate time to from Prepayments goods and services. the related of delivery full through the ma assets) forms and non-current within current presented (which are prepayments amount of The carrying based overseas. are obtains securit the Group appropriate, Where the Group. held by collateral or security any account taking into before exposure, s on a short term leases on operating leases out aircraft The Group risk. credit mitigate to property accommodation the related end, on 24 year the £18m (2008: £6m). Subsequent to was year in the recognised season. Lease income the Winter over principally At 30 Sept years. 10 of an initial term for 13 aircraft, of Berlin PLC Air lease to wet the long term commenced 2009, the Group £151m (2008: £89m). was year than one more after which is recoverable accommodation prepaid Trade and other receivables (Note 16) (Note receivables and other Trade six-month period. At the start of a season the Group will have hedged substantially all of its fuel commodity exposure for that for exposure commodity its fuel all of hedged substantially will have a season the Group the start period. At of six-month date. the reporting from year less than one of with a maturity options, most or swaps commodity predominantly period for 2.0m metric tonnes) (2008: 1.8m metric tonnes of fuel for transactions has hedged the Group 2009, 30 September As at 2010. Winter in r volatility manage short term to and option instruments in order on swaption premiums paid the Group year, During the prior is these option premiums for charge The hedging policies. documented the Group’s apply hedging, to fuel whilst still continuing fu the exceptional of as a result directly as it arose sales) of (within cost disclosed items separately year’s the comparative during 2008. 25(I). set out in Note instruments are derivative forward fuel Details of risk (D) Credit t in financial loss to resulting obligations on its contractual will default a counterparty that the risk to refers risk Credit as cre well financial instruments, as and derivative deposits and cash and cash equivalents) (including bank cash balances from managed separatel is risk Credit transactions. and committed financial guarantees including outstanding receivables, customers, exposures. credit related operating the by and monitored management policies approved risk of application the through risk credit minimises its financial The Group limits individual counterparty that ensures policy Group institutions, banks and financial major to limited are counterparties (where its counterparties of ratings the credit monitors The Group risk. credit of no significant concentrations are there that with financial institutions with major transacted only Financial instruments are exposure. its credit its ongoing assessment of A1/P1. of set as are limits arise and credit they where units in the operating managed locally are exposures receivables Loans and other as receivables and other trade to with respect risk credit of concentration is no material There the customer. for appropriate dispersed customers. internationally of number the bala at risk credit to The maximum exposure exposure. credit the maximum financial assets represents amount of The carrying was: date (C) Commodity risk and Canada. in Europe aircraft of operation the Group’s arises from risk commodity Fuel with each season comprisi season and summer winter basis, being the on a seasonal exposures commodity hedges its fuel The Group 110 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

(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 and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. The Group’s loans and borrowings are measured at amortised cost with the exception of put option liabilities which are carried at fair value: Face value Face value and carrying and carrying amount amount 30 September 30 September 2009 2008 Financial instrument Currency Nominal interest rate Year of maturity £m £m Shareholder loan EUR 3.0% 2011 840 840 Secured bank loans Sterling 2.2%-6.2% 2010-2018 19 24 EUR 5.1%-6.0% 2009-2015 1 1 USD 1.4% 2011 9 9 Unsecured bank loans USD N/A N/A – 132 EUR 1.9%-5.7% 2009-2018 22 19 51 185 Finance leases EUR 2.6%-6.4% 2010-2015 187 180 USD 5.5% 2011-2013 2 5 MAD 5.9%-6.5% 2014-015 2 2 AUD 7.2%-11.8% 2009-2012 1 – 192 187 Loan notes Sterling 1.4% 2010-2011 1 3 USD 5.0%-6.0% 2010-2011 4 6 NZD 7.0% 2009-2010 1 – 6 9 Put option liabilities EUR 5.0% Current 39 45 Total interest-bearing liabilities 1,128 1,266

Analysed between: Fixed rate instruments 215 208 Variable rate instruments 913 1,058 1,128 1,266

(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 principally comprise two main sources of long term debt funding: (i) the shareholder loan from TUI AG of €919m which is fully drawn and is repayable on: 1 April 2010: €250m, 1 December 2010: €509m and 30 April 2011: €160m; and (ii) the external bank revolving syndicated credit facilities totalling £910m (2008: £770m) plus a bonding and letter of credit facility of £40m (2008: nil) which mature in June 2012 and September 2010 respectively. From these facilities, £144m has been utilised for letter of credit purposes at 30 September 2009 (2008: £224m). The Group’s external bank revolving credit facility was increased by £140m with effect from 30 September 2009. 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. In addition to the above facilities, the Group issued a £350m convertible bond (due 2014) on 1 October 2009 which was settled on 5 October 2009. The coupon has been set at 6.0% per annum, and the conversion price has been set at 349.3p per share, which represents a premium of 33.0% over the volume weighted average price of TUI Travel PLC’s ordinary shares from launch to pricing.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information – £m 111 546 546 2008 30 September of credit, of n. 6% convertible 40 £m our external our ed as earnings 766 806 2009 B)(ii). compliance with compliance BITDA, which BITDA, the Group’s financing Group’s ommitments at the ommitments at , tax, depreciation, g interest rates in force in rates g interest elivery dates and dates elivery 30 September at the Group can be the Group at www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI 9963–– 67511– 29222715363 31393939––– 6 10 15 – 840 865 249302 616 348 – 307 38 – 3 – 192 206 33 147 23 3 2,831 2,831 2,800 31 – – amount cash flows year 1 years years 5 years amount cash flows 1 year years years 5 years Carrying Contractual Within 1-2 2-5 than More Carrying Contractual Within 1-2 2-5 than More Total Expiring: year Within one years but less than five year than one In more Contracts used for hedging used for Contracts Total th in the tables is based on the first date The timing reflected vary. will facilities credit revolving of repayment The actual settle the liability. to required consideratio and contingent and deferred income deferred in advance, monies received customers exclude payables and other Trade letters £806m (2008: £546m), comprising of facilities borrowing committed undrawn had available 2009, the Group At 30 September underlying the with covenants non-compliance Any cash borrowings. for facilities credit rate floating and revolving, guarantees in full was The Group such arrangements. any to with respect default of an event constitute waived, not if could, arrangements £350m the Group’s exclude below presented facilities Undrawn the periods presented. each of throughout its financial covenants 2009. bond, issued on 1 October analysed as follows: are presented years all throughout facilities Undrawn 228 211 166 4,101 4,309 37 2,868 8 192 – 1,210 39 30 September 200830 September financial liabilities Non-derivative loanShareholder loans bank Secured loans bank Unsecured leasesFinance Loan notes £m 840 151 34 £m 998 187 186 42 £m 211 52 8 8 £m 29 53 9 7 £m 893 30 151 15 £m 143 – 18 12 9 Secured bank loans bank Secured financial liabilities Derivative hedging used for Contracts Total liabilities interest-bearing Other payables and other Trade financial liabilities Derivative 4,261 4,354 45 2,607 3,454 45 2,607 846 45 2,554 48 53 – 6 – – – – Non-derivative financial liabilities Non-derivative loan Shareholder Board believes to be the most useful measures of cash generation and gearing, as well as being the main basis for covenants in covenants and gearing, basis for as being the main well cash generation as of measures be the most useful to believes Board interest is defined as earnings before cover charges Fixed year. the end and throughout year the met at were facilities, credit is defin EBITDA lease rentals. plus operating net interest divided by (EBITDAR) charge lease rentals and operating amortisation 1( Note on an ‘underlying basis’ as defined in measured are covenants Both and amortisation. tax, depreciation interest, before d their of in advance aircraft new refinance is to established strategy the Group’s aircraft, new of the delivery of In respect c purchase aircraft Details of purchases. aircraft new for cash resources use internal to forecast does not the Group therefore 28. in Note given end are year usin calculated payments including interest financial liabilities, cash flows of contractual the undiscounted are The following sheet date: each balance at loans bank Unsecured leases Finance liabilities financial Other payables and other Trade The Board remains satisfied with the Group’s funding and liquidity position. Fixed charges cover and the ratio of net debt to E to net debt of and the ratio cover charges position. Fixed and liquidity funding with the Group’s satisfied remains The Board Loan notes 30 September 200930 September £m £m £m £m £m £m 112 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

