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

THE FOLLOWING ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND TUI TRAVEL SHAREHOLDERS SHOULD NOT MAKE ANY INVESTMENT DECISION IN RELATION TO THE NEW TUI AG SHARES EXCEPT ON THE BASIS OF THE INFORMATION IN THE SCHEME DOCUMENT AND THE TUI AG PROSPECTUS WHICH ARE PROPOSED TO BE PUBLISHED IN
DUE COURSE

FOR IMMEDIATE RELEASE

15 SEPTEMBER 2014

RECOMMENDED ALL-SHARE MERGER OF TUI TRAVEL PLC AND TUI AG

Further to the announcements made by TUI Travel and TUI AG on 27 June 2014 and 25 July 2014, the Independent Directors of TUI Travel and the Executive Board (Vorstand) of TUI AG are pleased to announce that they have reached agreement on the terms of a recommended all-share nil-premium merger of TUI Travel and TUI AG, which is to be implemented by way of a Scheme of Arrangement of TUI Travel.

Under the Merger, which will be subject to the Conditions and terms set out
in Appendix I to this announcement and to the further terms to be set out
in the Scheme Document, TUI Travel Shareholders (other than TUI AG and
certain connected parties) will receive 0.399 New TUI AG Shares for eachTUI Travel Share held by them at the Scheme Record Time.Taking into consideration TUI AG's existing stake in TUI Travel, the Mergeris expected to result in existing TUI Travel Shareholders (other than TUIAG and certain connected parties) owning 46% of the Combined Group andexisting TUI AG Shareholders owning 54% of the Combined Group, on afully-diluted basis.Based on the Exchange Ratio and the closing share prices as at 12 September2014 (being the last practicable date prior to the release of thisannouncement), the Combined Group would have a fully-diluted equity valueof approximately EUR6.5 billion (£5.2 billion).The Combined Group will be German domiciled with a premium listing on theLondon Stock Exchange, in parallel with a secondary market quotation on aGerman stock exchange. The FTSE Nationality Advisory Committee hasannounced that, subject to Completion, it would allocate the Combined Groupa UK classification for FTSE index inclusion purposes.TUI Travel Shareholders (including TUI AG) will receive a second interimdividend of 20.5 pence per TUI Travel Share, to include 10.5 pence per TUITravel Share in lieu of a final dividend for the financial year 2013/14.The Merger will result in the creation of the world's number one integratedleisure tourism business, clearly positioned as a fullyvertically-integrated tour operator with enhanced long-term growthprospects.Mr. Alexey Mordashov, TUI AG's largest shareholder, has confirmed hissupport for the Merger.Reasons for the MergerAccelerate growth and future-proof the vertically integrated business model - Opportunity to accelerate the long-term growth of the Combined Group by accessing high-quality hotel and cruise ship content on an exclusive basis - Enhances certainty of supply for the continued growth of Unique Holidays - Enhances and de-risks Mainstream content growth as a result of integration - Provides the potential for the Combined Group to double the pace of existing TUI AG content growth through further vertical integration - more than 30 additional hotels and up to two additional cruise ships - Historic annual performance suggests a potential contribution to EBITA of EUR1.4 million (£1.1 million) per hotel and a substantial contribution per ship (under the TUI Cruises business model)(Seeendnote 1) - Acceleration of content growth is expected to drive customer and top-line growth - Reinforces the Combined Group's competitive advantage versus non-integrated leisure travel businesses through further control over the end-to-end customer experience - The Merger is expected to deliver material value to all TUI Travel Shareholders and existing TUI AG Shareholders, with a continuation of strong leadershipDeliver significant synergies, increased occupancy and cost savings - The Merger is expected to deliver significant synergies - Corporate streamlining - potential cost savings of at least EUR45 million (£36 million) per annum - Significant tax optimisation - potential for a substantial reduction in the Combined Group's ongoing tax rate - a unified ownership structure would have delivered a decrease in the underlying effective tax rate of around 7 percentage points to 24% in the financial year 2012/13 (see endnote 2) - Significant increase in occupancy levels achievable through joint yield management - Each 1 percentage point improvement in occupancy would be expected to deliver approximately EUR6.1 million (£4.9 million) of