AD-HOC ANNOUNCEMENT ACCORDING TO SECTION 15 OF THE GERMAN SECURITIES TRADING ACT (WPHG)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT IS NOT AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE") AND THERE CAN BE NO CERTAINTY THAT AN OFFER WILL BE MADE OR AS TO THE TERMS OF ANY OFFER

27 June 2014

For Immediate Release

TUI Travel plc ("TUI Travel") and TUI AG

Statement regarding proposed merger of TUI Travel and TUI AG
The Independent Directors of TUI Travel and the Executive Board (Vorstand)
of TUI AG are pleased to announce that they have reached an agreement in
principle on the key terms of a possible all-share nil-premium merger of
TUI Travel and TUI AG (the "Merger"). The Merger, if consummated, is
anticipated to deliver a number of strategic and financial benefits for
both the TUI Travel shareholders and TUI AG shareholders.

Strategic Highlights

* Creation of the world's number one integrated leisure tourism business
* Continuation of existing strong leadership
* Significant synergies through combining the two businesses
o Potential cost savings of at least EUR45 million (£36 million) per annum,
in addition to certain cash tax benefits
o Top line growth expected to be enhanced by broadening the portfolio of
unique holiday experiences, increased occupancy levels in existing hotels,
the future expansion of TUI AG's core hotel and cruise activities and
integrated yield management
* Simplification of the current group structure to unlock further value
within the businesses of the combined TUI AG and TUI Travel group (the
"Group")
* Acceleration in the growth of the Core Mainstream Tourism Business
o An enhanced growth profile from a broadened content portfolio and
increased investment in digital platforms to drive accelerated growth in
customer numbers
* Non-core businesses will be run separately and maximised for value
o The current Online Accommodation businesses and Specialist and Activity
sector of TUI Travel will operate separately from the core tourism business
and opportunities to maximise their value for the Group will be actively
pursued
o Hapag-Lloyd stake to be held for disposal

Key Terms

* Under the terms discussed between the parties, TUI Travel shareholders
(other than TUI AG and certain connected parties) would receive 0.399 new
TUI AG shares for each TUI Travel share that they own
* German domiciled Group with a premium listing on the London Stock
Exchange with an intention to seek inclusion in the FTSE UK Index Series
(including FTSE 100), in parallel to a quotation on a German stock exchange
* Intention to adhere to both the UK Corporate Governance Code and the
German Corporate Governance Code to the extent practicable. The Group is
expected to be subject to the shared jurisdiction of the UK Takeover Code
and applicable German takeover law
* TUI AG and TUI Travel expect that any dividends paid for the 2013/2014
financial year would ensure equivalent payment to TUI AG and TUI Travel
shareholders, taking into account the exchange ratio and would be in line
with the current TUI Travel dividend policy
* The Group intends to review its future dividend policy following
completion of the Merger and in light of its expected profits and free cash
flow generation, targeting a level which is in line with TUI Travel's
current dividend policy

Mr. Alexey Mordashov, the largest shareholder in TUI AG, has indicated his
support for the Merger.

Discussions remain ongoing and there can be no certainty that an offer will
be made or as to the terms of any offer.

Media Calls

There will be a call for UK and Germany media at 1500hrs (BST), 1600hrs
(CEST) today.
The UK media dial in details are:
Telephone number: +44 203 147 4862
(from Germany: +49 30 232 531 366)

The German media dial in details are:
Telephone number: +49 30 8687 1410
Analyst and Investor Webcast

A live webcast presentation for analysts and investors will start today at
1530hrs (BST), 1630hrs (CEST). To access the webcast, please go to
www.tuitravelplc.com or www.tui-group.com for more details. The
presentation will be available to download from both websites shortly
before the webcast is due to start. It will also be possible to listen to
the presentation via telephone.

