Flughafen Wien AG
VSE:FLU
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Okay. So ladies and gentlemen, welcome to our conference call for the first half year of 2022 of Vienna Airport. Today's presentation, as usual, will be held by our board members, Mr. Gunther Ofner and Mr. Julian Jager.
[Operator Instructions]
The call will be recorded and will be available on our website shortly after this call. The slides of the presentation that will be held now are also available on our website under Presentations. And now I would like to hand over to our CFO, Mr. Ofner. Please go ahead, sir.
Yes. Good afternoon, and welcome to our conference call today. It's a very significant increase in passenger numbers and also in earnings we can report today for the first 6 months. And what you should have in mind is that the first quarter due to travel restrictions in connection with the COVID have been relatively weak, but we saw them steadily improvement throughout the next quarter. And now in summertime, July, we are almost close to 90% of precrisis levels.
If you look at the figures, you see that we have improved all our main financial indicators through the Board. So revenues are up by 190%. And after a loss of EUR 30 million in the same period last year, we have now a positive net result of EUR 52.3 million. We can strongly confirm our improved guidance for '22. And if we look at booking numbers and the plans of the airlines and the overall framework and economic framework, I would even say that from today's perspective this improved guidance looks rather conservative.
So I would not rule out that results finally will be substantially above what we saw until now, always with the assumption that no new lockdowns or things like that will happen, and we would not see a significant deterioration of international tensions alongside the war of Russia against Ukraine. But if we rule out that, I think, we see a very positive, steady improvement of traffic numbers and also our cost management.
If you look at the details, you will see that our EBITDA is up to EUR 143 million compared to EUR 25 million last year. Our earnings before interest and taxes, EBIT is at EUR 75.8 million versus minus EUR 40 million last year. The financial results improved from minus [ EUR 5.9 million ] to minus EUR 4.3 million this year, and they could further improve if we decide that a certain portion of our EIB loan will be repaid before maturity. Earnings before tax are at EUR 71 million versus minus EUR 46 million last year. And finally, net profit, EUR 52 million versus minus EUR 32 million last year.
The positive development also results in the fact that we are more or less debt-free. It's somehow a historic moment because the company now for almost 20 years had a substantial debt. And we are now more or less close to 0. And that gives us a very strong position, especially in regard of future investments or even dividend improvement.
If you look at the cash flow, you see also a positive development, EUR 96 million from operating activities versus EUR 9.4 million. And CapEx is slightly above last year, but still very low with EUR 25.9 million.
If we look at the expenses, you see that we are still very disciplined. And what was a very wise decision was that our big [ PV ] plant could go in operation already end of May. And that we are now providing up to 40% of the needed electricity from our own production, which shields us substantially from the price hike on the energy sector.
And we also have bought electricity for this year and next year already 5 years ago. So we have prices from 2017, 2018, 2019. Unfortunately, there was a split of the price zones of Germany and Austria, and therefore, we cannot fully exploit this price differential because there are very substantial additional costs for the transfer from Germany to Austria now, which was a really bad decision taken in 2018.
Personnel and operating expenses are up, but not in the same rate as our revenue -- revenues went up. And clearly, you would ask what's about wage inflation. So we have already entered into a new collective agreement for next year, starting with the 1st of January with an increase overall of 5.7%. And beginning with 1st of May next year, we will have another round for the collective agreement. And in this case, we will have to include inflation for the year '22 into these negotiations.
On the other hand, we are entitled by law that also our tariffs will be adapted with inflation rates. I mean this will constitute the time lag of roughly 1 year, but we will be entitled to raise our tariffs alongside the very unfortunate development on the inflation side.
If we go further on and look at the share price, you see that still, we are substantially outperforming our peers. And if you look at the improved financial guidance and our last improvement was the 2nd of August, it shows that we are also somehow optimistic for the rest of the year.
And as said before, if everything is going as it looks now, even this improved outlook is on the conservative side. You are aware that IFM infrastructure fund made a bit voluntary public offer to acquire 50% of our shares minus 1 share versus the actual possession of 40% plus 9 shares and the management Board of Flughafen Wien AG was giving its statement, which is obligatory by law, just yesterday in regard of this offer. The complete text of our opinion, which was checked by the respective auditor and was unanimously also approved by our Supervisory Board. You can find the complete text on our homepage and on the link that is included in this chart.