(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: Held for Available Loans and Amortised Total trading for sale receivables cost carrying value At 30 September 2009 £m £m £m £m £m Cash and cash equivalents – – 790 – 790 Borrowings due within one year – – – (288) (288) Borrowings due after more than one year – – – (801) (801) Derivative assets 284–––284 Derivative liabilities (302) – – – (302) Other financial assets – 47 1,029 – 1,076 Other financial liabilities (39) – – (2,831) (2,870) Total (57) 47 1,819 (3,920) (2,111)

Held for Available Loans and Amortised Total trading for sale receivables cost carrying value At 30 September 2008 £m £m £m £m £m Cash and cash equivalents – – 1,130 – 1,130 Borrowings due within one year – – – (54) (54) Borrowings due after more than one year – – – (1,167) (1,167) Derivative assets 321 – – – 321 Derivative liabilities (228) – – – (228) Other financial assets – 23 1,232 – 1,255 Other financial liabilities (45) – – (2,607) (2,652) To t a l 48 23 2,362 (3,828) (1,395) 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 4. Derivatives presented under Held for trading under IAS 39 classifications are analysed between cash flow hedges and economic hedges in Note 25(I). (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 2009 and at 30 September 2008, are as follows: 30 September 2009 30 September 2008 Carrying Fair Carrying Fair amount value amount value £m £m £m £m Cash and cash equivalents 790 790 1,130 1,130 Borrowings Shareholder loan (840) (840) (840) (840) Bank loans (51) (51) (185) (185) Loan notes (6) (6) (9) (9) Finance lease liabilities (192) (188) (187) (179) Derivative financial instruments Forward exchange contracts used for hedging: – assets 271 271 264 264 – liabilities (173) (173) (112) (112) Commodity contracts used for hedging: – assets 13 13 57 57 – liabilities (129) (129) (116) (116) Other financial assets Trade receivables 993 993 1,203 1,203 Trade and listed investments 47 47 23 23 Other investments 36 36 29 29 Other financial liabilities Other financial liabilities (39) (39) (45) (45) Trade and other payables (2,800) (2,800) (2,554) (2,554) Other long term payables (31) (31) (53) (53) Total (2,111) (2,107) (1,395) (1,387) The basis for fair value measurement of financial assets and liabilities is set out in Note 1(Y) to the consolidated financial statements.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 113 . Ineffectiveness perating profit. perating sheet. Speculative hedges) are expected hedges) are www.tuitravelplc.com 30 September 2008 30 September 2015 (4) (16) 16 (1) 4215 (100) (58) (21)48 (6) (50) (2) £m £m £m Fair Fair Fair 229 (87)306 142 321 (207)273 (228) 99 321 (178) 93 (228) 95 93 value value value Assets Liabilities Total Projected cash flows Projected Projected cash flows Projected 8––– 5––– (8) (3) – – 81 2 43 – 42 2 – – £m £m £m £m £m £m £m £m (90) (15) – – (50) (27) (3) – (27) (2) – – 247 39 51 – 252 11 – – 257 11 – – TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI (166) (37) (8) – 1 year1 years 1 and 2 years 2 and 5 years 5 (132) (22) (1) – (307) (38) (3) – (148) (14) (2) – 1 year 1 and 2 years 2 and 5 years 5 years Less than Between Between Over Less than Between Between Over 30 September 2009 30 September 3 (13) (10) – (1) (1) 1033 (116) (106) (5)13 28 (18) (5) £m £m £m Fair Fair Fair 238 (167)251 71 (297)271 (46) (284) (13) value value value Assets Liabilities Total in the year ended 30 September 2009 comprised £5m (2008: £7m) relating to fuel hedging and this is included within underlying o hedging and this is included fuel to £5m (2008: £7m) relating 2009 comprised ended 30 September year in the To t a l Ineffectiveness 2009 ended 30 September year the for statement in the income hedges has been recognised cash flow of in respect Ineffectiveness Commodity swaps Commodity Commodity swaps Commodity Derivative financial assets Derivative forwards exchange Foreign options exchange Foreign options Commodity 194 3 37 – 51 – – – 30 September 2008 30 September Commodity options Commodity swaps Commodity Total Derivative financial assets financial Derivative forwards exchange Foreign swaps Commodity 30 September 2009 30 September All derivatives are held as cash flow hedges or to offset changes in the value of items recognised in the consolidated balance balance in the consolidated recognised items of value in the offset changes to hedges or held as cash flow are All derivatives Non-current Total 284 (302) (18) Foreign exchange forwards exchange Foreign Total 284 (302) (18) Commodity swaps Commodity Cash flow hedges forwards exchange Foreign options exchange Foreign Economic hedges as: Analysed Current undertaken. not positions are cash flow principally (which are with derivatives which the cash flows associated the periods in table indicates The following occur: to (I) Derivative instruments (I) Derivative as follows: was financial assets and liabilities derivative the Group’s of value the fair date sheet At the balance Derivative financial liabilities Derivative forwards exchange Foreign options Commodity (68) (19) (8) – Derivative financial liabilities Derivative forwards exchange Foreign options Commodity 114 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

Aircraft order book derivatives In November 2008, US dollar cash flow hedges in connection with the Group’s aircraft order books were fully unwound and settled early in a planned process. This early settlement which resulted in a net cash gain, has arisen because post the business combination forming TUI Travel PLC, the Board has determined the Group’s asset ownership strategy is ‘asset right’. In terms of aircraft ownership and financing this means that the Group’s preferred solution is to sell and leaseback new aircraft under operating leases at the time of delivery. Consequently, payments for new aircraft in US dollars are now planned to be funded by way of proceeds from sale and leaseback transactions and future US dollar currency requirements are not required to be forward hedged. The cumulative gain on aircraft order book derivatives from the period when these hedges were effective up until the termination of these hedges is recognised in the hedging reserve. Net gains relating to aircraft orders delivered or cancelled in the year (comprising 10 Boeing 787s) have been recycled to the income statement immediately and are recorded in separately disclosed items (Note 3). A remaining amount of £11m (net of deferred taxation) remains in reserves and will be recycled to match the delivery of the related aircraft. (J) Amounts recognised directly in equity The following amounts have been recognised directly in equity during the year: Year ended Year ended 30 September 30 September 2009 2008 £m £m Hedging reserve Effective portion of changes in fair value of cash flow hedge (60) 163 Fair value of cash flow hedges transferred to the consolidated income statement (81) 37 (141) 200 Translation Foreign currency translation differences for foreign operations recorded in the consolidated statement of recognised income and expense 129 180 Net (credit)/charge to equity (12) 380

(K) Capital management 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 Group has a roadmap to deliver sustainable long term value to shareholders with a return on invested capital greater than the Group’s weighted average cost of capital. Progress in achieving this objective has been made during this year, by improving underlying operating margins from 2.9% to 3.2% which increases return on invested capital (ROIC) to 9.2% (2008: 8.4%). ROIC is defined as ‘Underlying NOPAT’/‘Average Invested Capital’ Underlying NOPAT is underlying net operating profit less a tax charge at the effective annual rate. ‘Underlying’ as a measure of operating profit is defined in Note 1(B)(ii). 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 2009 2008 Note £m £m Underlying operating profit Consolidated income statement 443 398 Taxation at the underlying effective rate of 28% – (124) (111) Underlying NOPAT 319 287 Net assets Consolidated balance sheet 2,286 2,596 Net debt 26 338 136 Adjustment for seasonal cash balances – 300 300 Cumulative goodwill impairment charge (2009: Sunsail Clubs £7m/2008: TUIFly £112m) 10 119 112 Defined benefit pension net deficit 5C 500 253 Invested Capital 3,543 3,397 Average Invested Capital 3,470 3,430 ROIC 9.2% 8.4%