The webcast dial in details are:
UK: +44 203 367 9216
Germany: +49 69 9418 4017
France: +33 17 225 3098
US: +1 408 916 9838

Analyst and Investor Briefing
A briefing for analysts and investors will be held on Monday, 30 June, at
0930hrs (BST) at the London Stock Exchange, 10 Paternoster Square, London,
EC4M 7LS.

Strategic Rationale: Creation of the World's Number One Integrated Leisure
Tourism Business

If the Merger is consummated, it would bring together the content portfolio
of hotels and cruise ships of TUI AG with access to customers through the
distribution capability and unique holiday concepts of TUI Travel. It would
create a pure play integrated leisure travel Group that is a global leader,
capable of delivering a complete end-to-end customer experience, thereby
significantly enhancing the Group's growth opportunities and capability for
delivering material financial benefits.
TUI AG owns the most recognised travel brand in Europe. With over 230
hotels and more than 155,000 beds it is Europe's largest holiday hotelier
while its cruise operation is one of Europe's most successful. Having
rationalised its businesses through oneTUI it has ambitious growth plans to
double the size of its content.

TUI Travel's leisure tourism business operates as a single organisation
across Europe with a portfolio of tour operator brands servicing more than
30 million customers. Having differentiated itself from the rest of the
industry, its growth is focused on the continued development of unique
holidays, which are available exclusively through its brands, distributed
directly through its own channels with significant numbers of its customers
flying on its modern holiday airline fleet.

Core Mainstream Tourism Business

The Group would become a streamlined leisure tourism business which would
enhance its growth and margin profile by vertically integrating the TUI AG
hotel portfolio and cruise operations with the distribution capability of
TUI Travel. The Group would focus on broadening its customer offerings,
leveraging its brands and implementing its unique proposition across much
of the hotel portfolio, providing a superior experience to its customers.
The resources available to the Group would enable an acceleration of the
development of new content, driving and broadening the range of unique
holiday experiences that TUI Travel can deliver to new customers, thereby
enhancing the Group's top line growth.

A holistic end-to-end customer approach would be developed offering unique,
high quality content from the strongest brands in tourism booking anytime,
anywhere, any way - driving further expected growth through lifetime
customer value, building loyalty, retention and increased, long-term
sustainable profit growth.

Key to this is operating effectively in a digital age. Single solutions
developed and deployed to many would remove long-term infrastructure cost
and the Group therefore expects it would be able to focus cash utilisation
to accelerate the development of TUI Travel's existing digital platforms
across the whole holiday cycle with two-way interaction - from suggestion,
to research, to booking, travelling to the holiday, while on holiday,
sharing it with friends and family and returning home to the suggestion for
the next leisure travel experience from the Group - every step of the way.
In doing this, personal interaction on the ground at home, in the air and
in the resort would provide considerable added-value expertise.
The Core Mainstream Tourism Business recorded revenue of £13,426 million
(excluding Inbound Services) and EBITA (excluding central costs but
including Inbound Services) of £706 million in the financial year
2012/2013.

Non-Core Businesses

Given the future of the Group would be its Core Mainstream Tourism
business, the management would focus on unlocking value from its other
non-core assets.

The current Online Accommodation businesses and Specialist and Activity
sector of TUI Travel would operate separately from the core tourism
business and opportunities to maximise their value for the Group would be
actively pursued.

The Online Accommodation business recorded total transaction value of
£2,077 million and the Specialist and Activity sector recorded revenue of
£1,433 million in the financial year 2012/2013. Combined EBITA for both
businesses was £81 million for the same period.

The stake in Hapag-Lloyd Container Shipping held by TUI AG would be held as
a business for disposal within the Group, resulting in the Group becoming a
pure play integrated leisure tourism business.

