TUI Annual Report 2010

Annual Report & Accounts for the year ended 30 September 2010
Were on a journey. Focused on delivery.
http://ara2010.tuitravelplc.com
The investment case

Reasons to invest in TUI Travel PLC (London Stock Exchange ticker code TT.)
Experienced management team
Each of our businesses is led by highly experienced management teams giving us real strength and depth of leadership. Our leaders have demonstrated excellent track records of building strong businesses and creating value.
Market-leading brands
We have some of the most recognised and highly trusted brands in the industry, which reduces the cost of customer acquisition and means we are highly attractive to our accommodation providers and distribution partners.
Market-leading positions Market consolidation Economies of scale
We are either the number one or number two tour operator in almost all of our mainstream source markets, including leadership positions in the UK, Germany, France, Belgium and the Netherlands. Consolidation in some of our key markets has improved the structure of the industry, helping to remove excess supply from the market. 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.
Turnaround potential
In 2009, we identified 142m of turnaround opportunities as we took strategic actions to improve margins in a number of underperforming businesses. After delivering 53m of these in 2010, a further 89m of opportunities for margin improvement remains.
Exposure to higher growth specialist travel
Almost one third of our profits are generated by our portfolio of specialist businesses which enjoy high growth and margin characteristics, including specialist tour operators offering unique, experiential travel experiences and online accommodation providers.
Emerging markets
We have established a significant presence in the fast-growing Russian and Ukrainian source markets, leaving us well positioned to take advantage of the potential in these markets. We have an existing presence in Brazil, China and India and are investigating the opportunities in these exciting markets.
www.tuitravelplc.com
TUI Travel PLC Annual Report & Accounts 2010 01
Group at a glance
Contents
TUI Travel PLC is the worlds leading leisure travel company. Find our 2010 Annual Report online at http://ara2010.tuitravelplc.com
ifc Group at a glance

ifc 02 04 07 The investment case TUI Travel overview Our structure Financial highlights Strategic overview
08 Strategic overview
08 09 10 12 14 18 20 24 27 28
Chairmans statement Chief Executives statement Chief Executives interview Market overview Our strategy Key performance indicators Principal risks People Health and safety Sustainable development
Business performance
32 Business performance
32 33 40 Group performance Segmental performance Current trading
42 Governance
42 44 47 48 53 63 64 65
Board of Directors Directors report Statement of Directors responsibilities Corporate Governance report Remuneration report Independent Auditors report
Governance
64 Financial statements
Consolidated income statement Consolidated statement of comprehensive income 66 Consolidated balance sheet 67 Consolidated statement of changes in equity 68 Consolidated statement of cash flows 69 Notes to the consolidated financial statements 136 Company balance sheet 137 Notes to the Companys financial statements Shareholder profiles Contacts and advisers Shareholder discount Index
Financial statements
142 Shareholder information

142 142 143 144
Shareholder information
The Annual Report contains forward-looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in countries and Sectors in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ from those currently anticipated.
02 TUI Travel PLC Annual Report & Accounts 2010
Group at a glance
TUI Travel overview
Who we are TUI Travel PLC (TUI Travel PLC group of companies or the Group) is the worlds 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 marketleading mainstream brands (reported under Mainstream Sector) and specialist travel businesses (reported under Specialist Sectors). TUI Travel is focused on providing customers with a wide choice of differentiated and flexible travel experiences. TUI Travel is headquartered in the UK and employs approximately 49,000 people. It is listed in the FTSE 100 and has the ticker code TT.
Our strategy
vision
Making travel 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 experiences to meet their changing needs Product & Content Distribution & Brands People & Operational Effectiveness Playing to win Growth & Capital Allocation Responsible leadership
strategic goal strategic imperatives values
Go to page 14 Go to page 25
Customer obsessed
Value driven
Where we operate TUI Travel is a truly global player operating in 27 key source markets.
Our 27 key source markets: Australia Austria Belgium Canada China Czech Republic Denmark Finland France Germany Hungary India Ireland Italy Luxembourg Netherlands New Zealand Norway Poland Russia Slovenia Spain Sweden Switzerland Ukraine United Kingdom United States
Group at a glance Strategic overview Business performance
Our key brands TUI Travel operates under more than 200 brands. A selection of our well-known brands includes:
TUI operates in the German source market and is the market-leading tour operator brand. www.tui.com
Marmara is the leading tour operator in France that provides exclusive package holidays to Mediterranean destinations. www.marmara.com
LateRooms is the UKs leading online accommodation site offering late availability deals in over 44,000 properties worldwide. www.laterooms.com
Hayes & Jarvis operates in the UK source market and creates specialist holiday itineraries for discerning travellers to 55 destinations worldwide. www.hayesandjarvis.co.uk
Governance
Thomson is a leading UK tour operator which also offers flights and accommodation. www.thomson.co.uk
The Moorings is the worlds premier yacht charter company and offers hire of its custom-designed yachts in North America, UK, France and Germany. www.moorings.com
Hotelbeds is a leading business-tobusiness provider of destination services and accommodation online to wholesalers, travel operators and travel organisers. www.hotelbeds.com
Mostravel is one of TUI Russias tour operating and retail businesses. It specialises in the destinations of Turkey and Egypt. www.mostravel.com
Fritidsresor is a tour operator and retail business in the Swedish source market offering package tours to the Mediterranean and destinations worldwide. www.fritidsresor.se
Quark Expeditions is the worlds leading operator of expedition cruise voyages to the Polar Regions. www.quarkexpeditions.com
Group at a glance
Our structure
In the financial year ended 30 September 2010 TUI Travel was organised and managed through four Sectors Mainstream, Activity, Specialist & Emerging Markets and Accommodation & Destinations.
Key activities
Mainstream Sector
For further information see page 33 Mainstream is the largest Sector in terms of size, financial performance and employee numbers. It comprises leading tour operators and power brands and operates a fleet of 143 aircraft and circa 3,500 retail shops. There are three divisions:
Northern Region
Top selling brands*
The Northern Region comprises the distribution, tour operating businesses and airlines in the UK and Ireland, the Nordic countries and Canada. The UK operates some of the best known and loved travel brands including the UKs third largest airline, Thomson Airways. The Nordics comprises the markets of Sweden, Norway, Denmark and Finland. The Nordics has number one brands in all markets, except Finland where it is number two.
Thomson, First Choice and Fritidsresor

Customer numbers
6.6m (excluding Canada)

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

Customer numbers
7.9m
Spain, Germany and Turkey
Western Europe
Top selling brands*
Western Europe comprises the distribution, tour operating businesses and airlines in France, Belgium and the Netherlands. In each country the brands have market-leading positions.
Jetair, Holland International and Marmara

Customer numbers
5.1m
Spain, Greece and Turkey
*By customer numbers.
The chart below illustrates the underlying operating profit mix** by Sector
15% 4% 13% 68% Mainstream Sector Activity Sector Specialist & Emerging Markets Sector Accommodation & Destinations Sector
Group at a glance
**Before central costs.
Key activities
Strategic overview
Specialist Sectors
The Specialist Sectors for the year ended 30 September 2010 included Accommodation & Destinations, Activity and Specialist & Emerging Markets.
Accommodation & Destinations Sector

For further information see page 37
The Accommodation & Destinations Sector (A&D) sells and provides a range of services in destination to tour operators, travel agents, corporate clients, and direct to the consumer worldwide. Services include hotel accommodation, transfers, excursions, round trips, organising meetings, incentives, conferences and events (MICE), cruise handling as well as integrated website solutions for our customers. A&D is structured along key business lines Business to Business, Business to Consumer and Specialist.
Top selling brands*
World of TUI (umbrella brand for Group customers) including TUI Espaa and TUI Hellas. Hotelbeds.com and LateRooms.com
Customer numbers/roomnights
29m (offline passengers 12.5m, room nights 16.8m)

Spain, UK and Portugal
Activity Sector
This Sector has over 40 activity travel businesses that operate under five divisions Marine, Adventure, Ski, Student and Sport. Each of these divisions has market-leading positions. The Adventure businesses take more customers to iconic adventure destinations than any other operator. The Sport businesses are leaders in supporter-led cricket and rugby tours in the UK and Australia, while the Student businesses encompass everything from the traditional school trip to France, to trek holidays for groups of young adults in the Himalayas. This Sector also includes the leading yacht brands in Europe and the US and the worlds largest ski operator.
Top selling brands*
Governance
Crystal Ski, The Moorings and Le Boat

Customer numbers
1.1m
France, Austria and Italy

Specialist & Emerging Markets Sector

The Specialist & Emerging Markets Sector is an international portfolio of travel businesses focusing on specific destinations, premium travel experiences or particular customer demographic segments often with differentiated and exclusive product. The Sector consists of 40 businesses operating from North America, Europe and, most recently, emerging markets such as Russia and Ukraine.
Top selling brands*
Mostravel, Turchese and Hayes & Jarvis

Customer numbers
0.8m (excluding Russia & Ukraine)

US, Egypt and Italy
Group at a glance
Our structure (from 1 October 2010)

TUI Travel PLC will continue to report in four Sectors. The Mainstream Sector remains unchanged. The remaining Sectors have been refined and renamed to reflect the strategic priorities of TUI Travel as it develops. These Sectors are now called Accommodation & Destinations, Specialist & Activity and Emerging Markets.
Key activities
Accommodation & Destinations
Top selling brands* The A&D Sector is a leading player in the accommodation and destination services industry, competing in four key business lines: Accommodation wholesaler worldwide online hotel intermediary offering over 34,000 hotels, via the brands Hotelbeds, Bedsonline and Hotelopia. Accommodation online travel agent providing hotel rooms to the final customer through popular online brands LateRooms and AsiaRooms. Destination services providing services to customers when they arrive in-destination such as airport transfers, excursions or tour trips. These services are provided in 42 countries both to leisure travellers and to corporations. The brands include TUI Espaa, TUI Hellas and Pacific World. Cruise handling offering turnaround services, excursions and port agency services to the main cruise lines on a global scale through the Intercruises brand.
World of TUI (umbrella brand for Group customers) including TUI Espaa and TUI Hellas. Hotelbeds.com and LateRooms.com
Customer numbers/roomnights
29m (offline passengers 12.5m, room nights 16.8m)

Spain, UK and United States of America
Specialist & Activity
Top selling brands*
This Sector is the worlds leading provider of specialist and experiential travel. It has over 100 specialist and activity brands delivering a range of unique customer experiences with the ethos of if you can dream it, we can take you there. The Sector operates under six divisions Adventure, Education, Marine, North American Specialist, Sport and Specialist Holiday Group.
Crystal, The Moorings and Hayes & Jarvis

Customer numbers
1.6m
France, Austria and Italy
Emerging Markets
Emerging Markets is a Sector in development at TUI Travel. It is a growing portfolio of travel businesses focusing on the specific source markets of Brazil, Russia and CIS, India and China. TUI Travel is the first international tour operator to build a presence in Russia and CIS. The TUI Russia & CIS brand was launched in March 2010. TUI Travel continues to investigate its optimal participation strategy for Brazil, India and China.
Russia & CIS division: Top selling brands*
Mostravel, VKO Travel and Voyage Kiev

Customer numbers
0.5m
Turkey, Egypt and Greece
Group at a glance
Financial highlights
Group at a glance
Revenue
10 09 restated
Underlying operating profit
13,525m 13,851m
-2% +11% +4% +10%
Strategic overview
10 09 restated
Underlying profit before tax
447m 401m
10 09 restated
Underlying earnings per share
337m 324m
10 09 restated
Dividend per share
22.0p 20.0p
Governance
10 09
11.0p 10.7p
+3%
Underlying operating profit and underlying profit before tax are from continuing operations and exclude separately disclosed items, amortisation of acquisition related expenses, goodwill impairment and interest and taxation on the Groups share of the results of 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. The references to the financial results contained in pages 2 to 63 are unaudited pro forma results for the year, reported before the estimated financial impact of the closures of European airspace as a result of volcanic ash. See Note 1(B)(iii) on page 71 for basis of preparation of the pro forma financial information.
Strategic overview
Chairmans statement
We have delivered results in line with our expectations after experiencing another year of challenges. Not least, the closure of much of Northern Europes airspace in April when the Icelandic volcano, located below the Eyjafjallajoekull Glacier, erupted and created an enormous ash cloud in the atmosphere. This closure cost our Group 104m and affected some 400,000 of our customers. At a macro level, economic uncertainty and concern about how Governments are seeking to tackle deficits were also factors that we faced during the year.
During the year we increased progress on the delivery of our synergy target of 200m and delivered 75m of incremental benefit in the full year. This has given us a total delivered benefit of 195m since the merger in September 2007. Progress on turning around some of our underperforming businesses in Mainstream is taking longer than originally anticipated but we remain confident that the drivers we have in place will deliver the targeted outcome. Overall growth in our Specialist Sectors remains strong and our joint venture in Russia and Ukraine has performed in line with our expectations.
On 30 November 2010, the appointment of Will Waggott as Chief Financial Officer of the Group was announced with immediate effect. Will is already a TUI Travel PLC Board member and was the Groups Commercial Director.
Sustainable development
Results
The Group has achieved an 11% increase in underlying operating profit of 447m (2009 restated: 401m) on revenue of 13,525m (2009 restated: 13,851m). Underlying profit before tax is up 4% to 337m (2009 restated: 324m). Underlying earnings per share increased 10% to 22.0p (2009 restated: 20.0p). The Group statutory loss before taxation was 36m (2009 restated: 94m).
For TUI Travel, sustainability is an important business issue and opportunity. Our vision for sustainable development is to make travel experiences special whilst minimising our environmental impact, respecting the culture and people in our destinations and offering real economic benefit to local communities. As a leading tour operator, our challenge is to prepare for a low-carbon society by further reducing our environmental impacts and as a business we are monitoring and preparing for regulatory proposals on climate change that could have a fiscal impact on our Group.
Colleagues
Dividends
The Board is recommending a final dividend of 7.8p per share. On 11 May 2010, the Board recommended an interim dividend of 3.2p per share, thereby resulting in a full year dividend of 11.0p per share (2009: 10.7p). The Group has a progressive dividend policy and will look to maintain underlying dividend cover at just over two times.
Board
As a Group we have circa 49,000 colleagues located across the world. Their hard work and dedication is much appreciated and, this year, our value of customer obsessed was well and truly demonstrated by their actions throughout the closure of airspace in April. We received many communications from our customers about their outstanding efforts and, on behalf of the Board, I would like to thank them for their valued contribution to making our customers holiday experiences special.
Post year end, on 21 October 2010, the Group announced that Paul Bowtell, Chief Financial Officer will leave the Board on 31 December 2010.
Dr Michael Frenzel Non-Executive Chairman
Strategic overview
Chief Executives statement

Group at a glance Following the success last year of launching our Annual Report & Accounts fully online we are doing the same this year with improvements to the functionality of the website and to the content. Reducing our environmental impact is important to us and the fact that more than 70% of our shareholders elect to receive the Annual Report & Accounts online proves that it is important for our stakeholders as well.
Strategic overview
As the worlds leading leisure travel company, this financial year we have faced headwinds both within and outside of our control including volcanic ash, economic uncertainty (see page 10) and one instance of our own making. We identified that, over a number of years, within TUI UK & Ireland, there was a failure to reconcile balances adequately in legacy systems in the retail and tour operator businesses. This has resulted in us having to write off 117m of irrecoverable balances. We are, therefore, restating our 2009 full year results with a reduction of underlying operating profit of 42m to 401m and a reduction in the underlying earnings per share of 3.8p from 23.8p to 20.0p. We have also reduced our opening reserves at 1 October 2008 by 70m from 2,596m to 2,526m. A full and detailed audit and business review has been undertaken and we are confident that we have now rectified the weaknesses. Having experienced some exceptional external challenges, the Summer season traded out strongly across the Group. It was, however, not sufficient to recover the increased losses and costs from earlier in the year. We have experienced a later booking curve due, in principle, to the economic uncertainties that our customers have continued to face. This is one of the reasons why it is so important that we relentlessly focus on our strategic imperatives to ensure that we are able to deliver on our strategic goal. As part of the focus during the year we made a number of changes to our Group Management Board (see page 24). These changes reflect the
new structure of the Group (see page 6) and succession planning. We operate in a highly regulated industry and dialogue at both a national Government and European Commission level is an important aspect of our daily lives both at TUI Travel and as members of various industry and trade bodies. We believe that it is important that there is a level playing field across leisure travel companies, airlines and intermediaries and we work to ensure that our views are heard and understood not only in our source markets but also in the destinations we operate in. For more information see page 12. This year we have made progress on delivering our strategic imperatives, albeit not as great as we would have wished. We know what we need to do to deliver long-term sustainable growth and have identified the levers with which to do that (see strategic imperatives page 14). Trading in the new financial year has started well but we believe that, given that it is so early in the year and economic uncertainty remains, it is prudent to be cautious about our outlook. In a year when our 49,000 colleagues have dealt with so many external and internal challenges, I would like to thank them personally for all their efforts. We have an outstanding team that delivers day-in dayout and I am extremely proud of what they achieve and of all the businesses that make up TUI Travel. Business performance Governance Financial statements
Peter Long Chief Executive
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Strategic overview | Chief Executives interview
An interview with Chief Executive, Peter Long
This year has been a difficult one for TUI Travel. Could you sum it up for us? We started the year off well in terms of trading despite the fact that there was some bad weather in January which disrupted our programme. That was nothing compared to what we then had to deal with during April when we had the closure of airspace and all of our 143 aeroplanes were grounded for over a week. Circa 400,000 guests were affected either by cancellations or having to be repatriated from their holidays. This was a huge level of disruption but I think what we demonstrated as an organisation was our absolute professionalism to repatriate all our customers whilst causing them the minimum amount of disruption. Our customers were extremely grateful and had high regard for the professionalism of our staff within our Company. After the General Election we had further closure of airspace and that really did start to spook our customers because they were unsure as to whether they could be stranded when they were on holiday. This clearly had a negative effect and a number of our customers took the decision to delay their bookings and that had a very adverse impact on our business. I think we then went on to have the perfect storm because of ash, the General Election, the emergency budget and the World Cup all these elements caused disruption in terms of our customers normal booking patterns. After the World Cup we saw a resumption in terms of demand and, as we went through the high season, we had very strong sales which I think confirmed the importance customers place on their main summer holiday and that its a must-have, but when they book depends on the circumstances prevailing at the time. We were unable to recover the impact of this perfect storm during the months of May, June and particularly in early July. As we went through our audit process we also uncovered some control issues within the Group in our UK business. We found that our tour operating and retail systems were not being properly reconciled and that there was an overstatement of revenue. This has now been fully investigated and controls have been put in place to ensure that this will not reoccur again. We have also undertaken a full review of financial controls across the Group and I am satisfied that this event has not occurred in any other part of our business.
We continue to see smaller tour operators and airlines across Europe going out of business. What does that say about the quality of the tour operating industry? I think firstly it says that there has been weakness of demand and the smaller companies suffer more. Invariably the smaller companies that have failed have not had appropriate capital structures and, as a consequence, I think we will now be a major beneficiary as customers migrate away from the smaller companies to those larger international organisations which are well financed, have been trading for decades and have very strong reputations. I believe, therefore, that we can capitalise on this and there is an important message that we give to our customers when you book with us you have peace of mind. We have the experience, we have the depth of management, the choice of holidays and most importantly, we have the financial strength to ensure that we will deliver you a great holiday. You launched TUI Russia & CIS this year. How is that area of the business performing? Were very excited by the opportunity within Russia. There is a huge emerging middle class who like to travel and they like to go to sun and beach destinations. Obviously being geographically located in the Northern hemisphere where the weather, particularly in the Winter, is severe, it plays very much to our strengths in terms of selling and delivering sun and beach holidays to large volumes of customers in a very efficient way. We have partnered with a Russian partner we think this is very important as we get to know and understand the different culture that we operate in and were very happy in terms of the partnership that we have. We launched the TUI brand, bringing TUI as a consumer brand to Russia in March and that has been very well received within the Russian market. So we are excited by the opportunities but we are also realists and know that this is a market that is going to have very strong growth characteristics but it will be some time before we see the profitability that we enjoy within the European markets. Our investment to date has been modest so the risk profile is right but were there, we have the platform and the Russian market could grow to be one of our biggest markets within our Group.
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Group at a glance
You have changed the structure of the Group (from 1 October 2010). Why have you done that? Weve modified the structure. Weve got our three regional geographies for our mainstream business no change at all. Ive taken the Specialist and Activity Sectors and merged them into one. The other part of the specialist business was Emerging Markets and that is now a Sector in its own right because we want to be focusing on the opportunities in Russia which I have already alluded to but were also looking at the other BRIC economies of India, China and Brazil. Our Accommodation & Destinations Sector remains unchanged. Are you worried about the low-cost carriers becoming tour operators and how will you counter the threat of the online travel agents (OTAs)? We continue to look at all our competition. One of the greatest strengths that we have as an organisation is the fact a large proportion of the holidays we offer are unique experiences that our customers can only book with us and that gives us a platform to set us aside from the rest of our competitors. With regard to the low-cost carriers, one of the areas implemented during Summer 2010 was a greater choice for our customers in terms of the duration of holidays. Weve introduced 10 and 11 nights on top of our existing seven and 14-night offerings. They have proved to be very popular and we will continue to offer further different duration lengths in order to give our customers the greatest choice of holiday experiences. With regard to online travel agents, I think we compete in two different ways within our mainstream businesses and, taking the UK as an example, 40% of our bookings are transacted online. We are also in the online travel agent space in the specialist area which is accommodation only and we have two very important businesses within the Group which are LateRooms and AsiaRooms and these businesses are extremely successful and growing very rapidly. You have all but delivered the synergies identified at the time of merger. How are you going to grow the business going forward? I am very pleased with the success of the integration of our two UK businesses, Thomson
and First Choice, and that is where the bulk of the synergies have come from. In terms of growth opportunities, there are a number of areas, firstly continuing to improve the underperforming businesses such as Corsair. I am delighted that we have now agreed a new social plan with all our colleagues at Corsair to create a viable business going forward and we will implement that restructuring over the next 24 months. We are also looking at further improvements within our German and UK businesses, particularly in the area of new systems which will improve the efficiency of our business. The other key aspect of our business is having more unique holiday experiences, those differentiated holidays. We will continue to introduce more concept hotels that will enable us to increase the number of customers going on holiday with us within our mainstream businesses. Equally, we also have good growth opportunities across all our specialist businesses where there is now a growing demand for different types of holidays, the non-sun and beach. That might be a sailing holiday, a walking holiday or a Polar expedition cruise. Customers are looking to do different things and we have this very broad portfolio of unique specialist holidays within the Group. One of your values is responsible leadership. How do you put this into practice in the Group? Were very focused on sustainable tourism and were looking constantly at ways of reducing the level of carbon emissions as we transport and take our customers on holiday. One way we do this is by having one of the most modern aircraft fleets in the world. We continue to invest in new aircraft types and were very excited about the delivery of our new 787 Dreamliners which come into the fleet in 2012. They burn 20% less fuel than the 767 fleet we currently operate. A very important part of our organisation, absolutely key, is our leadership and the senior management team that run and operate our businesses and motivate and manage our colleagues. We continually also look to develop talent within the organisation because one of the critical success factors within our business is ensuring we have the right management in the right place to continue to build and grow our businesses.
Strategic overview Business performance Governance Financial statements Shareholder information
Peter Long Chief Executive
Strategic overview
Market overview
TUI Travel participates in markets which account for 343bn of global travel spend
26bn
317bn
Our three largest markets

= TUI Relevant core Markets* *UK, Sweden, Germany, France, Belgium, Netherlands, Austria, Poland, Switzerland & Canada (Euromonitor) Germany France UK 57bn 80bn 102bn
The economic environment
Following the international economic and financial crisis in 2008, the global recession impacted negatively on almost all major markets in 2009. The GDP of our two largest source markets, Germany and UK, declined by 6% and almost 5% respectively (Euromonitor 2009). The economic uncertainty continued into 2010 with concerns that there would be a double-dip recession and ongoing volatility in fuel prices and currency. Despite this, as 2010 progressed there has been recovery. GDP growth has taken place in most major source markets with Germany at 2.2% and the UK at 1.6% (June 2010 Trading Economics Statistics). However the levels of growth have not been enough to offset the global recessionary environment of 2008 and 2009. Unemployment has continued to rise with German and UK rates at 7.6% and 7.8% respectively (Trading Economics Statistics). The economic outlook for 2011 remains uncertain with different markets at different points in the recovery cycle.
page 10). Other significant events in destinations that impacted tourism included the civil unrest in Bangkok and the strikes and unrest in Greece. Despite a period of economic decline and industry turmoil, the overall travel market is expected to continue to grow. UNWTO projects long-term growth for international tourism with international arrivals expected to reach 1.6 billion in 2020, nearly double 2010 figures (880 million 2010). The package holiday remains an important part of the future of leisure travel but, as the traditional mainstream markets mature, we are continuing to offer greater choice of destinations, unique and differentiated products and look to new markets for growth. We believe the BRIC (Brazil, Russia, India and China) countries represent a significant opportunity to participate in longer-term travel growth trends and have high growth potential. The fastest growing area of leisure travel continues to be independent travel (3% CAGR Euromonitor) which includes self-packaged holidays/componentbased packages, activity holidays and online travel agents. The global online travel market is estimated to be worth 52bn (PhoCusWright) with online sales of travel retail products representing 34% of total travel sales in 2009 (Euromonitor).
The leisure travel market
Travel and tourism remains the worlds largest export industry with the leisure travel market estimated to be worth 740bn (Euromonitor). TUI Travel participates in markets which account for 343bn or 46% of global travel spend. Our three largest markets combined (Germany, France and UK) contribute 70% of the 343bn. After 14 months of decline, which saw further tour operator and airline failures, growth returned to international tourism in the last quarter of 2009 with an increase in international tourist arrivals of 2% (United Nations World Tourism Organisation (UNWTO)). This recovery continued into the early part of 2010 but the industry faced a significant setback in April/May 2010 with the closure of European airspace due to the volcanic ash cloud. This unprecedented event had a significant financial impact on both the industry and TUI Travel (see
The political climate
Travel and tourism are heavily regulated industries. As a global organisation, TUI Travel has a public affairs team that works with governments and regulators across our key source markets to address issues that affect our industry and our customers. The issue of air passenger rights has assumed particular importance, the European institutions having focused heavily on this issue during the year. Our public affairs team has engaged regularly with politicians and officials both in Brussels and in key source markets in order to ensure regulation that properly balances the needs and interests of customers and industry.
Group at a glance
The question of aviation taxation has also figured prominently in a number of jurisdictions and we have, together with trade associations and other industry partners, sought to press our case for a more equitable taxation regime that properly rewards and incentivises efficient use of aircraft. Financial protection of air passengers continues to be an issue, particularly in the UK, and we have continued to lobby stakeholders to ensure a fair and affordable system of protection. Finally, our work to influence the European Commission to extend the scope of the European Package Travel Directive in order to reflect the changes in the industry, since the inception of that regulation, has continued to gather pace. Travel and tourism accounts for 11% of the worlds GDP and 12% of its exports.1 Around 50 of the worlds least developed countries rely largely on tourism for economic development. However, travel and tourism are responsible for around 5% of global carbon dioxide emissions2 and increasingly national and international carbon legislation is coming into force. As a leading tour operator TUI Travel aspires to lead the travel and tourism sector and to lobby for sustainability to be embraced as a business issue on which the future health of the industry depends. As a tourism group we take our responsibilities very seriously and are working to ensure that sustainable development aligns with the Groups key strategic imperatives. Our challenge is to understand how our industry can optimise its social, economic and environmental benefits for all concerned. TUI Travels goal in this respect is to make travel experiences special by providing holidays that cause minimal environmental impact, respect the culture and people of destinations and offer real economic benefit to local communities. See Sustainable Development on page 28.
All-inclusive packages and cruising proved particularly popular as consumers sought financial certainty of their total holiday spend. The destinations of Morocco, Egypt and Turkey continued to grow strongly in popularity due to favourable currency rates. Departures to the Eurozone decreased but these destinations still attracted the largest percentage of mainstream package holidaymakers. Long-haul destinations, including Thailand and Goa, remained popular and particularly those destinations offering allinclusive products. With high internet penetration rates (UK, Nordics and Germany at 75%) consumers increasingly turned online to research and book their holiday. Social media and customer travel review sites gained in popularity and prominence and are a key influencer on the consumers decision making process. Despite the tough conditions, there is evidence that consumers are feeling more positive about their holiday plans for next year and demand for holidays remains healthy. Increased flexibility in duration and ease of booking for consumers remain key factors in the holiday-making decision process. Recent consumer research, commissioned by TUI Travel across its major source markets, shows planned holiday spending has either slightly increased or remained stable compared to consumer sentiment in September 2009 (TUI consumer sentiment monitor October 2010).
Strategic overview Business performance
The sustainability challenge
Governance
Outlook, future trends and factors
TUI Travel has continued to prove resilient in these challenging times and maintains its marketleading position. TUI Travel has a 35% share of the European package holiday market and number one or two brand positions in its core mainstream markets. In the BRIC economies, TUI Travels participation strategy is most developed in Russia and Ukraine where it is the first international tour operator to build a presence. TUI Travel continues to investigate its optimal participation strategy for Brazil, India and China. In independent travel, TUI Travel has significant positions in a number of segments including online accommodation, marine, adventure, education, language travel, ski, sport and specialist holidays and plans to continue to grow this portfolio of businesses. TUI Travel has a strong online presence for package holidays, independent travel and online accommodation sites and continues to review growth opportunities in the online arena. Given the continued economic uncertainty we remain cautious about 2011. That said, there is every reason to believe that the demand for international travel will continue to grow strongly in the long term.
Consumer sentiment
The global recession and uncertain economic environment have had an effect on consumer travel spending habits in 2009/10, however, for most consumers holidays continue to be of considerable importance and a planned annual expense. Consumers are more discerning in their choice of holidays, looking for a greater variety of products and destinations, flexibility of duration and value for money. Consumers prioritised their main summer holiday abroad and waited much later to book their trips to assess both the weather at home and their personal finances. The package holiday saw a resurgence, as consumers sought to de-risk their holidays and book with a company that provided financial protection.
United Nations World Tourism Organisation (UNWTO) Tourism Satellite Accounts (TSA). United Nations World Tourism Organisation (UNWTO), United Nations Environment Programme (UNEP) and World Meteorological Organization (WMO) (October 2007) Climate Change and Tourism: Responding to Global Challenges. Madrid.
Strategic overview | Our strategy
Strategic imperatives
We have a clear strategic goal to create superior shareholder value by being the worlds leading leisure travel group providing customers with the widest choice of differentiated and flexible travel experiences to meet their changing needs. To help achieve our goal, we are focused on four strategic imperatives Product & Content, Distribution & Brands, People & Operational Effectiveness and Growth & Capital Allocation. We continually evaluate the delivery of these four strategic imperatives which link through to our key performance indicators. See KPIs on page 18.
Imperative 1: Product & Content

Summary
Different products to our competitors and unique in the marketplace High customer retention and repeat booking rates Earlier booking trends Product innovation Growth in the online accommodation market
Differentiated content continues to be a central pillar of our product and content strategy. We are developing a portfolio of exclusive products that no competitor can easily match or replicate and which is tailored to include additional services and facilities that customers want on their holiday. Every one of our businesses offer products that are tailored to meet the holiday needs and tastes of its customers. In the Mainstream Sector, the level of differentiated product has again increased over the last year and currently represents 38% 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. This year we have expanded our offering of Mainstream differentiated products. In the UK, Sensatori Tenerife was opened following the successful introduction of this five-star concept in Crete and Mexico over the last two years and the First Choice Holiday Villages portfolio was also expanded by two further Holiday Villages. In the Nordics three new family-focused Blue Villages were opened. In Germany we continue to experience strong demand for our new hotel brand Sensimar, a five-star spa concept for couples and Robinson clubs for families. In France, product differentiation continues with the launch of new Marmara Clubs in new destinations (e.g. Sardinia) and the roll-out of the new generation of Nouvelles Frontires hotel clubs.
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. There is also a huge demand from consumers for more experiential holidays. In the Specialist Sectors product innovation continues to meet this demand. We have created the worlds largest marine charter business and are developing a number of new yachts that are built exclusively for our marine businesses, including the new Sunsail 384 Catamarans. These new models create a leading and differentiated position in the fastest expanding section of the yacht charter market. There is also a strong focus in the Education division to develop new and differentiated products. The purchase of Condover Hall, an education campus in the UK, provides our JCA business, a specialist in residential school trips, with a flagship centre for residential activity holidays for schools and will be utilised across the wider Education division. In the OTA market we are building on the success of LateRooms, our online accommodation business, by investing in increasing the product offering of our AsiaRooms brand. We have increased our own hotel inventory in the Asian region by 62% (7,800 hotels) and rebranded the website to capture the significant forecasted growth in this market.
Group at a glance
Imperative 2: Distribution & Brands

Strategic overview Summary
Highly trusted brands that provide value and quality Broadening customer choice Building our customer relationships Increasing controlled distribution
Our highly trusted brands represent excellent value for money and drive customer loyalty and repeat bookings. The advantages of travelling with a leading tour operator were highlighted during the April 2010 volcanic ash crisis when we prioritised the needs of our customers and provided industryleading levels of service and support. We have market-leading brands in the Mainstream Sector including TUI, Thomson, First Choice, Jetairfly, Fritidsresor, Holland International, Arke, Nouvelles Frontires and Marmara. In the Specialist Sectors we have well-known niche brands that have market-leading positions including Hayes & Jarvis, Sovereign, Citalia, The Moorings, Crystal Ski, LateRooms.com and Hotelbeds.com. Our aim is to provide customers with a wide choice of holiday options that meet their preferences and a convenient range of booking options. By securing direct access to customers, we can manage and deliver the whole holiday experience from booking with an agent in our travel shops, online or via one of our call centres, to in-resort and after-sales service, whilst driving customer satisfaction and ultimately customer loyalty. In each source market the distribution of products is tailored to reflect different customer preferences and market dynamics. Each source market has its own distribution strategy, which aims to reduce costs by building controlled distribution through the efficient operation of retail shops, the use of the internet as a research and booking tool and by the utilisation of call centres.
In the Mainstream businesses our leading brands drive bookings through controlled distribution capability which is made up of three main channels; a retail network of circa 3,500 shops, an online booking capability for all major brands and call centres. In the UK and Nordics for instance, where there is a high propensity to purchase online, we have invested heavily in web capability. In the Nordics we have ceased production of traditional brochures from Summer 2011 and are promoting online as the main distribution channel. In the UK, the trend towards online booking continues, supported by improvements to the functionality of the Thomson and First Choice websites and the success of the MyThomson portal allowing customers to manage bookings online. In France, there is a higher propensity to purchase through more traditional travel agents and we are expanding our retail network both through owned and franchise agencies. We have also increased controlled distribution for the Nouvelles Frontires and Marmara brands by building their internet offering and selling our Marmara brand through our network of Nouvelles Frontires shops and Havas Voyages retail stores. In the Specialist businesses, we are focusing on increasing the share of direct distribution to reduce distribution costs and to increase direct access to customers. Our Adventure division is making wider use of our existing retail network and is crossselling product between brands. New websites have been developed for a number of brands including The Moorings, Quark Expeditions and TUI Ski to further improve the customer experience and to increase the level of controlled distribution. The LateRooms brand has a strong leadership position in the UK OTA accommodation market (room night growth of 31% year-on-year) and we are starting to roll out our successful LateRooms model to Continental Europe and Australia.
Business performance Governance Financial statements Shareholder information
Strategic overview | Our strategy
Strategic imperatives continued
Imperative 3: People & Operational Effectiveness

Summary
Our colleagues are key to our success Development of sophisticated capacity and yield management systems Underlying operating profit margin up 40 basis points from 2.9% (2009 restated) to 3.3% Integration progressing well with a total synergies target of 200m
The skills and expertise of our colleagues are the key to our success. Across the Group we have a unique breadth and depth of experience with innovative entrepreneurs in our specialist businesses, skilled tour operators in Mainstream, functional experts at the centre and a highly experienced and respected international management team. Our aim is to motivate and engage our teams to deliver outstanding customer experiences and results for our businesses. Talent across the Group is reviewed regularly with a focus on retaining and developing individuals to drive the business forward (see page 24).
Our tour operators actively manage capacity through sophisticated capacity and yield management systems. The UK Mainstream business has a market-leading yield system to plan and manage capacity allowing us to analyse profitability for Thomson and First Choice by creating a detailed picture of profitable capacity by individual flight. This allows us to determine optimum seat capacity by each UK airport and to ensure that we maintain the most appropriate aircraft fleet size and type. This has enabled us to leverage the strength of both these brands by improving efficiency with fewer aircraft and less risk. Our other businesses are also beginning to implement this system; in the Activity Sector, the ski business has fully implemented the same yield management tool driving further improvements in margin. We have made excellent progress in delivering cost synergies with 195m achieved to date and maintaining our target of 200m by 2011. In addition to the delivery of these cost synergies, the businesses are continually working to leverage their market-leading positions and scale to maximise their cost competitiveness and rationalise the cost base further through the continual improvement of business processes and systems. We are also further reviewing options to reduce the number of reservation and back office systems in the Mainstream businesses.
Group at a glance
Imperative 4: Growth & Capital Allocation

Strategic overview Summary
Acquired six niche high-growth businesses in Specialist Sectors Creating a leading position in Russia and CIS Underlying operating profit up 11% to 447m Increase in return on invested capital to 9.9%
We have identified a number of market segments where we can allocate capital to drive growth. These target market segments, primarily within our Specialist Sectors, are high-growth and high-margin and present excellent opportunities for us to create leading positions in fragmented markets. These segments offer significant potential for further growth and we are creating market-leading positions by a combination of the acquisition of complementary businesses and organic growth in our existing businesses. We have completed eight acquisitions this year, six in the Specialist Sectors, and will continue to make bolt-on acquisitions in targeted Specialist businesses. Further organic long-term growth will be achieved through the continued introduction of some of our Specialist brands into new markets utilising our distribution strength, including our pan-European retail estate of circa 3,500 branches. For example, we have launched the best of our Marine, Adventure and Polar Cruising products into Germany, Russia and Ukraine. Following the successful launch of Le Boat within our German retail operation, we have positioned this customer offering in the Dutch and Belgian markets. As the leading international leisure travel group we are well placed to benefit from the strong increase in demand for leisure travel in emerging markets to generate long-term growth for the Group. Our strategy within Russia and CIS has been the main area of focus and our growth plans are progressing well. We entered the Russia and Ukraine markets through the establishment of a joint venture with S-Group Capital Management and have subsequently completed three acquisitions. The acquisitions of VKO Group and Mostravel in Russia and Voyage Kiev in Ukraine have provided us with a strong entry point into this market. TUI Travel is the first international tour operator to build a presence in Russia and CIS and we successfully launched the
TUI brand into the market in March 2010. We have an existing presence in Brazil, China and India, through our inbound and destination management companies in the A&D Sector, and continue to build our understanding of these leisure travel markets. We are currently evaluating our optimal participation strategy for each market and discussing future collaboration opportunities with potential partners. It is our intention to further expand in these markets to create long-term sustainable growth for TUI Travel on a global scale. We continue to believe that the Boeing 787 Dreamliner represents a fantastic opportunity to deliver long-term growth for the Group. Not only will it be able to fly greater distances, enabling us to offer a wider range of non-stop destinations to our customers than equivalent aircraft today, but it will do so with greater fuel efficiency and additional comfort. As one of the first airlines to take delivery of these aircraft we plan to use the customer and operational benefits to position the long-haul offering as a key differentiator in Europe allowing us to develop a pre-eminent position in the long-haul charter market. We have an asset-right business model and typically only invest in assets such as yachts, inland waterway cruisers and expedition cruise ships that provide us with greater competitive advantage and enable us to earn premium margins. As a result of our assetright business model, delivery against our strategic imperatives driving underlying margin enhancement and delivery of synergy benefits of 200m, we remain confident of delivering our medium-term margin targets. Despite tough economic conditions and industry turmoil, we have made significant progress in realising these key objectives improving operating margins by 40 basis points to 3.3% (2009 restated: 2.9%) and return on invested capital to 9.9% (2009 restated: 8.6%).
Strategic overview
Key Performance Indicators (KPIs)
Strategic imperative
Financial
Our main strategic objective is to improve the Groups profitability and to deliver enhanced returns on investment. We believe that improving our financial performance will allow us to invest in the future of our business for the benefit of shareholders, colleagues and customers.
Performance
To measure our financial progress we have two Financial KPIs: (i) operating margin % and (ii) the return on invested capital (ROIC). In the year, margins improved by 40 basis points over the restated 2009 margin of 2.9%, primarily driven by the delivery of merger synergies and turnaround progress, partially offset by a weaker trading performance in the UK source market.
Product & Content
Increasing the proportion of our products that are different to those offered by our competitors is our most important strategic imperative. Differentiated products have earlier booking curves, higher customer satisfaction and retention and superior margins. These products are difficult for competitors to replicate and we have a significant competitive advantage due to our existing brand loyalty and experience of designing and operating new concepts.
In the year, we increased the differentiated product mix by one percentage point across the total Mainstream Sector, although certain source markets made greater improvements, such as the Nordics (up six percentage points) and the UK (up three percentage points). The overall increase was affected by a small reduction in France where we are re-mixing away from some of our older differentiated products (e.g. Club Paladien) to newer products (e.g. Nouvelles Frontires Hotel Clubs) and also growth in commodity product in Belgium where we increased our market share. We have increased our controlled distribution mix in the year in all source markets, with the most significant increases in France and Germany. In France, the key driver of the increase has been the introduction of our Marmara products in our Nouvelles Frontires and Havas Voyages retail stores.
Distribution & Brands
Increasing our direct distribution mix, with a focus on online sales, is a key driver of reducing our distribution costs and enhancing our customer relationships. Direct distribution typically represents the most efficient distribution method and allows us to provide even better value to customers. Importantly, selling directly to our customers means that we can further manage their end-to-end holiday experience and improve brand and product loyalty. The Specialist Sectors add significant value to the Group as they enjoy higher margins and growth characteristics, and are virtually impossible to replicate as we have crucial first mover advantage. Having a relevant position in non-mainstream markets is strategically important and is a key differentiator and growth driver for the Group. For these reasons, the generation of a substantial proportion of the Groups operating profits from Specialist Sectors is an important objective. We are experiencing greater consumer awareness of sustainability and believe that creating more sustainable holidays will help protect our product into the future and also support product differentiation, brand loyalty and competitive advantage.
Specialist Sectors
The proportion of operating profit contribution from the Specialist Sectors has decreased in the year as the Mainstream Sector profitability benefited from synergy delivery and turnaround progress, whereas operating profit in the Specialist & Emerging Markets Sector was lower due to startup investment in Russia and reduced capacity in our private jet tours businesses.
Responsible Leadership
TUI Travel airlines performance measured in terms of carbon dioxide emissions per revenue passenger kilometre (CO2/RPK) makes our fleet one of the most efficient in Europe and beyond.
Group at a glance
Key Performance Indicators

Operating margin % 2010
Target
Strategic overview
1
3.3%
ROIC 2010
2009
2.9%
2009
In January 2008, we set out a roadmap to increase TUI Travels operating margins from 2.0% to 4.7% and set out a target of doubling the Groups ROIC to a level in excess of the Groups cost of capital.
9.9% 38%
2010
8.6%
1
Differentiated/exclusive product mix as a proportion of total Mainstream Sector holidays
37%
2009
33%
2008
We are targeting a differentiated product mix of over 50% in our Mainstream Sector.
Controlled distribution mix, as a proportion of total Mainstream Sector holidays 2010
62%
2009
59%
2008
We are targeting a controlled distribution mix of greater than two-thirds in our Mainstream Sector.
Governance
53%
We expect the mix of profits from the Specialist Sectors to increase in the medium term due to their superior underlying growth characteristics.
The proportion of Group operating profit generated by our Specialist Sectors2 2010
32%
2009
37%
1
Aircraft carbon efficiency, measured through TUI Travel airlines fleet average CO2/RPK
76.1g
CO2/RPK
1 2
2010
78.1g
CO2/RPK
2009
77.9g
CO2/RPK
2008
The Group has committed to reducing its airlines direct carbon emissions by 6% by 2013/14 (against a baseline of 2007/08) in terms of total carbon emissions as well as relative carbon emissions, based on 2008/09 operational structure and plans. See Sustainable Development on page 28.
FY09 shown after the restatement. Before central costs.
Strategic overview
Principal risks
Managing unprecedented disruption

The volcanic ash cloud caused unprecedented disruption in April 2010 with circa 400,000 of our customers affected throughout Europe. During the crisis, we prioritised the needs of our customers, providing industryleading levels of support and made enormous efforts to repatriate stranded customers by all methods at our disposal. We firmly believe that our efforts further highlighted the advantages of travelling with a leading tour operator and that these benefits have resonated strongly with customers throughout our source markets. The new approach to the imposition of airspace restrictions, now based on scientific observations and consultations with engine manufacturers, should mean that any future airspace closures are more tightly targeted and cause substantially less disruption.
Risk management
Effective and appropriate enterprise-wide risk management remains key to the delivery of our business objectives and strategic goals. Our established framework is designed to facilitate the early identification and evaluation of risks to ensure challenges are prioritised and managed accordingly. Clearly we have experienced some failures in internal control and procedures this year (see page 50). Whilst we have taken shortterm actions to address the specific weaknesses we are reviewing the effectiveness of the risk management framework. The framework strives to improve operational performance, reduce losses and protect and enhance shareholder value in the pursuit of the Groups strategic imperatives. It can only seek to provide reasonable comfort that potential significant exposures to the Group are identified and appropriate mitigation plans developed and implemented. Risks by nature are uncertainties or unforeseen events as evidenced this year by the volcanic ash cloud. Responsibility for managing risk should clearly reside within the businesses themselves. All key areas of the business adopt the Groups uniform enterprise-wide risk management (ERM) approach, which is closely linked to the strategic planning process. It is the responsibility of senior management teams and Sector Boards across the Group to review, challenge and agree the risk profile for their area of responsibility and to ensure resource is allocated effectively to manage risk and maximise opportunities. Group Risk Management consolidates all risks identified by the businesses to create the Group Bottom-Up Risk Profile which is presented to the Audit Committee on a half-year basis. In addition to Group Risk Management, the Audit Committee is also responsible for monitoring and challenging the Groups risk response strategies. For further information see page 50.
The Group Risk Management Committee (GRMC), a sub-set of the GMB, is responsible for setting the tone at the top and supports the continuous improvement that is needed for risk management to function effectively through ensuring management of risk is at the heart of our day-today operations and considered during the business planning and strategy setting processes. The GRMC is also responsible for identification of risks associated to the delivery our strategic imperatives from a Board perspective and ensuring that these Top-Down risks are owned and appropriately mitigated across the Group or managed at Board level where required. Recognising that implementing and embedding ERM is a journey, two years in, efforts are now focused on further enhancing risk management capabilities across the Group. Plans are in place to deliver improvements to existing processes by introducing new methods which will be supported by the implementation of a more sophisticated risk management solution. Another key development will be the formalisation of the Group Risk appetite which is seen as critical to managing risks to within the right levels and in enhancing overall business performance. Finally, in preparation for the Bribery Act which comes into force in April 2011, we are currently developing a more comprehensive compliance framework which will be applied across the whole Group. A summary of the principal risks faced by the Group, along with the associated mitigation strategies, are contained in the following table. However, this is not intended to be a complete list of all possible risks that could occur. The Groups key financial risks are included in Note 25 of the accounts (see page 117).
Group at a glance
Specific Risk
Global Financial Factors Context External Environment Cross-border element of trading exposes the business to fluctuations in exchange rates and complex and technical tax laws. A significant proportion of operating expenses are in relation to aircraft fuel which is also unstable Risk Volatility of exchange rates and fuel prices may have a negative impact on unhedged balances; rising input costs could increase cost of product offering and leave the Group competitively disadvantaged; increase in tax authorities taking more frequent and intrusive tax audits of the Groups business operations Possible Impact Reduced demand due to increased costs, lower short-term growth rates, reduced margins, impact on cash flow, lengthy tax litigation processes, possible reduction in Groups after-tax earnings Strategic Focus High customer retention to deliver repeat booking rates and earlier booking trends Highly trusted brands providing value and quality and broadening customer choice Our colleagues are key to our success Political Volatility, Natural Catastrophes, Outbreaks Context External Environment Providers of holiday and travel services are exposed to the inherent risk of domestic and/or international incidents affecting some of the countries/destinations within its operations Risk Large scale events causing operational disruption; future reduction in destination desirability; inability to operate efficiently Possible Impact Significant consequential losses, holiday cancellations and decline in consumer demand, possible increase in insurance premiums Strategic Focus High customer retention to deliver repeat booking rates and earlier booking trends Building customer relationships Our colleagues are key to our success Regulatory Environment Context External Environment Industries in which the Group operates are heavily regulated, particularly in relation to aviation taxation and environmental and consumer protection Risk Non-compliance to applicable regulations; negative perception of product offering due to increased costs and/or increase in awareness of environmental issues. Failure in safety due diligence processes Possible Impact Limitations on operational flexibility, possible exposure to legal or regulatory sanctions, harm or injury to customers, associated reputational damage and increased costs Strategic Focus Highly trusted brands providing value and quality and broadening customer choice Building customer relationships Our colleagues are key to our success
Mitigation
Hedging policies in place across all source markets, controlled and monitored by Group Treasury with hedging cover taken out ahead of customer booking profile Continuous monitoring of foreign exchange and fuel markets to ensure most up-to-date market intelligence on commodity movements and products Source markets abreast of regulatory environment and known competitor behaviour Strong focus on fixed cost reduction and transition of fixed to variable costs where possible Ensuring compliance with all relevant tax laws and practice Ensuring high-quality advice is sought to structure the Groups operations appropriately Ensuring uncertainty is minimised and recording provisions to reflect potential tax exposures Development and maintenance of high-quality relationships with tax authorities and educating them on the Groups business operations
Balance of destination mix to minimise concentration and flexible supplier agreements in place to allow for capacity to be switched if required Established incident management policy and experienced leadership teams to support and repatriate stranded customers to minimise effects of negative events Increased awareness of the additional benefits of travelling with a recognised and leading tour operator, strongly increasing consumer confidence throughout source markets Strong relationships with local tourism bodies and travel industry associations with government guidance obtained and used as required Ongoing liaison with aviation industry stakeholders and meteorology service providers to improve the accuracy of ash concentration modelling and understanding of aircraft tolerance to ash Experienced public affairs team that works with governments and regulators to address issues affecting the industry and its customers Striving to reduce the environmental impact at each stage of the customers journey through creation of more sustainable holidays Carbon management strategy in place with a commitment to reduce CO2 emissions by 6% by 2013/14 (against a baseline of 2007/08) and significant investment in Boeing 787 aircraft with greater fuel efficiency Our airlines are preparing for the EU Emissions Trading Scheme and reporting requirements (applicable from January 2012) and working with PwC on a readiness review Customer and employee safety is paramount. Industryleading expertise employed at the centre to set policy, tailored by source market, to provide guidance, monitor compliance and remain up to date with changes in regulations
Strategic overview
Specific Risk
Economic Conditions Context External Environment Spending on travel and tourism is discretionary and price sensitive. The economic outlook remains uncertain with different markets at different points in the recovery cycle. Consumers are also waiting later to book their trips in order to assess their financial situation Risk Sustained decline in consumers propensity to travel; continuation of later booking patterns, inability to respond to short-term changes in consumer demand Possible Impact Lower short-term growth rates and reduced margins Strategic Focus Different products to our competitors and unique in the marketplace High customer retention to deliver repeat booking rates and earlier booking trends Highly trusted brands providing value and quality, broadening customer choice Increasing controlled distribution Development of sophisticated capacity and yield management systems Consumer Preferences Context Strategic and Emerging Consumers are increasingly turning online to research and book holidays. Social media and price play a key part in the decision-making process. In some cases consumers are moving towards more component-based packages including use of low-cost carriers as opposed to integrated tour packages Risk Inability to anticipate changes in consumer preferences; impact on efficiency of seasonal planning; challenges in delivering a competitive cost base Possible Impact Market positions come under pressure, lower short to medium-term growth rates, reduced margins Strategic Focus High customer retention, repeat booking rates and earlier booking trends Growth in online accommodation market Highly trusted brands providing value and quality and broadening customer choice Building customer relationships Increasing controlled distribution Development of sophisticated capacity and yield management systems Technology Systems Context Internal Operations The Group is heavily reliant on IT systems to provide holiday and travel services. Such activities include yield management, provision of central administration, the web and reservations. The Group is also vulnerable to rapid changes in technology standards Risk Sustained failure in systems causing operational disruption; weaknesses or inefficiencies in IT and financial control processes; inability to keep up with latest IT developments Possible Impact Significant impact on operations, reduced revenue and increased costs, unforeseen losses, higher levels of expenditure in order to keep up with competitors Strategic Focus Growth in online accommodation market Increased controlled distribution Development of sophisticated capacity and yield management systems
Mitigation
Developing a portfolio of products that no competitor can easily match or replicate Differentiated content increases competitive advantage, drives higher margins and has an earlier booking profile Reducing costs by building controlled distribution and maximising efficiency through various booking channels Actively managing capacity through use of sophisticated capacity and yield management systems to improve efficiency and drive margin improvements
Developing a portfolio of products that no competitor can easily match or replicate and delivery of exceptional customer service Maximising efficiency and enhancing internet as a research and booking tool Development of in-house social media channel www.cheqqer.com Building on success of OTA accommodation business by investing in increasing the product offering Promoting online as the main distribution channel and improving website functionality Actively managing capacity through use of sophisticated capacity and yield management systems to improve efficiency and drive margin improvements
Business continuity policy defined. Project now focused on raising awareness and capability across the Group to improve continuity provisions and reduce exposure and associated insurance premiums Continually working to leverage scale to maximise cost competitiveness through continuous improvement in business systems and processes Reviewing options to reduce number of reservation and back office systems Heavily invested in web capability in source markets where there is a high propensity to purchase online Defined strategy to ensure maximisation of new technologies in order to compete with key industry players
Group at a glance
Specific Risk
Niche Businesses and Emerging Markets Context Strategic and Emerging The Group continues to look into new markets as the traditional mainstream markets mature. Niche businesses and the BRIC countries represent a significant opportunity to participate in longer-term travel growth trends and have higher growth potential Risk Inability to identify appropriate opportunities; failure of acquisitions to deliver expectations; limited experience in new markets; possible difficulty in integrating operations and systems Possible Impact Potential lower long-term growth and reduced margins, impact on anticipated cash flows, significant diversion of management time Strategic Focus Our colleagues are key to our success Acquire niche high-growth businesses in Specialist Sectors Create a leading position in Russia and CIS Increase return on invested capital Supply Chain Context External Environment The Group is dependent on the provision of services by third parties, such as hotel operators, airline services and manufacturers and other third-party providers Risk Over-reliance and possible failure of key suppliers; withdrawal of certain products or services; poor commercial terms; lack of efficiency and quality of contract performance; exposure to counterparty risk Possible Impact Reduction in operational performance, inability to offer reliable products and services, deterioration in consumer confidence, consequential losses Strategic Focus Highly trusted brands providing value and quality and broadening customer choice Building our customer relationships Our colleagues are key to our success
Mitigation
Identified a number of market segments to allocate capital to drive high-growth and high-margin product offering Completed six successful acquisitions in 2009/10 and will continue to make bolt-on acquisitions during 2010/11 Appointed highly skilled tour operator to manage Russia and Ukraine businesses with integration and growth plans progressing well Investments in Russia and CIS by way of a joint venture with a local partner Currently investigating optimal participation strategy for Brazil, China and India and discussing future collaboration opportunities with potential partners Consideration payable for businesses directly linked to post-acquisition performance
Spread of financial commitments across key value chain suppliers Well-established relationships with key suppliers with service levels monitored and managed accordingly Centralised purchasing functions for key procurement areas Regular review of key service providers to assess financial standing and levels of health and safety, quality and sustainability standards Process in place to monitor and minimise levels of pre-payments to hoteliers and other third-party service providers
Strategic overview
People
Our team
1. Peter Long Chief Executive 2. Paul Bowtell* Chief Financial Officer 3. Dr Volker Bttcher Managing Director, Central Europe 4. Bart Brackx Managing Director, Western Europe 5. Andrew John Group Legal Director and Company Secretary 6. Jacky Simmonds Group Human Resources Director 7. Johan Lundgren Managing Director, Northern Region 8. Joan Vil Managing Director, Accommodation & Destinations 9. William Waggott** Commercial Director 10. John Wimbleton Managing Director, Specialist & Activity
Group Management Board
The strategic direction of the Group is set by the Group Management Board (GMB) in conjunction with the Board (see page 42). The GMB consists of tour operating and function experts drawn from across the Group. This highly experienced international team manages and executes TUI Travels day-to-day operations and is responsible for the overall performance of the Group. During the year, and post-year end, there have been changes. Richard Prosser left the GMB in July 2010 following the decision to restructure the Specialist & Emerging Markets Sector. On 1 October 2010, John Wimbleton was appointed Managing Director for the newly combined Specialist & Activity Sector. Dermot Blastland, Managing Director, UK & Ireland, retired with effect from 1 October 2010. Johan Lundgren, Managing Director, Northern Region, also took responsibility as Managing Director UK & Ireland from that date. Jacky Simmonds was appointed Group HR Director from 1 October 2010 replacing Bill Logan. Bill Logan will remain with the Group in an advisory role to both Peter Long and the GMB throughout 2011. Paul Bowtell*, Chief Financial Officer, resigned on 21 October 2010 and will step down from the GMB and the Board with effect from 31 December 2010. William Waggotts** appointment as Chief Financial Officer of TUI Travel PLC was announced on 30 November 2010.
Our colleagues
As the worlds leading international travel group we have a workforce of approximately 49,000 colleagues. At TUI Travel there is a clear link between the Groups overall strategy and the role that our people play. We recognise that by building the most capable and engaged teams we can deliver optimum business performance.
Strength in diversity
An important strength of TUI Travel is our diversity. We operate in approximately 180 countries worldwide and as a result have a highly diverse workforce. The composition of our top 250 senior leadership team highlights some demographical aspects of our Group. Over a quarter of our senior leadership team is female and the team is based in 24 different countries around the world. Out of our Groups total workforce, 41% of our managers are female. We uphold diversity as a core tenet of our success. We do not tolerate discrimination on any grounds and our ethos is that opportunities should be available to everyone. We have principles and guidelines in place, both Group-wide and more locally, to actively support this.
Engaging our colleagues
We believe employees who are engaged with our business will deliver the best performance. Its important that we engage our people in the strategy and goals of TUI Travel so they understand how they contribute to our success.
Group at a glance
Measuring and monitoring this is a key way to identify how we can improve high performance. This is why we measure engagement levels and benchmark ourselves against organisations in the UK and globally as we want to understand how we perform against national, global and highperformance norms. As an organisation operating in a large number of countries, with a large workforce and multiple brands, it is key that we can engage our colleagues so they deliver a great customer experience no matter where in the world they work. At TUI Travel it is not just about what we do, it is about how we do it. In 2008 we developed the TUI Spirit with a number of colleagues across the Group to build our culture. These values underpin our strategy, give our people a common purpose and help us to achieve our vision of making travel experiences special. Our values are: Customer obsessed Responsible leadership Value driven Playing to win The values are supported by Winning Behaviours that clearly illustrate what it looks like when we live our values at TUI Travel. We continuously look to ensure that what we do is aligned to our vision and values, both on a global and more local level, particularly by working with managers throughout our organisation.
Involving our colleagues
In the past year, a significant number of colleagues in the Group have taken part in one of our employee surveys. Our colleagues opinions have given us an insight into what we are doing well and highlighted areas of focus so that we can continue to improve. It is not just about listening, it is about acting too, which is why there is ongoing activity within our businesses to address the findings and involve our people when making improvements. In the latter part of 2009 we conducted the second Leadership Voice survey, which comprised 827 respondents from our leadership population (leaders). We wanted to track progress since 2008 and set a new benchmark for an extended manager population. The overall results confirmed that we have some great strengths that are common across the Group. Some of the results highlights included: 95% of our leaders feel personally motivated to help TUI Travel be successful 94% of our leaders feel well informed about the performance of our business 93% of our leaders are proud to work for TUI Travel 93% of our leaders feel their business looks for new opportunities to deliver profit The results were particularly strong in the category focusing on profitability, commercial advantage and how we add value to customer experience, highlighting our commitment in this field and the success of our responsive and flexible
Launching our values in Russia and CIS

