Aena SME SA
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Aena SME SA
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Good day, and thank you for standing by. Welcome to the Aena First Quarter 202 Results Presentation Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Emilio Rotondo. Please go ahead.
Thank you. Good morning to everybody, and welcome to Aena's first quarter 2022 results. Good having you back. We are here Jose Leo, CFO of Aena and myself as the speakers. And we'll leave the floor to Jose to start the presentation. Thank you.
Thank you, Emilio. Welcome, everyone, and thank you for being part of this call. As usual, we will start sharing with you the key aspects of the quarter 1 2022 results. On the Slide #4.
Okay. As you can see, we have a significant increase in the number of passengers between quarter 1 2021 and quarter 1, 2022, 280% up for the whole consolidated group. This is clearly not coming as a surprise to [indiscernible] because the quarter 1 2021 was really, but one fully impacted by the pandemic, which is more relevant is the level of the recovery that these numbers represent vis-a-vis the quarter 1 2019 figures.
And this is close to 72% of the traffic at that time, which is very good, particularly in March, the level of traffic reach something in the region of 78% in the Spanish network of the March 2019 figures. So this is an indication that the recovery that we started to experience at the beginning of the summer 2021. And that was, let's say, temporarily interrupted by the Omicron variant is back. And we are optimistic about these trends going forward.
Having said that, I want to be very upfront. At this moment in time, we are stopping short of reviewing or revisiting or announcing any new guidance for the whole 2021 -- sorry, 2022 traffic. Of course, we are positive. Of course, these traffic trends are very promising. Furthermore, the summer season capacity that the airlines are putting forward is indicating that is looking good. But there are a number of uncertainties that are leading us to believe that it's better to wait.
Probably in the coming months, we will be back to you, making a more clear statement about our views for 2022. In terms of clear statements I mean in terms of specific levels of recovery, we expect for the year. For the time being, suffice to say that we are optimistic that clearly, the trends are indicating that things are going in the right direction. Potentially who knows the 68% traffic recovery for the year can be considered conservative. I wouldn't call it conservative. I would say it's just a view that to be revisited, we need some more clarity.
Moving on to the revenues. Clearly, the revenues are going up by 93%. Everybody can see that this is not consistent with the passenger numbers -- with the recovery in the passenger numbers. That is a very significant element there impacting the figures and this is the accounting entries affecting the commercial revenues that we will discuss later on. This translates into a positive EBITDA of EUR 72.6 million, clearly against the '21 losses. Of course, I'm sure we will discuss this later and to what extent this is affected by the operating expenses evolution.
Still, we are incurring losses in quarter 1 2022, EUR 96.4 million. The loss is driven by the fact that quarter 1 is normally a quarter heavily impacted by one-off costs, namely the impact of the local taxes accounting treatment. But it's true that this happened as well before the COVID pandemic. Nowadays, it is more difficult to get back to -- from -- to normal, let's say, I'm back to profit until such a time where the traffic is in full fledge. And I think this will be happening in the coming quarters to be clear.
In terms of the cash generated by the operating activities, this is good news. We have already delivered EUR 343 million of positive operating cash flows. Of course, you may notice that this is pretty inconsistent with the EBITDA figures. The reason for that are mainly driven by the accounting things around -- well, there is a combination of things to start with. The accounting entries on the MAGs that are impacting EBITDA, but clearly have no -- have no effect in terms of cash.
Secondly, also the collections in the first quarter of the year of the MAGs accumulated in the previous year, and these MAGs are all of them, obviously, fully supported by contracts and the DF7. So we are not talking anymore about MAGs that were, let's say, disputed by our tenants.
Other than that, I would like to -- moving on to the next slide. I would like to highlight the operating cost side of the business. Clearly, the OpEx is also evolving in a way that is dragging EBITDA. The most relevant part of it is the electricity cost increases to the tune of EUR 47 million more than in the first quarter of 2021. This is, to give you an idea, this is 4x, fourfold the electricity costs in the first quarter of 2021.
On top of that, there are also other elements playing there. Looking at the Spanish network. Clearly, as the traffic is recovering and -- is recovering, and as I -- as we mentioned in previous calls, we opened substantially all the facilities. There are a number of items that are growing, such as the security costs, the maintenance costs. So I wouldn't point out at any particular operating cost item. I would say across the board, different elements of the service provisions are involving a higher cost, not coming as a surprise. I think I mentioned that a number of times previously.