additional profit (see endnote 3) - TUI Travel's vertically integrated Magic Life clubs have an occupancy level which is 5 percentage points higher than the level in TUI AG's hotel and resorts portfolio for the financial year 2012/13 (see endnote 4) - Additional cost savings achievable through the integration of Inbound Services into the Mainstream tourism business, resulting in net cost savings of EUR20 million (£16 million) annually (see endnote 5)Strategy of the Combined GroupThe Combined Group will utilise the scale of its fully-integratedMainstream tourism business - content, Unique Holiday experiences anddistribution - whilst driving growth and value from its non-Mainstreambusinesses, to enhance its growth and margin profile, therebyfuture-proofing its long-term sustainable competitive position.In particular, the Combined Group will: - Deliver a superior end-to-end customer experience through a fully-integrated Mainstream tourism business - Accelerate long-term growth supported by an asset-right business model based on an optimal mix of owned and managed hotels and cruise ships, with a targeted minimum required return on capital of 15% for new content (see endnote 6) - In the financial year 2012/13, approximately 50% of TUI AG hotels were operated under management contracts, approximately 9% were leased or franchised and the remainder were owned - Maximise the growth and value of the Online Accommodation and Specialist & Activity businesses - Treat the TUI AG stake in Hapag-Lloyd AG as a business for disposal and finalise the exit from Container Shipping - Focus on balance sheet strength, flexibility and strong free cash flow generation with a view to increasing shareholder returns from the MergerFinancial effects of the Merger - Merger is expected to be EPS accretive (see endnote 7) for both setsof shareholders from the first full financial year post-Merger (see endnote 8) - Strong EPS accretion for TUI Travel Shareholders - Strong cash flow/dividend benefit for TUI AG Shareholders - Strong EPS accretion for both sets of shareholders thereafter - The New Executive Board of TUI AG is confident that value creation for both sets of shareholders should result from the creation of a pure play integrated leisure tourism business and from the elimination of the current TUI AG structural discountContinuation of existing strong leadership - Expanded Executive Board of TUI AG and enlarged number of shareholder-elected members of the Supervisory Board of TUI AG, to be drawn equally from TUI AG and TUI Travel - Peter Long and Friedrich Joussen to be joint CEOs of the Combined Group, with Peter Long planned to become Chairman of the Supervisory Board of TUI AG and Friedrich Joussen leading the Combined Group as sole CEO from February 2016Dividend - The TUI Travel interim dividend of 4.05 pence per TUI Travel Share previously announced by TUI Travel will become payable on 3 October 2014 - In addition, TUI Travel will, immediately prior to Completion, declare and pay a second interim dividend of 20.5 pence per TUI Travel Share, to include 10.5 pence per TUI Travel Share in lieu of a final dividend for the financial year 2013/14. This second interim dividend will be payable to those TUI Travel Shareholders on the register of members of TUI Travel at the Scheme Record Time and will be paid prior to Completion conditional on the Court Order having been granted at the Scheme Court Hearing - TUI Travel Shareholders will not be eligible for any final dividend paid by TUI AG for the financial year 2013/14. TUI AG anticipates that it will declare a final dividend for the financial year 2013/14 (subject to adequate balance sheet capacity, recommendations by the Executive Board of TUI AG and the Supervisory Board of TUI AG and approval at the TUI AG Annual General Meeting in 2015) of EUR0.33 per TUI AG Share. The anticipated dividend of TUI AG would represent an equivalent amount to the originally anticipated final dividend of 10.5 pence per TUI Travel Share, reflecting the agreed Exchange Ratio (which already takes account of the 4.05 pence TUI Travel interim dividend). The TUI AG dividend for the financial year 2013/14 will be paid after the TUI AG Annual General Meeting in 2015 to TUI AG Shareholders (other than holders of New TUI AG Shares) - TUI AG and TUI Travel each confirm that neither of them will make any distribution to their shareholders, other than the aforementioned dividends, either in respect of the financial year 2013/14 or before Completion - Following Completion, the Combined Group intends to adopt a dividend