And giving you a short glimpse of it after carefully considering the arguments in favor and the gains, the acceptance of the offer, the Management Board and the Supervisory Board of the target company advise against settling the offer, not least because of the expected further positive development of our company.
From our perspective, the price offered is not considered to be adequate in like of the positive business development, the sound financial position [ factically ] debt free of the company. And especially not if you compare it with previous airport transactions, especially IFM paid, for example, 22 [ EBDAs ] for acquiring a stake in Sydney Airport recently and if you should compare with the offer price for Vienna, it's below 10 [ EBDAs ].
On the other hand, we are afraid that the acceptance of the offer would threaten the stock exchange listing of our company, and such a delisting is not considered to be in the interest of the company or our main stakeholders. And the regulatory framework would force us to delist once the offer would be successful because there are certain thresholds for a minimum free float, otherwise, the trading of the stock would be more or less impossible or very much diminished. So from our perspective, for the good of the company, we should be a listed company also in the future, and we would not like to see the free float absorbed by our current shareholders.
All the details and a lot of more considerations, you can find on the website and our complete report. We are very happy that we can be a CO2 neutrally operating green airport starting from 1st of January '23. We already have significantly reduced our CO2 emissions in the last years. And we did hundreds of measures throughout the whole company to come up to the point that we reduced roughly 60,000 tons of CO2 emissions yearly. And so we will be one of the first major airports that can operate CO2 neutral. And we are sure that this is a real milestone in the development of our company, and it will be followed by net-zero is the next goal maybe in 5 to 10 years from now. So our efforts will not stop with this milestone, but will continue.
So that's the presentation from my side, and I hand over to Julian Jager.
Good afternoon, ladies and gentlemen. I would like to continue with the traffic development. I think the first half is not really indicative anymore. I think you know the figures more or less in the group, we were down 35% versus the pre-COVID levels of 2019 with close to 20 million passengers. The recovery is stronger in Kosice and Malta. Kosice in the meantime, already above the 2019 levels. I think this is mainly due to the new strategic location which happened, unfortunately, now with the Ukraine war. Malta is doing like most Southern European airports is doing extremely well now in summer. And in Vienna, traffic picked up a lot as well in July.
The development of the respective carriers in the first 6 months of this year. Austrian has a market share of 45%, so Lufthansa Group in total 51%, Ryanair is #2 with 21.7% market share and Wizz Air is 7.2% market share. I think now with July, the picture has changed somewhat Austrian has now a market share of roughly 50%, pretty constant now over the last weeks. Ryanair around 20% to 21% and Wizz Air around 6% to 7%. So the market share of the low-cost carriers was reduced. EBIT and Austrian's position here is now stronger than it used to be in the complete first 6 months of this year.
July is I think more indicative about the rest of the year. So we had a really, really busy July. We were down 12% over 2019. 2.8 million passengers in July 2022 in Vienna as such, which is roughly double the amount of passengers we had in 2021, which -- what is especially encouraging is transfer traffic, down 5.7% over 2019, local passengers down minus 14%. So this gives an indication that Austrian Airlines is doing really good business. And I think whoever has had a look at their Q2 results can see that they were positive in Q2, which indicates that Q3 should be really, really strong. And I think overall, the development of Austrian has been very, very good in recent months.
What is positive as well is that the flight movements are 23% below 2019 levels, which means we have a significant increase in the number of seats per aircraft and very significant increase in the seat load sector. You can see here that the seat load factor is up 4.7 percentage points over 2019. This is a really high level, probably this is not sustainable forever, but it shows that all the airlines are doing really good business right now. Obviously, the low-cost carriers have even a higher load factor around 90%, but overall, this is extremely encouraging. And cargo is essentially on the level of 2021 and 8% below the 2019 levels.