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 115 vely by a sound by capital 1% (100 basis claims patterns, ome statement or ome statement l requirements all Group and all Group loss before tax loss before d increase by £70m by d increase tinue trading. tinue trading. st rates if these are if st rates dging instruments and insurance with and insurance uld neither increase uld neither fuel prices, from the from prices, fuel eased by £376m eased by exposures above exposures unting the future cash unting the future d gains or losses. d gains or if the fuel markets are markets the fuel if tions. Compliance tions. Compliance www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI recognised at fair value; fair at recognised end. year the at prevailing rates market using appropriate values net present flows to and all hedges are expected to be highly effective; and effective; be highly to expected and all hedges are capital position. An analysis of net debt at the year end is in Note 26. end is in Note year the at net debt capital position. An analysis of jurisdic in their regulations industry applicable travel of as a result capital requirements external Certain subsidiaries have con able to are they that in order in those countries businesses operating the relevant for is mandatory with these regulations The Canada and Australia. the Netherlands, Germany, Belgium, France, are capital requirements with such mandatory countries Key capita subsidiaries. All such in operating levels asset maintaining comprise equity/net minimum in these countries requirements the over significant to collectively or individually are these requirements None of 2009. 30 September with as at complied were operations. or funding on the Group’s significant restriction any place do not (L) Sensitivity analysis an events future likely of a projection be considered and should not purposes only illustrative analysis is for The sensitivity assumptions: analysis includes the following The sensitivity • financial instruments; variable of expense or income interest affect only rates interest Changes in market • intere with fixed financial instruments to expense in relation or income interest affect only rates interest Changes in market • as he financial instruments designated derivative of value the fair affect rates and fuel currency interest, Changes in market a of and equity statement the income change to estimated the measures that analysis technique has used a sensitivity The Group and in currencies all other against in Sterling weakening or a 10% strengthening or rates interest in market points) difference constant. remaining variables with all other sheet date, the balance applicable at rates risk rate Interest inc change in the consolidated material in any result not would rates in interest assumptions, a 100bp increase the above Under (2008: £5m). equity risk Currency rates, all principal exchange against Sterling of weakening or with a 10% strengthening assumptions, the above under Similarly, £29m), respecti by increased £5m (2008: profit by increased £24m) or by 2008: loss reduced £4m (September by reduced have would decr have tax)would (before subsidiaries). Equity overseas of statement the income of the translation to relating (principally (2008: £249m), respectively. £376m by increased (2008: £204m) or price risk Fuel correspondingly will differ and the sensitivity prices in fuel decrease or analysis is based on a 10% increase The sensitivity wo tax before profit fuel, of in the unit price decrease or with a 10% increase these assumptions, Under volatile. less or more tax)woul (before pricing adjustments. Equity and appropriate hedging policy price the fuel because of materially, decrease nor £70m (2008: £142m), respectively. by decrease (2008: £108m), or (M) Litigation risk companies insurance captive the use of through and disaster litigation of the financial risk mitigate to has a policy The Group for in place insurance with limits, and aggregate single event is capped by risk to exposure The Group’s providers. party third these limits. based upon historical methodology outstanding claims, including settlement expenses, using a consistent for provides The Group expectations. and future legal advice claims amounts, external average The Board seeks to maintain a balance between the levels of debt borrowings undertaken and the advantages and security afforded and security and the advantages undertaken borrowings debt of the levels maintain between a balance seeks to The Board • disco by estimated liabilities are financial assets or and other financial instruments derivative of value Changes in the fair 116 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

26. Movements in cash and net debt Cash Amounts Other and cash due to financial equivalents related parties Bank loans Loan notes Finance leases liabilities Total £m £m £m £m £m £m £m At 1 October 2007 1,959 (1,400) (553) (28) (178) (37) (237) Cash movement (951) 778 400 21 26 – 274 Non-cash movement – (23) – (1) (11) (4) (39) Foreign exchange 122 (195) (17) (1) (24) (4) (119) Arising on acquisition – – (15) – – – (15) At 30 September 2008 1,130 (840) (185) (9) (187) (45) (136) Cash movement (352) 91 143 6 22 23 (67) Non-cash movement (4) 29 – (2) – (12) 11 Foreign exchange 16 (120) (8) (1) (26) (5) (144) Arising on acquisition – – (1) – (1) – (2) At 30 September 2009 790 (840) (51) (6) (192) (39) (338) Non-cash movements in respect of other financial liabilities arise from the issue of a put option in respect of minority interest shares (Note 12). 27. Operating lease commitments Total Group obligations under non-cancellable operating lease contracts are payable as follows: Land Aircraft, Land Aircraft, and yachts and and yachts and buildings equipment buildings equipment 30 September 30 September 30 September 30 September 2009 2009 2008 2008 £m £m £m £m Total commitments under non-cancellable operating leases expiring: Within one year 190 406 153 341 Between one and five years 444 962 414 825 Later than five years 240 230 275 166 Total 874 1,598 842 1,332 Operating lease commitments in respect of land and buildings principally comprise commitments in respect of the Group’s retail estate. The future commitment under the Group’s floating rate aircraft operating leases at 30 September 2009 was £120m (2008: £34m). The increase in total aircraft lease commitments year-on-year reflects the movement in the US$ exchange rate since September 2008, and the extension of eight leases on the Thomson aircraft fleet. In total the Group operates 128 aircraft on operating leases at 30 September 2009 (2008: 128 aircraft). Yachts are held on operating leases in TUI Marine as part of the Group’s Sunsail and The Moorings fleets. 28. Capital and other commitments Capital commitments 30 September 30 September 2009 2008 The Group’s capital commitments are as follows: £m £m Contracted but not provided for 22 60 In addition to the above items, at the year end the Group had contracted to purchase 50 aircraft with initial deliveries to start in the last quarter of the calendar year 2010. At list price, the total order value was US$6,156m. On 3 October 2009, a Group company signed a contract which cancelled 10 of the aircraft which had been on order. The remaining 40 aircraft, at list price, have a total order value of US$4,316m. The Group intends to refinance 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 2009 (2008: nil). Other commitments On 29 September 2009, the Group announced a joint venture transaction with Sunwing Travel Group Inc. Under the terms of the deal, TUI Travel will contribute its Canadian operations plus CAD101m and Sunwing will contribute its operations to the joint venture. TUI Travel will receive a 49% interest in the joint venture with Sunwing’s owners receiving 51%. The deal is subject to regulatory and competition approvals which are in the process of being sought.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 78 31 21 £m 117 349 479 2008 time Year ended Year currently 30 September tion to tion to ibution of ntered into ntered were £3m were alments: tes and joint tes loan at loan at TUI Tourism’s on these nd (TUI Travel nd (TUI practised prior practised nt third parties. nt third aith and 63 71 £m lio’s hotel beds hotel lio’s relevant licensee relevant incoming s. The Hotel 384 151 669 2009 or these actions these or f the beds as it f : ut its ordinary ies of its ultimate ies of five years on the on years five Year ended Year 30 September www.tuitravelplc.com 2 4 19 18 43 £m 2008 Year ended Year 30 September Revenue Expenses 5 8 7 7 27 £m 2009 TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI Year ended Year 30 September Hotel and resort subsidiaries of TUI AG subsidiaries of and resort Hotel TUI AG of and associates ventures subsidiaries, joint Other Joint ventures and associates of the Group of and associates ventures Joint Total Related party Related TUI AG parent Ultimate 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 trademarks of portfolio TUI AG’s within from trademarks TUI name and logo and other the use of Tourism’s TUI the of turnover annual gross the average 0.02% of equal to an annual fee are each licence under payable fees business. Licence 2009 ended 30 September year in the charged fees licence Total period. a three-year over measured trademarks the relevant under a further for extend to licensee the relevant option for with an years five for are terms standard (2008: £3m). Each licence’s same terms. set out in the tables below are sheet date outstanding the balance parties and balances at with related transactions Details of Trademark Licence Agreement Trademark in rela Group Tourism TUI the members of to AG TUI from granted licences trademark incorporates Agreement Licence Trademark The Hotel Framework Agreement Hotel Framework parties e both the business combination, the time of at TUI AG and the Company between arrangements the relationship As part of Shareholder loan Shareholder EURIBOR plus a margin, at The loan bears interest 2007. on 3 September TUI AG by the Company to advanced was loan A shareholder where this is deemed appropriate. No actions which are outstanding at 30 September 2009 are expected to have a material effect effect a material have to expected 2009 are outstanding 30 September at which are No actions is deemed appropriate. this where all known liabilities. for has been made provision adequate that consider The Directors accounts. o in carrying PLC, Travel TUI financial statements, included in the consolidated which are with its own subsidiaries Apart from compan related or parties including consolidated with related relationships and indirect business activities, maintained direct in the Group. companies to services delivered These companies TUI AG. company, parent to primarily related These transactions companies. and associated ventures with its joint transactions also undertook The Group with associa transactions from and expenses arising The income operators. tour the Group’s by used companies agencies and hotel in the segmental analysis. as presented costs or revenue sector within the appropriate included are ventures with independe trade of normal conditions on an arms length basis and under executed were parties with related All transactions any at repayments voluntary can make The Company annum. 2.0% per a maximum of 0.2% to by six-monthly annum, increasing 1.5% per the of balance The drawn notice. 30 days’ the giving of €10m and of a minimum repayment the loan subject to of during the term inst in three It is repayable payable. interest including accrued 2008: €1,019m), not €919m (30 September was 2009 30 September €160m. 2010, €509m and 30 April 2011, 1 April 2010, €250m; 1 December the distr of in respect and the Company TUI AG between relationship the commercial which governs Agreement, Framework the Hotel TUI Deutschla Agreement, Framework the Hotel Under TUI AG. by retained interests portfolio the hotel part of beds forming hotel such portfo the distribution of and to portfolio hotel the Robinson to access have to business) continues operating German tour as TUI Deutschland and Robinson, between and seasonal arrangements exclusivity of the existing levels on the basis of in Europe the distribution o to in relation services the same provide to TUI Deutschland agrees In addition, the business combination. to these service with in connection trademarks use certain Robinson and shall be entitled to the business combination to did prior the parties shall discuss in good f such expiry to prior year one that 2011, provided on 31 October expires Agreement Framework agreement. a replacement agree to endeavour 30. Related party transactions 29. Contingent liabilities 29. Contingent is made f business. Provision of course actions against it arising in the normal of a number time defending any is at The Group 118 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