In Spring 2010, when launching TUI Travel in Russia and Ukraine, it was pivotal that our values became part of everyday life as early as possible. We ensured that leaders of our businesses could relate to our values and we tailored them to suit the Russian and Ukrainian local cultures. The values were also aligned to the brand values and adapted to: Reliable, Inspiring and Responsible. These values incorporate our Groupwide aspirations and are aligned with what we are delivering for customers in these new markets. The launch of the values included a series of face-to-face presentations, inclusion in Day-One activities and launch communication literature delivered in local languages. Training for key customer-facing teams in the local retail networks and destinations was based around the values. The values are now an important part of everyday life in our businesses in Russia and Ukraine helping us to make our customers and our teams smile as TUI Travel develops in this region.
10
Strategic overview
People continued
Blue Voice success

When TUI Nordic asked their colleagues in Sweden, Norway, Denmark and Finland to complete their annual employee survey, Blue Voice, their aim was to ensure they were on the right track to success in the eyes of their people. The results were very positive. Not only was there a high response rate but results had significantly improved in the majority of categories from the previous year. Progress had also been made on KPIs linked to key strategic areas of leadership, engagement and effectiveness. The results showed a strong link between having attended the values training and living the new values. In TUI Nordic, Blue Voice is more than just a way to find out what colleagues are thinking at a certain point in time, it provides a strategic tool for managers which is linked to both organisational and personal long-term goals. It helps managers focus on the right things, make improvements and act, all key aspects of being an organisation that drives high performance and rewards Winning Behaviours.
business model. It is also clear that our significant efforts to develop our leaders are both valued and of high impact. In addition to surveys, we have a range of proactive employee forums in place to ensure we have an ongoing dialogue and involve colleagues with matters that are important to them, both through elected employee representatives and directly with teams in meetings.
are also a vast number of tailored initiatives in our Sectors and businesses to build our colleagues skills. We have continued our commitment to attract talent and find our leaders of tomorrow. We have a range of national graduate schemes in place in our Sectors and businesses and we also offer a Group-wide International Management Trainee Programme. The objective is to attract and develop high-quality people to be future commercial leaders in our business. The programme stretches over 18 months and includes five work assignments in different businesses and countries to ensure a full overview of the Group. In the past year, we had an intake of 11 international management trainees, all high-calibre candidates with solid academic results and excellent language skills.
Attracting and developing talent
As a large, international organisation we can offer exciting career prospects for many of those who join us. However we dont just want to attract talent, we want to ensure that we develop our people too so that we can build our capability internally. At TUI Travel we put significant effort into ensuring that we develop our talent pipeline for the future and talent is reviewed at Board level regularly. We have Group-wide leadership development programmes designed for senior leaders, providing a great opportunity to enhance skills and to network with colleagues from across our businesses. This includes our very successful TUI Horizons Programme, aimed at high-potential middle managers in the talent pool who have been identified as our future leaders. The aim of the programme, which is delivered by internal as well as external experts, is to develop numerate, analytical leaders who engage with their people to drive high performance in their businesses. We have extended this initiative to cover a Horizons Master Class aimed at Horizons alumni. The format is short, targeted workshops designed according to business and personal development needs. There
Driving high performance
One of the main responsibilities of our leaders and managers is to drive performance and develop, coach and motivate their people to achieve success. Its essential that our colleagues are provided with regular feedback on their performance. Our people need to understand what needs to be achieved and how that links to the overall strategy as an organisation. In line with the TUI Spirit, we dont just have performance reviews to evaluate what our people do how they achieve is equally important. It is our objective to reward and encourage absolute commitment to providing our customers with quality service as well as encouraging a teamoriented environment where our people are free to innovate and collaborate.
HR strategy
imperative
People and Operational Effectiveness
aim
Engage our colleagues
Building the most capable and engaged teams to deliver optimum business performance
priorities underpin
Build leadership capability
Effective Organisation design
Effective and Efficient HR Operations
Strategic overview
Health and safety

Group at a glance
The health and safety of our employees and customers is of great importance to TUI Travel. The Group Health & Safety department sets a clear direction for the Group to follow, founded on the TUI Travel Health & Safety policy statement signed by Peter Long. The department actively directs and supports all Sectors in the design and implementation of comprehensive safety management systems.
(Reporting of Injuries, Diseases and Dangerous Occurrences Regulations). Below are the incidents statistics for 2009/10. Local and national authorities continue to visit various premises owned by the Group offering advice and alerting us to issues. No enforcement notices or convictions have occurred within the 2009/10 financial year.
From management trainee to business development

With a Masters in International Tourism Management, excellent language skills and a real passion for the leisure travel industry, Olga Kaidala was well placed to join the TUI Travel PLC International Management Trainee programme in April 2009. Thanks to the diverse nature of our business, Olga had the opportunity to gain broad commercial experience during her traineeship. First, she worked on KPI reporting and hotels and resorts projects in the UK. During her placement in Germany, she looked at website usability optimisation for Carhiremarket.com and got involved with the brand new Cheqqer project. Her next assignment took her to Poland, where she worked on Managing for Value implementation and the sales reporting tool before joining the Accommodations & Destinations Sector for her last placement, focusing on strategic projects. Having gained a comprehensive overview of our businesses commercial opportunities and challenges, Olga joined the business development department of our Accommodation & Destinations Sector in a permanent role as a business development executive, based in Majorca, Spain. In her role she contributes to shaping a competitive strategy for mergers and acquisitions for the Sector.
Strategic overview
Employee safety
Customer safety
The risks faced by employees across the business vary enormously; from a low-risk office environment to the high-risk airline engineering environment and everything in between. The majority of incidents that occur still remain in the slip, trip, fall and manual handling categories which, although not necessarily major, can lead to longterm injury. Workplace risk assessments continue to be conducted, highlighting areas where additional control measures need to be implemented. Where significant risk exists, risk assessments are used as the means of understanding the various hazards involved and identifying and implementing appropriate control measures, whether this be additional training, personal protective equipment or a change in the work process. Individual businesses within the Group continue to develop their own safety management systems, receiving assistance and advice from the Group Health & Safety function. For example, in the UK employees continue to undertake the baseline health and safety induction training, Safety in Your Workplace. This e-learning programme provides a consistent level of training, alerting employees to the different types of hazards they may find in their workplace. Additional programmes are being developed including one for noise awareness which is specifically aimed at airline employees. Within the UK, the Group continues to report any relevant injuries, diseases or dangerous occurrences under the RIDDOR regulations
During 2010 the Group Health & Safety function was further developed and deployed. A UK team of 20 staff, managing an overseas team of 65, continued to provide support to all Sectors, with extensive checks and audits carried out on accommodation, transport and activity suppliers. There was also an increased focus on identifying and managing sickness and illness outbreaks in our overseas destinations, with additional training and external intervention through the use of Preverisk a third-party hygiene consultancy. Group Health & Safety continues to facilitate the ever-increasing level of cooperation and coordination on Health & Safety issues facing our high-volume packaged product businesses in the Mainstream source markets. The Specialist & Emerging Markets and Activity Sectors continue to receive guidance, support, tools and resources to ensure appropriate bespoke safety management systems are implemented at business unit level within each Sector. This year a number of the Safety Management Systems have reached maturity evidenced by audits carried out by Group Health & Safety across all Sectors. Group Health & Safety has coordinated and managed with the A&D Sector, the growth and development of the Sure2Care online due diligence system. A&D continues to be a major user of this system with over 25,000 of its suppliers being captured. In total, the system is in use by some 45 brands across the Group, with all Sectors represented.
UK employee incident data October 2009 September 2010

INCIDENT CATEGORY Airline Airline equivalent* UK & Ireland
Crawley businesses
Total
Number of incidents Number of RIDDOR over 3-day incidents Number of RIDDOR major incidents Number of RIDDOR fatalities
464 14 4 0 26 3 0
49 4 2 0
22 0 0 0
535 44 9 0
*Where an incident occurs outside of the UK it is not reportable under the RIDDOR legislation, but the business reports them as a RIDDOR equivalent.
Strategic overview
Sustainable development
Sustainability is regarded as a serious business issue across TUI Travel, with many brands making it an integral part of business processes, supplier operating standards and performance metrics. We have already experienced a range of business benefits, including cost efficiencies, quality improvements and the enhanced engagement of customers, colleagues and suppliers. A sustainable future
TUI Travel PLC works with Forum for the Future, a UK sustainable development NGO. We are a core partner in the Tourism 2023 project which sets out to help the UK outbound travel and tourism industry understand the challenges it faces and plans for a sustainable future.
Our four strategic priorities for sustainable development are:

Carbon management Goal: To reduce TUI Travels airlines direct carbon emissions by 6% by 2013/14 (against a baseline of 2007/08) in terms of total carbon emissions as well as relative carbon emissions, based on 2008/09 operational structure and plans. Destinations Supplier Management Goal: All suppliers in our destinations follow sustainability practices and have continuous improvement programmes in place. Destination Projects Goal: TUI Travel, working with partners, will make measurable improvements to local livelihoods and environmental protection in destinations. Our colleagues Goal: TUI Travel colleagues are engaged and empowered to take action on sustainability for the future success of the Company. Our customers Goal: TUI Travel businesses deliver quality communications designed to raise customer interest and demand for sustainable holidays.
In 2009/10 we were pleased that our performance was recognised as follows: For the third consecutive year TUI Travel was featured in the Carbon Disclosure Leadership Index and was ranked 6th in the FTSE 350 for its approach to carbon disclosure www.cdproject.net TUI Travel continues to be listed on the FTSE4Good Index in recognition of its transparency and for meeting strict social, environmental and governance standards. TUI Travel was awarded the Worlds Responsible Tourism Award in 2009 www.worldtravelawards.com For further details on awards and our latest Sustainable Development Report, see www.tuitravelplc.com/sustainable development
Sustainable development strategy
TUI Travels sustainable development strategy is based on consideration of the key issues affecting the Company, now and in the future. It is regularly reviewed in consultation with internal and external stakeholders. Our four strategic priorities for sustainable development align with TUI Travels strategic imperatives. We encourage all TUI Travel businesses to develop their own strategies, aligning with Group and Sector priorities and the related targets, where appropriate. Our sustainable development goal is to minimise our environmental impact, respect the culture and people in our destinations and offer real economic benefit to local communities.
Group at a glance
Managing sustainable development
Our key achievements in 2009/10 include: Our CO2 per Revenue Passenger Kilometre (RPK) across TUI Travel airlines in 2009/10 is 76.1g (an improvement of 2.6% since 2008/09) making us one of the most efficient airlines in Europe and beyond. In 2009/10, TUI Travels airlines carbon footprint was 5,260,500* tonnes, saving more than 500,000 tonnes of carbon dioxide. Out of the 500,000 tonnes of CO2 saved, 26,000 was due to TUI Travel airlines fuel conservation programmes. We established a TUI Airlines Biofuel Working Group. 76% of TUI Travel airlines aircraft are now fitted with fuel-saving winglets. Our airlines are preparing for the EU Emission Trading Scheme and reporting requirements (applicable from January 2012) and are working with PwC on a readiness review. TUIfly Nordic was awarded ISO 14001 (certified Environmental Management System) and Thomson Airways and Jetairfly are working towards ISO 14001 certification in 2010/11. Our UK businesses have prepared a strategy to comply with the UK Governments Carbon Reduction Commitment legislation to date 71% of TUI UKs Retail Estate has implemented Automatic Meter Readers to improve day-today energy management. We have developed collaborative partnerships with many stakeholders whose insight and guidance is helping us to develop our position on aviation and climate change. Examples include: Forum for the Future, EU Cleansky project, UK Sustainable Aviation and Sustainable Aviation Fuel Users Group. Strategic overview
This year, the Group has maintained and enhanced its governance structure for sustainable development. Johan Lundgren, Managing Director of the Mainstream Sector, Northern Region, is responsible for reporting on sustainable development to the Group Management and TUI Travel PLC Boards. Dermot Blastland, Managing Director of TUI UK & Ireland was recognised at the TTG Travel Awards 2010 and by the British Travel & Hospitality Industry 2010 for outstanding contribution to sustainable tourism. The Group Management Board acts as the Steering Committee and sets the strategic direction and long-term objectives for sustainable development. Members of the Board have been working with PwC to prioritise sustainable development risks and opportunities. Each strategic priority has a Board-level sponsor and is underpinned by our commitment to integrate sustainable development into the way TUI Travel operates. The Group Sustainable Development departments role is to drive change towards a more sustainable company and to forge Sector leadership. Our Group-wide workstreams meet regularly to tackle issues and develop programmes of work. Each Sector of our Group has a sustainable development coordinator or team with a remit to develop and implement sustainable development strategy supported by a network of champions. Travel and tourism are responsible for around 5% of global CO2 emissions (UNWTO, 2007). As a leading tour operator, our challenge is to prepare for a low-carbon society by further reducing our environmental impacts. We have committed to reduce TUI Travels airlines direct carbon emissions by 6% by 2013/14 (against a baseline of 2007/08) in terms of total carbon emissions as well as relative carbon emissions based on 2008/09 operational structure and plans. See page 18 for our progress. TUI Travel has a carbon management strategy in place covering aviation, water transport, major premises, ground transport and flagship hotel properties. We are monitoring and preparing for regulatory proposals on climate change that could have a fiscal impact. In 2008/09 the carbon emissions from our airlines accounted for 89.6% of TUI Travels carbon footprint. We are making reductions in these emissions through the strategic venture with Air Berlin, ongoing aircraft fleet replacement, and fuel conservation measures.
Eco vessel for European waterways

Inland Waterways have circa 1,000 craft throughout the European inland waterways. We plan to introduce a new environmentally friendly hybrid eco vessel which operates with a combination of solar and diesel power. Over the course of the next five years, 500 craft will be introduced into the fleet.
Business performance Governance
Carbon management
Financial statements Shareholder information

*In 2009/10, there has been a circa 1% incremental reduction in absolute TUI Travel airline emissions against the previous year. This achievement has excluded the significant emission reductions achieved by TUIfly following the strategic venture with Air Berlin (whereby Air Berlin took on the scheduled flying business of TUIfly).
Strategic overview
Sustainable development continued
Destinations
British Travel Awards

In 2010, Thomson Airways was awarded Environmentally and Socially Responsible Airline for the fifth consecutive year and First Choice won the Environmentally and Socially Responsible Large Tour Operator for the fourth consecutive year. Exodus won a silver award for the Environmentally and Socially Responsible Small Tour Operator category.
We know that the leisure travel industry can have both positive and negative impacts on communities and the natural environment, depending on how these impacts are managed. We are committed to learning more about how our holidays can benefit local livelihoods and protect the environment and putting this into practice. This is fundamental to preserving the quality of our product in years to come. Supplier management TUI Travel has an extensive supply chain operating across the globe (see page 44). These businesses are the gatekeepers to TUI Travels sustainability performance in our destinations. By focusing on sustainability our suppliers are able to achieve cost efficiency savings which ultimately give customers better value for money. Our challenge is to extend the reach of our influence to all suppliers and to monitor their progress. Our key achievements in 2009/10 include: Environmental and social contractual minimum standards for accommodation suppliers and the Travelife Sustainability System have been adopted by our Mainstream tour operating businesses and some of the Activity and Specialist & Emerging Markets businesses www.its4travel.com. Over 400 hotels achieved Travelife awards by the end of Summer 2010. 27% of TUI UK & Irelands customers stayed in Travelife-awarded hotels and they launched new build and operational environmental guidelines for flagship hotel properties. The source markets in Mainstream Central Europe organised a destination sustainability supplier conference in Turkey. 8 TUI Nordic Blue Village flagship properties in Europe and Turkey were ISO 14001 certified. We have implemented a Travelife animal attraction audit programme for major animal attraction excursion venues. Destination projects TUI Travel is involved in hundreds of projects designed to improve the livelihoods of local people in destinations and protect the environment. Our key achievements in 2009/10 include: TUI Travels Mainstream businesses signed up to the Child Protection Code, committing the businesses to the six criteria of The Code www.thecode.org and TUI Nederland began a three-year child protection project in Brazil.
Several businesses supported reforestation projects including TUI Central Europe (committed to planting 57,600 wild olive and pine trees in a nature reserve in Majorca) and Nouvelles Frontires (committed to planting 15,000 trees in Madagascar). TUI UK & Ireland worked with the Overseas Development Institute to better understand the socio-economic impact of an all-inclusive Holiday Village hotel in Turkey we are putting what we have learnt into operation. We are conscious of the pressures that tourism can place on local populations and resources and therefore work collaboratively with communities, local and national governments, NGOs and trade associations to support sustainable management of destinations and to shape our strategy in this area. Examples include: Dutch Association of Travel Agents and Tour Operators, Deutscher ReiseVerband, Association of British Travel Agents, The Tour Operators Initiative, Forum for the Future, The Overseas Development Institute, Born Free and The Travel Foundation. Charitable giving In the last year, our businesses supported many source market and destination charities. Our Group-wide charity policy and guidelines help businesses to ensure transparency, report annual monies collected and manage charity relationships (see page 44). Our key achievements in 2009/10 include: Ongoing support for the Family Holiday Association (FHA) which is the TUI Travel PLC Boards nominated charity providing holidays to disadvantaged children and their families. Thomson Sport was one of the official partners for Sports Relief 2010, a charity that helps vulnerable people both in the UK and overseas. Across the Group businesses supported the Haiti earthquake aid effort through colleague fundraising activities, corporate donations, cargo space and seats on TUI Travel aircraft and support for those colleagues who had lost family members. TUI Central Europe has launched a five-year project to support the reconstruction of homes and a school in Haiti.
Group at a glance
Our colleagues
Our aim is to make sustainable development tangible to each and every colleague within our business. We communicate regularly about the progress we have made on our journey towards securing a sustainable future for our industry and continue to build sustainability into our colleague inductions and training programmes, including development programmes for managers. We have a Group Code of Conduct which covers a wide range of sustainability issues, including human rights, business ethics and transparency and commits TUI Travel to upholding the principles of the UN Global Compact. Our key achievements for 2009/10 include: We organised sustainability awareness-raising initiatives at head offices and overseas, during which TUI UK & Ireland overseas colleagues celebrated World Environment Day through a variety of environmental themed childrens entertainment, green competitions and beach clean-ups and 2,000 colleagues attended TUI Deutschlands Green Day. The Activity Sector re-launched its charity day scheme giving every colleague a day to volunteer for a chosen charity. TUI Travels senior management were regular public advocates for more sustainable tourism in the media, at industry and governmental events. For example, Peter Long, Chief Executive of TUI Travel, took part in a Hot Seat interview on World Responsible Tourism Day at the World Travel Market 2009 in London. We have developed a number of core questions relating to Responsible Leadership and sustainable development that businesses and Sectors include in colleague opinion surveys. Our 2009/10 Leadership Voice survey confirmed that: 80% of leaders agreed that my business acts responsibly on environmental matters (73% in 2008/09). 83% of leaders agreed that my business acts responsibly in the local communities in which we operate (66% in 2008/09). We also gather feedback from colleagues on sustainability issues through focus groups.
Our customers
Across the business we have been proactive in raising awareness of sustainability issues with our customers. To achieve many of our goals we need customers support both through the purchases they make and the personal actions they take. We are working to raise awareness, influence choice, change behaviour, and develop and promote new products to encourage responsible holiday choices. Our key achievements for 2009/10 include: TUI Travel businesses are communicating with customers on sustainable development issues and have launched many brochures dedicated to greener products. Holidays Forever was launched in 2010, a sustainable tourism campaign and microsite giving visitors information on Thomson and First Choices sustainable tourism activities. For details, see www.holidaysforever.co.uk Many of our businesses offer customers the opportunity to carbon offset. TUI Travel, in partnership with ClimateCare, has invested in five exclusive renewable energy projects in destinations important to our business, that are scheduled to deliver in excess of 400,000 tonnes of CO2 reductions by the end of 2012. TUI Travel businesses request feedback from customers regularly and some offer the opportunity to comment on the environmentally and socially responsible aspects of their holiday. In 2009/10 we commissioned international consumer research into holidaymakers perceptions of sustainability to inform our work programme. The study involved almost 4,000 online interviews in eight of our key source markets. The findings revealed that: 70% believe holiday companies should be committed to preserving natural environments and 55% fair working conditions. 46% would book a more sustainable holiday if they were more readily available. 66% would change their behaviour on holiday if it helps the environment. For details of the research, see http://www.tuitravelplc.com/reportingcentre Education project for girls in Brazil
In 2010, TUI Nederland began a three-year child protection project in North East Brazil, working in collaboration with Plan Nederland and ECPAT Nederland. The project aims to give vulnerable girls a good education and help finding a job in the tourism industry.
Group performance
Year ended 30 September 2010

m 2010 pro forma2
Underlying results1 2009 restated
Change %
Statutory results 2010 2009 restated
Revenue Operating profit/(loss) Profit/(loss) before tax Basic eps (p) Dividend per share (p)
13,525 447 337 22.0 11.0
13,851 401 324 20.0 10.7
(2%) 11% 4% 10% 3%
13,400 81 (36) (7.8) 11.0
13,851 (5) (94) (4.8) 10.7
1 Underlying operating profit and underlying profit before tax are from continuing operations and exclude separately disclosed items, amortisation of acquisition related expenses, goodwill impairment and interest and taxation on the Groups share of the results of 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. 2 Pro forma, unaudited results for the period, reported before the estimated financial impact of the closures of European airspace as a result of volcanic ash. See Note 1(B)(iii) on page 71 for basis of preparation over the pro forma financial information.
Group revenue was 2% lower than the prior year at 13,525m (2009 restated: 13,851m) driven by the impact of the strategic transactions in Canada and Germany scheduled flying which reduced revenue by 3%. Revenue from acquisitions increased revenue by 1% over the prior year whilst organic revenue was flat and the impact of foreign currency translation was neutral. The Group achieved a 46m improvement in underlying operating profit to 447m in 2010 (2009 restated: 401m). This improvement has primarily been achieved through the delivery of integration synergies, the recovery of scheduled flying losses in Germany and the strategic venture in Canada, partially offset by weaker trading. The trading performance was driven by increased Winter losses, especially in the UK source market following capacity-led volume reductions. Improved Summer trading, including strong performances in Belgium and the Nordic region, was not enough to offset the increased Winter losses. The main drivers of the year-on-year improvement in underlying operating profit are:
m
A reconciliation of underlying operating profit to statutory operating profit/(loss) is as follows:

Year ended 30 September 2010 m 2009 m
Underlying operating profit Separately disclosed items operating (Note 3) Volcanic ash impact Impairment of goodwill Acquisition reIated expenses Taxation on profits of joint ventures and associates Statutory operating profit/(loss)
447 (181) (104) (12) (63) (6) 81
401 (340) (7) (56) (3) (5)
As previously announced and consistent with the adoption of IFRS 8, which requires that an entitys operating segments are reported on the same basis as internally reported information, the results of joint ventures and associates are now reported within each relevant Sectors result.
2009 underlying operating profit Incremental synergies Turnaround of underperforming businesses Trading Acquisitions (including Emerging Markets JV) Foreign exchange translation 2010 underlying operating profit
401 75 53 (76) 4 (10) 447
Segmental performance
Group at a glance
Mainstream Sector
Strategic overview Sector revenue
Northern Region 2010 2009 Change %
10 09
11.7bn 12.0bn
Customers (000)1 UK & Ireland Nordic Total Revenue (m) UK & Ireland Nordic Canada1 Total Underlying operating profit/(loss) (m) UK & Ireland Nordic Canada Total Underlying operating margin % UK & Ireland Nordic Canada Total
5,399 1,224 6,623 3,392 904 52 4,348
5,687 1,177 6,864 3,245 797 168 4,210

2
(5%) 4% (4%)
Northern Region
Sustainable holidays
5% 13% (69%) 3%
In 2010, TUI UK rolled out a Sustainable Development Contract Addendum to main hotel suppliers, making it compulsory for them to subscribe to and be audited by the Travelife Sustainability System. Hotels achieving a Travelife award are featured in First Choice and Thomsons online Greener Holidays brochures, making it easier for customers to identify a more sustainable break. www.its4travel.com
The Northern region achieved a 10% improvement in underlying operating profit to 182m in 2010 (2009: 166m). The improvement was largely driven by incremental merger synergies of 62m and an improved result in Canada following the strategic venture with Sunwing, partially offset by trading in the UK. Underlying operating profit bridge
m UK & Ireland Nordics Canada Northern Region
2009 (excl. JVs & Associates) 2009 JVs & Associates 2009 (incl. JVs & Associates) Synergies Turnaround Trading Acquisitions FX translation 2010 (incl. JVs & Associates)
127 60 (5) 182
1422 48 (24) 166
(11%) 25% 79% 10%
142 142 62 2 (79) 127
46 2 48 7 2 3 60
(24) (24) 19 (5)
164 2 166 62 21 (72) 2 3 182
3.7% 6.6% n/a 4.2%
4.4%2 6.0% n/a 3.9%
(70bps) 60bps n/a 30bps
Governance
1 From 14 January 2010, our Canadian operations have been accounted for under the equity method and Canadian customer numbers have been excluded. 2 Restated.
UK & Ireland
The UK & Ireland businesses delivered an underlying operating profit of 127m (2009 restated: 142m). Summer trading was not strong enough to offset increased losses in the Winter season. Winter losses increased largely due to planned capacity reductions which, whilst ensuring that supply and demand were in balance, removed holidays from the programme that had previously made a positive contribution. The Summer trading performance was affected by a slowdown in bookings following a downturn in consumer confidence in the early Summer. Consumer booking trends were affected by the recurrence of airspace closures caused by the volcanic ash, the emergency budget and subsequent austerity measures, and the better than average UK weather, combined with the expected quiet trading period during the World Cup. The slowdown resulted in more stock left to sell in the lates period than expected and although this period traded well, margins were inevitably affected by this shift to later booking patterns.
Segmental performance continued
The expansion of unique products continued in 2010, helping to mitigate margin pressure in commodity products, with the differentiated product mix increasing by three percentage points to 42%. This included the opening of Sensatori Tenerife in May and the expansion of the First Choice Holiday Village portfolio with new units in Lanzarote and Rhodes. Increasing differentiated products
During the year, TUI Nordic opened three additional Blue Village family concepts in Hurghada, Crete and Bulgaria. In the UK, Thomson launched Thomson Couples, an adult-only experience designed to offer child-free holidays. Substantial work has been done in order to develop differentiated concepts that can work in several source markets. The UK concepts Thomson Couples, Splash (hotels with waterparks) and Holiday Villages (activity-focused family hotels) were introduced in the Nordic market.
As a part of the Nordic business focus on sustainability, TUIfly Nordic became the first charter airline globally to achieve ISO 14001 certification. Furthermore, during 2010 all Mediterranean Blue Villages achieved this certification. The business has also invested in multimedia content to improve online product presentation and this has further promoted the web as the main distribution channel. Web sales increased to 57% (2009: 52%). From Summer 2011, traditional holiday brochures will no longer be produced, emphasising the online culture within the business. Total controlled distribution was flat at 85% as we reduced the number of owned stores.
Controlled distribution increased by three percentage points to 81% in 2010, driven by the online channel. This was supported by improvements in functionality to the Thomson and the First Choice websites and the success of personalised portals such as MyThomson, which allows customers to manage their bookings online. Our business in Ireland delivered 2m of turnaround progress. A rationalisation in capacity resulted in an improved trading performance, helped by the high-profile failure of a competitor. Furthermore, cost savings were achieved through back-office restructuring and optimisation of the distribution network, which included the introduction of a virtual call centre and a reduction in the number of retail shops.
Canada
Nordic region
The Nordic region, consisting of our operations in Sweden, Norway, Denmark and Finland, achieved an improved underlying operating profit of 60m (2009: 48m). The profit improvement was largely driven by a sharp improvement in customer demand coupled with successful capacity planning. The business is highly flexible as in-house flying accounts for only circa 60% of all packages sold, allowing capacity to be adjusted to meet market demand. After reducing capacity in Summer 2009 and Winter 2009/10 in response to lower demand, the business was able to add capacity when demand improved for Summer 2010. Demand for TUI Nordics holidays outstripped that for competitors products as a result of multi-year investment in product and service differentiation which has contributed to strong improvements in customer satisfaction scores and repeat bookings. The range of unique products was further increased in 2010 with the opening of a Blue Village Exotic Aquamarine in Hurghada, the eco-friendly Blue Village Atlantica Caldera Creta Paradise and Blue Village Bellavista in Bulgaria.
Canada reported an underlying operating loss of 5m (2009: loss of 24m). This represents a significant turnaround in our participation in Canada, and results from the completion of the strategic venture with Sunwing in January 2010. The transaction has strengthened our position in the Canadian market, providing the Group with a 49% stake in the second largest tourism business. On an annualised basis, assuming the strategic venture was effective for the full financial year, Canada would have delivered a profit of 2m in 2010. We have identified opportunities to realise significant synergies in the venture, primarily though network planning benefits and actions to remove duplicated resources, such as migration to a single reservation system, integration of certain back office functions and consolidation of office premises. We estimate that our share of the synergy benefits is worth at least 8m per annum, resulting in a target of 10m for our share of the ventures profits.
Group at a glance
Central Europe
The Central Europe division reported an underlying operating profit of 92m in 2010, an improvement of 21m over the prior year (2009: 71m). This improvement is principally due to the elimination of scheduled flying losses (20m). Underlying operating profit/(loss) bridge
m SwitzerCentral Germany Austria land Poland Europe
Germany
Underlying operating profit was 81m, an improvement of 11m (2009: 70m). Underlying operating margins also improved by 40bps to 2.1% (2009: 1.7%). This improvement was driven by the 20m benefit of exiting from scheduled flying operations. This transaction was also the primary driver behind the 21% reduction in customers in the year. Trading in the tour operator deteriorated by 6m versus the prior year. This was largely as a result of weak trading in Q3 2010, with lower load factors in June, lost sales following the volcanic ash disruption, price pressure on commodity product and by a shift in mix towards lower margin holidays (such as overland tours). Summer 2010 bookings improved significantly in the last quarter of 2010 with volumes up 14% in Q4 2010 over the prior year, however the increased lates mix also led to a reduction in profitability. The result was also affected by foreign exchange translation losses of 3m. Germany improved its controlled distribution by two percentage points to 51%. During 2010 the online brand 1-2-FLY.com was launched, offering dynamically packaged flight and hotel content.
Strategic overview
TUI Environmental Conference

In June 2010, TUI Deutschland hosted an Environmental Conference for accommodation suppliers in Antalya, Turkey. Almost 100 hoteliers attended the event, learning about best practice environmental initiatives from TUI Deutschlands Umwelt (Environmental) Champion hotels. In 2011 a sustainability conference for hoteliers in the Canary Islands will be organised.
2009 (excl. JVs & Ass.) 2009 JVs & Ass. 2009 (incl. JVs & Ass.) Turnaround Trading Synergies FX Translation 2010 (incl. JVs & Ass.)
Central Europe
65 5 70 20 (6) (3) 81
8 8 1 1 (1) 9
2010
4 4
2009
(7) (7) 5 (2)
66 5 71 25 (1) 1 (4) 92
Change %
Customers (000) Germany Austria Switzerland Poland Total Revenue (m) Germany Austria Switzerland Poland Total Underlying operating profit/(loss) (m) Germany Austria Switzerland Poland Total Underlying operating margin % Germany Austria Switzerland Poland Total
6,938 558 286 116 7,898 3,800 324 183 68 4,375
8,775 565 286 104 9,730 4,144 405 185 62 4,796
(21%) (1%) Flat 12% (19%) (8%) (20%) (1%) 10% (9%)
Governance
Austria
Austria reported underlying operating profits of 9m (2009: 8m) and an improvement of 80bps in underlying operating margin to 2.8% (2009: 2.0%). Underlying margins improved by 1m over the prior year, due to growth in demand for differentiated hotel content, such as Magic Life, Pegasos and the Blue Collection, and an increase in online volumes. Controlled distribution increased by 10 percentage points to 31%.
Growth in river cruises Financial statements

Following the continuously growing river cruise market and the success with the first river cruise ship Maxima, TUI launched its second ship Sonata in August 2010. With a completely new product line, featuring modern design, diversified programme and excellent service and quality, the TUI river cruise fleet will address the increasingly younger river cruise customers.
81 9 4 (2) 92
70 8 (7) 71
16% 13% n/a 71% 30%
Switzerland
Switzerland reported underlying operating profits of 4m and an underlying operating margin of 2.2%, a significant improvement over 2009s breakeven result. This was primarily as a result of margin improvement, driven by fewer holidays sold in the lates market versus prior year.
2.1% 1.7% 40bps 2.8% 2.0% 80bps 2.2% 220bps (2.9%) (11.3%) 840bps 2.1% 1.5% 60bps
Poland
Poland reported an underlying operating loss of 2m in 2010 (2009: loss of 7m). Customer demand for the Summer 2010 programme was strong, with volumes up 24% over prior year in H2 10.
Western Europe
Western Europe reported underlying operating profits of 51m in 2010, an improvement of 18m over the prior year (2009: 33m). The improvement was largely driven by strong trading in Belgium and turnaround in Nouvelles Frontires. Underlying operating profit/(loss) bridge
m France Netherlands Belgium Western Europe
France
Underlying operating profit bridge
m Nouvelles Frontires Corsair Marmara France
Launch of differentiated products and new destinations

Nouvelles Frontires and Marmara have been working closely together to develop two destinations with differentiated products for the French market. They collectively launched Marbella as a new mediumhaul destination, each with their own club while sharing flight capacity. On long-haul, Marmara launched Mauritius as a new destination, capitalising on access to Nouvelles Frontires hotels and flight capacity with the in-house carrier Corsairfly.
2009 Trading Turnaround Synergies FX Translation 2010

Western Europe
(19) 2 6 3 (4) (12)
7 1 (1) 7
2010
45 13 (2) 56
2009
33 15 7 3 (7) 51
Change %
2009 Turnaround Trading Synergies FX Translation 2010
(13) 6 2 (2) (7)
(24) 1 (1) (24)
18 1 1 (1) 19
(19) 6 2 3 (4) (12)
France reported an underlying operating loss of 12m in 2010 (2009: loss of 19m). The 7m improvement was mainly due to continued turnaround in Nouvelles Frontires. Nouvelles Frontires benefited from reduced costs following the restructuring implemented last year and from the successful introduction of the new Nouvelles Frontires Hotel Clubs concept and the extended flight programme out of regional airports in France. Online sales also increased by five percentage points to 17% of total bookings. Marmara increased its market share across all of its destinations in the year and also successfully added new medium and long-haul destinations. Controlled distribution increased by three percentage points to 41%. Collaboration between the two tour operators in France delivered incremental synergies of 3m in the year. Corsair reported a flat underlying operating result. The scheduled flying market in France continues to be highly competitive and management is executing plans to make Corsair a viable airline in the future.
Customers (000) France Netherlands Belgium Total Revenue (m) France Netherlands Belgium Total Underlying operating (loss)/profit (m) France Netherlands Belgium Total Underlying operating margin % France Netherlands Belgium Total
2,031 1,211 1,861 5,103 1,244 668 754 2,666
1,959 1,274 1,790 5,023 1,228 700 724 2,652
4% (5%) 4% 2% 1% (5%) 4% 1%
(12) 7 56 51
(19) 7 45 33
37% Flat 24% 55%
Netherlands
(1.0%) 1.0% 7.4% 1.9% (1.5%) 50bps 1.0% Flat 6.2% 120bps 1.2% 70bps
Netherlands reported an underlying operating profit of 7m (2009: 7m). Underlying operating margins improved in 2010 by 1m, driven by a three percentage increase in controlled distribution to 60% (2009: 57%). This was mainly due to strong online growth due to improved websites for Arke.nl and ArkeFly.nl. However, foreign exchange translation adversely affected the result by 1m.
Belgium
Belgium achieved a strong improvement in underlying operating profits to 56m (2009: 45m). Customer volumes increased by 4% over the prior year, driven by the launch of new destinations and growth in the offering from regional airports. Margins also improved as a result of a five percentage point increase in controlled distribution to 55%, driven by the online channel.
Group at a glance

Strategic overview Sector revenue Within the flat underlying trading result, the B2B and B2C online businesses have benefited from strong volume growth and improved conversion rates. Profitability was offset, however, by start-up investment in new markets within the online businesses and the impact of reduced tour operator volumes in the incoming business and reduced activity in our Asian Meetings, Incentives, Conferences and Entertainment business which suffered from reduced corporate spending in the early part of the year. Investment in AsiaRooms
One of the key achievements during this year has been the investment made in the AsiaRooms brand. We have increased our own hotel inventory in the region by 62% (7,800 hotels), rebranded the website and implemented a commissionable model with our hotel partners. We believe we are now in a position to capture the tremendous growth expected in the Asian online travel market space in the coming years.
10 09
760m 719m
Accommodation & Destinations Sector The A&D Sector reported underlying operating profits of 71m in 2010 (2009: 67m). The underlying trading result was unchanged, with the increase driven by incremental merger synergies of 4m and a 1m contribution from the annualisation of prior year acquisitions, partially offset by foreign exchange translation losses of 1m. Accommodation & Destinations
Customers B2B roomnights B2C roomnights Incoming passenger volumes
2010 2009 change %
23% 17% (4%)

Change %
Revenue (m) Underlying operating profit (m) Underlying operating margin %
551 71 12.9%
552 67 12.1%
Flat
Governance
6% 80bps
Giving back
Businesses across this Sector support many charities. For example, this year the Sector supported a charity local to its head office in Mallorca. Over 10,000 was donated to the Allen Graham Charity 4 Kidz which supports children in need on the island.
Activity Sector
Sector revenue The Adventure businesses reported underlying operating profits of 9m (2009: 13m). The annualisation of acquisitions made in the prior year contributed 3m of profit in 2010. However, underlying trading worsened by 7m despite higher earnings at small group adventure operator Exodus, mainly due to weak demand in Australian Adventure and Polar Cruising. Our Australian businesses had a challenging time: Peregrine Adventures saw lower demand for higher priced long-haul travel; Adventure Tours Australia felt the effect of the strong Australian dollar which rendered outback experiences less affordable to their backpacker clients, although good progress has been made in extracting cost synergies following the combination of a number of similar businesses acquired in the last three years. Polar expedition specialist Quark had a difficult year, with clients reluctant to commit to their higher priced, iconic cruises in the uncertain economic climate. The Ski, Student and Sports divisions increased underlying operating profits by 9m to 36m (2009: 27m). The divisions delivered strong trading growth of 3m, driven by growth in the Student businesses and a good year for the Sports division due to the Football World Cup, Vancouver Olympics and Englands cricket tour to South Africa. Businesses acquired during the year, plus the annualisation of acquisitions made in the prior year, contributed 4m of incremental profit. In the Student division, the integration of new acquisitions (Hampstead School of English and the Manchester Academy of English) with our existing business, EAC Language Centres, has created a strong brand presence in the English language teaching industry. In the Ski division, Crystal, the UKs largest ski operator, experienced strong customer demand for its new Crystal Ski+ product which includes ski hire and lift pass in the package at highly competitive rates. The business also delivered incremental synergies of 2m, through the integration of the former TUI and First Choice ski businesses.
10 09
Thomson Sport wins Arsenal contract
Thomson Sport secured a three-year commercial partnership as Arsenals official UK travel agency partner which includes business travel (team travel supplier), official supporters travel, supplier marketing rights and access to over 250,000 Arsenal supporters to sell packages and holidays.
868m 816m
The Activity Sector delivered underlying operating profits of 61m in 2010 (2009: 59m), driven by 7m of profits from acquisitions and 2m of incremental synergies, offset by 6m due to weaker trading and a 1m loss from foreign exchange translation. Activity
Revenue (m) Marine Adventure Ski, Student and Sport Total Underlying operating profit (m) Marine Adventure Ski, Student and Sport Total Underlying operating margin % Total
2010 2009 Change %
134 286 448 868
131 240 445 816
2% 19% 1% 6%
16 9 36 61
19 13 27 59
(16%) (31%) 33% 3%
7.0%
7.2%
(20bps)
Volunteering day
In 2010, the Activity Sector re-launched its Charity Day scheme giving over 4,900 colleagues the opportunity to volunteer for a day at a chosen charity. This opportunity was used to clean up local environments, work with sick children and raise money for key projects within the Sector.
The Marine division reported underlying profits of 16m, a decrease of 3m versus the prior year (2009: 19m), primarily due to weak demand for the Winter 2009/10 programme.
Group at a glance

Strategic overview Sector revenue
US
717m 825m
10 09
The Specialist & Emerging Markets Sector reported underlying operating profits of 19m in 2010 (2009: 32m). The decrease was driven by start-up losses of 6m in Emerging Markets, and capacity cuts in our private jet tours business in the US, partly offset by better trading in the UK division. Specialist & Emerging Markets
2010 2009 Change %
The US division reported underlying operating profits of 8m (2009: 15m). The reduction in profits was due to the circa 70% reduction in the number of tours operated by our US private jet tours business in Winter 2009/10, as the key booking period for this season was during the peak of the recession in the fourth quarter of 2008. Following a strong recovery in demand, we have increased the number of tours for the Winter 2010/11 season and the business is performing well.
Staycation versus vacation

Hayes & Jarvis launched a Staycation/Vacation advertising and marketing campaign to challenge the publicity in the press that this was the summer for holidaying in the UK. Hayes & Jarvis focused on sourcing very strong air and land offers from key suppliers, particularly for their four and fivestar products. These were promoted in a slightly tongue-in-cheek fashion, comparing great value long-haul, luxury holidays in some of the more exotic destinations to a sample of British holiday resorts.
Emerging Markets
Customers (000) Europe US Total Revenue (m) Europe US Total Underlying operating profit/(loss) (m) Europe US Emerging Markets Total Underlying operating margin % Total
536 267 803 547 170 717
530 290 820 584 241 825
1% (8%) (2%) (6%) (29%) (13%)
17 8 (6) 19
16 15 1 32
6% (47%) n/a (41%)
This division reported underlying operating losses of 6m (2009 profit: 1m), due to our continued investment in market and product development in the businesses we acquired in Russia and the CIS. In 2010 the TUI brand was introduced into these markets, with the rebranding of the retail network, the launch of a TUI website and the co-branding of brochures. The division now has 480,000 customers and a retail estate of over 150 travel agencies. The Russian and Ukrainian markets remain attractive, with the annual package market estimated to be between 8.5 million and 10 million customers. Strong macroeconomic conditions, positive consumer behaviour and a growing appetite for travel make the markets of Brazil, India and China particularly interesting. The Group already has a presence in these markets, however we are currently evaluating our participation strategy across all three markets.
Governance
Sustainable development challenge

Managing Directors in the Sector responded to a challenge to showcase how they had taken personal action or worked with their teams to bring the value of Responsible Leadership to life. UK Specialist long-haul brands donated over 34,000 for Just a Drop, a charity which works to deliver water to those who need it most.
2.6%
3.9% (130bps)
Europe
Underlying operating profit was 17m (2009: 16m). This was mainly as a result of margin improvement in some of the UK businesses, such as Hayes & Jarvis, Sovereign and Citalia, who were able to change the mix of holidays sold to a higher proportion of premium holidays in 2010.
Current trading
Winter 2010/11
We have continued to see positive recent trading trends across most source markets. In line with our product strategy, we have expanded our portfolio of differentiated product and unique holiday experiences and this is driving booking activity.
Cumulative bookings at 17 Oct Bookings since previous trading statement Cumulative bookings at 21 Nov
Year-on-year customer booking variation %
UK Nordic region Germany France Belgium Netherlands
6 32 10 13 15 12
2 27 9 (6) 7 18
5 31 9 8 12 14
In the UK, as previously reported, capacity for the season is 5% higher due to a change in the fleet mix in Canada from B757s to smaller B737s which results in a higher number of B757s in the UK. Trading remains positive, with booking increases in line with the capacity change and higher average selling prices. Load factor is currently 47%. In November and December, two of Thomson Cruises five ships are in extended dry dock for routine maintenance and the resulting reduction in contribution will partially offset improved trading in the tour operator in that period. In the Nordic region, cumulative bookings are now up 31% versus the prior year and the load factor is 81%, up eight percentage points. Demand for our market-leading portfolio of differentiated products, coupled with the successful use of an additional long-haul aircraft from our airline in France, is driving these strong booking volumes. Our product offering has been enhanced for Winter 2010/11 and Summer 2011 through co-operation with the UK business to bring the Splash, Holiday Village and Sensatori concepts to the Nordic region. In Germany, booking volumes remain ahead of capacity with volumes up 9% versus the prior year. Due to the late timing of Easter and in response to demand we are commencing certain Summer destinations earlier than usual and as these departure dates are reported as part of the Winter season, reported Winter capacity is up 6%. Adjusting for this effect, underlying Winter capacity is flat. Our load factor in Germany is currently 57%. In the Western Europe source markets, the strong booking activity experienced towards the latter part of the Summer season has continued into Winter. In France, demand for our differentiated Nouvelles Frontires Hotel Clubs and Club Marmara products is a key driver of volume growth. In the Specialist & Activity Sector, all divisions have experienced higher sales to date versus the prior year. Our private jet tours businesses, TCS and Starquest, have seen a strong rebound in booking activity as the number of tours has increased following the reduction in 2009/10. There has also been good growth in our marketleading ski brand, Crystal. In A&D, the strong booking volumes for online accommodation experienced in 2010 has continued with booking volumes, transaction values and margins all higher than the prior year.
Current trading1 Winter 2010/11

Risk only Year-on-year variation % Total ASP2 Total Sales2 Total Customers2 Capacity3 Left to sell3
Mainstream UK Nordic Northern Region Germany Austria Switzerland Poland Central Europe France Belgium Netherlands Western Europe Specialist & Activity Accommodation & Destinations 4
11 Flat 7 2 7 (2) (12) 1 3 (2) 6 2 NA 7
16 31 21 11 6 (4) (2) 10 11 11 20 13 4 33
5 31 14 9 Flat (1) 11 8 8 12 14 11 NA 25
5 18 6
3 (18) Flat
1 These statistics are up to 21 November 2010. 2 These statistics relate to all customers whether risk or non-risk. 3 These statistics include all risk capacity programmes. 4 These statistics refer to B2B Online businesses only and sales refer to total transaction value (TTV).
Group at a glance
Summer 2011
Trading for Summer 2011 remains good in those source markets currently on sale. In the UK, total booking volumes are up 7% versus the prior year, driven by demand for our differentiated product and increased duration flexibility. Bookings for differentiated products are currently up 26% and we expect these products to represent half of all holidays sold over the full season. We have increased the flexibility in holiday durations significantly and have experienced strong demand for nine to 12-night durations. Average selling prices in the UK are currently up 4% versus the prior year and given that Summer 2011 is expected to have minimal cost inflation (based on achieved hedged rates and current forward rates), margins are currently ahead of the prior year. In the Nordic region, booking volumes are up 13%, again driven by our portfolio of differentiated products.
Current trading1 Summer 2011

Risk only Year-on-year variation % Total ASP2 Total Sales2 Total Customers2 Capacity3 Left to sell3
Strategic overview
UK Nordic Northern Region

1 These statistics are up to 21 November 2010.
4 1 4
11 14 11
7 13 7
1 5
Flat 4
2 These statistics relate to all customers whether risk or non-risk. 3 These statistics include all risk capacity programmes.
We expect this restructuring programme to enable the airline to achieve at least a breakeven result. Material benefits from the programme are expected to start to come through in 2012 with the full benefits delivered in 2013.
Integration and cost efficiencies
Fuel/foreign exchange
We have hedged a significant proportion of our expected fuel and foreign exchange exposure for 2011:
Winter 2010/11 Summer 2011
Euro USD Jet Fuel