To go in a bit more detail on traffic, I think this is important to get a bit of an idea about the future development. What we can see here is that Europe is performing above average, overall Europe, minus 9.6% over 2019. Eastern Europe, not surprising with the war in Ukraine and the reduction in traffic from Ukraine, Belarus and Russia, minus 14%; Western Europe, minus 8%; Far East still the market which is struggling minus 71%; Middle East, even above -- slightly above the 2019 levels and North America and Africa 5% below 2019 levels. So essentially, this says that we have one major market, the Far East, which is performing significantly below the 2019 levels, and the rest is performing pretty well.
If we have a look into our -- by far most important market Europe, what you see here that they are mainly the Southern European markets, which are performing significantly above the 2019 levels. Italy, Spain, Turkey, Greece, all performing extremely well. UAE performing very, very well. U.S.A. above the 2019 level. And there are a couple of markets, mainly Germany, U.K., France and Switzerland, which are performing significantly below the 2019 levels.
Our biggest market, Germany, [ minus 35%]. And I would say there are mainly 2 reasons: one, we have significantly less capacity on Germany. There are many exclusive Lufthansa routes mainly operated by Austrian Airlines. So Austrian Airlines is doing very, very well on Germany right now. And secondly, I think there are still some business traffic, although July is not a strong business traffic anyway. But still, I think we'll still see the effect of Zoom and Teams and so on.
But on the other hand, I think there's a lot of room for recovery in 2023 on Germany. I'm sure there will be more capacity on Germany next year. And overall, I think the markets, Germany, U.K., France, Switzerland will recover more in the coming months and definitely next year. So this gives some positive outlook.
And I think the same applies for Far East. I would not be overly optimistic on China, but what we see from markets like India, Thailand, Taiwan, Japan airlines want to come back. Airlines are seriously considering to put in capacity. So I think we will see some positive developments there next year as well.
Just a few words on operations. I think -- if compare to most other airports in Europe, we are doing really, really value in terms of waiting time, in terms of punctuality, in terms of flight cancellations. So, yes, I think the operation really works very, very well. We hear this a lot from Austrian Airlines. I think Austrian Airlines is within Lufthansa Group, a top performer in terms of punctuality. So I think the -- yes, I think Austrian is both from a financial perspective and from an operational perspective right now really on a good track. We are happy that the effort of our employees have been recognized by Airports Council International, and we've received the award, Best Airport in Europe 2022, from ACI a couple of months ago.
Yes.
The outlook for this year is, in Vienna, approximately 22 million passengers in the group, 28 million passengers. I hope this is on the conservative side. We -- this guidance or this forecast is not done under the assumption that we will be at the end of the year on a 90% recovery level. So we believe when the really strong summer months over that percentage versus 2019, will go down a bit.
So it might well be that we are above the 22 million. On the other hand, this does not in any way cater for severe travel restrictions or anything of that sort so if a new COVID wave should happen. So our best guess today is that we will be around 22 million passengers if the recovery remains as strong as it is today, we will probably have more passengers than that.
To finish off our presentation, a few words regarding our segments. As Gunther said already, I think the most important development in the airport segment is the airport charges. We will increase our airport charges by roughly 5.7% with the 1st of January. This includes the inflation from July 2021 up to July 2022. There is right now no formula in both. This is plain inflation according to law.
Overall, I think the airport segment improved significantly its results in H1. EBIT was EUR 16.4 million, EBITDA, EUR 56.9 million, and the increase is -- yes, essentially all throughout the board passenger-related fees, aircraft-related fees and infrastructure-related fees. So overall, I think the performance is good. It will be even better in -- now over the summer months. So overall, I think the development is good.
We intend to increase our net revenues next year. So we will, on the one hand, increase our gross charges. On the other hand, we have done some changes in our incentive scheme. So we assume that we will pay less out of our incentive scheme next year. And the net revenue should be above the 2022 and significantly above the 2019 levels.
To carry on with the Handling Security, a slight profit EUR 0.2 million after EUR 9 million loss in H1 2021. There, we want to increase our unit prices in the future as well. This might take a bit longer because we have contracts running on longer lever. There are some fixed prices. Other big contracts, we can increase our revenues by 75% of inflation. So there are base inflation covered as well.
