Aena SME SA
MAD:AENA
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Aena SME SA
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Thank you very much and welcome to this call. Without further ado, I will pass the floor to Maurici Lucena, Chairman and Chief Executive Officer of Aena. Thank you.
Hello, everybody. This is Maurici Lucena speaking. I will start with slide four. Before that, thank you very much for following our presentation. If we move to slide four. This slide, as you can see, summarizes the evolution of the activity and the most relevant economic and financial trends.
I will start within this slide passenger traffic. As you can see, Aena group passenger traffic increased to 117.3 million, which represents almost at 82% of the traffic in the same period of 2019.
And if we divide this figure into geographies, the Spanish network traffic was equivalent to 82%, exactly 82% of 2019. London Luton Airport was equivalent to almost 66%. And finally Aena Brasil, the airports of the Northeast of Brazil showed an increase of the traffic that was equivalent to 98% of 2019.
You know that last June, we updated our 2022 traffic forecast for the Spanish network, which we consider will be something between 75% and 85% of the 2019 traffic. The review -- the mentioned review was based both, on the one hand, the capacity that the airlines are scheduling and deploying in the summer season, which, as you know, ends in at the end of October.
And on the other hand, the review was based on the existing current and I would say, roaring demand. You know that, at present, the demand of tickets -- airline tickets is, let's say, very hot. And nobody expected at the beginning of the year that at present we would have this level of demand. But this is one of the two reasons why we reviewed and increased our forecast for the current year.
On the other hand, total consolidated revenue nearly doubled to more than €1.7 billion. Both the regulated and non-regulated businesses benefited from the strong traffic recovery as is natural. And this traffic recovery in June was 89% -- 89.2% of the traffic in June 2019.
This -- and I have only preliminary intuition, but I would say that our impression -- our current impression is that in July, in proportional terms, in relative terms we will be in this -- more or less in this figure.
So in other words probably the traffic recovery, now, if we consider not only June, July but also May, probably will stabilize in the short term, at least, around 90% with this high repeat figure that at the beginning of 2019 we could not expect. Nobody in the sector was expecting, but of course, it's very good news.
And I would also like to stress that, Aena has demonstrated that not only we still have the most competitive costs in the industry, regardless of some increases in our OpEx, which we will detail in the following slides, but we still, as I said, remain, very clearly, as the most competitive airport operator in terms of costs.
But at the same time we have incorporated, and I would like to underline this, a very strong resilience. And this has been included in the way we subcontract. We have included lessons that we extracted from the very strong and very sad experience of the pandemic. But now we can see that in the Spanish airports, we are not facing individual problems. And the problems with the operations and with the airlines that we are facing are not responsibility of Aena. So we are let's say affected, but by other airports' problems, but thanks to this resilience that we have incorporated in our contracts, we are very happy to be able to accommodate this very, very strong increase in the air traffic.
On top of that, apart from the -- this recovery of the traffic, which again is around -- stabilized around 90% compared to 2019, the commercial activity is enjoying even a more positive trend. We have -- everybody again has been surprised by the more than proportional recovery of the commercial activity. In the second quarter of 2022, the company recouped the total commercial revenue excluding any accounting adjustment of the same period of 2019. I will come back to this. And this means that the total variable and fixed rents were 4.5% higher compared to 2019, which is really an impressive figure.
All in all, our EBITDA for the period stood at noteworthy €631.3 million. This figure includes almost €47 million from the consolidation of Luton and almost €40 million from Brazil. So the consolidated EBITDA margin closed in June at 36.7%. The EBITDA of the first half of 2022 is impacted on the let's say not very welcome side of the OpEx is impacted by several factors being as you know the most relevant the increase in the cost of electricity, which compared with 2021 -- no excuse me compared with 2019 represents an increase of 200%. In other words, 3 times the cost we incurred in the first half of 2019. This is of course an issue. I think it's a universal issue.
But the good news and again, I would like to highlight this point. You know that Aena's strategy in the midterm continues to be to maintain our commitment on developing renewable energy sources and I can -- you can be sure that we will achieve that. We will become self-sufficient by 2026, which is not that far, because we are now in the mid of 2022. So in 2026, we will be self-sufficient from the energy point of view and you know that we will achieve this through the development of photovoltaic power plants in the Spanish network.
Additional factors that have negatively affected the EBITDA of the first half of 2022 are the accounting adjustment of minus €172 million due to the application of the Seventh Final Provision DF7 and the -- and this on the good side and the partial reversal of the impairments in the group assets for a net amount of €27.4 million. In other words, if we exclude these two effects, meaning DF7 and the reversal, the partial reversal of the impairment, the EBITDA for the period would amount to roughly €776 million, which is I would say a relevant figure.
Consolidated net profit came to €163 million. And moving to the last graph of the slide in the bottom right-hand corner. The operating cash flow ended with an increase above €1 billion up to €786 million compared to minus €220 million in 2021. The consolidated net debt EBITDA ratio closed at 5.2 ratio -- 5.2 times. This is again a relevant figure because we will -- I can assure you that we will continue decreasing this ratio. But at the present time both Aena S.M.E. and London Luton Airport are now again in full compliance with the financial ratios committed in their banking -- in our banking facilities, which is I would say of course very good news.