As at 25 November 2010.
87% 92% 87%
83% 85% 86%
The merger integration is now largely complete and we have delivered 195m of synergy benefit to date, with the remaining 5m expected to be delivered in 2011. As part of the integration process, we have identified and removed areas of duplicated cost. We are, however, continuing to review areas of our cost base to maintain competitiveness, especially in commodity segments. These include cost reductions and productivity improvements in Group airlines, replacement of core reservation systems in the UK and Germany, and an overhead reduction programme throughout the business.
Governance
Corsair
Outlook
After constructive and positive discussions, negotiations with employees and union representatives have been finalised, enabling Corsair to implement its turnaround plan. Employees have demonstrated strong support for the airline and a great willingness to deliver a successful turnaround. Social plans have been signed with the required employee representatives. Under the turnaround project, we plan to change the fleet to replace three of our B747 aircraft with two A330 aircraft which will optimise capacity and route planning. Customers will enjoy a significantly improved onboard experience as we also reconfigure and update the cabins in the existing fleet. We have agreed a number of significant productivity improvements with employee representatives, including a reduction in the number of employees by circa 25%, a freeze on salaries for a period of three years, a reduced cabin crew composition and rationalisation of allowances.
Since July, we have experienced a sustained improvement in trading which resulted in Summer 2010 closing out well in all source markets and positive trends for the Winter 2010/11 and Summer 2011 seasons. Trading for our unique, differentiated product continues to outperform commodity segments and we are introducing new concepts in 2011 leaving us well placed to capitalise on this trend. Whilst encouraged by current trading, we remain cautious about 2011 given the continued economic uncertainty and the relatively early stage of the booking cycle.
42 TUITravelPLCAnnualReport&Accounts2010
Governance
Board of Directors
10
11
12
13
14
15
16
17
TUITravelPLCAnnualReport&Accounts2010 43
1. Dr Michael Frenzel Non-Executive Chairman (Age 63) DrMichaelFrenzeljoinedtheBoardofTUITravelPLC on28June2007asNon-ExecutiveChairman.Michael studiedlawatRuhrUniversityinBochumand completedhisdoctoratewhilstworkingattheuniversity asascientificassistant.HejoinedWestdeutsche Landesbank(WestLB),Dsseldorf,in1981wherehe waspromotedtovariousmanagerialpositionsand becamemanageroftheIndustrialHoldingsDepartment in1983andoverallmanagerofWestLBsEquity HoldingsDivisionin1985includingholdingsin banking,leasingandrealestate. In1988,hebecameamemberofthePreussagAG executiveboard,beingresponsibleforTradingand Logistics.MichaelhasheldthepositionofChief ExecutiveandChairmanoftheExecutiveBoardof TUIAG(formerlyPreussagAG)sinceJanuary1994, overseeingitsextensiveacquisitionprogrammein thelate1990s,whichresultedintheacquisitionsofTUI AGsstakeinHapag-Lloydandofleadingtourism businessessuchasThomsonTravelandNouvelles Frontires.Michaelisalsocurrentlyamemberofthe supervisoryboardofanumberofcompaniesincluding AXAKonzernAG,AWDHoldingAGandVolkswagenAG. 2. Sir Michael Hodgkinson Non-Executive Deputy Chairman and Senior Independent Director (Age 66) SirMichaelHodgkinsonjoinedtheBoardofFirstChoice HolidaysPLCasaNon-ExecutiveDirectorinJanuary 2004andbecameChairmaninMarch2004.Hejoined theBoardofTUITravelPLCon28June2007asNonExecutiveDeputyChairmanandistheSenior IndependentDirector.Followinganearlycareerinthe automotiveindustry,hewasappointedChiefExecutive ofGrandMetropolitansEuropeanFoodDivisionin1986 andin1992hejoinedBAAplc,becomingChiefExecutive in1999,apostfromwhichheretiredinJune2003. SirMichaelwasSeniorNon-ExecutiveDirectorat RoyalMailandChairmanofPostOfficeLimiteduntil September2007andiscurrentlyanon-executive directorofTransportforLondonLimited,Dublin AirportandCrossrailLimited.HewasalsoaDirector ofBankofIrelandplcfromMay2004untilJuly2006. 3. Peter Long Chief Executive (Age 58) PeterLongjoinedtheBoardofTUITravelPLCon 28June2007asChiefExecutive.InNovember1996he wasappointedGroupManagingDirectorofFirstChoice HolidaysPLCandbecameChiefExecutiveinSeptember 1999.PriortojoiningFirstChoice,hewasChief ExecutiveofSunworldHolidays. FromFebruary2001toJune2005PeterwasanonexecutivedirectorofRACplc,andfromApril2006 toJuly2009hewasanon-executivedirectorof Debenhamsplc.Peterwasappointedasanon-executive directorofRentokilInitialPlcin2005andiscurrentlythe SeniorIndependentNon-ExecutiveDirector. 4. Paul Bowtell Chief Financial Officer* (Age 42) PaulBowtelljoinedtheBoardofTUITravelPLCon 28June2007asChiefFinancialOfficer.Hewas appointedtotheBoardofFirstChoiceHolidaysPLC inSeptember2004asGroupFinanceDirectorand waspreviouslytheFinanceDirectorofBritishGas, asubsidiaryofCentricaplc,wherehehadbeensince January2002.Priortothat,hewaswithWHSmithplc whereheheldanumberofcorporatecentreroles beforebecomingtheFinanceDirectoroftheUKRetail business.HeisanAssociateoftheInstituteofChartered AccountantsinEnglandandWales.InNovember2007 Paulwasappointedasanon-executivedirectorof SThreePLC.PaulwillberesigningfromtheTUITravel PLCBoardwitheffectfrom31December2010*. 5. William Waggott Commercial Director* (Age 47) WilliamWaggottjoinedtheBoardofTUITravelPLC on28June2007asCommercialDirector.Hewas appointedChiefFinancialOfficerofTUITravelPLC on30November2010*.Willspenttheearlypartof hiscareerwithCoopers&LybrandandCourtaulds Textilesplc,whereheperformedvariousseniorgroup financeanddivisionaldirectorroles.Heenteredthe leisuretravelindustrywhenhejoinedAirtoursplcand heldanumberofpositionsincludingUKleisuregroup
financedirector,priortojoiningThomsonTravelGroup in2001.HethenwentontobecomeChiefFinancial OfficerofTUITourismin2006. 6. Dr Volker Bttcher Managing Director, Central Europe (Age 51) VolkerBttcherjoinedtheBoardofTUITravelPLCon 19June2007andisresponsibleforCentralEuropein theMainstreamSector.Afteranearlycareerinlaw, VolkerjoinedTouristikUnionInternationalin1987as alegaladvisor.Havingoccupiedvariousmanagement positions,hebecameheadofTUIsSpecialProgrammes Divisionin1996whichincludedresponsibilityfor long-hauldestinations,citytoursandtheEastern Mediterranean.In2003VolkerwasappointedChairman forCentralEuropeforTUIAG,beingresponsibleforall tourismactivitiesinthesourcemarketsofGermany, Austria,SwitzerlandandPoland.Hewasappointedto theboardofTUIDeutschlandGmbHinApril2000. FollowingtherestructuringofTUIsbusinessmodelin Germany,hewasappointedCEOofTUIDeutschland GmbHinJuly2001. 7. Johan Lundgren Managing Director, Northern Region (Age 44) JohanLundgrenwasappointedtotheBoardofTUI TravelPLCon21December2007.Heisresponsiblefor theNorthernRegionwhichincludesallMainstream tourismsalesintheUK&Ireland,Canada,Sweden, Norway,DenmarkandFinland.Johanhasworkedin theNordictourismindustryforalmost25years,14of whichhavebeenasaManagingDirector.Between1999 and2001,hewasPresidentofSunquestVacationsin Canada.JohanwentontobecomeChiefExecutiveof TUINordicandalsotookresponsibilityfortourismsales inthesourcemarketsofItalyandRussia. 8. Rainer Feuerhake Non-Executive Director (Age 66) RainerFeuerhakejoinedthePreussagGroup(now TUIAG)in1968andby1980wasresponsibleforgroup accounting.RainerwasappointedasChiefFinancial OfficerofPreussagAGinNovember1988and subsequentlyTUIAG(followingaresolutiontorename PreussagAGon1July2002).InthispositionRainer wasresponsibleforthedepartmentsofAccounting& Reporting,Finance,InvestorRelations,TaxAffairs, Mergers&Acquisitions,DestinationManagementand theSharedServiceCentre.HeresignedasChief FinancialOfficerinFebruary2010andisnowactingas aconsultantforTUIAG.HejoinedtheBoardofTUI TravelPLCon28June2007. 9. Tony Campbell Non-Executive Director (Age 61) TonyCampbellbecameaNon-ExecutiveDirector ofFirstChoiceHolidaysPLCinApril1997andjoinedthe BoardofTUITravelPLCon28June2007asaNonExecutiveDirector.TonywasDeputyChiefExecutiveof AsdaStoresLimiteduntilMarch2001.Heiscurrently theChairmanofHobbsHoldingNo1Limited,TMLewin GroupLimited,TheWhiteCompany(UK)Limitedanda directorofDataTransfer&CommunicationsLimited. 10. Clare Chapman Non-Executive Director (Age 50) ClareChapmanbecameaNon-ExecutiveDirectorof FirstChoiceHolidaysPLCinMarch2003andjoinedthe BoardofTUITravelPLCon28June2007.Clareisthe DirectorGeneralofWorkforceforNHSandSocialCare, DepartmentofHealth.Priortothis,shewasGroup PersonnelDirectoratTesco.Inaddition,Clareserves ontheAuditCommitteeofJobcentrePlus;isan advisoryBoardMemberfortheJudgeInstitute, BusinessSchoolfortheUniversityofCambridge;and aFellowoftheInstituteofPersonnel. 11. Bill Dalton Non-Executive Director (Age 66) BillDaltonbecameaNon-ExecutiveDirectorofFirst ChoiceHolidaysPLCinOctober2004andjoinedthe BoardofTUITravelPLCon19March2007.Hewas previouslyanexecutivedirectorofHSBCHoldingsplc, ChiefExecutiveofHSBCBankplcandGlobalHeadof PersonalFinancialServicesfortheHSBCGroup.During hisbankingcareer,hehasamassedagreatdealof internationalexpertiseandisalsoanon-executive directorofanumberofUKandNorthAmerican companiesincludingAssociatedElectric&Gas InsuranceServices(AEGIS),AEGISManagingAgency Limited(UK),HSBCNorthAmericaHoldingInc, TalismanEnergyIncandUSColdStorageInc.
12. Jeremy Hicks Non-Executive Director (Age 57) JeremyHicksbecameaNon-ExecutiveDirectorofFirst ChoiceHolidaysPLCinMarch2005andjoinedthe BoardofTUITravelPLCon28June2007.Heisa CharteredAccountantwithanumberofbusiness interestsparticularlyinthefieldofmarketingservices. Hehasextensiveexperienceintheworldoffinance asanInvestmentBankerandmostrecentlyasChief FinancialOfficerofAegisGroupplc,aleadingUK-based multi-nationalmarketingservicesgroup,fromwhichhe resignedinApril2007. 13. Giles Thorley Non-Executive Director (Age 43) GilesThorleybecameaNon-ExecutiveDirectorofFirst ChoiceHolidaysPLCinFebruary2006andjoinedthe BoardofTUITravelPLCon19March2007.Gilesis Non-ExecutiveChairmanofTragusGroupLimited, aleadingrestaurantoperatorintheUK.HewasChief ExecutiveOfficerofPunchTavernsplc,theUKslargest puboperator,from2001toSeptember2010.After qualifyingasaBarrister,hehadanearlycareerat NomuraInternationalplc.Gilesisalsoadirectorof MatthewClarkHoldingsLimited,theUKslargestwine wholesalerandatrusteeoftheRonaSailingProject. 14. Harold Sher Non-Executive Director (Age 63) HaroldSherjoinedtheBoardofTUITravelPLCas aNon-ExecutiveDirectoron29October2007.He studiedcommerceatuniversityandstartedhiscareer asaCharteredAccountant.Haroldmovedtoindustry earlyinhiscareerholdingarangeofexecutivepositions beforebeingappointedChiefExecutiveofAmalgamated MetalCorporationPLCin1992,apositionhestillholds. HehasservedaspresidentofamajorNorthAmerican SteelServicesGroupand,togetherwithhisroleat AmalgamatedMetalCorporation,thishasprovidedhim withbroadinternationalcommercialexperience. 15. Dr Albert Schunk Non-Executive Director (Aged 69) DrAlbertSchunkjoinedtheBoardofTUITravelPLCas aNon-ExecutiveDirectoron29October2007.Albert studiedeconomicsatuniversityandcarriedouta researchprojectfortheGermanGovernmentinLatin America.AfterjoiningIG-Metall,hehasservedonthe supervisoryboardofVolkswagenandotherGerman Companiessince1976.In1994hebecameamemberof theEuropeanEconomicandSocialCouncilinBrussels andhasrecentlybeenadvisingtheRiuGroupinSpain. 16. Dr Erhard Schipporeit Non-Executive Director (Age 61) DrErhardSchipporeitjoinedtheBoardofTUITravel PLCasaNon-ExecutiveDirectoron29October2007. Hestartedhiscareerin1979intheBoschGroupandin 1981hejoinedVARTAAG/VARTABatteryAG,atthat timealeadingEuropeanbatterycompany,wherehe becameChiefFinancialOfficerin1990andChief ExecutiveandChairmanoftheExecutiveBoardin1993. AfterthesuccessfulrestructuringofVARTAthenext moveinhiscareerbroughthimtotheMunichbased conglomeratecompanyVIAGAGasCFO.VIAGmerged in2000withVEBAAGtoformthenewE.ONAG,oneof theworldsleadingutilitycompanies.ErhardwasCFO andExecutiveBoardMemberofE.ONfrom2000until hisresignationinNovember2006.In2007hewas appointedSeniorAdvisorforBNPParibasSAandisalso currentlyanon-executivedirectorofanumberof companiesincludingSAPAG,DeutscheBoerseAG, TalanxAGandHanoverRueckversicherungAG. 17. Horst Baier Non-Executive Director (Age 54) HorstBaierjoinedtheBoardofTUITravelPLCas aNon-ExecutiveDirectoron13October2009.He commencedhisprofessionalcareerintheTreasury DepartmentofContinentalAG,theGermantyre manufacturer.Between1994and1996Horstwas responsibleforGroupFinancingfortheFrth-based SchickedanzGroup.In1996,hetookoverresponsibility fortheTreasury,AccountingandTaxDepartmentatTUI AG.Since2001,Horsthasbeenresponsiblefor Accounting&ReportingforTUIAGand,inNovember 2007,wasappointedtotheExecutiveBoardofTUIAG withresponsibilityfortheControllingfunction.In February2010,HorstwasappointedChiefFinancial OfficerofTUIAG.
Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information
Governance
Directors report
TheDirectorssubmittheirreporttothemembersofTUITravelPLC (theCompany)fortheyearended30September2010. TheprincipalactivityoftheTUITravelPLCgroupofcompanies(the Group)isthatofaninternationalleisuretravelbusiness.Itprovides abroadanddiverserangeofleisuretravelexperiencestomore than30millioncustomersin27keysourcemarkets.Forfurther informationseeTUITraveloverviewpage2. TheCompanyhadnotradecreditorsat30September2010(2009: nil)andconsequentlycreditordayshavenotbeenpresented. WheretheCompanyistherecipientofgoodsorservices,paymentof suppliersisconductedbyoneoftheGroupcompaniesinaccordance withthepolicysetoutabove.
Principal activity
Charitable giving and political donations
Annual General Meeting
TheAnnualGeneralMeeting(AGM)willbeheldonThursday 3February2011at10.30amattheofficesofHerbertSmith,Exchange House,PrimroseStreet,LondonEC2A2HS.Anexplanationofthe businesstobetransactedattheAGMhasbeencirculatedto shareholdersandcanbefoundonthewebsitewww.tuitravelplc.com.
WehavedevelopedaGroup-widecharitypolicyandguidelinesto ensuretransparencyinourcharitableactivitiesandtoenableusto reportannuallyonTUITravelscharitablegiving.Duringtheyear, theGroupmadecharitabledonationsof475,277(2009:290,799). Forfurtherdetailsseepage30.TheGroupmadenopolitical contributionsduringtheyear(2009:nil).
Directors and Officers Insurance
TheCompanyhaspurchased,andmaintainedthroughouttheyear, DirectorsandOfficersLiabilityinsuranceandthelevelofcoveris regularlyreviewed.
AdescriptionoftheBusinessperformancefortheyearended 30September2010,preparedinaccordancewiththeCompanies Act2006,issetoutonpages32to41andformspartofthe Directorsreport.
Significant agreements change of control
Results and dividends
TheCompaniesAct2006requiresustodiscloseanysignificant agreementsthattakeeffect,alterorterminateonachangeofcontrol oftheCompany. Relationship Agreement with TUI AG TheRelationshipAgreementbetweenTUIAGandTUITravel,dated 29June2007,includestheprinciplethatTUITravelwilloperate independentlyofTUIAGandrecordstheunderstandingbetweenTUI AGandTUITravelregardingtherelationshipbetweenthemandthe governanceofTUITravel.TheRelationshipAgreementwillremainin forceuntileitherthesharesinTUITravelarenolongeradmittedto tradingontheLondonStockExchange,orTUIAGhaslessthan10% oftherightstovoteatgeneralmeetings.Inaddition,intheeventthat anotherpartyacquirescontrolofTUIAGduringthetermofthe RelationshipAgreement,TUIAGwilllosecertainrightsunderthe RelationshipAgreementincludingitsrightsinrespectofthe compositionoftheBoard. TheRelationshipAgreementcontainsrestrictionsontheacquisition byTUIAGofadditionalsharesinTUITravelwhichresultinthe increaseofitsshareholdingtomorethan55%ofthevotingrights onafully-dilutedbasis(savewhereTUIAGmakesageneralofferto acquireallTUITravelsharesinissue).Anumberofbondsareheld onTUIAGsbehalfand,ifconvertedattheconversionpriceseton thelaunchdate,wouldgiveriseto52,309,463newshares.Ona fully-dilutedbasis(ifsharesheldbyallbondholderswereconverted), TUIAGhadaholdingof50.37%asat30September2010.Asa percentageofsharesinissue,TUIAGsholdingasat30September 2010was54.92%. TUIAGhasanti-dilutionrightsinrespectoffurtherissuesofshares inTUITravelotherthanonapre-emptivebasis.TUITravelhasalso agreedthatcertainmatterswillrequirethepriorapprovalof80% oftheDirectorspresentatthemeetingoftheBoardatwhichsuch matterisconsidered,includingmaterialchangestothebusiness ofanyGroupcompany,acquisitionsanddisposalsofavaluewhich exceeds10m,theentryinto,variationorredemptionpriorto theirduedateofanyborrowingfacilitiesandtheapprovalofthe annualbudget. 770m bank revolving credit facility agreement Anagreementdated29June2007betweenanumberofrelationship banksandtheCompanyrelatingtoa770mbankrevolvingcredit facilitycurrentlyprovidedtotheCompany,containstermswhich givethelendingbankstherighttocancelallcommitmentstothe
TheGrouplossbeforetaxationfortheyearended30September 2010was36m(2009restated:94m).TheDirectorsrecommend afinaldividendof7.8pperordinaryshare(2009:7.7p),payableon 1March2011toholdersontheregisteratthecloseofbusinesson 4February2011.Whentakenwiththeinterimdividendof3.2pper ordinarysharepaidon1October2010(2009:3.0p),thisgivesa totaldividendof11.0p(2009:10.7p)relatingtotheyearended 30September2010. Theresultsfortheyearended30September2009havebeen restated,seeNote1ofthefinancialstatements.
Corporate Governance report
TheCorporateGovernancereportfortheyearended30September 2010,preparedinaccordancewithrule7.2oftheFSAsDisclosureand TransparencyRules,issetoutonpages48to52andformspartof theDirectorsreport. TUITravelbenefitsfrombothitsscaleandapplicationofbestin classpurchasing.Ourprincipalsuppliersarehotelownersand operatorsandaircraftsuppliers.Amongstothers,ourkeystrategic relationshipsarewithhotelchainssuchasRIU,Fiesta,Atlanticaand aircraftproviderssuchasBoeing.Eachsourcemarkethaslocaland overseasteamstoengageineffectiveprocurementstrategiesto deliveroptimumbenefitstoTUITravel.Co-operativeworkingis fundamentaltoourrelationshipswithkeysupplierstoensurethat thehigheststandardsintermsofhealthandsafetyandqualityare maintained.Suppliersfallingbelowtheseexpectationswillbe removedfromourprogrammes. TheoperatingunitswithintheGroupareresponsibleforagreeing thetermsandconditionsunderwhichbusinesstransactionswith theirsuppliersareconducted.DuetothenatureoftheGroups operations,andincommonwiththeindustryasawhole,payments areoftenmadeinadvancefortheprovisionofgoodsandservices. TheGroupdoesnotfollowanycodeorstatementonpayment practicebutitisGrouppolicythatpaymentstosuppliers,whetherin advanceoraftertheprovisionofthegoodsorservices,aremadeon thebasisofthetermsthathavebeenagreedwiththem.
Suppliers
Group at a glance
Companyandtodeclarealloutstandingcreditsandaccruedinterest immediatelydueandpayableifachangeofcontroloccurs.Forthe purposeofthisagreementachangeofcontroloccursif: Anypersonorgroupofpersonsactinginconcertgainscontrol oftheCompany;or TUIAGandanypersonsactinginconcertwithitacquiresor acquire75%ormoreofthevotingsharesintheCompany. 140m bank revolving credit facility agreement Anagreementdated29September2009betweenanumberof relationshipbanksandtheCompanyrelatingtoa140mbank revolvingcreditfacilitycurrentlyprovidedtotheCompany,contains termswhichgivethelendingbankstherighttocancelall commitmentstotheCompanyandtodeclarealloutstandingcredits andaccruedinterestimmediatelydueandpayableifachangeof controloccurs.Forthepurposeofthisagreementachangeofcontrol occursif: Anypersonorgroupofpersonsactinginconcertgainscontrolof theCompany;or TUIAGandanypersonsactinginconcertwithitacquiresor acquire75%ormoreofthevotingsharesintheCompany. 40m bonding and letter of credit facility agreement Anagreementdated29September2009betweenarelationshipbank andtheCompanyrelatingtoa40mbondingandletterofcredit facilitycurrentlyprovidedtotheCompany,containstermswhichgive thelendingbanktherighttocancelallcommitmentstotheCompany andtodeclarealloutstandingbondsorlettersofcredittogetherwith accruedissuancefeesimmediatelydueandpayableifachangeof controloccurs.Forthepurposeofthisagreementachangeofcontrol occursif: Anypersonorgroupofpersonsactinginconcertgainscontrolof theCompany;or TUIAGandanypersonsactinginconcertwithitacquiresor acquire60%ormoreofthevotingsharesintheCompany. 350m 6.0% Convertible Bonds InSeptember2009,theCompanyissued350mof6.0%Convertible Bondswithaconversionpricesetat349.30ppershare.The settlementtookplaceon5October2009.Theconvertiblebonds containtermswhichgivethebondholderstherighttoredeemthe bondsattheirprincipalamount,togetherwithaccruedandunpaid interestuptothedateofredemption,ifachangeofcontroloccurs. Forthepurposeoftheconvertiblebondsachangeofcontroloccursif: Followingatakeoveroffertoacquirealloramajorityofthe sharesintheCompanybeingdeclaredunconditionalinall respectsorbecomingeffective,theofferorand/oritsassociates haveorwillhavemorethan50%ofthevotingrightsinthe Company;or TheFreeFloatoftheCompanyislessthan30%oftheissued ordinarysharesforatleastfiveconsecutivedealingdays(where theFreeFloatis(a)alloutstandingordinarysharesofthe CompanylessthoseheldbyoronbehalfofTUIAG,itsassociates andanypersonsactinginconcertwithitand(b)theordinary sharesunderlyingtheoutstandingsecuredexchangeablebonds due2013issuedbyNeroFinanceLimitedon16January2008). 400m 4.90% Convertible Bonds InApril2010,theCompanyissued400mof4.90%ConvertibleBonds withaconversionpricesetat382.34ppershare.Thesettlementtook placeon27April2010.Theconvertiblebondscontaintermswhich givethebondholderstherighttoredeemthebondsattheirprincipal
amount,togetherwithaccruedandunpaidinterestuptothedate ofredemption,ifachangeofcontroloccurs.Forthepurposeofthe convertiblebondsachangeofcontroloccursif: Followingatakeoveroffertoacquirealloramajorityoftheshares intheCompanybeingdeclaredunconditionalinallrespectsor becomingeffective,theofferorand/oritsassociateshaveorwill havemorethan50%ofthevotingrightsintheCompany;or TheFreeFloatoftheCompanyislessthan30%oftheissued ordinarysharesforatleastfiveconsecutivedealingdays(where theFreeFloatis(a)alloutstandingordinarysharesofthe CompanylessthoseheldbyoronbehalfofTUIAG,itsassociates andanypersonsactinginconcertwithitand(b)theordinary sharesunderlyingtheoutstandingsecuredexchangeablebonds due2013issuedbyNeroFinanceLimitedon16January2008). TUIAGsubscribed,attheissueprice,for50%oftheconvertiblebond offeringtopreventthepotentialdilutionofitsmajorityshareholding. 100m bank revolving credit facility agreement Anagreementdated21April2010betweenanumberofrelationship banksandtheCompanyrelatingtoa100mbankrevolvingcredit facilitycurrentlyprovidedtotheCompany,containstermswhich givethelendingbankstherighttocancelallcommitmentstothe Companyandtodeclarealloutstandingcreditsandaccruedinterest immediatelydueandpayableifachangeofcontroloccurs.Forthe purposeofthisagreementachangeofcontroloccursif: Anypersonorgroupofpersonsactinginconcertgainscontrol oftheCompany;or TUIAGandanypersonsactinginconcertwithitacquiresor acquire75%ormoreofthevotingsharesintheCompany. 50m bank revolving credit facility agreement Anagreementdated27April2010betweenarelationshipbankand theCompanyrelatingtoa50mbankrevolvingcreditfacility currentlyprovidedtotheCompany,containstermswhichgivethe lendingbanktherighttocancelallcommitmentstotheCompanyand todeclarealloutstandingcreditsandaccruedinterestimmediately dueandpayableifachangeofcontroloccurs.Forthepurposeofthis agreementachangeofcontroloccursif: Anypersonorgroupofpersonsactinginconcertgainscontrol oftheCompany;or TUIAGandanypersonsactinginconcertwithitacquiresor acquire60%ormoreofthevotingsharesintheCompany. 50m bonding and letter of credit facility agreement Anagreementdated27September2010betweenarelationshipbank andtheCompanyrelatingtoa50mbondingandletterofcredit facilitycurrentlyprovidedtotheCompany,containstermswhichgive thelendingbanktherighttocancelallcommitmentstotheCompany andtodeclarealloutstandingbondsorlettersofcredittogetherwith accruedissuancefeesimmediatelydueandpayableifachangeof controloccurs.Forthepurposeofthisagreementachangeofcontrol occursif: Anypersonorgroupofpersonsactinginconcertgainscontrol oftheCompany;or TUIAGandanypersonsactinginconcertwithitacquiresor acquire75%ormoreofthevotingsharesintheCompany. Nootheragreementswhichtakeeffect,alterorterminateupon achangeofcontroloftheCompanyfollowingatakeoverbidare consideredtobesignificantintermsoftheirpotentialimpacton thebusinessoftheGroupasawhole.
Governance
Directors report continued

Going concern Other information
Information
Aftermakingappropriateenquiries,theDirectorshavereasonable expectationthattheCompanyandGrouphaveadequateresources tocontinueoperationsfortheforeseeablefuture.Forthisreason, theycontinuetoadoptthegoingconcernbasisinpreparingthe financialstatements. AfurthersummaryoffundingandliquidityisincludedinNote1to theconsolidatedfinancialstatements.
OtherinformationrelevanttotheDirectorsreportcanbefoundin thefollowingsectionsoftheAnnualReport:
LocationinAnnualReport
Contractual arrangements Auditors
TheGrouphascontractualarrangementswithnumerousthirdparties insupportofitsbusinessactivities(seepages30and44). Theauditorsfortheyearended30September2010wereKPMG AuditPlc.
Ourpeople Page24 Socialresponsibility Page26 Sustainabledevelopment Page28 Charitableandpoliticaldonations Page30 Page41 Futuredevelopments BoardandCommitteeMembership Page48 P Financialriskmanagement ages20and48 Postbalancesheeteventsafter FinancialstatementsNote34 30September2010 Sharecapitalauthorisedandissued FinancialstatementsNote23 Page142 Substantialshareholdings
TheDirectorsconfirmthat,sofarastheyareeachaware,thereis norelevantauditinformationofwhichtheCompanysauditorsare unaware;andeachDirectorhastakenallthestepsthatheorshe oughttohavetakenasaDirectortomakehimselforherselfaware ofanyrelevantauditinformationandtoestablishthattheCompanys auditorsareawareofthatinformation.
Statement of the Directors as to disclosure of information to auditors
TheDirectorsreportwasapprovedbyadulyauthorisedCommittee oftheBoardofDirectorson1December2010andsignedonits behalfbyAndrewJohn,theCompanySecretary. ByOrderoftheBoard
Andrew John CompanySecretary 1December2010 CompanyNumber:6072876
Statement of Directors responsibilities

inrespectoftheAnnualReportandtheFinancialStatements Group at a glance TheDirectorsareresponsibleforpreparingtheAnnualReportandthe Groupandparentcompanyfinancialstatementsinaccordancewith applicablelawandregulations. CompanylawrequirestheDirectorstoprepareGroupandparent companyfinancialstatementsforeachfinancialyear.Underthatlaw theyarerequiredtopreparetheGroupfinancialstatementsin accordancewithInternationalFinancialReportingStandards(IFRS) asadoptedbytheEUandapplicablelawandhaveelectedtoprepare theparentcompanyfinancialstatementsinaccordancewithUK AccountingStandardsandapplicablelaw(UKGenerallyAccepted AccountingPractice). UndercompanylawtheDirectorsmustnotapprovethefinancial statementsunlesstheyaresatisfiedthattheygiveatrueandfairview ofthestateofaffairsoftheGroupandparentcompanyandoftheir profitorlossforthatperiod.InpreparingeachoftheGroupandparent companyfinancialstatements,theDirectorsarerequiredto: Selectsuitableaccountingpoliciesandthenapplythemconsistently. Makejudgementsandestimatesthatarereasonableandprudent. FortheGroupfinancialstatements,statewhethertheyhavebeen preparedinaccordancewithIFRSsasadoptedbytheEU. Fortheparentcompanyfinancialstatements,statewhether applicableUKAccountingStandardshavebeenfollowed,subject toanymaterialdeparturesdisclosedandexplainedintheparent companyfinancialstatements. Preparethefinancialstatementsonthegoingconcernbasisunless itisinappropriatetopresumethattheGroupandtheparent companywillcontinueinbusiness. TheDirectorsareresponsibleforkeepingadequateaccountingrecords thataresufficienttoshowandexplaintheparentcompanys transactionsanddisclosewithreasonableaccuracyatanytimethe financialpositionoftheparentcompanyandenablethemtoensure thatitsfinancialstatementscomplywiththeCompaniesAct2006. Theyhavegeneralresponsibilityfortakingsuchstepsasarereasonably opentothemtosafeguardtheassetsoftheGroupandtopreventand detectfraudandotherirregularities. Underapplicablelawandregulations,theDirectorsarealsoresponsible forpreparingaDirectorsReport,DirectorsRemunerationReportand CorporateGovernanceStatementthatcomplieswiththatlawand thoseregulations. TheDirectorsareresponsibleforthemaintenanceandintegrityofthe corporateandfinancialinformationincludedontheCompanyswebsite. LegislationintheUKgoverningthepreparationanddisseminationof financialstatementsmaydifferfromlegislationinotherjurisdictions. Financial statements
Directors responsibility statement
EachoftheDirectors,thenamesofwhomaresetoutonpage43of thisAnnualReport,confirmsthattothebestofhisorherknowledge: thefinancialstatements,preparedinaccordancewiththeapplicable setofaccountingstandards,giveatrueandfairviewoftheassets, liabilities,financialpositionandtheprofitorlossoftheCompany andtheundertakingsincludedintheconsolidationtakenasa whole;and theDirectorsreportincludesareviewofthedevelopmentand performanceofthebusinessandthepositionoftheissuerand theundertakingsincludedintheconsolidationtakenasawhole, togetherwithadescriptionoftheprincipalrisksanduncertainties thattheyface. TheStatementofDirectorsresponsibilitieswasapprovedbyaduly authorisedCommitteeoftheBoardofDirectorson1December2010 andsignedonitsbehalfbyPaulBowtell,ChiefFinancialOfficer.
Strategic overview
Paul Bowtell ChiefFinancialOfficer 1December2010
Business performance Governance Shareholder information
Governance
Corporate Governance report

The Board
Directorsname
TheCompanyiscontrolledthroughitsBoardofDirectors theDirectorsatthedateofthisreportare:
Title
HorstBaier DrVolkerBttcher PaulBowtell* TonyCampbell ClareChapman BillDalton RainerFeuerhake DrMichaelFrenzel JeremyHicks SirMichaelHodgkinson PeterLong JohanLundgren DrErhardSchipporeit DrAlbertSchunk HaroldSher GilesThorley WilliamWaggott**
Non-ExecutiveDirector ManagingDirector,CentralEurope ChiefFinancialOfficer Non-ExecutiveDirector Non-ExecutiveDirector Non-ExecutiveDirector Non-ExecutiveDirector Non-ExecutiveChairman Non-ExecutiveDirector N on-ExecutiveDeputyChairman &SeniorIndependentDirector ChiefExecutive ManagingDirector,NorthernRegion Non-ExecutiveDirector Non-ExecutiveDirector Non-ExecutiveDirector Non-ExecutiveDirector CommercialDirector
Board procedures/responsibilities TheBoardmeetsregularly,includingawaydays,toreviewthestrategy oftheGroup.Thescheduleofmattersspecificallyreservedtoitfor decisioninclude:determiningthestrategyandcontroloftheGroup; amendmentstothestructureandcapitaloftheGroup;approvalof financialreportingandcontrols;oversightoftheGroupsinternal controls;approvalofcapitalandrevenueexpenditureofasignificant size;acquisitions,disposalsandsharedealings;Boardmembership andappointments;approvalofremunerationofDirectorsandcertain seniormanagement;corporategovernancematters;andapprovalof Grouppoliciesandriskmanagementstrategies. ThedivisionofresponsibilitiesbetweentheChairmanandChief Executiveisclearlyestablished,hasbeenagreedbytheBoardand isreviewedbytheCompanySecretaryonaregularbasis. AllDirectorshaveaccesstotheadviceandservicesoftheCompany SecretaryandallDirectorscantakeindependentprofessionaladvice, ifnecessary,attheCompanysexpense.Nosuchadvicewassought byanyDirectorduringtheyear. TheCompanySecretaryisresponsibleforensuringBoardprocedures arefollowedincludingtheformalminutingofanyunresolvedconcerns thatanyDirectormayhaveinconnectionwiththeoperationofthe Company.Duringtheyear,therewerenosuchunresolvedissues. TheTermsofReferencefortheBoardanditsCommitteesare availableforinspectionontheGroupswebsiteandwillbeavailable attheAGM. Directors conflicts of interests UndertheCompaniesAct2006,theDirectorshaveastatutoryduty toavoidasituationwheretheyhave,orcouldhave,adirectorindirect interestthatconflicts,orpossiblymayconflict,withtheinterestsof theCompany.Directorsofpubliccompaniesmayauthoriseconflicts andpotentialconflictswhereappropriate,ifthearticlesofassociation containaprovisiontothiseffect. TheCompanysarticlesofassociationpermittheBoardtoauthorise actualorpotentialconflictsofinterest.TheCompanyhasestablished formalproceduresforthedisclosureandreviewofanyconflicts,or potentialconflicts,ofinterestwhichtheDirectorsmayhaveandfor theauthorisationofsuchconflictmattersbytheBoard.Indeciding whethertoauthoriseaconflictorpotentialconflicttheDirectorsmust haveregardtotheirgeneraldutiesundertheCompaniesAct2006. Theauthorisationofanyconflictmatter,andthetermsof authorisation,maybereviewedatanytimeandwillbereviewed formallybytheBoardonanannualbasis.TheBoardbelievesthat theproceduresestablishedtodealwithconflictsofinterestare operatingeffectively. Board effectiveness and individual performance of Directors Arevisedprocessfortheassessmentoftheperformanceofthe BoardandofindividualDirectorswasimplementedinMay2010. TheBoardseffectivenesswasassessedbymeansofadetailed questionnairewhichwasdesignedbytheCompanySecretaryand completedbyeachDirector.Thequestionnairecovered34areas includingtheRoleoftheBoard,Strategy,Composition,Conduct ofBusiness,ManagementSuccession,CorporateGovernanceand RiskManagement. TheresultswerepresentedtotheBoardinJuly2010wherespecific areassuchasstrategy,Boardskillsandexperience,distributionof Boardpapersandbackgroundinformation,exposuretotheBoard oftheCompanysseniormanagementandenvironmentalissues weredebated.
AllDirectorsdetailedaboveservedthroughouttheyearwiththe exceptionofHorstBaierwhowasappointedon13October2009. PaulBowtell*willresignfromtheBoardon31December2010. WilliamWaggott**,GroupCommercialDirector,wasappointed ChiefFinancialOfficerwitheffectfrom30November2010. Asat30September2010,theBoardcomprisedfiveExecutive Directorsand12Non-ExecutiveDirectors(includingtheChairman). On13October2009HorstBaierwasappointedasaNon-Executive Director.BiographicaldetailsofalltheDirectorsaresetouton page43. InaccordancewiththenewUKCorporateGovernanceCode guidelines,witheffectfromthisAnnualGeneralMeeting(AGM),all Directorswillbesubjecttoannualre-electionbyshareholders.To enableshareholderstomakeaninformeddecision,the2011Noticeof theAGMincludesbiographicaldetailsandastatementastowhythe CompanybelievestheDirectorsshouldbere-elected.TheChairman intendstoconfirmattheAGMthattheperformanceofeach individualcontinuestobeeffectiveanddemonstratescommitment totherole. TheBoardrecommendstoshareholdersthere-appointmentofall Directorsretiringatthemeetingonthebasisthattheyareall effectiveDirectorsoftheCompanyanddemonstratetheappropriate levelofcommitmentintheirrespectiveroles. ThetermsoftheDirectorsservicecontractsaredisclosedinthe RemunerationReportcommencingonpage53.Directorsinterests inthesharesoftheCompanyaredisclosedonpage62. Directorsservicecontractsandthelettersofappointmentofthe Non-ExecutiveDirectorsareavailableforinspectionattheCompanys registeredofficeandwillbeavailableattheAGMwhichisscheduled totakeplaceonThursday3February2011. FollowingtheappointmentofanynewDirector,theChairman,in conjunctionwiththeCompanySecretary,ensuresthatafull,formal andtailoredinductiontotheCompanyisprovided.TheCompany Secretaryisavailabletoansweranyquestionswhichmayarise. AllDirectorshavebeengivenadetailedinductionandtrainingmanual.
Group at a glance
Independence of Non-Executive Directors TheChairman,DrMichaelFrenzel,didnotmeettheindependence criterialaidoutintheprovisionsoftheCombinedCodeatthetime ofhisappointment.ThisisbecauseDrFrenzelistheChiefExecutive ofTUIAGa54.92%shareholderoftheCompanyasat 30September2010. DetailsoftheChairmansothersignificantcommitmentsaregivenin hisbiographyonpage43.TheChairmandoeshaveanumberofother externalrolesbuttheBoardissatisfiedthatthesedonotinterfere withtheperformanceofhisdutiesasChairmanoftheCompany. Oftheother11Non-ExecutiveDirectors,twoarenotconsideredto beindependentHorstBaierisalsoanExecutiveDirectorofTUIAG andRainerFeuerhakewasamemberofTUIAGsExecutiveBoard untilhisresignationinFebruary2010. TheNon-ExecutiveDirectorsconsideredtobeindependentare SirMichaelHodgkinson,TonyCampbell,ClareChapman,BillDalton, JeremyHicks,DrErhardSchipporeit,DrAlbertSchunk,HaroldSher andGilesThorley. TheBoardrecognisesthattheCombinedCoderequiresthatatleast halftheBoard,excludingtheChairman,shouldbeindependentNonExecutiveDirectors.TheBoardhad17membersfrom13October 2009(whenHorstBaierwasappointed)ofwhomnineweredeemed tobeindependent.From30September2009to13October2009, theBoardhad16membersofwhomninewerealsodeemedtobe independent.ThereforetheCompanywascompliantwithprovision B1.1oftheCombinedCodethroughouttheyearended30September 2010.FollowingtheappointmentofHorstBaier,theBoardreverted to17membersofwhichnineweredeemedindependent.TheBoardis committedtoseektoensurethatitsmembershipisregularlyrefreshed. Meetings of the Non-Executive Directors TheChairmanmetwiththeNon-ExecutiveDirectorstwiceduringthe yearinMayandSeptember.Ameetinghasbeenscheduledfor 2011andotherswillbeheldastheneedarises. AmeetingoftheNon-ExecutiveDirectors,ledbytheSenior IndependentDirector,tookplaceduringtheyearandincludedonthe agendawasanappraisaloftheChairmansperformance.Therewas generalagreementthattheChairmanprovidesgoodleadershipofthe Boardandallowsalldirectorstoparticipateinfree-flowingdebatein ordertomakeaneffectivecontributiontothesuccessfulrunningof thebusiness.
Attendance of Directors at meetings of the Board and its Committees

Scheduled Audit Remuneration Board Committee Committee Meetings Meetings Meetings
HorstBaier(Non-ExecutiveDirector) DrVolkerBttcher(MDCentralEurope) PaulBowtell(ChiefFinancialOfficer) TonyCampbell(Non-ExecutiveDirector) ClareChapman(Non-ExecutiveDirector) BillDalton(Non-ExecutiveDirector) RainerFeuerhake(Non-ExecutiveDirector) DrMichaelFrenzel(Chairman) JeremyHicks(Non-ExecutiveDirector) SirMichaelHodgkinson(DeputyChairman) PeterLong(ChiefExecutive) JohanLundgren(MDNorthernRegion) ErhardSchipporeit(Non-ExecutiveDirector) DrAlbertSchunk(Non-ExecutiveDirector) HaroldSher(Non-ExecutiveDirector) GilesThorley(Non-ExecutiveDirector) WillWaggott(CommercialDirector)
7(7) 7(7) 7(7) 6(7) 5(7) 7(7) 6(7) 7(7) 7(7) 7(7) 7(7) 7(7) 6(7) 7(7) 7(7) 4(7) 7(7)
N/A N/A N/A 6(7) N/A 7(7) N/A N/A 7(7) N/A N/A N/A N/A N/A N/A 6(7) N/A
N/A N/A N/A 3(4) 4(4) 4(4) 4(4) 4(4) N/A N/A N/A N/A N/A N/A N/A N/A N/A
Figuresinbracketsindicatethemaximumnumberofmeetingsduringtheyearinwhichthe individualwasaBoardmember.TheNominationCommitteedidnotmeetduringtheyear.
Duringtheyear,meetingsofPunch(whereGilesThorleywasChief ExecutiveOfficer)andTragus(whereheisChairman)clashedonthree occasionswiththoseofTUITravelBoardmeetings,whichis whyhewasunabletoattend.ClaireChapmanwasunabletoattend twoBoardmeetingsduetoclasheswithNHSmeetings(whereshe isDirectorGeneralofWorkforce).
Remuneration Committee
SeetheRemunerationReportforfulldetailsoftheRemuneration Committee,itscompositionandworkduringtheyear. DuringJanuaryandFebruary2010,theRemunerationCommittee membersparticipatedinanindependentsurveyofCommittee membersperformance,whichwasconductedbyDeloitte.Ananalysis oftheresultswasproducedattheendofFebruary2010andconsidered atameetinginMarch2010.Therewasunanimoussupportforthe overalleffectivenessoftheCommittee.Theanalysisindicatedthat keepingcloselyintouchwithshareholderperspectivesandthe Groupscostofpensionprovisionshouldbeofparticularfocus. TheCommitteeconsideredrecentshareholderfeedback,agreed
Governance Financial statements
Board governance structure

TUI Travel PLC
Delegated authorities Sets remuneration and incentives for the Executive Directors; approves and monitors remuneration and incentive plans for the Group.
Nomination Committee
Delegated authorities Ensures that the Board and Committee composition has the optimum balance of skills, knowledge and experience by nominating suitable candidates for approval by the Board to fill executive and non-executive vacancies. Members Sir Michael Hodgkinson Chairman C M Chapman J D Hicks Dr M H F Frenzel R Feuerhake
Audit Committee
Delegated authorities Monitors the Groups integrity in financial reporting and reviews the effectiveness of the risk management framework.
Members C M Chapman Chairman L A Campbell W R P Dalton Dr M H F Frenzel R Feuerhake
Members J D Hicks Chairman L A Campbell W R P Dalton G A Thorley
Governance
Corporate Governance report continued

thattheCommitteeChairmanshouldmeetwithkeyshareholdersto discusspointsraisedandinMaytheCommitteefurtherconsidered thefeedbackfromthosemeetings.Anewfullperformance evaluationprocessisscheduledtocommenceinJanuary2011. ReviewingtheCompanysinternalfinancialcontrolsandthe Companysinternalcontrolandriskmanagementsystems. MonitoringtheeffectivenessoftheCompanysGroupAudit ServicesfunctionthroughmeetingswiththeDirectorofGroup AuditServices,theagreementinadvanceofannualworkplans andthereviewoftheresultsoftheworkundertaken. Theconsiderationoftheappointment,re-appointmentand removaloftheexternalauditorsandtheapprovaloftheir remunerationandtermsoftheirengagement. Apolicyfortheengagementoftheexternalauditorstosupply non-auditserviceswasapprovedin2007andremainsinforce. TheAuditCommitteehasconcludedthat,insomecases,the provisionofnon-auditservicesbytheincumbentauditors, whichdoesnotimpactontheirindependenceinprovidingtheir primarystatutoryauditrole,isappropriateandthishasbeen communicatedtotheBoard.Auditorindependenceand objectivityaresafeguardedbytheAuditCommitteemonitoring andapproving,whereappropriate,thenatureoftheworkandthe leveloffeespaidfornon-auditservicesasaproportionofthe totalauditfeespaid.
Nomination Committee
TheCommitteecomprisesfiveNon-ExecutiveDirectorsandischaired bySirMichaelHodgkinson(theSeniorIndependentDirector). InrelationtotheappointmentofHorstBaier,whowasappointedon 13October2009,adescriptionoftheroleandrequiredcapabilities waspreparedpriortotheappointment.AmeetingoftheCommittee chairedbySirMichaelHodgkinson(Non-ExecutiveDeputy Chairman)consideredHorstssuitabilityfortherole,hisother significantcommitmentsandtheexistingskillsandknowledgeofthe Boardasawhole.AsasignificantpercentageoftheGroupsturnover isgeneratedinGermany,itwasbelievedthatadditionalexpertiseand experienceinthedifferencesbetweenGermanandUKaccounting practiceswasrequired.ItwasfeltthatHorstsexperienceinthe leisuretravelindustryasanexecutivedirectorofTUIAG,andhis previousexperienceoveralongcareerinvolvingworkofafinancial nature,wouldassisttheBoardandenablehimtomakeanexcellent contributiontoitsdeliberations.Forthisreason,itwasnotdeemed appropriateforanexternalsearchconsultancyoropenadvertisingto beusedforthisappointmentastheBoardwasoftheviewthatno othercandidatewouldbeabletomatchthespecificknowledgeand expertiseHorstbringstothisrole. AtthemeetingheldinOctober2009thecurrentmembershipand effectivenessoftheCommitteewasalsodiscussedanditwasagreed thatthecompositionoftheCommitteeremainedappropriateand effective.TheeffectivenessoftheCommitteewasassessedagainin May2010bymeansofanewly-designedassessmentquestionnaire. Theonlysignificantpointsraisedwereinrespectofthereceiptof moretimelyandclearsupportingmaterialsandallowingmoretime forconsiderationofsuccessionplanningthislatterpointwasthe subjectofafullmeetinginMay2010. Atthatmeeting,theCommitteesmainfocuswasontheCompanys managementcapabilityandsuccessionplanningpolicies.Inthe contextofthedecentralisednatureoftheorganisation,theCompanys policytoactivelyseekandidentifyemergingtalentandthose individualswhocanmakeasignificantdifferencetoorganisational performancewasdiscussedandthevariousLeadershipSkills Programmeswerereviewed.Theimportanceofidentifyingbusiness criticalroles,developmentprogrammesandareplacementpipeline forseniorroleswerealsodiscussed.
Audit Committee effectiveness review
Anassessmentoftheeffectivenesswasconductedduringtheyear byaquestionnairesentbytheCompanySecretarytomembersof theAuditCommitteeandrelevantexecutives.Thequestionnaire contained23questionswhichrelatedtotheAuditCommitteeand, ofthese,onlytworeceivedbelow-averagescoresonerelatingto theGroupsinternalfinancialcontrolsystemsandtheotherwithits riskmanagementprocesses.Resultsfromthequestionnaireswere presentedtotheBoardinJuly2010.
Internal control and risk
TheBoardhasoverallresponsibilityfortheGroupssystemof internalcontrolandforreviewingitseffectiveness,whiletherole ofmanagementistoimplementBoardpoliciesonriskandcontrol. Thesystemsofinternalcontrolandriskmanagementhavebeen developedtoensurecompliancewiththeCombinedCode(UK CorporateGovernanceCodeasappropriate)andTurnbullGuidance oninternalcontrolandriskmanagement. TheBoardhasdelegatedtheday-to-daymanagementofthe CompanytotheChiefExecutiveand,throughhim,totheother ExecutiveDirectorsandtheGMB.Thesystemofinternalcontrolis designedtomanageandmitigateratherthaneliminatetheriskof failuretoachievebusinessobjectives.Inpursuingtheseobjectives, internalcontrolswhichincludefinancial,operationalandcompliance controlsandriskmanagementcanonlyprovidereasonable,andnot absolute,assuranceagainstmaterialmisstatementorloss.TheBoard hasreviewedtheeffectivenessofinternalcontrolsduringtheyear. ClearlytherehasbeenabreakdownininternalcontrolsintheUK Mainstreambusinesswhichgaverisetotheirrecoverablebalance write-offs(seepage70).TheAuditCommitteecommissionedafull andthoroughcontrolsandcompliancereviewacrosstheorganisation, chairedbyJeremyHicks(HeadoftheAuditCommittee)and supportedbyKPMGandPwC.Thisprogrammeofworkconsisted ofseveralfocusedworkstreams,oneofwhichwasdedicatedtothe UKMainstreamcontrolenvironment.Thisincludedthefulland thoroughreviewofthetworeservationsystemswhichgaveriseto theissuesandthereconciliationofthese,andanongoingreviewof back-officefinanceprocesses.Aheavyfocuswasonreviewing existingcontrolsinplaceandprovidingrecommendationsonwhere thesecouldbeimprovedupon.Theotherworkstreamsconsidered thewholeorganisation,consistingofanextensivebalancesheet
Audit Committee
AllmembersoftheCommitteeareconsideredtobeindependent. InaccordancewiththeCombinedCode,theBoardissatisfiedthat JeremyHickshasrecentandrelevantfinancialexperience. TheChiefFinancialOfficer,theDirectorofGroupAuditServicesand theexternalauditorsarenormallyinvitedtomeetingsandother Directors,includingtheChiefExecutiveandtheNon-Executive Directors,mayalsoattend.TheChairmanoftheCommitteealso meetswiththeexternalauditorswithoutmanagementpresent. TheCommitteesduties,whichweredischargedduringtheyear,include: Monitoringtheintegrityofthefinancialstatementsofthe CompanyandformalannouncementsrelatingtotheCompanys financialperformanceandreviewingthesignificantfinancial reportingjudgementscontainedinthem.
Group at a glance
reviewprogrammeandothercontrolreviewslookingatintercompany policiesandgeneralperiodicfinancecontrolprocesses.Asaresultof thispieceofwork,newpoliciesandproceduresonkeyareasof financialcontrolhavebeendevelopedinconjunctionwithsenior financeteamsacrosstheorganisationandhavenowbeenputinplace. Thesewillbecontinuallydevelopedandimproveduponthroughout thenextfinancialyear. TheBoardconfirmsthatthereisanongoingprocessforidentifying, evaluatingandmanagingthesignificantrisksfacedbytheGroup;that thishasbeeninplacefortheyearunderreviewanduptothedateof approvaloftheAnnualReportandAccounts;thatthisprocessis regularlyreviewedbytheBoard;andthattheprocessaccordswith theTurnbullGuidance.Thekeyelementsofthecontrolframework andreviewprocessesinplaceacrosstheGroupareasfollows: TheBoardsetscorporatestrategyandbusinessobjectives. TheGMBandSectormanagementintegratetheseobjectives intotheiroperationalandfinancialbusinessplans.Whereareas forimprovementinthesystemofinternalcontrolareidentified, theBoardconsiderstherecommendationsmadebytheGMBand theAuditCommittee. TheGMBmeetsregularlytogetherwithotherseniorexecutives toconsiderGroupoperationalandfinancialperformanceand businessdevelopment.TheChiefExecutivereportstotheBoard onbehalfoftheGMBonsignificantchangesinthebusinessand theexternalenvironment.TheChiefFinancialOfficerprovides theBoardwithfinancialinformationwhichincludeskey performanceandriskindicators. GroupRiskManagementhasdesignedaframeworkforrisk managementforTUITravelinlinewithTurnbullGuidance, integratedwiththeshortandlong-termbusinessplanning processes.SeeEnterprise-wideRiskManagement. TheAuditCommittee,withassistancefromcertainrelated managementcommittees,overseeskeyrisks,suchasfinancial risk,healthandsafety,corporateandsocialresponsibilityandthe environment,wheresuchrisksapplyacrossallSectors.TheBoard believesthat,inordertobeeffective,riskmanagementprocesses mustbedrivendowntoeachoperatingunit.Accordingly,each SectorBoardnowaddressesriskmanagementasastanding agendaitemandisresponsibleforensuringthattherisksfacing thatSectorsbusinessesareidentifiedandthatrelatedaction plansareimplemented.Sectorsformallyreporttheirriskprofile onaquarterlybasis. TheGroupAuditServicesfunctionindependentlyreviewstherisk identificationproceduresandcontrolprocesses,implementedby managementandreportsitsfindingsateachAuditCommittee meeting,ormorefrequentlyifappropriate. TheAuditCommitteereviewstheproposedworkplansofthe GroupAuditServicesfunction;reportsissuedbyGroupAudit Services;progressmadeonaddressingfindingsarisingfromthese reports;aswellasreportsonsystemsandcontrolsfromthe externalauditorscoveringmaterialweaknesses.TheChairman oftheAuditCommitteereportstotheBoardontheoutcomeof theAuditCommitteemeetingsheldandtheBoardreceivesthe minutesofallsuchmeetings. TheTreasurypositionoftheGroup,includingcash,foreign exchangeandfuelhedgingexposure,ismanagedcentrallyin accordancewithpoliciesappropriateforeachSectorandisthe responsibilityoftheChiefFinancialOfficerandGroupTreasurer. ReportsandforecastsaresubmittedmonthlytotheGMBandat eachmeetingoftheTUITravelPLCBoard.Weeklymeetingson liquidityandfuelhedgingtakeplaceandareattendedbythe
ChiefExecutive,ChiefFinancialOfficer,GroupTreasurerand otherseniormanagersasdeemednecessary. Financialforecasts,providingpredictedresultswithsensitivity analysis,arepreparedroutinelythroughouttheyearforreviewby theGMBandtheBoard.Theseforecastsalsoincludedetailsof theGroupsongoingcompliancewithitsregulatoryandbanking requirements.TheGrouphasestablishedinvestmentappraisal andauthorisationproceduresanditscapitalexpenditureis reviewedagainstbudgetswhichhavebeenapprovedbytheBoard. Processesareinplacetoensureappropriateactionistakenwhere necessarytoremedyanydeficienciesidentifiedthroughtheGroups internalcontrolandriskmanagementprocesses.
Strategic overview
Group Risk Management Committee (GRMC)
TheGRMCcomprisesofmembersoftheGroupManagementBoard (GMB)(excludingtheChiefExecutive),theDirectorofGroupAudit ServicesandtheGroupTreasurer.Membershipisreviewedannually bytheGMB.TheGRMCscoreresponsibilitiesaretoassisttheBoard byassessingandreportingtotheGMBontheeffectivenessofthe Companysinternalcontrolsystemsinmanagingrisksandinfulfilling itsresponsibilitiesbyprovidinganoversightoftheframeworkfor managingrisksthroughouttheGroup.
Enterprise-wide Risk Management (ERM)
Theobjectiveoftheframeworkstrivestoimproveoperational performance,reducelossesandtoprotectandenhanceshareholder valueinthepursuitoftheGroupsstrategicimperatives.TheGroup considersfourtypesofriskwhenidentifyingpotentialeventsthat couldaffectthedeliveryofbusinessobjectivesandstrategicgoals. Risksareconsideredinthecontextoflonger-termstrategicand emergingthreats;mediumchallengesassociatedwithbusinesschange programmes;shorter-termriskstriggeredbythechangingexternal environment;andshorter-termrisksinrelationtointernaloperations. KeyfeaturesoftheGroupssystemofriskmanagementare: Establishedriskmanagementpolicy. Ongoingprocessforriskidentification,evaluationandprioritisation thatcouldimpactonbusinessobjectivesorstrategicgoals. Managementprocessestomitigateriskswithinjustifiableand tolerablelevels. Visibilityofexistingcontrolsalongwithanyfurtheractionplans totreattheriskappropriately. Quarterlyreviewandupdateofreportingunitsriskprofiles. Half-yearlyreviewofGroupriskprofile,reportedtotheAudit Committeeforreviewandchallenge. Regularconsiderationofanyinternalandexternalfactorswhich couldimpacttheGroupposition. Complianceprocessandadequacyofthecontrolsreviewedby GroupAuditServices. Inaddition,thereisregularreportingtotheBoardthroughtheAudit CommitteeonkeyactivitiesundertakenbyGroupRiskManagement andthestatusoftheriskmanagementprocess.
Governance Financial statements Shareholder information
Whistleblowing process
Therearepoliciesandproceduresforthereportingbyemployeesand theresolutionofsuspectedfraudulentactivities.Itisthepolicyofthe Grouptoemploystaffandmanagementofhighintegrity,totrain themappropriatelyandtorequirecompliancewithallrelevantlaws, regulationsandinternalpolicies.
Governance
Corporate Governance report continued

ForallemployeesonaUKcontract,wehavebeenoperatinga confidentialemployeehotlineforseveralyears,usingathirdparty toensureconfidentialityandanonymitywherethisisrequired. Employeescanmakeconfidentialreportsaboutanyissuestheywould liketoraisewhichtheyfeeltheycannotreporttotheirmanager. Theoperatorofourhotlinereportscallstonominatedrecipients inourGroupAuditServicesDepartmentwhoreviewtheseand investigatethemasappropriate. Inthefinancialyearatotalof35callsweremadetothehotline, themajorityofwhichresultedininternalinvestigations. WithinitsregularreporttotheAuditCommittee,GroupAudit Servicesprovidesasummaryofanyconfidentialreportsreceived andactionstaken.Amonthlyreportisalsoproducedwhichincludes asummaryofallcallsreceivedhighlightinganyissuesraised. InrespectofgeneralmeetingsoftheCompany: TheCompanypreparesseparateresolutionsoneachsubstantially separateissueanddoesnotcombineresolutionstogether inappropriately. Proxyappointmentformsprovideshareholderswiththeoption tovotefor,againstortowithholdtheirvote.Theproxyform makesitclearthatavotewithheldisnotavoteinlawandwill notbecounted. AllpostalproxyvotesarereturnedtoEquiniti(theCompanys Registrar)whoisresponsibletoforensuringvotesareproperly receivedandcounted. ProxycountsaredisplayedatthecloseoftheAGMandthe resultspostedontheCompanyswebsitewww.tuitravelplc.com followingtheclosureofthemeeting. TheAnnualReportandAccountsislaidbeforeshareholders attheAGM.
Communication with shareholders
TheChiefExecutive,ChiefFinancialOfficerandmembersofthe InvestorRelationsteamholdregularmeetingswithmajorshareholders toreviewtheGroupsperformanceandprospects.Theviewsof shareholdersarecommunicatedtoallmembersoftheBoardfollowing suchmeetings.Duringthecourseofthesemeetingstheissueof governanceisdiscussed.Presentationstomajorshareholdersare madeatleasttwiceyearly,aftertheannouncementoftheinterim andpreliminaryresults,detailsofwhich,togetherwiththeGroups financialreportsandotherannouncements,canbeaccessedviathe Groupswebsitewww.tuitravelplc.com. TheChairmanoftheRemunerationCommittee,ClareChapman, metwithfourmajorshareholdersinDecember2009andhadtwo additionalmeetingsinApril2010withmajorshareholdersconcerning theremunerationpolicy.Feedbackfromshareholdersobtained duringthesemeetingswassharedwiththeRemunerationCommittee andgivendueconsideration. TheCombinedCoderecommendsthattheSeniorIndependent Directormeetswitharangeofmajorshareholderstogainan understandingoftheirviews.Inpracticeand,asaresultofthe extensiveinvestorfeedbackprovidedbytheChiefExecutiveandthe ChiefFinancialOfficer,theSeniorIndependentDirectorandother Non-ExecutiveDirectorsbelievethattheyarekeptfullyup-to-date andwouldbemadeawareshouldtherebeanyissues.Theytherefore consideredthatitwasnotnecessarytoarrangemeetingswithmajor shareholdersforthispurposeduringtheyear.Duringtheyear,no shareholdersrequestedanymeetingswiththeSeniorIndependent DirectororanyotherNon-ExecutiveDirectors.However,shoulda requestforameetingbemade,theywouldmakethemselvesavailable ifitwasappropriatetodoso. ThereisanopportunityforshareholderstoquestiontheChairman andotherDirectors(includingtheChairmenoftheAudit,Remuneration andNominationCommittees)attheAnnualGeneralMeeting(AGM). TheAGMalsoprovidesaforumfortheNon-ExecutiveDirectorsto discusstheviewsofshareholderswiththemdirectly.
Combined Code Provisions
ForthereasonsdisclosedwithinthisAnnualReport,duringtheyear theCompanydidnotfullycomplywiththefollowingprovisions: CodeProvisionA2.2.TheChairmanshouldonappointmentmeet theindependencecriteriasetoutinCodeA3.1(seepage49). CodeProvisionB2.1.TheRemunerationCommitteeshouldallbe independentNon-ExecutiveDirectors(seepage49). CodeProvisionD1.1.TheSeniorIndependentDirectorshould attendsufficientmeetingswitharangeofmajorshareholders tolistentotheirviewsinordertohelpdevelopabalanced understandingoftheissuesandconcernsofmajorshareholders (seeabove). ThenewUKCorporateGovernanceCodeprovisionsapplyto accountingperiodsbeginningonorafter29June2010.Althoughthe Companysreportingperiodbeganon1October2009,wehavetaken thedecisiontosubstantiallycomplywiththenewprovisionsinline withbestpracticeandtoexplainwhenwehavenot.Forthereasons disclosedwithinthisAnnualReportduringtheyeartheCompany didnotfullycomplywiththefollowingadditionalprovisionsofthe newcode: CodeProvisionC1.2.TheDirectorsshouldincludeintheAnnual ReportanexplanationofthebasisonwhichtheCompany generatesorpreservesvalueoverthelongerterm(thebusiness model)andthestrategyfordeliveringtheobjectivesofthe Company.InformationontheCompanysbusinessmodelisgiven onpages2to41andamoredetailedbusinessmodelwillbe providedintheyearendedSeptember2011inaccordancewith UKCorporateGovernanceCodeprovisions.
Andrew John CompanySecretary 1December2010
Remuneration report
Group at a glance TheRemunerationCommittee(theCommittee)formulatesand appliestheCompanypolicyaroundtherewardofExecutiveDirectors. ItoperateswithinthespiritofTUITravelscorevaluesandlooksto cultivateresponsibleleadershipinitsinternalandexternalsocial environment.ConsequentlytheCommitteecloselyconsidersthe Companyssustainedperformanceinbuildingbothshareholdervalue andasecurefutureforallitsstakeholders. ThisreporthasbeenpreparedbytheCommitteeandhasbeen approvedbytheBoard.ItcomplieswithSchedule8oftheLarge andMediumSizedCompaniesandGroups(AccountsandReports) Regulations2008.Thisreportwillbeputtoshareholdersfor approvalattheAnnualGeneralMeetingtobeheldonThursday 3February2011. Duringtheyear,theCommitteecomprisedthefollowing Non-ExecutiveDirectors: ClareChapmanChairman TonyCampbell BillDalton DrMichaelFrenzel RainerFeuerhake ThreeofthemembersoftheCommitteeareindependentNonExecutiveDirectors.DrMichaelFrenzelandRainerFeuerhakeare notconsideredbytheCompanytobeindependent.DrFrenzelis amemberoftheExecutiveBoardofTUIAGandRainerFeuerhake wasamemberofTUIAGsExecutiveBoarduntilhisresignationin February2010.TUIAGisa54.92%shareholderofTUITravelPLC asat30September2010andtheirappointmentsarepursuantto theRelationshipAgreementbetweenTUIAGandtheCompany. NomemberoftheCommitteehasanypersonalfinancialinterest,other thanasashareholder(asdisclosedintheinterestsinsharestableon page62),inthematterstobedecidedbytheCommittee.Thethree independentmembersoftheCommitteehavenoconflictsofinterest arisingfromCommitteememberscross-directorshipsandnoneofthe membersoftheCommitteeparticipateinanybonusschemes,pension plans,shareawardsoranyemployeeshareschemesinrespectofthe Company.MembersoftheCommitteehavenoday-to-day involvementintherunningoftheCompany. TheCommitteehadsixworkingsessionsduringtheyear(which includedfourformalmeetings).TonyCampbellwasunabletoattend ononeoccasionduetopriorcommitments. TheCommitteeadvisestheBoardonoverallremunerationpolicy. TheCommitteealsodetermines,onbehalfoftheBoard,andwiththe benefitofadvicefromexternalconsultantsandmembersoftheHuman ResourcesDepartment,theremunerationoftheExecutiveDirectors andothermembersoftheGroupManagementBoard.Theactivitiesof theCommitteearegovernedbyitsTermsofReference,whichhave beenapprovedbytheBoardandcanbefoundontheTUITravel websiteatwww.tuitravelplc.com MaterialadviceorserviceswereprovidedtotheCommitteeduring theyearby: DeloitteLLP(Deloitte) HerbertSmithLLP(HerbertSmith) PeterLongChiefExecutive PaulBowtellChiefFinancialOfficer BillLoganGroupHumanResourcesDirector DavidHouseGroupRewardDirector BillLoganhasdirectaccesstotheChairmanoftheCommitteeand, togetherwithDavidHouse,theyadvisedtheCommitteeonallaspects oftheGroupsrewardpoliciesandstructuresduringtheyear.Peter LongattendsmeetingsoftheCommitteetomakerecommendations relatingtotheperformanceandremunerationofhisdirectreports andAndrewJohn(CompanySecretary)actsasSecretarytothe Committee.PeterLong,PaulBowtell,BillLoganandAndrewJohn arenotinattendancewhentheirownremunerationisconsidered. Deloitte,anexternalconsultancyorganisation,providedindependent adviceonallaspectsofseniormanagementremuneration.Deloittealso providessalarybenchmarkinginformationandtaxservicestotheGroup fromtimetotimeandverificationoftherelativeperformance conditionsattachedtothePerformanceSharePlanandDeferred AnnualBonusScheme. HerbertSmithadvisedonvariouslegalissuesrelatingtotheCompanys shareschemesandalsoprovidesotherlegalservicestotheGroup.
Strategic overview
Policy on remuneration of Non-Executive Directors
Non-ExecutiveDirectors,includingtheChairman,donothaveservice contractsanddonotparticipateintheGroupspensionscheme,annual bonusschemeorlong-termincentiveschemes.Non-Executive Directorshavesecond-termlettersofappointmentwhichcanbe terminatedbyeitherpartyservingthreemonthsnotice(withthe exceptionofHorstBaierwhoseinitialappointmentletterhasnotyet expiredand,incommonwithallinitial-termletters,providesforsix monthsnotice).InaccordancewiththerequirementsoftheUK CorporateGovernanceCodealldirectorswillbesubjecttore-electionat theAnnualGeneralMeetingtobeheldon3February2011. Non-ExecutiveDirectorsarepaidafeewhichisapprovedbytheBoard ontherecommendationoftheExecutiveDirectors,havingtakenaccount ofthefeespaidinothercompaniesofasimilarcomplexityandtheskills andexperienceoftheindividuals.ThebasefeefortheNon-Executive Directorsis55,000buttheChairmanandDeputyChairman(whois alsotheSeniorIndependentDirector)arepaidhigherfeestoreflect theiradditionalresponsibilities.TheChairmanreceivesafeeof300,000 andtheDeputyChairmanreceivesafeeof200,000.TheChairmanof theAuditCommitteeandtheChairmanoftheRemunerationCommittee receiveanadditionalfeeof15,000and10,000respectively.
Policy on remuneration of Executive Directors and senior executives
TheCommitteeaimstoensurethatremunerationpackagesare offeredwhich: Structuretherewardofseniormanagementtoaligntheirinterests withthoseoftheshareholdersoverthelong-term; Reinforcethehigh-performanceculturethroughouttheGroup; Setthetotalremunerationpackageatanappropriateleveltoreflect thecompetitivemarketinwhichtheGroupoperates;and Linkasubstantialproportionofthetotalremunerationpackageto theachievementofdemandingfinancialperformancetargets.
Governance
Remuneration report continued

TheGrouphasperformance-relatedrewardpolicies.Thesearedesigned toprovidetheappropriatebalancebetweenfixedremunerationand variableat-riskrewardwhichislinkedtotheperformanceofboththe Groupandtheindividual.Groupperformance-relatedmeasuresare chosencarefullytoensureastronglinkbetweenrewardandtrue underlyingfinancialperformance.Individualperformanceismeasured throughanassessmentofcomprehensivebusinessunitdeliverables, modellingtheGroupsvaluesandtheachievementofspecificobjectives. Ataminimum,theindividualperformanceoftheExecutiveDirectorsis assessedonanannualbasis. Inassessinglevelsofpayandbenefits,TUITravelcomparesthe packagesofferedbydifferentgroupsofcomparatorcompanies. Thesegroupsarechosenhavingregardto: Financialsizeturnover,profitsandmarketcapitalisation; Scaleofbusinessthenumberofpeopleemployed; Diversityandcomplexityofbusinesses; Geographicalspreadofbusinesses; Industrytype;and Relevanceas: apotentialsourceforcandidatesforroleswithintheGroup;and apotentialthreatinrespectofattractingTUITravelexecutives. ExternalconsultantsareusedtoadvisetheCommitteeonthestructure andlevelofpayandbenefitsinTUITravelsmarkets.
Fixed remuneration Annual incentive Long-term incentive
Base salary
ThesalaryforeachExecutiveDirectorisbasedonindividual performanceandoninformationfromindependentprofessional sourcesonthesalarylevelsforsimilarjobsingroupsofcomparable companies.Thisapproachisconsistentwiththatusedtodetermine salaryandbenefitlevelsforallemployeeswithintheGroup.Internal relativitiesandsalarylevelsinthewideremploymentmarketarealso takenintoaccount. InaccordancewithadecisiontakenbytheCommitteelastyearbased upontheeconomicclimate,ExecutiveDirectorsbasesalarieswerenot increasedatthenormalannualreviewinOctober2009orOctober 2010.TheCommitteedoesnotanticipateundertakingthenextnormal annualreviewpriorto1October2011. BenefitsareprovidedtoExecutiveDirectorsinaccordancewiththe practiceapplyingtootherexecutivesintheirgeographiclocation. WithintheAnnualBonusPlan,challengingperformancegoalsareset andthesemustbeachievedbeforethemaximumbonusbecomes payable.TheAnnualBonusPlanmeasuresareweightedheavilytothe Groupsfinancialperformanceandthebalancetopersonalobjectives. ThemaximumbonusopportunityforeachExecutiveDirectorvariesby individualbutwillnotexceed175%ofannualbasesalary. Theannualperformancebonusawardmaybesettledbysharesor cash.ArulechangeduringtheyearallowstheCommittee,atits discretion,todeterminethatanyannualperformancebonusawardmay betransferredtotheparticipantortoaGrouppensionschemeorto theTUITravelInternationalRetirementSavingPlanortoanyother long-terminvestmentplanoracombinationofsomeorallofthe foregoing.Thequantumofanytransferotherthanincashwillbe subjecttoadjustmentfortaxorsocialsecuritydifferences,ifany,to ensurecostneutralityfortheCompany.
Annual performance bonus
Long-term incentives
ThenormalpolicyforExecutiveDirectorsisthat,usingtargetor expectedvaluecalculations,long-termperformancedrives60% oftotalannualremuneration(excludingbenefits)andthetotal proportionofperformance-relatedremuneration(includingannual bonus)is70%. ThemaincomponentsofremunerationintheCompanyare: Fixedremuneration basesalary benefits pensioncontribution Performance-relatedremuneration annualbonus long-termincentives Deferred Annual Bonus Scheme AllExecutiveDirectorsalsoparticipateintheDeferredAnnualBonus Scheme(DABS)whichrequiresaminimumof25%andamaximum of50%ofanyannualperformancebonusawardtobedeferredinto shares.Matchingsharesmayalsobeawardeduptofourtimesthe deferredamountandaresubjecttotheachievementofstretching performanceconditionsoverathree-yearperiod.Awardsofdeferred andmatchingsharesaresubjecttoforfeitureconditionsuntilthe releasedate.Theearliestpointatwhichthesharesareeligiblefor releaseisattheendofthreeyearsfollowingdeferral.Followinga DABSrulechangeduringtheyear,theactualreleasedateforawards madeonorafter1December2009isnowdeterminedbythe RemunerationCommitteeatitsdiscretion.Participantsmaymakea requesttotheCommitteeforanissueortransferoftheseawardstwice peryearonceperformanceconditionshavebeensatisfiedandthe awardshavevested,althoughtheCommitteeisnotobligedtocomply withtheserequests.Theactualreleasedateforawardsmaybeno laterthantenyearsfollowingdeferral.
Group at a glance
Forawardsofmatchingsharesmadeduringtheyear,noshareswillvest unlesstheannualaverageoftheratiooftheGroupsreturnoninvested capital(ROIC)totheweightedaveragecostofcapital(WACC)meetsor exceedsoneoverthethree-yearperiod.AhurdleofROIC,beingat leastequaltoWACC,isusedtoensurethattherelevantlong-term incentiveawardspayoutonlywhenshareholdervalueisbeingcreated overtheperformanceperiods.IftheROIC/WACChurdleismet,shares willonlyvesttotheextenttowhichtwofurtherperformanceconditions aresatisfiedoverthethree-yearperiodasfollows: Uptothree-quartersofthematchingshareswillvestbasedon growthintheGroupsearningspershare(EPS),beforeamortisation ofmergerintangibles,goodwillimpairmentandseparatelydisclosed items,inrelationtothegrowthintheUKRetailPriceIndex(RPI)as showninthetablebelow:
AverageannualEPSgrowthinexcessofRPIgrowth Proportionofmatchingsharesvesting
AverageannualEPSgrowthinexcessofRPIgrowth
Proportionofsharesvesting
Below4% Between4%and13% 13%orabove
0% O nastraightlinebasis between10%and100% 100%
UptohalfofthematchingshareswillvestbasedontheGroups rankingoftotalshareholderreturn(TSR)performancerelativeto companiesranked30thto100thbymarketcapitalisationasatthe dateoftheawardasshowninthetablebelow:

TSRRanking Proportionofsharesvesting
Strategic overview
Belowmedian Betweenmedianandupperquartile Atoraboveupperquartile
0% O nastraightlinebasis between15%and100% 100%
0% nastraightlinebasis O between10%and100% 100%
AwardsunderthePerformanceSharePlanlapseiftheperformance conditionsarenotmet. TheCommitteeconsidersthatEPSandTSRarethekeyperformance conditionsthataremostrelevanttotheGroup.EPSisakeyindicator oftheGroupsunderlyingfinancialperformancewhilstTSRisarelative measureofshareholdervaluecreation.AhurdleofROIC,beingatleast equaltoWACC,isusedtoensurethattherelevantlong-termincentive awardspayoutonlywhenshareholdervalueisbeingcreatedoverthe performanceperiods. AfurtherrulechangeduringtheyearallowstheCommitteeatits discretiontodeterminethatanyDABSorPSPawardmadeonorafter 1December2009maybesettledonthereleasedatebyatransferof sharesorcashtotheparticipantortoaGrouppensionschemeorto theTUITravelInternationalRetirementSavingPlanortoanyother long-terminvestmentplanoracombinationofsomeorallofthe foregoing.Thequantumofanytransferotherthaninshareswillbe equaltothemarketvalueofeachvestedshareasatthereleasedate subjecttoadjustmentfortaxorsocialsecuritydifferences,ifany,to ensurecostneutralityfortheCompany. Business performance
Uptoone-quarterofthematchingshareswillvestbasedonthe Groupsrankingoftotalshareholderreturn(TSR)performance relativetocompaniesranked30thto100thbymarketcapitalisation asatthedateoftheawardasshowninthetablebelow:

TSRRanking Proportionofmatchingsharesvesting
0% nastraightlinebasis O between15%and100% 100%
Matchingshareawardslapseiftheperformanceconditionsare notmet. Performance Share Plan ThePerformanceSharePlan(PSP)allowsExecutiveDirectorsand eligibleparticipantstoreceiveshareawards,subjecttothesatisfaction ofperformanceconditionssetbytheCommittee,whicharenormally measuredoverathree-yearperiod.Oncevested,PSPsharesare subjecttoforfeitureconditionsuntilthereleasedate.Theearliestpoint atwhichthesharesareeligibleforreleaseisthethirdanniversaryofthe awarddate.FollowingaPSPrulechangeduringtheyear,forawards madeonorafter1December2009,theactualreleasedateis determinedbytheRemunerationCommitteeatitsdiscretion. ParticipantsmaymakearequesttotheCommitteeforanissueor transferoftheseawardstwiceperyearonceperformanceconditions havebeensatisfiedandtheawardshavevested,althoughthe Committeeisnotobligedtocomplywiththeserequests.Theactual releasedateforawardsmaybenolaterthan10yearsfollowing deferral.Awardsarenormallymadeannuallyand,exceptin exceptionalcircumstances,willnotexceedtwotimesannualsalary forExecutiveDirectors. Forawardsmadeduringtheyear,noshareswillvestunlesstheannual averageoftheratiooftheGroupsROICtotheWACCmeetsor exceedsoneoverthethree-yearperiod. IftheROIC/WACChurdleismet,shareswillonlyvesttotheextentto whichtwofurtherperformanceconditionsaresatisfiedoverthethreeyearperiodasfollows: UptohalfoftheshareswillvestbasedongrowthintheGroups EPS,beforeamortisationofmergerintangibles,goodwillimpairment andseparatelydiscloseditems,inrelationtothegrowthintheUK RPIasshowninthetablebelow:
Governance
All-employee share schemes
ExecutiveDirectorsbasedintheUKareeligibletoparticipatein theHMRC-approvedShareIncentivePlanwhichisanall-employee shareschemeenablingstafftoacquiresharesintheCompanyon preferentialterms.Tofurtherencourageemployeeshareholding intheCompany,theShareIncentivePlanprovidesamatching shareforeveryfoursharesboughtbyaparticipantundertheplan. Matchingsharesarenotsubjecttoperformanceconditions. TheExecutiveDirectorswillbeexpectedtobuild,withinfiveyears oftheirappointment,andthenmaintain,ashareholdingequalin valueto1.5timestheirbasicsalaryortwotimesinthecaseofthe ChiefExecutive. NonewshareswereissuedduringtheyearandthereforetheCompany hasremainedwithinitsheadroomlimitsfortheissueofnewshares undershareincentiveschemes.Allshareincentiveawardsmade,and allfutureshareincentiveawards,willnormallybesettledwithshares purchasedinthemarket.
Shareholding guidelines
Policy on pensions
EachoftheUK-basedExecutiveDirectorsandseniorexecutives participatesinadefinedcontributionretirementorlong-term investmentscheme.
Governance

TheGroupspensionpolicyisthat,intheeventthataparticipant inaregisteredpensionschememayreachorexceedHMRClifetime orannualthresholds,theyhaveachoicenottoacceptfurther registeredpensioncontributions.Onmakingthischoicetheindividual willbeofferedinlieuacontributiontoanunregisteredlong-term investmentschemeoranon-pensionablecashpayment,equivalentto theGroupscontributiontotheregisteredpensionscheme.Pension schemeparticipantswillnotbecompensatedforanyadversetax consequencesofexceedingtheHMRClifetimeallowancelimit. ExecutiveDirectors,andseniorexecutivesoutsideoftheUK,participate inlocalpensionplans.
Contracts of service
Executive Directors TheRemunerationCommitteespolicyisforExecutiveDirectorstohave rollingcontractswitha12-monthnoticeperiod. VolkerBttcher,PaulBowtell,PeterLong,JohanLundgrenandWilliam Waggottcurrentlyhaveserviceagreementswitha12-monthnotice periodanditisintendedthatallnewappointmentswillalsohave 12-monthnoticeperiods.However,onoccasion,tocompletean externalrecruitmentsuccessfully,alongerinitialperiodmaybeused reducingto12months,followingguidanceintheCombinedCode. Noprovisionsforcompensationforterminationfollowingchangeof control,orforliquidateddamagesofanykind,areincludedinthe currentDirectorscontracts.Intheeventofanyearlytermination ofanExecutiveDirectorscontract,thepolicyistoseektominimise anyliability.
ExecutiveDirector Effectivedate ofcontract Noticeperiod
Policy on external appointments
TheCompanyrecognisesthatitsDirectorsmaybeinvitedtobecome non-executivedirectorsofothercompaniesandthatsuchdutiescan broadenexperienceandknowledgeandbenefitthebusiness.Subject totheapprovaloftheBoard,ExecutiveDirectorsare,therefore,allowed toacceptnon-executiveappointmentsandtoretainthefeesreceived (excludingpositionswheretheDirectorisappointedastheCompanys representative)aslongasthisisnotlikelytoleadtoaconflictofinterest. Fortheyearended30September2010,PeterLongreceivedand retainednon-executivedirectorsfeesinrespectofanappointment withRentokilInitialplc(FTSE100)of75,000(2009:97,500he resignedasadirectorofDebenhamsPLCinAugust2009).PaulBowtell receivedandretainednon-executivedirectorfeesinrespectofhistwo appointmentsCapitaGroupPlc(FTSE100)from28June2010 andSThreeplc(asmallcapcompany)of55,682(2009:40,000).
DrVolkerBttcher PaulBowtell PeterLong JohanLundgren WilliamWaggott
5September2007 7April2008 19February2008 20March2009 22April2008

Effectivedate ofappointment
12 12 12 12 12
Noticeperiod
Non-Executive Directors
Non-ExecutiveDirector
Performance graph
TUITravelshareswerelistedontheLondonStockExchangeon 3September2007.SinceDecember2007,theCompanyhasbeen amemberoftheFTSE100Index.Thegraphbelowmeasuresthe performanceofFirstChoiceHolidaysPLCuptothemerger,and subsequentlytheperformanceofTUITravelPLC,assumingdividends arereinvested,comparedwiththeTSRperformanceachievedagainst theconstituentcompaniesoftheFTSE100Indexandseparately thoseranked30to100bymarketcapitalisation.ThelatterIndexis consideredtobethemostappropriatebenchmarkforcomparison purposesandisusedwithintheperformancemeasuresofthe Companyslong-termincentiveschemes.
HorstBaier TonyCampbell ClareChapman BillDalton RainerFeuerhake DrMichaelFrenzel JeremyHicks SirMichaelHodgkinson GilesThorley DrErhardSchipporeit DrAlbertSchunk HaroldSher
13October2009 3September2010 3September2010 3September2010 3September2010 3September2010 3September2010 3September2010 3September2010 29October2010 29October2010 29October2010
6 3 3 3 3 3 3 3 3 3 3 3
Theinformationprovidedinthefollowingpagesofthisreporthasbeen auditedbyKPMGAuditPlc.
Total Shareholder Return

TUI Travel PLC v FTSE 100 & FTSE 30-300
200
TUI Travel PLC shares listed 03.09.07
150
100
50 TUI Travel PLC FTSE 100 FTSE 30-100
30.09.05
30.09.06
30.09.07
30.09.08
30.09.09
30.09.10
Group at a glance
Directors remuneration
Basicsalaries andfees 000
Performancepayments Annual Bonus1 000 Value Creation Synergy Plan2 000 Benefits3 000
Totalremuneration excludingpensions For the year ended 30 September 2010 000 Fortheyear ended 30September 2009 000
Executive Directors DrVolkerBttcher4 PaulBowtell PeterLong JohanLundgren WilliamWaggott5 Non-Executive Directors HorstBaier TonyCampbell ClareChapman BillDalton RainerFeuerhake DrMichaelFrenzel(Chairman) JeremyHicks SirMichaelHodgkinson(DeputyChairman) DrErhardSchipporeit DrAlbertSchunk HaroldSher GilesThorley Total
474 490 850 605 460 55 55 65 55 55 300 70 200 55 55 55 55 3,954
336 506 1,200 618 639 3,299
17 16 16 183 16 248
827 1,012 2,066 1,406 1,115 55 55 65 55 55 300 70 200 55 55 55 55 7,501
891 1,053 2,122 1,437 881 55 65 55 55 300 70 200 55 55 55 55 7,404
Strategic overview Business performance Governance
1 AnnualBonusfiguresincludebonusawardsincashinrespectofparticipationintheAnnualBonusPlanbutexcludebonusawardsindeferredshares,detailsofwhicharesetoutonpage58. InrespectoftheirparticipationintheAnnualBonusPlan,theExecutiveDirectorsdidnotreceiveacashbonusfortheyear.NotwithstandingthefactthattheunderlyingEBITandcash-flowmeasures weremetinfull,theRemunerationCommitteedecidedthat,inthecontextofanappropriateclaw-backofprioryearbonusduetotheprofitrestatementandsubstantialone-offcostsduringtheyear, acashbonuswouldnotbepayable. 2 ValueCreationSynergyPlanfiguresrelatetothethirdandfinalawardfromthisone-offthree-yearschemewhichinaccordancewiththeschemedesignwasduetobesettledincash.Furtherdetails ofthisschemearesetoutonpage61.Synergyperformanceattheendofthethirdyearwas195mcomparedtothetargetlevelof100mandthemaximumlevelof150m.Furtherdetailsabout synergyperformancearesetoutonpage61.ThefinalcashawardwasthereforemadeatthemaximumlevelforMessrsBttcher,Bowtell,Long,LundgrenandWaggott. 3 Benefitsincorporatealltaxassessablebenefitsarisingfromtheindividualsemployment.ForMessrsBowtell,LongandWaggott,thisrelatesinthemaintotheprovisionofafullyexpensedcompany carorcarallowanceandprivatehealthcarecover,andforMrBttchertheprovisionofafullyexpensedcompanycarorcarallowance.Inadditiontotheprovisionofafullyexpensedcompanycaror carallowanceandprivatehealthcarecover,MrLundgrenreceivedhousingandeducationbenefitsaspartoftheongoingsupportrelatingtohisrelocationtotheUKfromSwedenon1August2009. 4 ncalculatingremunerationforMrBttcher,paymentsmadeduringtheyearinEURhavebeenconvertedat1.15to1GBP,beingtheaverageexchangeratefortheperiod1October2009to I 30September2010. 5 n1January2010MrWaggottssalaryincreasedfrom430,000to470,000howeverhispensioncontributionreducedfrom50%ofbasesalaryto33%ofbasesalaryatthesametime. O ThischangewasasaresultofhimtakingExecutiveresponsibilityfortheAccommodation&DestinationsSectorandrestructuringhisoverallpackageinfavourofvariableperformancerelatedpay.
Governance

Directors pensions
Duringtheyearacontributionequalto50%and33%ofbasesalaryhasbeenmadeintotheTUITravelInternationalRetirementSavingPlanfor thebenefitofPeterLongandJohanLundgrenrespectively.Acontributionequalto25%ofbasesalaryhasbeenmadeintodefinedcontribution pensionschemeforthebenefitofPaulBowtell. Fortheperiod1October2009to31December2009acontributionequalto50%ofbasesalaryprorataandfortheperiod1January2010 to30September2010acontributionof33%ofbasesalaryproratahasbeenmadeintoadefinedcontributionschemeforthebenefitof WilliamWaggott. Inaddition,WilliamWaggotthasdeferredpensionentitlementsundertheDefinedBenefitsectionoftheTUIPensionScheme(UK).Heceased tobeanactivememberoftheDefinedBenefitsectionon3September2007and,therefore,noincreaseinaccruedbenefithasoccurredduring theyear. ThenormalretirementdatefortheUK-basedExecutiveDirectorsandseniorexecutivesis65. Intheeventofdeathinservice,theExecutiveDirectorsandseniorexecutivespensionarrangementsprovidelumpsumsforthepurchaseof dependantspensionsofthegreaterofeighttimessalaryorthevalueofthepensionfundinadditiontowhichalumpsumoffourtimessalary ispayable.FollowingthechangestothetaxrulesfromApril2006,anydependantspensionmaybepaidasanadditionallumpsumsubjectto HMRClimits. DrVolkerBttcherparticipatesinseparatepensionarrangementsinGermanyatacostof25%ofbasesalary.
Pension contributions for Directors

ExecutiveDirector
Pensioncontributionsorallowancefor theyearended30September2010 000
DrVolkerBttcher PaulBowtell PeterLong JohanLundgren WilliamWaggott Total
118 123 425 200 170 1,036
Totalpensioncontributionsorallowancesfortheyearended30September2010were1.036m.Incalculatingthistotal,paymentsmadein EURhavebeenconvertedat1.15to1GBP,beingtheaverageexchangeratefortheyearended30September2010.
Long-term incentives
Deferred Annual Bonus Scheme (DABS) MessrsBttcher,Bowtell,Long,LundgrenandWaggottparticipatedintheDABSduringtheyearended30September2010and,withtheexception ofMrBowtell,areexpectedtoreceiveanawardon2December2010asfollows:
Director Estimatedvalueofaward 000
DrVolkerBttcher PeterLong JohanLundgren WilliamWaggott
284 744 363 282
AwardsmadeundertheDABS,andwhichremainoutstandingat30September2010,aregiveninthetableonpage59.
Group at a glance
Deferred Annual Bonus Scheme (DABS)

Directors Maximum ABSshares D DABSshares DABSshares value awarded vested released Maximum basedon DABSshares duringthe Marketprice duringthe Marketprice Planned/ duringthe Marketprice DABSshares shareprice heldat yearended pershare yearended pershare Marketvalue Actual yearended pershare Marketvalue heldat of214.4pat 1/10/2009 30/09/2010 Awarddate ataward 30/09/2010 atvesting atvesting vestingdate 30/09/2010 atrelease atrelease Releasedate 30/09/2010 30/09/2010
DrVolker Bttcher Total
60,4322 241,7293 104,8094 419,2365 826,206 156,9231 67,5992 270,3943 134,4704 537,8805
19.12.07 270.40p 19.12.07 270.40p 28.11.08 205.25p 28.11.08 205.25p 101,8196 02.12.09 243.30p 7 407,276 02.12.09 243.30p 509,095 13.02.07 260.00p 19.12.07 270.40p 19.12.07 270.40p 28.11.08 205.25p 28.11.08 205.25p 120,8386 02.12.09 243.30p 7 483,352 02.12.09 243.30p 604,190
386,102 164,468 327,166 293,999
19.12.10 19.12.10 28.11.11 28.11.11 02.12.12 02.12.12 15.02.10 02.12.09 19.12.10 02.12.09 28.11.11 02.12.09 02.12.12
147,311 27,716 55,133 49,544 279,704 306,178 56,699 119,854 107,430 590,161 27,647 55,533 43,404 126,584 30,159 39,952 36,231 106,342 1,102,791
262.10p 243.30p 243.30p 243.30p 262.10p 243.30p 243.30p 243.30p 243.30p 243.30p 243.30p 243.30p 243.30p 243.30p
386,102 67,433 134,139 120,541 708,215 802,493 137,949 291,605 261,377 67,265 135,112 105,602 307,979 73,377 97,203 88,150 258,730 2,768,348
60,432 241,729 104,809 419,236 101,819 407,276
129,566 518,267 224,710 898,842 218,300 873,200
Strategic overview
1,335,301 2,862,885 15.02.10 02.12.09 39,8838 85,509 270,394 579,725 02.12.09 79,3378 170,099 537,880 1,153,215 02.12.09 71,2948 152,854 483,352 1,036,307 1,482,140 3,177,709 15.02.10 02.12.09 81,5898 174,927 553,150 1,185,954 02.12.09 172,4728 369,780 1,169,304 2,506,988 02.12.09 154,5928 331,445 1,048,088 2,247,101 3,179,195 6,816,195 02.12.09 39,7848 269,723 02.12.09 79,9138 541,784 02.12.09 62,4598 423,452 02.12.09 43,3998 294,230 02.12.09 57,4908 389,768 02.12.09 52,1378 353,472 85,297 578,286 171,333 1,161,585 133,912 907,881 93,047 630,829 123,259 835,663 111,782 757,844
PaulBowtell Total PeterLong Total
147,311 262.10p 67,599 243.30p 134,470 243.30p 120,838 243.30p 306,178 138,288 292,326 262,022 67,431 135,446 105,863 73,558 97,442 88,368 262.10p 243.30p 243.30p 243.30p 243.30p 243.30p 243.30p 243.30p 243.30p 243.30p
1,167,266
13.02.07 260.00p 326,1551 138,2882 19.12.07 270.40p 3 553,150 19.12.07 270.40p 292,3264 28.11.08 205.25p 1,169,3045 28.11.08 205.25p 262,0226 02.12.09 243.30p 7 1,048,088 02.12.09 243.30p 2,479,223 1,310,110 19.12.07 270.40p 19.12.07 270.40p 28.11.08 205.25p 28.11.08 205.25p 105,8636 02.12.09 243.30p 423,4527 02.12.09 243.30p 529,315 19.12.07 270.40p 19.12.07 270.40p 28.11.08 205.25p 28.11.08 205.25p 88,3686 02.12.09 243.30p 353,4727 02.12.09 243.30p 441,840
802,493 15.02.10 336,455 02.12.09 19.12.10 711,229 02.12.09 28.11.11 637,500 02.12.09 02.12.12 164,060 02.12.09 19.12.10 329,540 02.12.09 28.11.11 257,565 02.12.09 02.12.12 178,967 02.12.09 19.12.10 237,076 02.12.09 28.11.11 214,999 02.12.09 02.12.12
1,493,424
JohanLundgren 67,4312 269,7233 135,4464 541,7845 Total 1,014,384 WilliamWaggott 73,5582 294,2303 97,4424 389,7685 Total 854,998
1,417,115 3,038,294
Governance
1,190,496 2,552,424 8,604,247 18,447,507
Grand Total 6,342,077 3,394,550
1 hisroll-overawardisbasedona)performanceto30September2009wheretheperformancemeasurerelatestoEPSgrowthinexcessoftherateofinflationandb)performancetothe3rd T anniversaryoftheawarddatewheretheperformancemeasurerelatestotheCompanysTSRrankingagainsttheconstituentcompaniesoftheFTSEMid-250index(excludingInvestmentTrusts) ascalculatedattheAwarddate.AperformancehurdleoftheROICbeinginexcessoftheWACCmustalsobeachievedforanyoftheawardtobereleased.Thenumberofsharesreleasedisgraded accordingtoa)EPSgrowth,with7.5%oftheawardbeingreleasedfor4%perannuminexcessofinflationand75%oftheawardreleasedfor13%perannuminexcessofinflationandb)ranking oftheCompanyagainstthecomparatorgroup,with2.5%oftheawardbeingreleasedformedianand25%oftheawardbeingreleasedforupperquartile.TheROIC/WACChurdlewasachieved, EPSgrowthwasgreaterthan13%perannuminexcessofinflationandtheCompanyTSRrankingwas69thpercentiletherefore93.875%oftheawardwasreleasedon15February2010. 2 ThisawardisthedeferredelementoftheAnnualBonusentitlementforFinancialYear2006/07andissubjectonlytocontinuedemploymenttothereleasedate. 3 Thismatchingawardisbasedona)performanceto30September2010wheretheperformancemeasurerelatesto(EPS)growthinexcessoftherateofinflationandb)performancetothe3rd anniversaryoftheawarddatewheretheperformancemeasurerelatestotheCompanysTSRrankingagainsttheconstituentcompaniesoftheFTSE100indexranked30to100bymarketcapitalisation ascalculatedattheawarddate.AperformancehurdleofthereturnonROICbeinginexcessoftheWACCmustalsobeachievedforanyoftheawardtobereleased.Thenumberofsharesreleasedis gradedaccordingtoa)EPSgrowth,with7.5%oftheawardbeingreleasedfor12%inexcessofinflationand75%oftheawardreleasedfor39%inexcessofinflationandb)rankingoftheCompany againstthecomparatorgroup,with3.75%oftheawardbeingreleasedformedianand25%oftheawardbeingreleasedforupperquartile. 4 ThisawardisthedeferredelementoftheAnnualBonusentitlementforFinancialYear2007/08andissubjectonlytocontinuedemploymenttothereleasedate. 5 hismatchingawardisbasedona)performanceto30September2011wheretheperformancemeasurerelatestoEPSgrowthinexcessoftherateofinflationandb)performancetothe3rd T anniversaryoftheawarddatewheretheperformancemeasurerelatestotheCompanysTSRrankingagainsttheconstituentcompaniesoftheFTSE100indexranked30to100bymarketcapitalisation ascalculatedattheawarddate.AperformancehurdleoftheROICbeinginexcessoftheWACCmustalsobeachievedforanyoftheawardtobereleased.Thenumberofsharesreleasedisgraded accordingtoa)EPSgrowth,with7.5%oftheawardbeingreleasedfor12%inexcessofinflationand75%oftheawardreleasedfor39%inexcessofinflationandb)rankingoftheCompanyagainst thecomparatorgroup,with3.75%oftheawardbeingreleasedformedianand25%oftheawardbeingreleasedforupperquartile. 6 ThisawardisthedeferredelementoftheAnnualBonusentitlementforFinancialYear2008/09andissubjectonlytocontinuedemploymenttothereleasedate. 7 hismatchingawardisbasedonperformanceto30September2012wheretheperformancemeasurerelatestoa)EPSgrowthinexcessoftherateofinflationandb)theCompanysTSRranking T againsttheconstituentcompaniesoftheFTSE100indexranked30to100bymarketcapitalisationascalculatedattheawarddate.AperformancehurdleoftheROICbeinginexcessoftheWACC mustalsobeachievedforanyoftheawardtobereleased.Thenumberofsharesreleasedisgradedaccordingtoa)EPSgrowth,with7.5%oftheawardbeingreleasedfor12%inexcessofinflation and75%oftheawardreleasedfor39%inexcessofinflationandb)rankingoftheCompanyagainstthecomparatorgroup,with3.75%oftheawardbeingreleasedformedianand25%oftheaward beingreleasedforupperquartile. 8 DuringtheyeartheDirectorandtheCompanyagreedtoenterintoajointelectionpursuanttosection431(1)oftheIncomeTax(EarningsandPensions)Act2003inrespectofthisaward.Consequently, theRemunerationCommitteeagreedtovesttheseawardsearlyandreleasesufficientsharestosatisfythetaxliabilityarisingfromthejointelection.Theremainingshares,whicharevested,areheldas restrictedsharesandwillnotbereleasedbeforethethirdanniversaryoftheoriginalawarddate.Theserestrictedsharesaresubjecttoclaw-backconditionsinaccordancewiththeschemerules.
Governance

Performance Share Plan (PSP) AwardsmadeunderthePSP,andwhichremainoutstandingat30September2010are:
Directors Maximum PSPshares PSPshares Maximum vested vested PSPshares duringthe Marketprice duringthe Marketprice Planned/ heldat yearended pershare yearended pershare Marketvalue Actual 1/10/2009 30/09/2010 Awarddate ataward 30/09/2010 atvesting atvesting vestingdate Maximum PSPshares value released Maximum basedon duringthe Marketprice PSPshares shareprice yearended pershare Marketvalue heldat of214.4pat 30/09/2010 atrelease atrelease Releasedate 30/09/2010 30/09/2010
DrVolker Bttcher Total
78,8881 129,2092 221,8293 429,926 74,0391 202,1982 286,4793 562,716 173,0781 586,0812 828,2583
03.09.07 285.50p 13.09.07 273.00p 28.11.08 205.25p 3 203,639 02.12.09 243.30p 203,639 241,6764 241,676 13.02.07 13.09.07 28.11.08 02.12.09 260.00p 273.00p 205.25p 243.30p
78,888 74,039 173,078 130,348 244,685
262.10p 262.10p 262.10p 262.10p 262.10p
206,765 15.02.10 02.12.10 28.11.11 02.12.12 194,056 15.02.10 02.12.10 28.11.11 02.12.12 453,637 15.02.10 02.12.10 28.11.11 02.12.12 341,642 15.02.10 02.12.10 19.12.10 28.11.11 02.12.12 641,319 15.02.10 02.12.10 28.11.11 02.12.12
78,888 78,888 74,039 74,039 173,078 173,078 130,348 130,348 244,685 244,685 701,038
262.10p 262.10p 262.10p 262.10p 262.10p
206,765 206,765 194,056 194,056 453,637 453,637 341,642 341,642 641,319 641,319 1,837,419
15.02.10 15.02.10 15.02.10 15.02.10 15.02.10
129,209 221,829 203,639 202,198 286,479 241,676
277,024 475,601 436,602 433,513 614,211 518,153
554,677 1,189,227
PaulBowtell Total PeterLong Total
730,353 1,565,877 586,081 1,256,558 828,258 1,775,785 698,725 1,498,066 104,773 192,307 287,106 248,664 146,520 209,500 176,736 224,633 412,306 615,555 533,136 314,139 449,168 378,922
13.02.07 260.00p 13.09.07 273.00p 28.11.08 205.25p 698,7254 02.12.09 243.30p 698,725 03.09.07 285.50p 13.09.07 273.00p 19.12.07 270.40p 28.11.08 205.25p 4 248,664 02.12.09 243.30p 248,664 176,7364 176,736 03.09.07 285.50p 13.09.07 273.00p 28.11.08 205.25p 02.12.09 243.30p
1,587,417
2,113,064 4,530,409
JohanLundgren130,3481 104,7732 192,3072 287,1063 Total 714,534 WilliamWaggott244,6851 146,5202 209,5003 Total 600,705
832,850 1,785,630
532,756 1,142,229 4,763,700 10,213,372
Grand Total 3,895,298 1,569,440
1 hisroll-overawardisbasedonperformancefrom1November2006to30September2009wheretheperformancemeasurerelatestoEPSgrowthinexcessoftherateofinflationandaperformance T hurdleoftheROICbeinginexcessoftheWACC.ThenumberofsharesreleasedisgradedaccordingtoEPSgrowth,with10%oftheawardbeingreleasedfor4%perannuminexcessofinflationand theentireawardreleasedfor13%perannuminexcessofinflation.TheROIC/WACChurdlewasachievedandEPSgrowthwasgreaterthan13%perannuminexcessofinflationthereforetheentire awardwasreleasedon15February2010. 2 hisawardisbasedona)performanceto30September2010wheretheperformancemeasurerelatestoEPSgrowthinexcessoftherateofinflationandb)performancetothe3rdanniversaryofthe T awarddatewheretheperformancemeasurerelatestotheCompanysTSRrankingagainsttheconstituentcompaniesoftheFTSE100indexranked30to100bymarketcapitalisationascalculatedatthe awarddate.AperformancehurdleoftheROICbeinginexcessoftheweightedaveragecostofcapital(WACC)mustalsobeachievedforanyoftheawardtobereleased.Thenumberofsharesreleased isgradedaccordingtoa)EPSgrowth,with5%oftheawardbeingreleasedfor12%inexcessofinflationand50%oftheawardreleasedfor39%inexcessofinflationandb)rankingoftheCompany againstthecomparatorgroup,with7.5%oftheawardbeingreleasedformedianand50%oftheawardbeingreleasedforupperquartile. 3 hisawardisbasedona)performanceto30September2011wheretheperformancemeasurerelatestoEPSgrowthinexcessoftherateofinflationandb)performancetothe3rdanniversaryofthe T awarddatewheretheperformancemeasurerelatestotheCompanysTSRrankingagainsttheconstituentcompaniesoftheFTSE100indexranked30to100bymarketcapitalisationascalculatedatthe awarddate.AperformancehurdleoftheROICbeinginexcessoftheWACCmustalsobeachievedforanyoftheawardtobereleased.Thenumberofsharesreleasedisgradedaccordingtoa)EPS growth,with5%oftheawardbeingreleasedfor12%inexcessofinflationand50%oftheawardreleasedfor39%inexcessofinflationandb)rankingoftheCompanyagainstthecomparatorgroup, with7.5%oftheawardbeingreleasedformedianand50%oftheawardbeingreleasedforupperquartile. 4 Thisawardisbasedonperformanceto30September2012wheretheperformancemeasurerelatestoa)EPSgrowthinexcessoftherateofinflationandb)theCompanysTSRrankingagainstthe constituentcompaniesoftheFTSE100indexranked30to100bymarketcapitalisationascalculatedattheawarddate.AperformancehurdleoftheROICbeinginexcessoftheWACCmustalsobe achievedforanyoftheawardtobereleased.Thenumberofsharesreleasedisgradedaccordingtoa)EPSgrowth,with5%oftheawardbeingreleasedfor12%inexcessofinflationand50%ofthe awardreleasedfor39%inexcessofinflationandb)rankingoftheCompanyagainstthecomparatorgroup,with7.5%oftheawardbeingreleasedformedianand50%oftheawardbeingreleased forupperquartile.
Group at a glance
TheValueCreationSynergyPlan(VCSP),wasaone-offthree-yearplanandExecutiveDirectorsreceivedanawardwhichwastobesatisfiedbya combinationofcashandsharesprovidedthatstretchingperformancetargetsweresatisfied.Theperformancetargets,setbytheCommittee,were basedontheachievementofthesynergisticobjectivesofthemergerofFirstChoiceHolidaysPLC(nowFirstChoiceHolidaysLimited)andthe TourismDivisionofTUIAG. Theawards,beingacombinationofcashandshares,relatedtoperformanceoverthreeyears,asshownbelow: Tranche1(2007/2008): Tranche2(2008/2009): Tranche3(2009/2010): 50%cashand50%shares; 50%cashand50%shares;and 100%cash.
Value Creation Synergy Plan (VCSP)
Strategic overview
Cashentitlementswerepaidimmediatelyfollowingconfirmationofannualperformanceachievement,sharesweredeferreduntiltheendofthe three-yearperiod.Thereleaseofthedeferredshareselementswassubjecttoanadditionaloverallthree-yearperformancetarget. Theoverallthree-yearperformancetargetwassetat100mofsynergisticvalue(belowwhichnovestingwouldoccur)withavestingscaleup toastretchlevelof150m.Inaddition,theCommitteesetannualprofitmargintargetsbelowwhichnopaymentorvestingwouldoccur. Attargetandstretchannualperformance,theproportionvestingundereachannualtranchewas50%and100%respectively.Intheeventofthe overallthree-yearperformancetargetnotbeingachieved,anynetamountspreviouslypaidinrelationtothecashelementsofTranches1and2 mustberepaidtotheCompany. Theoverallsynergyvalueachievementoverthethree-yearperiodis195masdescribedindetailonpage41ofthisreport. Value Creation Synergy Plan (VCSP) AwardsmadeundertheVCSP,andwhichremainoutstandingat30September2010,aregiveninthetablebelow.
Directors VCSPshares VCSPshares awarded vested VCSPshares duringthe Marketprice duringthe Marketprice heldat yearended pershare yearended pershare 1/10/2009 30/09/2010 Awarddate ataward 30/09/2010 atvesting Maximum VCSPshares value released Maximum basedon Planned/ duringthe Marketprice VCSPshares shareprice Valueat Actual yearended pershare Marketvalue heldat of214.4pat vesting vestingdate 30/09/2010 atrelease atrelease Releasedate 30/09/2010 30/09/2010
DrVolker Bttcher Total PaulBowtell Total PeterLong Total
78,6061 78,606 123,2641 123,264 292,3261 292,326
72,1612 72,161 103,986 103,986 246,609 246,609 127,030 127,030 90,4232 90,423 640,209
28.11.08 02.12.09 28.11.08 02.12.09 28.11.08 02.12.09 28.11.08 02.12.09 28.11.08 02.12.09
205.25p 243.30p 205.25p 243.30p 205.25p 243.30p 205.25p 243.30p 205.25p 243.30p
123,264 103,986 292,326 246,609 148,990 127,030 107,186 90,423
243.30p 243.30p 243.30p 243.30p 243.30p 243.30p 243.30p 243.30p
299,901 252,998 711,229 600,000 362,493 309,064 260,784 219,999
02.12.10 02.12.10 02.12.09 02.12.09 02.12.09 02.12.09 02.12.09 02.12.09 02.12.09 02.12.09
50,539 42,635 93,174 119,854 101,110 220,964 61,086 52,083 113,169 43,947 37,074 81,021 508,328
243.30p 243.30p 243.30p 243.30p 243.30p 243.30p 243.30p 243.30p
122,961 103,731 226,692 291,605 246,001 537,606 148,622 126,718 275,340 106,923 90,201 197,124 1,236,762
78,606 72,161 150,767 72,7253 61,3513 134,076 172,4723 145,4993 317,971 87,9043 74,9473 162,851 63,2393 53,3493 116,588
168,531 154,713 323,244 155,922 131,537 287,459 369,780 311,950 681,730 188,466 160,686 349,152 135,584 114,380 249,964
Governance
JohanLundgren 148,9901 Total 148,990 WilliamWaggott 107,1861 Total 107,186 750,372 Grand Total
882,253 1,891,549
1 hisawardisthedeferredelementofTranche1oftheVCSPforFinancialYear2007/08.Aprofitmarginperformancehurdlemustalsobeachievedforanyoftheawardtovest.Thevestingofshares T isgradedaccordingtosynergisticvalueachievedwithnoneoftheawardvestingforsynergisticvaluebelow100mandalloftheawardvestingfor150msynergisticvalueormore.Theprofitmargin hurdlewasexceededandthesynergyperformancewas195mthereforeallofthesharesvested.Furtherdetailsregardingthesynergyperformanceachievedaresetoutonpage41. 2 hisawardisthedeferredelementofTranche2oftheVCSPforFinancialYear2008/09.Aprofitmarginperformancehurdlemustalsobeachievedforanyoftheawardtovest.Thevestingofshares T isgradedaccordingtosynergisticvalueachievedwithnoneoftheawardvestingforsynergisticvaluebelow100mandalloftheawardvestingfor150msynergisticvalueormore.Theprofitmargin hurdlewasexceededandthesynergyperformancewas195mthereforeallofthesharesvested.Furtherdetailsregardingthesynergyperformanceachievedaresetoutonpage41. 3 DuringtheyeartheDirectorandtheCompanyagreedtoenterintoajointelectionpursuanttosection431(1)oftheIncomeTax(EarningsandPensions)Act2003inrespectofthisaward.Consequently, theRemunerationCommitteeagreedtovesttheseawardsearlyandreleasesufficientsharestosatisfythetaxliabilityarisingfromthejointelection.Theremainingshares,whicharevested,areheldas restrictedsharesandwillnotbereleasedbeforethethirdanniversaryoftheoriginalawarddate.Theserestrictedsharesaresubjecttoclaw-backconditionsinaccordancewiththeschemerules.
Governance

Directors interests in ordinary shares of the Company
Directorsname Title
Asat30September2010,theDirectorsinterestsinordinarysharesoftheCompanywere:
Ordinarysharesof10peach asat30September2010
HorstBaier DrVolkerBttcher PaulBowtell* TonyCampbell ClareChapman BillDalton RainerFeuerhake DrMichaelFrenzel JeremyHicks SirMichaelHodgkinson PeterLong* JohanLundgren DrErhardSchipporeit DrAlbertSchunk HaroldSher GilesThorley WilliamWaggott*
Non-ExecutiveDirector ManagingDirector,CentralEurope ChiefFinancialOfficer Non-ExecutiveDirector Non-ExecutiveDirector Non-ExecutiveDirector Non-ExecutiveDirector Non-ExecutiveChairman Non-ExecutiveDirector Non-ExecutiveDeputyChairmanandSeniorIndependentDirector ChiefExecutive ManagingDirector,NorthernRegion Non-ExecutiveDirector Non-ExecutiveDirector Non-ExecutiveDirector Non-ExecutiveDirector CommercialDirector
75,814 880,504 44,863 10,000 10,000 20,000 3,154,859 430,000 25,000 389,237
*IncludessharespurchasedundertheShareIncentivePlan.
TheCompanysRegisterofDirectorsInterests,whichisopentoinspectionattheRegisteredOffice,containsfulldetailsofDirectors shareholdingsandwillbeavailableforinspectionbeforeandduringtheAnnualGeneralMeetingtobeheldonThursday3February2011. Duringtheyear,thepriceoftheCompanysordinarysharesrangedbetween190.0pand308.4pandthemid-closingpriceon30September2010 was214.4p. On1October2010,TonyCampbellwasallocated651additionalsharesinrespectoftheDividendReinvestmentPlan. TheRemunerationreportwasapprovedbyadulyauthorisedCommitteeoftheBoardofDirectorson1December2010andsignedonits behalfby: Clare Chapman ChairmanoftheRemunerationCommittee 1December2010
Independent Auditors report to the members of TUI Travel PLC

Group at a glance WehaveauditedthefinancialstatementsofTUITravelPLCforthe yearended30September2010setoutonpages64to141.Wehave notauditedtheproformainformationonpage64.Thefinancial reportingframeworkthathasbeenappliedinthepreparationof theGroupfinancialstatementsisapplicablelawandInternational FinancialReportingStandards(IFRSs)asadoptedbytheEU. Thefinancialreportingframeworkthathasbeenappliedinthe preparationoftheparentcompanyfinancialstatementsisapplicable lawandUKAccountingStandards(UKGenerallyAccepted AccountingPractice). ThisreportismadesolelytotheCompanysmembers,asabody, inaccordancewithChapter3ofPart16oftheCompaniesAct2006. Ourauditworkhasbeenundertakensothatwemightstatetothe Companysmembersthosematterswearerequiredtostatetothem inanauditorsreportandfornootherpurpose.Tothefullestextent permittedbylaw,wedonotacceptorassumeresponsibilityto anyoneotherthantheCompanyandtheCompanysmembers, asabody,forourauditwork,forthisreport,orfortheopinions wehaveformed.
Opinion on other matters prescribed by the Companies Act 2006

Inouropinion: thepartoftheDirectorsRemunerationReporttobeauditedhas beenproperlypreparedinaccordancewiththeCompaniesAct 2006;and theinformationgivenintheDirectorsReportforthefinancial yearforwhichthefinancialstatementsarepreparedisconsistent withthefinancialstatements.
Strategic overview
Matters on which we are required to report by exception
Wehavenothingtoreportinrespectofthefollowing: UndertheCompaniesAct2006wearerequiredtoreporttoyouif, inouropinion: adequateaccountingrecordshavenotbeenkeptbytheparent company,orreturnsadequateforouraudithavenotbeen receivedfrombranchesnotvisitedbyus;or theparentcompanyfinancialstatementsandthepartofthe DirectorsRemunerationReporttobeauditedarenotin agreementwiththeaccountingrecordsandreturns;or certaindisclosuresofDirectorsremunerationspecifiedbylaware notmade;or wehavenotreceivedalltheinformationandexplanationswe requireforouraudit. UndertheListingRuleswearerequiredtoreview: theDirectorsstatement,setoutonpage46,inrelationtogoing concern;and thepartoftheCorporateGovernanceStatementrelatingtothe CompanyscompliancewiththenineprovisionsoftheJune2008 CombinedCodespecifiedforourreview.
Respective responsibilities of Directors and Auditors
AsexplainedmorefullyintheDirectorsResponsibilitiesStatement setoutonpage47,theDirectorsareresponsibleforthepreparation ofthefinancialstatementsandforbeingsatisfiedthattheygivea trueandfairview.Ourresponsibilityistoauditthefinancial statementsinaccordancewithapplicablelawandInternational StandardsonAuditing(UKandIreland).Thosestandardsrequire ustocomplywiththeAuditingPracticesBoards(APBs)Ethical StandardsforAuditors.
Scope of the audit of the financial statements Opinion on financial statements

Inouropinion:
Adescriptionofthescopeofanauditoffinancialstatementsis providedontheAPBswebsiteatwww.frc.org.uk/apb/scope/UKP.
Governance
thefinancialstatementsgiveatrueandfairviewofthestate oftheGroupsandoftheparentcompanysaffairsasat 30September2010andoftheGroupslossfortheyearthen ended; theGroupfinancialstatementshavebeenproperlyprepared inaccordancewithIFRSsasadoptedbytheEU; theparentcompanyfinancialstatementshavebeenproperly preparedinaccordancewithUKGenerallyAcceptedAccounting Practice; thefinancialstatementshavebeenpreparedinaccordancewith therequirementsoftheCompaniesAct2006;and,asregardsthe Groupfinancialstatements,Article4oftheIASRegulation.
Oliver Tant (SeniorStatutoryAuditor)forandonbehalfof KPMGAuditPlc,StatutoryAuditor Chartered Accountants 15CanadaSquare London E145GL 1December2010
Consolidated income statement

fortheyearended30September2010
Note Year ended 30 September 2010 Unaudited pro forma before impact of volcanic ash m Year ended 30 September 2010 Unaudited Year ended pro forma 30 September impact of 2010 Statutory volcanic ash(A) m m
Restated Yearended 30September 2009(A) Statutory m
Continuing operations Revenue Costofsales Gross profit/(loss) Administrativeexpenses Shareof(losses)/profitsofjointventures andassociates Operating profit/(loss) Analysed as: Underlyingoperatingprofit/(loss) Separatelydiscloseditems Acquisitionrelatedexpenses Impairmentofgoodwill Taxationonprofitsandinterestofjoint venturesandassociates Financialincome Financialexpenses Net financial expenses Loss before tax Taxation(charge)/credit Loss for the year from continuing operations Discontinued operation Lossfromdiscontinuedoperation Loss for the year Attributable to: Equityholdersoftheparent Non-controllinginterests Loss for the year

12 6
13,525 (12,238) 1,287 (1,099) (3) 185 447 (181) (63) (12) (6) 185
(125) 21 (104) (104) (35) (69) (104)

13,400 (12,217) 1,183 (1,099) (3) 81 412 (250) (63) (12) (6) 81 69 (186) (117) (36) (50) (86) (18) (104) (104) (104)
Pence
13,851 (12,735) 1,116 (1,130) 9 (5) 401 (340) (56) (7) (3) (5) 72 (161) (89) (94) 42 (52) (14) (66) (67) 1 (66)
Pence
1,2 3 13(A) 10 12

4 4
Basic and diluted loss per share (pence) for loss attributable to the equity holders of the Company during the year basicanddiluted: fromcontinuingoperations basicanddiluted: fromdiscontinuedoperation
(A)RefertoBasisofPreparationwithinNote1ofthefinancialstatementsfordetails.
33 33
(7.8) (1.6)
(4.8) (1.3)
Non-GAAP measures
Reconciliation of underlying operating profit to underlying profit before tax
Year ended 30 September 2010 m Restated Yearended 30September 2009 m
Underlying operating profit Netunderlyingfinancialexpenses Underlying profit before tax
1,2 4
447 (110) 337
401 (77) 324
Consolidated statement of comprehensive income

fortheyearended30September2010 Group at a glance
Note Year ended 30 September 2010 m Restated Yearended 30September 2009 m
Loss for the year

5(C) 25(J) 25(J)
(104) (88) (42) 33 41 (6) 2 (4) (9) (73) (177)
(66) 129 (271) (60) (81) (1) 105 (179) (245)
Other comprehensive (expense)/income Foreignexchangetranslation Actuariallossesarisinginrespectofdefinedbenefitpensionschemes Cashflowhedges: movementinfairvalue amountsrecycledtotheconsolidatedincomestatement Foreignexchangegainsrecycledthroughtheconsolidatedincomestatement Shareofothermovementsinreservesofassociatesandjointventures Changesinthefairvalueofavailableforsalefinancialassets Deferredtaxonitemstakendirectlytoequity Other comprehensive expense for the year net of tax Total comprehensive expense for the year Total comprehensive expense for the year Attributable to: Equityholdersoftheparent Non-controllinginterests Total
Strategic overview
12 7(iii)
(177) (177)
(247) 2 (245)
Consolidated balance sheet

at30September2010
Note 30 September 2010 m Restated 30September 2009 m Restated 1October 2008 m
Non-current assets Intangibleassets Property,plantandequipment Investmentsinjointventuresandassociates Otherinvestments Tradeandotherreceivables Retirementbenefitasset Derivativefinancialinstruments Deferredtaxassets Current assets Inventories Otherinvestments Tradeandotherreceivables Incometaxrecoverable Derivativefinancialinstruments Cashandcashequivalents Assetsclassifiedasheldforsale Total assets Current liabilities Interest-bearingloansandborrowings Retirementbenefits Derivativefinancialinstruments Tradeandotherpayables Provisions Incometaxpayable Liabilitiesclassifiedasheldforsale Non-current liabilities Interest-bearingloansandborrowings Retirementbenefits Derivativefinancialinstruments Tradeandotherpayables Provisions Deferredtaxliabilities Total liabilities Net assets Equity Sharecapital Convertiblebondreserve Otherreserves Retaineddeficit Total equity attributable to equity holders of the parent Non-controlling interests Total equity
10 11 12 12 16 5(C) 25(I) 14

15 17 16
4,659 1,012 211 79 156 1 21 114 6,253 49 1,404 34 144 1,304 57 2,992 9,245 (757) (5) (122) (4,301) (236) (84) (31) (5,536) (796) (489) (23) (93) (307) (28) (1,736) (7,272) 1,973 112 83 2,772 (995) 1,972 1 1,973
4,737 964 112 77 194 1 13 211 6,309 51 36 1,482 30 271 790 126 2,786 9,095 (327) (3) (284) (4,220) (189) (67) (59) (5,149) (801) (498) (18) (108) (250) (97) (1,772) (6,921) 2,174 112 2,775 (716) 2,171 3 2,174
4,429 926 114 56 210 17 48 205 6,005 51 29 1,599 29 273 1,130 157 3,268 9,273 (99) (2) (178) (4,073) (235) (89) (22) (4,698) (1,167) (268) (50) (149) (180) (235) (2,049) (6,747) 2,526 112 2,749 (340) 2,521 5 2,526

25(I) 17 18

19 5(C) 25(I) 20 21

18

19 5(C) 25(I) 22 21 14

23 24 24 24 24 24 24
ThefinancialstatementswereapprovedbyadulyauthorisedCommitteeoftheBoardofDirectorson1December2010andsignedonits behalfby:
Paul Bowtell ChiefFinancialOfficer
Consolidated statement of changes in equity

Group at a glance
Share capital m Convertible bond reserve m Merger reserve m Translation reserve m Hedging reserve m Retained deficit m Equity holders of parent m Non- controlling interests m
Total m
At1October2008 (aspreviouslyreported) Restatement(Note1(B)(ii)) Restatedbalanceat 1October2008 (Loss)/profitfortheyear (aspreviouslyreported) Restatement(Note1(B)(ii)) Restated(loss)/profitfortheyear
112 112
2,490 2,490
232 232
27 27
(270) (70) (340) (25) (42) (67)
2,591 (70) 2,521 (25) (42) (67)
5 5 1 1
2,596 (70) 2,526 (24) (42) (66)
Strategic overview
Other comprehensive income/(expense) for the year Othercomprehensiveincome/(expense) Restatedtotalcomprehensive income/(expense)fortheyear Transactions with owners Share-basedpayment (netofdeferredtax) Dividends Acquisitionofnon-controllinginterests Restatedbalanceat 30September2009

128 128
(102) (102)
(206) (273)
(180) (247)
1 2
(179) (245)
112
Share capital m

Convertible bond reserve m
2,490
Merger reserve m
360
Translation reserve m
(75)
Hedging reserve m
16 (107) (12) (716)

Retained deficit m
16 (107) (12) 2,171

Equity holders of parent m
(3) (1) 3
Non- controlling interests m
16 (110) (13) 2,174
Total m
At1October2009 (aspreviouslyreported) Restatement(Note1(B)(ii)) Restatedbalanceat1October2009 Lossfortheyear Other comprehensive (expense)/income for the year Othercomprehensive (expense)/incomefortheyear Totalcomprehensive (expense)/incomefortheyear Transactions with owners Share-basedpayment (netofdeferredtax) Acquisitionofownshares Dividends Issueofconvertiblebonds (netofdeferredtax) At 30 September 2010
Governance
112 112
2,490 2,490
360 360
(75) (75)
(604) (112) (716) (104)
2,283 (112) 2,171 (104)
3 3
2,286 (112) 2,174 (104)
(59) (59)
56 56
(70) (174)
(73) (177)
(73)
(177)
112
83 83
2,490
301
(19)
20 (7) (118) (995)
20 (7) (118) 83 1,972
(2) 1
20 (7) (120) 83 1,973
DetailsofreservemovementsaresetoutinNote24totheconsolidatedfinancialstatements.
Consolidated statement of cash flows

fortheyearended30September2010
Loss for the year Adjustment for: Depreciationandamortisation Impairmentofintangibleassetsandproperty,plantandequipment Equity-settledshare-basedpaymentexpenses Loss/(profit)onsaleofproperty,plantandequipment Shareofloss/(profit)ofjointventuresandassociates Loss/(gain)onforeignexchange Changeinvalueoftradeinvestment Dividendsreceivedfromjointventuresandassociates Financialincome Financialexpenses Lossfromdiscontinuedoperation Taxation Operating profit before changes in working capital and provisions Decrease/(increase)ininventories Decreaseintradeandotherreceivables Increase/(decrease)intradeandotherpayables Increase/(decrease)inprovisionsandemployeebenefits Cash flows from operations Interestpaid Interestreceived Incometaxespaid Cash flows from operating activities

10,11 10,11 5(D) 6 12 6 12 12 4 4 8 7
(104) 261 27 14 1 3 14 (30) 9 (69) 186 18 50 380 1 34 100 93 608 (59) 2 (34) 517 26 1 (51) 9 (90) (204) (309) 768 (257) (31) (120) (7) 353 561 790 (47) 1,304
(66) 287 132 16 (12) (9) (23) 10 (72) 161 14 (42) 396 (2) 93 (141) (23) 323 (68) 6 (43) 218 161 (48) (3) (51) (234) (175) 17 (280) (22) (110) (395) (352) 1,130 (4) 16 790
13(B) 24 24
17
Investing activities Proceedsfromsaleofproperty,plantandequipment Proceedsfromdisposalofassociatedundertakingsnetofcashdisposedof Acquisitionofsubsidiariesnetofcashacquired Acquisitionofnon-controllinginterests Proceedsfromotherinvestments Investmentinjointventures,associatesandotherinvestments Acquisitionofproperty,plantandequipmentandsoftware Cash flows from investing activities Financing activities Proceedsfromnewloansanddepositstaken Repaymentofborrowings Repaymentoffinanceleaseliabilities Dividendspaidtoordinaryandnon-controllinginterests Acquisitionofsharesforshare-basedpayments Cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cashandcashequivalentsatstartoftheyear Reclassificationofcashtoassetsclassifiedasheldforsale Effectofforeignexchangeoncashheld Cash and cash equivalents at end of the year
17
MovementsincashandnetdebtarepresentedinNote26.
Notes to the consolidated financial statements

Group at a glance
1. Accounting policies
Theaccountingpoliciesadoptedinthepreparationofthese consolidatedfinancialstatementsareconsistentwiththosefollowed inthepreparationoftheGroupsconsolidatedfinancialstatements fortheyearended30September2009,exceptfortheadoption ofthefollowingnewInternationalFinancialReportingStandards (IFRS)andInterpretationsthatareapplicablefortheyearended 30September2010: IAS 1 (revised) Presentation of financial statements TheGrouphaspresentedforthefirsttimeaconsolidatedstatement ofcomprehensiveincomeandaconsolidatedstatementofchanges inequity.Theconsolidatedstatementofcomprehensiveincome replacestheconsolidatedstatementofrecognisedincomeand expense(SORIE).Thisrepresentsachangefromtherequirementto presentonlyonefinancialstatement:aSORIEorastatementofall changesinequityasaprimarystatement.Comparativeinformation hasbeenre-presentedsothatitisinconformitywiththerevised standard.Therevisedstandardrequiresthisstatementtopresent allitemsofrecognisedincomeandexpense,eitherinonesingle statementorintwolinkedstatements.TheGrouphaselectedto presenttwostatements. Therevisedstandardprohibitsthepresentationofitemsofincome andexpenses(thatis,non-ownerchangesinequity)inthe statementofchangesinequity,requiringnon-ownerchangesin equitytobepresentedseparatelyfromownerchangesinequityin aconsolidatedstatementofcomprehensiveincome.Asaresultthe Grouppresentsintheconsolidatedstatementofchangesinequity allownerchangesinequity,whereasallnon-ownerchangesinequity arepresentedintheconsolidatedstatementofcomprehensive income.Comparativeinformationhasbeenre-presentedsothatit isalsoinconformitywiththerevisedstandard.Asthechangein accountingpolicyonlyimpactspresentation,thereisnoimpact ontheGroupsresultsforeitheryearorlosspershare. IAS 27 (amended 2008) Consolidated and separate financial statements Therevisedstandardrequirestheeffectsofalltransactionswith non-controllingintereststoberecordedinequityifthereisnochange incontrol.Thesetransactionswillnolongerresultingoodwillorgains andlosses.Thestandardalsospecifiestheaccountingwhencontrolis lost.Anyremaininginterestintheentityisre-measuredtofairvalue andagainorlossisrecognisedinprofitorloss.Thereisnomaterial impactontheGroupsresultsforeitheryearorlosspershare. IFRS 3 (2008) Business Combinations IFRS3(2008)BusinessCombinations,alsostatedasIFRS3 (revised),changesthetreatmentofincidentalacquisitionexpenses anddeferredconsiderationpaymentswhicharecontingenton continuedemployment,themeasurementofconsiderationpayable andthetreatmentofchangestotheamountofconsiderationpayable. Thishasresultedinatotalof9mbeingexpensedintheconsolidated incomestatementwhichwouldpreviouslyhavebeencapitalisedas partoftheinvestmentcostinanacquiredbusiness.Thefinancial impactofthisrevisedstandardhasbeenincludedintheacquisition relatedexpenseslineoftheconsolidatedincomestatement.The revisedstandardisonlyapplicableprospectivelyforacquisitions after1October2009.
Adoptionoftherevisedstandardhashadthefollowingimpact:
Year ended 30 September 2010 m (unless otherwise stated)
Lossbeforetax Lossfortheyearattributabletoequity holdersoftheparent Decreaseintotalequity Basicanddilutedlosspershare(pence)
(9) (9) (7) (0.7)
Strategic overview
Contingentconsiderationarisinginabusinesscombinationthathad beenaccountedforinaccordancewithIFRS3(2004)thathasnot beensettledorotherwiseresolvedattheeffectivedateofIFRS3 (2008),continuestobeaccountedforinaccordancewithIFRS3 (2004).Assuch,thereisnochangetotheGroupsresultsorloss pershare,forthisaccountingpolicy. IFRS 8 Operating Segments IFRS8replacesIAS14SegmentReportingandrequiresthatan entitysoperatingsegmentsarereportedonthesamebasisas theinternallyreportedinformationthatisprovidedtothechief operatingdecisionmaker.Thechiefoperatingdecisionmakerhas beenidentifiedastheGroupManagementBoard(GMB).Following theadoptionofIFRS8,theGrouphasreviseditsreportedoperating segmentsandprovidedfurtherinformationinrespectofthese segments.TheGrouphasdecidedtoadoptearlyanamendmentto IFRS8OperatingSegmentswhichstatesthatsegmentinformation fortotalassetsareonlyrequiredifsuchinformationisregularly reportedtothechiefoperatingdecisionmaker.Thisnewstandard onlyimpactspresentationalaspects.Thereisnoimpactonthe Groupsresultsforeitheryearorlosspershareinrespectofthis newstandard. IAS 23 (revised) Borrowing costs Thestandardhasbeenrevisedtorequirecapitalisationofborrowing costswhensuchcostsrelatetoaqualifyingasset.Therevisiontothis standardhashadnoeffectonthefinancialpositionorperformance oftheGroupasborrowingcostsforqualifyingassetshavealready beencapitalisedunderthepreviouslyallowedalternativetreatment. IFRS 7 Financial Instruments Disclosures (amendment) IFRS7hasbeenamendedrequiringenhanceddisclosureinrelation tofinancialinstrumentsatfairvalueandliquidityrisk.Financial instrumentsmeasuredatfairvaluearenowpresentedinatable accordingtoathree-tierhierarchythatprioritisesthevaluation techniquesusedinthecalculationoftheirfairvalue.Forfinancial instrumentsclassifiedinthethirdtier,areconciliationofthe movementsintheyearisalsorequired.Thechangestothe disclosuresofliquidityrisksarenotsignificant.Thereisnoimpact ontheGroupsresultforeitheryearoronlosspershareasaresult oftheamendmenttothisstandard. Theamendedstandarddoesnotrequirethepresentationof comparativeinformationintheyearofadoptionandtheGroup haschosentoapplythisoption. IAS 39 (2008) Financial Instruments: Recognition and Measurement Therevisedstandardallowsreclassificationofinstrumentsintoand outofatfairvaluethroughprofitandlossincertaincircumstances andclarifiesthedesignationofhedgesatasegmentlevel.Thereis noimpactontheGroupsresultsforeitheryearorlosspershareas aresultoftherevisiontothisnewstandard.
Notes to the consolidated financial statements continued