Receivables outstanding Payables outstanding Year ended Year ended Year ended Year ended 30 September 30 September 30 September 30 September 2009 2008 2009 2008 £m £m £m £m Related party Ultimate parent TUI AG 6 107 885 840 Hotel and resort subsidiaries of TUI AG 1 3 56 52 Other subsidiaries, joint ventures and associates of TUI AG 6 5 14 12 Joint ventures and associates of the Group 13 20 19 13 Total 26 135 974 917 Payables outstanding with related parties are reported in Notes 19 and 20 and receivables outstanding are reported in Note 16. In accordance with IAS 24, key management functions within the Group and the Group Management Board 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 2009 2008 £m £m Short term employee benefits 17 18 Post-retirement benefits 2 2 Share-based payments 10 7 Total 29 27 Details of Directors’ remuneration are given in the Remuneration Report. 31. Key accounting estimates and judgements The preparation of consolidated financial statements under Adopted IFRSs requires the Group 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 Group evaluates its estimates and judgements on an on-going 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 and intangibles balances held across the Group on a cash generating unit basis. The impairment review is performed on a ‘value in use’ basis, which requires estimation of future net operating cash flows, the time period over which they will occur, an appropriate discount rate and an appropriate growth rate. Further details, including sensitivity analysis, are given in Note 10 and the accounting policy is set out in Note 1(P). 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 were required to exercise judgement to satisfy themselves that appropriate weight had been afforded to macroeconomic factors. Details of the actual assumptions used, including sensitivity analysis, are set out in Note 5(C). 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 25(L).

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 119 y judgement y rs in order to rs in order out in Note ermining o which they erating accruals. erating the materiality of the materiality policy is set out policy y third parties. third y s classified as pendently estimate pendently lanned disposal is or incidence to incidence or ic loss that may be may ic loss that d leaseback of d leaseback t and estimation is t and estimation seas jurisdictions. ooks and customer using valuation s to sell can also s to ses and recognition e of the Company’s e of accommodation. The accommodation. n particular, inance leases, inance www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI enable a full understanding of the Group’s financial performance. Such items are included within the income statement caption t statement within the income included are Such items performance. financial Group’s the understandingenable a full of 3 and 4). (Notes relate values Other asset carrying Ke impairment. signs of for the Group assets across all material of sheet date each balance at an assessment Management perform and prepaid receivables trade and motorboats, yachts ships, land and buildings, aircraft, of values include the carrying areas b goods or services future of provision and the cash flows receivable future assets is dependent on estimated these of recovery management review. regular subject to are values and residual lives economic Useful Business combinations I assets and liabilities on acquisitions. separable of valuation and identification in the is required Judgement and estimation b orders intangible assets, being brands, separable of valuation and identification in the is required judgement and estimation in det is also required these assets. Judgement and estimation for lives economic useful appropriate databases, and determining 13. set out in Note are acquisitions Details acquisitions. of of in respect payable consideration contingent Liabilities risk. Judgemen of and level maturity probability, occurrence in determining required judgement is provisions, for In accounting and transactions of volume the Due to lease provisions. and onerous restructuring maintenance, aircraft in determining required op airline and accommodation of derecognition and the recognition of in respect judgement is also required period end accruals, 21 and the accounting is disclosed in Note has been calculated which the provision made and the basis on provisions Details of 1(T). in Note payments Share-based is estimated value The fair award. of the date at shares of value the fair in determining is required Judgement and estimation pric the market of volatility and the expected rate interest the risk-free term, the awards’ account into which take techniques is set policy 5(D) and the accounting disclosed in Note applied are and the assumptions payments share-based Details of shares. 1(Y)(ix). sale held for assets and disposal groups Non-current the p whether in determining judgement sale’ requires as ‘held for groups assets and disposal non-current of The classification less cost value fair their sale assets at held for of The measurement months. within 12 be realised and able to probable highly market. active is no there significant judgement if require Lease accounting f of leases and, in respect finance leases or operating leases as either of in the initial classification Judgement is required certain lease of In respect minimum lease payments. discount implicit in the lease to rate discount the appropriate determining inde to and management has been required values lessors’ residual estimate reliably been possible to leases, it has not finance gains and losses arising on the sale an of the treatment of in respect Judgement is also required rate. discount an appropriate 1(G), 1(H) and 1(Q). leases is set out in Notes for policy The accounting 11). assets (Note Taxation and over in the UK transactions and corporate trading liabilities arising from tax time, contingent time to has, from The Group econom of level these liabilities based on the probable for provision makes the Group advice, external taking appropriate After los tax of recoverability the future in the assessment of Judgement is also required measurable. which is reliably and incurred 14. in Note given losses are tax unrecognised assets. Details of tax deferred of amounts of deposits and prepayments Recoverable those hotelie of and the credit-worthiness with hoteliers trading future of volumes the of been made in respect Judgements have those hoteliers. made to deposits and prepayments amounts of assess the recoverable (B) Judgements disclosed items Separately size their of virtue by highlighted judgement are which in management’s those significant items are items disclosed Separately 120 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

