Flughafen Wien AG
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Good day, and welcome to the Vienna International Airport Conference Call. Today's conference is being recorded.
At this time, I would like to turn the conference over to Judit Helenyi. Please go ahead.
Thank you. Ladies and gentlemen, welcome to the conference call for the second quarter and the first half year of Vienna Airport. The presentation will be held by our board members, Mr. Ofner and Mr. Jäger. The presentation will be followed as usual by a Q&A, and it will be also recorded. The replay will be probably available by tomorrow noon the latest. You can find the presentation slides at the homepage. And that will be the point where I would like to hand over to you. Please go ahead, Mr. Ofner.
Good morning to those on the other side of the Atlantic, and good afternoon to anybody else. We are pleased to present you today as we think very good results for the first 6 months of 2018. And if you think back 1 year, we were in rather a difficult situation with the bankruptcy of airberlin. But it's turned out that this crisis really turned into chances, and we are now on the brink to harvest the fruits of these chances, meaning that we see substantial interest in our airport from local carriers, triggering substantial growth of movements and of passengers. And from today's perspective, it seems that there is a lot more to be seen of it in the years that are ahead of us.
So for the first 6 months, in the group, we had passenger growth of 7.6%, resulting from 16.3% in Malta and 14.2% in Kosice, and in Vienna itself 5.5%. This resulted in a revenue increase of 4.5%, which is below passenger growth numbers but that results from the deal with Lufthansa Group and the new incentive scheme.
EBITDA is up 6.1% and net profit rose by 20.4%, which is, from our perspective, a rather good result than we could not foresee this development 12 months ago.
On the other hand, we were able to further reduce our net debt because the payout for the environmental fund still is pending, and might be realized later this year. And in regard of our guidance, we can confirm what we said so far, that the passenger volume should increase by at least 6% in Vienna and 8% for the Group. I would say this is the very conservative basis. And if it's realized, what the airlines are now planning in their schedules, it might be the case that we would substantially exceed these numbers for Vienna in the course of 2018. Following that, the minimum revenue should be at EUR 770 million, most likely above EBITDA more than EUR 350 million and the profit for the period -- net profit, at least EUR 148 million.
We finally decided not to change our guidance because you might be aware that there is still a lot of problems in the sector in Europe recently. So a lot of flights have been canceled, substantially delayed, and there are a lot of reasons that triggered a very unpleasant situation. So we are a little bit cautious also for the second half of the year. But given that the airlines will do better to manage this mismatch, the air control strikes end and other weather-related factors will be less effective than they had been in the first half, then this should support substantial additional growth in the second half and also for '19.
Despite our agreement with Lufthansa Group, which, by definition, is a heavy burden to digest, we could improve our EBITDA margin from 44.2% last year to 44.9%, which is massively supported by the fine development in Malta.
On the other side, we have to mention that the irregularities had a substantial negative cost effect on us because the numerous delays could only be handled by overtime payments. And so several million are added to our personnel costs for the first half year because of these irregularities, which we will not and cannot pass over to the airlines. Although, the main portion of it was not on our fault. Saying that, I would assume that these negative developments should also improve stepwise in the second half of the year.
Our financial results are improving due to the repayment of our EIB loan, EUR 25 million has been repaid in June and this is the yearly installment. And I cannot, unfortunately, give you any new information about the attempt to change this EIB loan. It's still in court procedure and we cannot foresee whether we will win or at what time it will be finally decided. So for the time being, we have to cope with it exactly as it is.
I always appointed that personnel expenses, here you have to understand that we included one of our service companies with 62 employees, so the personnel expenses in total are not fully comparable with last year. On the other hand, overtime and compensatory rest as a result of the flight delays increased substantially personnel expenses in the first 6 months of this year.
Consumables and services used and other operating expenses are more or less in line, and there [ are ] still a high degree of cost discipline regarding debt. Net debt could be reduced by EUR 36.6 million, but this development will be not prolonged in the second half because roughly EUR 60 million will flow out for the environmental fund, which is already included in the EUR 91.9 million CapEx figure.
Net debt and gearing, I think, does not need further commentaries. Cash flow, you should have in mind that last year, when the problems of airberlin became visible, they had to prepay and this positively influenced last year's cash flow. Right now all our customers are paying on a normal basis. So this is responsible for a slight -- in the main for the slight reduction.
What is also necessary to mention is that we have a one-off contribution this year from the sale of land to DHL. On the other hand, we had also negative one-offs, so in total, it's roughly plus EUR 1.5 million if we sum up negative and positive one-offs for this first 6 months.