policy in line with TUI Travel's present progressive dividend policy under which dividends grow broadly in line with earnings. Provided the performance of the Combined Group develops in line with expectations, the Combined Group will target an increase in its dividend per share for the financial years 2014/15 and 2015/16 of 10% in excess of the underlying growth in the Combined Group's earnings per share. This is subject to adequate balance sheet capacity, recommendations by the Executive Board of TUI AG and the Supervisory Board of TUI AG and approval at the respective TUI AG Annual General Meeting in the relevant year - The net dividend receivable from TUI AG may be affected by German withholding tax. Further details are set out in paragraph 7 of this announcementFinancing - Credit facility agreements have been entered into regarding new credit facilities for the Combined Group, in an aggregate amount of EUR1.55 billion - These facilities will provide available financing for the Combined Group's general corporate and working capital requirements from Completion, replacing TUI Travel's existing revolving credit facility - In addition, a credit facility agreement has been entered into for a EUR600 million term loan facility available at Completion, which it is envisaged will be refinanced by the issue of senior unsecured notes shortly after this announcementDirectors' irrevocables - TUI AG has received irrevocable undertakings to vote in favour of the Merger from the Independent Directors of TUI Travel, their families and related trusts, who hold or are beneficially entitled to TUI Travel Shares, representing in aggregate approximately 0.100% of TUI Travel's ordinary share capital in issue on 12 September 2014 (being the last practicable date prior to the release of this announcement) - TUI AG has received an irrevocable undertaking to vote in favour of the Merger at the relevant TUI Travel shareholder meetings from Peter Long (who is a director of TUI Travel, but not one of the Independent Directors of TUI Travel), his family and related trusts, who hold or are beneficially entitled to TUI Travel Shares, representing in aggregate approximately 0.267% of TUI Travel's ordinary share capital in issue on 12 September 2014 (being the last practicable date prior to the release of this announcement) - Friedrich Joussen, Horst Baier and Sebastian Ebel, who are directors of TUI Travel but not Independent Directors of TUI Travel, do not have interests in TUI Travel Shares and neither do their respective families or related trustsCommenting on the MergerSir Michael Hodgkinson, Deputy Chairman and Senior Independent Director ofTUI Travel, said:"The Board of TUI Travel is focused on delivering shareholder value and Iand my fellow independent directors are confident that the finalised termsof this Merger represent significant value for our shareholders. Bysimplifying the structure and combining the two businesses substantialsynergies and cost savings will be realised. In addition, the potential todeliver material commercial benefits will be unlocked. Peter Long'sposition as, firstly joint Chief Executive with continued responsibilityfor the former TUI Travel businesses, and then in 2016 as Chairman of theSupervisory Board should also serve to give TUI Travel shareholdersconfidence in the long-term prospects for the group."Prof. Dr Klaus Mangold, Chairman of the Supervisory Board of TUI AG, said:"The Supervisory Board of TUI AG strongly endorses the merger of the twocompanies. Significant operational and financial benefits are expected bythe vertical integration which enables further efficiency gains and growthowing to a new group structure. The listing of the TUI AG shares on thepremium segment of the London Stock Exchange and the FTSE UK Index makesthe shares attractive for international investors, the euro listing on theFrankfurt Open Market secures market access in Germany and emphasises theinternational nature of the group. With this euro listing on a German stockexchange we want to ensure that TUI AG shares will remain an attractiveinvestment for private investors. Further, the newly formed IntegrationCommittee of the Supervisory Board of TUI AG will actively accompany thephase of re-orientation and the merger of both companies as well as attendto the aspired benefits."Peter Long, Chief Executive of TUI Travel and Member of the Executive Boardof TUI AG, said:"The Merger will strengthen and future-proof our combined business byenhancing the certainty of long-term Unique Holiday growth, and byreinforcing our competitive