To end up my presentation, I would like to single out two very positive trends that I introduced a moment ago that we are seeing in the commercial activity. On the one hand, the underlying sales are now reaching levels above 2019's. On the other hand the new commercial contracts that we have awarded since November 2021 both in the food and beverage and specialty shops branches are to deliver MAGs in excess of 2019's already next year in 2023.
So this means that the expectations for our business is -- the expectations are very good. And another example is that in specialty shops concretely we have completed 130 tenders that will render MAGs in 2023, 8% higher than they did in 2019. In food and beverage, we have completed 29 tenders that will deliver MAGs again in 2023 higher in this case 10% higher than those in 2019.
Thank you and I will intervene again in the Q&A session. Thank you.
Thank you. I will just keep slides 5, 6, 7 and 8 if that's okay. And I will try to focus on -- particularly on the commercial revenue information and the operating cost element of the P&L that clearly are -- those that might be more complicated to understand. Rest assured that every quarter we are trying our best to provide more information in a very transparent way hopefully helping you to navigate through the accounting vagaries.
To start with, we have this slide number 9, which is the usual one the one that was -- it is a sort of legacy from previous years. And this is the headline commercial revenue figure excluding the real estate revenues. So the headline here is the revenues are flat in the first half of 2022 vis-à-vis the first half of 2021, which makes no sense at all as you -- I'm sure you agree. This is because there are accounting adjustments affecting these figures.
So we move on to the next slide, slide number 10, which I'm sure you are familiar with it since we started to disclose this information in 2021. What we are doing here is to split the total revenue figure between what we can call the underlying proper business activity and the adjustments -- accounting adjustments. You will notice that the total revenues are higher than the -- those in the previous slide. This is because this is the whole picture. This is taking into account all the non-regulated activities including the real estate business.
So what you can see here is that the underlying the proper business activity is growing by 159.5% year-on-year and this makes more sense. The main driver for that is the fixed and variable rent element. Those revenues that we are generating every day that are supported by either the underlying sales, the spend per passenger through the shops and the outlets of run by others as well as our own businesses, the businesses we run internally such as car parks rent-a-car, well, sorry, rent-a-car is not the case, VIP lounges things like that. So both businesses are contemplated here.
And then we have a MAG revenue element that for some people reading the papers this morning, this element was surprisingly low. Well, actually this is the DF7 in action. So they are surprisingly low for two reasons. First of all, because this DF7 is haircutting our ability to pass MAGs on to the tenants. And secondly, because the more, the underlying business is doing the MAGs are required. So, this shouldn't be a surprise. Really this is just -- those MAGs that will be collected, will be billed and collected in the first weeks of 2023, because they are properly supported by the DF7 provisions. Then, we have the adjustments that you can see is €172 million. This adjustment means nothing in terms of the -- what -- tells nothing about the business performance these days. Probably in -- years ago, this would have been taken to P&L a long while ago. So, all in all, I believe this is providing a very good picture of the commercial performance.
But then, we move on to the slide number 11, which is giving us even more color. As the Chairman said a minute before, what you can see here is that, in the second quarter, in particular, the fixed and variable rents invoiced and collected let's say day by day or month by month, overall are 4.5% above the same figures in 2019, which is in my view very telling of how good the performance of the commercial activities these days is. There are a number of drivers for that. There is no one single reason for this. But clearly, as the Chairman also indicated we have the UK passengers now being considered obviously subject to Duty Free sales.
You have some of our own businesses making, let's say making -- or performing really well because of particular circumstances like the rent-a-car or the activities, but there is also a propensity to spend these days that clearly is higher than before. We don't know, whether this is part of a psychological or sociological behavior, but it is what it is.
And just to wrap up, although, we haven't included this information in the presentation pack, because we didn't want to obviously confuse people with different elements, but if you add to this fixed and variable rent element, if you add the MAGs for this period, in the second quarter of 2022, the total revenues all included are at level with the same figures for the 2019 second quarter as well.
So, in summary, with less number of passengers, we are doing better in terms of commercial revenues. Obviously, I will be more than happy to answer any questions about it, but I think this is sufficiently granular information to help you understand the underlying trends.
Then we can take a look at the operating expenses. This is likely simplistic. You have all the detail in the management report, if you want to take a look at the breakdown of the -- what we call here other line by line. And indeed, I'm happy to answer questions later on. But what you can see here is that, in summary, we have the pressure of the electricity, the energy costs, which is clearly, I would say a whopping impact, but the rest of the cost lines are more or less in line with the 2019 figures. And someone could say, this is bad news. Why on Earth, this is similar to the 2019 operating cost build? And I would say, this is good news. This is simply that the business is deploying in full the capacity available, opening terminals and spaces, getting the resources ready unlike others and being able to accommodate the growth that we see is coming.
And obviously, as the Chairman also indicated, there is a level of uncertainty about the last quarter of the year and beyond. But subject to that, we are ready to accommodate what hopefully will be a very healthy growth over the coming months. So, we can discuss that later. I'm sure, operating cost is one of the key points of focus for everybody. But let me say, this is good news. And no one can be misled, if the 2019 figures are coming back, unless that individual never listen to me.