On top of that, our subsidiaries, Luton and the Brazilian airports, are also starting to work on a completely different environment. Luton, for instance, kept the costs very, very tightly managed. And now obviously, they need to start getting back to normal. So this is also impacting the cost bill for the group.
Likewise, the Brazilian airports that are now in full operation, frankly, operating at 100% of the traffic levels of 2019. So both Luton and Brazil are adding some EUR 35 million quarter-on-quarter. So it's part of a broader picture of everybody coming back to normality.
Other than that, I would jump to the Slide #9, commercial revenues. When looking at this slide, what you see is roughly the accounting -- the headline, so to speak, the headline revenue figures indicating that our revenues overall are down year-on-year. And of course, the commercial revenue per passenger is also down big time because in quarter 1 2021, there were MAGs accumulated on the basis of the contractual arrangements. So well before the DF7 came into place. So this is just headline figures that, in my view, have no interest at all for you anymore.
So let's move on to the next slide, where we are trying to provide a more insightful information. Splitting the figures between the business activity, what we can say is the underlying business activity. You see there revenues growing by 177%. That is a combination of 2 different lines. The rent that are being invoiced and collected monthly, they are a combination of variable rents in the cases where the contract arrangements provide for that. Our fixed rents in the cases where contract arrangements provide for this other form of rent. But both of them are literally the everyday life of the business, billing and collecting. And this is going up by 224%. So this is more consistent with the traffic evolution.
With regard to MAGs. The MAGs are being, let's say, calculated here pro forma for Q1 2021 as is in Q1 2021, the DF7 would have been already in place. And clearly, for 2022, this is the actual figure.
So those 2 lines are the -- showing the reality of the activity. Below that, what you see is the 2 adjustments, accounting adjustments, very positive in 2021, although we know that, that did imply finally, and negative in 2022 as a result of the accounting treatment that we already discussed when submitting the year-end accounts.
So for me, this is probably the most relevant slide of the presentation. I mean, in terms of the providing some more clarity about the underlying commercial business. Let me give you a headline, and then I will hand you over to Emilio who will be dwelling a little bit more on this particular aspect of the business.
I have to say the commercial business these days is doing well. I think we are witnessing a recovery, which is really positive. I would say, surprisingly positive at times. This is clearly can be seen in the fixed and variable rent line there, which is growing very healthily. And it's getting us back in terms of the underlying activity, the spend per pax to levels of 2019. So -- by way of headline, this is what I wanted to share with you. This is promising. I don't know whether this is going to be the trend as we have more and more and more traffic. But I have the impression that this is going to last for a while.
On top of that, the new contracts that we are tendering out in the commercial business are coming back to us with very competitive offers, and they are -- the new contracts are being signed with MAGs at the level of 2019 being back very quickly. Overall, on average, by 2023, we expect for these contracts to recover in full the 2019 MAGs. So the combination of both things, the current underlying activity, the trends that we can witness in the business and the new contracts being tendered and awarded are very positive signals of the evolution of the commercial business.
I will stop here. As I said before, Emilio will give you some more color on the commercial business trends, and then we will start the Q&A. Thank you very much.
Thank you, Jose. Regarding the commercial sales, I'm going here to speak about sales, not the revenue for Aena, but the sales of our commercial operators versus 2019. As Jose was mentioning in terms of the spend per pax, the trend that we have been seeing in the last quarters in duty free and food and beverage continues to be very positive. The spend per pax is above 2019, mainly due to the positive effect of having the other shops closed. So that means that more number of passengers use and go duty free and food and beverage shops.
Also, we have seen the recovery of REITs during the last quarter. And this English passenger are spending more than in the past. First of all, mainly because just the -- being something that's just recovering, the vacations and coming back to Spain, but also because we are seeing that the effect of the Brexit that they are now using duty free versus Duty paid is also positive for ourselves and also positive for Aena revenue as duty free pays a higher variable rent in terms of percentage than duty paid.
On the specialty shops, continue -- the spend per pax of specialty shops continue to be lower than in 2019, mainly due to the number of shops that continue closed. But if we do the exercise of a like-for-like spend per pax, so we adjust the spend per pax by the operating area, which now this is 53% of what we had back in 2019, the spend per pax would be similar to what we had back in 2019.
Rent a Car continues to be very positive with a very positive trend. In fact, both sales and also Aena revenues are above in absolute terms than in 2019 mainly due to the lack of stock and the higher prices that are driving these revenues up. In terms of VIP services and parkings, both trends are in line with traffic performance maybe a slightly better VIP services than parkings, but both in line with the traffic performance.