So overall, the outlook for H2 is obviously even better than what we've seen in H1 where the first 4, 5 months were severely impacted still by COVID restrictions, but overall, I would say, a positive development as well.
And the retail segment is doing -- Retail & Properties is doing very well as well, an EBIT of EUR 30 million versus EUR 9.2 million in H1 last year. EBITDA of EUR 40 million versus EUR 18 million. Revenues are increasing everywhere except rentals. In rentals, what you can see here is a reduction in rental income from Austrian Airlines because Austrian Airlines had an office infrastructure in 8 floors now they reduced it to 4 floors, this still has to be rented out. So this is the reason why there's a reduction there.
But we see very strong part revenues. There was a lot of upselling going on so this really works well and center management and hospitality is doing well as well. They are -- mainly the duty-free shop is performing better than the passengers number would indicate. F&B is significantly above the passenger numbers where we serve by specialty retail logo. This is just a small portion of the overall revenues. We see there that the Russian passengers are missing the Ukrainian [ stations ]. So this is an area where we see the change in the passenger mix. And on the other hand, we see this change in the passenger mix in [indiscernible]. But overall, I would say, a very positive development.
And finally, Malta, again, very positive EBITDA, EUR 23 million; EBIT, EUR 16 million versus EUR 2.4 million and minus EUR 4.2 million last year. Yes, overall, very positive development close to the 2019 passenger numbers now over summer. We will still invest there in additional office space, conferencing and hotel space. So overall, Malta is really doing the well.
That's it from our side, and now we are happy to take your questions.
Yes. Thank you, gentlemen, for your presentation. And now I would like to open the floor for questions. So please go ahead.
Yes, if I may. Bernd speaking from Raiffeisen. Yes, there are 2 questions. First, regarding the CapEx plans. You had pre-COVID quite detailed CapEx plans with the targeted expansion of especially nonaviation facilities. Of course, everything was halted in the life as a consequence of COVID and the drop of passenger numbers. Now we are doing quite well. It's crucial timing for elevation of your company and CapEx is an important factor for it. Please give us a hint here.
Shall we go back to the former midterm CapEx guidance that this is, yes, a valid assumption going forward? Has it to be increased by the rise of construction costs, has it to be decreased because of changed plans? What is in your agenda in the next 4 to 5 years for the maintenance, adaption and enlargement of the airport, of course, all excluding our preparations for this runway?
This would be point 1 and point #2, just one clarification. Mr. Ofner you said at the beginning that you see the updated guidance from today's perspective as conservative. Just your -- question from my side, also conservative without any potential so-called extraordinary gains from the sale of real estate or would the conservative categorization by you include the potential say -- only include the potential for [indiscernible] from real estate transactions?
No. I mean, we are not foreseeing real estate transactions yet for the second half of the year. I mean not in the form of the sale of land. I mean this is a future perspective. And I think a very substantial one, but it's not the case for the rest of the year. I mean conservative, in my point of view, because what we saw for July and what are the expectations for the rest of the year could be above the figures that are now implemented for this forecast.
And I mean given that we see no major external event that would calm down air traveling, everything looks that we could outperform even these assumptions. In regard of CapEx plans, I think that we cannot or you cannot simply take the plans from pre-COVID because many things now look different. So for example, the Pier East renovation or maybe even a new building is not in the immediate foreseeable program anymore. What could be activated and the decision thereof might even be taken in our supervisory board meeting in December is the restart of the so-called South extension.
I mean everything in regard of maintenance, we'll see some inflationary implications. I mean that's clear. On the other hand, as you might be aware, the strategy of our company in the last 10 years was that we insource quite a lot of activities in the service sector, so that we are not in the same extent vulnerable to external price shocks than companies would be who simply rely on the foreign market.
So in this respect, I think we are a little bit shielded against extraordinary price hikes. And so yes, there will be some inflation impact also on our wage costs clearly, but it will be in line with inflation. And I hope that we can cap it there and will not follow price hikes, as you see it in some areas right now. I mean, material costs will be higher definitely.
But here again, in regard of energy, I think we are well positioned, and we still are somehow shielded against the price hike that is currently underway. And this will also be the case for 2023. And hopefully, prices will come down somehow in 2024. I mean nobody of us knows, and we have not the magic cube to really predict it. But from the point of experience, I would say that the latest in '24, you should see some relief there.