IAS 7 Statement of cash flows TheGrouphasadoptedearlytheamendmenttoIAS7Statement ofcashflowsinrespectofcategorisationwithintheconsolidated statementofcashflowsofacquisitionrelatedexpenseswhichare chargeddirectlytotheconsolidatedincomestatement.7mof acquisitionrelatedexpenseshavebeenincludedwithincashflows fromoperatingactivitiesintheyear.Thereisnochangetotheprior yearconsolidatedstatementofcashflowsastheseexpenseswere includedwithinthecostofthebusinesscombinationinaccordance withIFRS3(2004)andthereforeincludedwithininvestingactivities. Other changes Thefollowingaccountingstandardsandinterpretationsissuedbythe InternationalAccountingStandardsBoard(IASB)orInternational FinancialReportingInterpretationsCommittee(IFRIC)havebeen adoptedbytheGroupfrom1October2009withnosignificantimpact onconsolidatedresultsorfinancialposition: AmendmenttoIAS32(2008)andIAS1FinancialInstruments: Presentation. AmendmenttoIAS32(2008)andIAS1Puttablefinancial instrumentsandobligationsarisingonliquidation. AmendmenttoIAS39FinancialinstrumentsRecognitionand Measurement:Eligiblehedgeditems. AmendmenttoIFRIC9andIAS39Embeddedderivatives. AmendmenttoIFRS2Share-basedpaymentScopeofIFRS2 andIFRS3(revised)BusinessCombinations. AmendmenttoIAS38IntangibleassetsConsequential amendmentsarisingfromIFRS3(revised). AmendmenttoIFRIC9Reassessmentofembeddedderivatives ScopeofIFRIC9andrevisedIFRS3. AmendmenttoIFRIC14PrepaymentsofaMinimum FundingRequirement. AmendmenttoIFRIC16Hedgesofanetinvestmentina foreignoperation. TheconsolidatedfinancialstatementsarepresentedintheGroups presentationalcurrencyofSterling,roundedtothenearestmillion. (A) Statement of compliance Theconsolidatedfinancialstatementsfortheyearended 30September2010havebeenpreparedandapprovedbythe DirectorsinaccordancewithInternationalFinancialReporting StandardsasadoptedbytheEuropeanUnion(AdoptedIFRSs). Theconsolidatedfinancialstatementswereapprovedon 1December2010. (B) Basis of preparation (i) Parent Company TUITravelPLC(theCompany)isacompanyincorporatedand domiciledinEnglandandWalesundertheCompaniesAct1985and listedontheLondonStockExchange.TheRegisteredOfficeofthe CompanyisTUITravelHouse,CrawleyBusinessQuarter,Fleming Way,Crawley,WestSussexRH109QL. TheCompanyhaselectedtoprepareitsparentcompanyfinancial statementsinaccordancewithUKGAAP. (ii) Restatement On10August2010,aspartofitsunauditedresultsforthethird quarter(ninemonthsended30June2010),TUITravelPLCreported thatfollowingcompletionoftheintegrationofITsystemsinits UKmainstreambusiness,ithadwrittenoffanumberoflegacy receivablebalancesthathadbuiltupoveranextendedperiodof time,amountingintotalto29m.Thisbalancewasreportedas aseparatelydiscloseditem. TheauditforthefullyearendedSeptember2010highlighteda further88mofirrecoverablebalancesthatnowneedtobewritten off,givingatotalof117m.Thesehavearisenasaresultoffailures toreconcilebalancesadequatelyinlegacysystemsintheretailand touroperatorbusinessesinTUIUK.Asaresult,TUITravelPLChas restateditsresultsfortheyearended30September2009. Theadjustmentstotheresultsarenon-cashinnatureandhaveno impactontheGroupscashandnetdebtposition.Asaresultof processimprovementsduringtheyear,theimpactin2010hasbeen limitedto5m. Thetotalimpactissummarisedinthetablebelow:
2010 m 2009 m Pre2009 m Total m
Revenueoverstatement Releaseof unmatchedcredits Total
5 5
12 30 42
70 70
87 30 117
Revenue overstatement In2004,theUKtouroperator,Thomson,implementedanewRetail bookingsystemintoitsdistributionnetworkofshops,callcentres andwebsite.Aspartofthatimplementation,somecontrolswere putinplacetoensurethatthenewRetailbookingsystemwas recordingthesamedataastheexistingTourOperatingsystem. Inthemain,thesecontrolsoperatedwellforthefirstfewyears ofthenewsystemandanydifferencesfoundaspartoftherecent investigationwereminimal. Subsequently,aspartofadriveforfurthercostsavingsand efficiencies,processesaroundthetwosystemswerestreamlined, roleswereconsolidatedandpartsoftheprocessweretransferred toanoutsourceproviderinIndia.Asaresult,itisnowunderstood thatcontrolweaknessesaroseandthelevelofdifferencesbetween thetwosystemsgrew.Thesedifferencesarosebecausetransaction datawasnotaccuratelyreflectedintheRetailshops.Discounts givenonthepriceofholidays,cancellationfeesandadministration feesforchangestoholidaybookingswereinaccuratelyrecordedby travelagentsasapricechangeasopposedtobeingallocatedtothe relevantcategorywithintheRetailbookingsystem.Thisledtoan overstatementinrevenueintheTourOperatorandamismatchwith thecashactuallyreceivedfromthecustomerthatwasbookedinthe Retailbookingsystem. WhenthetourismbusinessofTUIAGmergedwithFirstChoice HolidaysPLCon3September2007,akeypartofthebusinessplan wastheintegrationofthetwoUKtouroperatorbusinesses,Thomson andFirstChoice.Aspartofthatbusinessmergeritwasdecidedto co-locatethebusinessesinLuton(theThomsonheadquarters)and integratetheFirstChoicebusinessontotheThomsonsystems.The systemschangeoveroccurredin2008andasaresultthevolumes
Group at a glance
goingthroughthesystemsincreased.Furthermore,thestrategic initiativetoincreasecontrolleddistributioninthebusinessalsomeant thatthevolumesgoingthroughinternalchannelsweregrowing steadily.Thesechangescausedthelevelofoverstatedrevenueto increase,reachingapeakin2008.Subsequently,in2009asaresult oftheintroductionofanewfront-endsellingsysteminthein-house retailstores,tightercontrolswereplacedontheretailagentwhereby discounts,cancellationfeesandadministrationfeeshadtobebooked totheappropriatecategoryinthesystemandaccordinglythese operationalchangesmeantthatthelevelofoverstatedrevenue startedtofall.Furtheractionstakenin2010furtherimproved thesituation. Overaperiodofsevenyearsthepre-2009levelofoverstatedrevenue amountedto87mwith5marisingin2010,12min2009andthe balanceof70mpriortotheyearending30September2009.The resultofthecorrectionofthisrevenueoverstatementhasbeento reducethe2009profitby12mandreducetheopeningreservesas at1October2008by70m. Release of unmatched credits Asaconsequenceofthesystemicdeficienciesintherevenue recognitionprocessthatresultedintheoverstatementreferredto above,unmatchedcreditsbuiltupinthebooksoftheretailer.These unmatchedcreditsweredeemedbyUKmanagementtobesurplusto Consolidated income statement
Year ended 30 September 2009 Revenue m
requirementsin2009andwereaccordinglyreleasedtocostofsales intheprofitandlossaccountinthatyear.Hadthesystemicerrors intherevenuerecognitionprocessbeenidentifiedandaddressedat thetime,theseunmatchedcreditswouldnothaveexistedasthey wouldhavebeenappropriatelymatchedoff.Itisnowevidentthat theanalysiscarriedout,thejudgementsmadeandtheprocesses undertakenatthetimetobookthereleaseoftheseunmatched creditsintherecordsoftheentityconcernedwereinappropriate andthattheinformationprovidedtobothGroupmanagementand totheexternalauditorswasinaccurate.Accordingly,thereleaseof unmatchedcreditshasnowbeenreversedintherestatedincome statementfortheyearended30September2009. Tax Theassociatedtaxbenefitshavenotbeenrecognisedasthelegal entitiesimpactedalreadyhadunrecognisedtaxlosses.Theeffectof therestatementisthereforetoincreasetheunrecognisedtaxlosses. Thetablesbelowshowtheimpactoftherestatementontherelevant consolidatedincomestatementandbalancesheetlines.
Prioryearcomparativeshavebeenrestatedforthefollowingitems. Relatednotestothefinancialstatementsinrespectofthebalance sheetat30September2008havebeendisclosedwheretherelevant notehasbeenrestated.
Costof Sales m
Operating profit/(loss) m
Underlying operating profit m
Loss before tax m
Lossfromthe yearfrom continuing operations m
Originallyreported Correction Restated
13,863 (12) 13,851
(12,705) (30) (12,735)
37 (42) (5)
443 (42) 401
(52) (42) (94)
(10) (42) (52)
Governance
Earnings/(loss) per share

Earningspershare ContinuingOperations Basic Pence Diluted Pence
UnderlyingEarnings perShare Basic Pence Diluted Pence
(1.0) (3.8) (4.8)

Equity m
(1.0) (3.8) (4.8)
23.8 (3.8) 20.0
23.5 (3.7) 19.8
Consolidated balance sheet

3 0September2009 Currenttrade andother receivables m Currenttrade andother payables m
3 0September2008 Currenttrade andother receivables m Currenttrade andother payables m
Equity m
1,536 (54) 1,482
(4,162) (58) (4,220)
2,286 (112) 2,174
1,653 (54) 1,599
(4,057) (16) (4,073)
2,596 (70) 2,526
(iii) Pro forma financial information Anunauditedproformaincomestatementfortheyearended 30September2010hasbeenpreparedbytheDirectors,onthepro formabasisdescribedbelow.Thisistoillustratetheestimated financialeffectontheconsolidatedincomestatementinthecurrent yearoftheunprecedentedclosureofUKandEuropeanairspace,
followingtheeruptionoftheEyjafjallajoekullvolcanoinIcelandinApril 2010.Duringthisperiodofclosureandtheperiodtoresumptionof afullflyingschedule,from15Apriltocirca23April2010,theGroups abilitytoearnrevenuefrompackageholidaysandflightswasseverely impactedandtheGroupincurredcostsassociatedwithdisruption causedtoholidaysinprogressandstrandedpassengers.

Theunauditedproformainformationispresentedalongsidethe consolidatedincomestatement.Thisistoprovideinformationwhich theDirectorsconsiderhelpstoprovideabetterunderstandingofthe underlyingperformanceofthebusiness.Thedifferencesbetween theunauditedproformaincomestatementinformationandthe consolidatedstatutoryincomestatementfortheyeararesummarised asfollows: Theproformaincomestatementexcludestheestimated incrementaldirectcostsincurredbytheGroupinrespectof welfarecoststoaccommodateandrepatriatethecustomerswho wereaffectedbytheclosureofEuropeanairspace.Thesecosts principallyincludehotelcostsforstrandedinboundandoutbound customersandthecostofrepatriationofinboundcustomers. Thesecostsamountto69m. Theproformaincomestatementincludestheestimatedrevenue (93m)andestimatedattributablecostofsalesandadministrative expenses(68m)fromholidaysandflightswhichwereboth bookedandpaidforpriortotheclosureoftheairspacebutwhich werecancelledorunabletodepartduringtheaffectedperiod (aforegonegrossprofitcontributionof25m). Theproformaincomestatementalsoincludesanestimated reductioninholidayandflightsalesof32mandcostofsales of22mintheimmediateperiodafter23April2010,asaresult oftheuncertaintyfromboththeoriginalclosureofairspaceand furtheradditionalclosuresanddisruptioninMay,particularly intheUK.Thisimpact,intermsofforegonegrossprofit contribution,isestimatedat10m. Certaincustomerswhoseholidaysand/orflightswerecancelled willhavesubsequentlyre-bookedtheirholidayoncefullholiday andflyingoperationscommencedagainafter23April2010. Itisnotpossibletoreliablytracksuchre-bookings.Itisalso notpossibletodemonstratethatthere-bookedholidaycapacity wouldnototherwisehavebeensoldandmadeapositive contribution,giventheabilityoftheGrouptosellanddistribute holidaysupuntilthedateofdeparture.Consequentlyno adjustmenthasbeentoreflectanestimateofsuchpossible re-bookingsintheproformainformation. Theproformaincomestatementdoesnotincludetheestimated benefitoflostrevenueandpositivecontributionwhichwouldhave arisenfromsaleoffurtherholidaysduringtheairspaceclosure periodfrom15-23April2010inthelatesmarketwhichwould otherwisehavedepartedduringthisperiod. Adetailedanalysisoftheimpactontheproformaincomestatement duetothevolcanicashdisruptionisshowninthetablebelow:
Estimated Cancellations impactpost Incremental 15-23April 23April costs m m m Total m
(iv) Underlying measures of profits and losses TheGroupbelievesthatunderlyingoperatingprofit,underlying profitbeforetaxandunderlyingearningspershareprovideadditional guidancetostatutorymeasurestohelpunderstandtheunderlying performanceofthebusinessduringthefinancialyear.Theterm underlyingisnotdefinedunderIFRS.Itisameasurethatisusedby managementtoassesstheunderlyingperformanceofthebusiness internallyandisnotintendedtobeasubstitutemeasureforadopted IFRSsGAAPmeasures.TheGroupdefinestheseunderlying measuresasfollows: Underlyingoperatingprofitisoperatingprofitorlossfrom continuingoperationsstatedbeforeseparatelydiscloseditems (Note3),acquisitionrelatedexpenses,impairmentofgoodwill, interestandtaxationontheGroupsshareoftheresultsofjoint venturesandassociates. Underlyingprofitbeforetaxisprofitorlossfromcontinuing operationsbeforetaxation(Groupandshareofjointventuresand associates),acquisitionrelateditems,impairmentofgoodwill,the interestexpenseofjointventuresandassociatesandseparately discloseditemsincludedwithinboththeoperatingresult(Note3) andnetfinancialexpenses(Note4). Underlyingearningsusedinthecalculationofunderlyingearnings pershareisprofitaftertaxfromcontinuingoperationsexcluding acquisitionrelateditems,impairmentofgoodwillandseparately discloseditemsincludedwithinboththeoperatingresult(Note3) andnetfinancialexpenses(Note4)(netofrelatedtaxation). Itshouldbenotedthatthedefinitionsofunderlyingitemsbeing usedintheseconsolidatedfinancialstatementsarethoseusedby theGroupandmaynotbecomparablewiththetermunderlying asdefinedbyothercompanieswithinboththesamesectoror elsewhere. (v) Separately disclosed items Separatelydiscloseditemsarethosesignificantitemswhichin managementsjudgementarehighlightedbyvirtueoftheirsizeor incidencetoenableafullunderstandingoftheGroupsfinancial performance.Suchitemsareincludedwithintheincomestatement captiontowhichtheyrelate(Notes3and4). (vi) Acquisition related expenses Acquisitionrelatedexpensescompriseamortisationofbusiness combinationintangibles,otheracquisitionrelatedexpensesand remunerationforpost-combinationservices. ThisfollowstheGroupsadoptionofIFRS3(Revised)forbusiness combinationscompletedafter1October2009.Therevisedstandard hasresultedinanumberofchangesforbusinesscombinationsmade afterthisdate,notablythatdirectlyattributableacquisitioncostsare tobeexpensedratherthanincludedaspartofthepurchaseprice andthatcontingentconsiderationisaccountedforatfairvalueat theacquisitiondatewithsubsequentchangestothefairvaluebeing recognisedintheconsolidatedincomestatement.Therevised standarddoesnotapplytobusinesscombinationsbefore1October 2009andthereisnoretrospectiveapplicationforbusiness combinationsbeforethatdate.
Revenue Costofsales Grossprofit Separatelydisclosed items(SDI) NonSDI
(93) 68 (25) (25) (25)
(32) 22 (10) (10) (10)
(69) (69) (69) (69)
(125) 21 (104) (69) (35) (104)
TheclosureofUKandEuropeanairspacehadnoeffectonthe comparativeyearto30September2009andthereforenopro formaincomestatementispresentedforthisperiod.
Group at a glance
(vii) Business and Performance Review TheGroupsbusinessactivities,togetherwithfactorslikelytoaffect itsfuturedevelopment,performanceandpositionaresetoutinthe BusinessPerformancesection.Inaddition,Note25setsoutthe Groupsobjectives,policiesandprocessesformanagingitscapital, financialrisks,financialinstrumentsandhedgingactivitiesaswellas itsexposurestocreditandliquidityrisk. (viii) Funding and liquidity TheBoardremainssatisfiedwiththeGroupsfundingandliquidity position.Themainsourcesofdebtfundingare: 1. theshareholderloanfromTUIAG,whichis669mandisbeing repaidasfollows:1December2010:509mand30April2011: 160m; 2. atotalof1,060msyndicatedbankrevolvingcreditfacilitieswhich matureinJune2012; 3. 40mofbondingandletterofcreditfacilitieswhichmaturein September2011andafurther50mwhichmatureinJune2012; 4. a350mconvertiblebond(due2014)issuedon1October2009 andsettledon5October2009;and 5. a400mconvertiblebond(due2017)issuedon22April2010 andsettledon27April2010. Inadditiontotheabovefacilitiesafurther30mbondingand letterofcreditfacilitywhichmaturesinJune2012wassigned on15October2010. TheratioofEarningsBeforeInterest,Taxation,Depreciation, AmortisationandoperatingleaseRentals(EBITDAR)tofixed charges(beingtheaggregateamountofinterestandanyother financechargesinrespectofborrowingsandincludingallpayments underoperatingleases)andtheratioofnetdebttoEarningsBefore Interest,Taxation,DepreciationandAmortisation(EBITDA),which theBoardbelievestobethemostusefulmeasuresofcashgeneration andgearing,aswellasbeingthemainbasisfortheGroupscredit facilitycovenants,arecurrentlywellwithinthecovenantlimits. ForecastsreviewedbytheBoard,includingforecastsadjustedfor significantlyworseeconomicconditions,showcontinuedcompliance withthesecovenants.Forbothcovenants,earningsarecalculatedon anunderlyingbasisasdescribedinNote1(B)(iv). Onthebasisofitsforecasts,bothbasecaseandadjustedas describedabove,andavailablefacilities,theBoardhasconcludedthat thegoingconcernbasisofpreparationcontinuestobeappropriate. InparticulartheBoardbelievethatthefundingalreadyinplaceis sufficienttorepaytheShareholderloanwhichwillbecomepayable asdescribedabove. (C) Basis of consolidation Theconsolidatedfinancialstatementsarepreparedonthehistorical costbasisotherthanderivativefinancialinstruments,financial instrumentsheldfortrading,financialinstrumentsclassified asavailableforsaleandliabilitiesforcash-settledshare-based payments,whicharestatedattheirfairvalue.Non-currentassets anddisposalgroupsheldforsalearestatedattheloweroftheir carryingamountandfairvaluelesscoststosell. TheGroupfinancialstatementsconsolidatethoseoftheCompany anditssubsidiaries(togetherreferredtoastheGroup)andequity accounttheGroupsinterestinjointventuresandassociates. Theparentcompanyfinancialstatementspresentinformation abouttheCompanyasaseparateentityandnotabouttheGroup.
(i) Subsidiaries SubsidiariesareentitiescontrolledbytheGroup.Controlexists whentheGrouphasthepower,directlyorindirectly,togovernthe financialandoperatingpoliciesofanentitysoastoobtainbenefits fromitsactivities.Inassessingcontrol,potentialvotingrightsthat arecurrentlyexercisableorconvertiblearetakenintoaccount. Thefinancialstatementsofsubsidiariesareincludedinthe consolidatedfinancialinformationfromthedatethatcontrol commencesuntilthedatethatcontrolceases. (ii) Joint ventures and associates Jointventuresarejointlycontrolledentitieswhoseactivitiesthe Grouphasthepowertojointlycontrol,establishedbycontractual agreement.AssociatesarethoseentitiesinwhichtheGrouphasthe abilitytoexercisesignificantinfluence,butnotcontrol,overthe financialandoperatingpolicies.Theconsolidatedfinancialstatements includetheGroupsshareofthetotalrecognisedincomeandexpense andchangesinequityofjointventuresandassociatesonanequity accountedbasis,fromthedatethatjointcontrolorsignificant influencerespectivelycommencesuntilthedatethatitceases. Associatesandjointventuresarerecordedatcostasadjustedfor post-acquisitionchangesintheGroupsshareofnetassetsofthe entityincludinggoodwillnetofaccumulatedimpairmentloss.When theGroupsshareoflossesexceedsthecarryingamountofthejoint ventureorassociate,thecarryingamountisreducedtoniland recognitionoffurtherlossesisdiscontinuedexcepttotheextentthat theGrouphasincurredlegalorconstructiveobligationsormade paymentsonbehalfofthejointventureorassociate. (iii) Transactions eliminated on consolidation Intra-groupbalancesandanyunrealisedgainsorincomeand expensesarisingfromintra-grouptransactions,areeliminatedin preparingtheconsolidatedfinancialstatements.Unrealisedgains arisingfromtransactionswithassociatesandjointlycontrolledentities areeliminatedtotheextentoftheGroupsinterestintheentity. Unrealisedlossesareeliminatedinthesamewayasunrealisedgains, butonlytotheextentthatthereisnoevidenceofimpairment. (iv) Acquisition in stages WhereaGroupgainscontrolofasubsidiaryundertakingthrougha stepacquisition,theexistinginterestownedisremeasuredatfair valuewiththedifferencebetweenfairvalueandbookvaluebeing recognisedintheincomestatement.Theaccountingimpactof changesinshareownershipwhichdonotaffectcontrolisaccounted forthroughreserves. (v) Contingent acquisition consideration (for business combinations from 1 October 2009) Contingentconsiderationisaccountedforatfairvalueatthe acquisitiondatewithsubsequentchangesinthefairvaluebeing recognisedintheincomestatement.Contingentconsideration dependentuponcontinuingserviceofanemployeeischargedtothe incomestatementovertherelatedserviceperiod. Contingent acquisition consideration (for business combinations up until 30 September 2009) Contingentconsiderationisrecognisedwhenthepaymentamount becomesprobableandtheamountscanbereliablymeasured. Thepurchasepriceissubsequentlyadjustedagainstgoodwillor negativegoodwillastheestimateoftheamountpayableisrevised.

Thetermcontingentconsiderationhasbeenusedthroughoutthese financialstatementstodescribethepartoftheoverallconsideration paidtotheformershareholdersofbusinessesacquiredonorafter 1October2009thatiscontingentuponthefutureresultsofthose acquiredbusinesses,includingwherethepaymentiscontingenton thoseformershareholdersundertakingemploymentwiththeGroup forapredeterminedperiodaftertherelevantbusinesscombination. IFRS3(revised)requiresthattheseamountsarechargedtothe consolidatedincomestatementasapost-acquisitionemploymentcost overthetermoftherelevantpost-combinationemploymentperiod. TheGroupincludestherelevantincomestatementchargewithin acquisitionrelatedexpenses(Note13).TheDirectorsbelievethe commercialnatureofthesepaymentsmeansthatthistermremains themostappropriatetodescribethesepayments,notwithstanding theaccountingtreatmentrequiredbyIFRS3(revised). (vi) Non-current assets held for sale TheGroupclassifiesnon-currentassetsasheldforsaleiftheir carryingamountwillberecoveredprincipallythroughasale transactionratherthanthroughcontinuinguse.Tobeclassifiedas heldforsale,theassetsmustbeavailableforimmediatesaleintheir presentcondition,subjectonlytotermsthatareusualandcustomary forthesaleofsuchassets,andtheirsalemustbehighlyprobable. Saleisconsideredtobehighlyprobablewhenmanagementare committedtoaplantoselltheassetsandanactiveprogrammeto locateabuyerandcompletetheplanhasbeeninitiated,ataprice thatisreasonableinrelationtotheircurrentfairvalue,andthereisan expectationthatthesalewillbecompletedwithinoneyearfromthe dateofclassification.Non-currentassetsclassifiedasheldforsale arecarriedontheGroupsbalancesheetattheloweroftheircarrying amountandfairvaluelesscoststosell. (D) Foreign currency (i) Foreign currency transactions Transactionsinforeigncurrenciesaretranslatedattheforeign exchangeraterulingatthedateofthetransaction.Monetaryassets andliabilitiesdenominatedinforeigncurrenciesatthebalancesheet datearetranslatedtoSterlingattheforeignexchangeraterulingat thatdate.Foreignexchangedifferencesarisingontranslationare recognisedintheincomestatement(exceptfordifferencesarisingon theretranslationofafinancialliabilitydesignatedasahedgeofthe netinvestmentinaforeignoperation,orqualifyingcashflowhedges, whicharerecogniseddirectlyinequity).Non-monetaryassetsand liabilitiesthataremeasuredintermsofhistoricalcostinaforeign currencyaretranslatedusingtheexchangerateatthedateofthe transaction.Non-monetaryassetsandliabilitiesdenominatedin foreigncurrenciesthatarestatedatfairvaluearetranslatedto Sterlingatforeignexchangeratesrulingatthedatesthefairvalues weredetermined. (ii) Foreign operations Theassetsandliabilitiesofforeignoperations,includinggoodwill andfairvalueadjustmentsarisingonconsolidation,aretranslatedto Sterlingattheforeignexchangeratesrulingatthebalancesheetdate. Therevenuesandexpensesofoverseasoperationsaretranslated atratesapproximatingtotheforeignexchangeratesrulingatthe datesofthetransactions.Foreignexchangedifferencesarisingon retranslationhavebeenrecogniseddirectlyinequityinthetranslation reserve,adesignatedforeignexchangereserve,since1January2007. Foreignexchangegainsandlossesarisingfromamonetaryitem receivablefromorpayabletoaforeignoperation,thesettlement ofwhichisneitherplannednorlikelyintheforeseeablefuture,are consideredtoformpartofanetinvestmentinaforeignoperation andarerecogniseddirectlyinequityinthetranslationreserve. (iii) Net investment in foreign operations TheGroupapplieshedgeaccountingtoforeigncurrencydifferences arisingbetweenthefunctionalcurrencyoftheforeignoperation andtheparententitysfunctionalcurrency(Sterling)regardless ofwhetherthenetinvestmentishelddirectlyorthroughan intermediateparent. Foreigncurrencydifferencesarisingontheretranslationofa financialliabilitydesignatedasahedgeofanetinvestmentina foreignoperationarerecognisedintheconsolidatedstatementof comprehensiveincometotheextentthatthehedgeiseffectiveand arepresentedwithinequityinthetranslationreserve.Totheextent thatthehedgeisineffective,suchdifferencesarerecognisedinprofit orloss.Whenthehedgedpartofanetinvestmentisdisposedofthe relevantamountinthetranslationreserveistransferredtoprofitor lossaspartoftheprofitorlossondisposal. (E) Financial instruments (i) Financial assets Financialassetsareeitherclassifiedasloansandreceivables,available forsalefinancialassets,orfinancialassetsatfairvaluethroughprofit orloss.Financialassetsincludecashandcashequivalents,trade receivables,otherreceivables,loans,tradeandotherinvestments andderivativefinancialinstruments.TheGroupdeterminesthe classificationofitsfinancialassetsatinitialrecognition.Financial assetsarerecognisedinitiallyatfairvalue,normallybeingthe transactionpriceplus,inthecaseoffinancialassetsnotatfair valuethroughprofitorloss,directlyattributabletransactioncosts. Thesubsequentmeasurementoffinancialassetsdependsontheir classification,asfollows: Loans and receivables Loansandreceivablesarenon-derivativefinancialassetswith fixedordeterminablepaymentsthatarenotquotedinanactive market.Suchassetsarecarriedatamortisedcostusingthe effectiveinterestmethodifthetimevalueofmoneyissignificant. Gainsandlossesarerecognisedinincomewhentheloansand receivablesarederecognisedorimpaired,aswellasthroughthe amortisationprocess.Thiscategoryoffinancialassetsincludes tradeandotherreceivables. Available for sale financial assets Availableforsalefinancialassetsarethosenon-derivativefinancial assetsthatarenotclassifiedasloansandreceivablesorfinancial assetsatfairvaluethroughprofitorloss.Afterinitialrecognition, availableforsalefinancialassetsaremeasuredatfairvalue,withgains orlossesrecognisedasaseparatecomponentofequityuntilthe investmentisderecognisedoruntiltheinvestmentisdeterminedto beimpaired,atwhichtimethecumulativegainorlosspreviously reportedinequityisincludedintheconsolidatedincomestatement. Note1(Y)(iv)describesthebasisonwhichfairvalueisdetermined. Financial assets at fair value through profit or loss Financialassetsatfairvaluethroughprofitorlossaremeasuredat fairvalueafterinitialrecognition.Thegainorlossisincludedinthe consolidatedincomestatement.Note1(Y)(iv)describesthebasis onwhichfairvalueisdetermined.
Group at a glance
Cash and cash equivalents Cashandcashequivalentscomprisecashbalancesandcalldeposits whicharereadilyconvertibletoknownamountsofcashandwhich aresubjecttoinsignificantriskofchangesinvalueandhavean originalmaturityofthreemonthsorless.Bankoverdraftsthatare repayableondemandandformanintegralpartoftheGroups cashmanagementareincludedasacomponentofcashandcash equivalentsforthepurposeonlyoftheconsolidatedstatement ofcashflows. Derivatives Derivativesareaccountedforinaccordancewiththepolicyin Note1(E)(iii). Derecognition TheGroupderecognisesafinancialassetwhenthecontractual rightstothecashflowsfromtheassetexpire,orittransfersthe rightstoreceivethecontractualcashflowsonthefinancialasset inatransactioninwhichsubstantiallyalltherisksandrewardsof ownershipofthefinancialassetaretransferred.Anyinterestin transferredfinancialassetsthatiscreatedorretainedbytheGroup isrecognisedasaseparateassetorliability. (ii) Financial liabilities Financialliabilitiesareeitherclassifiedasfinancialliabilitiesmeasured atamortisedcost,orfinancialliabilitiesatfairvaluethroughprofitor loss.Financialliabilitiesincludetradeandotherpayables,accruals, financedebtandderivativefinancialinstruments.TheGroup determinestheclassificationofitsfinancialliabilitiesatinitial recognition.Financialliabilitiesarerecognisedinitiallyatfairvalue, normallybeingthetransactionpriceplus,inthecaseoffinancial liabilitiesnotatfairvaluethroughprofitorloss,directlyattributable transactioncosts.Thesubsequentmeasurementoffinancialliabilities dependsontheirclassification,asfollows: Financial liabilities measured at amortised cost Allfinancialliabilitiesareinitiallyrecognisedatfairvalue.Forinterestbearingloansandborrowingsthisisthefairvalueoftheproceeds receivednetofissuecostsassociatedwiththeborrowing.Afterinitial recognition,financialliabilitiesotherthanthoseatfairvaluethrough profitorlossaresubsequentlymeasuredatamortisedcostusingthe effectiveinterestmethod.Amortisedcostiscalculatedbytakinginto accountanyissuecostsandanydiscountorpremiumonsettlement. Gainsandlossesarisingontherepurchase,settlementorcancellation ofliabilitiesarerecognisedrespectivelyininterestandotherrevenues andfinancecosts.Thiscategoryoffinancialliabilitiesincludestrade andotherpayables. Convertible bonds Convertiblebondsareseparatedintothreecomponents:liability, issuercalloptionandequityatinception.Eachcomponentis recognisedseparately. Theinitialfairvalueoftheliabilitycomponentoftheconvertible bondisdeterminedusingthemarketinterestrateforanequivalent non-convertiblebondandissubsequentlyrecordedatanamortised costbasisusingtheeffectiveinterestmethoduntilextinguishedon conversionormaturityofthebonds.Theissuercalloptionisfair valuedusingavaluationmodelandismeasuredateachbalancesheet datewithchangesinfairvaluerecognisedintheincomestatement. Theremainderoftheproceedsarerecognisedinshareholdersequity inretainedearnings.
Issuecostsareapportionedbetweentheliabilityandequity componentsofaconvertiblebondbasedontheallocationof proceedstotheliabilityandequitycomponentswhenthe instrumentsarefirstrecognised. Derivatives Derivativesareaccountedforinaccordancewiththepolicyin Note1(E)(iii). Derecognition TheGroupderecognisesafinancialliabilitywhenthecontractual obligationstopaythecontractualcashflowsonthefinancialliability aredischarged,cancelledorexpire. (iii) Derivative financial instruments TheGroupusesderivativefinancialinstrumentstohedgeits exposuretoforeignexchange,interestrateandfuelpricerisks arisingfromoperational,financingandinvestmentactivities. Inaccordancewithitstreasurypolicy,theGroupdoesnothold orissuederivativefinancialinstrumentsfortradingpurposes. However,derivativesthatdonotqualifyforhedgeaccountingare accountedforastradinginstruments. Derivativefinancialinstrumentsareinitiallyrecognisedatfairvalue onthedateaderivativecontractisenteredintoandaresubsequently remeasuredatfairvalue.Themethodofrecognisingtheresulting gainorlossdependsonwhetherthederivativeisdesignatedasa hedginginstrumentandifsothenatureoftheitembeinghedged. Thegainorlossonremeasurementtofairvalueonderivativesnot designatedasahedginginstrumentisrecognisedimmediatelyinthe incomestatement.Wherederivativesqualifyforhedgeaccounting, seeAccountingPolicyNote1(F). (iv) Share capital Ordinarysharesareclassifiedasequity.Incrementalcostsdirectly attributabletotheissueofordinarysharesandshareawardsare recognisedasadeductionfromequity,netofanytaxeffects. (F) Hedge accounting TheGroupdesignatescertainderivativesaseitherhedgesofa particularriskassociatedwitharecognisedassetorliabilityorahighly probableforecasttransaction(cashflowhedge)orahedgeofthefair valueofrecognisedassetsorliabilitiesorafirmcommitment(fair valuehedge). Oninitialdesignationofthehedge,theGroupformallydocumentsthe relationshipbetweenthehedginginstrument(s)andhedgeditem(s), includingtheriskmanagementobjectivesandstrategyinundertaking thehedgetransaction,togetherwiththemethodsthatwillbeusedto assesstheeffectivenessofthehedgingrelationship.TheGroup makesanassessment,bothattheinceptionofthehedgerelationship aswellasonanongoingbasis,whetherthehedginginstrumentsare expectedtobehighlyeffectiveinoffsettingthechangesinthefair valueorcashflowsoftherespectivehedgeditemsduringtheperiod forwhichthehedgeisdesignatedandwhethertheactualresultsof eachhedgearewithinarangeof80-125%.Foracashflowhedgeof aforecasttransaction,thetransactionshouldbehighlyprobableto occurandshouldpresentanexposuretovariationsincashflowsthat couldultimatelyaffectreportednetincome.

Derivativesarerecognisedinitiallyatfairvalue;attributable transactioncostsarerecognisedinprofitorlossasincurred. Subsequenttoinitialrecognition,derivativesaremeasuredatfair value,andchangesthereinareaccountedforasdescribedbelow: (i) Cash flow hedges Whereaderivativefinancialinstrumentisdesignatedasahedgeof thevariabilityincashflowsarisingfromarecognisedassetorliability, orahighlyprobableforecasttransaction,theeffectivepartofanyfair valuegainorlossonthederivativefinancialinstrumentisrecognised directlyinthehedgingreserve.Anyineffectiveportionofthehedge isrecognisedimmediatelywithintheconsolidatedincomestatement. Whentheforecasttransactionsubsequentlyresultsintherecognition ofanon-financialassetornon-financialliability,theassociated cumulativegainorlossisremovedfromthehedgingreserveandis includedintheinitialcostorothercarryingamountofthenonfinancialassetorliability.Ifahedgeofaforecasttransaction subsequentlyresultsintherecognitionofafinancialassetora financialliability,theassociatedgainsandlossesthatwererecognised directlyinequityarereclassifiedintotheconsolidatedincome statementinthesameperiodorperiodsduringwhichtheasset acquiredorliabilityassumedaffectsprofitorloss. Forcashflowhedges,otherthanthosecoveredbytheprecedingtwo paragraphs,theassociatedcumulativegainorlossisremovedfrom equityandrecognisedintheconsolidatedincomestatementinthe sameperiodorperiodsduringwhichthehedgedforecasttransaction affectstheconsolidatedincomestatement. Prospectivehedgetestingisperformedattheinceptionofthehedge relationshipandsubsequentlyateachbalancesheetdate,through comparisonofthecriticaltermsofthehedgedforecasttransaction andthehedginginstrument.Criticaltermsarethematurity,amount andcurrencyofthecashflowsrelatingtothehedginginstrumentand theforecasthedgedtransaction.Retrospectivehedgetestingis performedateachreportingdateprincipallyusingadollaroffset analysis,comparingthecumulativechangesinthefairvaluesofthe forecasthedgedtransactionandthehedginginstrument. Whenahedginginstrumentnolongermeetsthecriteriaforhedge accounting,expiresorissold,terminatedorexercised,ortheentity revokesdesignationofthehedgerelationship,hedgeaccountingis discontinuedprospectively.Ifthehedgedforecasttransactionisstill expectedtooccur,thecumulativegainorlossatthatpointremainsin equityandisrecognisedinaccordancewiththeabovepolicywhenthe transactionoccurs.Ifthehedgedtransactionisnolongerexpectedto takeplace,thecumulativeunrealisedgainorlossrecognisedinequity isrecognisedintheconsolidatedincomestatementimmediately. (ii) Fair value hedges Whereaderivativefinancialinstrumentisdesignatedasahedge ofthevariabilityinfairvalueofarecognisedassetorliabilityoran unrecognisedfirmcommitment,allchangesinthefairvalueofthe derivativearerecognisedimmediatelyintheincomestatement. Thecarryingvalueofthehedgeditemisadjustedbythechange infairvaluethatisattributabletotheriskbeinghedged(evenifit isnormallycarriedatcostoramortisedcost)andanyfairvaluegains orlossesonremeasurementofthehedgedriskarerecognised immediatelyintheincomestatement(evenifthosegainswould normallyberecogniseddirectlyinequity). (G) Revenue Revenuerepresentstheaggregateamountearnedfrominclusive tours,scheduledandcharterflying,provisionofincomingagency destinationservices,travelagencycommissionreceivedandother servicessuppliedtocustomersintheordinarycourseofbusiness. Revenueexcludesintra-grouptransactionsandisstatedafterthe deductionoftradediscountsandsalestaxes.Revenueisreported grossoffixedchargeswhicharealiabilityofthetouroperatoror airline.TheseincludeAirPassengerDutyandotherperpassenger chargesandlevies,includingtheATOLProtectionContributionin theUK. (i) Revenue recognition Revenueisrecognisedintheconsolidatedincomestatementwhen thesignificantrisksandrewardsofownershiphavebeentransferred tothebuyer.Travelagencycommissionsandotherrevenuesreceived fromthesaleofthird-partyproductarerecognisedwhentheyare earned,typicallyonreceiptoffinalpayment.Revenueinrespectof inhouseproductisallrecognisedonthedateofdeparture.Revenue fromindividualtravelmodulesdirectlybookedbythecustomer withairlines,hotelsandincomingagenciesisrecognisedwhenthe customerdepartsorusestherespectiveservice. Norevenueisrecognisediftherearesignificantuncertainties regardingrecoveryoftheconsiderationdueorassociatedcosts. (ii) Client monies received in advance (deferred income) Clientmoniesreceivedatthebalancesheetdaterelatingtoholidays commencingandflightsdepartingaftertheyearendaredeferred andincludedwithintradeandotherpayables. (iii) Valuation of revenue WheretheGroupactsasprincipal,revenueisstatedatthe contractualvalueofgoodsandservicesprovided. WheretheGroupactsasagentandcollectsamountsonbehalfofthe principalproviderofgoodsorservices,revenueisstatedatthevalue ofthecommissionsearnedandnotthetotaltransactionsalesvalue. WheretheGroupactsasintermediarybetweentheserviceprovider andtheendcustomer,revenueispresentedonanetbasisasthe differencebetweenthesalespricetothecustomerandthecostof theservicespurchased.Businessesareidentifiedasintermediaries dependentonanumberofcriteria,principallyincluding:thecontrol exercisedovertheprovisionofservice,inventoryrisk,andcustomer creditrisk. (iv) Aircraft lease income Operatingleaserentalincomesarerecognisedinoperatingincome asearned,onastraightlinebasisovertheleaseterm. (H) Expenses (i) Operating lease payments Paymentsmadeunderoperatingleasesarerecognisedinthe consolidatedincomestatementonastraightlinebasisovertheterm ofthelease.Leaseincentivesreceivedarerecognisedinthe consolidatedincomestatementasanintegralpartofthetotallease expenseoverthetermofthelease.
Group at a glance
(ii) Finance lease payments Minimumleasepaymentsareapportionedbetweenthefinance chargeandthereductionoftheoutstandingliability.Thefinance chargeisallocatedtoeachperiodduringtheleasetermsoasto produceaconstantperiodicrateofinterestontheremainingbalance oftheliability. (iii) Marketing and other direct sales costs Marketing,advertisingandotherpromotionalcosts,includingthose relatedtotheproductionofbrochures,areexpensedwhenthe benefitofthegoodsorservicesismadeavailabletotheGroup. Inparticular,brochurecostsareexpensedwhentheGrouphas accesstotherelatedadvertisingorpromotionalmaterial. (I) Employee benefits (i) Defined contribution plans Obligationsforcontributionstodefinedcontributionpensionplans arerecognisedasanexpenseintheconsolidatedincomestatement asincurred. (ii) Defined benefit plans TheGroupsnetobligationinrespectofdefinedbenefitpensionplans iscalculatedseparatelyforeachplanbyestimatingtheamountof futurebenefitthatemployeeshaveearnedinreturnfortheirservice incurrentandpriorperiods.Thatbenefitisdiscountedtodetermine itspresentvalueandanyunrecognisedpastservicecostsandthefair valueofanyplanassetsisdeductedincalculatingtheoverallliability. Theliabilitydiscountrateistheyieldatthebalancesheetdateon AAcredit-ratedbondsdenominatedinthecurrencyof,andhaving thesamematuritydatesapproximatingto,thetermsoftheGroups obligations.Thecalculationisperformedbyaqualifiedactuaryusing theprojectedunitcreditmethod. WherethecalculationresultsinabenefittotheGroup,theasset recognisedislimitedtothepresentvalueofanyfuturerefundsfrom theplanorreductionsinfuturecontributionstotheplanwhichare underthecontroloftheGroup. Whenthebenefitsofaplanareimproved,theportionofthe increasedbenefitrelatingtopastservicesbyemployeesisrecognised asanexpenseintheconsolidatedincomestatementonastraightline basisovertheaverageperioduntilthebenefitsbecomevested. Totheextentthatthebenefitsvestimmediately,theexpenseis recognisedimmediatelyintheconsolidatedincomestatement. Allactuarialgainsandlossesarerecognisedintheperiodthey occurdirectlyinequitythroughtheconsolidatedstatementof comprehensiveincome.Eithermonthlyorannualcontributions aremadetofundedschemes. (iii) Share-based payment transactions TheGroupsshareawardprogrammesallowcertainGroupemployees toacquiresharesoftheCompany;thesesharesareawardedbythe Company.Forequity-settledtransactions,thefairvalueofservices ismeasuredbythefairvalueofthesharesatthetimeawardedand isrecognisedasanemployeeexpensewithacorrespondingincrease inequity.Thefairvalueisspreadovertheperiodduringwhichthe employeebecomesentitledtotheawards.
Thefairvalueoftheawardsismeasuredusingoptionvaluation models,takingintoaccountthetermsandconditionsuponwhichthe awardsweremade.Theamountrecognisedasanexpenseisadjusted toreflecttheactualnumberofshareawardsthatvestexceptwhere forfeitureisdueonlytomarket-basedperformanceconditionsnot meetingthethresholdforvesting. Forcash-settledtransactions,theresultingliabilityfortheGroupis chargedtoexpensesatitsfairvalueasatthedateoftheperformance oftheservicebythebeneficiary.Untilpaymentofthisliability,the fairvalueoftheliabilityisremeasuredateveryreportingdateandall changesinthefairvaluearecarriedwithaneffectonresults. (iv) Own shares held by the Employee Benefit Trusts TransactionsoftheGroup-sponsoredEmployeeBenefitTrusts(the Trusts)areincludedintheGroupsconsolidatedfinancialstatements. Inparticular,theTrustspurchaseofsharesintheCompanyisdebited directlyinequitytoretainedearnings/(deficit). (v) Short-term benefits Short-termemployeebenefitsaremeasuredonanundiscounted basisandareexpensedastherelatedserviceisprovided. (J) Financial income and expenses Financialincomecomprisesinterestincomeonfundsinvested (includingavailableforsalefinancialassets),dividendincome,gains onthedisposalofavailableforsalefinancialassetsandchangesinthe fairvalueoffinancialassetsorliabilitiesatfairvaluethroughprofitor loss.Interestincomeisrecognisedasitaccruesinprofitorloss,using theeffectiveinterestmethod.Dividendincomeisrecognisedin profitorlossonthedatethattheGroupsrighttoreceivepaymentis establishedwhich,inthecaseofquotedsecurities,istheex-dividend date.Foreigncurrencygainsandlossesarereportedonanetbasis. Financialexpensescompriseinterestexpenseonborrowings, unwindingofthediscountonprovisions,changesinthefairvalueof financialassetsorliabilitiesatfairvaluethroughprofitorlossand impairmentlossesrecognisedonfinancialassets.Allborrowingcosts arerecognisedinprofitorlossusingtheeffectiveinterestmethod. Foreigncurrencygainsandlossesarereportedonanetbasis. (K) Taxation Incometaxcomprisescurrentanddeferredtax.Incometaxis recognisedintheconsolidatedincomestatementexcepttothe extentthatitrelatestoitemsrecogniseddirectlyinequity,in whichcaseitisrecognisedinequity. (i) Current tax Currenttaxistheexpectedtaxpayableonthetaxableincomefor theperiod,usingtaxratesenactedorsubstantivelyenactedatthe balancesheetdate,andanyadjustmenttotaxpayableinrespect ofpreviousperiods.

(ii) Deferred tax Deferredtaxisprovidedorrecognisedusingthebalancesheetliability method,providingfortemporarydifferencesbetweenthecarrying amountsofassetsandliabilitiesforfinancialreportingpurposesand theamountsusedfortaxationpurposes.Thefollowingtemporary differencesarenotprovidedfor:theinitialrecognitionofgoodwill notdeductiblefortaxpurposes,theinitialrecognitionofassetsor liabilitiesinatransactionthatisnotabusinesscombinationand differencesrelatingtoinvestmentsinsubsidiariestotheextentthat theywillprobablynotreverseintheforeseeablefuture.Theamount ofdeferredtaxassetrecognisedisbasedontheexpectedmanner ofrealisationorsettlementofthecarryingamountofassetsand liabilities,usingthetaxrateatwhichtheassetorliabilityisexpected toreverseinfutureperiods,basedontaxlawsenactedor substantivelyenactedatthebalancesheetdate. Adeferredtaxassetisrecognisedonlytotheextentthatitis probablethatfuturetaxableprofitswillbeavailableagainstwhich theassetcanbeutilised.Deferredtaxassetsarereducedtothe extentthatitisnolongerprobablethattherelatedtaxbenefitwill berealised. (L) Dividends DividenddistributiontotheCompanysshareholdersisrecognised asaliabilityintheGroupsfinancialstatementsintheperiodinwhich thedividendsareappropriatelyauthorisedandapprovedforpayment andarenolongeratthediscretionoftheCompany.Unpaiddividends thatdonotmeetthesecriteriaaredisclosedinthenotestothe financialstatements. (M) Earnings per share TheGrouppresentsbasicanddilutedearningspershare(EPS)data foritsordinaryshares.BasicEPSiscalculatedbydividingtheprofit orlossattributabletoordinaryshareholdersoftheCompanybythe weightedaveragenumberofordinarysharesoutstandingduringthe period.DilutedEPSisdeterminedbyadjustingtheweightedaverage numberofordinarysharesoutstandingfortheeffectsofalldilutive potentialordinaryshares.EPSmeasuresforbothcontinuingand discontinuedoperationshavebeenpresentedinaccordancewith IAS33.TheGroupalsopresentsabasicanddilutedunderlying EPSmeasurebasedonunderlyingearningsasdefinedin Note1(B)(iv)above.FurtherdetailsoftheEPScalculationare presentedinNote33. (N) Non-current assets held for sale IFRS5requiresthatanon-currentassetoradisposalgroup containinganon-currentassetisclassifiedasheldforsaleifits carryingamountwillberecoveredprincipallythroughsaleratherthan throughcontinuinguse,itisavailableforimmediatesaleandsaleis highlyprobablewithinoneyear. Oninitialclassificationasheldforsale,non-currentassetsand disposalgroupsaremeasuredatthelowerofpreviouscarrying amountandfairvaluelesscoststosellwithanyadjustments takentoprofitorloss.Thesameappliestogainsandlosses onsubsequentremeasurement. Anyimpairmentlossonadisposalgroupisallocatedfirsttogoodwill andthentoremainingapplicableassetsonaproratabasis(exceptno lossisallocatedtoinventories,financialassets,deferredtaxassets oremployeebenefitassets,whichcontinuetobemeasuredin accordancewiththeGroupsaccountingpolicies). Certainassets/liabilitiesareexcludedfromthemeasurementbasis ofIFRS5including:deferredtaxassets(IAS12IncomeTaxes),assets arisingfromemployeebenefits(IAS19EmployeeBenefits)and financialassetswithinthescopeofIAS39FinancialInstruments: RecognitionandMeasurement. (O) Investments Unlessdesignatedatfairvaluethroughprofitandloss,trade investmentsareclassifiedasavailableforsaleassetsandareincluded undernon-currentassets.Theyarerecordedatfairvaluewith movementsinvaluetakentoequity.Anyimpairmenttovalueis recordedintheincomestatement. Short-terminvestmentsindebtandequitysecuritieswhichareheld fortradingareclassifiedascurrentassetsandarestatedatfairvalue, withanyresultantgainorlossrecognisedintheincomestatement. (P) Intangible assets (i) Goodwill Allbusinesscombinationsareaccountedforbyapplyingthe purchasemethod. Goodwillrepresentsamountsarisingonacquisitionofsubsidiaries, jointventuresandassociates.Goodwillrepresentsthedifference betweenthefairvalueofconsiderationpaidorpayableandthenet fairvalueoftheidentifiableassets,liabilitiesandcontingentliabilities acquired.Identifiableintangibles,suchasbrandsandcustomer relationships,arethosewhichcanbesoldseparatelyorwhicharise fromcontractualorlegalrightsregardlessofwhetherthoserightsare separable,andthefairvaluecanbereliablymeasured.Identifiable intangiblesarethosewhichcanbesoldseparatelyorwhicharisefrom legalrightsregardlessofwhetherthoserightsareseparable.Goodwill isstatedatcostlessanyaccumulatedimpairmentlosses.Goodwillis allocatedtothosecashgeneratingunitsexpectedtobenefitfromthe businesscombinationandisnotamortisedbuttestedannuallyfor impairment.Impairmenttestingisbasedonassetsgroupedatthe lowestlevelatwhichgoodwillismonitoredforinternalmanagement purposes.Inrespectofjointventuresandassociates,thecarrying amountofgoodwillisincludedinthecarryingamountofthe investmentinthejointventureorassociate. Fairvalueadjustmentsaremadeinrespectofacquisitions.Ifatthe balancesheetdate,theamountsoffairvaluesoftheacquirees identifiableassetsandliabilitiescanonlybeestablishedprovisionally, thenthesevaluesareused.Anyadjustmentstothesevaluesare takenasadjustmentstogoodwillandmustberecordedwithin 12monthsoftheacquisition.Negativegoodwillarisingonan acquisitionisrecognisedintheincomestatementuponacquisition. (ii) Computer software and other intangible assets Computersoftwareconsistsofallsoftwarethatisnotanintegral partoftherelatedcomputerhardwareandisstatedatcostless accumulatedamortisationandimpairmentlosses.
Group at a glance
(iii) Amortisation Amortisationischargedtotheconsolidatedincomestatementon astraightlinebasisovertheestimatedusefuleconomiclifeofeach typeofintangibleassetasfollows: Computersoftware Brands Orderbookatdateofacquisition Customerrelationships

Licences
Assetsunderconstructionandadvancepayments,including capitalisedborrowingcosts,forfutureaircraftarenotdepreciated. Uponthedeliveryoftheaircraft,theadvancepaymentsare re-categorisedtoaircraftassetsanddepreciationiscommenced. (iv) Borrowing costs Inrespectofborrowingcostsrelatingtoqualifyingassets,theGroup capitalisesborrowingcostsdirectlyattributabletotheacquisition, constructionorproductionofaqualifyingassetaspartofthecost ofthatasset. TheGrouphascapitalisedborrowingcostswithrespectto pre-deliverypaymentsrelatingtoaircraft. (v) Sale and leaseback transactions Whenasaleandleasebackresultsinafinancelease,anygainon thesaleisdeferredandrecognisedasincomeovertheleaseterm. Anylossonthesaleisimmediatelyrecognisedasanimpairment losswhenthesaleoccurs. Iftheleasebackisclassifiedasanoperatinglease,thenanygain isrecognisedimmediatelyifthesaleandleasebacktermsare demonstrablyatfairvalue.Otherwise,thesaleandleasebackare accountedforasfollows: Ifthesalepriceisbelowfairvalue,thenthegainorlossis recognisedimmediately,otherthantotheextentthatalossis compensatedforbyfuturerentalsatabelow-marketprice,then thelossisdeferredandamortisedovertheperiodthattheasset isexpectedtobeused. Ifthesalepriceisabovefairvalue,thenanygainisdeferredand amortisedovertheusefullifeoftheasset. Ifthefairvalueoftheassetislessthanthecarryingamountof theassetatthedateofthetransaction,thenthatdifferenceis recognisedimmediatelyasalossonthesale. (R) Impairments (i) Financial assets Afinancialassetisassessedateachreportingdatetodetermine whetherthereisanyobjectiveevidencethatitisimpaired.Afinancial assetisconsideredtobeimpairedifobjectiveevidenceindicatesthat oneormoreeventshavehadanegativeeffectontheestimated futurecashflowsofthatasset. Animpairmentlossinrespectofafinancialassetiscalculatedasthe differencebetweenitscarryingamountanditsrecoverableamount. Animpairmentlossinrespectofanavailableforsalefinancialasset iscalculatedbyreferencetoitsfairvalue.Therecoverableamount oftheGroupsreceivableswhicharecarriedatamortisedcostis calculatedasthepresentvalueofestimatedfuturecashflows, discountedattheoriginaleffectiveinterestrate(i.e.theeffective interestratecomputedatinitialrecognitionofthesefinancialassets). Receivableswithashortdurationarenotdiscounted. Individuallysignificantfinancialassetsaretestedforimpairment onanindividualbasis.Theremainingfinancialassetsareassessed collectivelyingroupsthatsharesimilarcreditriskcharacteristics. Allimpairmentlossesarerecognisedinprofitorloss.Anycumulative lossinrespectofanavailableforsalefinancialassetpreviously recognisedinequityistransferredtoprofitorloss.Animpairment lossisreversedifthereversalcanberelatedobjectivelytoanevent occurringaftertheimpairmentlosswasrecognised.Forfinancial assetsmeasuredatamortisedcostandavailableforsalefinancial assetsthataredebtsecurities,thereversalisrecognisedinprofitor loss.Foravailableforsalefinancialassetsthatareequitysecurities, thereversalisrecogniseddirectlyinequity.
3-10years 15-20years vertheperioduntil O traveloccurs O vertheperiodduringwhich valuewillbeobtainedbythe Group(upto15years)

Overthetermoflicence
Strategic overview
Softwareindevelopmentisnotamortised.Uponcompletionof developmentandbringingthesoftwareintouse,thecostsare re-categorisedintocomputersoftwareandamortisationcommences. (Q) Property, plant and equipment (i) Owned assets Itemsofproperty,plantandequipmentarestatedatcostless accumulateddepreciationandimpairmentlosses. Wheresignificantpartsofanitemofproperty,plantandequipment havedifferentusefullives,theyareaccountedforasseparateitems ofproperty,plantandequipment. (ii) Leased assets LeasesinwhichtheGroupassumessubstantiallyalltherisksand rewardsofownershipareclassifiedasfinanceleases.Leasedassets acquiredbywayofafinanceleasearestatedatanamountequalto theloweroftheirfairvalueandthepresentvalueoftheminimum leasepaymentsattheinceptionofthelease,lessaccumulated depreciationandimpairmentlosses.Leasepaymentsareaccounted forassetoutinNote1(H)above. (iii) Depreciation Depreciationischargedtotheconsolidatedincomestatementon astraightlinebasisovertheestimatedusefuleconomiclivesofeach partofanitemofproperty,plantandequipment.Freeholdlandis notdepreciated.Theusefuleconomiclivesareasfollows: Freeholdproperties Shortleaseholdimprovements Ownedaircraft Financeleasedaircraft andequipment Aircraftspares Cruiseships Yachts Motorboats Computerequipmentincluding retailcomputerequipment Retailfixturesandfittings
Otherassets
Upto50years L easeperiodorusefuleconomic lifeifshorter Upto18years Leaseperiodorusefuleconomic lifeifshorter 12years 20years 5-15years 15-24years 3-5years 8years
4years
Thecostofmajoroverhaulsofownedairframesandenginesis capitalisedanddepreciatedovertheperioduntilthenextscheduled majoroverhaul. Thedepreciationmethods,usefuleconomiclivesandresidual valuesarereassessedannually.Revisionstousefuleconomiclives andresidualvaluesareaccountedforprospectivelyfromthedate ofchange.