Share price, still suffering a little bit from the general sentiment. And other activities, we had already the groundbreaking ceremony for our new Office Park 4, which should be completed beginning of 2020. We are looking for a investor for the hotel. We will open our new health center on the 1st of October. And we have a lot of companies who are settling down on the airport or near the airport. So in total, more than 2,500 new jobs could be created in the last 12 months.
One of the major new agreements is with DHL. They are setting up their logistic campus nearby our airport, and also cargo partner substantially increased its operations and will open the new logistic center in the next weeks.
So summing up, our guidance remains revenue more than EUR 770 million, EBITDA above EUR 350 million, Group net profit above EUR 148 million, net debt below EUR 250 million and CapEx should stay around EUR 175 million.
So that's it from my side. And I hand over to Julian.
Thanks, Günther. Good afternoon, ladies and gentlemen. Let me start with a positive issue. We improved our position in the latest Skytrax ratings, and we made it the 17th airport in terms of quality globally and the seventh airport in Europe. And after 3 years where we won the best airport staff in Europe, we got this year the second place behind Amsterdam. So overall, I think a positive impression of our passengers based on the latest Skytrax ratings for 2017.
With our terminal development program which we, I think, highlighted in recent calls and the personal meetings, quite frequently, we want to improve on that even further, and give a completely new impression to our passengers with -- mainly with our terminal expansion, the so called South extension of Terminal 3.
Let me spend a few words on our 4 segments. The Airport, I think, a very positive result. I think we've shown that cost is under control in the Airport segment, and we managed to translate the passenger volume growth in a nice growth in terms of revenue. Depending on the growth in the second half of this year, which we expect to be higher than the growth in the first 6 months, the incentive level might increase. Nevertheless, it will not endanger in any way our guidance.
I think -- yes, obviously, what you see here as well is that depreciation is going down quite significantly, which mainly benefits the Airport segment. So therefore, EBIT increased by 43%, EBITDA by 14%. And overall, a very good development. One thing we mentioned as well, EUR 4 million which used to be revenue -- sorry, which used to be marketing cost is now decreasing the revenue. So which adds on to the development that the revenue is not entirely at -- the revenue growth is not entirely in line with passenger growth.
Yes, the probably most difficult segment this year is the Handling & Security Services segment. Despite the reduction in the price we charge Austrian Airlines for the ground handling service, this -- you might recall that we negotiated last year a new long-term contract with Austrian Airlines and the Lufthansa Group, and we secured the contract with Austrian until 2025 and Lufthansa until 2023. So therefore, we saw, this year, first part, a significant reduction of external revenues. Due to the growth, due to a strong winter, due to growth in terms of passenger handling and then new customers, we managed to maintain the revenue level of last year. Unfortunately, with a significantly higher effort, because of the growth and the additional customers, and therefore, the EBIT and EBITDA decreased quite significantly.
This is the area, as well, where we have been hit quite hard with overtime costs, as Günther explained already. So in this segment, we will have still a long way to go to be in a position to outweigh the revenue increase -- the revenue decreases by cost reductions. And therefore, in the next 18 months, we will have to refuel our processes, have to find synergies throughout the company to be in a position to increase our -- mainly our staff costs, again in the next 12 to 18 months.
Maybe a short information regarding our customer base. Due to the low-cost carrier growth, we expect this, in next year, it might be that our ramp handling market share decreases. But we managed to secure Laudamotion as our customer. So Laudamotion has publicly said that they plan base 80 aircraft here in Vienna starting from winter this year. So in terms of growth, they seem to be the most aggressive from the 3 new entrants [ level with ] and Laudamotion. So for the local carriers we've got currently under contract, Laudamotion, easyJet and Eurowings, whereas our competitor [indiscernible] has got a level [indiscernible].
Retail properties. Maybe let's start with the Shopping and F&B, growth by 1.8%. This is obviously pretty significantly below the passenger growth rate. The biggest challenge we face here in the Duty Free. So I think in the F&B area, we are growing essentially in the first 6 months, even a bit above the passenger growth. Specialty retail is insignificantly below the passenger growth, and Duty Free is, in absolute terms, in the negative sector in the first 6 months of this year.
The first 2 -- I mean July doesn't really look a great increase in revenue for us, but still significantly below passenger numbers. August started pretty well, but I think it's too early to see a real change in the trend. The reasons why Duty Free is not performing as it should, there are different reasons, I think, on the one hand is currency. We saw in the first 6 months of this year, a decrease of the spend per pax from Russians by 17%, Turkey 13%, Switzerland 11%. So essentially pretty much throughout the board reductions. Obviously, we see more local carrier passengers and I think having spoken to our Duty Free operator, it seems to be a trend which is, definitely in Germany, very strong as well, I think, probably throughout Europe. It's nowadays difficult to grow the revenue in line with passenger numbers.