Also for the future and also tackling the tenders, the new tenders that Jose mentioned, we -- since November, we have tended 18 contracts in food and beverage and 113 specialty shops. Altogether, in 2022, minimum annual guarantees are also just slightly below 2019 minimum annual guarantees around 90%, 95%. And 2023 minimum annual guarantees will be above 2019, around 110%, 115% higher than 2019 numbers. So mean, I think all these figures and trends very positive and confirming what Jose just mentioned of the positive evolution of the commercial business.
This is it from our side. So now we can move to the Q&A session. Thank you.
[Operator Instructions] The first question comes from the line of Cristian Nedelcu from UBS.
A few questions, please. Maybe firstly, on OpEx. In Spain, I think you have around EUR 400 million in staff costs and maybe around EUR 700 million in third-party contracts with subcontractors. How should we think about the wage inflation that we'll see here? Should we put in the sort of 5%, 7%, 10% wage inflation? I think your average duration for the third-party contract is 3, 4 years. So we should start seeing this gradually -- the inflationary pressure is gradually kicking in.
In relation to this, how should we think about the measures that Aena can take over the next few years to mitigate the inflationary pressures? And my last question, if I may, if you look a bit at what the travel retailers are doing these days, and we have 10% inflation in Spain, are you seeing prices increasing in duty free, food and beverage, specialty shops? Are they increasing in line with inflation? I guess at the end of the day, this could be helpful if this elasticity is not here so much. But anything you're seeing there?
Okay. Thank you, Cristian. First of all, we would struggle to anticipate a clear view on the impact that inflation can have on our OpEx because, frankly, still what we can see is just the -- just probably is more than enough, but just the electricity costs going up very dramatically, the energy costs in general. But frankly, we are not yet experiencing any sort of inflationary pressures.
From the point of view of our staff, I think, honestly, there are no -- there is -- so far, there is no sense of urgency. There are no pressures coming from the unions. Everybody is, of course, looking at discussions on the next, let's say, agreement. But I cannot see any tension, let's say, above the standard and the usual and the normal, let's say, experience in the past. And nobody is speaking about, let's say, high level salary increases.
I have to say that the Spanish labor market, I think I mentioned that a number of times, is not exactly the same that you can see in other Northern European countries and indeed in the U.S. So frankly, for the time being, I see no indication of this becoming a problem.
With regard to the third-party contracts, third-party services, well, we expect everybody to honor these agreements. And whether or not in the coming years, as we -- as some of them are coming to renewal will have a different sort of underlying staff costs. Time will tell. But frankly, I will struggle to give you any indication of any real sense of that.
For 2022, I would say I don't expect any major, any major inflation pressure other than the one coming from the energy costs. And maybe in the investment side of the business, in the CapEx side of the business, some pressures, because some of the materials are, let's say, experiencing problems for both in terms of supply, lead times and costs. But this is on the CapEx side.
Sorry, I'm not able to give you any more color. But for the time being, I cannot tell you that there is any real sense of pressure. Time will tell, 2023, 2024, we'll see. But for the time being, I would struggle to quantify that.
In terms of the -- well, your question was also about what can we do if and when this inflationary pressures manifest themselves. I would say our process is extremely, extremely transparent. We run competitions for everything. In every case, we run a process that ends up in electronic auction. So there is full transparency and full ability by every supplier to compete. And this is the market. So I would expect that the market will give you the best answer.
And beyond that, there is nothing you can do. You cannot squeeze anybody's, let's say, finances to get them back or something like that. If they are competing and they put on the table a competitive offer, you will get the best in terms of any third-party service, security, cleaning, whatever. And this is the way we work.
Of course, you can reduce the level of resources, but frankly, I have to be extremely clear on that. I don't see Aena or indeed any other major European airport cutting corners going forward because the regulatory frameworks are very, very demanding in terms of the quality of the service, the standards that you have to meet. So the opportunity to discuss that again is the opportunity of the next dollar discussion with the regulator. But there is no way you can cut corners and reduce the level of service or, let's say, turning back on the regulatory, let's say, requirements.
Finally, in terms of the impact of inflation in the other side of the business. I -- so far, I haven't seen any major price increases. Indeed, we haven't seen any price reduction. Probably, probably, there are some price increases in the Duty Free shops because honestly, they are now facing a situation where the alternative shopping outlets are closed to a great extent. So the -- but in any case, I haven't seen anything major, but you are right. If there is a price increase in this -- in our retailers, we will benefit from that, of course. So that will be the flip side of the coin of the inflation.
