Fraport AG Frankfurt Airport Services Worldwide
XETRA:FRA
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Fraport AG Frankfurt Airport Services Worldwide
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Ladies and gentlemen, thank you for standing by. I'm Haley, your Chorus Call operator. Welcome, and thank you for joining the conference call of Fraport AG. [Operator Instructions] May I now hand you over to your host today, Christoph Nanke, SVP, Head of Finance and IR. Please go ahead.
Thank you, Haley, and welcome to everybody also from my side. I have with me at the table Stefan Schulte, our CEO; and Matthias Zieschang, our CFO. They will lead you through the presentation. And as Haley said, there will be time thereafter for your questions. So let's start.
Yes. Thanks very much, and good afternoon, ladies and gentlemen, here from Frankfurt. The presentation of our 9 months results today is clearly extraordinary. We are looking back at a period where we handled about 16 million passengers in Frankfurt. And usually, this is a figure of a single quarter, but today, we are already in November, and we're reporting the financials for the first 3 quarters of the year. In addition, more than half of our labor force here in Frankfurt is running under the German short-term -- short-time working scheme. And those in [indiscernible] continue to work -- are working from home as far as this is possible. The financial impacts you also see on my first slide on Slide 4. We've recorded a clear drop in revenues and in our operating results. While revenue was down by about EUR 1.5 billion or EUR 1.3 billion when adjusted for IFRIC 12, our EBITDA was even negative after 9 months at minus EUR 230 million. In here, we recorded a staff-related restructuring provision in the amount of about EUR 280 million for our labor force in Frankfurt. Adjusted for this provision, our EBITDA would have been about EUR 52 million, but still a significant drop of almost EUR 900 million. The provision we booked is in connection with our [indiscernible] program and all the staff measurements we took, which we initiated to counter the financial impact of COVID-19 crisis even in the midterm. The progress of this program and other -- our other measures to safeguard our financial position I will discuss later on, but let's focus on our financial performance first. Bottom line, our group result ended the period under review clearly negative. At minus EUR 550 million, the year-over-year drop amounted to some EUR 900 million. Relying on the last quarter exclusively, we already saw first signs of an improvement. On Chart 5, you see a closer look on the Q3 performance. While Q2 was throughout negative at almost no traffic and a negative EBITDA of more than EUR 100 million, we achieved the financial turnaround already in the last quarter. At minus 80% Frankfurt traffic, the size reduced its negative EBITDA from minus EUR 90 million to almost breakeven levels of minus EUR 17 million, if excluding for the staff restructuring provision. Let me emphasize here that besides a mild traffic recovery, this improvement was only achievable with the help of strict cost management and the short-time working scheme, which, again, safeguarded about EUR 90 million of personnel expense in Q3. On the flip side, our international airports started to recover to an even larger extent. Following a modestly negative EBITDA of EUR 18 million in the second quarter, the international segment contributed a clearly positive EBITDA in the third quarter, again, of more than EUR 40 million. In total, this brought our underlying EBITDA back into the positive area. As a result, we largely covered all operating cost items, brought back our operating cash flow to almost 0 in the third quarter. Therefore, in Q3, we clearly reduced our negative free cash flow to around minus EUR 330 million, which was basically attributable to our CapEx program to prepare the group for future recovery and growth. An update on our CapEx program I will present you in a minute, but let's move on to our business update first. On Slide 7, you see our year-to-date traffic performance. While we published our 9 months' traffic figures already in October, the chart here is still quite impressive in many ways. First of all, especially in Western Europe, there's a general impression that there is no recovery in air traffic due to low or no demand. Relying on the traffic performances of Frankfurt and Ljubljana, this impression seems right. However, the performances of our international activities, especially in Eastern Europe and Asia, prove the impression to be wrong. If we go through the portfolio, you see, for example, that the traffic figures in China were only down in a single-digit percentage range in September. In fact, the site recorded almost the third best September result in its history. And St. Petersburg domestic traffic was even higher in September than the value of the previous year. Antalya just reopened for international flights in July. Still, in September, the airport handled more than 50% of the 2019 recorded year, mostly driven by short-notice bookings. More or less the same is the case for Greek investment. As a result, the perception in Central or Western Europe is not right. We clearly see that people who are being offered the opportunity to fly continue to fly. The below average results in Western Europe, therefore, are clearly the result of travel restrictions being imposed to reduce the spread of the pandemic. However, there's no clear evidence that traveling is leading to increased infection rates. With our clear conviction that air traffic is no driver for a quicker spread of the virus, and then, on the other side, also a shutdown of air traffic is now tapering to reduce infection rates. Hence, we keep on lobbying to restore the possibilities to fly on a global scale, to go for uniform approaches than -- rather than to have national solutions and that we clearly prefer testing over quarantine requirements.However, as we can't directly influence the reopening of the markets, we initiated clear cost-cutting measures to reduce the financial impact of the low traffic volumes on our financial position. I'm on Slide 8 now. The first level is not new, and we discussed this already with our full year figures in March. We are making use of the German short-time working scheme to reduce our staff costs short term without the need to go for compensation payments. Some components are also shown on the next slide. From today's perspective, however, it seems clear that the possibility to make use of the short-time work will end latest end of 2021. As we don't expect to be fully recovered by then, we need to take