(ii) Non-financial assets ThecarryingamountoftheGroupsnon-financialassets,other thaninventoryanddeferredtaxassets,arereviewedateach balancesheetdatetodeterminewhetherthereisanyindication ofimpairment.Ifsuchanindicationexists,theassetsrecoverable amountisestimated.Forgoodwill,therecoverableamountis estimatedateachbalancesheetdate. Animpairmentlossisrecognisedwheneverthecarryingamountof anassetoritscashgeneratingunitexceedsitsrecoverableamount. Therecoverableamountofanassetorcashgeneratingunitisthe greaterofitsvalueinuseandfairvaluelesscoststosell.Inassessing valueinuse,theestimatedfuturecashflowsarediscountedtotheir presentvalueusingapre-taxdiscountratethatreflectscurrent marketassessmentsofthetimevalueofmoneyandtherisksspecific totheasset.Acashgeneratingunitisthesmallestidentifiablegroup ofassetsthatgeneratescashinflowsthatarelargelyindependentof thecashinflowsfromotherassetsorgroupsofassets. Impairmentlossesarerecognisedinprofitorloss.Impairmentlosses recognisedinrespectofcashgeneratingunitsareallocatedfirstto reducethecarryingamountofgoodwillallocatedtothecash generatingunitandthentoreducethecarryingamountofother assetsintheunitonaproratabasis. Animpairmentlossinrespectofgoodwillisnotreversed.Inrespect ofotherassets,impairmentlossesrecognisedinpriorperiodsare assessedateachreportingdateforanyindicationsthatthelosshas decreasedornolongerexists.Animpairmentlossisreversedifthere hasbeenachangeintheestimatesusedtodeterminetherecoverable amount.Animpairmentlossisreversedonlytotheextentthatthe assetscarryingamountdoesnotexceedthecarryingamountthat wouldhavebeendetermined,netofdepreciationoramortisation,if noimpairmentlosshadbeenrecognised. (S) Inventories Inventoriesaremeasuredatthelowerofcostornetrealisablevalue. Netrealisablevalueistheestimatedsellingpricelesstheestimated costsincurreduntilthesaleandtheestimatedvariablecostsrequired tosell.Allinventoriesarewrittendownindividuallywherethenet realisablevalueofinventoriesislowerthantheircarryingamounts. Themeasurementmethodappliedtosimilarinventoryitemsisthe weightedaveragecostformula. (T) Provisions Aprovisionisrecognisedintheconsolidatedbalancesheetwhenthe Grouphasalegalorconstructiveobligationasaresultofapastevent, itisprobablethatanoutflowofeconomicbenefitswillberequiredto settletheobligationandtheoutflowofeconomicbenefitscanbe reliablyestimated.Iftheeffectismaterial,provisionsaredetermined bydiscountingtheexpectedfuturecashflowsatapre-taxratethat reflectscurrentmarketassessmentsofthetimevalueofmoneyand therisksspecifictotheliability. (i) Maintenance provision for leased aircraft ToreflectthelegalobligationsplacedupontheGroupunder thetermsofcertainoperatingleases,provisionismadeforthe maintenance,overhaulandrepaircostsofoperatingleasedairframes, enginesandcertainothercomponents.Theprovisionisbasedon thepresentvalueoftotalanticipatedexternalcostsovertheuseful economiclifeoftheassetcalculatedbyreferencetocosts experiencedandpublishedmanufacturersdata.Thechargetothe consolidatedincomestatementiscalculatedbyreferencetothe numberofhoursandcyclesflownandbyreferencetothelength ofthefulloverhaulcycle.Costsincurredarechargedagainstthe provision.Neitherthetimingnorthevalueoftheexpenditurecan bepreciselydeterminedbuttheycanbeaveragedovertimeand overafleet.Theunwindingofdiscountedvaluesischargedtothe consolidatedincomestatementasafinancialexpense. Thecostofmajoroverhaulsofownedairframesandenginesis capitalisedanddepreciatedovertheperioduntilthenextscheduled majoroverhaul. (ii) Restructuring provision AprovisionforrestructuringisrecognisedwhentheGroup hasapprovedadetailedandformalrestructuringplan,andthe restructuringeitherhascommencedorhasbeenannounced publicly.Futureoperatingcostsarenotprovidedfor. (iii) Onerous contracts Aprovisionforonerouscontractsisrecognisedwhentheexpected benefitstobederivedbytheGroupfromthecontractarelowerthan theunavoidablecostofmeetingitsobligationsunderthecontract. Theprovisionismeasuredatthepresentvalueofthelowerofthe expectedcostofterminatingthecontractandtheexpectednetcost ofcontinuingwiththecontract.Beforeaprovisionisestablished,the Grouprecognisesanyimpairmentlossontheassetsassociatedwith thatcontract. (U) Non-controlling interests Intheconsolidatedbalancesheet,theshareofnetassetsattributable tonon-controllinginterestsisdisclosedasaseparatecomponent ofequityaftersharecapitalandreserves,althoughitisneithera financialliabilitynoranequityinstrument.Theconsolidatedincome statementdisclosestheamountoftheresultfortheyearattributable tonon-controllinginterests. WheretheGrouphasawrittenputoptioninrespectofanoncontrollinginterestandhasanunavoidableobligationtopurchasethe shareholding,thenon-controllinginterestisrecordedasafinancial liabilityatfairvalue,ratherthanbeingreportedasaseparate componentofequity.Noresultisattributabletonon-controlling interestsandinsteadchangestothefairvalueofthefinancialliability arerecordedateachperiodendintheincomestatementwithin financialincomeorfinancialexpenses. Onpurchaseorsaleofanon-controllinginterestheldinaGroup subsidiary,theGrouprecognisesincreasesordecreasesinitsinterest directlyinequity. (V) Related parties Forthepurposeoftheseconsolidatedfinancialstatements,parties areconsideredtoberelatedtotheGroupiftheGrouphastheability, directlyorindirectly,tocontrolthepartyorexercisesignificant influenceoverthepartymakingfinancialandoperatingdecisions,or viceversa,orwheretheGroupandthepartyaresubjecttocommon controlorcommonsignificantinfluence.Relatedpartiesmaybe individualsorotherentities. (W) Segment reporting Anoperatingsegmentisacomponentofanentitythat: a) engagesinbusinessactivitiesfromwhichitmayearnrevenues andincurexpenses(includingrevenuesandexpensesrelatingto transactionswithothercomponentsofthesameentity); b) whoseoperatingresultsareregularlyreviewedbytheGMBto makedecisionsaboutresourcestobeallocatedtothesegment andassessitsperformance;and c) forwhichdiscretefinancialinformationisavailable. AsdescribedinNote2,allunderlyingoperatingitemsareallocated tothesegmentsunderlyingprofitexceptcentralcostsandnet financialexpenses.
Group at a glance
TheGrouphasdecidedtoadoptearlyanamendmenttoIFRS8 OperatingSegmentswhichstatesthatsegmentinformationfortotal assetsisonlyrequiredifsuchinformationisregularlyreportedtothe chiefoperatingdecision-maker. (X) Use of estimates Thepreparationoffinancialstatementsrequiresmanagement tomakejudgements,estimatesandassumptionsthataffectthe applicationofaccountingpoliciesandthereportedamountsof assets,liabilities,incomeandexpenses.Actualresultsmaydiffer fromtheseestimates. Estimatesandunderlyingassumptionsarereviewedonanongoing basis.Revisionstoaccountingestimatesarerecognisedintheperiod inwhichtheestimatesarerevisedandinanyfutureperiodsaffected. Detailsofcriticaljudgements,significantestimatesandassumptions aredisclosedintherelevantnotestotheconsolidatedfinancial statements.Thekeyaccountingestimatesandjudgementsare describedinNote31. (Y) Determination of fair values AnumberoftheGroupsaccountingpoliciesanddisclosuresrequire thedeterminationoffairvalue,forbothfinancialandnon-financial assetsandliabilities.Fairvalueshavebeendeterminedfor measurementand/ordisclosurepurposesbasedonthefollowing methods.Whenapplicable,furtherinformationaboutthe assumptionsmadeindeterminingfairvaluesisdisclosedinthe notesspecifictothatassetorliability. (i) Property, plant and equipment Thefairvalueofproperty,plantandequipmentrecognisedasa resultofabusinesscombinationisbasedonmarketvalues.The marketvalueofpropertyistheestimatedamountforwhicha propertycouldbeexchangedonthedateofvaluationbetweena willingbuyerandawillingsellerinanarmslengthtransactionafter propermarketingwhereinthepartieshadeachactedknowledgeably, prudentlyandwithoutcompulsion.Themarketvalueofitemsof plant,equipment,fixturesandfittingsisbasedonthequotedmarket pricesforsimilaritems. (ii) Intangible assets Thefairvalueofintangibleassetsrecognisedasaresultofabusiness combination,includingbrands,customerrelationshipsandthe customerorderbookatthedateofacquisition,isvaluedbyreference toexternalmarketvaluesorincome-basedmethods.Income-based methodsestimatethefutureeconomicbenefitstobederivedfrom ownershipoftheassetbyidentifying,quantifyingandseparatingcash flowsattributabletotheassetandcapitalisingtheirpresentvalue. (iii) Inventories Thefairvalueofinventoriesacquiredinabusinesscombinationis determinedbasedontheestimatedsellingpriceintheordinary courseofbusiness,lesstheestimatedcostsofcompletionandsale, andareasonableprofitmarginbasedontheeffortrequiredto completeandselltheinventories. (iv) Investments in equity and debt securities Thefairvalueoffinancialassetsatfairvaluethroughprofitorloss andavailableforsalefinancialassetsisdeterminedbyreferenceto theirquotedclosingbidpriceatthereportingdate,whereavailable. Ifthereisnomarketpriceavailablethefairvalueiscalculatedbased onothervaluationtechniques,includingassessmentsoffuture cashflows,estimatedsellingpriceandotheravailableinformation. Thefairvalueofheldtomaturityinvestmentsisdeterminedon initialrecognitionandthereafterfordisclosurepurposesonly.
(v) Trade and other receivables Tradereceivablesarerecognisedattheirfairvalueandsubsequently recordedatamortisedcostusingtheeffectiveinterestmethod asreducedbyallowancesforestimatedirrecoverableamounts. Anallowanceforirrecoverableamountsisestablishedwhenthere isobjectiveevidencethattheGroupwillnotbeabletocollectall amountsdueaccordingtotheoriginaltermsofthereceivables. Theamountofallowanceisthedifferencebetweentheassets carryingamountandthepresentvalueofestimatedfuturecashflows. (vi) Trade payables Tradepayablesarerecognisedattheirfairvalueandsubsequently recordedatamortisedcostusingtheeffectiveinterestmethod. (vii) Derivatives Thefairvalueofforeigncurrencycontracts,fuelforwardcontracts andoptioncontractsistheirforwardmarketpriceatthebalance sheetdate,basedonexternalvaluationsorinternalvaluationsusing marketdata. (viii) Non-derivative financial liabilities Fairvalue,whichisdeterminedfordisclosurepurposes,iscalculated basedonthepresentvalueoffutureprincipalandinterestcash flows,discountedatthemarketrateofinterestatthereportingdate. Forfinanceleasesthemarketrateofinterestisdeterminedby referencetosimilarleaseagreements. (ix) Share-based payments Thefairvalueofthesharesawardedismeasuredusingoption valuationmodels,takingintoaccountthetermsandconditionsupon whichtheawardsweremade.Thevaluationbasisisidenticalwhether theawardswillbesettledincashorshares. (Z) New Standards and interpretations not yet adopted ThefollowingstandardswhichareapplicabletotheGrouphave beenendorsedbytheEuropeanUnionandareeffectiveforthe yearending30September2011.Theyarenotexpectedtohavea significantimpactontheGroupsfinancialstatementsinfutureyears: IAS1PresentationofFinancialStatementshasbeenamendedto statethattheclassificationoftheliabilitycomponentofaconvertible instrumentascurrentornon-currentisnotaffectedbytermsthat, attheoptionoftheholder,resultinsettlementoftheliabilitythrough issueofequityinstruments. IAS7Statementofcashflowshasbeenamendedtostateexplicitly thatonlyexpenditurethatresultsinitiallyintherecognitionofan assetmaybeclassifiedasacashflowfrominvestingactivities. Paragraph14ofIAS17Leaseshasbeendeletedsuchthatalease oflandwithanindefiniteeconomiclifeneednotbeclassifiedasan operatinglease.Alandleasewithaleasetermofseveraldecadesor longermaybeclassifiedasafinancelease,evenifattheendofthe leasetermtitledoesnotpasstothelessee.Whenaleaseincludes bothlandandbuildings,classificationofeachelementofthelease willtakeaccountofthefactthatlandnormallyhasanindefinite economiclife. TheappendixofIAS18Revenuehasbeenamendedtospecifythatan entityactsasprincipalwhenexposedtosignificantrisksandrewards associatedwithsaleofgoodsorrenderingofservices.Further indicatorshavebeenaddedtotheappendixtoassistinassessing whetheranentityisprincipaloragent.

AmendmenttoIAS32Classificationofrightsissuesrequiresthat rights,optionsorwarrantstoacquireafixednumberoftheentitys ownequityinstrumentsforafixedamountofcurrencyareequity instrumentsiftheentityofferstherights,optionsorwarrantspro ratatoallofitsexistingownersofthesameclassofitsownnonderivativeequityinstruments. IAS36ImpairmentofAssetshasbeenamendedtostatethatthe largestunittowhichgoodwillisallocatedisoperatingsegmentlevel asdefinedinIFRS8beforeapplyingaggregationcriteriaofIFRS8.12. IAS38IntangibleAssetsMeasuringthefairvalueofanintangible assetacquiredinabusinesscombinationhasbeenamendedtoclarify thedescriptionofvaluationtechniquescommonlyusedtomeasure fairvalueofintangibleassetsacquiredinabusinesscombinationfor whichnoactivemarketexists. IAS39FinancialInstruments:RecognitionandMeasurementhasbeen amendedsothat: i) wheretheexercisepriceofanembeddedprepaymentoption reimbursesthelenderforanamountuptotheapproximate presentvalueofthelostinterestfortheremainingtermofthe hostcontract,thentheembeddedprepaymentoptionisclosely relatedtothehostcontractandtheembeddedderivativeis notseparated. ii) thescopeexemptioninparagraph2(g)isnowrestrictedto forwardcontractsbetweenbuyerandsellertobuyorsellan acquireeatafuturedate(i.e.contractthatwillresultinabusiness combinationatafuturedate). iii) gainsorlossesonahedgedinstrumentshouldbereclassifiedfrom equitytoprofitorlossduringtheperiodthatthehedgedforecast cashflowsaffectprofitorloss. IFRIC17Distributionofnon-cashassetstoownersprovidesguidance onaccountingforarrangementswherebyanentitydistributesnoncashassetstoshareholderseitherasadistributionofreservesor asdividends. IFRIC18TransferofAssetsfromCustomersdealswiththeaccounting forcontributedproperty,plantandequipmentbytheentityreceiving thecontribution. IFRIC19Extinguishingfinancialliabilitieswithequityinstruments dealswithhowentitiesshouldmeasureequityinstrumentsissuedin adebtforequityswap. TheGroupcontinuestomonitorthepotentialimpactofother newstandardsandinterpretationswhichmaybeendorsedbythe EuropeanUnionandrequireadoptionbytheGroupinfuture accountingperiods. betweenCentralEurope,NorthernRegionandWesternEurope), SpecialistandEmergingMarkets,ActivityandAccommodation& DestinationsSectors.UnderIFRS8,theresultsofGermany,theUK &IrelandandCanadaareshownseparatelyfromCentralEuropeand NorthernRegionrespectivelyasthesemeetthethresholdofbeing individualreportablesegments.TheFrenchairline,Corsair,hasbeen separatelydisclosedfromtherestofWesternEuropeasitistheonly scheduledairlineconsolidatedwithintheGroupandthereforehas adifferentbusinessmodeltotherestoftheGroupsintegrated touroperators.Amoredetailedexplanationofeachsegmentis includedintheBusinessperformancesectionoftheAnnualReport &Accounts.Comparativeinformationhasalsobeenrestatedto reflectthesenewsegments. CertainGroupoperatingsegmentshavebeenaggregatedinto reportablesegmentswheretheiractivitiesareconsideredtobe sufficientlysimilarinnatureundertheaggregationcriteriaofIFRS8. TheresultsofNordicsformtherestofNorthernRegion;Switzerland, AustriaandPolandformtherestofCentralEurope;andBelgium,the NetherlandsandtheFrenchtouroperatingbusinessesformtherest ofWesternEurope. Centralcostscomprisefinance,humanresources,legal,facilitycosts andsomeinformationtechnologycoststhatdonotrelatetoeach businesssegment(andhencetheyarenotallocated)andare classifiedwithinallothersegments. Informationregardingtheresultsofeachreportablesegmentis providedbelow.Segmentalperformanceisevaluatedbasedon underlyingoperatingprofitandismeasuredconsistentlywith underlyingoperatingprofitorlossintheconsolidatedfinancial statementsandasdefinedinNote1(B)(iv).TheGMBreviews revenuesandunderlyingoperatingprofitbeforetheimpactofthe volcano.Consequently,thesegmentalresultsareshownonaprevolcanobasisasdefinedinNote1(B)(iii)andreconciledbacktothe statutoryresult.TheGroup-widedisclosuresreflectthestatutory revenuesandnon-currentassetsfigures. Inter-segmentsalesandtransfersreflectarmslengthpricesasifsold ortransferredtothirdparties.Financialincomeandexpensesarenot allocatedtothereportablesegmentsasthisactivityismanagedby theGroupstreasuryfunctionwhichmanagestheoverallnetdebt positionoftheGroup. Noonecustomerexceeds10%ofentityrevenuesinanysegment. ImpairmentlossesarisingintheperiodrelatetoSpecialistsegments whicharefurtherdetailedinNote10.Allimpairmentlosseshave beenrecognisedintheconsolidatedincomestatement. Segmentassetscomprisecapitalexpenditure(asthisistheonly measureofassetsreportedtotheGMB)andrepresenttheamounts purchasedintheyear.Capitalexpenditureismeasuredwithinthe Groupasnon-businesscombination-relatedadditionsofintangibles andproperty,plantandequipment. Notethatwitheffectfrom1October2010,theGrouphas reorganiseditsbusinessSectors.TheMainstreamSectorremains unchangedintermsofoperatingsegments.TheremainingSectors havebeenrefinedandrenamedtoreflectthestrategicprioritiesof TUITravelasitdevelops.ThethreeremainingSectorsarenowcalled Accommodation&Destinations,Specialist&ActivityandEmerging Markets.Segmentalinformationwillbepresentedusingthisnew structurethroughouttheforthcomingfinancialyearending 30September2011.
2. Segmental information
TheGrouphasadoptedIFRS8OperatingSegmentsforthefirsttime intheyear.IFRS8requiressegmentinformationtobepresentedon thesamebasisasthatusedforinternalmanagementreporting. SegmentalinformationisreportedbytheGroupsbusinesssectorsto theGMB.TheGMBconsistsoftouroperatingandfunctionalexperts drawnfromacrosstheGroupthatexecutesTUITravelPLCsday-todayoperationsandallocatesresourcesto,andassessesthe performance,oftheoperatingsegments.Consequently,theGMBis consideredtobethechiefoperatingdecisionmaker. TheGrouppresentssegmentinformationinrespectofitsbusiness segments.OntheadoptionofIFRS8,theGrouphasdeterminednew segmentsinlinewiththerequirementsofthisstandard.TheGroups operatingsegmentswerepreviouslydefinedasMainstream(split
Group at a glance

Sector
Total revenue before impact of volcanic ash m
Underlying operating profit/(loss) before joint Total external ventures and Inter- revenue before associates and segmental impact of impact of revenue volcanic ash volcanic ash m m m
Groups share of underlying operating profit/(loss) of joint ventures and associates m
Underlying operating profit/(loss) before impact of volcanic ash m
UK Canada RestofNorthernRegion Total Northern Region Germany RestofCentralEurope Total Central Europe Frenchairline RestofWesternEurope Total Western Europe Total Mainstream Specialist&EmergingMarkets Activity Accommodation&Destinations Allothersegments Total Group
3,453 52 967 4,472 3,829 627 4,456 399 2,336 2,735 11,663 717 868 760 14,008
(61) (63) (124) (29) (52) (81) (56) (13) (69) (274) (209) (483)
3,392 52 904 4,348 3,800 575 4,375 343 2,323 2,666 11,389 717 868 551 13,525
127 (5) 58 180 76 11 87 (24) 75 51 318 25 61 61 (29) 436
2 2 5 5 7 (6) 10 11
127 (5) 60 182 81 11 92 (24) 75 51 325 19 61 71 (29) 447
Yearended30September2009
Sector
Totalrevenue m
Inter- segmental revenue m
Totalexternal revenue m
Underlying operating profit/(loss) beforejoint venturesand associates m
Groupsshare ofunderlying profitofjoint venturesand associates m
Underlying operating profit/(loss) m
Governance
UK(restated*) Canada RestofNorthernRegion TotalNorthernRegion(restated*) Germany RestofCentralEurope TotalCentralEurope Frenchairline RestofWesternEurope TotalWesternEurope TotalMainstream(restated*) Specialist&EmergingMarkets Activity Accommodation&Destinations Allothersegments TotalGroup(restated*)
3,332 168 878 4,378 4,183 654 4,837 432 2,310 2,742 11,957 825 816 719 14,317
(87) (81) (168) (39) (2) (41) (75) (15) (90) (299) (167) (466)
3,245 168 797 4,210 4,144 652 4,796 357 2,295 2,652 11,658 825 816 552 13,851
142 (24) 46 164 65 1 66 (24) 57 33 263 31 59 60 (27) 386
2 2 5 5 7 1 7 15
142 (24) 48 166 70 1 71 (24) 57 33 270 32 59 67 (27) 401
*PleaserefertoBasisofPreparationwithinNote1ofthefinancialstatementsfordetails. Shareholder information

Reconciliation of segmental analysis of revenue to statutory revenue

Total external revenue in segmental analysis Impactofvolcanicash Statutory revenue

1(B)(iii)

Note
13,525 (125) 13,400

Year ended 30 September 2010 m
13,851 13,851
Restated Yearended 30September 2009 m
Reconciliation of underlying operating profit to loss before tax

Group underlying operating profit disclosed above Impactofvolcanicash Separatelydiscloseditems Acquisitionrelatedexpenses Impairmentofgoodwill Taxationonprofitsandinterestonjointventuresandassociates Operating profit/(loss) Netfinancialexpenses Loss before tax

1(B)(iii)

3 13(A) 10 12
Capitalexpenditure 30 September 2010 m
447 (35) 412 (250) (63) (12) (6) 81 (117) (36)
401 401 (340) (56) (7) (3) (5) (89) (94)
Totaldepreciationofproperty, plantandequipmentand amortisationofintangibleassets 30 September 2010 m 30September 2009 m
Other segmental information UK Canada RestofNorthernRegion Total Northern Region Germany RestofCentralEurope Total Central Europe Frenchairline RestofWesternEurope Total Western Europe Total Mainstream Specialist&EmergingMarkets Activity Accommodation&Destinations Allothersegments Total Group
30September 2009 m
188 15 203 24 2 26 22 22 44 273 4 29 17 1 324
63 1 19 83 28 4 32 26 33 59 174 5 35 16 4 234
84 9 93 35 4 39 22 37 59 191 11 27 32 261
91 3 7 101 35 4 39 25 49 74 214 12 34 27 287
Totaldepreciationofproperty,plantanddepreciationandamortisationofintangibleassetsof261m(2009:287m)comprises94m(2009:103m) ofamortisationofintangibleassetsasshowninNote10and167m(2009:184m)ofdepreciationasshowninNote11.
Group at a glance
Reconciliation of capital expenditure to amounts included in the financial statements

TotalGroupcapitalexpenditureasshownabove Analysedas: Additionstointangibleassets Additionstoproperty,plantandequipment Reconciliation to the notes to the financial statements Additionstointangibleassetsinsegmentalanalysis Additionstogoodwill Intangible assets: total additions Additionstoproperty,plantandequipmentinsegmentalanalysis Property, plant and equipment: total additions
Note
Yearended 30September 2009 m
10
11
324 43 281 324 43 1 44 281 281
234 82 152 234 82 3 85 152 152
Strategic overview
Group-wide disclosures
TheUKistheGroupsparentcompanyscountryofdomicile.Revenuesfromexternalcustomersandnon-currentassetsaresplitgeographically asfollows:
UK 2010 m Restated 2009 m Germany 2010 m 2009 m France 2010 m 2009 m OtherEurope 2010 m 2009 m RestoftheWorld 2010 m 2009 m Total 2010 m Restated 2009 m
Revenuefrom externalcustomers Non-currentassets
4,134 2,685
4,150 2,598
3,704 639
3,753 643
1,313 735
1,337 779
3,524 856
3,831 955
725 756
780 13,400 13,851 726 5,671 5,701
UnitedKingdomrevenueariseswherethesourceofthesupplyistheUnitedKingdom.InadditiontotheUnitedKingdom,revenuerelatingto anindividualcountryisseparatelydisclosedwhenitrepresents10%ormoreoftotalrevenue.OtherEuropeisdefinedasContinentalEurope andEireexcludingUK,GermanyandFrance.Non-currentassetsforthetableaboveincludesintangibleassetsandproperty,plantand equipmentandexcludesallfinancialinstruments,deferredtaxassetsandpost-employmentbenefitassets.
3. Separately disclosed items

Year ended 30 September 2010 m Yearended 30September 2009 m
Governance
Mergerrelatedintegrationcosts Aircraftandotherassets Restructuringandotherseparatelydiscloseditems Total pre volcanic ash Incrementalcostscausedbyvolcanicashdisruption Total Separatelydisclosedfinancialexpenses
116 7 58 181 69 250 7
144 124 72 340 340 12
The2009comparativenumbershavebeenreallocatedtoensurethattheyareinalignmentwiththerevisedcriteriausedtodifferentiate betweenthedifferenttypesofseparatelydiscloseditems. Separatelydiscloseditemswithintheoperatingprofit/(loss)areincludedwithintheconsolidatedincomestatementasfollows:

Costofsales Administrativeexpenses Total
133 117 250
209 131 340

Merger related integration costs TheserelateprimarilytothecostsofintegrationoftheUKbusinesses.Themajorityofcosts(48m)arisefromtheintegrationofFirstChoice andThomsonintheUK,and,inparticular,fromtheformationofoneairlineandanintegratedretailestate.AcombinedMainstreamUKhead officehasbeenestablishedinLuton. TheUKbusinesshasalsonowcompletedthecreationofasinglemanagementinformation(MI)suite.TheimprovedMIandforecastcapability whichithasgiventhebusinesshasnowledtotheclosingoutofcertainforeigncurrencypositionsbasedontheimprovedvisibilityofpastand futurerequirements,resultingina20mchargeinthecurrentyear. CostsalsoarosefromtheongoingmergerofformerTUIbusinessesbasedinContinentalEuropewiththeirFirstChoicecounterparts(4m). IntheAccommodation&DestinationsSectorseparateFirstChoiceandTUITourismincomingagencieshavebeencombinedinanumberof keydestinations,notablySpain,theDominicanRepublic,GreeceandTurkey(total16m). Costsincludeamountspaidorprovidedforredundancyandintegrationremunerationcosts(includingthecostoftheValueCreationSharePlan androlledoverFirstChoiceshareawards(Note5(D))),propertyclosuresandonerousleaseobligations,aswellasprofessionalfeesrelatingto theintegrationproject. Aircraft and other assets Includedintheyearended30September2010isa47mcreditwhichrelatestoacombinationofaircraftordercancellationcreditsand compensationfordelaystothedeliveryofaircraft.Principalchargesinclude15mfortheimpairmentofthecruiseship,theIslandEscape (Note11);12mtoprovideforcostsrelatingtotheCorsairfleetrenewalaspartoftherestructuringofthatbusiness;and7mtorecordan onerousleaseprovisiononanunusedproperty. Intheyearended30September2009therewasa124mimpairmentchargeprincipallyinrespectofassetwrite-downsofBoeing747soperated byCorsair(Note11). Restructuring and other separately disclosed items Costsincurredintheyearended30September2010includerestructuringprogrammeswhicharenotrelatedtothebusinesscombinationof FirstChoiceandtheTourismbusinessesofTUIAG.Theprincipalitemsare43mtosignificantlyrestructureCorsair,thescheduledFrench airline;22mfortherestructuringofhoteloperationsinTurkeyand13mtorestructurethetouroperator,retailnetworkandhoteloperations ofNouvellesFrontiresinFrance.Alsoincludedisa30mcreditarisingfromtherevaluationoftheinvestmentinTheAirlineGroup(Note12), anda13mgainrecognisedonthedisposaloftheCanadianMainstreamoperationwhichwascontributedwhencreatingthestrategicventure (Note18).Thisgainwasmorethanoffsetbyourshareofpost-dealrestructuringcostsandrelatedSkyservicewrite-offs. Themaincostsincurredintheyearended30September2009were40minrelationtotransactioncostsandassociatedrestructuringinthe Germansourcemarket,duetothetransactiontosellTUIflyscitycharterbusinesstoAirBerlinPLC,16mduetotheclosureoftheSunsail ClubsinTurkeyandtheCaribbean,and13mforrestructuringoftheFrenchtouroperator,NouvellesFrontires. Impact of volcanic ash IncludedinseparatelydiscloseditemsaretheincrementaldirectcostsincurredbytheGroupinrespectofwelfarecoststolookafterthe customerswhowereaffectedbytheclosureofEuropeanairspace.Thesecostsprincipallyincludehotelcostsforstrandedinboundand outboundcustomers,andthecostofrepatriationofinboundcustomers.Thesecostsamountto69mandareshownintheProformaimpact ofvolcanicashcolumnonthefaceoftheconsolidatedincomestatement. Separately disclosed financial expenses Theseparatelydisclosedfinancialexpensesintheyearended30September2010relatetonondebtitems,principallya3minterestchargeon ataxpenaltyimposedbytheTurkishauthoritiesrelatingtofinancialyearsuptoandincluding2008. Theseparatelydisclosedfinancialexpensesfortheyearended30September2009relatetonondebtitemsincludingtherevaluationofaput optionwrittenbytheGroupinrespectofanon-controllinginterestshareholderofLTURTourismusAG(LTUR).
Group at a glance
4. Net financial expenses

Financial income Bankinterestreceivable Interestonpensionschemeassets Otherfinancialincome Total Financial expenses Bankinterestpayableonloansandoverdrafts Financechargesonconvertiblebond Interestonpensionschemeliabilities Interestpayableinrespectofloansfromparent Financeleasecharges Unwindingofdiscountonprovisions Otherfinancialexpenses Total Net financial expenses

3 66 69 (10) (44) (84) (15) (11) (11) (11) (186) (117)

6 64 2 72 (11) (81) (42) (10) (5) (12) (161) (89)

Yearended 30September 2009 m
Netfinancialexpenses(asabove) Lessseparatelydisclosedfinancialexpenses(Note3) Net underlying financial expenses
(117) 7 (110)
(89) 12 (77)
5. Employees

(A) Average number of employees

By Sector MainstreamSector Specialist&EmergingMarketsSector ActivitySector Accommodation&DestinationsSector Corporate Total
Year ended 30 September 2010 Number
Yearended 30September 2009 Number
Governance
35,375 1,522 4,492 6,941 394 48,724
35,130 1,474 4,792 7,673 394 49,463
The2009comparativenumbershavebeenreallocatedtoensurethattheyareinalignmentwitharevisedmethodofallocatingheadcounttothe variousSectors.Thereisnochangetothetotalnumberofemployees.
(B) Staff costs

Wagesandsalaries Socialsecuritycosts Pensioncosts Share-basedpayments(Note5(D)) Total
1,385 248 61 15 1,709
1,293 234 47 17 1,591
Includedwithinwagesandsalariesare96m(2009:65m)ofwagesandsalariesand8m(2009:5m)ofsocialsecuritycostsinrelationto redundancyandintegrationcosts.Theserelatedstaffcostsareincludedwithinseparatelydiscloseditems(Note3). (C) Pension costs TheGroupoperatespensionschemesforemployeeseligibleandwishingtoparticipateintheschemes.Thesecomprisebothdefined contributionanddefinedbenefitschemes.Pensionobligationsvaryreflectingthedifferentlegalandmarketconditionsineachcountryof operation.Definedcontributionschemesarefundedbythepaymentofcontributionstoprivateandstate-runorganisations,whilstdefined benefitschemescomprisebothfundedandunfundedschemes.Theassetsofallthefundeddefinedbenefitschemesareheldseparatelyfrom theassetsoftheGroup.

Defined contribution schemes for employees and Directors CurrentcontributionsarerecognisedasanexpenseintheyearandoncepaidtheGrouphasnofurtherliability.Pensioncostsof24m (2009:20m)relatingtodefinedcontributionschemeswerechargedtotheincomestatement. Defined benefit pension schemes Themovementofdefinedbenefitpensionobligationsandassetsisdetailedbelow,summarisedasUK,GermanyandOther.Otherincludes fundedschemesinIreland,theNetherlands,SwitzerlandandNorway,whilstthemainunfundedarrangementsareinAustriaandFrance. AlmostallUKschemesarefundedwhilstGermanschemesareunfunded. TheprincipalfundedschemesintheUKareshowninthetablebelow.Theseareclosedtonewmembers,withtheexceptionofexisting employeesworkingtowardstheirentryqualificationdate:
Schemename Dateoflastfull actuarialvaluation AverageGroup contributionrate Averageemployee contributionrate
BritanniaAirwaysLimitedSuperannuationandLifeAssuranceScheme TUIPensionScheme(UK) Air2000LimitedRetirementBenefitsScheme UnijetGroupPlcFinalSalaryScheme
31March2008 31March2008 1November2006 1November2006
38.8%plus48.2mperannum* 16.5%plus17.6mperannum* 26.3%plus1.4mperannum 24.7%plus1.3mperannum
10.0% 5.4% 9.8% 10.0%
*CashcontributionsfromtheCompanytofundtheSchemesdeficitsarecurrentlyreducedbyanamountheldbackunderanescrow arrangementagreedbetweentheCompanyandtheSchemesTrustees.TheCompanyandTrusteesarecurrentlyindiscussionregarding theongoingfundingoftheSchemesdeficits,andtheescrowarrangementformspartofthesediscussions.Thisarrangementexpireson 31March2011.Thevaluesquotedabovearethegrossvaluesbeforereduction. Wherethereismorethanasingleclassofmembership,contributionratesreflectweightedaveragevalueswithinthescheme.Contributionrates arestatedbeforeadjustmentforsalarysacrificearrangementswhereapplicable. TheTrusteesofallfourschemeslistedabovearecurrentlyundertakingvaluationsandareinnegotiationwiththeCompanytoagreethese. TheprincipalunfundedschemesinGermanyareshownbelow.Thesewereallsubjecttoafullactuarialvaluationwithinthreemonthspreceding thebalancesheetdate:

Schemename Status
VersorgungsordnungHapag-LloydFluggesellschaftmbH VersorgungsordnungTUIDeutschlandGmbH VersorgungsordnungTUILeisureTravelGmbH
Opentonewmembers Closedtonewmembers Closedtonewmembers
Valuationsoftheschemesaremadebyqualifiedactuariesusingmarket-basedvaluationsfortheassetsandtheprojectedunitmethodforthe liabilities.TheGrouprecognisesallactuarialgainsorlossesintheconsolidatedstatementofcomprehensiveincome. Theassetsofeachschemehavebeentakenatmarketvalueandliabilitiesineachterritoryhavebeencalculatedusingthefollowingprincipal assumptions:

UK1perannum 2010 % 2009 % Germanyperannum 2010 % 2009 % Other3perannum 2010 % 2009 %
Inflation Salaryinflation Discountrate
3.2 4.22 5.3
3.2 4.22 5.5
1.6 2.5 4.3
1.8 2.5 5.3
1.8 2.8 3.9
1.9 2.9 4.8
1. PensionincreasesintheUKSchemesreflectthegeneralinflationassumption,subjecttominimumandmaximumincreaselimits. 2. 4.2%(2009:4.2%)isapplicableacrossallUKSchemeswiththeexceptionoftheBritanniaAirwaysLimitedSuperannuationandLifeAssuranceSchemewhichhasassumedsalaryinflationof 3.7%plus1.4%(2009:3.7%plus0.8%)toreflectannualserviceincrements. 3. TheassumptionsforOtherareaweightedaverage.
TheCompanyisawareoftheUKgovernmentsproposedchangeinpensionindexationfromtheRetailPricesIndex(RPI)totheConsumer PricesIndex(CPI). Followingtheannouncement,theCompanyundertookanexercisetoexamineschemerulesgoverningpensionincreasesinitsmaterialschemes. Theresultsofthisexercisetogetherwithcertainassumptionswereusedtodevelopanestimateofthepotentialimpact.UsinganRPItoCPI differentialof0.7%andapplyingittoallUKschemepensionincreasesindeferment,otherthanthosesubjecttofixedinflationescalation,would produceapotentialreductioninpensionliabilitiesofapproximately8m.Thereductionwouldberecognisedthroughactuarialgainsand treatedasachangeinactuarialassumptionsduetopensionincreasesbeinglinkedtostatutoryindexationasopposedtoRPI. Further,ifthechangewereextendedtoapplytobothpensionincreasesindefermentandpensionincreasesinpayment,thereisatotal potentialreductioninpensionliabilitiesofapproximately30m,butsuchachangewouldrequirefurtherpermissivelegislationandthe agreementoftheschemetrusteesasthepensionsinpaymentincreasesarecurrentlylinkedtoRPI.Theestimated22mfurtherreduction wouldberecognisedthroughtheincomestatementasthechangetoCPIontheseplanswouldbeconsideredachangeinbenefitobligation. Thepotentialreductioninthecurrentyearof8mismodestcomparedtothetotalUKpensionliabilityof349millionbecausesignificant elementsoftheaccruedliabilitiesaresubjecttofixedratesofrevaluation.
Group at a glance
WhilstinManagementsviewthepotentialadjustmenttothepensionliabilityisnotmaterial,noadjustmenthasbeenrecognisedduetothe significantuncertaintyrelatingtokeyvariablesandassumptionsonthisissue. Themortalityassumptionsunderlyingthevalueoftheaccruedliabilitiesforeachterritoryaresetoutinthetablesbelow.Themortality assumptionsarebasedonrelevantstandardmortalitytablesineachterritory:
UK life expectancy (weighted average) Males Lifeexpectancyinyearsforapensionerretiringaged65,onthebalancesheetdate Lifeexpectancyinyearsforapensionerretiringaged65,20yearsafterthebalancesheetdate Females Lifeexpectancyinyearsforapensionerretiringaged65,onthebalancesheetdate Lifeexpectancyinyearsforapensionerretiringaged65,20yearsafterthebalancesheetdate
2010 Years
2009 Years
23.0 24.3 25.4 26.5

2010 Years
22.9 24.2 25.2 26.4

2009 Years
Strategic overview
Germany life expectancy Males Lifeexpectancyinyearsforapensionerretiringaged65,onthebalancesheetdate Lifeexpectancyinyearsforapensionerretiringaged65,20yearsafterthebalancesheetdate Females Lifeexpectancyinyearsforapensionerretiringaged65,onthebalancesheetdate Lifeexpectancyinyearsforapensionerretiringaged65,20yearsafterthebalancesheetdate
18.3 21.4 22.0 25.0

2010 Years
18.2 20.9
22.3 24.9
2009 Years
Other life expectancy (weighted average) Males Lifeexpectancyinyearsforapensionerretiringaged65,onthebalancesheetdate Lifeexpectancyinyearsforapensionerretiringaged65,20yearsafterthebalancesheetdate Females Lifeexpectancyinyearsforapensionerretiringaged65,onthebalancesheetdate Lifeexpectancyinyearsforapensionerretiringaged65,20yearsafterthebalancesheetdate
20.5 21.9 22.9 23.6
18.8 20.2 21.8 22.5
Thefairvalueofassetsoftheschemesineachterritoryaresetoutbelow:
UK 2010 m 2009 m Germany 2010 m 2009 m Other 2010 m 2009 m Total 2010 m 2009 m
Governance
Equities Governmentdebt Corporatebonds Property Cashandcashequivalents Other Total
523 242 177 12 20 99 1,073
457 210 129 15 45 86 942
47 37 21 1 1 35 142
46 37 21 1 1 31 137
570 279 198 13 21 134 1,215
503 247 150 16 46 117 1,079
Theexpectedratesofreturnoneachcategoryofassetsineachterritoryareasfollows:
UK 2010 % 2009 % Germany 2010 % 2009 % Other 2010 % 2009 %
Equities Governmentdebt Corporatebonds Property Cashandcashequivalents Other Overallexpectedrateofreturn
7.8 3.8 5.3 6.5 0.5 7.4 6.3
7.8 4.1 5.5 6.0 0.5 7.4 6.2
N/A N/A N/A N/A N/A N/A N/A
N/A N/A N/A N/A N/A N/A N/A
8.0 4.2 4.3 6.4 2.6 2.5 5.0
8.0 4.2 3.8 5.8 0.5 2.5 5.1
Theoverallexpectedrateofreturniscalculatedbyweightingtheindividualratesinaccordancewiththeanticipatedbalanceintheschemes investmentportfolio.Thefairvaluesoftheschemesassetsarenotintendedtoberealisedintheshort-termandmaybesubjecttosignificant changebeforetheyarerealised.

Changesinthefairvalueofschemeassetsineachterritoryareasfollows:
Balanceatbeginningofyear Expectedreturnonschemeassets Companycontributions Membercontributions Benefitspaid Experiencegains/(losses) Foreignexchange Balance at end of year Actualreturnonschemeassets
942 60 89 4 (61) 39 1,073 99
810 58 86 6 (55) 37 942 95
137 6 5 2 (5) (3) 142 6
114 6 6 1 (6) (3) 19 137 3
1,079 66 94 6 (66) 39 (3) 1,215 105
924 64 92 7 (61) 34 19 1,079 98
Employercontributionsinthenextyearbasedonagreementsinplaceatthebalancesheetdateareexpectedtobe98minrespectofthe UKand5minrespectofOther.CashcontributionsfromtheCompanytofundtheUKSchemesdeficitsarecurrentlyreducedbyanamount heldbackunderanescrowarrangementagreedbetweentheCompanyandtheSchemesTrustees.TheCompanyandTrusteesarecurrently indiscussionregardingtheongoingfundingoftheSchemesdeficits,andtheescrowarrangementformspartofthesediscussions. Thisarrangementexpireson31March2011. Thecompositionofthefairvalueofschemeassetsineachterritoryisasfollows:

Schemeswithsurplusofassets Schemeswithdeficitofassets Total
2 1,071 1,073
2 940 942
9 133 142
10 127 137
11 1,204 1,215
12 1,067 1,079
Changesinthepresentvalueofdefinedbenefitobligationsineachterritoryareasfollows:
Balanceatbeginningofyear Reclassification Currentservicecost Interestcostonobligation Benefitspaid Membercontributions Experiencelosses Amountsarisingfromtransfersin Foreignexchange Balance at end of year
1,327 26 72 (61) 4 54 1,422
1,015 20 69 (55) 6 272 1,327
97 7 5 (2) 16 (6) 117
50 18 3 5 (3) 13 1 10 97
156 4 7 (7) 2 11 (3) 170
113 4 7 (8) 1 20 19 156
1,580 37 84 (70) 6 81 (9) 1,709
1,178 18 27 81 (66) 7 305 1 29 1,580
Thereclassificationin2009withinGermanyrelatestoflightcrewearlyretirementbenefitswhichwerepreviouslydisclosedinaccruals. Theamountsrecognisedintheconsolidatedincomestatementfortheyearsended30September2010and30September2009foreach territoryareasfollows:

Currentservicecost Interestondefinedbenefit pensionschemeobligation Expectedreturnondefined benefitpensionscheme Total
26 72 (60) 38
20 69 (58) 31
7 5 12
3 5 8
4 7 (6) 5
4 7 (6) 5
37 84 (66) 55
27 81 (64) 44
Group at a glance
Theseamountsareincludedwithinthefollowingexpense/(income)categoriesintheconsolidatedincomestatement:
Costofsales Administrativeexpenses Financialexpenses Financialincome Total
14 12 72 (60) 38
10 10 69 (58) 31
6 1 5 12
2 1 5 8
2 2 7 (6) 5
3 1 7 (6) 5
22 15 84 (66) 55
15 12 81 (64) 44
Strategic overview
Theamountsrecogniseddirectlyinequityfortheyearended30September2010andfortheyearended30September2009foreachterritory areasfollows:
Cumulativelosses/(gains) broughtforward Lossesrecognisedduringtheyear Exchangeadjustments Cumulative losses carried forward
439 15 454
204 235 439
5 16 (1) 20
(8) 13 5
24 11 (1) 34
(1) 23 2 24
468 42 (2) 508
195 271 2 468
TrendanalysisinformationinrespectoftheUK,GermanyandOtherterritoriesisasfollows:
UK
UK balance sheet Fairvalueofschemeassets Presentvalueofschemeliabilities Deficit
2010 m
2009 m
2008 m
2007 m
2006 m
1,073 (1,422) (349)

2010 m
942 (1,327) (385)

2009 m
810 (1,015) (205)

2008 m
891 (1,144) (253)

2007 m
781 (1,125) (344)

2006 m
UK experience adjustments Experiencegain/(loss)onschemeassets Experience(loss)/gainonschemeliabilities Germany Germany balance sheet Fairvalueofschemeassets Presentvalueofschemeliabilities Deficit

39 (54)
2010 m
37 (272)
2009 m
(178) 184
2008 m
(7) 95
2007 m
11 108
2006 m
Governance
(117) (117)
2010 m
(97) (97)
2009 m
(50) (50)
2008 m
(48) (48)
2007 m
(53) (53)
2006 m
Germany experience adjustments Experience(loss)/gainonschemeliabilities
(16)
2010 m
(13)
2009 m
8
2008 m
11
2007 m
(1)
2006 m
Other
Other balance sheet Fairvalueofschemeassets Presentvalueofschemeliabilities (Deficit)/surplus Other experience adjustments Experiencelossonschemeassets Experience(loss)/gainonschemeliabilities

142 (170) (28)

2010 m
137 (156) (19)

2009 m
114 (113) 1
2008 m
103 (97) 6
2007 m
91 (87) 4
2006 m
(11)
(3) (20)
(15) 5
(1) 14
10

Total
All Territories balance sheet Fairvalueofschemeassets Presentvalueofschemeliabilities Deficit

2010 m
2009 m
2008 m
2007 m
2006 m
1,215 (1,709) (494)

2010 m
1,079 (1,580) (501)

2009 m
924 (1,178) (254)

2008 m
994 (1,289) (295)

2007 m
872 (1,265) (393)

2006 m
All Territories experience adjustments Experiencegain/(loss)onschemeassets Experience(loss)/gainonschemeliabilities
39 (81)
34 (305)
(193) 197
(8) 120
11 117
Themovementinthenetdeficitforpensionsisasfollows:
Balanceatbeginningofyear Reclassification Provisionsmadeduringtheyear Provisionsusedduringtheyear Amountsarisingfromtransfersin Actuariallossrecognisedinequity Foreignexchange Balance at end of year
385 38 (89) 15 349
205 31 (86) 235 385
97 12 (2) 16 (6) 117
50 18 8 (3) 1 13 10 97
18 5 (7) 11 27
(2) 5 (8) 23 18
500 55 (98) 42 (6) 493
253 18 44 (97) 1 271 10 500
Thereclassificationin2009withinGermanyrelatestoflightcrewearlyretirementbenefitswhichwerepreviouslydisclosedinaccruals. ReconciliationofdefinedbenefitobligationsandschemeassetstovaluesrecognisedintheBalanceSheet:
Presentvalueoffunded definedbenefitobligations Fairvalueofschemeassets Presentvalueofunfunded definedbenefitobligations Unrecognisedpastservicecost Recognisedliabilityfordefined benefitobligation Analysed as: Retirementbenefit non-currentassets Retirementbenefit currentliabilities Retirementbenefit non-currentliabilities Total
1,421 (1,073) 1 349 349
1,326 (942) 1 385 385
117 117 117
97 97 97
152 (142) 18 28 (1) 27
139 (137) 17 19 (1) 18
1,573 (1,215) 136 494 (1) 493
1,465 (1,079) 115 501 (1) 500
349 349
385 385
3 114 117
3 94 97
(1) 2 26 27
(1) 19 18
(1) 5 489 493
(1) 3 498 500
Thesensitivityofthefairvalueofthedefinedpensiondeficittothekeyfinancialanddemographicassumptionsisillustratedbelow.
UK 2010 m Germany 2010 m Other 2010 m Total 2010 m
(Decrease)todeficitofincreasingdiscountrateby0.25% Increasetodeficitofreducingdiscountrateby0.25% Increasetodeficitofincreasingalllifeexpectanciesby1year
(64) 68 40
(8) 8 5
(6) 6 4
(78) 82 49
Group at a glance
(D) Share award schemes TheCompanyoperatesfourprincipalshareawardschemeswhicharedesignedtolinkremunerationtothefutureperformanceoftheGroup. TheschemesarethePerformanceSharePlan(PSP),theDeferredAnnualBonusScheme(DABS),theDeferredAnnualBonusLong-term IncentiveScheme(DABLIS)andtheValueCreationSynergyPlan(VCSP).TheDABLISschemeisdescribedbelowandtheotherthreeschemes aredescribedintheRemunerationReportalongwiththerelevantvestingcriteria. At30September2010thesharesallocatedandoutstandinginrespectofordinaryshares,wereasfollows:

Shareawardscheme Number of shares Dateduetovest
PerformanceSharePlan DeferredAnnualBonusScheme DeferredAnnualBonusLongTermIncentiveScheme ValueCreationSynergyPlan Total
1,819,513 618,658 2,755,536 131,840 1,030,546 5,930,834 2,227,585 722,799 2,621,921 4,486,020 3,952,024 3,797,395 636,178 30,730,849
2December2010 19December2010 19December2010 19May2011 28November2011 28November2011 2December2012 19March2013 19December2010 28November2011 2December2012 2December2012 28November2010
Thenumberofshareawardsatthebeginningandendoftheyearisasfollows:
Number of awards 30 September 2010
Outstandingatbeginningoftheyearexcludingdeferredshares Forfeitedduringtheyear Exercisedduringtheyear Grantedduringtheyear Outstanding at the end of the year excluding deferred shares
25,614,686 (1,346,399) (6,350,607) 12,813,169 30,730,849
Governance
Inadditiontotheaboveshares,thereare423,096(2009:1,830,960)deferredsharesoutstandinginrelationtotheDeferredAnnualBonus Scheme.Theseareduetovestbetween19December2010and2December2012. DuringtheyearsomeoftheparticipantsoftheDABSandVCSPagreedtoenterintoajointelectionwiththeCompanypursuanttosection 431(1)oftheIncomeTax(EarningsandPensions)Act2003inrespectoftheseawards.Consequently,theRemunerationCommitteeagreedto vesttheVCSPawardsearlyandreleasesufficientsharestosatisfythetaxliabilityarisingfromthejointelection.Theremainingshares,which arevested,areheldtogetherwiththedeferredelementoftheDABSschemeasrestrictedsharesandwillnotbereleasedbeforethethird anniversaryoftheoriginalawarddate(DABSdeferredshares1,384,680andVCSPawards1,701,816).Theserestrictedsharesaresubjectto clawbackconditionsinaccordancewiththeschemerules. NomaterialawardshavebeenmadetodateundertheGroupsHMRC-approvedShareIncentivePlanwhichisanall-employeeshareplan. Thefairvalueofservicesreceivedinreturnforsharesawardedduringtheyearismeasuredbyreferencetothefairvalueofthesharesawarded. Thefairvalueatthedatetheshareswereawardedhasbeenestimatedusingabinomialmethodologyforallschemesexceptwherethereisa market-basedperformanceconditionattachedtovesting,inwhichcaseaMonteCarlosimulationwasused.Theprincipalassumptionsrequired bythesemethodologieswere:
2010 2009 2008
Information relating to fair values of shares awarded Fairvalueatmeasurementdate Shareprice Expectedvolatility Awardlife Expecteddividends Riskfreeinterestrate
1.30-2.58 2.43-2.93 44.0% 3 years 3.6% 1.6%
1.34-1.82 2.05 44.9% 3years 3.8% 2.73%
1.05-2.42 2.51-2.70 30.4%-34.8% 3years 3.6% 4.52%-4.75%
Participantsarenotentitledtodividendspriortovesting.Expectedvolatilityisbasedonhistoricvolatilityadjustedforchangestofuture volatilityindicatedbypubliclyavailableinformation.Shareswereawardedunderaservicecondition.

Employee expenses for the year Employeeexpensesforthecurrentandprioryearrelatingtoshare-basedschemesare:
Sharesawardedin2007 Sharesawardedin2008 Sharesawardedin2009 Sharesawardedin2010 Equity-settled Expensearisingforshareappreciationrights Total
2 5 3 4 14 1 15
4 5 7 16 1 17
Includedinthechargeforequityawardsmadein2010is3m(2009:3m)relatingtotheVCSP.Thesharesthischargecorrespondstowillbe awarded/releasedafterthedateoftheseaccounts. Ofthe15m(2009:17m)totalemployeeexpensesrelatingtoshare-basedschemesincurredintheyearended30September2010,4m (2009:6m)isincludedwithinseparatelydiscloseditems(Note3)asrelatingtospecificremunerationincurredforpost-mergerintegration. Thefutureestimatedexpenseforshareawardschemesoutstandingat30Septemberis:

Tobeincurredwithinoneyear Tobeincurredaftermorethanoneyear Total
10 6 16
16 9 25
At30September201013,191,246shares(2009:10,842,908shares)wereheldbytheGroupsEmployeeBenefitTrusts. Long-term incentives Deferred Annual Bonus Long-term Incentive Scheme TheDeferredAnnualBonusLong-termIncentiveScheme(DABLIS)isforparticipantsbelowtheGMBlevelandrequiresa25%deferralof anyannualperformancebonusawardintoshares.Matchingsharesmayalsobeawardeduptofourtimesthedeferredamountandaresubject totheachievementofstretchingperformanceconditionsoverathree-yearperiod.Awardsofdeferredandmatchingsharesaresubject toforfeitureconditionsuntilthereleasedate.Theearliestpointatwhichthesharesareeligibleforreleaseisattheendofthreeyears followingdeferral. Forawardsofmatchingsharesmadeduringtheyear,noshareswillvestunlesstheannualaverageoftheratiooftheGroupsreturnoninvested capital(ROIC)totheweightedaveragecostofcapital(WACC)meetsorexceedsoneoverthethree-yearperiod.AhurdleofROIC,beingatleast equaltoWACC,isusedtoensurethattherelevantlong-termincentiveawardspayoutonlywhenshareholdervalueisbeingcreatedoverthe performanceperiods.IftheROIC/WACChurdleismet,shareswillonlyvesttotheextenttowhichtwofurtherperformanceconditionsare satisfiedoverthethree-yearperiodasfollows: UptohalfthematchingshareswillvestbasedongrowthinROICwithintheparticipantsSectororGroupoverthethree-year performanceperiod.
ROIC performance GAP Proportion of matching shares vesting
Belowtheminimum Minimumlevelachieved Maximumlevelachieved
0% Onastraightlinebasisbetween10%and100% 100%
UptoonequarterofthematchingshareswillvestbasedongrowthintheGroupsearningspershare(EPS),beforeamortisationofmerger intangibles,goodwillimpairmentandseparatelydiscloseditems,inrelationtothegrowthintheUKRetailPriceIndex(RPI)asshowninthe tablebelow:

Average annual EPS growth in excess of RPI growth Proportion of matching shares vesting
Group at a glance
UptoonequarterofthematchingshareswillvestbasedontheGroupsrankingoftotalshareholderreturn(TSR)performancerelative tocompaniesranked30thto100thbymarketcapitalisationasatthedateoftheawardasshowninthetablebelow:
TSR Ranking Proportion of matching shares vesting
Matchingshareawardslapseiftheperformanceconditionsarenotmet. Strategic overview (E) Remuneration of Directors

Emoluments Pensionsandotherretirementbenefits Total
9 1 10
10 1 11
FurtherinformationisprovidedintheauditedsectionoftheRemunerationReportwhichformspartofthesefinancialstatements.
6. Income, expenses and auditors remuneration

Includedwithinoperatingprofitintheconsolidatedincomestatementfortheyeararethefollowing(credits)/charges Operatingleaseincome:aircraft Operatingleaserentals:landandbuildings Operatingleaserentals:aircraftandotherequipment Depreciationofproperty,plantandequipment Amortisationofintangibleassets Chargeforshare-basedpayments Loss/(profit)onsaleofproperty,plantandequipment Loss/(gain)onforeigncurrencyretranslation Impairmentofgoodwillandotherintangibles Impairmentofproperty,plantandequipment
(54) 162 417 167 94 15 1 14 12 15
(18) 163 408 184 103 17 (12) (23) 7 125
Governance
Operatingleaserentals,landandbuildings,includes15m(2009:8m)ofcostsincludedinseparatelydiscloseditems(Note3)asprovisions foronerousleases,primarilyrelatedtovacatedpropertiesintheUKandIreland.Inadditiontotheoperatingleaserentalsdisclosedabove, chargesof149m(2009:71m)wereincurredinrespectofhotelaccommodationrentalswhicharedisclosedasoperatingleasesunder IFRIC4:Determiningwhetheranarrangementcontainsalease.

Auditors remuneration AuditorsremunerationforthesefinancialstatementsandotherGroupsubsidiaryfinancialstatements pursuanttolegislation Otherservicespursuanttolegislation(includingregulatoryreporting) Otherservices
3 1 3
2 1 1
AuditorsremunerationreferstofeespaidtotheGroupsauditors,KPMGAuditPlc,anditsassociatesanddoesnotincludefeespaidto otherauditorswhoauditsubsidiariesoftheGroup.Otherservicesareprincipallyinrespectofworkrelatingtotherestatementdescribedin Note1(B)(ii),definedbenefitpensionschemeadviceandtaxcomplianceworkinrespectofcertainoverseassubsidiaries.

7. Taxation
Thetaxcharge/(credit)canbesummarisedasfollows:
Year ended 30 September 2010 m Restated Yearended 30September 2009 m
(i) Analysis of charge/(credit) in the year Current tax charge UKcorporationtaxonlossfortheyear Non-UKtaxonlossfortheyear Adjustmentsinrespectofpreviousyears Deferred tax charge/(credit) Origination and reversal of timing differences: CurrentyearUK Currentyearnon-UK Changesintaxrates Adjustmentsinrespectofpreviousyears Total income tax charge/(credit) in consolidated income statement
61 (15) 46
(21) 41 (3) 17
(6) (2) (1) 13 4 50
(5) (43) (11) (59) (42)
(ii) Reconciliation of effective tax rate Thetotaltaxcharge(2009:credit)fortheyearishigher(2009:higher)thanthestandardrateofcorporationtaxintheUKof28%(2009:28%). Thedifferencesareexplainedbelow:

Year ended 30 September 2010 m % Restated Yearended 30September2009 m %
Lossbeforetaxreportedintheconsolidatedincomestatement(2009:restated) Lessshareofloss/(profit)injointventuresandassociates(Note12) Incometaxonlossbeforetaxexcludingshareofprofitofjointventures andassociatesatthestandardrateofUKtaxof28%(2009:28%) Expensesnotdeductiblefortaxpurposes Incomenottaxable Non-utilisationoftaxlosses Highertaxratesonoverseasearnings/losses Lowertaxratesonoverseasearnings/losses Changesintaxrates Adjustmentstotaxationinrespectofpreviousperiods Total income tax charge/(credit) in income statement
(36) 3 (33) (9) 3 (2) 67 (3) (3) (1) (2) 50
28 (9) 6 (203) 9 9 3 6 (151)
(94) (9) (103) (29) 3 (4) 11 (8) (1) (14) (42) 28 (3) 4 (11) 8 1 14 41
Theunderlyingeffectiverateoftaxationfortheyearended30September2010iscalculatedbasedontheunderlyingprofitbeforetax (excludingseparatelydiscloseditems,amortisationofIFRS3businesscombinationintangiblesandgoodwillimpairmentcharges)andis calculatedat27%.Theactualtaxrateof151%differsfromtheunderlyingeffectivetaxrateduetothetaxeffectofseparatelydiscloseditems (principallythenon-recognitionoftaxlossesarisingfromsuchitems),amortisationofIFRS3businesscombinationintangiblesandgoodwill impairmentcharges.
Group at a glance
(iii) Deferred tax recognised directly in equity Thefollowingtaxationcharge/(credit)hasbeenrecogniseddirectlyinequitywithintheconsolidatedstatementofcomprehensiveincome:

Tax relating to components of other comprehensive income Cashflowhedges Definedbenefitpensionplans Other Total tax debited/(credited) to other comprehensive income Tax (credited)/debited directly to equity Equitysettledtransactions(share-basedpayments) Convertiblebonds Total tax debited/(credited) to equity Total
9 (9) 9 9 (4) 31 27 36
(39) (65) (1) (105) (105)
(iv) Factors affecting future tax charge A)TheEmergencyBudgeton22June2010announcedthattheUKcorporationtaxratewillreducefrom28%to24%overaperiodoffouryears from2011.ThefirstreductionintheUKcorporationtaxratefrom28%to27%wassubstantivelyenactedon20July2010andwillbeeffective from1April2011.ThismayreducetheGroupsfuturecurrenttaxchargeaccordingly.Ithasnotyetbeenpossibletoquantifythefullanticipated effectoftheannouncedfurther3%ratereduction,althoughthisshouldfurtherreducetheGroupsfuturecurrenttaxchargeandreducethe Groupsdeferredtaxliabilities/assetsaccordingly. B)TheSpanishtaxauthoritiesareauditingpartsoftheGroupsSpanishoperationsfortheyears2002through2006.During2010,theSpanish taxauthoritiesformallynotifiedtheGroupthattheydisagreewiththeSpanishcorporateincometaxtreatmentoftwoseparatetransactions thatwereundertakenduringtheperiodunderaudit.TheGrouphashadextensivediscussionswiththeSpanishtaxauthoritiestoexplainthe natureofthetransactionsandseektoagreetheSpanishtaxtreatmentofthese. TheoriginaltaxdeductionarisingfromthetransactionsbeingchallengedbytheSpanishtaxauthoritieswasapproximately28million.Inprior years,theDirectorsrecordedataxcreditorfortheirbestestimateofthetaxthattheybelievemaybecomepayableintheeventthatthe Spanishtaxauthoritiesaresuccessfulintheirchallenge.Thiscreditorcontinuestobeheldat30September2010,withinincometaxespayable. Incontinuingtochallengethesetransactions,thetaxauthoritiesmayseektopursueajudicialprocesswiththepossibilityofinterestand penalties,theoutcomeofwhichatthisstageisnotcertain.Onthebasisofindependentlegaladvicetaken,theGroupfirmlybelievesthatin theeventofanysuchcase,itcouldbedefendedrobustly.Itislikelythattheresolutionofthismatterwilltakeanumberofyearstoreacha finalconclusion. C)Otherfactorswhichmayaffectthefuturetaxchargeincludethemixofjurisdictionswithdifferenttaxratesinwhichprofitsandlossesarise, changesintaxratesandthepotentialfuturerecognitionoftaxlossesforwhichadeferredtaxassethasnotbeenrecognisedattheyear-end (Note14).