Okay. So I understand the main from the project you've announced and scheduled CapEx project, Pier East rather not on the agenda for the mid-term and South extension is to come and the other things are rather smaller?
Yes.
Thank you. Are there any questions? Any other questions? Yes, we can hear you, although a little bit quiet ? Yes. Now I think we can hear you.
Okay, okay. So I would maybe elaborate a little bit more on these previous questions. Regarding energy, I would like to know how big portion of your costs represent energy cost? And how big portion of these costs are kind of protected against the current increases and until when they are protected from these current price hikes? And then you mentioned that you are changing incentive schemes. Could you maybe a little bit more elaborate what is the estimated impact just to quantify it?
Sorry, I did not get your last question. Can you repeat?
I would take the last question. It's about -- I mean it's difficult to quantify on an incentive per incentive method. But I think it's -- the main aim is to increase the net revenue per passenger. So what we are doing, we've reduced some incentives, we've incentivized higher frequency of flights, let's say, to Eastern Europe and the Middle East. And these were ongoing incentives, which gave a reduction to airlines where we think it's not necessary to attract them to Vienna.
So what we are going to do, we skip these incentives. We have skipped all the -- purely on growth incentives and what we are doing in the future, we will incentivize destinations or new destinations, but only for 1 year and maybe underserved markets, but just for 1 year as well. And we will do in the future -- we will incentivize transfer traffic with incentivized volume, but not cost per se, just on a destination by destination basis.
So overall, the revenue per passenger should grow next year. And this year, obviously, we will be roughly on the lines of last year, I would say. So we should be significantly above 2019 levels.
Yes. I mean in regard of energy costs, we can maybe give you the full detail a little bit later. But in general, we have 2 different types or 3 different types of energy consuming tasks. One is electricity, the second one is district heating and district heating is gas price-related. And the third one are fuels for our vehicles. So the price effects are different for each of these means. The highest increase is gas price; the second one, electricity price and on the lower end fuel prices.
For electricity, we have already bought a substantial amounts of electricity 4 and 5 years ago on the [indiscernible]. The problem there is that unfortunately, due to the fact that the common price zone between Germany and Austria was unleashed 2018. The electricity bought at the fixed price cannot simply be transferred from Germany to Austria. And there is a specific extra cost in regard of that. And we cannot exactly calculate what this will be. It started with EUR 3 or EUR 4 per megawatt hour. It was last year around EUR 30 per megawatt hour, and it went up on a daily basis to the maximum of EUR 200 per megawatt hour on certain days this year. So this is complicating a full visibility but -- and that's the good part of the story.
Fortunately, we have a natural hedge for that issue, and this natural hedge is our own production. So what we spend on the supply side, more or less, we earn on the production side. And therefore, overall, we are well shielded for this year and also next year from the enormous price hikes on the electricity side. We are not shielded against the gas price increases, unfortunately not, but that's the factor or the means from which district heating finally is produced.
And we are not hedged or we are not shielded against the prices on the fuel side. But altogether, it's roughly around EUR 20 million per year, but we can't give you a more accurate figure. And it's a substantial sum but it's not substantially influencing our total cost position, as you see in the costs for the first half of this year. And you will see also for the full year.
If I may come in here, Vladimira, if I may come in here, I just rechecked for the first half year of 2022. And there, the energy costs were EUR 8.7 million. And that compares to the total costs for material and other things of EUR 19.4 million. So it's below 50%. But close, I would say, between 40% and 50%, if I see that.
Yes. For the full year, it will be somewhere at EUR 20 million plus/minus.
So are there any other questions? Are there any analysts in the call that have additional questions. If not, then I would like to open the floor for any other questions that still might be there. Please come forward and ask your question. This is the final round in that sense. Anybody left. It doesn't look like it.
So then thank you very much for joining our call this time again. We wish you a nice remaining summer. Enjoy your time, and we're looking forward to you joining us the next time for our next call. Thank you, and bye-bye.
Thank you. Bye.
Thank you.