further measures to reduce our staff costs on a sustainable basis. Here, the target is to be a 4,000 employees leaner company. To achieve this target, we first of all make use of nonextending or nonrenewing temporary contracts. This means that people who are, for example, hired on a 12-months base don't get a new contract. With these measures and the natural fluctuation, we have already become 1,300 employees smaller by end of Q3. Moreover, we launched a voluntary program that offered employees an incentive payment to leave the company or to take advantage of an early or partial retirement. As of today, we can tell you that some 1,500 employees will leave the company under the umbrella of the voluntary program by Q1 and Q2 next year. In addition, about 900 employees will leave the company over the next 1 to 3 years, taking advantage of early and partial retirement or due to planned exits. Adding all the before-mentioned numbers together means that we have already locked in about 3,700 employees or 90% of our target volume. Here, out of these, by end 2021, significantly more than 3,000 employees will leave the company. So let me emphasize here that despite the good progress we can show you today, this won't mark the end to our restructuring program.Besides staff costs, it's our clear target to reduce our cost of materials sustainably. Here, we already achieved savings of EUR 10 million to EUR 15 million per month. So EUR 100 million to EUR 150 million on an annual basis. This will turn into permanent savings. Partly, this can be achieved by the staff restructuring because some tasks will not exist anymore, and like this affiliated costs, items like laptops, mobile phones, offices and so on, will disappear. On the other side, we've clearly focused on all nonoperational needed cost items. We will reduce, for example, expenses [indiscernible] corporate citizenship, but we also have saved some consultant costs, for example, in M&A. Also, we will reduce cost for printing and marketing in general. The staff cost savings and cost of material savings have the clear target to reach free cash flow breakeven latest in 2023. To achieve this, we also needed to adapt our CapEx program. We are deferring and canceling projects here in Frankfurt which are not needed to maintain the airport. Here, we canceled, for example, the planned EUR 270 million refurbishment of Terminal 1 and Terminal 2 in light of the capacity overutilization where we were in a year ago. We also stopped the EUR 300 million expansion of our airport and taxi wait system as those capacities are not needed in the foreseeable future. In addition, we decided to postpone the opening and the construction process, of course, of Terminal 3, in line with the demand, to about 2025. In doing all this, we will save about EUR 100 million to EUR 150 million per annum in Frankfurt, mainly within other CapEx. In international activities, we are also in talks to defer the terminal project in Lima. This will also reduce near-term burden for us. Moreover, to reduce the near-term capital needs, we are claiming for force majeure at all our concession holdings. Here, we are in advanced talks at some of our group airports, like Fraport Greece and Brazil, and we'll communicate once we have agreements in place. Now I jump to Slide 12, as I was already speaking about Slides 9 and 10 that provide more details on those staff restructuring and restructuring of CapEx. Moving on with our outlook here. While it was not possible to provide you an outlook on the impacts of the pandemic over the course of the year, the outlook can be more quantified now that we have seen the development of the first 3 quarters. Starting with the passenger numbers here in Frankfurt. Here, we expect to see a shortfall of some 70% to 75% to about 18 million to 19 million passengers this year. Our international activities, we expect, in general, a better development. While ASEAN should be the front runner at around 30% -- minus 30%, St. Petersburg should follow at minus 50%. For the rest of the portfolio, we expect the declines to range from minus 60% to minus 80%, subject to travel restrictions that currently continue to be in place. Revenue wise, we expect a clear shortfall of some 60%. For the EBITDA, we continue to expect a slightly positive underlying EBITDA, so net of the restructuring provision. Including for the restructuring provision, we expect a negative reported EBITDA, which can fall below minus EUR 200 million. Simultaneously, we expect EBIT to be negative with or without the provision. The group EBIT, including for the provision can amount up to minus EUR 900 million or minus EUR 600 million, excluding for the provision. Net of taxes, our group results and, therefore, earnings per share will also be clearly negative. Looking at our midterm expectations. For Frankfurt, we expect to see about 35% to 45% of the pre-COVID levels next year. Here, the development will largely depend on the summer season and the availability of a vaccine. From today's point of view, we expect that the first quarter, so also the winter season, that will end in March next year, that we don't see a significant traffic rebound but rather to remain on the levels we are seeing this year. Thereafter, depending on the availability on vaccine and at what time and which broader sense can be used also for traveling around the world and how it is available around the world, we are more optimistic to see a rebound then in summer next year and ending up much higher next year, of course. Going forward, for the year 2023, '24, we expect traffic levels that are still around 15% to 20% below the volumes of 2019. Here, we also expect positive impacts from the availability of a vaccine on a broader scale, which explains a bigger step up. Full recovery we expect in 2025 or 2026 from today's point of view, and hopefully, everything will be better in the future and quicker rebound than from today's point of view. This, however, will very much depend on the market reopening and the macro situation in general, so unemployment rates, budget cuts to corporate travel and possible impacts from consolidation in the airline market. For our international airports, we are in general more optimistic to see a quicker recovery. First signs I already showed you on my chart today, and we continue to expect the leisure traffic as well as visiting friends and relatives will be the 2 traffic streams to recover first before business or corporate travel. As such, some airports of our portfolio can already be fully recovered within the next 2 to 3 years, like China or Russia. Having said this, I would like to thank you for your attention, and I hand over to Matthias now.