32. 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 Group’s results and net assets during the year. The Directors consider that those companies not listed are not significant in relation to the Group as a whole. All of the subsidiaries have only ordinary share capital except for First Choice Canada Inc., which also has unlimited preference shares all of which are owned by the Group. TUI UK Limited is presented within the Mainstream Sector, Northern Region to reflect its principal operations but the Company also includes certain UK Activity and Specialist businesses at 30 September 2009. Subsidiary Country Nature of business Mainstream Sector Mainstream – Northern Region Falcon Leisure Group (Overseas) Limited Eire Tour operator First Choice Holidays Finance Limited United Kingdom Treasury operation First Choice Canada Inc Canada Tour operator Sunshine Cruises Limited (trading as Island Cruises Ltd) United Kingdom Cruise vessel operator Thomson Airways Limited United Kingdom Airline TUI Nordic Holding AB Sweden Tour operator TUI UK Limited United Kingdom Tour operator TUI UK Retail Limited United Kingdom Travel agent TUIfly Nordic AB Sweden Airline Mainstream – Central Europe Berge und Meer Touristik GmbH Germany Tour operator Hapag-Lloyd Express GmbH Germany Airline Hapag-Lloyd Fluggesellschaft mbH Germany Airline 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 Österreich GmbH Austria Tour operator Mainstream – Western Europe Groupe Marmara SAS France Tour operator Groupe Nouvelles Frontières S.A.S. France Tour operator JetAir N.V. Belgium Tour operator Société d’Investissement Aérien S.A. (Jet4You) Morocco Airline TUI Airlines Belgium N.V. Belgium Airline TUI Airlines Nederland B.V. Netherlands Airline TUI Travel Belgium N.V. Belgium Tour operator TUI Nederland N.V. Netherlands Tour operator Jet4You is held for sale at 30 September 2009. Specialist & Emerging Markets Sector Aventuria SA France Tour operator Caradonna Dive Adventures, Inc USA Tour operator Citalia Holidays Limited United Kingdom Tour operator Country Walkers, Inc USA Tour operator Educational Tours, Inc USA Tour operator EEFC, Inc USA Tour operator Hayes & Jarvis (Travel) Limited United Kingdom Tour operator I Viaggi del Turchese Srl Italy Tour operator International Expeditions, Inc USA Tour operator Les Tours Jumpstreet Tours Inc Canada Tour operator Meon Travel Limited United Kingdom Tour operator National Events Inc. USA Tour operator Royal Vacaciones SL Spain Tour operator Starquest Expeditions, Inc USA Tour operator StudentCity.com, Inc USA Tour operator TCS Expeditions, Inc USA Tour operator Tourinter SA France Tour operator TRAVCOA Corporation USA Tour operator Travel Adventures, Inc. USA Tour operator Travelmood Limited United Kingdom Long haul travel Your Man Tours, Inc USA Tour operator

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 121 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI TUI Hellas Travel Tourism and Airlines AE.Tourism Travel TUI Hellas Greece services Destination Zegrahm Expeditions, IncZegrahm & Destinations Sector Accommodation SLUHotelbeds Spain SLUHotelbeds SLU Product, Hotelbeds USA, IncHotelbeds Limited Rooms Late A.S. Seyahat Turizem Tantur S.A.Turismo TUI España USA Spain Spain Spain Turkey USA Kingdom United Spain operator Tour accommodation Late services Destination Online accommodation Online accommodation services Destination services Destination services Destination SubsidiaryActivity Sector Limited Pty Group Australia Tours Adventure Ltd Pty Tours Sports Australian Limited Services Tour CHS Blue Line LimitedCrown (UK) Limited Language Centres EAC LimitedEdwin Doran LimitedTravels Exodus LimitedTravel Sports Gullivers IncTravel, International Mariner Australia A/SMyPlanet International Ltd Pty Adventures Peregrine Expeditions, IncQuark LimitedTravel Real Ski Bound Limited Australia Limited Group Sportsworld Limited) Piste.com The On Kingdom United (formerly Skiing Limited Student KingdomSunsail Limited United Limited Sailing Sunsail Worldwide Kingdom United CountryThe Moorings Limited Kingdom United LimitedTravel Williment World operator Tour Kingdom United Challenge Holdings LimitedWorld USA Kingdom United Limited International Yachts Kingdom United Denmark Australia Language teaching operator operator Tour Tour USA operator Tour operator Tour Kingdom United Kingdom United operator Tour Kingdom United operator Kingdom United Tour operator business of Nature Tour Zealand New Kingdom United operator Tour IslandsVirgin British Kingdom United operator Tour operator Tour IslandsVirgin British operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour 122 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the consolidated financial statements continued

33. (Loss)/earnings per share The basic (loss)/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 share ownership trusts. The diluted earnings per share is calculated on the result attributable to ordinary shareholders divided by the adjusted weighted average number of ordinary shares, which takes account of the outstanding share awards, where their conversion is dilutive. The additional earnings per share measures have been given to provide the reader of the accounts with a better understanding of the results. Basic and diluted loss per share from continuing operations is as follows 2009 2008 (Loss)/ Weighted average (Loss)/earnings (Loss)/ Weighted average (Loss)/earnings earnings number of shares per share earnings number of shares per share £m Millions Pence £m Millions Pence Basic and diluted loss per share (11) 1,107 (1.0) (271) 1,109 (24.4) Amortisation of business combination intangibles, and impairment of goodwill (net of tax) 47 – 4.3 174 – 15.7 Separately disclosed items (net of tax) 227 – 20.5 323 – 29.1 Basic underlying earnings per share 263 1,107 23.8 226 1,109 20.4 Effect of dilutive options – 11 (0.3) – 9 (0.2) Diluted underlying earnings per share 263 1,118 23.5 226 1,118 20.2

Basic and diluted loss per share from the discontinued operation is as follows: 2009 2008 Weighted average Loss Weighted average Earnings Loss number of shares per share Earnings number of shares per share £m Millions Pence £m Millions Pence Basic and diluted loss per share (14) 1,107 (1.3) – 1,109 – For statutory measures of loss per share, in both the current and prior year the effect of options is anti-dilutive. The anti-dilutive effect is not taken into account and basic loss per share and diluted loss per share are both disclosed as (1.0)p (2008: (24.4)p) for continuing operations and (1.3)p (2008: nil p) for the discontinued operation. The diluting effect of options in 2009 and 2008 is included solely to calculate diluted underlying earnings per share. 34. Post balance sheet events The following events after 30 September 2009 are disclosed in the notes to the consolidated financial statements: • Acquisitions: details of acquisitions since the balance sheet date are set out in Note 13; • Trade investments: details of the investment in Air Berlin are set out in Note 12; • Convertible bond issue: details are provided in Note 1(B)(v) and Note 25(F) – Funding and liquidity; and • Capital commitments: on 3 October 2009 an agreement was reached with Boeing to cancel 10 of the B787 aircraft the Group had on order. Details are provided in Note 28. 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 2009 TUI AG was the beneficial owner of 52.54% of the ordinary share capital of the Company on a fully diluted basis. TUI AG prepares consolidated financial statements which include the results of the Group. The accounting reference date of TUI AG is 30 September (previously 31 December). Copies of the TUI AG financial statements are publicly available and can be obtained from the registered office of this company situated at Karl-Wiechert-Allee 4, 30625 Hanover, Federal Republic of Germany.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 3 14 £m 123 (70) 706 205 755 685 393 706 547 112 267 393 2008 (998) 1,391 30 September gned on its 30 36 30 £m (11) 911 300 900 269 911 234 112 127 269 2009 (311) (631) 30 September www.tuitravelplc.com I I I F E G H D Note TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI amounts falling due within one year within one due amounts falling year than one more due after amounts falling Paul Bowtell Paul Financial Officer Chief behalf by: behalf Other reserve Other funds Equity shareholders’ si were 2009 and on 30 November Directors of the Board of authorised Committee a duly by approved were The financial statements Creditors: Net assets Creditors: (liabilities)/assets Net current Current assets Current financial instruments Derivative Debtors and in hand bank Cash at liabilities assets less current Total Capital and reserves capital Share Fixed assets Fixed undertakings in subsidiary Investment investments Total Company balance sheet balance Company 2009 At 30 September Profit and loss account Profit 124 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the Company’s financial statements