So far, I would say nothing relevant other than the Rent a Car activities were, as Emilio said, there is a shortage of cars and the prices are going up to the point that with less number of contracts, with less number of services, we are obtaining a higher level of revenues.
Actually, our revenues today are higher than the revenues in 2019 in terms of -- for the Rent a Car business.
The next question comes from the line of Nicolò Pessina from Mediobanca.
I have 3 questions. First one, if you can comment on the summer capacity. If you have seen any change in the last month as suggested by the price that indicates summer capacity now broadly in line with 2019? Second question, maybe if you can comment on the level of bookings and how it compares with 2019. And I would also have a final question again on the electricity cost. What could be the implications from the recent agreement on the cap to gas prices in Spain? My understanding is that there should be benefits for retail users at the treatment of corporate users. So can you share with us your expectations for the rest of the year on this cost item?
Starting with the summer capacity. I think the summer capacity initially declared by the airlines was something like close to 2% above the 2019 figures. I think there has been some degree of attrition recently, but very minor. And this is something very, very common. So you should expect between now and the summer and every particular month of the summer to see some attrition. But so far, there are no news about any significant change.
So overall, the capacity available will be in line with 2019 there or thereabouts. With growth, significant growth in the -- let's say, in the islands, mainly in the Canary and Balearic Islands and the holiday destinations. And slightly behind for the large airports. And this is it. Of course, you need to see every single month how this translates into the effective number of passengers, and this will be driven by the demand reaction. In terms of bookings. Frankly, I don't have the information now. I can try and get some intelligence, but I don't think we will have the full information available ourselves.
In terms of the electricity cost. Well, yes, I think this is an agreement that is going to benefit the, let's say, retail users. In terms of us, what we are doing is just working with the market, with the Iberian market directly and getting to potentially hedge partially if and when we consider that to be appropriate to hedge partially the electricity cost to reduce the volatility. But frankly, I expect the year, the 2022 figures in full to be impacted by this. I think we are not going to get away with, let's say, without having a significant impact. Hopefully, that will be less than the current one, but I cannot promise anything. Just we are monitoring the market and coming to hedge partially the -- our energy needs for the coming months. This is what we are doing.
The next question comes from the line of Siobhan Lynch from Deutsche Bank.
Just 2 quick ones for me, if possible. Firstly, you mentioned in a previous question about CapEx costs and the potential that they rise. Just to check, are there any ways in the door of regulation that this can be adjusted for? Or is this a risk that you have to bear in the same way that you bear the risk on traffic and on OpEx? And then just a quick follow-up on staff costs. When do you typically start negotiating for the year ahead? So when will you start kind of discussing for the 2023 staff cost?
Well, in terms of the OpEx, we bear the risks entirely. Of course, I suppose that if there is any, let's say, I would say, sort of earthquake or something like that, that will be a different thing. But normally, you -- we take in full the risks and the reward as we do with the traffic evolution. I always said that this DORA is demanding on OpEx, that we have been extremely lucky to be able to navigate through years with a really, really low cost level and parallel across the European airport industry and that we will continue being the most effective -- and the most efficient, sorry, airport operator in Europe. But having said that, our cost build is going to go up.
I'm discussing the cost build from the point of view of the level of resources and the level of service. Obviously, the discussion on inflation is a different story altogether. And this discussion on inflation, I think we will be, frankly, pushing hard to get to something more consistent with the rest of the European regulations. But from the point of view of the resources needed, the fact that our facilities are needing more resources than before because the requirements are higher and more demanding, this is -- we cannot take any -- we cannot reopen the DORA.
Then you mentioned -- well, we are literally starting to get in touch with the unions. I think probably in the second half of the year, there will be discussions. Honestly, I don't see any sort of, let's say, confrontational stand here. I feel this will be -- of course, the discussions on pay will be probably more difficult across the board now with the inflationary pressures, but I don't see in Aena any sort of, let's say, once again, confrontational approach generally speaking. So we will come to terms, I believe, in reasonable conditions.
The next question comes from the line of Luis Prieto from Kepler.
I had a couple of them, if I may. The first one is keeping in mind that the OpEx mechanisms that you just described, would it be possible to provide us with a very rough, and I reiterate rough idea of what unitary cost inflation could amount to over the next couple of years? Is it 2%, 3%, 4%? I'm thinking of factor P calculations in the 1% cap against backdrop of the cost inflation reality. And the second question is if you could provide us with any update on the constitutionality questions at judicial level and the administrative appeal against the Article 27 compensation denial. Any progress there?