[Yes. Thank you, Stefan, and also a warm welcome from my side, ladies and gentlemen. I would like to start my presentation with some good news on Slide 14. After a very depressed second quarter in which we experienced an almost complete lockdown, we managed to improve our cash burn at the group by 25%, and we were able to nearly achieve an operational breakeven cash flow wise. To be precise, the operational cash flow in Q3 stood at less than minus EUR 10 million per month. So that's almost all the negative cash flow was linked to our CapEx programs. On the right-hand side, you see that, on average, our monthly cash burn in Frankfurt improved by EUR 10 million per month. However, looking at the monthly development, it becomes very clear that this was only due to a one-off effect from a down payment in July, which, therefore, stood at EUR 140 million. In September, we improved by around 30% to EUR 76 million if compared to the average monthly cash burn that we incurred in the second quarter. Also, our international assets made a big contribution to the improvement of our negative free cash flow by reducing their cash burn by around EUR 30 million per month. Here, the negative cash flow was driven by the ongoing CapEx programs, which you can also see on my next slide. All in all, we incurred negative free cash flow of around EUR 330 million in the third quarter. Going forward, we, as a management team, will continue to focus on the improvement of the monthly cash flow situation, which will also be helped by ending the remaining construction work in Greece and Brazil by the end of this year and throughout the upcoming year. Coming to the big picture on my next slide, let's have a look at the year-to-date free cash flow. Having started the year with net debt of around EUR 4.15 billion, we now stand a bit more than EUR 5.1 billion, having incurred a negative free cash flow of exactly minus EUR 988 million in the first 9 months of the year. On the one side, the negative operating cash flow of minus EUR 125 million weighs on the net debt development, and on the other side, as you know, we continue to construct new infrastructure in Frankfurt and abroad, which results in a much more material cash drag. Including for the third quarter, we had invested around EUR 850 million in the group over the course of the year, out of which roughly EUR 600 million had been spent in Frankfurt. However, not only in Frankfurt but also at our international sites, especially in Greece, Brazil and Lima, we are progressing in line with our CapEx budget assumptions for the full year 2020. Looking forward towards the end of the year, we still expect our net debt to increase to a level of up to EUR 5.5 billion. In line with the higher group net debt and the decline in equity due to a negative net result, also our gearing ratio recorded a clear increase after 9 months, which we expect to continue for the full year. However, as bad as the situation is and as much as we hope for a significantly better development in 2021 as comfortable we feel with then these crisis financials. And this brings me to my next slide, 16, that you also know from past publications and which makes progress from quarter-to-quarter our liquidity profile. We started the year with a very good buffer in normal times of around EUR 1.7 billion. Having made heavy efforts already in the first weeks and months of the pandemic, by mid of the year, on June 30, we had already financed another EUR 1.3 billion at an average interest rate of 0.8%. In July then, we issued a bond in the amount of EUR 800 million, which added up to EUR 21 billion of new financing after 7 months. This is what you already know from our Q2 publication. Now in Q3, we were again very active on the debt market, which made us successfully sign the financing for the construction of the runway in Lima in the amount of roughly EUR 380 million. And only recently, 2 weeks ago, we closed the order book of a promissory note loan of EUR 250 million and signed another bilateral agreement over EUR 30 million. Settlement for the promissory note loan is expected for December. All this brings us to an additional financing of more than EUR 2.7 billion over the first 3 quarters of the year. Of course, adverse effects are coming from the negative free cash flow and the repayment of financial debt. However, talking all financing activities into -- taking all financing activities into account, we are having a group liquidity, including for unused credit lines, of more than EUR 3.2 billion as of today. On my next slide, you find the meanwhile well-known maturity profile of our group, which is now including for the repayments of the bond tranches of EUR 300 million in 2024 and EUR 500 million in 2027. What is missing here is the repayment of the Lima financing, which has not been drawn yet, as well as the additional EUR 280 million that we financed in October with settlement of the promissory note loan in December. The terms of the 5 different tranches of the loan vary between 3 and 12 years. Like this, at the end of September, our gross financial liabilities amounted to EUR 7.1 billion. Looking at the repayment profile, we feel very well positioned looking at our currently available funds of around EUR 3 billion. Coming now to Slide 18. I would like to go a bit more into detail about the underlying financial performance of our Frankfurt segments. Starting with the year-to-date figures. The significant drop in passenger numbers of 70% also heavily impacted our revenue streams, especially in the segments that are predominantly traffic driven, namely Aviation and Ground Handling, but also in the Retail & Real Estate segment, which we still incurred a decline in revenues of around 39% at roughly stable real estate revenues. In the segments Aviation and