A. Accounting policies Investments In the Company’s financial statements, investments in subsidiaries are Basis of preparation stated at cost less provision for impairment. Dividends received and The following accounting policies have been applied consistently in receivable are credited to the Company’s profit and loss account. dealing with items which are considered material in relation to the Company’s financial statements. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less Accounting convention attributable transaction costs. Subsequent to initial recognition, The financial statements have been prepared in accordance with interest-bearing borrowings are stated at amortised cost with any applicable UK accounting standards and under the historical cost differences between cost and redemption value being recognised convention. The financial statements have been prepared on the going in the income statement over the period of the borrowings on an concern basis, which assumes that the Company will continue in effective interest rate basis. operational existence for the foreseeable future. The Company has taken advantage of the exemption under Section Classification of financial instruments issued 408 of the Companies Act 2006 from presenting its own profit and Financial instruments issued by the Company are treated as equity loss account. The loss after tax included in the financial statements only to the extent that they meet the following conditions: they of the Company determined in accordance with the Act, was £33m include no contractual obligation upon the Company to deliver cash (14-month period ended 30 September 2008: profit of £376m). or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially Under Financial Reporting Standard No 1 (revised), the Company is unfavourable to the Company and; where the instrument will or may exempt from the requirement to prepare a cash flow statement as its be settled in the Company’s own equity instruments, it is either a cash flows are included within the published consolidated statement non-derivative that includes no obligation to deliver a variable number of cash flows of TUI Travel PLC. of the Company’s own equity instruments or is a derivative that will be The Company has taken advantage of the exemption contained within settled by the Company exchanging a fixed amount of cash or other FRS 8 and has not therefore disclosed transactions or balances with financial assets for a fixed number of its own equity instruments. entities which form part of its Group. Derivative financial instruments The Company has taken advantage of the exemption contained within Derivative financial instruments are stated at fair value. The gain or FRS 29 and has not provided the required financial instruments loss on remeasurement to fair value is recognised immediately in disclosure on the basis that the Group’s consolidated financial the income statement. However, where derivatives qualify for hedge statements include consolidated IFRS 7 disclosures which are accounting, recognition of any resultant gain or loss depends on the compliant with the requirements of FRS 29. nature of the item being hedged. Foreign currencies Share-based payment Transactions in foreign currencies are translated at the foreign The Company operates share-based payment schemes for the exchange rate ruling at the date of the transaction. Monetary assets employees of its subsidiaries. The fair value of shares awarded to and liabilities denominated in foreign currencies at the balance sheet employees of the Company is recognised as an employee expense with date are translated to Sterling at the foreign exchange rate ruling at a corresponding increase in equity. The employee expense is recharged that date. Foreign exchange differences arising on translation are to fellow Group subsidiaries. The Company grants awards of its own recognised in the income statement. Non-monetary assets and shares to the employees of its subsidiaries and as such recognises liabilities that are measured in terms of historical cost in a foreign an increase in the cost of investment in its subsidiaries equivalent to currency are translated using the exchange rate at the date of the the equity-settled share-based payment charge recognised in its transaction. Non-monetary assets and liabilities denominated in subsidiaries’ financial statements with the corresponding credit being foreign currencies that are stated at fair value are translated to recognised directly in equity. The fair value is measured at the award Sterling at foreign exchange rates ruling at the dates the fair values date and is spread over the period during which the employee were determined. becomes unconditionally entitled to the awards. Calculating the fair value takes into account various factors including the expected Leases volatility of the shares, the dividend yield and the risk free interest Assets acquired under finance leases are capitalised and the outstanding rate. Further information on the share schemes is provided in Note 5 future lease obligations are shown in payables. Operating lease rentals to the consolidated financial statements. are charged to the profit and loss account on a straightline basis over the period of the lease. The increase in investments and credit to equity for the year ended 30 September is £16m (14-month period ended 30 September Operating lease income is recognised in the profit and loss account on 2008: £14m). a straightline basis over the period of the lease. 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.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 1 9 – (4) 16 £m £m 125 706 546 547 706 184 2008 911 911 Shares in Shares subsidiaries 30 September ncentive bsequent Report and Report – tations in oyees of the of oyees £m the Company. e in the sued by the sued by 234 234 2009 nch companies nch companies ial statements in ial statements ar ended ar g differences ich have arisen but arisen ich have 30 September www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI Other receivables Other Total Amounts owed by group undertakings group by Amounts owed E. Debtors Additions represent share-based payment liabilities incurred. The costs of the share-based schemes, which are operated for empl for operated which are schemes, the share-based of The costs liabilities incurred. payment share-based Additions represent Net book value 2009 At 30 September 2008 At 30 September At 30 September 2009 At 30 September 2009 30 September 2008 and at At 30 September an increas recognises Company The standards. local accounting the subsidiaries, subject to borne by subsidiaries, are Company’s Payment. with FRS 20: Share-based earnings, in accordance retained to and a credit in the subsidiary investment ye in the acquired companies and of the Company by and indirectly subsidiaries held directly the principal operating Details of financial statements. consolidated the Group’s 13 and 32 of in Notes 2009 can be found 30 September the Fre certain of of S.A. during the restructure Touraventura in £184m invested to relates companies Group of Recapitalisation year. during the groups existing tax two combine to Disposals Cost 2008 At 1 October D. Investments C. Dividends su dividends proposed details period and of and prior year in the current the Company by and proposed dividends paid Details of B. Directors’ remuneration and employees remuneration B. Directors’ i long term them under by amounts receivable awards, share of vesting them on by gains made remuneration, Directors’ Details of Auditors’ remuneration Auditors’ £25,000 (2008: £25,000). was 2009 audit fee The Company’s between the treatment of certain items for taxation and accounting purposes. and accounting taxation for certainitems of the treatment between wh all timing differences, is made for without discounting provision full standards, accounting by required as otherwise Except compu included in tax are and expenditure income of when items arise Timing differences sheet date. balance the at reversed not inclusion in the financial statements. their from periods different funds within shareholders’ presented Dividend on shares financ in the Group’s equity from and deducted as a liability recognised is shareholders the Company’s Dividend distribution to of discretion the at no longer and are payment for authorised and approved appropriately are which the dividends the period in the financial statements. to disclosed in the notes are meet these criteria do not Unpaid dividends that the Remuneration section of contained in the audited period are and prior year schemes and pension entitlements in the current is awards all share (2008: nine). Details of had nine employees The Company financial statements. the consolidated 5 of in Note financial statements. the consolidated 5 of in Note given are Company financial statements. the consolidated 9 of in Note given are sheet date the balance to Acquisitions Additions companies group of Recapitalisation diminution in value for Provision Taxation timin because of taxation deferred account into the period and takes loss for or taxation is based on the profit for The charge 126 TUI Travel PLC Annual Report & Accounts 2009