Frankly, Luis, I would be misleading you if I give you any indication of the trends over the coming 2 years, driven by inflation because I don't really know. What I know is the level of -- of course, we are not providing guidance on that, but I know what's the level of resources we are expecting to require to deliver the DORA 2 commitments. And as I said before, that will take us to a territory where the margins -- the EBITDA margins wouldn't be anymore in the 62% region. There will be some points below. I never mentioned any particular figure, but I always said they would be still very healthy, very solid and best-in-class.
But if you ask me to what extent the new reality of inflation, let's say, being higher is going to impact us. I don't want to speculate because really nobody knows. There are still discussions about whether or not this inflation trends are temporary or they are permanent, whether or not -- of course, they are driven by events and circumstances that nobody expected as they were. Things like that. So in that regard, I wouldn't give you any view on that. I would be a little bit, let's say, I would be misleading you, honestly. Then the next question? Sorry, Luis, I...
Yes, the next question...
Yes, the legal dispute. In terms of the DF7, we carry on waiting for different judges to come with different views. You know we have something in the region of 100 different disputes. So far, no judge has, let's say, open the door to an unconstitutionality question. That's absolutely clear. But I think we are still at, I don't know, 15%, 20% of the total number of disputes to be dealt with by the judge. So we are still waiting. We only need one to open that door.
Of course, this is going to be a very long and protracted and complicated process, but we are not going to surrender. We will carry on our case because it's our obligation, it's our duty and is our right. With regard to the Article 27. Yes, the latest news are communicated in our management report this quarter, we submitted an appeal to the Spanish High Court, the Tribunal Supremo, Supreme Court because in our view, after a couple of, let's say, decisions made at the administrative level rejecting our request, we believe that this is somehow a responsibility for the government, for the Spanish Government Cabinet, for the Council of Ministers.
And the way to get to that point is to appeal to the Supreme Court, and this is what we have done. Once again, a complicated, potentially long process, but we are where we are because we believe we are right.
The next question comes from the line of Elodie Rall from JPMorgan.
Can I just come back, sorry, on the regulation and the ability to cover inflation in there? Did you say that basically there is no protection at all on the higher inflation until the end of DORA 2? Is that what you said? How about the P factor, if you could remind us how the P factor works? And my second question would be on the EBITDA bridge, sorry, to come back again on OpEx. But in aviation, you said that electricity costs are up like EUR 46 million year-on-year in Q1.
But I think OpEx are up to EUR 430 million or so in the Aviation segment, excluding depreciation. I think there is a delta there because if you look at EUR 368 million of OpEx in Q1 last year, you add the EUR 45 million of electricity costs, you get to EUR 405 million. So what is the delta in terms of extra costs? And should we extrapolate that in the coming quarters as well?
Well, thank you. We are protected against inflation partially because we have this index mechanism. But it's true that the P index mechanism is capped or people -- we are looking at that, obviously, very carefully because we are very concerned about this cap and we will turn every stone to find out whether this can be changed. But initially, this is capped at 1%. And this is a problem because so far, that was fine, now inflation levels are likely to be above 1%.
Having said that, there is something irrelevant in this mechanism. The P index applies on the per unit airport charge, so per passenger airport charge. So you may end up through increasing the number of passengers or through having a higher level of passengers, recovering inflation in absolute terms well above the 1% cap.
I hope you understand me. You have a cap of 1%. In terms of the inflation, you can consider when setting the airport charge per passenger. But if you have, let's say, double the number of passengers the year after, in absolute terms, you will be recovering more than 1% of the inflation.
Of course, still, this is a position that is not consistent with the other European regulations where CPI applies and still you can get the upside of the traffic volumes. In our case, through the traffic volumes, you can recover part of the cost -- the inflation cost but this is still not right to have a cap at 1%. So the answer is we are protected against inflation to a level that is not enough in the current circumstances.
In terms of the electricity cost, I'm not sure I understood your question in full, but the -- clearly, the costs went up by EUR 46 million to EUR 62 million in total. This is the cost -- of course, there is an element of that cost that is passed through on to the tenants because you know our costs bill is always split into 2 components: the regulated side of the business and the unregulated side of the business. And this is always done under the supervision of the CNMC. They review our cost accounting, say, systems and practices.
So part of that is recovered from the commercial side of the business. And this is something in the region of 20%, more or less. So of course, we retain 80% of the negative impact.