Financial Benefits: Significant Shareholder Value Creation through both
Growth and Financial Benefits

Growth is the key driver for the proposed combination of TUI AG and TUI
Travel through the Merger, but financial benefits would be achieved in a
number of areas. The Independent Directors of TUI Travel and the Executive
Board of TUI AG, having reviewed and analysed the potential synergies of
the Merger, believe these would include:

* Potential recurring cost savings of at least EUR45 million (£36 million)
per annum are expected to be achieved by the third year following the
completion of the Merger. Estimated one-off integration costs of
approximately EUR45 million (£36 million) are expected to be incurred to
achieve these cost savings
* Use of carried forward tax losses and a more efficient tax grouping
possible under a unified ownership structure. Based on the group's tax
calculations for the 2012/13 financial year a cash tax benefit of EUR35
million (£28 million) would have been achieved had the two businesses been
combined in that year
* Top line growth is expected to be enhanced by commercial benefits such as
accelerated broadening of the portfolio of unique holiday experiences,
increased occupancy levels in existing hotels, the future expansion of TUI
AG's core hotel and cruise activities and integrated yield management
* Simplification of the group structure unlocking further value within the
Group's businesses, particularly those within the current TUI AG portfolio

Aside from the one-off integration costs set out above, no material
dis-synergies (whether or not recurring) are expected in connection with
the Merger. The Independent Directors of TUI Travel and the Executive
Board of TUI AG consider that the identified synergies would only accrue as
a direct result of the success of the offer and could not be achieved
independently of the Merger.

The above information on the potential synergy benefits should be read in
conjunction with Appendix I which includes further details including the
key assumptions underlying the potential synergies.

The Combination of the Businesses would Result in Accelerating Growth and
Strong Cashflow Potential

The Group would benefit from balance sheet strength, flexibility and strong
free cashflow generation.

TUI AG and TUI Travel intend that any dividends paid for the 2013/2014
financial year would ensure equivalent payment to TUI AG and TUI Travel
shareholders, taking into account the exchange ratio and would be in line
with the current TUI Travel dividend policy.

The Group intends to review its future dividend policy following completion
of the Merger, and in light of its expected profits and free cash flow
generation, targeting a level which is in line with TUI Travel's current
dividend policy.

If the Merger is consummated, the impact of these financial benefits would
strengthen the long term prospects for the Group and therefore also for
shareholders, customers, employees and other stakeholders.

Governance: Assured Continuation of the Leadership Team

TUI AG would propose to its shareholders to increase the Supervisory Board
members from 16 to 20. This would be subject to approval in an
extraordinary shareholder meeting, as the charter would need to be changed.

The Supervisory Board would comprise ten members representing the
shareholders, drawn in equal number from both TUI AG and TUI Travel, and
ten employee representatives. The new Supervisory Board would be chaired by
Prof. Dr. Klaus Mangold and Sir Michael Hodgkinson would be co-Vice
Chairman along with Frank Jakobi. Frank Jakobi would also be a
representative of the employees.

Prof. Dr. Klaus Mangold's term as Chairman of the Supervisory Board will
end at the Annual General Meeting in February 2016 and he will then retire.
Peter Long will then, on the proposal of the Supervisory Board, be
suggested as a member of the Board at the Annual General Meeting in 2016.
The Supervisory Board will undertake all necessary steps to achieve this,
and TUI AG will inform its shareholders at the EGM in 2014 about Peter
Long's future position.

It is foreseen that for a limited period of two years, the Supervisory
Board would have an Integration Committee, initially chaired by Prof. Dr.
Klaus Mangold and co-chaired by Sir Michael Hodgkinson. Main
responsibilities of this committee would be the monitoring of the Merger
and its implementation. It would advise the Executive Board as a whole and
would not have decision-making power.

Peter Long and Friedrich Joussen would become joint Chief Executives of the
Group until February 2016 and would be jointly responsible for achieving
the envisaged synergy benefits from the Merger. It is planned that Peter
Long would then become Chairman of the Supervisory Board of the Group.
Friedrich Joussen would lead the Group as sole CEO from February 2016
onwards.

It is anticipated that Peter Long would focus on delivering the envisaged
value creation for shareholders of the Group, and would also ensure that
the non-synergistic Online Accommodation businesses and Specialist and
Activity sector are managed separately in the Group, maximising value. He
would also work closely with Friedrich Joussen to ensure a smooth
transition and hand-over until February 2016.