Financial statements Notes to the Company’s financial statements continued

F. Creditors: amounts falling due within one year 30 September 30 September 2009 2008 £m £m Loan notes – 2 Amounts owed to group undertakings 55 61 Amounts owed to ultimate parent company 252 – Deferred and contingent consideration 4 4 Accruals and deferred income – 3 Total 311 70

G. Creditors: amounts falling due after more than one year 30 September 30 September 2009 2008 £m £m Loan notes – 1 Bank loans and overdrafts – 132 Amounts owed to group undertakings – 3 Amounts owed to ultimate parent 611 840 Deferred and contingent consideration 20 22 Total 631 998 Amounts owed to the ultimate parent at 30 September 2009 comprise a shareholder loan from the ultimate parent, TUI AG, which is being repaid in instalments over the period to April 2011 and bears interest at EURIBOR plus a margin, currently 1.5% per annum, increasing six-monthly by 0.2% to a maximum of 2.0% per annum. The Company can make voluntary repayments at any time during the term of the loan subject to a minimum repayment of €10m and the giving of 30 days’ notice. The drawn balance of the loan at 30 September 2009 was €919m of which €669m is due in more than one year (2008: €1,019m, all due in more than one year), not including accrued interest payable. All balances repayable after more than one year are due within one to two years. H. Share capital 30 September 30 September 2009 2008 £m £m Authorised share capital 1,999,500,020 (2008: 1,999,500,020) ordinary shares of 10p each 200 200 49,998 (2008: 49,998) redeemable preference shares of £1 each – – Total 200 200 Allotted, called up and fully paid share capital 1,118,010,670 (2008: 1,118,010,670) ordinary shares of 10p each 112 112 Total 112 112

I. Capital and reserves Share Profit capital and loss Other Total account account reserve £m £m £m £m At 1 August 2007 –––– Profit for the period – 376 – 376 Issue of shares 112 – – 112 Share issue costs – (24) – (24) Share-based payment costs – – 14 14 Shares acquired to satisfy share-based payment schemes – (20) – (20) Dividends paid – (65) – (65) At 30 September 2008 112 267 14 393 Loss for the year – (33) – (33) Share-based payment costs – – 16 16 Dividends paid – (107) – (107) At 30 September 2009 112 127 30 269 At 30 September 2009, shareholders’ funds are all due to equity shareholders.

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 7 7 £m 127 2008 Aircraft 30 September to have a have to the Company ontract as a ontract – – ntee. £m similar terms. terms. similar certain tatements. 2009 ness. Provision ness. Provision for this purpose. for Aircraft es at the time of default. the time of es at 30 September www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI Details of post balance sheet events relevant to the Company and its Group are given in Note 34 of the consolidated financial s the consolidated 34 of in Note given are and its Group the Company to relevant sheet events post balance Details of L. Post balance sheet events L. Post Under the terms of guarantees given to the Civil Aviation Authority and other relevant authorities by the Company in respect of in respect the Company authorities by relevant and other Authority the Civil Aviation to given guarantees of the terms Under K. Contingent liabilities After five years five After Total undertakings on subsidiary sub-leased to are the Company leased by Aircraft aircraft. to relate commitments lease All operating incorporated was which Limited, Finance Aviation TUI company, group a fellow to novated were leases On 9 June 2009 all aircraft liabiliti the subsidiaries’ net trading of the extent be held liable to could the Company default of subsidiaries, in the event busi of actions against it arising in the normal course of a number time defending any and its subsidiaries, is at The Company, expected 2009 are outstanding 30 September at which are No actions this is deemed appropriate. where these actions is made for all known liabilities. has been made for provision adequate that consider The Directors on these accounts. effect material within its group, companies other of the indebtedness guarantee to contracts financial guarantee into enters the Company Where c the guarantee treats the Company them as such. In this respect, for and accounts arrangements be insurance these to considers the guara under a payment make to will be required the Company that probable such time as it becomes until liability contingent Annual commitments under non-cancellable operating leases expiring: leases operating non-cancellable under Annual commitments J. Operating lease commitments J. Operating as follows: are lease contracts operating under obligations The Company’s 128 TUI Travel PLC Annual Report & Accounts 2009

Shareholder information Three-year financial history

Year ended Year ended Year ended 30 September 30 September 30 September 2009 2008 2007 £m £m £m Revenue 13,863 13,932 12,840 Underlying operating profit 443 398 261 Underlying operating profit margin % 3.2% 2.9% 2.0% Underlying earnings per share (basic) 23.8p 20.4p 14.4p Return on invested capital (ROIC) 9.2% 8.4% 5.4%

Shareholder profiles In the 12 months to 30 November 2009 the Company was notified by way of Transparency Directive Form 1 (TR1) notifications of the following voting rights of the issued ordinary share capital of the Company. Shares (m) % TUI AG 603,996,039 54.00 Prudential 37,097,287 3.31

Financial calendar AGM: 9 February 2010 Interim results: May 2010 Preliminary results: December 2010

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 129 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI Share dealing service Share and sale of the purchase for service share-dealing An execution-only NatWest Stockbrokers. NatWest from is available shares PLC Travel TUI the Financial Services by is authorised and regulated Stockbrokers and PLUS. Exchange the London Stock of and is a member Authority details, please contact: For Stockbrokers NatWest Square Waterhouse 38-142 Holborn London EC1N 2TH 0808 208 4433 Tel: Find out more through which can be accessed website has a corporate PLC Travel TUI www.tuitravelplc.com *Discounts are not valid on accommodation-only bookings and cannot be used in conjunction bookings and cannot on accommodation-only valid not are *Discounts offers. promotional other or savings group discounts, discretionary with any (including shareholders the scheme, private for qualify to In order least 500 must hold at account) a nominee those holding through booking the holiday of on the date in the Company shares ordinary a minimum for shareholders of on the register been and must have date. on that year one period of (Monday call Equiniti on 0871 384 2030 discount your for register To details to provide to will be required You 0830-1730hrs). Friday to will be you confirmed, Once an eligible shareholder. are you confirm a unique code. given 0900- Friday to a booking call us on: 0844 800 3104 (Monday make To unique your for will be asked You 0900-1700hrs). 1800hrs, Saturday will be applied. discount your and code Country Walkers plus a further website www.countrywalkers.com on the Best price tours. booking on all escorted £400 per adult or per £200 of discount The Moorings* discount plus a further website www.moorings.com on the Best price £40 or destinations) booking (short haul per £40 adult or £20 per of booking (long haul destinations). £80 per adult or per Sunsail* of discount plus a further website www.sunsail.co.uk on the Best price per £40 or booking (short haul destinations) £40 per adult or £20 per booking (long haul destinations). £80 per adult or Le Boat* discount plus a further website www.leboat.co.uk on the Best price booking on all destinations. £40 per adult or £20 per of Club Vass* discount plus a further website www.clubvass.com on the Best price booking on all destinations. £40 per adult or £20 per of Eligible shareholders are entitled to the following discounts (which are discounts the following entitled to are Eligible shareholders dedicated our through when booking holidays change) subject to Line. Discount Shareholder First Choice* of discount plus a further website www.firstchoice.co.uk on the Best price haul destinations) booking (cruise, short/medium £40 per adult or £20 per booking (long haul destinations). £80 per adult or £40 per or Thomson* of discount plus a further website www.thomson.co.uk on the Best price haul destinations) booking (cruise, short/medium £40 per adult or £20 per destinations). booking (long haul £80 per adult or £40 per or Thomson Airways of discount plus a further website www.thomson.co.uk on the Best price haul destinations) (short/medium journey a return person for £10 per haul destinations). (long journey a return person for £20 per or Thomson Worldwide* plus a website www.thomsonworldwide.com on the Best price booking (short/medium £40 per adult or £20 per of discount further booking (long £80 per person or £40 per or haul destinations) haul destinations). Citalia* of discount plus a further website www.citalia.com on the Best price haul destinations) booking (short/medium £40 per adult or £20 per destinations). booking (long haul £80 per person or £40 per or & Jarvis* Hayes plus a further website www.hayesandjarvis.co.uk on the Best price booking (short/medium £40 per adult or £20 per of discount booking (long £80 per person or £40 per or haul destinations) haul destinations). Jetsave* discount plus a further website www.jetsave.co.uk on the Best price haul destinations) booking (short/medium £40 per adult or £20 per of booking (long haul destinations). per £80 person or £40 per or Meon Villas* discount plus a further website www.meonvillas.com on the Best price haul destinations) booking (short/medium £40 per adult or £20 per of booking (long haul destinations). per £80 person or £40 per or Sovereign* discount plus a further website www.sovereign.com on the Best price haul destinations) booking (short/medium £40 per adult or £20 per of booking (long haul destinations). per £80 person or £40 per or Hotelopia plus an website www.hotelopia.co.uk on the on all hotels Best price additional 14% discount. Traveller* Imaginative plus an website www.imaginative-traveller.com on the Best price additional 10% discount. Shareholder discount Shareholder 130 TUI Travel PLC Annual Report & Accounts 2009