So overall, we saw a reduction of PRR by minus 3.8%. Let's see how the next few months work. I mean, what works very well is East Asia, and all these passengers where we saw so far this year 30%. But obviously, even for the full year, we -- probably, we have to look at the reduction in the PRR. And I think the minus 3.8% we face -- or 3.6% reduction in the first 6 months. Probably until the end of the year, we will be at this level or it might, depending on the growth, it might go down a bit.
Parking income increased slightly as well, with 1.9%. I think here one has to see that the situation in Vienna is that we increased the capacity -- the train capacity in the next last 5 years tremendously. So therefore, I think, it's still not a bad result to grow the overall revenues from Parking. I think the passenger growth we will see in the next few months. There will be definitely revenue growth in Parking, but probably for sure not in line with passenger growth. And in rentals, the main problem there is that we're essentially pretty sold out in terms of office space. And therefore, there should be some growth in the next 1 or 2 years but very moderate. And until then the next office park [indiscernible] will come online to be sold.
Malta, excellent again, 16 points passenger volume increase, 11 points revenue increase, EBIT about 17%. We just finalized our Duty Free extension, which came very nicely. We finalized the security area extension, but our colleagues over there are already working on the next extension. We need more gates in Malta. And if possible, we need more specialty retail space. So we will continue to expand the terminal there.
We've got now, finally, we swapped land with government in Malta to be in a position to increase aircraft [ spend ] quite insignificantly. And in January or February, we got the approval for our master plan, where we started now a big parking garage, which is the first part of the landside extension and will enable us to build another office building and another hotel. So the landside development will continue in Malta in the next 2 years.
Kosice doing quite well. We were a bit worried when we heard that Wizz Air [indiscernible] their base in earlier this year, but now we will get Eurowings starting operations to Germany from autumn this year, some other -- the charter is doing very well. So despite the closure of the Wizz base, we will increase our passenger numbers for 2018 as well. Each one was pretty good with about 14.2%.
Yes, I don't want to bore you with our H1 traffic results, I think you know them very well. You know the July figures as well. What's probably interesting is the market share in H1. And Lufthansa increased its market share to 65%, and low-cost increased its market share to 20%, the growth by 30%. So one can only imagine, without the low-cost carrier growth in Vienna this year, the Lufthansa share probably would have gone up close to 70%.
So I think, overall, it's a healthy development, and a development we did not foresee 12 months ago, when airberlin broke down. We will -- we saw quite a good development in July, plus 7.4%, but we expect a significantly better development now in August and in the rest of the year. So we can confirm our guidance that passenger growth will be significantly above 6%. How much above 6% will depend on -- mainly on the last quarter. And probably we will give you an update there -- or we definitely will give you an update, maybe we will increase our guidance with our Q3 results.
I think what is very encouraging is the long-haul development we had in the first half of this year, that of 30% in terms of passengers to Eastern Asia. So a very healthy development in the first 6 months from Austrian, from easyJet, from Eurowings. But we did not see yet the strong impact from Laudamotion, from Wizz Air, from LEVEL. So that's why we expect the second half of 2018 to have significantly stronger growth than the first 6 months of this year.
In terms of long-haul, a lot of new increases in frequencies, high increased frequency to Bangkok [ at the open to adding ], EVA Air introduced 3 direct flights to Taipeh; Chin Airlines increased its frequency to Taipeh. In October, Hainan Airlines will start Shenzhen. Air India increased Dehli, Austrian started again Tokyo this summer and will start Cape Town from autumn. So overall, a very positive development, and I'm very optimistic that we will manage to get 2 to 3 additional long-haul carriers in 2019.
But in terms of numbers, obviously, the 2019 will -- and the rest of 2018 will show very strong focused carrier growth. Wizz Air started with 3 aircraft in 2018 and wants to add 2 aircraft by March of 2019. Laudamotion wants to increase their fleet in Vienna until the winter flight plan up to 8 aircraft stationed here. And LEVEL started in July with 4 aircraft, they are mulling about a possible long-haul engagement. As you know, LEVEL is the long -- the low-cost long-haul brand as well. And they -- I don't know yet how much they want to grow in 2019, but I would assume that they will grow in 2019 as well. To my knowledge, in the next 2 or 3 weeks, they're going to put their summer flight plan 2019 online, so that one can book it. And we saw -- yes, overall, 2019 will be quite significant growth here in Vienna. So we can confirm our forecast for the group, more than 8%; Vienna, more than 6%, but it could be significantly above these numbers as well.