Ground Handling, revenues even decreased by more than 50% on the back of significantly less passengers' movements and lower maximum takeoff weights. In total, revenue across the 3 Frankfurt segments was clearly down by about 51%. With the help of the countermeasures that we implemented already in spring with the beginning of the crisis, we were able to offset part of the revenue losses, around 30%, through cost savings. In total, we saved around 25% in personnel costs before booking the provision for the staff restructuring program and 18% in other OpEx. All in all, we achieved savings of roughly 22% in Frankfurt. This is really a very good result. However, you still see that this was not enough to achieve a positive EBITDA for all 3 Frankfurt segments, but only for Retail & Real estate. Like this, after 9 months, we see an EBITDA of minus EUR 29 million for Frankfurt. If you now also take into consideration the provision for the restructuring program, which was booked completely in Q3, the EBITDA decreases to minus EUR 262 million. In total, the provision amounts to EUR 280 million, while the segments Aviation, Retail & Real Estate and Ground Handling account for EUR 233 million. It is clear that the result of Aviation and Ground Handling are predominantly hit by the provision as these are the labor-intense segments. Taking a closer look on the performance of our Retail & Real Estate segment on Slide, 19. It becomes clear that our non-Aviation business is most robust among the 3 business units in Frankfurt during the crisis. However, we have to differentiate among the revenue streams. Starting with retail, you see that the decline of close to 60% mainly stems from shopping, while advertising, which is not directly linked to passenger numbers and also the demand for services, especially food and beverage, are holding up if compared to the significant passenger decline of 17%. Based on this and supported by minimum annual guaranteed rents at lower passenger volumes, our retail revenue per passenger reached an all-time high of EUR 4.40 after 9 months. Compared to the first 3 quarters of 2019, this means an increase by EUR 1.26 or 40%, which is a very good result. When looking at the other relevant revenue streams of the segments, you see that especially the real estate business, which is operating under fixed-term contracts, so no revenue-related rental component, is roughly stable at more than EUR 120 million in the first 9 months, which equals a minor decline of only 4% over the year 2019. Also, the revenues from car parking have not decreased in the same magnitude as passengers but only by a bit more than 50%. This is the case because companies that have their offices at the airport oftentimes also rent parking spaces for their employees, which is not related to passenger volumes. All in all, the segment's revenue decreased by less than 40% at a passenger decline of around 70% after 3 quarters of the year. Now coming to my next slide. I would like to give you a bit more insight into the Q3 performance, separately the important summer season. The picture does not change complete. Aviation and Ground Handling still show a negative, Retail & Real Estate a positive EBITDA. However, it is worth noting that despite a decline in passenger numbers of around 80% in Frankfurt, we achieved an underlying EBITDA, so without restructuring cost, of minus EUR 17 million. Close -- very close to breakeven despite a revenue decline of more than 60%. Of course, this is nothing to be really proud of, but I think during these months in which actually the basis for our business model is disruptive, this shows that we did a good job improving cost efficiency and that we have a successful crisis management in place. Looking at the pure figures on the top right, we offset 1/3 of our revenue losses through OpEx savings, which equals a cost reduction by 32% before restructuring costs. Including for the provision for the restructuring program, the EBITDA stood at minus EUR 250 million in Q3. On my next slide, 21, you find the financial performance of our international activities and services segment as well as our main international assets in Greece, Lima and Brazil in the 3 quarters of the year. As you saw on Stefan's slides before, also our portfolio airports abroad have been heavily hit by the coronavirus pandemic, with passenger numbers at some of the airports down by up to minus 85% year-to-date and even up to minus 95% in Q3 stand-alone. Therefore, in our international business, the revenue decline was even higher than in Frankfurt and stood at minus 58% after the first 9 months. When adjusted for IFRIC 12, the decline was even a bit steeper at minus 60%. However, our airport organizations abroad are even more flexible to react concerning their cost structure, and therefore, they were able to offset more than 50% of their revenue losses through cost savings. And close to 40%, if adjusted for IFRIC 12, revenues that are balanced with the expenses in the same amount. One of the major effects in other OpEx savings of 60% or 73%, if adjusted for IFRIC 12, is coming from lower variable concession charges that amounted to more than EUR 50 million per quarter in 2019 and only to EUR 16 million per quarter after 9 months in 2020. Besides that, staff cost was reduced by 20%. All this resulted in a clearly positive EBITDA contribution to the group of EUR 81 million. Looking now at the bottom of my slide, you find our 3 main contributors to the positive EBITDA, which were Greece with EUR 21 million at minus 72% traffic; Lima with EUR 32 million despite passenger numbers being down minus 70%; and Brazil, which still contributed EUR 5 million at minus 59% traffic and despite the significant devaluation of the Brazilian real this year. To make a picture complete, you'll