And it was very clear, this -- the margins of 2019 are not going to be back. That doesn't mean, our margins are going to -- our margins will be best-in-class. It will take some time to come back. But forget about the 62% that you may have in your mind from 2019, because the business is changing. And believe me, it's changing for everybody. That doesn't mean that we are not a very good and very positive and very promising business generating cash flows at levels that I would say are really, really attractive.
I wouldn't go any further. Of course I will be more than happy to answer any questions you might have. Thank you.
Thank you. This is the conference operator. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Cristian Nedelcu with UBS. Please go ahead.
Thank you very much. Hi, thank you for taking my questions. Firstly on the OpEx in the Spanish network, how do you think about the second half of the year versus 2019? And if you can separate electricity cost in here versus all the other OpEx?
Secondly, going back to slide 11, which is very helpful. The rent invoice per passenger in Q2 look higher than 2019 levels for several of the categories. Do you think this is sustainable? And do you think this can increase even more over the next quarters as retailers start to increase prices to counter inflation?
And the last question just a technical one. Could you tell us what was the drag on aviation revenues from the dilution from the K factor in Q2, and how you see that playing out for the next quarter? Thank you.
First of all with regard to the operating costs, let me say again that you have on page 23 of the management report or might be a different page, because I'm looking at the Spanish version. You have the detail, the breakdown of the operating costs. That other is broken down. So you have all the details there.
And for the second half of the year, we are not giving guidance. You know that well. We never did it. But what I can tell you is that you should expect a picture that will be similar to what you can see in the first half of the year. Energy costs clearly increasing significantly vis-à-vis previous years. And the rest let's say not very far from flattish vis-à-vis 2019.
There will be a point in which our operating costs can go beyond that point. Why? Because as I said before you never -- you should never expect Aena to be able to deliver to run to manage 275 million passenger number at the same costs that we incurred in 2019. That's out of question. That will never happen setting aside completely aside the impact of the energy costs. But for the time being, I think we will be able to run the business at this level.
And then the second point you make is about future evolution of the commercial revenues. We are optimistic. We are positive. It's difficult to say because part of this is driven by in my view a very particular, a very peculiar individual behavior after the COVID. But we are optimistic among other things because in the figures we are presenting today, the impact of the inflation scenario so the impact of the price increases in the shops, in the restaurants, in the Duty Free shops is negligible yet. So we expect that to be playing a part in the coming months, a positive part for the commercial revenues.
And then with regard to your last question, I believe that it's probably a matter of the K factor. You are -- let me double check. This is a matter of the K factor. So you are used to deal with concentration and now you are dealing with dilution -- sorry with concentration. You got me. We can get back to you. Don't -- give me some minutes and I might be able to answer properly your question.
Yeah. I think that just concerns about the aviation revenues. And I think most probably a big chunk of that is explained by the K dilution factor. You will recover those revenues. But, yeah, we can continue off-line. Thank you very much.
The next question is from Nicolo Pessina with Mediobanca. Please go ahead.
Yes, good afternoon, and thanks for taking my questions. My first one is on the traffic forecast for 2022. With first half of 82% of the 2019 level and currently at 90%, my impression is that Aena forecast implies a clear deterioration in the last quarter of the year. Do you agree with this view? And do you see evidence in the evolution of the capacity planned by the airlines?
Second question on the P factor for next year, Aena's initial recast was up 2.2%, while the CNMC approved at 0.7%. So there was no need to apply the 1% cap. Could you explain the different approach in the calculation by the CNMC and which cost items were evaluated differently from Aena's calculation?
And third question, we see that the summer capacity in 2022 is now 6% below the 2019 level, while at the beginning of the year it was 4% above. What could be the impact of the capacity constraints in other airports on Aena? Thank you.
Hello. Thank you for your question. I will answer your first issue. Well, I don't know if I will answer it. I will try to answer it, which is different. Yeah, traffic forecasts for everybody in the industry are being very difficult.
I mentioned, how we struggled to forecast that this part of the year would be so good which was something very difficult to assess at the end of 2021 and the beginning of the current year. But I would not say – clearly, I would not say that we are convinced that the traffic and the economic situation will inexorably deteriorate in the last quarter.
If you look for example at the economic forecast, the GDP growth both from the Spanish government and the IMF, of course they are different, but so far the Spanish government and the international organizations forecast a significant growth for the Spanish economy next year. So I would say that you know very well how Aena usually behaves.
So we are proud to be considered a prudent company. So taking into account the difficult visibility of the evolution of the economy, the impact of geopolitic issues and so on, we feel comfortable with the forecast that we released last June on the one hand and we still feel comfortable with the forecast that is included contemplated in the DORA 2 framework -- regulatory framework.
This I think that, just means that, at present, we rather prefer to be -- to remain prudent. But on the other hand I would say that if you for example talk with the airlines the airlines are not pessimistic concerning the last quarter at present, I mean, at present, at the present time.
So it's just a combination of factors that all-in-all let's say they advise us to remain prudent. But I would say that with a little touch of optimism, this would be my qualitative assessment. And I would be very glad that Jose Leo complements my explanations. Thank you.