Whether or not this will be -- could be extrapolated for the rest of the year? Well, not really because the second half of 2021 was already affected by the increases in energy prices. We don't know whether the second half of the year, the prices will be the same or higher or lower than the prices in the second half of 2021. But clearly, quarter 1 and quarter 2 of 2021 and 2022 will be completely different scenarios in terms of the energy costs, whether the impact will be EUR 46 million again or not, I have no idea to be honest. Because what we are not going to do is to hedge 100% of the -- of our needs. This is something we don't believe is right. So I cannot fix the price for the whole electricity needs. We are not going to do that.
The next question comes from the line of Johannes Braun from Stifel.
I only have 2 left. One is -- I'm sorry, again on the cost and cost inflation. The one question I would still have is, was there any -- I mean you said that you will potentially partially hedged energy costs going forward. But is there any reason why you haven't hedged anything in the past because I think your peers did. That's the first question. Second question, you said that you would need more clarity to revisit the traffic guidance. Question would be what you -- what are you actually waiting for? I mean we have travel restrictions being obviously canceled. We had a good Easter period and the capacity outlook by the airlines is pretty bullish. So what kind of clarity you are basically waiting for?
Okay. With regard to the -- the reason why we didn't hedge is -- I think I explained that back in February, but the -- we have been working with an arrangement that was really, really consistent with our business model. We could pass through the cost of energy and we were naturally hedged. So we have no reason to hedge, although we work with a mechanism where we could hedge with a 3-month notice.
So we were operating in the market with, let's say, market price, but with the possibility of closing the price with a 3-month notice, let's say, with 3 months of notice, okay? We didn't do that, never. First of all, we were naturally hedged. And secondly, frankly, we were always right. You may or may not be, but for a number of years, we always were very, very, let's say, happy with checking that our prices were better than the alternative fixed price available.
Then at the early days of the summer 2021, all of a sudden, we were taken by surprise by the energy price hike. This is a purely psychological behavior and mechanism. Should we hedge at that time? We said, "No, let's move on." And then you enter into a situation where the whole energy market, let's say, got out of control.
On top of that, there were -- so is the usual situation where you have been enjoying a very, very positive experience. And then one day, overnight, you have to make a decision as you decide to wait. And this is it but of course, in the current circumstances, we are changing our mind and we are starting to hedge partially the cost of the energy. But this is it, no more and no less than that. This is a very simple explanation.
Whether or not others did that hedge or not, I have no idea, to be honest, I'm not sure. In our business, of course, it is very, very usual in the airline business.
With regard to guidance. When I said clarity, what I mean is we need to see a little bit more of this traffic taking place over the coming months, let's say, a couple of months. And whether or not there is any impact coming from the clear uncertainties surrounding us. I said before, we are optimistic but we struggle to give a new guidance today. This is it. So we are not in a position to give a new guidance so far. We will do it for sure over the coming couple of months. But for the time being, we have started to give a new guidance that we believe is right, that we are optimistic.
The next question comes from the line of Sathish Sivakumar from Citigroup.
So in terms of going into the summer, right, you said that you have the capacity is like in line with 2019 or slightly above. What was your -- like in terms of hiring bonds, do you see similar disruptions that we have seen in the U.K. or even in transport. Do you think that the traffic -- surging traffic as you go into the summer, it's actually very well factored in your hiring plans in terms of headcount? So that's point one. And then how should we actually think up both in terms of traffic as we go into winter for the latter part of the year? So do you expect a typical seasonality that you have seen in 2019? Or do you expect a similar momentum?
Well, with regard to the impact of traffic on OpEx, I think that it will be some, of course, but what you can see today in our numbers is already the full deployment of the, let's say, the fixed component of our cost structure, which you know is relevant because we are in a business with a level of operating leverage, which is -- it is what it is. So the reality that we are already incurring significant costs as a result of opening the facilities, getting everything ready to accommodate passengers about the current figures.
Of course, there is always a variable element of that, and this will trigger some additional cost. But I would say what you see today is substantially already taking a significant part of these costs of running the Aena's airports fully -- full capacity.
With regard to the summer and winter season, it's difficult to say. It's difficult to say. This is one of the interesting conundrums here. It's whether or not the shock waves that the war and the inflationary pressures and the cost of the fuel are sending across the world in terms of macro conditions worsening. Whether or not that will have an impact on the continuity of the trends that we are seeing for the coming months.
I'm not saying I have any reason to be pessimistic, frankly, but we need to get more understanding of that because all of us know that the macro conditions are worsening. The growth expectations are going down across the board. The fuel price is going up and the airlines are unlikely to, let's say, maintain ticket prices at very, very competitive levels for too long. So we need to wait and see.