find the Q3 stand-alone performance for the International segment and our 3 main international assets on Slide 22. Out of the EUR 45 million in the segment, around EUR 36 million or 80% was coming from Greece, which luckily opened up for tourism again in July or end of July when the main holiday season began. However, Q3 traffic numbers were still down by 64%. Also, what is worth noting here is that Lima, despite a traffic decline of minus 95%, were still realizing a slightly positive EBITDA. This was, of course, mainly possible because of the high degree of flexibility due to the strong correlation of concession payments to revenues, but it also proved their successful cost saving measures. The enhanced cost flexibility of our international subsidiaries made our group realized a positive operational result in Q3. And year-to-date, before restructuring costs, which now brings me to the next slide, where I would like to reflect the EBITDA breakeven levels. Again, starting from the top of the table with Frankfurt, supported by implementation of short-time work and the significant reduction in other operational expenses during the crisis, we can achieve the EBITDA breakeven point at roughly 50,000 passengers a day, which we saw in August, and August itself, we had already a positive EBITDA. Again, 50,000 passengers a day or 45 million passengers in the quarter. In Q3, as a reminder, we handled close to 4 million passengers in Frankfurt and incurred a slightly negative EBITDA. In Q2, we only handled an average of a bit more than 11,500 passengers per day and faced a clearly negative EBITDA. In Q4, the traffic shortfall should not be more than 73% in order to achieve a breakeven EBITDA during the final quarter of the year. Moving on to our international airports. You see that overall, these assets need much less passengers a day to be EBITDA breakeven. However, there are still differences when it comes to the outlook for Q4. While Lima could even handle a decline in passenger numbers of 89% over Q4 and still beyond the edge, Fraport Twin Star in Bulgaria would need 78% of last year's volumes to be break even in Q4. We are aware that if looking at these figures, it appears challenging to realize a positive EBITDA at the group level in Q4. However, what also has to be considered is that now in Q4, a touristic airports like in Greece or Bulgaria, it is not so much the tourists anymore that drive traffic, but passenger numbers rather than depend on ethnic traffic especially over Christmas, which should not be affected as much as touristic during the summer season. In other places in the world, in South America, the summer season just -- has just started now, and we have already seen a slight recovery in Lima and Brazil over the last weeks. That is why we are also optimistic here for Q4 with regards to the EBITDA performance.This now brings me to my last slide of today, where I would like to conclude with some financial highlights of today's presentation. First of all, I think it is a great success of the whole organization that we were able to turn Frankfurt's EBITDA almost breakeven in Q3, and this at more than minus 80% of passengers if compared to 2019. With this in mind, we are fully convinced that if the status quo does not deteriorate, also with the full year steps, we report a reasonable financial outcome for Frankfurt Airport. This is, of course, adjusted for the provision for the staff restructuring program. The situation at our international sites does even appear a bit brighter on the back of their more flexible cost structure in the financially positive summer season. Here, we saw a clearly positive EBITDA in Q3 and also forecast this for the full year. All in, we are optimistic to end this year of the worst crisis that global aviation industry has ever seen in history with a positive operational result net of special items. And this once again is only possible with the contribution of all employees in Frankfurt and abroad. Having said this, I would like to end our presentation for today and open for Q&A session now. Thank you very much for your attention.
[Operator Instructions] And the first question comes from the line of Cristian Nedelcu of UBS.
Three, if I may. Firstly, how much do you expect wage inflation or cost inflation to offset your EUR 350 million to EUR 400 million cost savings by 2023? I'm just trying to get understanding where do you see 2023 EBITDA versus '19 levels? Secondly, it looks that by the end of 2021, your gearing is moving towards 20%. Should we expect this will increase meaningfully the interest rates you are paying for incremental debt financing going forward? And lastly, with a large part of your debt related to Frankfurt airport, in your current base case scenario, where do you see the net debt to EBITDA at the asset level in Frankfurt? And what do you consider a maximum level of financial leverage that you can incur there?
I will start and Matthias will then take over. Wage inflation. It depends very much whether we are successful in the negotiations with the unions on restructuring contract. As you know, that we've got an opening clause there on the federal level. It could be one of the components that wage inflation, staff cost increase would not occur for us industry up to the year 2023, including. But that's too early. It's under negotiation, and we have to see. Regarding gearing, I would say, from my point of view, the interest cost will not go very much up even with those levels because, yes, of course, the background of our central infrastructure is seen there on the one side and important as of the other side, of course, the shareholders structure with the state of Hesse and so on. Even if they haven't given any guarantee on that, but it's seen as a stability source. Let's say it, this way.