Okay. Well, with regard to this traffic comment linking with your question about the summer capacity and the impact of the disruption in other airports across Europe, I think the level of visibility we have about the post-summer season is exceptionally low. I think this is true for everybody.
This means that, you can count on only a portion of the traffic to remain and to be sustainable beyond that point. Hopefully, we all will be wrong. But in the meantime this is the expectation.
So we believe that the -- honestly the last quarter figures won't be reaching the levels of the summer figures. Obviously I mean in relative terms, in absolute terms that would be true in any case. So this is the situation.
But even so, we are likely to end up not very far from the positive end of the range that we provided. Part of this situation -- this -- part of this view about the 2022 numbers, obviously, is impacted by the disruptions that many European airports are facing in countries which are important to Aena, because a significant part of the visitors to Spain are coming from those countries.
So, we are taking into account an element of attrition that in part is what you can see in the summer season capacity declaration evolution. And that attrition is driven by a number of things, but one of them definitely is the struggle that many European airports are facing. I hope that helps. But obviously if you need any more clarification, happy to do it.
With regard to the P factor the -- it's very simple. We -- there is a provision in the index legislation where you could call for a short of -- exceptionality element under certain circumstances. That's what we did. We -- particularly with regard to the energy costs, the cleaning costs from memory and something else, we said it would be wrong to apply strictly the indexes or the references, the benchmarks -- statistical benchmarks that are supposed to be -- well the standard rule.
We believe that it makes all the sense. We argue very strongly that to apply an exceptionality factor for those particular inputs. Through that we submitted a request to increase the -- to calculate the P index at 2.2%. You can see that we failed. The CNMC applied the standard and they came to let's say in my view almost ridiculous 0.72%.
Okay, many thanks for the details. Thank you.
The next question is from Elodie Rall with JPMorgan. Please go ahead.
Thanks for taking my questions. Just for me the main surprise on the results was indeed on aviation revenues. So, I think you said you were going to come back off-line, but actually it'd be really helpful I think for everyone to understand what caused the lower aviation revenue per pax if it's the key factor.
If you could explain the impact and what to expect going forward and if there's anything else such as discounts that we haven't actually fairly forecasted it would be helpful because I do think this was the main -- I mean to me was the main surprise of the results. And then could you also share the recent traffic trends on the rest of your portfolio such as Luton and Brazil airports? You gave us the trends in Spain elsewhere. Thank you.
Well, clearly there is an element of I have now in front of me some numbers. In quarter two, the 2022 -- quarter one 2022 concentration was €38.7 million. In quarter two, 2022 you have a dilution -- we have a dilution of €29.3 million -- sorry million euros in both cases.
So, the second quarter has almost fully reversed the concentration experienced in the first quarter. Why is that? Well, usually it's the result of the type of traffic, the load factors the particular airports at which the recovery is taking place. That combination will deliver a particular yield. But still we have the right to recover that gap in the year after as you know -- well two years later as you know.
So, the ups and downs of the yield, driven by the type of traffic the airports the relative recovery of different airports level of recovery of different airports whether the traffic is more domestic or more international, things like that are supposed to be captured by the K factor.
If you remember pre-COVID, every year, we ended up with something like €60 million €50 million to get recovered two years later. So, this is it. Still frankly, we are in the process of reviewing this in more detail. This is the kind of detail that you need to get under the skin of it, but I think this is the headline.
Literally the accumulated concentration -- yield concentration at the end of the quarter -- at the end of June is just €9.4 million, which when you compare with the figures we had the year before well there is an astronomical difference. I hope that helps. But still the IR team will carry on working on this and providing more information.
But it'd be useful to understand how to think about it for H2, for example.
It's not easy to be honest, Elodie. Even for us, it's not easy, because if you have a recovery in the -- well more aggressive recovery in Alicante and the Islands and in Madrid and Barcelona, you will have a different yield. And -- but, we will do our best, and we will try and help you, rest assured. But I think we are heading for concentration -- sorry, for dilution. I got confused myself with these two terms. We are heading for dilution as we move forward, which is getting back to the, let's say, the standard -- the traditional story.
And on recent plans in other airports?
Well, in the Brazilian airports, the recovery is fantastic. They are back to the 2019 figures and growing. And Luton is also doing really well. They were lagging behind the Spanish network for obvious reasons, but they are catching up very quickly. I think they are now not far from 70% on a monthly basis of the 2019 figures. So, it is really very, very, very promising, very, very good. And the summer will be good for them.
Always a little bit behind the rest of the Spanish network for obvious reasons, but catching up very, very quickly. And if you take a look at the EBITDA of the international business activities, it is a very good figure. They are contributing a significant figure of more than €90 million from memory. And this is because they are doing very well.
Okay. Thanks.
The next question is from Luis Prieto with Kepler. Please go ahead.
Good afternoon. Luis Prieto, here. Thanks for taking my questions. I had a couple of them. The first one is how should we think about cost inflation in 2023-2024? Would you have an estimate of how the gradual retendering of operational service agreements should impact the cost base in coming years, in the context of today's inflationary pressures being staggered and delayed in time?