Friedrich Joussen would be responsible for the strategy and future
development of the Core Mainstream Tourism Business and content platforms,
all of which would be at the core of the Group in the future. He would
focus on leading the Group to become even more competitive in the digital
age. In particular, this would include an accelerated development of hotels
and cruise content, profitable growth in the Mainstream markets based on
strong enhanced central platforms like airline and IT to facilitate the
achievement of the envisaged synergies.

It is envisaged that the Executive Board of the Group would have a balanced
number of members drawn from TUI AG and TUI Travel. Apart from Peter Long
and Friedrich Joussen it would further comprise:

From TUI Travel
* Johan Lundgren - Deputy-Group CEO leading all Mainstream markets
* William Waggott - CEO of Online Accommodation businesses and Specialist
and Activity sector focusing on managing these businesses separately for
value

From TUI AG
* Horst Baier - Group CFO
* Sebastian Ebel - HR/Arbeitsdirektor and in parallel responsible for all
Group platforms & processes - including Hotels & Resorts, Cruises and IT

The Group would be incorporated and headquartered in Germany and would
retain a two tier board structure. All of the envisaged appointments would
be subject to final approval by the Supervisory Board. Group and
operational management would continue to be located in multiple locations
as the Group continues to draw on the expertise across its markets and the
Group would endeavour to optimally utilise the existing talent in both
companies.

It is intended that the Group would adhere to both the UK Corporate
Governance Code and the German Corporate Governance Code to the extent
practicable, and is expected to be subject to the shared jurisdiction of
the UK Takeover Code and applicable German takeover law.

Key Terms of the Transaction

It is envisaged that the Merger would be achieved through a nil-premium
merger of TUI AG and TUI Travel, by way of a UK Scheme of Arrangement
involving TUI AG issuing new shares to the TUI Travel shareholders (other
than TUI AG and certain connected parties). It is anticipated that the
enlarged share capital of TUI AG would then be listed on the premium
segment of the main market of the London Stock Exchange and would seek
inclusion in the FTSE UK Index Series (including FTSE 100).

Under the proposed terms of the Merger, the TUI Travel shareholders (other
than TUI AG and certain connected parties) would receive:

0.399 New TUI AG Shares in exchange for each TUI Travel share held by them
at the relevant record time

The exchange ratio has been calculated on the basis that no dividend would
be paid by either of TUI AG or TUI Travel prior to completion of the
Merger, other than the TUI Travel interim dividend of 4.05 pence per TUI
Travel share previously announced by TUI Travel and payable on 3 October
2014. TUI AG and TUI Travel expect that any dividends paid for the
2013/2014 financial year would ensure equivalent payment to TUI AG and TUI
Travel shareholders, taking into account the exchange ratio and would be in
line with the current TUI Travel dividend policy.

Listing and Indexation: Premium listing on the London Stock Exchange and
intention to seek inclusion in the FTSE UK Index Series (including FTSE
100)

It is anticipated that the enlarged share capital of TUI AG would be listed
on the premium segment of the main market of the London Stock Exchange and
the Group would seek inclusion in the FTSE UK Index Series (including FTSE
100).

Following completion of the Merger, it is anticipated that TUI AG's shares
would be delisted from the regulated market of the Frankfurt Stock
Exchange. However, an Open Market Quotation would also be sought on the
Frankfurt Stock Exchange to provide the opportunity for investors to trade
their shares in the Group in Euro on a German stock exchange.

Following completion of the Merger, it is anticipated that TUI AG would be
eligible for inclusion in the FTSE UK Series Indices.

Commenting on the Merger

Sir Michael Hodgkinson, Deputy Chairman and Senior Independent Director of
TUI Travel said:
"The Merger would deliver significant value to shareholders. This is partly
due to the simplification of the ownership structure, the operational
synergies that we foresee and also the successful working relationship
already established between TUI AG and TUI Travel. Shareholders of TUI
Travel can take great confidence from the fact that Peter Long and his
team, who have created so much value for TUI Travel's shareholders, would
be strongly influential in running the Group and the delivery of those
synergies."