Perhaps I can take over. And first of all, again, when you look on this, what we did in the debt market this year, we already refinanced more than EUR 2.7 billion in this year and the average interest burden for this long-term money is 1.3%. So also including this EUR 2.7 billion, we -- to give you just one example, we also made a non-recourse financing for Lima in the amount of USD 450 million equivalent to EUR 380 million. Here, we have to pay 1.7% interest rate. This shows that these are fantastic rates despite the fact that in the moment, our revenue is down, and we have the biggest crises ever, but this is a reflection in the trust of the capital markets in us in our long-term business model. And also just what Stefan said, we have no official guarantee, but you can say we have an implicit guarantee by our shareholders, the Federal State Hesse on one side and the city of Frankfurt. And this is, of course, then reflected in this very attractive interest rates. That's the reason why also looking forward into 2021, when we, again, will come into the debt market to keep our liquidity on this high level. We expect, again, very attractive interest rates for us. So no clear trend upward. So we think what we have is good, and we will continue on this level. With regards to net debt to EBITDA, before corona, we always said our ceiling, our limitation will be 5x. Now we are through the ceiling. That's clear. Everybody is though because the whole aviation industry is, so to say, is bumped down, but everybody is also aware that the traffic will recover. And also the cash flows will come back, so that we have an intermediate period where we are far away from this 5x net debt-to-EBITDA target, but all long, we will come back to this number and again we stick to this target, but don't expect 5x in the next 2 years. But this is our target, and we are working to come back to this level.
The next question is from Elodie Rall of JPMorgan.
I have 3, if I may. The first one is on your traffic assumptions. You gave us your assumption for recovery in traffic from [ beginning ] this spring you expect flattish level in Q1 as per this year and then a gradual recovery. And you gave us your assumption for '21, '22. My question is, what is your assumption in terms of vaccine and testing capacity in order for you to actually give us this kind of traffic assumptions? So that's my first question. My second question is more a longer-term one. Given the cost cutting that you have taken in terms of employees and nonoperational costs, meaningful cost cutting. So if we assume that by 2025, traffic has recovered, say, to a normalized level of 2019, where do you see the cost base in your portfolio in Frankfurt mostly versus 2019? Would it be back to this level or stay materially lower given the cost cutting? And my last question is on tariffs. You said that Q2 results that you plan to oppose flat tariffs for 2021. Can you give us an update on negotiation, how it's been? And do you still expect to increase slightly tariff from 2022?
Yes, of course. Thanks very much for your questions. Let me come back on the traffic assumptions. We gave an outlook today for the year 2021 on a level of 35% to 45%. On the first glance, it may look a little bit conservative for worst case. But if you see how the pandemic numbers are going up across Europe, maybe across the world, our estimate from today's point of view is that these numbers will stay on such a more or less high level, on that level what we see these days probably over the winter period. So saying January, February, March and then some coming down April, May. That would mean that on the traffic side, we will see a first quarter, which somewhere would be on the level of the fourth quarter now [indiscernible] Somebody should mute, if possible, Thanks very much. So that would mean that we are on minus 85% or something like this on the first quarter. Of course, and we hope that we will see them somewhere getting in a better second quarter, but the real recovery, we are not expecting for summer next year and then, of course, second half of next. So if you would estimate something like minus 85% on the first quarter and then something on minus 70%, then you need something like above 50% third and fourth quarter to achieve somewhere a range of 35% to 45%. All this depends, of course -- it's also a question how long lockdowns are, how successful governmental policies are and at what time vaccine is available. But it's not the question at what time vaccine is really available, but at what time vaccine is also approved by governments across the world at the end and produced and allocated to the population. That's more the point. So we are optimistic that we will see vaccine somewhere over the next -- don't ask me exactly 1 or 2 months, hopefully. And I stay optimistic on that side. But up to the point that they are, really -- the production factories up that it's really produced on a big scale that it's allocated up to the population and not just Germany, we would need also other countries. There will be some time going ahead and don't ask me exactly how long because we are not a pharmacy company, but it will take some time. That's probably the background why we are maybe a little bit why our forecast for next year has seen a little bit conservative, but that's the background on that side. Long term, there's a clear commitment from our side. You mentioned 2025, there's a clear commitment by Mathias and by myself, the cost savings we are now doing. So somewhere a range of minus EUR 400 million is really sustainable. No question at all. The direct people we have to take in is the traffic is coming back, that's clear, but we have to do. But the cost savings on that level, EUR 350 million to EUR 400 million is really a target we have to achieve and we will achieve. And we have taken already a big step on that side on a sustainable basis, and we will do that. Regarding aviation fees, the consultation is running. There's no big surprise, nothing on that. So I would expect that it's on a flat base for next year. And thereafter, we see that much early now. There are no negotiations these days. It's a question if we have a clear look and a clear see on what's going on traffic-wise and so on, cost restructuring and all those topics for the year 2022 and 2023.
And the next question is from Stephanie D'Ath of RBC.
My first question, please, is on the cost saving of EUR 250 million stat and between EUR 100 million and EUR 150 non-stat. Could you please confirm the bulk of that would be at Frankfurt? Or what percentage is linked to international, please? My second question is regarding the EBITDA breakdown. Could you please let us know in the coming years, like, what percentage of passenger 2019 level would you expect to achieve EBITDA breakeven, and then in particular for Frankfurt, please? And then on Slide 23, you gave some indication for the international airports and which are the most or less operationally geared. Would you say that's a fair assumption to look at also going forward in terms of the range? Or how would you see breakeven there? And then my last question, please, is on your assumptions to reach in 2023, '24, passenger levels of between 80% and 90% of pre-crisis level. What do you expect would not have come back by then? And can you maybe also contextualize with what you expect Lufthansa then to do in terms of capacity?