And the second question is regarding what you said in Q1, that you were -- or at least, I understood that you were closely looking at the 1% factor P cap. Has any progress been made on this front? What is the likelihood of the regulator opening the door to a change in this cap? Thank you.
Well, I will answer the second question first, because it's really easy. No, we made no progress at all. With regard to the former question, really the -- I have to be very, very clear the inflation pressures are likely to have an impact on our costs. So far, we haven't seen it.
When we -- I discussed -- when I meet investors or indeed analysts these days, and they obviously show me what is going on in other airports in Europe. Frankly, in Spain, the only actual impact is the energy cost. Nothing else, so far.
But it would be disingenuous to say that we are immune to that. We expect that to have an impact over the coming months and years, assuming that the inflation scenario is here to stay that frankly nobody knows.
To what extent? We don't know. You know we have a number of contracts that are due for renewal, but they are -- we have contracts that -- we don't have a year where we have substantially all the contracts out for renewal.
There is a constant flow of new contracts being tendered and agreed. So, it will depend on that. If you need more detail about which contracts are due for renewal in which years, we are happy to provide that probably off-line. But remember, we always have contracts coming in and going out. And we'll see.
What I can tell you is that still we have contracts -- third party services being tendered out where people are bidding aggressively. They are still bidding aggressively.
The labor cost pressures in Spain are nothing near the labor cost pressures in the Northern European countries. So, I believe there will be some pressure coming from that angle, but not of the scale of the, let's say, the pressures that you can see in the UK or in Germany or in the Netherlands. So, sorry for not being more precise, but it would be difficult to quantify this impact, although there will be some.
Thanks a lot. That’s very helpful. Thank you.
The next question is from José Arroyas with Santander Bank. Please, go ahead.
Good afternoon, gentlemen. I have three sets of questions, if that's possible. I'll take them one by one. I'd like to ask you about the first tender of the real estate project in Madrid-Barajas. We have read several reports in the Spanish press highlighting that Aena is about to designate a partner that may have offered a substantial premium to the evaluation Aena performed of its surface right and I wanted to confirm if this is where things are going and if these articles are accurate.
And if this is accurate, if you could confirm when we could have an outcome for this tender? And what could be the financial implication in terms of cash flow for Aena? And if you could also tell us what future plans Aena has to develop new real estate project like this one. That's question number one.
Okay. Well, without confirming or denying any particular news, the process is ongoing. The -- officially the contract will be -- well, the decision will be made at the end of September. And Aena tends to be very prescriptive in terms of processes, in terms of ticking all the boxes before announcing something. So this is the reason why we are not publicly telling anyone who is going to be the winner, because the winner will be the winner once the Board of Directors of Aena has made the decision.
But I have to say the outcome of this tender is really positive. We are very happy with what we have been -- we have received by way of bids. The numbers that you can hear are not very far from the reality, which means that the -- in particular the logistics business is one -- this now, well, capable of rendering better returns than we expected probably two years ago three years ago. And this is good.
But we will be able to make public decision or to announce the decision in a couple of months. But nothing of what you have heard is silly. Nothing is misleading. It's relatively well adequate.
On the other hand, the way this works for us with the current model is that, we select a partner to create an SPV. The partner will take 65% of the shareholding. We will take 35%. We will receive an upfront payment for any extra value that the partner is considering in its offer. And obviously, that value is attached to the right of use of the land for 75 years.
So, for instance, you can have different people valuing that differently for different reasons, because they have different business plans, because they have different expectations, because they are capable of managing this better, or because they are requesting from this business a lower rate of return.
For whatever reason they could end up valuing this higher and they will pay that upfront. But not today not in one year time, only once the -- all the necessary administrative steps are being taken.
From then on the partner will take responsibility for all the additional capital needs of the business. So this is the model, in simple terms and we will be receiving the dividends on our 35% stake. I hope this helps.
That was very clear. If I may ask about slide 11, that's my second question. I think you have put a positive spin still on car rental business. And I can see the revenue per pax actually declined sequentially in the Q2 to €0.70 down from -- to €0.97 in the first quarter.
And I wanted to understand if there is nothing untoward here, if the trend is still solid as you highlighted. I wanted to confirm there is nothing here that we should be -- that we should know about in the car rental.
No, no. Believe me, this is a very good performance. Of course, you can experience at times reductions in your revenue per pax when -- as the passenger numbers are growing. Particularly when you -- the starting point is a very low level, there is an element of, let's say, pure mathematics or pure statistics.
You can have a relatively small universe of people spending a higher amount per passenger. As you grow your business and you incorporate more people and more passengers, there is -- in some businesses you can experience some degree of dilution. This is not unusual, but there is nothing untoward here. If you ask -- particularly you were asking about car parks in particular or...
Rent-a-car, car rental.
Rent-a-car, sorry, car rental. Well car rental is a very peculiar business these days, because there is no real growth in terms of the number of transactions. The rent-a-car operators are struggling to get the cars they need -- the units they need. So what -- all the revenue growth there, is coming from price increases. The renting a car is becoming more expensive, because there is scarcity of cars available. So you can see some sort of performance, there but there is nothing untoward believe me, that I'm aware of definitely.