Prof. Dr. Klaus Mangold, Chairman of the Supervisory Board of TUI AG said:
"The Merger would unlock significant value creation potential. It is a
unique opportunity to simplify our group structure and combines a strong
German corporate structure with a leading UK capital markets and FTSE 100
listing profile. It would create significant potential for our
shareholders, employees and customers. I would take responsibility together
with the above described integration committee. We will do everything to
give comfort to the TUI AG shareholders to continue to be committed with
their shares in the Group."

Peter Long, Chief Executive of TUI Travel and Member of the TUI AG
Executive Board said:
"I strongly believe that the Merger would give us the unparalleled
opportunity to build on the successful platform we have created as TUI
Travel. Friedrich Joussen and I have formed a very effective partnership
over the last 18 months and together we would be able to accelerate our
unique holiday concept growth plans utilising TUI AG's strong asset
portfolio, whilst seeking to maximise the value in our non-core businesses
to deliver even greater value to all our shareholders as the world's number
one integrated leisure tourism business."

Friedrich Joussen, Chief Executive of TUI AG and Chairman of TUI Travel
said:
"The Merger of TUI AG and TUI Travel would create the number one integrated
leisure tourism group in the world and we would expect substantial
synergies from combining these two publicly listed companies. Our strength
would come from the combination of a global tour operator business, six
airlines as well as a unique portfolio of tourism products including
hotels, clubs and cruise lines. All combined under the globally renowned
TUI AG brand representing unique holiday experiences and setting quality
standards for the industry. This also provides us with a competitive
advantage for the ongoing digitalisation of the tourism sector. We are
convinced that the Merger, if implemented, would represent an important and
positive step for our shareholders and customers and would enable us to
offer attractive opportunities to our employees across 130 countries."

Mr. Alexey Mordashov Support

Mr. Alexey Mordashov, TUI AG's largest shareholder has indicated his
support for the Merger, and said:
"I am pleased with the recent business development of both companies. The
combination will serve to improve the tourism business model and help drive
future business growth for the benefit of both shareholder groups."


Anticipated Timing
It is currently anticipated that any announcement of a firm intention to
put forward a Merger proposal would not be made before mid-September 2014,
with closing anticipated by around Spring 2015.

Further Information
This announcement is not an announcement of a firm intention to make an
offer under Rule 2.7 of the Code and there can be no certainty that an
offer will be made or as to the terms of any offer. Assuming a merger is
formally proposed to shareholders, full details will be published at that
time relating to any proposals to be made to TUI Travel convertible
bondholders and to holders of options over TUI Travel shares.

The parties reserve the right to introduce other forms of consideration
and/or to vary the mix of consideration.

In addition, TUI AG reserves the right to make an offer for TUI Travel at
any time on less favourable terms:

i. with the agreement or recommendation of the TUI Travel Independent
Directors;
ii. in the event that any TUI Travel dividend is announced, declared, made
or paid in excess of the interim dividend of 4.05 pence per TUI Travel
share previously announced by TUI Travel;
iii. if a third party announces a firm intention to make an offer for TUI
Travel on less favourable terms; or
iv. following the announcement by TUI Travel of a whitewash transaction
pursuant to the Code.