advantage through further control over theend-to-end customer experience. Friedrich Joussen and I are committed toworking closely to ensure that we achieve significant synergies, costsavings, commercial benefits and long-term growth as the world's number oneintegrated leisure tourism business. All of which will contribute tosignificant earnings accretion from the first full financial year postCompletion and growth in shareholder returns."Friedrich Joussen, Chief Executive of TUI AG and Chairman of TUI Travel,said:"We have conducted the negotiations goal orientated, seriously and fairlyand have completed them successfully. The result is a clear and jointcommitment to the merger of the companies. The potential cost savings aresignificantly higher than expected at the start of the negotiations. Thenew TUI will be the leading integrated tourism group in the world and aninnovative pioneer in the industry. We will set new standards in ourindustry with respect to growth, quality as well as brand promise andcreate significant opportunities for shareholders, customers and ouremployees. Our shareholders benefit from faster growth, higher margins andan attractive dividend policy. Our customers receive unprecedented accessto exclusive products and services and thereby individual and uniqueholiday experiences around the globe. Our 74,000 employees worldwide inapproximately 130 countries will have completely new development and careerprospects. The new TUI will definitely be a truly international group andthus also one of the most international employers in Europe."Mr. Alexey Mordashov, TUI AG's largest shareholder, has confirmed hissupport for the Merger and said:"I am pleased with the recent business development of both companies. Thecombination will serve to improve the tourism business model and help drivefuture business growth for the benefit of both shareholder groups."RecommendationsThe Independent Directors of TUI Travel, who have been so advised byLazard, consider the terms of the Merger to be fair and reasonable. Inproviding its advice, Lazard has taken into account the commercialassessments of the Independent Directors of TUI Travel. Accordingly, theIndependent Directors of TUI Travel intend unanimously to recommend TUITravel Shareholders to vote in favour of the Scheme at the TUI Travel CourtMeeting and the resolutions to be proposed at the TUI Travel GeneralMeeting, as the Independent Directors of TUI Travel who hold or arebeneficially entitled to TUI Travel Shares have irrevocably undertaken todo in respect of their own beneficial holdings of 1,135,168 TUI TravelShares representing in aggregate approximately 0.100% of TUI Travel'sordinary share capital in issue on 12 September 2014 (being the lastpracticable date prior to the release of this announcement). Bank ofAmerica Merrill Lynch and Barclays have also provided financial advice tothe Independent Directors of TUI Travel in respect of the Merger.Peter Long is a director and Chief Executive of TUI Travel and is also amember of the Executive Board of TUI AG. As such, Peter Long is notconsidered to be an Independent Director of TUI Travel for the purposes ofTUI Travel's discussion of, or decisions in relation to, the Merger and hasnot been involved in or voted on such decisions. Similarly, Peter Long hasnot participated in decisions in relation to the Merger by the ExecutiveBoard of TUI AG. Accordingly, Peter Long has not participated in theformal recommendation of the Merger by the Independent Directors of TUITravel or the Executive Board of TUI AG contained in this announcement.Peter Long's comment on the Merger is set out above.Also, as set out above, TUI AG has received an irrevocable undertaking tovote in favour of the Merger at the relevant TUI Travel shareholdermeetings from Peter Long, his families and related trusts, who hold or arebeneficially entitled to TUI Travel Shares, representing in aggregateapproximately 0.267% of TUI Travel's ordinary share capital in issue on 12September 2014 (being the last practicable date prior to the release ofthis announcement. Peter Long, his families and related trusts have nocurrent interests in TUI AG Shares.Friedrich Joussen, Horst Baier and Sebastian Ebel, who are directors of TUITravel are either members of the Executive Board of TUI AG or members ofTUI AG's senior management. As such, they are not considered to beIndependent Directors of TUI Travel for the purposes of TUI Travel'sdiscussion of, or decisions in relation to, the Merger and have notparticipated in such discussions or voted on such decisions. Neither