And Jose, just my last question. Sorry, if I'm taking too long. It's about electricity costs. Previously, you have stated that Aena is not considering hedging. Has this view changed, or has it not changed? Thank you.
Not for the time being. I think we have a middle term -- let's say a solution, that the Chief Exec mentioned before. This is our horizon to get rid of these kind of things. But in the meantime, we will stay vigilant. But frankly, these days makes no sense to hedge. It would be in my personal view, the wrong thing, the wrong decision.
Thank you.
The next question is from Stephanie D'Ath with Bank of Capital.
Good morning. Thank you for answering my question. The first one please is, on commercial. Have you done any survey to understand the propensity of passengers to spend at your airports? I believe in the past you've mentioned, longer term at the airport as a tailwind or shorter average trips, which means they spend more? And any interesting things to highlight or maybe on the passenger mix, as well?
My second question, is a follow-up on other OpEx. Could you clarify, if for the second half, we should expect an absolute or relative percentage point amount a similar increase in the first half? And is it versus 2019 or 2021, that we should be looking at the trend? And a follow-up on the OpEx inflation for the later years. What would be your best guess of wage increase for 2023 2024? And do you think that the high unemployment rates in Spain, means that the inflation on wage is not going to be as substantial? And then finally, my third question is on working capital. In the first half, it was a €300 million better performance than last year. What do you expect for the second half? Thank you.
Okay. You started with – sorry, propensity to spend. And frankly, we haven't undertaken any particular analysis or survey recently, that I can share with you. There is a well-known let's say -- well-understood behavior in different passengers from different countries that I believe is, still the same. Normally, you have people coming from long-haul destinations particularly Asia destinations, or origins to spending more.
Or in Europe, there are countries that have more propensity to spend. But that remains the same. Probably, the only factor that is changing now is apart from the COVID impact in the mindset of the people that is a different story altogether, but probably the only change is the fact that the Britons are now out of the European Union. So they can be treated as non-European Union citizens, and in terms of Duty Free sales. But the rest frankly, I have very little to add. I don't have anything.
We always -- in the past we always kept an eye and we will do it going forward in trying to attract as many passengers from Asian countries as possible, because they are well people who spend more than others. And you know our Achilles heel in the past, was the relatively low level of let's say, traffic with these countries. But this is the generalistic point, nothing new to add. Then you mentioned the other OpEx. I would say, the other OpEx is likely to be -- well performing similarly, to first half but always are always comparing with 2019. I think 2019, is a more meaningful year to compare with than 2021 for obvious...
[indiscernible] So I think of [indiscernible].
No. Don't ask me to give you a particular figure. I'm not going to do that. But I can tell you, don't be surprised if you have similar performance that for some people might be bad news, for me is good news other than energy costs that we are there or there about the 2019 cost bill.
On the other hand, this is not hugely material. But today we spent on things that we didn't spend in 2019 as much such as innovation, obviously the sustainability agenda, the agenda that are -- they are not a huge amount of money, but they are relevant to us. They are strategic. And you have to spend some tens of millions of euros, if you want to deploy that agenda and move forward. And this is something that is a must these days.
So many things are changing and one of them is the quality standards, the regulatory requirements and also the strategic agenda of the airport. The inflation wages in Spain, well, I suppose you mean wages in Spain rather than wages in Aena. But I believe that the level of wage increases in Spain are going to be more modest than some of the figures, double-digit figures, I can see in the Northern European countries in some cases, because our labor market unfortunately on the other hand is not as robust as it is in the Northern European countries. And there is a long-lasting experience, long-standing experience of that.
So increases -- there will be increases, but I struggle to see increases that go beyond I don't know 3%, 4% up. I might be entirely wrong and I think there are people more prepared to answer this.
Working capital. Last year was an unusual year for -- because the working capital was affected by the accumulation of minimum guarantee rents. Let me double check here. Working capital half one 2021 that was a period pre-DF7. So we were accumulating receivables. Do you remember? Receivables that at the end of the day ended up being a basket case, but as we accumulate receivables that were not collected, we had a very negative working capital impact. The figures you can see this year are more in line with the, what I would say, is the usual run rate.
Thank you.
The next question is from Dario Maglione with BNP Paribas Exane. Please go ahead.
Hi. Hello. Three questions from me. The first one on business traffic. If you have any figures, so you can give us some indication of how business traffic is recovering.
Second question on the tariff for 2023, which you propose at plus 0.6%. Just wonder why they are so low given that you will also need to recover COVID-related OpEx in the tariff.
And the third question is on OpEx. Do you -- I mean what is your assumption for when COVID-related OpEx will reduce to zero? Thanks.
Well, with regard to business traffic, I'm afraid I cannot give you that information frankly in a reliable way. What we know is that the business traffic is lagging a little bit behind the rest of the traffic. But we will need to get to obtain information that I don't have handy here. So bear with me and we will do our best to provide you with that information, but this is not handy.
Tariff 2023, well, the tariff 2023 is just a pure mathematical, let's say, calculation. First of all, all the factors -- all the different factors that should be included are included, let's say, rightly. And the most relevant one is the K factor. This time the K factor is taking away €0.30 per passenger, and this is it. There is nothing you can do about it.