Yes. That's it from our end, and we are now happy to answer your questions.
[Operator Instructions] We will now take our first question from Stephanie D'Ath from RBC.
The first one is regarding your commentary on new routes and impact on traffic. So you said that you would expect the full year traffic at Vienna Airport to be significantly ahead of guidance of over 6%. Could you, sorry, just come back on the impact from Eurowings? Do you maybe have a number of seats that they are offering? And then regarding the new routes from Wizz and Laudamotion for this year and next, if you could also please specify how many seats are offered? I believe Wizz was 450,000 for this year, and 1.5 million new seats for next year. If you could give us an idea of what that is for? If it's still the case and what it is for Laudamotion? And yes, so that is my first question on traffic expectation from new routes for the back of this year and next year. My second question relates to the aviation revenue per passenger. So for the first half, it was flat year-on-year at about EUR 30.7 per passenger. Are your expectations to be flat for the full year as well? Or do you expect the incentive program to impact that number more in the second half? And finally, my third question is on the spend per head, which was down, if you look at just retail, about 4% in the second half and 3% in the first half. You mentioned earlier the reasons, currency, low-cost carriers, that you shared. But could you please specify, I mean, Asians and Middle Easterns have been growing well. So is -- are they also spending less and what do you expect in terms of retail trends going forward?
Yes. Let's start with your first question. I cannot give you any specific numbers in terms of seats for 2019. I mean we just got the winter schedules. They are not even published yet, but we -- I think we have good insights on the winter traffic. We have no concrete flight plans for the summer of 2019. So it would be pretty much premature to put out any seats. And in general, we don't comment on seat capacity of specific airlines unless they themselves release data on the seat capacity. So what we do in our forecast is essentially taking the amount of capacity they are deploying to Vienna and, from historic data, trying to figure out how many seats that would be. But this is obviously data we cannot share. But...
So you don't share the winter schedule then?
Not in the detail per airline. So overall, we are very optimistic for the winter schedule. We believe that Q4 of this year and Q1 of next year will see very strong growth, to which extent, we still have to wait. And we probably, we can give you a more detailed guidance with our Q3 results of this year. In terms of incentives, I would expect that we will see, in H2 of this year, a stronger impact from the incentives. On the one hand, you have to see that the first half of this year was -- we saw very significant Austrian Airlines traffic, and this is -- this incentive was, to a certain extent, already reflected in 2017. So you saw in 2017 already a decrease from -- in terms of revenue per passenger over 2016. And now with stronger growth in the second half of this year, I would expect that average revenue per passenger will be below the revenue of the first half of this year. But overall, it will not endanger, in any way, our guidance. And as Günther said, with probably a higher-than-expected passenger number, probably even our net results guidance could be increased a bit in the future. Regarding your third question, I mean, to -- retail spend is always difficult to predict. But what we see is that F&B is still doing very well. Specialty retail is not bad. But as I said, we are struggling in Duty Free. I mean, there are only a few destinations where the -- we saw an actual growth in the spend per passenger. So the -- China essentially was in line with last year, which we had some destinations where we had an insignificant decrease in the spend per pax. Hong Kong was doing great. Unfortunately, Austrian is still being down from autumn. But essentially, across the board, we saw strong increases. And yes, as I said, to a certain extent, it's currency, to a certain extent I think it's an underlying trend in terms of online shopping. I think with low-cost carriers, we have more repeat passengers, which are mainly out-going Austrians who have holiday homes and so on in the south of Europe. So I think there are a number of trends which people, not only us this year, but overall, I think we should -- or H2 should be more or less in line with H1. So I would expect something of -- a PRR of minus 4% to minus 5% should be doable. As I said, the first half of August looked really good, even in Duty Free. But I would be very cautious to see this as a change of the trend, probably it's just a one-off. So essentially, it's Duty Free will be the driver of our PRR results for the full year. And if the trend of Duty Free does not change, we will be in line with H1 results.
Sorry, so could you just repeat, you said minus 2% to minus 5%, right?
Minus 4% to minus 5%. [indiscernible] and in line with the H1 results. I would be surprised if we are better and I don't think that we should be significantly worse.
[Operator Instructions] Okay, there are no further questions in the queue, I would like to turn the call back over to the speakers for any additional or closing remarks.
Ladies and gentlemen, thank you for your interest for the presentation of today. Should you have any additional questions later on, please feel free to get back to us. Many thanks. Bye-bye.
Bye.
This will conclude today's conference call. Thank you all for your participation. You may now disconnect.