theynor their family and related trusts hold any interests in TUI TravelShares.The Executive Board of TUI AG (other than Peter Long who has recusedhimself as set out above) considers the Merger to be in the interests ofexisting TUI AG Shareholders. The Executive Board of TUI AG (other thanPeter Long) has been advised by Deutsche Bank and Greenhill in relation tothe Merger. In providing their advice, Deutsche Bank and Greenhill havetaken into account the commercial assessments of the Executive Board of TUIAG (other than Peter Long).Accordingly, the Executive Board of TUI AG (other than Peter Long) intendunanimously to recommend existing TUI AG Shareholders to vote in favour ofall of the resolutions to be proposed at the TUI AG EGM to approve theDirect Capital Increase, the Conditional Capital Increase and relatedmatters, as the members of the Executive Board of TUI AG (other than PeterLong) who hold or are beneficially entitled to TUI AG Shares intend to doin respect of their own beneficial holdings of 158,798 TUI AG Sharesrepresenting in aggregate approximately 0.055% of TUI AG's share capital inissue on 12 September 2014 (being the last practicable date prior to therelease of this announcement).The Supervisory Board of TUI AG intends unanimously to recommend existingTUI AG Shareholders to vote in favour of all of the resolutions to beproposed at the TUI AG EGM to approve the Direct Capital Increase, theConditional Capital Increase and related matters, as the members of theSupervisory Board of TUI AG who hold or are beneficially entitled to TUI AGShares intend to do in respect of their own beneficial holdings of 27,955TUI AG Shares representing in aggregate approximately 0.010% of TUI AG'sordinary share capital in issue on 12 September 2014 (being the lastpracticable date prior to the release of this announcement). TheSupervisory Board of TUI AG has obtained an additional separate fairnessopinion from J.P. Morgan with respect to the Exchange Ratio.Next stepsThe Merger will be voted on by TUI Travel Shareholders at the TUI TravelCourt Meeting and at the TUI Travel General Meeting. Resolutions requiredto be passed in connection with the Merger will be voted on by existing TUIAG Shareholders at the TUI AG EGM. In order for the Scheme to becomeEffective: - it must be approved by a majority in number of the TUI Travel Scheme Shareholders who are on the register of members of TUI Travel at the Voting Record Time and who are present and voting (and entitled to vote) at the TUI Travel Court Meeting, either in person or by proxy, representing at least three quarters in nominal value of the TUI Travel Scheme Shares held by such holders. TUI Travel Shares in which TUI AG and certain of its connected parties have an interest will not be eligible to be voted at the TUI Travel Court Meeting; - the Special Resolution approving the Reduction of Capital and such other matters as may be necessary to implement the Scheme (requiring a majority of at least three quarters of the votes cast by person or by proxy) must be passed by TUI Travel Shareholders at the TUI Travel General Meeting; - the resolutions necessary to approve the Direct Capital Increase and the Conditional Capital Increase (each requiring a majority of at least three quarters of the share capital voting on such resolution) must be passed at the TUI AG EGM; - the proposed election of the new members of the Supervisory Board of TUI AG set out in the TUI AG EGM Invitation, being certain of the existing independent non-executive directors of TUI Travel, and the proposed resolution regarding the amendment of the TUI AG Charter to allow TUI AG to appoint one or more chairmen to the Executive Board (as defined in the TUI AG Charter) must be passed at the TUI AG EGM; - the resolution of the Direct Capital Increase and the resolution of the Conditional Capital Increase must be registered at the commercial registries in Hanover and Charlottenburg/Berlin; - the Court must sanction the Scheme with or without modification (but subject to any such modification being acceptable to TUI AG and TUI Travel) and confirm the Reduction of Capital and: - office copies of the Court Order (and the Statement of Capital) must be delivered to the Registrar of Companies; and - if the Court so orders for it to become effective, the Court Order and the Statement of Capital must be registered by the Registrar of Companies; - the UK Listing Authority must acknowledge to TUI AG or its agent that the application for the admission of the TUI AG Shares to the premium listing segment of the Official