Let me start maybe with your first question. The cost savings, the EUR 250 million as well as EUR 150 million. That's on Frankfurt. That has nothing to do with international business. That's just on Frankfurt. Of course, also the international participations are working on similar programs, on different programs. That depends a little bit on the different business model, how they do it, but they are also working there, whatever they can do to bring costs down. Regarding your last question, 80% to 90%, why we're not expecting 2023 or '24, already 100%? It's a crystal ball, of course, so very much foreseeing this. The topic is a little bit that we get a lot of feedback and then have some discussions that the corporate business, which amounts to roughly 35% to 40% in Frankfurt, that's -- some portions of that business could go -- could be digitalized, so it could be virtual in the future, if I take internal meetings, something like this. Even though we believe that long term, most of this will come back and then companies have to meet other businessmen and so on, but some portions could be due to cost reduction reasons and so on and due to digitalization, could be virtual in the future. On the other side, there could be, in the near term, there could be some portions of the leisure traffic falling down if there is a higher minimum price, if aviation ticket prices are going up also to the Green Deal of the EU Commission depending on what's happening on that side. So that's a little bit the reason why we say okay on the one and on the other segment, there could be a minus 10%, a minus 15%, maximum minus 20% be less than 2019 level. But from that, we expect that we will continue to restart and to come back to the levels of 2019 at even higher levels. The other 2 questions?
Yes. With regards to your question, the breakeven numbers. I refer again to Slide 23. Perhaps you made it a little bit too complicated, but it's relatively simple to understand. So when you look, for example, we are starting at Frankfurt, where we said we need 50,000 pax per day. So if you want to see what does it mean for the full year, it's relatively simple. Take the 50,000 x 365 days, then you have exactly the number of passengers we need to reach EBITDA breakeven in Frankfurt. And when I do the math, I think it's 50,000 x 365, EUR 18.5 million (sic) [ EUR 18.25 million ]. So if you take, for example, Greece with breakeven level 20,000 x 365, it's about EUR 7 million to EUR 8 million. So then you have always to compare this number to this, what we had in 2019 and you can make as a final value the percentage, of which -- of the 2019 numbers you need to achieve. You can see that this is extremely low. And this is also a result of our cost-cutting measures. So before corona, all these breakeven levels have been much higher, but this was not an issue at that point in times because everybody thought it will -- the growth will continue. But we think we did our homework now, and we have a high leverage now coming up when the recovery of passengers will take place. And even if you now refer to the very modest growth guidance for next year of 35% to 45%, so regardless, it's 35% or even a little bit more optimistic, 45%, then we will be clearly in the positive EBITDA numbers in Frankfurt as well as outside Frankfurt. So we do not know what will really happen in '21. But one is, for sure, the passenger numbers will be higher than in Q2, Q3 and Q4. And this means you will see solid EBITDA numbers again for the Fraport Group in '21.
The next question is from Andrew Lobbenberg of HSBC.
Can I ask -- you said you were opening talks or in talks with the government around your concessions on force majeure. Can you give us some thoughts of what the -- I guess, what the levers are that you're looking to negotiate on? And perhaps what the range of outcomes potentially that could be there? I appreciate it's sensitive and you're in talks. Can you give a bit of explanation about Latin American traffic because Lima was a standout week, wasn't it, through our summer, through its winter? How much confidence and how strongly can Brazil and Lima rebound as they have their summer? And then can you just give me a little bit more understanding on the minimum guarantee? Obviously, I don't think they're anything like the scale of influence that they are for the likes of Aena. But you did say that it was a key support, and obviously, our retail spend per pax was good. So can you explain to us how much real money is coming through the door because of these minimum guarantees that wouldn't be otherwise? And whether they're vulnerable.
If I may start -- thanks very much for those questions. If I may start with the different government talks. There are different talks with different governments from different countries, of course, because we are active in a lot of countries, but there are 2 main important talks these days. The one is in Greece, where we, in principle, reach an agreement with the government. But in principle, that means, let's say, we are 80% advanced, let's say, it's something like this. We hope to get it done somewhere over the next 2 to 3 months. That could give us a compensation of roughly EUR 150 million, up to EUR 180 million, something like this. But it's still under discussion. But in general, I have to say, thanks very much to the Greek government, that they are in a sensitive situation and that they honor the contract. Around that level, we have to see the final negotiations. Same in Brazil, and that's the second government discussion, where we already have an agreement, I would say, yes, in principle, we have an agreement on the level of EUR 35 million, something like this. This could even be near-term probable to execute this one at what time ever, then the payment is -- the payment is always different from the agreement, from financing agreement. There are further discussions, and we mentioned this in Lima. But Lima, it's not so much on the compensation side. There, the discussions are much more on the concession obligations, especially regarding the midfield terminal, where we have to have discussions with the government what is really the size of the terminal needed for next 5, 10, 15 years, so long term also. And at what time it is needed, so how is the recovery path. And there are some smaller discussions with other governments in Slovenia and so on, but these are smaller items. I think that's probably mainly the topic. We have seen the traffic recovery on the different airports. Brazil already is on a good path, especially, of course, domestic, but then also reopened internationally, not completely just on distances, but distances up to USA. So it's more on the Latin America and the North American traffic, not up to Europe up to now. And it will depend of course, it's a government, how the pandemic is continuing on that side. And we get signals that also Lima is reopening now. So which level will achieve, that's not easy to answer, but it should go up, say, on both sides.