8. Discontinued operation
ThebusinessofSocitdInvestissementArienS.A.,tradingasJet4You,istheGroupsairlineoperationinMoroccoandhasbeenpresentedas adiscontinuedoperationasitwasacquiredexclusivelywithaviewtoitssubsequentresale.Thebusinessisalsopresentedasadisposalgroup heldforsale(Note18).
Revenue Operatingcosts Loss before tax of discontinued operation Tax Loss after tax of discontinued operation Provisionforlossondisposal Loss for the year from discontinued operation
91 (109) (18) (18) (18)
80 (86) (6) (6) (8) (14)
9. Dividends
Thefollowingdividendswhichrelatetoordinaryshareshavebeendeductedfromequityintheyear:
Pence per share Year ended 30 September 2010 m Yearended 30September 2009 m
Dividends relating to the year ended 30 September 2008 Interimdividend(paidOctober2008) Finaldividend(paidApril2009) Dividends relating to the year ended 30 September 2009 Interimdividend(paidOctober2009) Finaldividend(paidApril2010)
2.8 6.9 9.7 3.0 7.7 10.7
33 85 118
31 76 107
Theinterimdividendinrespectoftheyearended30September2010of3.2ppersharewaspaidon1October2010andthisdividendof36m willberecognisedasadeductionfromequityintheyearending30September2011. Subsequenttothebalancesheetdate,theDirectorshaveproposedafinaldividendof7.8ppershare(2009:finaldividendof7.7ppershare) payableon1March2011totheholdersofrelevantsharesontheregisterat4February2011.Thefinalproposeddividendamountsto122m andwill,afterapprovalbyshareholders,berecognisedintheconsolidatedfinancialstatementsfortheyearending30September2011.Thefinal ordinarydividendof7.8ppershare,togetherwiththeinterimdividendof3.2ppershare,makesatotaldividendof11.0ppersharerelatingtothe yearended30September2010. Adividendreinvestmentplanisinoperation.Thoseshareholderswhohavenotelectedtoparticipateinthisplan,andwhowouldliketo participatewithrespecttothe2010finaldividend,maydosobycontactingEquinitidirectlyon08713842030.Thelastdayforelectionforthe finalproposeddividendis15February2011andanyrequestsshouldbemadeingoodtimeaheadofthatdate.
Group at a glance
10. Intangible assets

Goodwill m Brands m Customer relationships m Computer software m Licences m Softwarein development m Other m Total m
Cost At1October2008 Additions Acquisitionthrough businesscombinations Disposals Reclassificationtoassets heldforsale Foreignexchange Reclassificationofassetclass At30September2009 Additions Acquisitionthrough businesscombinations Disposals Reclassificationtoassets heldforsale Foreignexchange Reclassificationofassetclass At 30 September 2010 Amortisation and impairment losses At1October2008 Amortisationfortheyear Impairmentloss Disposals Reclassificationtoassets heldforsale Foreignexchange Reclassificationofassetclass At30September2009 Amortisationfortheyear Impairmentloss Disposals Reclassificationtoassets heldforsale Foreignexchange Reclassificationofassetclass At 30 September 2010 Net book value At1October2008 At30September2009 At 30 September 2010
4,194 3 62 (17) 288 4,530 1 31 (6) (80) 4,476 (555) (7) (41) (603) (12) 20 (595) 3,639 3,927 3,881
415 21 (21) 26 441 13 (7) 447 (23) (25) 2 (2) (48) (25) 1 (72) 392 393 375
203 (1) (14) 23 211 1 (12) 200 (16) (17) 2 (3) (1) (35) (13) 3 (45) 187 176 155
309 55 (15) (3) 19 30 395 27 (18) (2) 20 422 (218) (47) 14 2 (14) (15) (278) (47) 16 2 (5) (312) 91 117 110
57 4 (2) (4) 5 (18) 42 1 (2) 2 (2) (5) 36 (35) (4) 2 2 16 (19) (2) 2 (1) 5 (15) 22 23 21
18 23 (12) 29 14 (1) (15) 27 18 29 27
138 (4) (1) 4 137 1 27 (2) 163 (58) (10) 3 (65) (7) (1) (73) 80 72 90
5,334 85 83 (22) (60) 365 5,785 44 72 (26) 2 (106) 5,771 (905) (103) (7) 19 8 (60) (1,048) (94) (12) 18 (1) 25 (1,112) 4,429 4,737 4,659
Strategic overview Business performance Governance Financial statements
Amortisationofintangibleassetsisrecognisedwithincostofsalesintheconsolidatedincomestatement. Amortisationofbusinesscombinationandotherintangiblescombinedwithdepreciationofproperty,plantandequipmentisdisclosedby segmentinNote2.ImpairmentofintangibleassetsbysegmentisalsodisclosedinNote2.

Theaggregatecarryingamountsofgoodwillallocatedtoeachprincipalcashgeneratingunit(CGU)areasfollows:
Sector CGU 30 September 2010 m 30September 2009 m
MainstreamNorthernRegion MainstreamCentralEurope Accommodation&Destinations MainstreamNorthernRegion MainstreamWesternEurope Accommodation&Destinations Accommodation&Destinations Activity AllSectors Total goodwill
UKandIreland Germany Accommodation&DestinationsB2B Nordics France Accommodation&DestinationsB2C Accommodation&DestinationsSpecialist Student MultipleCGUs
1,514 387 322 273 228 218 159 143 729 3,973 3,881 3 89 3,973
1,507 406 309 273 230 209 153 110 787 3,984 3,927 21 36 3,984
Ofwhich: Goodwillincludedwithinintangibleassets Goodwillincludedinassetsheldforsale(Note18) Goodwillincludedwithinjointventuresandassociates(Note12)
GoodwillincludedinassetsheldforsalerelatestoJet4Youat30September2010andJet4YouandtheMainstreamCanadianbusinessat 30September2009. Onceeveryyear,ormorefrequentlyifeventsorachangeintheeconomicenvironmentindicateariskofimpairment,theGroupassessesthe recoverableamountofgoodwillallocatedtoitsCGUsasrequiredbyIAS36:Impairmentofassets.Therecoverablevalueofgoodwillforall CGUshasbeendeterminedtobevalueinuse. ThemultipleCGUsnotseparatelylistedabovedonotindividuallyrepresentmorethan3%oftotalGroupgoodwill.AllCGUshavebeentested forimpairment. IAS36requiresthatimpairmenttestsarecarriedoutonCGUs,followingthelevelatwhichtheGroupsmanagementmeasuresreturns onoperations. Thecalculationofrecoverablevalueusesthefollowingassumptions: ashflowprojectionsbasedontheGroupslatestapprovedfive-yearbusinessplan. C hereinformationwasreceivedconcerningtheunderlyingoperatingprofitofaCGUafterthefinalisationofthefive-yearbusinessplan, W cashflowprojectionswerere-runbasedontherevisedinformationtoobtainamoreup-to-datevalueinuse. ashflowsbeyondtheplanperiodareextrapolatedusinganinflationaryonlygrowthrateofbetween1%and3%.Thegrowthrateusedis C lessthanorequaltothirdpartyestimatesofthemedium-termGDPgrowthratesofthekeygeographicmarketsinwhichthespecificCGU operatesatthetimetheprojectionsareprepared. ashflowsarediscountedusingtheGroupsweightedaveragecostofcapital(WACC)adjustedasappropriateforbusinessspecificfactors C ofsectorrisk,businesssizeandgeographicrisk. incedeterminationofanappropriateGroupWACCwasjudgemental,sensitivitiesalsoaddressedhowincreasesinthebaseGroupWACC S mightimpacttheresultsoftheimpairmenttests.TheGroupsWACCwasbasedonacapitalassetpricingmodelcalculationusingamixture ofinhousedataandexternalinputsprovidedbythirdpartyfinancialinstitutions. C entralgroupoverheadsareborneinfullbyCGUsandareallocatedproratatotheCGUsunderlyingoperatingprofit. n2009theAccommodation&DestinationsSectorwaspresentedasoneCGUastherewasinsufficientinformationavailabletoallocate I goodwillbetweenthevariouscashgeneratingsectionsofthebusiness.Sufficientinformationisnowavailableforameaningfulallocation andthe2009comparativeshavebeenamendedtoshowthegoodwillallocationonasimilarbasistothatusedin2010.Noimpairments havearisenasaresultofthischange. Thecalculationofrecoverableamountissensitivetoforecastfutureearningsand,particularly,thediscountratesused: A percentagedecreaseofupto20%infutureplannedearningsforboththeyearending30September2011andtheyearending 30September2012wouldstillresultinsignificantheadroompositionsforalltheprincipalCGUsdetailedinthetableabove. I nadditiontothedecreasedearningsnotedabove,anincreasefortheprincipalCGUsdetailedaboveofa1percentagepointinthediscount ratesusedwouldnotchangetheconclusionthatthecarryingvalueofgoodwillissupportedbyitsrecoverableamount. I nadditionthesensitivitiesdisclosedimmediatelyabovedonottakeaccountofanymitigatingactionthatmanagementwouldtakeshould earningsdecrease. therkeyassumptionsareinrespectoftheshortandmedium-termpost-acquisitionearningsofacquiredoperations.Theforecastearnings O ofthesenewly-acquiredbusinessesareinherentlymorejudgementaloverthesetimeframes.
Group at a glance
Thepre-taxdiscountratesusedforeachCGUorgroupofsimilarCGUsareasfollows:
Sector Cashgeneratingunits (CGUs) Pre-tax discount rate used 30 September 2010 (%) Pre-taxdiscountrateused 30September2009(%)
MainstreamNorthernRegion MainstreamCentralEurope MainstreamNorthernRegion MainstreamWesternEurope MainstreamNorthernRegion Specialist&EmergingMarkets Activity Accommodation&Destinations

* MultipleindividualCGUs
UK&Ireland Germany Nordics France Canada** OtherCGUs* EuropeanSpecialistbusinesses* AmericanSpecialistbusinesses* Russia** Marinebusinesses* Sport,Adventure,Student andSkibusinesses* Accommodation&Destinations*
11 11 11 11 11 11-12 11-12 11-11.5 14 12 11-12 13
10 11 11 11 10 11 12 12.5 14 12-13 13 12.5
Strategic overview
**GoodwillinrespectofCanadaandRussiaisincludedwithintheGroupsequityinvestmentinjointventuresandassociates.
Exceptfortheimpairmentsreferredtobelowandbasedonthecalculationsundertaken,theDirectorsconsiderthattherecoverableamount ofgoodwillineachCGUexceedsitscarryingvalue. Impairment charges IftherecoverableamountofaCGUisestimatedtobelessthanthetotalofitsoperatingfixedassets,goodwillandotherintangibles,an impairmentlossisrecognisedimmediatelyintheincomestatement.Theimpairmentlossisallocatedfirsttoreducethecarryingamountofany goodwillallocatedtotheCGUandthentotheotherassetsonaproratabasis.Theimpairmentlossrecognisedisequaltothedifference betweenthenetbookvalueandtherecoverableamount. At30September2010,theEuropeanSpecialistdivisionoftheSpecialist&EmergingMarketsSectorhad8CGUscorrespondingeithertoan operationinaparticularcountry,oratypeofspecialistleisuretravelorproduct. Intheyearended30September2010therewasa12mimpairmentofgoodwillrelatingtotheItalian(7m)andSpanish(5m)SpecialistCGUs asaresultofadeteriorationinforecasttradingresultscomparedtotheprioryear.TheimpairmenttestforbothoftheseCGUswasbasedon thevalueinusecalculation.Bothimpairmentchargesaredisclosedwithinadministrativeexpensesandshownseparatelyonthefaceofthe consolidatedincomestatement. Theimpairmenthasarisensincethecashflowmodelbasedonthecurrent5-YearPlanandothercriteriadescribedabovedoesnotsupport thecarryingamountofgoodwillandallotherassetsforthesetwoCGUs.Thepre-taxdiscountrateusedforthesetwobusinesseswas11%for Italyand12%forSpain(2009:bothcountries12%)andthegrowthratesbeyondthe5-YearPlanusedwere1.2%(2009:0.8%)fortheItalian SpecialistCGUand1.9%(2009:1.7%)fortheSpanishSpecialistCGU. Inprioryears,impairmentchargeshavearisenasaresultoftheGroupsrestructuringpostbusinesscombination.In2009,withintheActivity Sector,animpairmentchargeof7marosefollowingtheclosureofthemajorityofSunsailClubsoperationsduringthatfinancialyear. Thegoodwillimpairmentchargewascalculatedbasedonthevalueinuseoftheremainingbusinessusingadiscountrateof13%.

11. Property, plant and equipment
Landand buildings m Yachts, motorboats andcruise ships m Aircraft and equipment m Advance payments forfuture deliveryof aircraft m Computer equipment m Other equipment m Total m
Cost At1October2008 Foreignexchange Acquisitionsthroughbusinesscombinations Transfers Additions Disposals Reclassifications Transferred(to)/fromassetsheldforsale At30September2009 Foreignexchange Acquisitionsthroughbusinesscombinations Additions Disposals Reclassifications Transferredfromassetsheldforsale At 30 September 2010 Depreciation and impairment At1October2008 Foreignexchange Acquisitionsthroughbusinesscombinations Providedintheyear Disposals Impairments Reclassifications Transferredto/(from)assetsheldforsale At30September2009 Foreignexchange Providedintheyear Disposals Impairments Reclassifications Transferredfromassetsheldforsale At 30 September 2010 Netbookvalue At1October2008 At30September2009 At 30 September 2010
329 36 2 16 (30) 5 (19) 339 (10) 2 26 (8) 3 2 354 (170) (19) (1) (17) 18 (1) 15 (175) 4 (16) 7 (2) (1) (183) 159 164 171
170 8 74 14 (22) 1 (4) 241 (2) 131 (17) (1) 352 (47) (3) (36) (16) 12 3 (87) 1 (19) 9 (15) (111) 123 154 241
881 87 31 (75) 11 32 967 (40) 32 (49) 24 934 (416) (41) (99) 66 (124) (2) (17) (633) 27 (83) 41 (648) 465 334 286
2 80 33 (7) 108 (5) 36 (2) 137 108 137
172 8 1 5 (14) (3) (1) 168 1 8 (13) 11 175 (136) (7) (14) 11 (1) 1 (146) (1) (12) 12 (7) (154) 36 22 21
411 41 6 22 53 (25) (14) 1 495 (15) 3 48 (35) (35) 461 (268) (26) (4) (38) 22 1 (313) 6 (37) 30 9 (305) 143 182 156
1,963 182 83 102 152 (173) 9 2,318 (71) 5 281 (122) 2 2,413 (1,037) (96) (41) (184) 129 (125) (1,354) 37 (167) 99 (15) (1) (1,401) 926 964 1,012
Group at a glance
Impairment charges Theimpairmentchargeintheyearended30September2010for15mrelatestooneownedshipwithintheUKoperatingsegment,the IslandEscape. Anexpandedclasssurveyontheconditionoftheshipconductedin2010revealedthattheshipwillrequireamoreextensivedrydockthan originallyexpectedassteelworkcorrosionandotherconditionsofclasswillneedtoberectifiedbeforecertificationisrenewed.Asaresultof increasedrectificationcosts,theDirectorshavereconsideredthestrategyforthisshipandnowconsiderthattherecoverableamountwillbe baseduponnetdisposalproceeds.Therecoverableamountoftheasset,usingfairvaluelesscoststosellbasisofvaluation,isderivedfrom obtaininganindependentmarketvaluationfromanexternalinternationalshippingconsultancy,usingopenmarketvalue.Thecarryingvalue hasbeenimpairedtotheextentthatitisbelowrecoverablevalue. The2009chargewasforAircraft,124m(withintheFrenchairlineoperatingsegment)andLandandbuildings,1m,(ActivitySectoroperating segment).Theimpairmentchargesaredisclosedwithincostofsalesandasaseparatelydiscloseditem(Note3). Advance payments for future delivery of aircraft Interestof5m(2009:2m)hasbeencapitalisedduringtheyearinrelationtotheadvancepaymentsforfuturedeliveryofaircraftatarateof 5.4%(2009:6.0%).Advancepaymentsforfuturedeliveryofaircraftweredisclosedasprepaymentsintheyearended30September2008but weretransferredtoproperty,plantandequipmentintheprioryear.Therewere80mofadvancepaymentsforfuturedeliveryofaircraftat 30September2008,73mwithinnon-currentprepaymentsand7mwithincurrentprepayments.Thechangeswereundertakentoalignthe Groupspresentationwithitsparentcompany. Other equipment advance payments for maintenance of owned aircraft Advancepaymentsformaintenanceofownedaircraftweredisclosedasprepaymentsat30September2008butweretransferredtoproperty plantandequipmentunderconstructionwithinotherequipmentintheprioryear.Therewere22mofadvancepaymentsforaircraft maintenanceat30September2008,allwithinnon-currentprepayments. Other disclosures Otherproperty,plantandequipmentwithacombinednetbookvalueasat30September2010of156m(2009:182m)includes103m (2009:103m)offixturesandfittings,24m(2009:47m)ofproperty,plant,andequipmentunderconstructionand28m(2009:30m) ofmotorvehicles. Landandbuildingscomprisefreeholdandlongleaseholdpropertieswithnetbookvaluesof118m(2009:108m)andshortleasehold propertieswithanetbookvalueof53m(2009:56m)respectively. Thenetbookvalueofassetsheldunderfinanceleasesandhirepurchasecontractsat30September2010was201m(2009:152m). Thisincludes109m(2009:3m)ofships,yachtsandmotorboats,79m(2009:144m)ofaircraft,7m(2009:nil)oflandandbuildings and6m(2009:5m)ofotherassets,mainlyvehicles. Thenetbookvalueofproperty,plantandequipmentwithrestrictionsontitle,beingpledgedassecurityforbankloans,amountedto 27m(2009:29m).

12. Investment in joint ventures, associates and other investments
TheGroupsequityinvestmentinitsjointventuresandassociatesisrecordedintheconsolidatedfinancialstatementsasfollows:
Shareofnet assetsof jointventures m Shareofnet assetsof associates m Total shareof netassets m
Cost At1October2008 Shareofprofitsbeforeinterestandtaxfortheyear Shareofinterestandtaxcharge Acquisitions Disposals Dividendspaid Reclassificationsandothermovements Foreignexchange At30September2009
85 8 (2) (30) (8) (3) 7 57 8 (5) 1 (7) 5 (2) 57 13 9 (4) 2 20 10 (1) 29 98 77 86
11 4 (1) 8 (2) (4) 3 19 (3) (1) (2) 58 (1) (2) (4) 1 65 5 3 7 1 16 47 (1) (2) 60 16 35 125
96 12 (3) 8 (30) (10) (7) 10 76 5 (6) (2) 59 (1) (9) 1 (1) 122 18 12 (4) 7 3 36 57 (1) (3) 89 114 112 211
Shareofprofits/(losses)beforeinterest,amortisationandtaxfortheyear Shareofinterestandtaxcharge Shareofamortisationfortheyear Acquisitions Disposals Dividendspaid Reclassificationsandothermovements Foreignexchange At 30 September 2010 Goodwill At1October2008 Acquisitions Disposals Reclassificationsandothermovements Foreignexchange At30September2009 Acquisitions Reclassificationsandothermovements Foreignexchange At 30 September 2010 Net book value At1October2008 At1October2009 At 30 September 2010
TheGroupsshareofjointventureandassociatelossafterinterestandtaxwas3m(2009:profit9m). Theprincipaljointventuresandassociatesandtheproportionofvotingrightsareshownbelow:
Nameofcompany Proportionof votingrights held% Natureofbusiness Countryofregistration/ incorporation
Joint ventures TravcoGroupHoldingSAE LePassagetoIndiaToursandTravelPrivateLtd AtlanticaHellasSA AtlanticaHotels&ResortsLimited TogebiHoldingsLimited Associates SunwingTravelGroupInc TUIInfoTecGmbH
50.0 50.0 50.0 49.9 49.0 25.0 49.9
Incomingagency Incomingagency Hoteloperator Hoteloperator Touroperator Touroperator ITServices
Egypt India Greece Cyprus Cyprus Canada Germany
TogebiHoldingsLimitedoperatesthroughsubsidiariesinRussiaandUkraine.
Group at a glance
Asummaryoftheresultsfortheyearended30September2010andoftheassetsandliabilitiesatthisdateoftheGroupsjointventuresand associatesisshownbelow:
100%values Jointventures m Associates m Total m
Revenue Operatingcosts Operatingprofit/(loss) Netinterestpayable Profit/(loss) before taxation Taxation Profit/(loss) after taxation for the year Non-currentassets Currentassets Totalassets Non-currentliabilities Currentliabilities Totalliabilities Net assets
792 (781) 11 (2) 9 (5) 4 169 158 327 (59) (154) (213) 114
618 (623) (5) (1) (6) (3) (9) 159 184 343 (60) (145) (205) 138
1,410 (1,404) 6 (3) 3 (8) (5) 328 342 670 (119) (299) (418) 252
Sunwing strategic venture TheCanadianMainstreambusinesswasclassifiedasadisposalgroupasat30September2009anddisclosedasheldforsaleonthebasisofthe announcedstrategicventuretransactionwithSunwingTravelGroupInc.(Sunwing).Therespectivepartiesreceivedallthenecessaryregulatory approvalson14January2010andsubsequentlyfinalisedthetransaction.Onthisdate,Sunwinghasbeenaccountedforasanacquisitionofan associateinaccordancewithIAS27(revised). InformationrelatingtotheprofitondisposaloftheCanadianMainstreambusinessandtheCanadianresultsisdetailedinNote18. Togebi Holdings Limited On15April2009,theGroupsignedanagreementwithS-GroupCapitalManagementLimited(SGCM)fortheformationofajointlyowned investmentholdingcompany,tobeowned51%bySGCMand49%bytheGroup.Thejointventureagreedtoacquiremajoritystakesinthe businessesoftwotouroperatorsandtravelagencygroupsinRussiaandUkraine,VKOGroupandVoyageKiev,andsignedaletterofintentto acquirea75%controllingstakeinthebusinessofMostravel,anentityinwhichTUITravelPLCalreadyowneda34%stake.Allregulatoryand competitionauthorityapprovalsweregrantedduringthecurrentyearandthejointventurewasofficiallylaunchedon2March2010,including thecompletionoftheacquisitionofa75%controllingstakeinMostravelsbusiness. AllmajordecisionshavetobeagreedbybothshareholdersandunderIAS31:InterestsinJointVenturestheentityisthereforeaccountedfor asajointventure. SGCMisownedbyasignificantshareholderofTUIAGandisthereforeconsideredtobearelatedparty.TogebiHoldingsanditssubsidiary undertakingsarethereforeconsideredtoberelatedpartiesbyvirtueofSGCMbeingthejointventurertothisinvestment.

Governance
Other investments
Trade andlisted investments m
Non- consolidated entities m
Total m
At1October2008 Additions Disposals Repaymentofloannotes Investmentsconsolidatedforthefirsttime Impairmentduringtheyear Changeinthefairvalueofavailableforsalefinancialasset Foreignexchange At30September2009 Disposals Reclassificationtonon-currentinterestbearingreceivables Investmentsconsolidatedforthefirsttime Changeinthefairvalueofavailableforsalefinancialasset Changeinthefairvalueofassetsheldatfairvaluethroughprofitandloss Foreignexchange At 30 September 2010
23 36 (9) (2) (1) 47 (9) (7) (4) 30 (1) 56
33 3 (8) (2) 4 30 (4) (3) 23
56 39 (9) (2) (8) (2) (1) 4 77 (9) (7) (4) (4) 30 (4) 79
Otherinvestmentsof79m(2009:77m)comprisetradeandlistedinvestmentsandnon-consolidatedentities.

Tradeandlistedinvestmentsat30September2010representedtheGroups14.3%shareholdinginTheAirlineGroupLimited(whichinturnhas a42%shareholdinginNationalAirTrafficServicesLimited),a7.2%shareholdinginAirBerlinPLCanda10%holdingintheAtlanticaLeisure GroupLimited. Duringtheyear,theGrouprevalueditsinvestmentinTheAirlineGrouptofairvalueandreclassifiedtheloannoteelementofthisinvestment tonon-currentinterest-bearingreceivables.Theupliftinthevalueoftheinvestmentof30mhasbeencreditedtoseparatelydisclosed items(Note3). Non-consolidatedentitiesarerecordedatcostandreflecttheGroupsnetinvestmentheldincirca50subsidiarieswhich,duetotheimmaterial sizeoftheirrevenues,resultandfinancialposition,havenotbeenconsolidated.Balancesbetweentheseentitiesandconsolidatedsubsidiaries havenotbeeneliminated.
13. Investments
Acquisitions (A) Acquisitions in the year ended 30 September 2010 Acquisitionsweremadeintheyearforatotalinvestmentvalueof43minordertoexpandbusinessoperationsinlinewiththeGroups growthstrategy.InaccordancewiththeprovisionsofIFRS3(revised),incidentalacquisitioncostsof7mand2mofremuneration forpost-combinationserviceshavebeenexpensedwithinadministrativeexpensesintheconsolidatedincomestatementintheyear. Theseacquisitionsgaverisetoprovisionalgoodwillof31m.Theprincipalacquiredbusinessesandtheiracquisitiondateswere:
Business Description Date Country
Mainstream Sector TTOHLOtelHizmetleriTurizmVeTicaretAnonimSirketi WonderHoldingAB Activity Sector SportsExecutiveTravelLimited HampsteadSchoolofEnglish ManchesterAcademyHoldingsLimited TortolaYachtServices Accommodation & Destinations Sector SelectWorldPtyLimited(tradingasSelectToursAustralia)* HilarioTours
Hoteloperations Touroperator Touroperator Languageteaching Languageteaching Yachtservices Cruiseservices Coachoperations
March2010 May2010 December2009 February2010 August2010 September2010 October2009 April2010
Turkey Sweden UnitedKingdom UnitedKingdom UnitedKingdom USA Australia DominicanRepublic
* On7September2010SelectWorldPtyLimitedchangeditsnametoIntercruisesShoreside&PortServicesPtyLimited.
Inadditiontotheabove,theGroupacquired22individuallyinsignificantGerman-basedtravelagencybusinessesandoneinsignificantDanish touroperatorforatotalconsiderationof7mduringtheyearended30September2010. TheGroupacquired100%ofthevotingequityinstrumentsinrespectofeachacquisitioncompletedduringtheyearwiththeexceptionof WonderHoldingAB,ofwhich51%ofthevotingequityinstrumentswereacquiredandTTOHLOtelHizmetleriTurizmVeTicaretAnonimSirketi, HampsteadSchoolofEnglish,TortolaYachtServicesandHilarioTours,whichwereassetdeals.Theamountofnon-controllinginterestin WonderHoldingABisnotconsideredmaterial. Therelativesizeoftheacquisitionsmadeissetoutinthetablebelow:

Consideration m Numberof acquisitions Total consideration m Total goodwill m
05 510 Total Otherindividuallyinsignificantbusinesses Total
4 4 8 23 31
7 29 36 7 43
6 18 24 7 31
Group at a glance
Thetotalprovisionalnetassets/(liabilities)acquiredaresetoutbelow:
Note Bookvalue priorto acquisition m Fairvalue adjustments m Fairvalueof netassets/ (liabilities) acquired m
Net assets/(liabilities) acquired Intangibleassets Property,plantandequipment Tradereceivables Cash Currentliabilities(excludingdebt) Deferredtaxprovision Othernon-currentliabilities(excludingdebt) Interest-bearingliabilities Total Totalconsideration Lessnetassetsacquired(asabove) Total goodwill in respect of acquisitions
A1
A2
1 3 4 5 (36) (3) (1) (27)
40 2 1 (4) 39
41 5 4 5 (35) (4) (3) (1) 12 43 (12) 31
Ofthetradereceivablesabove,4mrepresentsthegrossandfairvalueoftheamountofthereceivables. Allacquisitionshavebeenaccountedforusingthepurchasemethod,asrequiredbyIFRS3(revised).Itshouldbenotedthatcertainfairvalue adjustmentsandthevalueofcontingentconsiderationhavenecessarilybeenpreparedonaprovisionalbasisduetotherecenttimingofcertain acquisitions,theperiodsoverwhichcontingentconsiderationmaybecomepayableandtheseasonalityofbusinesses,suchthatfairvaluescan onlybedeterminedaccuratelyonceaseasonhaspassed.Experiencemayresultinrevisionstofairvaluesinthesubsequentaccountingperiod. Nomaterialamountofgoodwillisexpectedtobedeductiblefortaxpurposes. Fairvalueadjustmentsprincipallyarisefrom: A1EliminationofgoodwillexistinginbalancesheetsatacquisitionandinclusionofthefairvalueofIFRS3businesscombinationintangible assetscomprisingprincipallybrands,customerrelationshipsandcontracts(Note10). A2Recognitionofdeferredtaxationliabilitiesrelatingtootheradjustments,includingintangibleassetsrecognised. Therearenoaccountingpolicyadjustments. Theconsiderationpayableismadeupof:
m
Governance
Cash Contingentconsideration Deferredconsideration Total consideration
40 1 2 43
Thegoodwillarisingintheyearof31m(2009:62m)arisesfrom31(2009:27)separateacquisitions.Asnoonesingleacquisitioninthecurrent orprioryearisconsideredmaterialtogoodwill,thereconciliationsummaryasshowninNote10ofthefinancialstatementshasnotbeen analysedbyeachacquisitioninthecurrentyearorprioryear. IFRS3(revised)hasbeenadoptedforthefirsttimeintheyearandisapplicableprospectivelyforallacquisitionsafter1October2009.IFRS3 (revised)requiresconsiderationthatiscontingentonfutureservicebythevendortobeexpensedovertheserviceperiodandacquisitioncoststo beexpensedasincurred.Previouslythesecostswouldhavebeenincludedaspartofthecostofacquisitionandcalculationofgoodwill.Asaresult ofthesechanges,9mhasbeenexpensedintheyearandincludedintheacquisitionrelatedexpensesintheconsolidatedincomestatement.

Acquisition related expenses in operating profit/(loss) Amortisationofbusinesscombinationintangibles Otheracquisitionrelatedexpenses Remunerationforpost-combinationservices Total
54 7 2 63
56 56

Movementsindeferredandcontingentconsiderationintheyearwereasfollows:
Deferred consideration m Contingent consideration m Loan notes m Total m
At1October2009 Recognisedintheyearrelatingtocurrentyearacquisitions* Adjustmentstoamountsrecognisedinrespectofpriorperiodacquisitions Cashpaid Foreignexchange At 30 September 2010
20 2 1 (2) 21
51 2 (11) (9) 1 34
6 1 (1) (4) 2
77 5 (11) (15) 1 57
* Includescapitalisedandexpensedamounts.ContingentconsiderationisdefinedwithinNote1(C)(v).
FurtherdetailsofdeferredandcontingentconsiderationpayableinlessthanoneyearandaftermorethanoneyearisgiveninNotes20and 22respectively. Thecontingentanddeferredconsiderationpayablearisingintheyearisinrespectoftheacquisitionslistedbelow.Itisdependentontheresults ofthebusinessesoverthefollowingperiodsorthebalanceofworkingcapitalattheacquisitiondate,andtheDirectorsbelievetheamounts reflectthemostlikelyoutcomeineachcase:

Acquisition Basisof calculation ofconsideration Periodfor calculation ofconsideration Expected rangeof consideration
SelectWorldPtyLimited(tradingasSelect ToursAustralia)* Earnings&Employment Earnings&Employment SportsExecutiveTravelLimited HampsteadSchoolofEnglish Earnings&Employment WonderHoldingAB Earnings&Employment Total contingent consideration recognised in respect of current year acquisitions
* On7September2010SelectWorldPtyLimitedchangeditsnametoIntercruisesShoreside&PortServicesPtyLimited.
Upto31Dec2011 AUD3-4m Upto31Dec2012 GBP1m Upto13Aug2011 GBP1m Upto30Sep2015 SEK7-17m GBP 4-5m
ExpectedconsiderationpayablerepresentstheexpectedconsiderationthattheGroupwillbeobligedtopayfollowinganassessmentofthe rangeofpossiblecontingentamountsofconsideration. Theexpectedcontingentconsiderationforallfouracquisitionsaboveiscalculatedusingmultiplesofunderlyingearnings.Asalloftheabove acquisitionsarewithinthefairvaluingperiodsincetheirdateofacquisition,therehavebeennomaterialchangestotheamountsrecognised intheyear. (B) Cash flows arising in respect of acquisitions Totalcashflowsrelatingtoacquisitionsintheyear,includingamountspaidinrespectofdeferredandcontingentconsiderationarisingonprior periodacquisitions,areasfollows:
Expected total m 2010 paid m
Acquisitions in the current year Deferred&contingentconsiderationarisingandpaid Cash outflow relating to current year acquisitions (excluding acquisition related expenses) Cashacquiredwithacquisitions Net cash outflow in the year relating to current year acquisitions Cashpaidrelatingtopriorperiodacquisitions(includingsettlementofacquisitionrelatedloannotes) Net cash outflow in the year relating to acquisitions Acquisition related expenses Total cash outflows in the year relating to acquisitions
40 3 43
40 1 41 (5) 36 15 51 7 58
(C) Residual goodwill Aconsistentprocessisundertakenateachacquisitiontoidentifythefairvalueofseparableassetsandliabilitiesacquired,includingthefairvalue ofintangibleassets,beingbrands,orderbooks,licences,customerrelationshipsandotherintangibleassets.Theresidualgoodwillonacquisition representsthevalueofassetsandearningsthatdonotformseparableassetsunderIFRS3(revised)butneverthelessareexpectedto contributetothefutureresultsoftheGroup.
Group at a glance
Residualgoodwillinrespectofcurrentyearacquisitionsrepresentsprincipally: Marketknowledgeofparticulargeographicareas; Knowledgeofparticularmarketsegments,forexamplesportstravelandlanguagetraining; Involvementofexistingmanagementandemployeesandtransferoftheirknowledgeoftheoperationofthebusinessmodel; IntegrationsynergiesparticularlywithinUKMainstreamandtheActivitySector;and Theabilitytosellacquiredproductthroughexistingchannelsandexistingproductthroughacquiredchannels,inallSectors.
Strategic overview
(D) Consolidated income statement Ifthebusinessesthatwereacquiredatvarioustimesduringtheyearended30September2010hadbeenpartoftheGroupsince1October 2009,Grouprevenuewouldhavebeenincreasedby42mto13,442m.Thelossbeforetaxfortheyearof36mwouldhavebeen8mhigher at44monthisbasis.ThisamounthasbeencalculatedafterapplyingtheGroupsaccountingpoliciesandadjustingforchargingamortisation ofbusinesscombinationintangibleshadthoseintangibleassetsbeenrecognisedsince1October2009. Theacquiredbusinessescontributedrevenuesof68mandprofitaftertax(includingamortisationofbusinesscombinationintangibles)of7m. (E) Acquisitions post balance sheet date Subsequentto30September2010,theGroupacquired49%ofBoomerangReisenGmbHforconsiderationof2m. Theaccountingforthisacquisitionhasnotyetbeenfinalised. (F) Prior period revisions to fair values Intheyearended30September2009,theGroupacquiredvariousbusinessesforatotalconsiderationof92m.Thefinalisationofthe acquisitionbalancesheetsforthesebusinesseshasnotledtoamaterialadjustmenttogoodwillpresentedinthe2009accountsandtherefore thereisnorestatementoftheresultsfortheyearended30September2009,orbalancesheetasat30September2009inrespectof thesefinalisations. (G) Gains and losses in subsequent periods IFRS3(revised)anditspredecessor,IFRS3(2004)requiresdisclosureinthecurrentyearofanymaterialgainorlossinthecurrentperiodin respectofmaterialbusinesscombinations.In2010,theGrouphasimpairedtheassetofIslandEscape,by15mfollowingthestepacquisitionof IslandCruisesin2009.FurtherinformationisincludedinNote11.Therewerenomaterialgainsorlossesinrespectofmaterialbusiness combinationsinthecomparativeyear. Disposals Duringtheyearended30September2010,theGroupdisposedofits100%shareholdinginKayleeEnterprisesInc.,acompanyincorporatedin theUnitedStates.Totalproceedswere2mandtheprofitondisposalwas1m.
14. Deferred tax assets and liabilities

A ssets 30 September 2010 m Liabilities Net 30September 30 September 30September 30 September 30September 2009 2010 2009 2010 2009 m m m m m
Intangibleassets Financeleasetransactions Property,plantandequipment Financialinstrumentsandforeignexchange Interest-bearingloansandborrowings Employeebenefits Othershort-termtemporarydifferences Taxvalueoflossescarriedforward Total Setoffofdeferredtaxwithinthesamejurisdiction Net tax assets/(liabilities)
1 97 32 254 126 302 87 899 (785) 114
26 1 81 85 46 117 102 77 535 (324) 211
(150) (32) (47) (37) (230) (317) (813) 785 (28)
(212) (25) (44) (80) (10) (50) (421) 324 (97)
(149) (32) 50 (5) 24 126 (15) 87 86 86
(186) (24) 37 5 36 117 52 77 114 114
TheGrouphasrecogniseddeferredtaxassetsrelatingtotaxlossesinindividualtaxjurisdictionsbasedonforecastfuturetaxableprofits.

Unrecognised deferred tax assets Deferredtaxassetshavenotbeenrecognisedinrespectofthefollowingitems(reportedattheapplicabletaxrate):
30 September 2010 m Restated 30September 2009 m
Capitallosses Otherlosses Othershort-termtimingdifferences Total losses
3 197 200
3 147 32 182
TheseassetshavenotbeenrecognisedprincipallybecausetheDirectorsarenotcertainofthetimingofanybenefitsthatmightariseinthe future.Theselossesarenotsubjecttotimeexpiryandareavailableforutilisationagainstprofitsarisinginfutureperiodsintheterritoriesin whichtheyhavearisen.Thevalueofunrecognisedcapitallosseshasbeenreassessedduringtheyear.The2009comparativehasbeenrestated tobepresentedonaconsistentbasis.Therearenootherunprovideddeferredtaxliabilitiesnorunrecogniseddeferredtaxassets. Movementsintemporarydifferencesduringthecurrentyear:

Balanceat 1October 2009 m Arisingon acquisition m Extinguished ondisposals m Recognised/ (charged)in income m Recognised/ (charged)in equity m Balance at Foreign 30 September 2010 exchange m m
Intangibleassets Financeleasetransactions Property,plantandequipment Financialinstrumentsandforeignexchange Interest-bearingloansandborrowings Employeebenefits Othershort-termtemporarydifferences Taxvalueoflossescarriedforward Total
(186) (24) 37 5 36 117 52 77 114
(4) (4)
26 (1) 1 (3) 8 (11) 20
13 (8) 14 27 (5) (65) 20 (4)
(1) (9) (31) 13 (8) (36)
3 (2) (5) 1 (2) 1 (4)
(149) (32) 50 (5) 24 126 (15) 87 86
Movementsintemporarydifferencesduringtheprioryearareanalysedasfollows:
Balanceat 1October 2008 m Arisingon acquisition m Recognised/ (charged)in income m Recognised/ (charged)in equity m Foreign exchange m Balanceat 30September 2009 m
Intangibleassets Financeleasetransactions Property,plantandequipment Financialinstrumentsandforeignexchange Interest-bearingloansandborrowings Employeebenefits Othershort-termtemporarydifferences Taxvalueoflossescarriedforward Total
(187) 12 (3) (23) (1) 58 50 64 (30)
(1) (1) (2)
15 (35) 41 (10) 39 (7) (1) 17 59
1 39 65 105
(14) (1) (1) (1) (2) 1 4 (4) (18)
(186) (24) 37 5 36 117 52 77 114
Intangibleassettemporarydifferencesariseinrespectofassetsrecognisedonacquisition.Property,plantandequipmenttemporary differencesprincipallyrelatetotaxdepreciationintheUK,FranceandGermany.Employeebenefitstemporarydifferencesariseinrespectof definedbenefitpensionschemeliabilitiesandfuturedeductionsavailableonthevestingofemployeeawards.Financialinstrumentsandforeign exchangetemporarydifferencesariseinrespectoffinancialinstrumentsaccountedforunderIAS39andprincipallyreflectthefairvalueat 30September2010ofcashflowhedgingderivativesthatwillbesettledagainstfuturetransactions.Othershort-termtemporarydifferences relatetooperatingexpensesandrelatedaccrualsandprovisionsforwhichataxdeductionhasnotyetbeenrecognised.
15. Inventories
30 September 2010 m 30September 2009 m
Marineinventories Airlinesparesandoperatingequipment Otheroperatinginventories Total
15 24 10 49
17 21 13 51
Thereversalofawrite-downofinventoriestonetrealisablevalueamountedto2min2010(2009:write-down3m).
Group at a glance
16. Trade and other receivables

30 September 2010 Current Non-current assets assets m m Total assets m Restated 30September2009 Current Non-current assets assets m m Total assets m Restated 30September2008 Current Non-current assets assets m m Total assets m
Tradereceivables Amountsowedbyrelatedparties Interestbearingotherreceivables Otherreceivables Prepayments Total
586 53 204 843 561 1,404
7 34 41 115 156
586 53 7 238 884 676 1,560
604 26 266 896 586 1,482
43 43 151 194
604 26 309 939 737 1,676
576 133 340 1,049 550 1,599
2 98 100 110 210
576 135 438 1,149 660 1,809
Strategic overview
Tradereceivablesasat30September2009havebeenreducedby54m(2008:54m)followingtherestatementdisclosedinNote1(B)(ii). Themaximumexposuretocreditriskfortotalloansandreceivablesatthereportingdatebygeographicregionwas:
30 September 2010 m Restated 30September 2009 m
UnitedKingdom Germany France OtherEuropeancountries RestoftheWorld Total
235 131 93 358 67 884
222 132 132 331 122 939
Tradeandotherreceivablesaredisclosednetofprovisionsforbadanddoubtfuldebts,ananalysisofwhichisshownbelow:
Balanceatthebeginningoftheyear Foreignexchange Chargetotheconsolidatedincomestatement Utilisationofprovision Total
59 (2) 17 (19) 55
36 10 23 (10) 59
Governance
Theageingoftradereceivablesatthebalancesheetdatewas:
30 September 2010 Gross m Provision m Net m Gross m Restated 30September2009 Provision m Net m
Notoverdue Overdue130days Overdue3190days Overdue91180days Overduemorethan180days Total
645 139 47 18 90 939
(2) (3) (1) (2) (47) (55)
643 136 46 16 43 884
696 125 50 20 107 998
(1) (8) (3) (3) (44) (59)
695 117 47 17 63 939
Noindividuallymaterialbaddebtprovisionmovementsorchangeshavebeenrecordedintheyear.Basedonpastexperienceandthepost balancesheetperiodtothedateofapprovaloftheseconsolidatedfinancialstatements,theGroupconsidersthattheprovisionallowance recordedisadequate.Withintheprovisiontherearenoindividuallymaterialamountsheld.Tradereceivablesnotoverdueandnotimpaired includeamountsduefromtravelagencies,touroperatorsandhoteliersinrespectofMainstream,Specialist&EmergingMarkets,Activityand Accommodation&DestinationsSectors.CreditexposuretoindividualpassengersbookingholidaysdirectlyislimitedbytheGroupspolicythat fullpaymentisrequiredbeforetheissueofticketsandholidaydeparture. Theprovisionof55m(2009:59m)relatestogrossreceivablesof96m(2009:103m).Thereforethereare198mofreceivablesthatare overdueandnotimpairedat30September2010(2009:199m).

17. Cash and cash equivalents
Cashinhand Cashatbank Deposits Cash and cash equivalents
18 234 1,052 1,304
34 304 452 790
Cashandcashequivalentsincludes51m(2009:60m)thatisnotavailableforimmediateusebytheGroup.Thisismadeupofmoniesheld tomeetregulatoryrequirementspluscashbalancesonshort-termdepositsheldonarestrictedbasisbytheGroupscaptiveinsurancefunds aspartoftheirongoingoperations. Depositsincludeanamountof370m(2009:nil)whichisdepositedwiththeparentcompany,TUIAGandisrepayableondemand. Othercurrentinvestmentsdisclosedintheconsolidatedbalancesheetofnil(2009:36m)comprisedepositbalancesheldtomeetregulatory requirementswithatermexceedingthreemonths.
18. Assets classified as held for sale

Yachtsandmotorboats Landandbuildings Aircraft Disposalgroupsassets Other Total assets classified as held for sale Disposalgroupsliabilities Net assets classified as held for sale
1 1 15 30 10 57 (31) 26
4 9 16 93 4 126 (59) 67
ThedisposalgroupassetsandliabilitiesheldforsalecompriseSocitdInvestissementArienS.A.(Jet4You)at30September2010and 30September2009andtheCanadianMainstreambusinessat30September2009.Jet4YouisincludedwithintherestofWesternEurope segmentandtheCanadianMainstreambusinesswasincludedintherestofNorthernRegion.Jet4Youispresentedasheldforsaleatthe currentandprioryearend,basedontheactiveandongoingdisposalprocessforthebusinesswhichisprogressingandwhichtheDirectors expecttocompletewithin12months. Assetsheldforsaleareexpectedtobesoldwithin12months. TheCanadianMainstreambusinesswasclassifiedasadisposalgroupasat30September2009anddisclosedasheldforsalepreviouslyonthe basisoftheannouncedstrategicventuretransactionwithSunwingTravelGroupInc.,aleadingtouroperatorinCanada.Therespectiveparties receivedallthenecessaryregulatoryapprovalson14January2010andsubsequentlyfinalisedthetransaction. Underthetermsofthedeal,TUITravelPLCcontributeditsCanadianMainstreamoperationsplusC$102mandSunwingcontributedits operationstothestrategicventure.TUITravelreceiveda49%economicinterestinthestrategicventure,withSunwingsownersreceiving 51%oftheeconomicinterest.ThetotalgainrecognisedonthedisposaloftheMainstreambusinessinaccordancewithIAS27(revised)was 13mandhasbeenincludedwithinseparatelydiscloseditemsinNote3. Goodwillarisingonthetransactionwas47mandformspartoftheGroupsequityinvestmentinassociatedundertakings.
Result of the disposed group company classified as held for sale as at 30 September 2009 Canadian Mainstream business 100% Revenue Expenses Lossbeforetaxofdisposedoperation Tax Loss for the year from disposed operation AssociatedGroupshareofresultsoftheSunwingstrategicventure49% Shareofunderlyingprofitsbeforetaxfortheyear Shareoftaxcharge Share of net profits
52 (57) (5) (5)
167 (192) (25) (25)
1 1
Group at a glance
19. Interest-bearing loans and borrowings

Current liabilities Amountsowedtorelatedparties Bankloansandoverdrafts Loannotes Financeleases(andhirepurchasecontracts) Otherfinancialliabilities Total
575 1 1 142 38 757
229 31 3 25 39 327
Strategic overview
OtherfinancialliabilitiescomprisethefairvalueoftwoputoptionswrittenbytheGrouptothesoleremainingnon-controllinginterest shareholderinLTURthatmayrequiretheGrouptopurchasethenon-controllinginterestshareholding.Duringtheprioryear,theGroup increaseditsshareholdingfrom51%to70%ontheexerciseofpartofoneoftheoptions.Theremainderofthisputoptionover20%ofthe sharesmaybeexercisedatanytimeuntil2015.AfurtherputoptionatafixedpricewithnotimelimithasbeenwrittenbytheGroupduring theyeartothesamenon-controllinginterestshareholderfortheremaining10%shareholding. Fairvaluechangesintheputoptionliabilityareincludedwithinfinancialexpensesorfinancialincome.

Non-current liabilities Amountsowedtorelatedparties Bankloans Loannotes Financeleases(andhirepurchasecontracts) Convertiblebonds Total
35 1 127 633 796
611 20 3 167 801
Thebankloansandloannotesarerepayable:
Withinoneyear Betweenoneandfiveyears Total
2 36 38
34 23 57
Governance
Certainloansaresecuredontheunderlyingassetsofthecompanyinwhosenametheborrowingsaremade.At30September2010and 30September2009therelatedpartyloanswereallrepayablewithinfiveyears.Financeleaseliabilitiesrelateprimarilytotheleasingofaircraft, boatsandcruiseships.Groupobligationsunderfinanceleasesandhirepurchasecontractsarepayableasfollows:

Principal m Interest m Minimum lease payments 30 September 2010 m Principal m Interest m Minimum lease payments 30September 2009 m
Inrespectofaircraft,yachtsandequipmentpayablewithin: Oneyear Onetofiveyears Afterfiveyears Total
142 78 49 269
12 14 16 42
154 92 65 311
25 164 3 192
8 6 14
33 170 3 206

Convertible bonds

30 September 2010 m
30September 2009 m
350mConvertibleBond6.0%October2014 400mConvertibleBond4.9%April2017 Total
304 329 633
TheGroupissuedtwoconvertiblebondsduringtheyear. i) 350mfixedrate6%bondwasissuedon1October2009andsettledon5October2009raising341mnetofissuecosts.Thebondis A convertibleattheoptionoftheholder,beforeoruponmaturityinOctober2014.Conversionintoordinaryshareswilloccuratapremiumof 33%totheGroupssharepriceonthedateofissuance. ii) 400mfixedrate4.9%bondwasissuedon22April2010andsettledon27April2010raising391mnetofissuecosts.Thebondis A convertibleattheoptionoftheholder,beforeoruponmaturityinApril2017.Conversionintoordinaryshareswilloccuratapremiumof33% totheGroupssharepriceonthedateofissuance. TheGroupholdsanIssuercalloptiontoredeemtheconvertiblebondsattheirprincipalamounts,togetherwithaccruedinterest,upon fulfilmentofcertainpre-determinedcriteria.Thefairvalueofthisoptionwasnegligibleat30September2010.Theequityportionofthebonds of83misincludedintheconvertiblebondreserve.

Reconciliation of face value to carrying amount
350m Convertible Bond m
400m Convertible Bond m
Total Convertible Bonds m
ConvertiblebondFacevalue Issuecost Cashreceived Equityportion Accretioninterest Issuecostsamortised Carrying amount
350 (9) 341 (48) 9 2 304
400 (9) 391 (66) 4 329
750 (18) 732 (114) 13 2 633
20. Current trade and other payables

30 September 2010 m Restated 30September 2009 m Restated 30September 2008 m
Tradepayables Deferredandcontingentconsideration(Note13(A)) Otherpayables Amountsowedtorelatedparties Othertaxesandsocialsecuritycosts Accrualsanddeferredincome Clientmoneyreceivedinadvance Total
1,365 25 181 87 65 1,065 1,513 4,301
1,421 23 232 134 99 1,005 1,306 4,220
1,158 20 233 77 58 1,033 1,494 4,073
Tradepayablesasat30September2009havebeenincreasedby58m(2008:16m)followingtherestatementdisclosedinNote1(B)(ii).
Group at a glance
21. Provisions for liabilities and charges

Aircraft maintenance m Restructuring m Other m Total m
At 1 October 2009 Provided in the year Released in the year Unwinding of discounted amount Costs incurred Foreign exchange At 30 September 2010 Analysed as: Non-current Current
254 198 (12) 10 (115) (5) 330 236 94 330
30 55 (2) (26) 1 58 26 32 58
155 94 (14) 1 (76) (5) 155 45 110 155
439 347 (28) 11 (217) (9) 543 307 236 543
Strategic overview
At 30 September 2009 Analysed as: Non-current Current
205 49 254
2 28 30
43 112 155
250 189 439
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.
Governance
Restructuring Restructuring, which includes severance payments, relates to provisions arising as a result of reorganisation and restructuring plans that are irrevocably committed. Further details of restructuring projects in the current year are set out in Note 3. The provision is expected to be utilised within 18 months of the balance sheet date. Other Other provisions relate to litigation (including provisions for contingent liabilities recorded on the merger of First Choice), 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 2010 m 30 September 2009 m
Deferred and contingent consideration (Note 13(A)) Other payables Accruals and deferred income Total
30 19 44 93
48 5 55 108

23. Share capital
Authorised 1,999,500,020 (2009: 1,999,500,020) ordinary shares of 10p each 49,998 (2009: 49,998) redeemable preference shares of 1 each Total
200 200
30 September 2010 m
200 200
30 September 2009 m
Issued and fully paid 1,118,010,670 (2009: 1,118,010,670) ordinary shares of 10p each Total
112 112
112 112
As described more fully in Note 35, the ultimate parent company, TUI AG, is the beneficial owner of 54.92% of the Companys issued ordinary share capital as at 30 September 2010. From time to time the Company purchases its own shares on the market; the timing of these purchases depends on market prices. Primarily the shares are intended to be used for issuing shares under the Companys share award programme. Buy and sell decisions are made on a specific transaction basis by the Board; the Company does not have a defined share buy-back plan. Acquisition of own shares The number of shares held by the Groups Employee Benefit Trusts (EBT) at 30 September 2010 and at 30 September 2009 is disclosed in Note 5(D).
24. Capital and reserves

Share capital m Convertible bond reserve m Merger reserve m Translation reserve m Hedging reserve m Retained deficit m Equity holders of parent m Noncontrolling interests m Total m
At 1 October 2008 (as previously reported) Restatement (Note 1(B)(ii)) Restated balance at 1 October 2008 (Loss)/profit for the year (as previously reported) Restatement (Note 1(B)(ii)) Restated (loss)/profit for the year Other comprehensive income/(expense) for the year Other comprehensive income/(expense) Restated total comprehensive income/ (expense) for the year Transactions with owners Share-based payment (net of deferred tax) Dividends Acquisition of non-controlling interests Restated balance at 30 September 2009
112 112
2,490 2,490
232 232
27 27
(270) (70) (340) (25) (42) (67)
2,591 (70) 2,521 (25) (42) (67)
5 5 1 1
2,596 (70) 2,526 (24) (42) (66)
112
2,490
128 128 360
(102) (102) (75)
(206) (273) 16 (107) (12) (716)
(180) (247) 16 (107) (12) 2,171
1 2 (3) (1) 3
(179) (245) 16 (110) (13) 2,174
Group at a glance
Share capital m
Convertible bond reserve m
Merger reserve m
Translation reserve m
Hedging reserve m
Retained deficit m
Equity holders of parent m
Noncontrolling interests m
Total m
At 1 October 2009 (as previously reported) Restatement (Note 1(B)(ii)) Restated balance at 1 October 2009 Loss for the year Other comprehensive (expense)/income for the year Other comprehensive (expense)/income for the year Total comprehensive (expense)/income for the year Transactions with owners Share-based payment (net of deferred tax) Acquisition of own shares Dividends Issue of convertible bonds (net of deferred tax) At 30 September 2010
112 112
2,490 2,490
360 360
(75) (75)
(604) (112) (716) (104)
2,283 (112) 2,171 (104)
3 3
2,286 (112) 2,174 (104)
Strategic overview
112
83 83
2,490
(59) (59) 301
56 56 (19)
(70) (174) 20 (7) (118) (995)
(73) (177) 20 (7) (118) 83 1,972
(2) 1
(73) (177) 20 (7) (120) 83 1,973
Restatement Please refer to Note 1(B)(ii) for a full explanation of the restatement. Convertible bond reserve The convertible bond reserve comprises the equity element of the convertible bonds and the related portion of the bonds issue costs (see Note 19). The equity element is calculated in accordance with the accounting policy described in Note 1(E)(ii) and is presented net of deferred tax. Merger reserve The merger reserve arose on the business combination of TUI Travel PLC (TUI Travel), First Choice Holidays PLC (First Choice) and the Tourism Division of TUI AG on 3 September 2007. The merger reserve is non-distributable. Other reserves The share-based payment credit for the year ended 30 September 2010 of 16m has an associated deferred tax credit of 4m (2009: nil). During the year ended 30 September 2010 the Groups Employee Benefit Trusts acquired shares at market value for consideration of 7m (2009: nil). Details of dividends to equity holders of the parent debited to equity in the year are set out in Note 9. Exchange gains or losses arising on the translation to the Groups reporting currency are recorded in the translation reserve. Gains or losses arising on cash flow hedges are initially recorded in the hedge reserve and are recycled to the consolidated income statement in accordance with the accounting policy in Note 1(F). The Group also has a capital reserve of 0.1m at 30 September 2010 (2009: 0.1m) and a revaluation reserve of 0.2m (2009: 0.2m). The capital reserve is non-distributable. Non-controlling interest As described in Note 13, the Group purchased a 51% stake in WonderHolding AB during the year. The non-controlling interest is not considered material.
25. Financial instruments

(A) Treasury risk overview The Group is exposed to a variety of financial risks: Market risk (in respect of foreign currency rate risk, jet fuel price risk and interest rate risk); Liquidity risk (in respect of the Groups 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). Shareholder information

The Groups 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 Groups 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 Groups 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 Groups 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 Groups risk management framework and for ensuring that the Group has adequate policies, procedures and controls to successfully manage the financial risks that it faces. These form part of the Groups overall Risk Management Framework (the framework). Incorporated within the frameworks 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 approving and to dealing the types of hedging financial instrument used to manage these exposures. Transactions are only undertaken to hedge underlying exposures. Financial instruments are not traded, nor are speculative positions taken. The treasury position of the Group, including liquidity, foreign exchange and fuel hedging exposure, is managed centrally in accordance with policies appropriate to cover specific risks faced by each business unit, and is the responsibility of the Chief Financial Officer and Group Treasurer. Group Treasury conducts regular reviews of financial risks with business unit management teams and receives regular cash flow and, where relevant, jet fuel usage forecasts from each business unit to ensure hedging instruments match the currency or fuel requirements of each operating business. Reports and forecasts for the Group, showing hedging instruments and forecast requirements, are submitted monthly to the GMB and to each Board meeting of TUI Travel PLC. In line with its established policy, the Group has monitored throughout the year its counterparty exposure with individual financial institutions. Such counterparty risk can arise by way of cash deposited or derivative instruments traded. (B) Currency risk management The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currencies of individual Group businesses (which are principally Sterling, US Dollar, Euro and Swedish Krona). The Group hedges its foreign currency exposures on a seasonal basis, that is Winter and Summer, with each season comprising a 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 and option-based instruments, most with a maturity of less than one year from the reporting date. In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level principally by using forward contracts in respect of 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 Groups Sterling presentation currency (excluding the impact of hedged transactions) are illustrative of the rates applied during the current and prior year:
Average rate Year ended 30 September 2010 Year ended 30 September 2009 Mid-spot rate 30 September 2010 30 September 2009
1 GBP equivalent
US Dollar Euro Swedish Krona
1.559 1.152 11.307
1.560 1.149 12.101
1.587 1.163 10.631
1.600 1.094 11.181
As at 30 September 2010, the Group has hedged forecast transactions for $3.4bn (2009: $3.5bn) and 1.5bn (2009: 1.2bn) for periods up until Winter 2011 principally relating to Winter 2010 and Summer 2011. (C) Commodity risk Fuel commodity risk arises from the Groups operation of aircraft. The Group hedges its fuel commodity exposures on a seasonal basis, being Winter and Summer with each season comprising a six-month period. At the start of a season the Group will have hedged substantially all of its fuel commodity exposure for that season, using predominantly commodity swaps or options, most with a maturity of less than one year from the reporting date. As at 30 September 2010, the Group has hedged transactions for fuel of 1.7m metric tonnes (2009: 1.8m metric tonnes) for periods up until Winter 2011. Details of fuel forward derivative instruments are set out in Note 25(I).
Group at a glance
(D) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises from cash balances (including bank deposits and cash and cash equivalents) and derivative financial instruments, as well as credit exposures to customers, including outstanding receivables, financial guarantees and committed transactions. Credit risk is managed separately for treasury and operating related credit exposures. The Group minimises its financial credit risk through the application of risk management policies approved and monitored by the Board. While counterparties are limited to major banks and financial institutions, Group policy ensures that individual counterparty limits are adhered to and that there are no significant concentrations of credit risk. The Group monitors the credit ratings of its counterparties (where applicable) as part of its ongoing assessment of its credit exposure. Financial instruments are only transacted with major financial institutions with strong credit ratings of A1/P1. Loans and other receivables exposures are managed locally in the operating units where they arise and credit limits are set as deemed appropriate for the customer. There is no material concentration of credit risk with respect to trade and other receivables as the Group has a large number of internationally dispersed customers. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the balance sheet date was:
Carrying value 30 September 2010 m Restated Carrying value 30 September 2009 m
Trade and other receivables Cash and cash equivalents (Note 17) Derivatives contracts used for hedging (Note 25(I)) Trade and listed investments (Note 12) Other investments (Note 17) Total
814 1,304 165 56 2,339
939 790 284 47 36 2,096
The trade and other receivables balance for 2009 has been restated. Trade receivables have been reduced by 54m as at 30 September 2009. See Note 16 and Note 1(B)(ii). The maximum exposure to credit risk for total trade and other receivables at the balance sheet date and by geographic region as well as their ageing is disclosed in Note 16. Trade and other receivables are shown net of provision for bad and doubtful debts of 55m (2009: 59m). Cash, cash equivalents and other investments principally comprise money market deposits and other short-term investments. The investments are with counterparties with a strong credit rating of A1/P1. At 30 September 2010, approximately 33% (2009: 51%) of the Groups unrestricted cash and cash equivalents were invested with counterparties based in the United Kingdom. A further 33% (2009: 0%) was on deposit with TUI AG, the ultimate parent company of the Group. Trade and other receivables exclude prepaid accommodation and other prepayments which do not meet the definition of a financial instrument. Prepayments for hotel accommodation, whilst not meeting the definition of a financial asset under IAS 39, give rise to a risk similar to credit risk due to the inherent risk of the Group not recovering the prepayment through full delivery of the related goods and services. From time to time prepayments can concentrate risk with specific counterparties which are based overseas. The carrying amount of prepayments (which are presented within current and non-current assets) forms the maximum credit exposure, before taking into account any security or collateral held by the Group. Where appropriate, the Group obtains security collateral over the related accommodation property to mitigate credit risk. At 30 September 2010, prepaid accommodation which is recoverable after more than one year was 115m (2009: 151m). (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 Groups 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 have any interest rate swap derivative instruments.