On the other hand, you have the COVID costs. The COVID costs that are considered here are those between the 1st of October 2021 and the 31st of March 2022, which is the period that the regulator have time to capture. Anything before was already considered in the 2022 charges. And anything after that period of time, obviously, it was impossible to be considered for timing reasons.
And then you have the P index. The P index, clearly, we wanted more and we argued for more. So the only element you can challenge here is whether or not the P index is right or wrong. The rest is pure mathematics. So it cannot come as a surprise honestly speaking. The P index is the only thing that you can take a view on it. Obviously, we have a very strong view on it. Then OpEx -- sorry can you say again what you...
Yeah. The COVID-related OpEx that will reduce at 0.
Well, this is not the better, but I don't know. We expect this to be the case over the coming months slowly, but firmly. But honestly at this point in time, I cannot tell you when, but we would be delighted to get rid of them because we don't believe there is a good reason to keep them in place these days.
Okay. Thanks.
The next question is from Marcin Wojtal with Bank of America. Please go ahead.
Yes. Good afternoon. Thank you for taking my question. I will have two. So the first one is just a follow-up on electricity. You mentioned that you are building this photovoltaic plant and you will be fully self-sufficient in 2026. But presumably, it's a lot of projects in various airports. So could we expect any impact, any savings actually before 2026 from those? And question number two, more high level. Are you planning to provide perhaps at some point a medium-term business plan to the market? Obviously, you have the regulation right now and traffic is recovering. So do you have any plans to share some financial forecast? And I think the most interesting would be of those your dividend payout. Is it realistic to expect an 80% dividend payout, which was the case before the pandemic? Thank you.
Thank you. I will take the second question. Well, honestly, I'm not very happy that we have felt let's say the obligation to postpone several times our intention to present a new strategic plan. I'm not happy because I simply don't like to postpone issues that I consider very important. But we have postponed the presentation of this strategic plan and also the elaboration of the plan, because honestly it's been in the last two years almost impossible not to get the impression of being obsolete very fast because the forecast, the traffic and the uncertainty has presided almost every serious analysis.
So why I'm saying all these things? Well, because now I'm pretty sure that possibly at the end of the summer, I don't know exactly the date, but for sure before the end of the year, we will present a strategic plan. Of course, the strategic plan will incorporate the main issues of the DORA at least in terms of CapEx and other -- of our obligations. And we will also take into account the traffic forecast of the dollar, but we will try to incorporate if it's adequate the novelties that we have at the end of the state in which we are ending the elaboration of the strategic plan.
But many of the things that will be contemplated in this plan, you already know them. Probably there will be a few novelties. And the most important thing is that we will be very happy to convey the long-term messages that we consider strategic for the future of the company. And one of them -- and I'm not forgetting your question, one of them is the payout. I cannot anticipate our final decision because this of course has to be discussed with many relevant stakeholders, but -- and in the end it will be the Board of Directors who will take the decision. But I'm pretty sure that our payout policy in the future will be in the same range of the one you know.
I mean I feel very comfortable with the 80% payout, more so when we have been lowering the debt EBITDA ratios, which for several months really worried me and worried even more the CFO. But now that we are clearly seeing that we will be able to reduce this ratio to even a figure that many -- some investors could find even too low. But our policy it's clear. We don't want surprises. And coming back to the payout policy, I'm pretty sure that we will approve something similar to our past and recent policy which I hope that it's a good news for our investors and owners.
Well, the other question about the potential savings from the solar plant. Yes, as some of these facilities are in operation, we will get some savings definitely. But having said that, there is one of them which is particularly relevant which is the Madrid-Barajas plant that is already in -- has been already awarded in terms of the building and maintaining and operating it to a third-party provider. So it is already -- there is already a work -- intense work on it. But still it will take a good while. It's the kind of thing that normally takes around three years to get completed. So the savings -- the major savings are going to come from facilities like this one in particular. So -- but yes, the more we deploy, the more -- well the less expensive the energy will be for us and for others, yes, for our commercial partners as well.
Thank you very much.
The last question from the conference call is from Andrew Lobbenberg with HSBC. Please go ahead.
Hi, there. Can I just ask for an update on what you're thinking about the reletting of the Duty Free contract? When that process might start? And what concepts you might be addressing? And then in that context, just curious to see what you think the combination of Dufry and Autogrill means for your balance of power or the competitiveness of that process? Thanks,
Okay. Thank you, Andrew. The reletting is going to start externally through the tender process probably at the end of the year -- of this year. In the meantime, we are working internally in getting this ready. So the process will kick-off at the end of this year. And as you know the contract should be awarded well ahead of the first of October 2023, which from memory is when the current contract expires.
With regard to the Dufry-Autogrill deal I think this is good news for Aena. I would say could be good news for other airports as well in Europe because I have to say Dufry is a very big very -- is a leading group. They are definitely a group with strong muscles. And to have someone like them competing in the food and beverage arena or the combination of both competing in the food and beverage arena is good news, I suppose. Honestly speaking, Autogrill was in our case was out of our network already for a while. And if they -- by combining both businesses they feel stronger and they want to address -- well they want to target Aena's spaces we welcome that.