Shareholder information Contacts and advisers

Secretary and Registered Office Solicitors A L John Herbert Smith TUI Travel PLC TUI Travel House Bankers Crawley Business Quarter Barclays Bank PLC Fleming Way Citigroup NA Crawley Royal Bank of Scotland plc West Sussex RH10 9QL Société Générale Telephone: +44 (0)1293 645700 Facsimile: +44 (0)1293 645704 Registrars and transfer office Equiniti Limited Registered number 6072876 Aspect House Auditors Spencer Road Lancing BN99 6DA KPMG Audit Plc Shareholder Contact Centre No: 0871 384 2030 Merchant bankers International: +44 (0) 121 415 7161 Website: www.shareview.co.uk Lazard Brothers & Co Limited Deutsche Bank Company website Stockbrokers www.tuitravelplc.com RBS Hoare Govett Limited Deutsche Bank

www.tuitravelplc.com Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information 131 www.tuitravelplc.com TUI Travel PLC Annual Report & Accounts 2009 2009 & Accounts Report Annual PLC Travel TUI Winter season April to November Retail Price Index Price Retail Sector similar businesses share whose PLC Travel TUI Subset of Sector, Activity Sector, these include Mainstream characteristics, & and Accommodation Sector Markets Specialist & Emerging Sector Destinations Specialist Sectors Specialist & Emerging Sector, the Activity are The Specialist Sectors Sector & Destinations Accommodation and Sector Markets Summer season October to May TSR Return Shareholder Total TUI AG shareholder majority PLC’s Travel TUI The Board Directors of Board PLC Travel TUI The Group Companies of Group PLC Travel TUI The The Company PLC TUI Travel VCSP Plan Synergy Creation Value WACC capital of cost average Weighted KPIs Indicators Performance Key Lates market departure to prior weeks 8-10 Load factor capacity of as a percentage volumes Passenger m million Merger TUI AG Division of Tourism the of The business combination PLC Holidays assets) and First Choice certain hotel (excluding MOU Understanding of Memorandum PSP Plan Share Performance RCF Facility Credit Revolving ROIC capital on invested Return RPI /RPK 2 JV venture Joint Gross Domestic Product Gross GMB Management Board Group GAS Audit Services Group GDP Earnings per share Earnings per ETS Scheme Trading Emissions European EBT Trust Benefit Employee EPS Direct distribution Direct website and call centre Retail, DABS Annual Bonus Scheme Deferred content Differentiated offer to been tailored have that and products Includes hotels customers our to and facilities additional services Owned and franchised retail shops, call centre and website and shops, call centre retail Owned and franchised CGU unit Cash generating CO kilometre passenger revenue emissions per Carbon dioxide distribution Controlled CIS States Independent of Commonwealth billion Business combination certain (excluding TUI AG Division of Tourism the of The merger PLC Holidays assets) and First Choice hotel Bednights sold accommodation Amount of bn B2C Business-to-Consumer Bedstock capacity Accommodation B2B Business-to-Business A&D Sector & Destinations Accommodation Asset-right owned and leased assets of Optimum mix AGM Meeting Annual General Glossary of key terms Glossary key of 132 TUI Travel PLC Annual Report & Accounts 2009

Shareholder information Index

A K Accommodation & Destinations Sector 5, 41 Key Performance Indicators 18 Accounting policies 68 Acquisitions 31, 98 M Activity Sector 5, 39 Mainstream Sector 4, 34 Annual General Meeting 46 Market overview 8 Audit Committee 51 Auditors 63 N Notes to the Company’s financial statements 124 B Notes to the consolidated financial statements 68 Balance sheet 123 Net debt 116 Board Committees 50 Nomination Committee 51 Board of Directors 44 Brands 3 O Business performance 30 Operational highlights 7 C Outlook 43 Chairman’s statement 10 P Chief Executive’s statement 11 People & Operational Effectiveness 16 Chief Executive’s interview 12 Pensions 33 Climate change 10, 28 Principal risks 20 Colleagues 22 Principal operating subsidiaries 120 Company balance sheet 123 Product & Content 14 Consolidated balance sheet 65 Consolidated income statement 64 Consolidated statement of cash flows 66 R Consolidated statement of recognised Remuneration Committee 53 income and expense 67 Remuneration report 53 Consumer sentiment 9 Report of the Directors 46 Contacts and advisers 130 Responsible leadership 22 Corporate Governance report 49 Risk 20 Current trading 42 S D Segmental performance 34 Directors’ biographies 45 Shareholder profiles 128 Directors’ report 46 Shareholder discount 129 Directors’ responsibilities 48 Shareholder information 128 Directors’ remuneration 57 Specialist & Emerging Markets Sector 5, 40 Distribution & Brands 15 Strategy 14 Dividends 10, 32, 90 Strategic imperatives 14 Strategic overview 8 E Structure 4 Sustainable development 26 Earnings per share 32 Suppliers 29 Emerging markets 9, 17 F T Taxation 32, 89 Financial calendar 128 Three-year financial history 128 Financial highlights 6 TUI Travel overview 2 Financial statements 64 Total Shareholder Return 56 Fuel and foreign exchange 43 G W Who we are 2 Glossary of key terms 131 Where we operate 3 Governance 44 Group at a glance IFC Group Management Board 22 Group performance 30 Growth & Capital Allocation 17 I Independent Auditors’ report 63 Investment case IFC

www.tuitravelplc.com Designed and produced by Likemind www.likemind.com This report is printed on Regency Satin, which contains material sourced from responsibly managed forests, certified in accordance with the FSC (Forest Stewardship Council). It is made from 10% recovered fibre, diverting waste from landfill and is manufactured under strict environmental management systems, the international ISO 14001 standard, EMAS (Eco-Management & Audit Scheme) and the IPPC (Integrated Pollution Prevention and Control) regulation. Printed in England by Cousin. Cousin is a carbon neutral company with ISO 4001 accreditation: it recycles all solvents used in the printing process, making any waste ph neutral, and also holds FSC status. Photography supplied by Exodus, First Choice, TUI Deutschland, TUI España, TUIfly, TUI picture pool, TUI Nederland, TUI Nordics, Quark.

www.tuitravelplc.com TUI Travel PLC TUI Travel PLC TUI Travel House Crawley Business Quarter Fleming Way Crawley

West Sussex Annual Report & Accounts for the year ended 30 September 2009 RH10 9QL Telephone: 01293 645700 www.tuitravelplc.com