The Groups loans and borrowings are measured at amortised cost with the exception of the other financial liabilities which are carried at fair value:
Carrying amount 30 September 2010 m Carrying amount 30 September 2009 m
Financial instrument
Currency
Nominal interest rate
Year of maturity
Convertible bonds Shareholder loan Secured bank loans
Sterling EUR Sterling EUR USD EUR EUR USD MAD AUD Sterling USD NZD EUR
4.9%-6.0% 2.9% 1.6%-6.2% 5.1%-6.0% 1.4% 1.3%-8.4% 2.0%-8.4% 4.5%-5.5% 5.9%-6.5% 7.2%-11.8% 1.0%-4.5% 6.0%-6.5% 7.0% 5.0%
2014-2017 2011 2011-2018 2010-2016 2011 2010-2016 2010-2046 2011-2015 2014-2017 2010-2015 2010-2012 2011-2016 2011 Current
633 575 15 2 7 12 36 236 29 2 2 269 1 1 2 38 1,553 921 632 1,553
840 19 1 9 22 51 187 2 2 1 192 1 4 1 6 39 1,128 215 913 1,128
Unsecured bank loans Finance leases
Loan notes
Other financial liabilities Total interest-bearing liabilities Analysed between: Fixed rate instruments Variable rate instruments
The main movements between fixed rate and variable rate instruments in 2010 are the partial repayment of the shareholder loan (variable rate) and the issuance of the convertible bonds (fixed rates). (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 Groups approach is to ensure that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed circumstances. The Groups 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 the following main sources of long-term debt funding: i) the external bank revolving syndicated credit facilities totalling 1,060m (2009: 910m) plus bonding and letter of credit facilities totalling 90m (2009: 40m) which all mature in June 2012 except for a 40m bonding and letter of credit facility in September 2011. From these facilities, 166m has been utilised for letter of credit purposes at 30 September 2010 (2009: 144m); ii) a 350m convertible bond (due 2014) issued on 1 October 2009 and settled on 5 October 2009; and iii) a 400m convertible bond (due 2017) issued on 22 April 2010 and settled on 27 April 2010. The external bank revolving credit facility is used to manage the seasonality of the Groups 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 a further 30m bonding and letter of credit facility which mature in June 2012 was signed on 15 October 2010. The Board remains satisfied with the Groups funding and liquidity position. Fixed charges cover and the ratio of net debt to EBITDA, which the Board believes to be the most useful measures of cash generation and gearing, as well as being the main basis for covenants in our external credit facilities, were met at the year end and throughout the year. Fixed charges cover is defined as earnings before interest, tax, depreciation, amortisation and operating lease rentals charge (EBITDAR) divided by net interest plus operating lease rentals. EBITDA is defined as earnings before interest, tax, depreciation and amortisation. Both covenants are measured on an underlying basis as defined in Note 1(B)(iv).
Group at a glance
In respect of the delivery of new aircraft, the Groups established strategy is to refinance new aircraft in advance of their delivery dates and therefore the Group does not forecast to use internal cash resources for new aircraft purchases. Details of aircraft purchase commitments at the year end are given in Note 28. The following are the undiscounted contractual cash flows of financial liabilities, including interest payments calculated using interest rates in force at each balance sheet date:
30 September 2010 Carrying amount m Contractual cash flows m Within 1 year m Between 1 and 2 years m Between 2 and 5 years m More than 5 years m
Non-derivative financial liabilities Convertible bonds Shareholder loan Secured bank loans Unsecured bank loans Finance leases Loan notes Other financial liabilities Trade and other payables Derivative financial liabilities Contracts used for hedging Total
Strategic overview
633 575 24 12 269 2 38 2,678 145 4,376

Carrying amount m
982 580 26 13 311 3 38 2,678 146 4,777

Contractual cash flows m
41 580 10 9 154 2 38 2,630 119 3,583

Within 1 year m
41 2 2 21 1 48 27 142
Between 1 and 2 years m
461 14 2 71 548
439 65 504
More than 5 years m
30 September 2009 (restated)
Non-derivative financial liabilities Shareholder loan Secured bank loans Unsecured bank loans Finance leases Loan notes Other financial liabilities Trade and other payables Derivative financial liabilities Contracts used for hedging Total
840 29 22 192 6 39 2,889 302 4,319
865 31 27 206 7 39 2,889 348 4,412
249 6 15 33 5 39 2,858 307 3,512
616 10 3 147 1 31 38 846
15 6 23 1 3 48
3 3 6
Governance
Trade payables as at 30 September 2009 have been increased by 58m following the restatement disclosed in Note 1(B)(ii). The actual repayment of revolving credit facilities will vary. The timing reflected in the tables is based on the first date that the Group can be required to settle the liability. Trade and other payables exclude customers monies received in advance, deferred income, contingent consideration and other non-contractual payables. At 30 September 2010 the Group had available undrawn committed borrowing facilities of 984m (2009: 806m), comprising letters of credit, guarantees and revolving, floating rate credit facilities for cash borrowings. Any non-compliance with covenants underlying the Groups financing arrangements could, if not waived, constitute an event of default with respect to any such arrangements. The Group was in full compliance with its financial covenants throughout each of the periods presented. Undrawn facilities throughout all years presented are analysed as follows:
Expiring: Within one year In more than one year but less than five years Total
1 983 984
40 766 806

(G) Analysis of total financial assets and financial liabilities The tables below set out the Groups IAS 39 classification for each of its financial assets and liabilities:
Financial assets and liabilities at fair value through income statement m Derivative financial instruments used in hedge accounting m Available for sale financial assets m Financial liabilities at amortised cost m
At 30 September 2010
Loans and receivables m
Total carrying value m
Cash and cash equivalents Borrowings due within one year Borrowings due after more than one year Derivative assets Derivative liabilities Other financial assets Other financial liabilities Total
10 (12) 29 (59) (32)

Financial assets and liabilities at fair value through income statement m
155 (133) 22
Derivative financial instruments used in hedge accounting m
27 27
1,304 814 2,118
(719) (796) (2,657) (4,172)
1,304 (719) (796) 165 (145) 870 (2,716) (2,037)
At 30 September 2009 (restated)
Available for sale financial assets m
Loans and receivables m
Financial liabilities at amortised cost m
Total carrying value m
Cash and cash equivalents Borrowings due within one year Borrowings due after more than one year Derivative assets Derivative liabilities Other financial assets Other financial liabilities Total
(59) (59)
284 (302) (18)
47 47
790 975 1,765
(288) (801) (2,869) (3,958)
790 (288) (801) 284 (302) 1,022 (2,928) (2,223)
Other financial assets and other financial liabilities have been restated as described in Note 1(B)(ii). Other financial assets have reduced by 54m (see Note 16) and other financial liabilities have increased by 58m (see Note 20) at 30 September 2009. Following the amendments to IFRS 7 and IAS 39 the Group has re-presented the 2009 table in Note 25(G). The main changes are to split the assets and liabilities previously classified in the held for trading column into financial assets and liabilities at fair value through income statement and derivative financial instruments used in hedge accounting. The Groups derivative assets (284m) and liabilities (302m) at 30 September 2009 have been classified as derivative financial instruments used in hedge accounting and the LTUR put option of 39m has been classified as a financial liability at fair value through income statement. In addition the deferred consideration liability of 20m at 30 September 2009 has been reclassified from amortised cost to financial assets and liabilities at fair value through income statement to reflect a more appropriate categorisation under IFRS 7 fair value hierarchy. There are no other changes to the table. The reclassifications between categories of financial instrument have no impact on any of the primary statements in either year. 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).
Group at a glance
(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 2010 and at 30 September 2009, are as follows:
30 September 2010 Carrying amount m Fair value m Restated 30 September 2009 Carrying amount m Fair value m
Cash and cash equivalents Borrowings Convertible bond Shareholder loan Bank loans Loan notes Finance lease liabilities Derivative financial instruments Forward exchange contracts used for hedging assets liabilities Commodity contracts used for hedging assets liabilities Other financial assets Trade and other receivables Trade and listed investments Other investments Other financial liabilities Other financial liabilities Current trade and other payables Non-current trade and other payables Total
1,304 (633) (575) (36) (2) (269) 153 (127) 12 (18) 814 56 (38) (2,630) (48) (2,037)
1,304 (705) (575) (36) (2) (271) 153 (127) 12 (18) 814 56 (38) (2,630) (48) (2,111)
790 (840) (51) (6) (192) 271 (173) 13 (129) 939 47 36 (39) (2,858) (31) (2,223)
790 (840) (51) (6) (188) 271 (173)
13 (129) 939 47 36 (39) (2,858) (31) (2,219)
The basis for fair value measurement of financial assets and liabilities is set out in Note 1(Y) to the consolidated financial statements. 30 September 2009: Trade and other receivables has been reduced by 54m (see Note 16) and Trade and other payables have been increased by 58m (see Note 20) as a result of the restatement described in Note 1(B)(ii). Fair value measurements The adoption of the amendment to IFRS 7 in the year ended 30 September 2010 requires enhanced disclosures about fair value measurements of financial instruments through the use of a three-level fair value hierarchy that prioritises the valuation techniques used in fair value calculations. The levels can be broadly described as follows: Level 1 use of unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 use of observable inputs other than quoted prices included within level 1, such as quoted prices for similar assets or liabilities in active markets. Level 3 use of inputs not based on observable market data but reflecting managements own assumptions about pricing the asset or liability. The Group maintains policies and procedures to value instruments using the most relevant data available. If there are multiple inputs available that fall into different levels of the hierarchy, the instrument is categorised on the basis of the lowest level input.

The Groups financial assets and liabilities, excluding finance lease liabilities, measured at fair value at 30 September 2010 are categorised as follows:
At 30 September 2010 Level 1 m Level 2 m Level 3 m Total fair value m
Assets
Trade and listed investments Derivative financial instruments Total assets 19 19 19 165 165 (145) (145) 20 37 37 (59) (59) (22) 56 165 221 (145) (59) (204) 17
Liabilities
Derivative financial instruments Other financial liabilities Total liabilities Total
The movements in level 3 instruments, measured on a recurring basis, for the year ended 30 September 2010 are as follows:
Trade and listed investments m Other financial liabilities m Total level 3 instruments m
At 30 September 2009 Deferred consideration settlement Net credit/(charge) included in the income statement Adjustment through goodwill Reclassification to non-current interest bearing receivables Foreign exchange movements (in equity) At 30 September 2010
14 30 (7) 37
(59) 2 (3) (1) 2 (59)
(45) 2 27 (1) (7) 2 (22)
Trade and listed investments As at 30 September 2010 37m of trade and listed investments were categorised as level 3 instruments. These consist of the Groups investment in The Airline Group (29m) and other trade investments in the equity of unlisted companies (8m). Both are valued using assumptions not observable in the market and so have been categorised as level 3 instruments in the fair value hierarchy (see Note 12). The level 1 trade investment is the Groups holding in Air Berlin PLC (see Note 12). Derivative assets and liabilities Derivatives are valued in the market using discounted cash flow techniques. These techniques incorporate inputs at levels 1 and 2, such as interest rates and foreign currency exchange rates. These market inputs are used in the discounted cash flow calculation incorporating the instruments term, notional amount and discount rate, and taking credit risk into account. As significant inputs to the valuation are observable in the markets, these instruments are categorised as level 2 in the hierarchy. Other financial liabilities The put option to acquire the remaining equity stake in LTUR Tourismus AG (38m) is classified as an other financial liability with changes in fair value included in operating profit. The deferred consideration balance (21m) is also measured at fair value based on the relevant contracts. As all of these financial liabilities are valued using assumptions not observable in the market, they are categorised as level 3 instruments in the fair value hierarchy. Reclassification to non-current interest bearing receivables 7m of loan notes owed to the Group by The Airline Group Limited have been reclassified from trade and other investments to non-current interest bearing receivables during 2010.
Group at a glance
(I) Derivative instruments At the balance sheet date the fair value of the Groups derivative financial assets and liabilities was as follows:
30 September 2010 Assets Fair value m Liabilities Fair value m Total Fair value m Assets Fair value m 30 September 2009 Liabilities Fair value m Total Fair value m
Cash flow hedges

Foreign exchange forwards Foreign exchange options Commodity options Commodity swaps 80 3 1 11 95 60 10 165 144 21 165 (101) (2) (18) (121) (12) (12) (145) (122) (23) (145) (21) 1 1 (7) (26) 48 (2) 20 22 (2) 20 238 3 10 251 33 284 271 13 284 (167) (1) (13) (116) (297) (5) (302) (284) (18) (302) 71 (1) (10) (106) (46) 28 (18) (13) (5) (18)
Strategic overview
Economic hedges
Foreign exchange forwards Held at fair value in profit & loss Total Analysed as: Current Non-current Total
The Group has hedged a proportion of its currency requirements for the Winter 2010 and Summer 2011 seasons using collecting forward option instruments which are carried at fair value through profit and loss. All other derivatives are held as cash flow hedges or to offset changes in the value of items recognised in the consolidated balance sheet. Speculative positions are not undertaken. The following table indicates the periods in which the cash flows associated with derivatives are expected to occur. Future cash flows have been estimated based on spot rates and prices at 30 September 2010. The net cash flows are shown net for each instrument.
Projected cash flows Less than 1 year m Between 1 and 2 years m Between 2 and 5 years m Over 5 years m
30 September 2010
Derivative financial assets

Foreign exchange forwards Foreign exchange options Commodity swaps 132 2 8 142 (99) (1) (19) (119) 23
Less than 1 year m
Governance
16 16 (20) (7) (27) (11)

Projected cash flows Between 1 and 2 years m
2 2 2

Over 5 years m
Derivative financial liabilities

Foreign exchange forwards Commodity options Commodity swaps Total
30 September 2009
Derivative financial assets Foreign exchange forwards Commodity swaps Derivative financial liabilities Foreign exchange forwards Commodity options Commodity swaps Total
252 5 257 (148) (27) (132) (307) (50)
11 11 (14) (2) (22) (38) (27)
(2) (1) (3) (3)

Ineffectiveness Ineffectiveness in respect of cash flow hedges has been recognised in the consolidated income statement for the year ended 30 September 2010. Ineffectiveness for the year ended 30 September 2010 comprised a credit of 2m (2009: credit 5m) relating to fuel hedging and this is included within underlying operating profit. Aircraft order book derivatives Last year US dollar cash flow hedges in connection with the Groups aircraft order books were fully unwound and settled early in a planned process. 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 was recognised in the hedging reserve. Net gains relating to aircraft orders delivered or cancelled in the prior year (comprising 10 Boeing 787s) were recycled to the consolidated income statement immediately and were recorded in separately disclosed items (Note 3). There were no deliveries in 2010 and the remaining amount of 11m (net of deferred taxation) remains in reserves available to 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 30 September 2010 m Year ended 30 September 2009 m
Hedging reserve
Effective portion of changes in fair value of cash flow hedging instruments Fair value of cash flow hedges transferred to the consolidated income statement 33 41 74 (60) (81) (141)
Deferred tax on the above items recognised directly in equity is shown in Note 7(iii). (K) Capital management The Boards 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 Groups pre-tax weighted average cost of capital. Progress in achieving this objective has been made during this year, by improving underlying operating margins to 14.3% which increases return on invested capital (ROIC) to 9.9% (2009: restated 8.6%). ROIC is defined as Underlying NOPAT/Average Invested Capital. Underlying NOPAT is underlying Net Operating Profit After a Tax charge at the effective annual rate. Underlying as a measure of operating profit is defined in Note 1(B)(iv). 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 30 September 2010 m Restated Year ended 30 September 2009 m
Note
Underlying operating profit excluding impact of volcanic disruption Taxation at the underlying effective rate of 27% (2009: 28%) Underlying NOPAT Net assets** Net debt Seasonal net debt adjustment Cumulative goodwill impairment charge (2010: Spain, 5m and Italy, 7m; 2009: Sunsail Clubs, 7m; 2008: TUIFly, 112m) Defined benefit pension net deficit Invested Capital Average Invested Capital ROIC
*Pro forma unaudited underlying operating profit (Note 1(B)(iii)). **Net assets includes the liability element (633m) of the convertible bond.
Consolidated income statement
447* (121) 326 1,973 249 300 131 493 3,146 3,289 9.9%
401 (112) 289 2,174 338 300 119 500 3,431 3,379 8.6%
Consolidated balance sheet 26
10 5(C)
ROIC in 2009 prior to the restatement described in Note 1(B)(ii) was 9.2%.
Group at a glance
The Board seeks to maintain a balance between the levels of debt borrowings undertaken and the advantages and security afforded by a sound capital position. An analysis of net debt at the year end is in Note 26. Certain subsidiaries have external capital requirements as a result of applicable travel industry regulations in their jurisdictions. Compliance with these regulations is mandatory for the relevant operating businesses in those countries in order that they are able to continue trading. Key countries with such mandatory capital requirements are France, Belgium, the Netherlands, Germany and Australia. The capital requirements in these countries stipulate maintaining minimum equity/net asset levels in operating subsidiaries. All such capital requirements were complied with as at 30 September 2010. None of these requirements are individually or collectively significant to the overall Group and do not place any significant restriction on the Groups funding or operations. Underlying operating profit, underlying NOPAT, net assets, invested capital, average invested capital and ROIC have been restated. See Note 1(B)(iv). (L) Sensitivity analysis The sensitivity analysis is for illustrative purposes only and should not be considered a projection of likely future events and gains or losses. The sensitivity analysis includes the following assumptions: Changes in market interest rates only affect interest income or expense of variable financial instruments; Changes in market interest rates only affect interest income or expense in relation to financial instruments with fixed interest rates if these are recognised at fair value;
Changes in market interest, currency and fuel rates affect the fair value of derivative financial instruments designated as hedging instruments and the majority of hedges are expected to be highly effective with the main exception being collecting FX forward contracts not qualifying for hedge accounting; and Changes in the fair value of derivative financial instruments and other financial assets or liabilities are estimated by discounting the future cash flows to net present values using appropriate market rates prevailing at the year end. The Group has used a sensitivity analysis technique that measures the estimated change to the consolidated income statement and equity of a 1% (100 basis points) difference in market interest rates or a 10% strengthening or weakening in Sterling against all other currencies and in fuel prices, from the rates applicable at the balance sheet date, with all other variables remaining constant. Interest rate risk Under the above assumptions, a 100 basis points increase in interest rates would result in a 5m increase in interest expense in the consolidated income statement or equity (2009: no material impact). A 100 basis points reduction in interest rates is not considered reasonably possible.
Currency risk Similarly, under the above assumptions, a 10% strengthening or weakening of Sterling against all principal exchange rates would not have altered the reported loss before tax (September 2009: loss reduced by 4m, profit increased by 5m, respectively) (principally relating to the translation of the income statements of overseas subsidiaries). Equity (before tax) would have decreased by 210m (2009: 376m) or increased by 215m (2009: 376m), respectively. Fuel price risk The sensitivity analysis is based on a 10% increase or decrease in fuel prices and the sensitivity will differ correspondingly if the fuel markets are more or less volatile. Under these assumptions, with a 10% increase or decrease in the unit price of fuel, profit before tax would neither increase nor decrease materially, because of the fuel price hedging policy and appropriate pricing adjustments. Equity (before tax) would increase by 79m (2009: 70m), or decrease by 78m (2009: 70m), respectively. (M) Litigation risk The Group has a policy to mitigate the financial risk of litigation and disaster through insurance with third party providers and the use of captive insurance companies. The Groups exposure to risk is capped by single event and aggregate limits, with insurance in place for exposures above these limits. The Group provides for outstanding claims, including settlement expenses, using a consistent methodology based upon historical claims patterns, average claims amounts, external legal advice and future expectations.

26. Movements in cash and net debt
Cash and cash equivalents m Convertible bonds m Amounts due to related parties m Bank loans m Loan notes m Finance Leases m Other financial liabilities m Total m
At 1 October 2008 Cash movement Non-cash movement Foreign exchange Arising on acquisition At 30 September 2009 Cash movement Non-cash movement Foreign exchange At 30 September 2010
1,130 (352) (4) 16 790 561 (47) 1,304
(750) 117 (633)
(840) 91 29 (120) (840) 222 43 (575)
(185) 143 (8) (1) (51) 13 2 (36)
(9) 6 (2) (1) (6) 4 (2)
(187) 22 (26) (1) (192) 31 (121) 13 (269)
(45) 23 (12) (5) (39) 1 (38)
(136) (67) 11 (144) (2) (338) 81 (4) 12 (249)
Non-cash movements relate to the equity portion of the convertible bond issues and the inception of new finance leases arising on capital expenditure (2009: financial liabilities arising from the issue of a put option in respect of non-controlling interest shares).
27. Operating lease commitments

Total Group obligations under non-cancellable operating lease contracts are payable as follows:
Land and buildings 30 September 2010 m Aircraft, ships yachts and equipment 30 September 2010 m Land and buildings 30 September 2009 m Aircraft, ships yachts and equipment 30 September 2009 m
Total commitments under non-cancellable operating leases expiring: Within one year Between one and five years Later than five years Total
226 512 245 983
369 728 107 1,204
190 444 240 874
406 962 230 1,598
Operating lease commitments in respect of land and buildings principally comprise commitments in respect of the Groups retail estate. The future commitment under the Groups floating rate aircraft operating leases at 30 September 2010 was 122m (2009: 120m). In total the Group operates 122 aircraft on operating leases at 30 September 2010 (2009: 128 aircraft). Yachts are held on operating leases in TUI Marine as part of the Groups Sunsail and The Moorings fleets. Cruise ships are held on operating leases in the UK source market.
28. Capital and other commitments

Capital commitments The Groups capital commitments are as follows:
Contracted but not provided for
22
In addition to the above items, at the year end the Group had contracted to purchase 40 (2009: 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$4,439m (2009: US$6,156m). 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 Groups joint ventures and associates had no material capital commitments at 30 September 2010 (2009: nil).
Group at a glance
29. Contingent liabilities

The Group is at any time defending a number of actions against it arising in the normal course of business. Provision is made for these actions where this is deemed appropriate. No actions which are outstanding at 30 September 2010 are expected to have a material effect on these accounts. The Directors consider that adequate provision has been made for all known liabilities.
30. Related party transactions

Apart from with its own subsidiaries which are included in the consolidated financial statements, TUI Travel PLC, in carrying out its ordinary business activities, maintained direct and indirect relationships with related parties including consolidated or related companies of its ultimate parent company, TUI AG. These companies delivered services to companies in the Group. The Group also undertook transactions with its joint ventures and associated companies. These transactions related primarily to incoming agencies and hotel companies used by the Groups tour operators. The income and expenses arising from transactions with associates and joint ventures are included within the appropriate sector revenue or costs as presented in the segmental analysis. All transactions with related parties were executed on an arms length basis and under normal conditions of trade with independent third parties. Shareholder loan A shareholder loan was advanced to the Company by TUI AG on 3 September 2007. The loan bears interest at EURIBOR plus a margin, currently 1.9% per annum, increasing six-monthly 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 2010 was 669m (30 September 2009: 919m), not including accrued interest payable. It is repayable in two instalments: 1 December 2010, 509m and 30 April 2011, 160m. Hotel Framework Agreement As part of the relationship arrangements between the Company and TUI AG at the time of the business combination, both parties entered into the Hotel Framework Agreement, which governs the commercial relationship between TUI AG and the Company in respect of the distribution of hotel beds forming part of the hotel portfolio interests retained by TUI AG. Under the Hotel Framework Agreement, TUI Deutschland (TUI Travel PLCs German tour operating business) continues to have access to the Robinson hotel portfolio and to the distribution of such portfolios hotel beds in Europe on the basis of the existing levels of exclusivity and seasonal arrangements between TUI Deutschland and Robinson, as practised prior to the business combination. In addition, TUI Deutschland agrees to provide the same services in relation to the distribution of the beds as it did prior to the business combination and shall be entitled to use certain Robinson trademarks in connection with these services. The Hotel Framework Agreement expires on 31 October 2011 and discussions regarding a new agreement are currently being undertaken. Trademark Licence Agreement The Trademark Licence Agreement incorporates trademark licences granted from TUI AG to members of the TUI Tourism Group in relation to TUI Tourisms use of the TUI name and logo and other trademarks from within TUI AGs portfolio of trademarks used in the former TUI Tourisms business. Licence fees payable under each licence are an annual fee equal to 0.02% of the average annual gross turnover of the relevant licensee under the relevant trademarks measured over a three-year period. Total licence fees charged for the year ended 30 September 2010 were 3m (2009: 3m). Each licences standard terms are for five years with an option for the relevant licensee to extend for a further five years on the same terms. Details of transactions with related parties and balances outstanding at the balance sheet date are set out in the tables below:
Revenue Year ended 30 September 2010 m Year ended 30 September 2009 m Expenses Year ended 30 September 2010 m Year ended 30 September 2009 m
Strategic overview Business performance Governance Financial statements
Related party
Ultimate parent TUI AG Hotel and resort subsidiaries of TUI AG Other subsidiaries, joint ventures and associates of TUI AG Joint ventures and associates of the Group Total 11 13 7 10 41 7 5 8 7 27 70 403 98 120 691 71 384 63 151 669

Receivables outstanding 30 September 2010 m 30 September 2009 m Payables outstanding 30 September 2010 m 30 September 2009 m
Related party
Ultimate parent TUI AG Hotel and resort subsidiaries of TUI AG Other subsidiaries, joint ventures and associates of TUI AG Joint ventures and associates of the Group Total 385 4 4 30 423 6 1 6 13 26 594 46 12 10 662 885 56 14 19 974
The 385m receivable balance outstanding from the ultimate parent TUI AG at 30 September 2010 includes a 370m (2009: nil) cash deposit, returnable on demand. Payables outstanding with related parties are reported in Notes 19 and 20 and receivables outstanding are reported in Note 16 and Note 17. Details regarding the investment in Togebi Holdings Limited are included in Note 12. In accordance with IAS 24, key management functions within the Group and the GMB 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 30 September 2010 m Year ended 30 September 2009 m
Short-term employee benefits Post-retirement benefits Share-based payments Total
15 2 9 26
17 2 10 29
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 Directors to make estimates and judgements that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amount of revenue and expenses during the year. The Directors evaluate the estimates and judgements on an ongoing basis. Such estimates and judgements are based upon historical experience and other factors it believes to be reasonable under the circumstances. Actual results may differ from estimates. Management has discussed with the Audit Committee the development, selection and disclosure of the Groups 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 Groups obligations under defined benefit pension schemes using assumptions taken from a range of possible actuarial assumptions. These assumptions may not be borne out in practice, especially due to the long timescales involved. In particular, the valuation of scheme assets is based on the fair value at the balance sheet date. As these assets are not intended to be sold in the short-term, their value may change significantly prior to realisation. In reviewing the work of the qualified independent actuary, management was required to exercise judgement to satisfy itself that appropriate weight had been afforded to macroeconomic factors. Details of the actual assumptions used, including sensitivity analysis, are set out in Note 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).
Group at a glance
(B) Judgements Separately disclosed items Separately disclosed items are those significant items which in managements judgement are highlighted by virtue of their size or incidence to enable a full understanding of the Groups financial performance. Such items are included within the income statement caption to which they relate (Notes 3 and 4). Other asset carrying values Management performs an assessment at each balance sheet date of all material assets across the Group for signs of impairment. Key judgement areas include the carrying values of land and buildings, aircraft, ships, yachts and motorboats, trade receivables and prepaid accommodation. The recovery of these assets is dependent on estimated future cash flows receivable and the provision of future services or goods by third parties. Useful economic lives and residual values are subject to regular management review. Business combinations Judgement and estimation is required in the identification and valuation of separable assets and liabilities on acquisitions. In particular, judgement and estimation is required in the identification and valuation of separable intangible assets, being brands, orders books and customer databases, and determining appropriate useful economic lives for these assets. Judgement and estimation is also required in determining contingent consideration payable in respect of acquisitions. Details of acquisitions are set out in Note 13. Liabilities In accounting for provisions, judgement is required in determining occurrence probability, maturity and level of risk. Judgement and estimation is required in determining aircraft maintenance, restructuring and onerous lease provisions. Due to the volume of transactions and the materiality of period end accruals, judgement is also required in respect of the recognition and derecognition of airline and accommodation operating accruals. Details of provisions made and the basis on which the provision has been calculated is disclosed in Note 21 and the accounting policy is set out in Note 1(T). Share-based payments Judgement and estimation is required in determining the fair value of shares at the date of award. The fair value is estimated using valuation techniques which take into account the awards term, the risk-free interest rate and the expected volatility of the market price of the Companys shares. Details of share-based payments and the assumptions applied are disclosed in Note 5(D) and the accounting policy is set out in Note 1(Y)(ix). Non-current assets and disposal groups held for sale The classification of non-current assets and disposal groups as held for sale requires judgement in determining whether the planned disposal is highly probable and able to be realised within 12 months. The measurement of held for sale assets at their fair value less costs to sell can also require significant judgement if there is no active market. Lease accounting Judgement is required in the initial classification of leases as either operating leases or finance leases and, in respect of finance leases, determining the appropriate discount rate implicit in the lease to discount minimum lease payments. In respect of certain leases classified as finance leases, it has not been possible to reliably estimate lessors residual values and management has been required to independently estimate an appropriate discount rate. Judgement is also required in respect of the treatment of gains and losses arising on the sale and leaseback of assets. The accounting policy for leases is set out in Notes 1(G), 1(H) and 1(Q). Taxation The Group has, from time to time, contingent tax liabilities arising from trading and corporate transactions in the UK and overseas jurisdictions. After taking appropriate external advice, the Group makes provision for these liabilities based on the probable level of economic loss that may be incurred and which is reliably measurable. Judgement is also required in the assessment of the future recoverability of tax losses and recognition of deferred tax assets. Details of unrecognised tax losses are given in Note 14. Recoverable amounts of deposits and prepayments Judgements have been made in respect of the volumes of future trading with hoteliers and the credit-worthiness of those hoteliers in order to assess the recoverable amounts of deposits and prepayments made to those hoteliers. Fair value measurements Management has to make judgements regarding the valuation of some financial instruments that use inputs that are not observable in active markets. These are disclosed in Note 25(G).

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 Sectors results and net assets during the year. The Directors consider that those companies not listed are not significant in relation to the Sector specified. TUI UK Limited is presented within the Mainstream Sector, Northern Region to reflect its principal operations but the Company also includes certain UK Activity and Specialist businesses at 30 September 2010.
Subsidiary Country Nature of business
Mainstream Sector
Mainstream Northern Region Fritidsresor AB Oy Finnmatkat AB Star Tour A/S Startour-Stjernereiser AS Thomson Airways Limited TUI Canada Holdings Inc. (Holding Co. of Sunwing Travel Group Inc.) TUI UK Limited TUI UK Retail Limited TUIfly Nordic AB Mainstream Central Europe Berge und Meer Touristik GmbH Hapag-Lloyd Express GmbH LTUR Tourismus AG (70.0%) TUI fly GmbH TUI (Suisse) AG TUI Austria Holding GmbH TUI Aviation GmbH TUI Deutschland GmbH TUI Leisure Travel GmbH TUI sterreich GmbH TUI Poland Sp Zoo Mainstream Western Europe Corsair S.A. Groupe Marmara SAS (98.9%) JetAir N.V. TUI Airlines Belgium N.V. TUI Airlines Nederland B.V. TUI Travel Belgium N.V. TUI Nederland N.V. Voyages Touraventure S.A. Sweden Finland Denmark Norway United Kingdom Canada United Kingdom United Kingdom Sweden Germany Germany Germany Germany Switzerland Austria Germany Germany Germany Austria Poland France France Belgium Belgium Netherlands Belgium Netherlands France France United Kingdom Italy USA USA United Kingdom Italy Spain USA USA USA France USA USA USA Tour operator Tour operator Tour operator Tour operator Airline Holding Company Tour operator Travel agent Airline Tour operator Airline Tour operator Airline Tour operator Tour operator Leasing company Tour operator Travel agent Tour operator Tour operator Airline Tour operator Tour operator Airline Airline Tour operator Tour operator Tour operator Tour operator Tour operator On-line travel agent Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator

Aventuria SAS Citalia Holidays Limited Easy Market S.P.A. Educational Tours, Inc. EEFC, Inc. (Trading as Europe Vacations) Hayes & Jarvis (Travel) Limited (includes trading names Thomson Tailor Made and Jetsave) I Viaggi del Turchese Srl Interspecialists SLU (trading as Royal Vacaciones & Ambassador Tours) New Horizons Tour & Travel Inc. StudentCity.com, Inc TCS and Starquest Expeditions, Inc Tourinter SAS TRAVCOA Corporation Travel Turf Inc. (trading as World Class Vacations) Your Man Tours, Inc.
Group at a glance
Subsidiary
Country
Nature of business
Activity Sector
Adventure Tours Australia Group Pty Ltd Crown Blue Line Limited EAC Language Centres (UK) Limited TTSS Limited (previously called Edwin Doran Limited) Exodus Travels Limited Fanfirm Pty Limited Gullivers Sports Travel Limited Hampstead School of English Limited Mariner International Travel, Inc. Porter and Haylett Limited Peregrine Adventures Pty Ltd Prestige Boating Holidays Limited Quark Expeditions, Inc Real Travel Limited Ski Bound Limited Sportsworld Group Limited Sunsail Limited Sunsail Worldwide Sailing Limited Williment Travel Group limited World Challenge Holdings Limited Yachts International Limited Zegrahm Expeditions, Inc Australia United Kingdom United Kingdom United Kingdom United Kingdom Australia United Kingdom United Kingdom USA United Kingdom Australia Irish Republic USA United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom New Zealand United Kingdom British Virgin Islands USA Spain Spain Dominican Republic Spain Spain USA United Kingdom Turkey Portugal Spain Tour operator Tour operator Language teaching Tour operator Tour operator Tour operator Tour operator Language teaching Tour operator Boat owning company Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Tour operator Online accommodation Online accommodation Destination services Destination services Online accommodation Destination services Late accommodation Destination services Destination services Destination services

Beds on line SLU Hotelbeds SLU Hotelbeds Dominicana SA Hotelbeds Spain SLU Hotelbeds Product, SLU Hotelbeds USA, Inc. Late Rooms Limited Tantur Turizm Seyahat A.S. Transfar Agencia de Viagens e Turismo Unipessoal LDA TUI Espaa Turismo S.A. (99.0%)

33. (Loss)/earnings per share
The basic loss per share is calculated by dividing the result attributable to ordinary shareholders by the applicable weighted average number of shares in issue during the year, excluding those held in the employee benefit trusts. The diluted loss per share is calculated on the result attributable to ordinary shareholders divided by the adjusted potential weighted average number of ordinary shares, which takes account of the outstanding share awards and the impact of the conversion of the convertible bonds, where their conversion is dilutive. The additional underlying earnings per share measures have been presented to provide the reader of the accounts with a better understanding of the results. Basic and diluted loss per share from continuing operations is as follows:
(Loss)/ earnings 2010 m Weighted average no. of shares 2010 Millions (Loss)/ earnings per share 2010 Pence (Loss)/ earnings Restated 2009 m Weighted average no. of shares Restated 2009 Millions (Loss)/ earnings per share Restated 2009 Pence
Basic and diluted loss per share Acquisition related expenses and impairment of goodwill (net of tax) Separately disclosed items (net of tax) Basic underlying earnings per share Effect of dilutive options Effect of convertible bond (net of tax) Diluted underlying earnings per share
(86) 127 203 244 32 276
1,107 1,107 11 144 1,262
(7.8) 11.5 18.3 22.0 (0.2) 0.1 21.9
(53) 47 227 221 221
1,107 1,107 11 1,118
(4.8) 4.2 20.6 20.0 (0.2) 19.8
Basic and diluted loss per share from the discontinued operation is as follows:
Loss 2010 m Weighted average no. of shares 2010 Millions Loss per share 2010 Pence Loss 2009 m Weighted average no. of shares 2009 Millions Earnings per share 2009 Pence
Basic and diluted loss per share
(18)
1,107
(1.6)
(14)
1,107
(1.3)
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 7.8p (2009: loss of 4.8p) for continuing operations and 1.6p (2009: loss of 1.3p) for the discontinued operation. The fully diluted weighted average number of shares on a statutory basis is 1,323 million (2009: 1,118 million). The diluting effect of options in both years and the convertible bond (in 2010 only) is included solely to calculate diluted underlying earnings per share. 2009 loss per share, (basic and diluted) underlying earnings per share (basic and diluted) have been restated as a result of the restatement in Note 1(B)(ii). The impact of the restatement on basic (and diluted) loss per share is to increase the loss by 3.8p per share from 1.0p per share to 4.8p per share. Basic underlying earnings per share decreases by 3.8p per share from 23.8p per share to 20.0p per share. Diluted underlying earnings per share decreases by 3.8p from 23.5p per share to 19.8p per share. Reconciliation of loss for the year from continuing operations attributable to ordinary shareholders from continuing operations
Year ended 30 September 2010 m Restated Year ended 30 September 2009 m
Loss attributable to ordinary shareholders from continuing operations Result attributable to non-controlling interests from continuing operations Loss for the year from continuing operations
(86) (86)
(53) 1 (52)
2009 numbers have been restated as described in Note 1(B)(ii). None of the discontinued loss for the year is attributable to non-controlling interests (2009: none).
Group at a glance
Non-GAAP measure Reconciliation of underlying operating profit to underlying earnings

Note
Restated Year ended 30 September 2009 m
Underlying operating profit Net underlying financial expenses Underlying profit before tax Underlying tax charge at 27% (2009: 28%) Underlying profit for the year Attributable to ordinary shareholders Attributable to non-controlling interests Underlying profit for the year
447 (110) 337 (93) 244 244 244
401 (77) 324 (102) 222 221 1 222
Strategic overview
2009 reconciliation has been restated as described in Note 1(B)(ii). The underlying numbers shown are as described in Note 1(B)(iv) and exclude the impact of the volcano ash as described in Note 1(B)(iii).
34. Post balance sheet events

Paul Bowtell, Chief Financial Officer, will be resigning from the TUI Travel PLC Board with effect from 31 December 2010 and will be replaced as Chief Financial Officer by Will Waggott. Acquisitions: details of acquisitions and disposals since the balance sheet date are set out in Note 13. A 30m bonding and letter of credit facility which matures in June 2012 was signed on 15 October 2010.
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 2010 TUI AG was the beneficial owner of 54.92% of the ordinary share capital of the Company. In addition a number of bonds are held on TUI AGs behalf and, if converted, this would give rise to 52,309,463 of new shares. On a fully-diluted basis, if all bonds were converted, TUI AGs shareholding would be 50.37% at 30 September 2010.
Governance
TUI AG prepares consolidated financial statements which include the results of the Group. The accounting reference date of TUI AG is 30 September. Copies of the TUI AG financial statements are publicly available and can be obtained from the registered office of this company situated at Karl-Wiechert-Allee 4, 30625 Hanover, Federal Republic of Germany.
Company balance sheet

At 30 September 2010
Note
Fixed assets Investment in subsidiary undertakings Total investments Current assets Derivative financial instruments Debtors Cash at bank and in hand Creditors: amounts falling due within one year Net current assets/(liabilities) Total assets less current liabilities Creditors: amounts falling due after more than one year Provision for liabilities and charges Net assets Capital and reserves Share capital Profit and loss account Convertible bond reserve Other reserves Equity shareholders funds
918 918 6 1,145 1,151 (967) 184
911 911 30 234 36 300 (311) (11) 900 (631) 269 112 127 30 269
G H
1,102 (638) (19) 445 112 227 83 23 445
I J J J
The financial statements were approved by a duly authorised Committee of the Board of Directors on 1 December 2010 and were signed on its behalf by:
Paul Bowtell Chief Financial Officer
Notes to the Companys financial statements for the year ended 30 September 2010
A. Accounting policies
Basis of preparation The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Companys financial statements. Accounting convention The financial statements have been prepared in accordance with applicable UK accounting standards and under the historical cost convention. The financial statements have been prepared on the going concern basis, which assumes that the Company will continue in operational existence for the foreseeable future. The Company has taken advantage of the exemption under Section 408 of the Companies Act 2006 from presenting its own profit and loss account. The profit after tax included in the financial statements of the Company determined in accordance with the Act, was 214m (2009: loss of 33m). Under Financial Reporting Standard (FRS) No 1 (revised), the Company is exempt from the requirement to prepare a cash flow statement as its cash flows are included within the published consolidated statement of cash flows of TUI Travel PLC. The Company has taken advantage of the exemption contained within FRS 29 and has not provided the required financial instruments disclosure on the basis that the Groups consolidated financial statements include consolidated IFRS 7 disclosures which are compliant with the requirements of FRS 29. Foreign currencies Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Sterling at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Sterling at foreign exchange rates ruling at the dates the fair values were determined. Investments In the Companys financial statements, investments in subsidiaries are stated at cost less provision for impairment. Dividends received and receivable are credited to the Companys profit and loss account. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any differences between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest rate basis. Classification of financial instruments issued Financial instruments issued by the Company are treated as equity only to the extent that they meet the following conditions: they include no contractual obligation upon the Company to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Company; and where the instrument will or may be settled in the Companys own equity instruments, it is either a nonderivative that includes no obligation to deliver a variable number of the Companys own equity instruments or is a derivative that will be settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. Derivative financial instruments Derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged. Convertible bond The convertible bonds are split into two components: a debt component and a component representing the embedded derivatives in the bond. The debt component represents the Groups liability for future interest coupon payments and the redemption amount. The embedded derivatives represent the value of the option that bondholders have to convert into ordinary shares of the Company. These derivatives were valued on inception and recognised in the Convertible bond reserve in equity. The debt component of the convertible bonds are measured at amortised cost and therefore increase as the present value of the interest coupon payments and redemption amount increases, with a corresponding charge to finance cost. The debt component decreases by the cash interest coupon payments made. The embedded derivatives are measured at fair value at each balance sheet date, and changes in fair value are recognised in the income statement. Issue costs are apportioned between the liability and derivative components of a convertible bond based on the allocation of proceeds to the liability and derivative components when the instruments are first recognised. Share-based payment The Company operates share-based payment schemes for the employees of its subsidiaries. The fair value of shares awarded to employees of the Company is recognised as an employee expense with a corresponding increase in equity. The employee expense is recharged to fellow Group subsidiaries. The Company makes awards of its own shares to the employees of its subsidiaries and as such recognises an increase in the cost of investment in its subsidiaries equivalent to the equity-settled share-based payment charge recognised in its subsidiaries financial statements with the corresponding credit being recognised directly in equity. The fair value is measured at the award date and is spread over the period during which the employee becomes unconditionally entitled to the awards. Calculating the fair value takes into account various factors including the expected volatility of the shares, the dividend yield and the risk free interest rate. Further information on the share schemes is provided in Note 5 to the consolidated financial statements. The increase in investments and credit to equity for the year ended 30 September 2010 is 14m (30 September 2009: 16m). Transactions of the Companys Employee Benefit Trust are included in the Companys financial statements. In particular, the Trusts purchases and sales of shares in the Company are debited and credited directly to equity.
Group at a glance Strategic overview Business performance Governance Financial statements Shareholder information
Notes to the Companys financial statements for the year ended 30 September 2010 continued
Related parties For the purpose of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. The Company has taken advantage of the exemption contained within FRS 8 and has not therefore disclosed transactions or balances with entities which are wholly-owned subsidiaries. Taxation The charge for taxation is based on the profit or loss for the period and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Except as otherwise required by accounting standards, full provision without discounting is made for all timing differences, which have arisen but not reversed at the balance sheet date. Timing differences arise when items of income and expenditure are included in tax computations in periods different from their inclusion in the financial statements. Dividends on shares presented within shareholders funds Dividends distributed to the Companys shareholders are recognised as a liability and deducted from equity in the Groups financial statements in the period in which the dividends are appropriately authorised and approved for payment and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the financial statements. Auditors remuneration The Companys 2010 audit fee was 25,000 (2009: 25,000).
B. Directors remuneration and employees

Details of Directors remuneration, gains made by them on vesting of share awards, amounts receivable by them under long-term incentive schemes and pension entitlements in the current and prior year are contained in the audited section of the Remuneration Report and in Note 5 of the consolidated financial statements. The Company had seven employees (2009: nine). Details of all share awards issued by the Company are given in Note 5 of the consolidated financial statements.
C. Dividends
Details of dividends paid and proposed by the Company in the current and prior year and details of dividends proposed subsequent to the balance sheet date are given in Note 9 of the consolidated financial statements.
D. Investments
Shares in Subsidiaries m
Cost At 1 October 2009 Additions Disposals At 30 September 2010 Provision for diminution in value At 30 September 2009 Impairment At 30 September 2010 Net book value At 30 September 2009 At 30 September 2010
911 14 (3) 922 (4) (4) 911 918
Additions represent share-based payment liabilities incurred. The costs of the share-based schemes, which are operated for employees of the Companys subsidiaries, are borne by the subsidiaries, subject to local accounting standards. The Company recognises an increase in the investment in the subsidiary and a credit to retained earnings, in accordance with FRS 20: Share-based payments. The investment in Travelmood Limited, a wholly owned subsidiary, of 4m has been fully written down in the year. This follows a review of the carrying value by the Directors in light of the intended strategic direction and expected trading of the company in the foreseeable future. Details of the principal operating subsidiaries held directly and indirectly by the Company and of companies acquired in the year ended 30 September 2010 can be found in Notes 32 and 13 of the Groups consolidated financial statements.
Group at a glance
E. Debtors
Amounts owed by ultimate parent company Amounts owed by Group undertakings Corporation tax recoverable Prepayments Other debtors Total
370 705 35 2 33 1,145
234 234
Strategic overview
Amounts owed by ultimate parent Amounts owed by ultimate parent comprise a loan of 370m. The loan is unsecured, bears interest at EURIBOR plus a margin of 1.9%, has no fixed date of repayment and is repayable on demand. Amounts owed by Group undertakings Amounts owed by Group undertakings are unsecured, includes 360m (2009: 226m) that bears interest at 6.0% (2009: 1.5%) and matures on 5 October 2010, 9m (2009: nil) that bears interest at 7.0% and matures on 29 October 2010. 336m (2009: 8m) is unsecured, bears no interest, has no fixed date of repayment and is repayable on demand.
F. Creditors: amounts falling due within one year

Bank overdraft Deferred and contingent consideration Amounts owed to ultimate parent company Amounts owed to Group undertakings Accruals and deferred income Total
112 12 589 234 20 967
4 252 55 311
Bank overdraft Bank overdraft is unsecured, repayable on demand and bears interest at overnight LIBOR rate plus a margin of 2%. Governance Amounts owed to Group undertakings Amounts owed by Group undertakings are unsecured, interest free, have no fixed date of repayment and are repayable on demand. Amounts owed to ultimate parent company Amounts owed to the ultimate parent comprise a shareholder loan of 669m (2009: 919m), current account of 14m (2009: 15m) and interest payable of 2m (2009: 9m). The loan bears interest at EURIBOR plus a margin of 1.9% (2009: 1.5%) 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 2010 was 669m (2009: 919m), not including interest payable. It is repayable in two instalments: 1 December 2010, 509m and 30 April 2011, 160m.
G. Creditors: amounts falling due after more than one year

Convertible bonds Deferred and contingent consideration Amounts owed to ultimate parent company Total
633 5 638
20 611 631
Details of the convertible bonds are given in Note 19 of the consolidated financial statements. The accounting under UK GAAP and IFRS is the same.
Notes to the Companys financial statements for the year ended 30 September 2010 continued
H. Provision for liabilities and charges
Other timing differences Total provision for liabilities and charges At 1 October Deferred tax charge to profit and loss account Deferred tax charge to equity At 30 September
(19) (19) 8 (27) (19)
Other timing differences comprise the deferred tax charge on the equity portion of the convertible bonds and share-based payments.
I. Share capital
Authorised share capital 1,999,500,020 (2009: 1,999,500,020) ordinary shares of 10p each 49,998 (2009: 49,998) redeemable preference shares of 1 each Total Allotted, called up and fully paid share capital 1,118,010,670 (2009: 1,118,010,670) ordinary shares of 10p each Total
200 200 112 112
200 200 112 112
J. Capital and reserves

Share capital m Profit and loss account m Convertible bond reserve m Other reserves m Total m
At 30 September 2008 Share-based payment costs Loss for the year Dividends paid At 30 September 2009 Acquisition of shares Disposal on award of shares Share-based payment costs Profit for the year Equity portion of convertible bonds Dividends paid At 30 September 2010
112 112 112
267 (33) (107) 127 4 214 (118) 227
83 83
14 16 30 (7) (18) 18 23
393 16 (33) (107) 269 (7) (14) 18 214 83 (118) 445
The share-based payment credit for the year ended 30 September 2010 of 14m (2009: 16m) has an associated deferred tax credit of 4m (2009: nil). During the year ended 30 September 2010 the Groups Employee Benefit Trusts acquired shares at market value for consideration of 7m (2009: nil). Details of dividends debited to equity in the year are set out in Note 9.
Group at a glance
K. Contingent liabilities
Under the terms of guarantees given to the Civil Aviation Authority and other relevant authorities by the Company in respect of certain subsidiaries, in the event of default the Company could be held liable to the extent of the subsidiaries net trading liabilities at the time of default. The Company, and its subsidiaries, is at any time defending a number of actions against it arising in the normal course of business. Provision is made for these actions where this is deemed appropriate. No actions which are outstanding at 30 September 2010 are expected to have a material effect on these accounts. The Directors consider that adequate provision has been made for all known liabilities. Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its Group, the Company considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.
Strategic overview
L. Related party transactions

Apart from with its own subsidiaries which are included in the consolidated financial statements, TUI Travel PLC, in carrying out its ordinary business activities, had transactions with its ultimate parent company, TUI AG, which delivered services to companies in the Group. All transactions with related parties were executed on an arms length basis and under normal conditions of trade with independent third parties. Details of transactions with related parties and balances outstanding at the balance sheet date are set out in the tables below:
Interest received Year ended 30 September 2010 m Year ended 30 September 2009 m Expenses Year ended 30 September 2010 m Year ended 30 September 2009 m
Related party
Ultimate parent TUI AG Total 4 4
Debtors Year ended 30 September 2010 m Year ended 30 September 2009 m
22 22
Creditors Year ended 30 September 2010 m
46 46
Related party
Ultimate parent TUI AG Total 370 370 589 589 863 863
Governance
M. Post balance sheet events

Paul Bowtell will be resigning as a Director of the Company with effect from 31 December 2010. Subsequent to 30 September 2010 the Company has sold TTSS Limited (previously Edwin Doran Travel Limited) for a total consideration of 6m to another company within the TUI Travel PLC Group. Details of further post balance sheet events relevant to the Company and its Group are given in Note 34 of the consolidated financial statements.
Shareholder profiles
Shareholder profiles

Inthe12monthsto30November2010theCompanywasnotifiedbywayofTransparencyDirectiveForm1 (TR1)notificationsofthefollowingvotingrightsoftheissuedordinarysharecapitaloftheCompany.
Shares %
TUIAG AllianceBernsteinInvestmentsLP MarathonAssetManagement
615,882,193 42,423,212 34,073,455
55.09 3.79 3.05
AGM: Interimresults: Preliminaryresults:
Financial calendar
3February2011 May2011 December2011
Contacts and advisers

Secretary and Registered Office Solicitors Bankers
ALJohn TUITravelHouse CrawleyBusinessQuarter FlemingWay Crawley WestSussexRH109QL Telephone:01293645700 Facsimile:01293645704
HerbertSmith BarclaysBankPLC CitigroupNA RoyalBankofScotlandplc SocitGnrale
Registerednumber6072876
Registrars and transfer office
Auditors
KPMGAuditPlc
Merchant bankers Stockbrokers
LazardBrothers&CoLimited DeutscheBank RBSHoareGovettLimited DeutscheBank
EquinitiLimited AspectHouse SpencerRoad LancingBN996DA ShareholderContactCentreNo:08713842030 International:+44(0)1214157161 Website:www.shareview.co.uk
Company website
Shareholder discount
Group at a glance Eligibleshareholdersareentitledtothefollowingdiscounts(whichare subjecttochange)whenbookingholidaysthroughourdedicated ShareholderDiscountLine. Bestpriceonthededicatedwebsiteplusafurtherdiscountof20per adultor40perbooking(cruise,short/medium-hauldestinations)or 40peradultor80perbooking(long-hauldestinations)forthe following: *FirstChoice *Thomson *ThomsonWorldwide *Citalia *Jetsave *MeonVillas *Sovereign *Hayes&Jarvis www.firstchoice.co.uk www.thomson.co.uk www.thomsonworldwide.com www.citalia.com www.jetsave.co.uk www.meonvillas.com www.sovereign.com www.hayesandjarvis.co.uk Quark Expeditions* Bestpriceonthewww.quarkexpeditions.comwebsiteplusafurther 5%discountperadultonalldepartures. SkiBound* Bestpriceonthewww.skiboundholidays.co.ukwebsiteplusafurther discountof20peradultor40perbookingonallourFrenchclub hoteldestinations.
*Discountsarenotvalidonaccommodation-onlybookingsandcannotbeusedinconjunction withanydiscretionarydiscounts,groupsavingsorotherpromotionaloffers.
Strategic overview
Inordertoqualifyforthediscount,privateshareholders(including thoseholdingthroughanomineeaccount)mustholdatleast500 ordinarysharesintheCompanyonthedateofbookingtheholiday andmusthavebeenontheregisterofshareholdersforaminimum periodofoneyearonthatdate. ToregisterforyourdiscountcallEquinition08713842030(Monday toFriday08:30-17:30).Youwillberequiredtoprovidedetailsto confirmyouareaneligibleshareholder.Onceconfirmed,youwillbe givenauniquecode. Tomakeabookingcalluson:08448003104(MondaytoFriday 09:00-18:00/Saturday09:00-17:00).Youwillbeaskedforyourunique codeandyourdiscountwillbeapplied. Share dealing service Anexecution-onlyshare-dealingserviceforthepurchaseandsaleof TUITravelPLCsharesisavailablefromNatWestStockbrokers. NatWestStockbrokersisauthorisedandregulatedbytheFinancial ServicesAuthorityandisamemberoftheLondonStockExchange andPLUS. Fordetails,pleasecontact: NatWestStockbrokers PremierPlace 2DevonshireSquare LondonEC2M4BA Telephone08082084433 Find out more TUITravelPLChasacorporatewebsitewhichcanbeaccessed throughwww.tuitravelplc.com
Thomson Airways Bestpriceonthewww.thomson.co.ukwebsiteplusafurtherdiscount of10perpersonforareturnjourney(short/medium-haul destinations)or20perpersonforareturnjourney(long-haul destinations). Hotelopia Bestpriceonallhotelsonthewww.hotelopia.co.ukwebsiteplusan additional14%discount. Trek America Grand American Adventures* Bestpriceonthewebsitewww.trekamerica.complusanadditional 10%discount. The Moorings* Bestpriceonthewww.moorings.comwebsiteplusafurtherdiscount of20peradultor40perbooking(short-hauldestinations)or40 peradultor80perbooking(long-hauldestinations). Sunsail* Bestpriceonthewww.sunsail.co.ukwebsiteplusafurtherdiscountof 20peradultor40perbooking(short-hauldestinations)or40per adultor80perbooking(long-hauldestinations). Le Boat* Bestpriceonthewww.leboat.co.ukwebsiteplusafurtherdiscountof 20peradultor40perbookingonalldestinations. Real Gap Gap Year for Grown Ups* Bestpriceonthewww.realgap.co.ukwebsiteplusafurtherdiscount of10%.
Index
A H I
Accommodation&DestinationsSector Accountingpolicies Acquisitions ActivitySector AnnualGeneralMeeting AuditCommittee Auditors Balancesheet BoardCommittees BoardofDirectors Brands Businessperformance Chairmansstatement Charitablegiving ChiefExecutivesstatement ChiefExecutivesinterview Colleagues Consolidatedbalancesheet Consolidatedincomestatement Consolidatedstatementofcashflows Consolidatedstatementofchangesinequity Consolidatedstatementofcomprehensiveincome Consumersentiment Contactsandadvisers CorporateGovernancereport Currenttrading Directorsbiographies Directorsreport Directorsresponsibilities Directorsremuneration Distribution&Brands Dividends Earningspershare Emergingmarkets
05,37 69 17,106 05,38 44 50 46 66 49 42 03 32 08 44 09 10 24 66 64 68 67 65 13 142 48 40 43 44 47 57 15 08 08 6,17 142 07 64 42 02 24 32 17
Healthandsafety IndependentAuditorsReport Investmentcase
27 63 ifc 18 04 12 69 50 13,41 24 16 87 20 132 14 70 53 53 20 33,83 85 142 143 06 5,39 2,14 14 08 28 44 96 02 56 02 03
KeyPerformanceIndicators
M N
MainstreamSector Marketoverview Notestotheconsolidatedfinancialstatements NominationCommittee
O P
Outlook People People&OperationalEffectiveness Pensions Principalrisks Principaloperatingsubsidiaries Product&Content
Restatementofprioryearsaccounts RemunerationCommittee RemunerationReport Risk
E F
Financialcalendar Financialhighlights Financialstatements
Segmentalperformance Separatelydiscloseditems Shareholderprofiles Shareholderdiscount Specialist&ActivitySector Specialist&EmergingMarketsSector Strategy Strategicimperatives Strategicoverview Sustainabledevelopment Suppliers
Governance Groupoverview GroupManagementBoard Groupperformance Growth&CapitalAllocation
Tax TUITraveloverview TotalShareholderReturn
Whoweare Whereweoperate
Delivered by global3digital Print managed by urban life support www.urbanlifesupport.co.uk This document is printed on Chorus Silk, a paper containing 100% virgin fibre sourced from well-managed, sustainable, FSC certified forests. Printed by Park Communications on FSC certified paper. Park is an EMAS certified CarbonNeutral Company and its Environmental Management System is certified to ISO 14001. 100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average, 99% of any waste associated with this production will be recycled. Photography supplied by TUI Travel businesses.
TUI Travel PLC
TUI Travel House Crawley Business Quarter Fleming Way Crawley West Sussex RH10 9QL Telephone: 0044 (0)1293 645700

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TUI Annual Report 2010

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Annual Report & Accounts for the year ended 30 September 2010

Were on a journey. Focused on delivery.

The investment case

Experienced management team

Market-leading positions Market consolidation Economies of scale

Exposure to higher growth specialist travel

TUI Travel PLC Annual Report & Accounts 2010 01

ifc Group at a glance

142 Shareholder information

02 TUI Travel PLC Annual Report & Accounts 2010

TUI Travel overview

strategic goal strategic imperatives values

TUI Travel PLC Annual Report & Accounts 2010 03

Group at a glance Strategic overview Business performance

04 TUI Travel PLC Annual Report & Accounts 2010

Top selling brands*

Thomson, First Choice and Fritidsresor

6.6m (excluding Canada)

Balearics, Greece and Turkey

Top selling brands*

TUI, 1-2-Fly and ltur

Spain, Germany and Turkey

Top selling brands*

Jetair, Holland International and Marmara

Spain, Greece and Turkey

*By customer numbers.

TUI Travel PLC Annual Report & Accounts 2010 05

**Before central costs.

Accommodation & Destinations Sector

Top selling brands*

29m (offline passengers 12.5m, room nights 16.8m)

Spain, UK and Portugal

Top selling brands*

Crystal Ski, The Moorings and Le Boat

France, Austria and Italy

Specialist & Emerging Markets Sector

Top selling brands*

Mostravel, Turchese and Hayes & Jarvis

0.8m (excluding Russia & Ukraine)

US, Egypt and Italy

*By customer numbers.

06 TUI Travel PLC Annual Report & Accounts 2010

Our structure (from 1 October 2010)

29m (offline passengers 12.5m, room nights 16.8m)

Spain, UK and United States of America

Specialist & Activity

Top selling brands*

Crystal, The Moorings and Hayes & Jarvis

France, Austria and Italy

Russia & CIS division: Top selling brands*

Mostravel, VKO Travel and Voyage Kiev

Turkey, Egypt and Greece

*By customer numbers.

TUI Travel PLC Annual Report & Accounts 2010 07

-2% +11% +4% +10%

08 TUI Travel PLC Annual Report & Accounts 2010

Dr Michael Frenzel Non-Executive Chairman

TUI Travel PLC Annual Report & Accounts 2010 09

Chief Executives statement

Peter Long Chief Executive

View the CEOs interview online

Watch the CEOs interview online at http://ara2010.tuitravelplc.com

10 TUI Travel PLC Annual Report & Accounts 2010