Okay. Cool. Thanks.
The next question is from [indiscernible] with Citigroup. Please go ahead.
Yes. Thank you for taking my question. I have three, if I may. On capacity airlines are planning to scale back this winter. So what do you think on the traffic evaluation for the winter? Is it already baked in your current traffic forecast of 75% to 85% of 2019 levels?
And my second question is on commercial revenues. If I may, if you look at what the travel retailers are doing these days as you have 10% inflation in Spain and as you've already alluded earlier, you've not seen price increases in like Duty Free food and beverage and specialty shops. So when do you think that will increase in line with inflation? And is it price elastic that segment?
And the last 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? Thanks.
Okay. With regard to the Q4 passenger numbers or expectations they are factored in the 75% to 85% range. I would say that they are the reason for this range together with the potential impact of the operational challenges in the summer, as well as the fact that, we expected some degree of attrition, some degree of reduction in the capacity available for the summer. This is always the case. And the currency circumstances is not a surprise to see that level of attrition growing statistically – well, vis-à-vis the standard statistical reduction. So, altogether led us to provide, this 75% to 85% range.
If the winter is good is reasonable is – well, I wouldn't say, not necessarily in line with the summer, but not very far from that, we will end up in the top end of the range. If the winter is something that some people mentioned could be like a balloon, let's say or a bubble bursting or something like that, we would end up probably at the low end of the range. So it is a factor in that regard.
Price increases in the shops, I – we believe that, the – we believe – not only we believe we have checked that the price increases of the shops are probably starting to show – to be shown now. It's when we recognize there are some price increases in line with the high street. So, so far the commercial revenue performance hasn't been driven by that, but we expect these price increases to – well to be evident over the summer.
These days we already start to see price increases in the shops. Whether there is a level of elasticity that could offset that, I don't know. I don't know. Honestly, my answer is, I suppose, there is always elasticity. When people are buying just for the sake of it, when they are traveling, you can say yes or no to any particular buying decision. But on the other hand, what we see these days is there is a willingness in people to really spend at the shops spend at the restaurants. And we believe that, this is going to last over the summer. Beyond that point, I think you can link that also to the general economic conditions and the macro conditions.
If the conditions worsened, I think that elasticity can play a more significant part. But I would link, all of that to the more general macro conditions not at the airport, but generally speaking across the economy.
With regard to the judicial processes, yes we appeal that. The process is ongoing. These things take time. So the only thing, we can do now is to wait and to provide any further information the different court instances will require from us to carry on working on it. And time will tell.
Thank you.
The next question is from Nicolas Mora with Morgan Stanley. Please go ahead.
Yes. Good afternoon. Just two quick follow-ups. The first one on the tariffs for next year. So, you've given the different components so P and K factor COVID, but you also quite massively over-earning on COVID recovery cost in 2022, it was like by €50 million. So that should come out next year as well in your tariff as an adjustment. That would be the first question. Second one on, just going back quickly on the cost for third-party service providers. I mean, back in the day so 2018, 2019, early 2020 you flagged very well, how certain large contracts were being tendered and being re-priced upwards. Now, you're telling us in 2022, 2023, 2024 basically this is going to be more run-of-the mill. So I'm a little bit lost. I mean, could you provide us at least big-picture view of what will be tendered in terms of the most important contracts cleaning security maintenance internal transport just for us to gauge and assess when the step-up in costs might occur over 2023, 2024? That would be great. Thank you.
Well, the answer to your second question is, yes, we will make sure that we pull together something that we can distribute to everyone. Yes, definitely. No trouble at all. With regard to the charges, let me be clear – so I can read for you, the main component parts. So you can get to the €10.01 per passenger. The IMAAJ is €9.89 as you know. Then, the P index is 0.72%. That takes you to €10. There are a number of adjustments, of which, you know, the usual ones quality, standards investments. The most relevant one is the K factor. The K factor means, there will be a negative adjustment of €0.30 per pax. So altogether, we'll take you to €9.75 per pax pre-COVID costs. And COVID costs is exactly the figure you mentioned about €50-some million, €56 million I believe. That is €0.27 per pax. So altogether, this means €10.01 per pax, considering the number of pax that you know well are in the data too for '23, which is 232.5 million passengers.
Yes. No, that's very helpful. Jose just -- because you're getting €0.80 for COVID recovery in 2022, you are -- and because your tax numbers are much higher than you initially expected, you also quite massively of earning in '22 in regards next year.
No, no, no. I think, the K factor is not affected by the COVID costs. Don't forget the COVID cost is sort of overlay. The reason why we have €0.80 last year and €0.27 this year is because the costs incurred in the -- was higher. And secondly, and probably more importantly, there were three quarters factor in that €0.80. Now, we are dealing with two quarters only, just for timing reasons, nothing else.
Okay. I think we can take it offline. No worries.
Okay.
Thank you very much for the details.
Thank you. I think this is over. We have finished. So, thank you very much. And hopefully, over the coming days, we will be in touch, clarifying any extra points you might have. See you soon. Have a very good summer break. Bye-bye.