Statements of estimated cost savings and synergies relate to future actions
and circumstances which, by their nature, involve risks, uncertainties and
contingencies. As a result, the cost savings and synergies referred to may
not be achieved, may be achieved later or sooner than estimated, or those
achieved could be materially different from those estimated. For the
purposes of Rule 28 of the Code, statements of estimated cost savings and
synergies in this announcement are solely the responsibility of the
Independent Directors of TUI Travel and the Executive Board of TUI AG.
These statements are not intended as a profit forecast and should not be
interpreted as such. Appendix I includes reports in connection with the
synergy statements from PricewaterhouseCoopers LLP, Deutsche Bank AG
("Deutsche Bank"), Greenhill & Co Europe LLP ("Greenhill") and Lazard &
Co., Limited ("Lazard"), as required pursuant to Rule 28.1(a) of the Code.
Each of PricewaterhouseCoopers LLP, Deutsche Bank, Greenhill and Lazard has
given and not withdrawn its consent to the publication of its report in the
form and context in which it is included.

The Independent Directors of TUI Travel comprise all directors of TUI
Travel other than Friedrich Joussen, Peter Long, Horst Baier and Sebastian
Ebel, being those directors of TUI Travel who also have roles within the
existing TUI AG group. Peter Long, as CEO of TUI Travel, is not
participating in the Executive Board (Vorstand) of TUI AG for the purposes
of the Merger.

Under Rule 2.6(a) of the Code, TUI AG is required, by no later than 5.00
p.m. (London time) on 25 July 2014, to either announce a firm intention to
put forward a merger proposal to TUI Travel in accordance with Rule 2.7 of
the Code or announce that it does not intend to put forward such a merger
proposal, in which case the announcement will be treated as a statement to
which Rule 2.8 of the Code applies. This deadline may be extended with the
consent of the UK Takeover Panel in accordance with Rule 2.6 of the Code.

The Executive Board of TUI AG and the Independent Directors of TUI Travel
each confirms its intention to request an extension to the deadline from
the Panel if the parties are still in discussions at that time.

A further announcement will be made in due course.

A copy of this announcement will be available for inspection on TUI
Travel's website at www. tuitravelplc.com and on TUI AG's website at
www.tui-group.com by no later than 12 noon (London time) on the business
day following this announcement. For the avoidance of doubt, the contents
of these websites are not incorporated into and do not form part of this
announcement.

Details of Relevant Securities of TUI AG in Issue

In accordance with Rule 2.10 of the Code, TUI AG confirms that it has in
issue:

(a) 279,061,400 ordinary shares (without par value). TUI AG holds no
shares in Treasury. The International Securities Identification Number
("ISIN") for the ordinary shares is DE000TUAG000.
(b) EUR 67,209,645.10 of convertible bonds with a coupon of 5.5% due in
November 2014 in issue (the "TUI AG November 2014 Bonds"). The ISIN for the
November 2014 Bonds is DE000TUAG117.
(c) EUR 338,945,036.76 of convertible bonds with a coupon of 2.75% due in
March 2016 in issue (the "TUI AG March 2016 Bonds"). The ISIN for the March
2016 Bonds is DE000TUAG158.

The TUI AG November 2014 Bonds and the TUI AG March 2016 Bonds are
convertible into TUI AG ordinary shares.
Note:
* The total number of ordinary shares comprises the registered share
capital of TUI AG, together with all shares issued out of the conditional
capital since the date that TUI AG's registered share capital was last
recorded with the Commercial Register and in its charter.
Details of Relevant Securities of TUI Travel in Issue
In accordance with Rule 2.10 of the Code, TUI Travel confirms that it has
in issue:
(a) 1,118,010,670 ordinary shares with a nominal value of 10 pence each.
TUI Travel holds no shares in Treasury. The ISIN for the ordinary shares is
GB00B1Z7RQ77.
(b) GBP 350,000,000 of convertible bonds with a coupon of 6.0% due in
October 2014 (the "TUI Travel 2014 Convertible Bonds"). The ISIN for the
2014 Convertible Bonds is XS0455660216.
(c) GBP 400,000,000 of convertible bonds with a coupon of 4.9% due in April
2017 (the "TUI Travel 2017 Convertible Bonds"). The ISIN for the 2017
Convertible Bonds is XS0503743949.
The TUI Travel 2014 Convertible Bonds and the TUI Travel 2017 Convertible
Bonds are convertible into TUI Travel ordinary shares.