But having said that, I'm not pessimistic. I have the impression that there are -- even considering all these circumstances, there are also good reasons to expect the traffic recovery to maintain. I don't know if I'm answering all your questions or I missed something.
Next question comes from the line of Marcin Wojtal from Bank of America.
Yes. The first one is on your operating expenses. I just wanted to follow up on these expenses related to COVID, I believe, EUR 26 million in Q1. Do you expect these expenses to actually continue even as pandemic recede over time? And also, when should you expect -- when should we expect actually a compensation for these expenses? Is it only in 2024, so 2 years after the actual expense incurs?
And question number two, just on the commercial segment, if I can. There are certain business lines like car parks and VIP services that you run directly. So what is your pricing strategy in those? Are you perhaps increasing prices right now to offset the cost inflation in those segments?
Well, with regard to the COVID costs, the answer is I don't know. I suspect -- we don't know. We suspect this will come to an end at some point in time. But frankly, I would not be in a position to tell you when. So in May, last -- probably some of the routines will be discontinued sooner and some of them will be maintained for long for a longer period of time. I suppose that this will end up in a reduced level of costs at some point in time. I don't know if at the end of this year or later on.
The recovery of the costs, our expectation is to recover in 2023 as we did in 2022. The fourth quarter of 2021, the cost incurred in the fourth quarter of 2021 and the costs incurred in the first 9 months of 2022. This is our expectation. This is what the CNMC did with -- in the previous year. And this is driven by the need of having the information available when discussing the charges for the year to come and it's impossible technically to get any information beyond the 30th of September. So this is our expectation.
With regard to the commercial business. The businesses we are running, as you rightly said, internally are the Rent a car -- well, sorry, the car parks and the VIP lounges. In terms of the VIP lounges, definitely, we are using some price strategy, in combination with an improvement in the quality of the service. This is a business that is growing. I think more and more people are willing to be treated and this way and there is opportunity there. So we are planning to invest in facilities, better facilities. We are planning to -- and we are, as we speak, improving the quality of the service massively. And obviously, that is coming with a price increase. So it's, let's say, is pretty consistent. So the answer is yes. But not price increases for the sake of it, but the price increases because we are upscaling the quality of the service and the quality of the experience.
And with regard to the car park, it's a different story. This is much more complicated business where you are -- if you want to be successful, you have to manage your yield, and this is not about increasing or decreasing prices arbitrarily. It's to keep an eye on the rest of the alternatives to manage the loyalty, let's say, programs to attract people on to the -- to those loyalty programs and the underlying bookings and to manage the price. Overall, you will attract more value, hopefully, this is the plan, but not necessarily through massive price increases, not so far.
The next question comes from the line of Andrew Lobbenberg from HSBC.
I apologize if this was asked before or clarified on. It did drop out for a little while. But is there anything you can tell us about the thread process of the new Duty Free contract in terms of your preparatory work or what concepts you're looking at? Second question might be around Luton. And what is your optimism for the traffic recovery there? It's clearly was lacking a bit in Q1, but I suspect it's going quite strong now, but I'm curious to hear. And then if I can just come back to an area that some of my colleagues were dancing around, and it is on the other costs. I mean you've been very clear and discuss the impact of electricity. I think what we're all struggling to understand or eager to understand is what is the balance of that sort of EUR 100 million that's not electricity? And how do we accept the balance of it? .
Andrew, I didn't quite understand your question on Luton. Can you say again, please?
What's the traffic prognosis? What's the traffic outlook?
Well, in terms of the Duty Free contract, well, we are working -- starting to work literally. I think today, today has been announced the appointment of an adviser to help us with this process. So we are working with -- I wouldn't say a blank sheet of paper, but with an open-minded approach, we will see what is best. So frankly, other than telling you that when this contract is tendered at the end of this year or very early days of next, we will consider all the learnings and the lessons learned from our advisers, the information we have been capturing from different airports across the world, different players in the duty free activities, talking to people.
And with an open-minded approach, I personally -- I said that before. I personally believe the MAGs will still be there. I would bet. I'm open-minded, but at the same time, I know what this particular market and this particular airport network needs, and I wouldn't struggle to see the MAGs disappearing. But other than that, open-minded.
What we are not going to do is to -- I think, to create any joint venture or to do things like that. We are not going to be involved in the business. We want to be open-minded and capture all the best practices.