List of the UK Listing Authority has been approved and will become effective as soon as the UK Listing Authority's decision to admit the TUI AG Shares is announced and the London Stock Exchange must acknowledge to TUI AG or its agent that the TUI AG Shares will be admitted to trading on the London Stock Exchange's main market for listed securities; and - Deutsche Bank (as German listing agent of TUI AG) must not have received any notification or other communication from the Frankfurt Stock Exchange or any of the Stuttgart, Hamburg, Berlin, Düsseldorf, Hanover or Munich stock exchanges that admission to trading of all the New TUI AG Shares on the regulated market of the Frankfurt Stock Exchange with simultaneous admission to the segment of the regulated market with additional post-admission obligations (Prime Standard) of the Frankfurt Stock Exchange as well as the regulated markets of the stock exchanges in Stuttgart, Hamburg, Berlin, Düsseldorf, Hanover and Munich, will not be granted pursuant to an application made for such trading.It is expected that the Scheme Document, containing further informationabout the Merger and notices of the TUI Travel Court Meeting and the TUITravel General Meeting, will be posted to TUI Travel Shareholders withinthe next 28 days.It is expected that the TUI AG Prospectus, containing information about theNew TUI AG Shares and the Combined Group, will be published at or aroundthe same time as the Scheme Document is made available to TUI TravelShareholders.It is expected that the TUI AG EGM Invitation, containing details of theMerger and notice of the TUI AG EGM at which resolutions will be proposedfor the approval of the Direct Capital Increase, the Conditional CapitalIncrease and other matters relating to the Merger by existing TUI AGShareholders, will be published by 19 September 2014.It is currently anticipated that the Scheme will become Effective by theend of December 2014, subject to the satisfaction or (where applicable)waiver of the Conditions, certain terms set out in Appendix I to thisannouncement and the further terms to be set out in the Scheme Document. However, it should be noted that there is no certainty that all of theConditions will be satisfied or waived by that date or that the Scheme willbecome Effective by that date.In particular, certain resolutions are required to be passed at the TUI AGEGM, expected to be held on or around 27 October 2014. These includeresolutions for approving the Direct Capital Increase and for approving theConditional Capital Increase, which must also then be registered with theappropriate commercial registries before the Scheme can become Effective.However, in accordance with German law, insofar as any shareholdercontestation actions (Anfechtungsklagen) are raised relating to thoseresolutions, TUI AG will not be able to register the resolutions for theDirect Capital Increase and the Conditional Capital Increase until suchactions have been concluded. The conclusion of any such actions could takeup to approximately four to seven months from the date on which the TUI AGEGM is held and therefore result in a delay before all of the Conditionsare satisfied and, if successful, could prevent satisfaction of all theConditions.Media callsThere will be conference calls for the UK and German newswires and nationalmedia today, 15 September 2014. The newswire calls will take place at08.15hrs (BST), 09.15hrs (CEST). The national media calls will take placeat 11.00hrs (BST), 12.00hrs (CEST). Respective dial in details are below.The UK media dial in details are:UK newswire call at 08.15hrs (BST): +44 1452 555 566UK newswire PIN code: 503 7004UK national media call at 11.00hrs (BST): +44 1452 555 566UK national media PIN code: 504 6416The German media dial in details are:German newswire call at 09.15hrs (CEST): +49 30 232 531 469 or +44 20 31474861 (no PIN code required for either dial in)German national media call at 12.00hrs (CEST): +49 30 232 531 403 or +44 203367 9216 (no PIN code required for either dial in)Analyst and investor briefing and webcastA briefing and live webcast for analysts and investors will be held today,15 September 2014, at 09.00hrs (BST), 10.00hrs (CEST) at the London StockExchange, 10 Paternoster Square EC4M 7LS, United Kingdom. To access thewebcast, please go to www.tuitravelplc.com or www.tui-group.com for moredetails. The presentation will be available to download from both websitesshortly before the webcast is due to start. A replay of the webcast will beavailable through the respective websites shortly after it finishes.