In terms of the Luton traffic. Frankly, the view is positive. The view is that the recovery that has already started in the U.K. is going to continue over the summer and subject to my comments before, through the winter. Of course, with the seasonality that is typical of our business, but fine. Once again, I would apply to Luton, the same comments I made before. More generally, whether or not the macro conditions could sooner or later impact negatively these trends, we don't know. And if you like, ignoring any new COVID issues. Nobody knows what is going to happen, but I'm not going to consider that.
But just what we can see today, which is macro conditions worsening could potentially erode part of the recovery. I don't mean the traffic will be disappearing, but the trends might not be as positive as they were as they are expected to be over the summer. But other than that, Luton is experiencing a very healthy recovery. Every month is better than the month before. And I think this summer will be brilliant if nothing changes.
Finally, yes. Well, the OpEx, I. can tell you -- what I can share with you is the sort of items that gave rise to the cost increases year-on-year. But please bear in mind that the 2021 figures were -- first quarter 2021, were costs incurred by airports that were only partially open. So after electricity, which is the lion's share of that, EUR 47 million, we have also increases in security of EUR 30 million. That means something in the region of 50% over quarter 1, 2021. We have also maintenance growing by EUR 8 million, something in the region of 20% of 2021. Cleaning is also growing, EUR 4 million, but representing 15% of 2021.
So this kind -- at the same time, you have cost increases, which are driven by revenue increases by literally, commercial activities, let's say, been deployed. For instance, the VIP business as it is increasing, providing a very significant increase in revenues. Obviously, you have the corresponding cost increases, which is also EUR 4 million.
Likewise, car parks, you need to manage the car parks. They are the management services. Costs are going up because the car parking services are also generating more revenues. So these kind of things. It's a combination of different things. Nothing particularly material or extremely material other than the energy cost in absolute terms. Is that answering your question, Andrew? Or did I miss something?
No, that's definitely helpful. I guess the thing to lay on top of it would be, can you remind us when terminals open? So do we expect the same rate of increase in security and maintenance, cleaning, just for the facilities being opened throughout the whole year? Or they open in Q2 last year?
No. From the summer last year, we reopened substantially all the facilities. Maybe some of them were still lingering, but the summer -- the summer already was a good summer in terms of the experience in a recovery and then we deployed the -- all the fixed elements of our cost structure.
So some pressure on costs in Q2 because you weren't fully open in the early part of Q2 last year, but thereafter, that pressure...
I think Q2 probably is going to be a similar situation to Q1, but then from the second half onwards, the 2021, second half of the year already had substantially all the facilities up and running.
[Operator Instructions] The next question comes from the line of Jose Arroyas from Santander.
Just have one question. It's on the upcoming Brazilian tender. There are 3 lots that are coming to the market in the coming weeks. And I wanted to check if Aena remains willing to participate in the auction. And assuming Aena participates, if the company has any preference for any of the 3 lots or they are in principle equally appealing to the company's business model in the country?
Well, the only thing I can tell you is that we remain interested in the Brazilian market. Other than that, I cannot share with you any more information for obvious reasons, but we remain interested in that market, definitely.
The next question comes from the line of Cristian Nedelcu from UBS.
Thank you for allowing me to add one more question. Retail revenues, I think in 2019, it was around EUR 1.250 billion. Once you get back to the '19 traffic, how should that number look like? Can it be the same or higher? Will it be lower? Any comments that you can make there? You talked earlier about the British tourist spending more. We have some inflationary pressure. So any color, please?
Honestly, Cristian, I cannot answer this question because I don't have an answer for this question. It's not that one. Probably if I had it, maybe I would share it with you, but literally, I don't know. Some of the trends, so what is clear and Emilio was mentioning that in detail. First of all, the trends that we can see today are positive. Some of them you can realize very quickly would be temporary. I suspect some of them hopefully will be more sustainable.
And the second point is the contracts that we are tendering now for -- so far for food and beverage and shops. And hopefully, that will be the same for duty free activities next year and delivering MAGs above the 2019 MAGs committed before the 2019 traffic is expected to be back. So both are good signals of a business that hopefully will be very healthy. And we, of course, carry on working on initiatives to change the profile of some of the commercial offer, improving loyalty programs, improving the use of innovation, making the business more up to the -- up-to-date. So those trends are positive. Whether or not that will deliver a particular figure by a particular time, Cristian, I don't know. So far, I don't know.
Thank you. There are no further questions. I would like now to hand the conference over to our speakers for closing remarks.
Well, thank you to everybody, just for joining us to this conference call, and see you next -- at the end of July. Thank you. Bye.
That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day.