With regard to your MAG question. We have 2 different quarters. First of all, in Q2, where most of the shops inside the terminals have been closed, when you look at our retail numbers, just in Q2, you can say that more than 50% of these proceeds came from collecting the MAG. In Q3, this turned totally because then we had the first recovery of traffic. So most of the shops reopened again. And let me say, due to the increase of revenue, they grow out of these MAG threshold amount so that the proceeds from the MAG in Q3 have been marginal. We are not going to make this transparent because we have in each and every contract with the tenants different MAG levels, and that's the reason why we are not going to say exactly, in average, we have a MAG at certain percent. But again, in Q2, most of the revenue was MAG related. In Q3, it was just a marginal amount.
So you just said most in -- earlier, I wrote down 50% in Q2 of the retail.
Yes. Yes. You see the subsegments when you go back in your old files. In Q2, where we have the differentiation into retail, into services, media, retail, shopping, you can see the certain numbers and especially in retail, more or less, everything or more than 50% came from MAG payments. And now when you look now on slide and was it now in the today's presentation, Slide #19, you can say that we -- but now you see here the 9 month numbers. But that in Q3 sales, more or less, most of the revenue, again, comes from pure percentage rates of the revenues because, more or less, now all shops are open. Just Terminal 2 is closed. And if you find solutions with the tenants. But in T1, more or less, most of the shops are still open. And again, they make not good, but relatively good revenues now again, which is not directly related to the passengers numbers. You can see from the numbers, we had minus 70% passenger reductions but just 60% revenue reduction. So this was a good job, also managed from the tenants, and that's the reason why the MAG in the moment doesn't play any longer role.
No, that's clear. Is there any risk of the Q2 MAG payment being legally challenged and everything was shut? Or is that the contract?
No, no. Everything is based to -- there's no force majeure, nothing. Of course, if this total lockdown would have continued in Q3, then latest, then we had a discussion. But things got up from July. We had this recovery of passenger numbers. So that this discussion, which started, of course, in Q2, you can say, more or less, all of the tenants they complain heavily about this contractual agreement. But the whole situation then relaxed by the fact that the shops were -- could reopen after the recovery of the first recovery of passengers, middle and end of July.
The next question is from Ruxandra Haradau-Doser of Kepler Cheuvreux.
Several questions, please. First, on Lima, could you please give a breakdown of revenue performance? Traffic declined by 95%, but revenues by only 68% in Q3. Did you have some one-offs? Or what is the share of revenues that are not traffic related there?Second, to understand the sustainability of cost restructurings in Frankfurt, what share of the personnel cost savings of EUR 250 million will be generated by the leasing of administrative employees? Then how much does traffic need to recover at Frankfurt airport for Terminal 2 to be opened again? And finally, what do you expect from the meeting of airports with the Transport Minister on Friday? Most of the airports in Germany generated significant losses already before the crisis. So do you expect the government to continue to support airport, but did not prove they have a viable business model before the crisis? Or do you see the potential for some changes in the airport landscape in Germany?
So thanks very much for those questions. Regarding the Friday, to start with that one. That's, of course, also a topic whether we get any, you can call it subsidies or cost recovery, I would more call it, because all airports kept open in the first lockdown from mid of March to end of June. And if you compare it with other industries, there's a clear requirement and clear right also that this should be somewhat compensated because -- just due to economic reasons, you wouldn't have kept open all the airports. That's one of the discussions. But it's still under discussion in between the governments, so I can't tell you whether it's going through and in what way it's going through. But it's not just a topic for small airports or just for big airports, it's a general discussion. So the landscape on that side is not changing, that's not the topic for Friday. That the bigger efforts, they are all profit making so that's not the topic you meant, the smaller airports, that's clear. But that's mainly a decision by the state, whether they continue to go ahead there and they have the discussion with the airport on that side from the state level. It's not so much a topic on Friday. On Friday, it's much more the topic for all of us that we have to find a way forward to fly under corona circumstances and how to organize this in the future is on testing strategy, for example, this quick test. But what's the way forward on that side to show on the one side, yes, flying is safe, no question at all. But on the other side, to get the business back up at some time in the future, at least from the point what we can offer then, of course, we have the point of demand. So is anybody willing to fly? That depends very much on the corona infection, of course, how this is going ahead. Regarding Terminal 2, to reopen this. There's not the one number. That depends very much on the structure of the traffic and of the volume. You know that if I take the 2019 numbers, more than 50 million of the passengers have been handled in Terminal 1. So we are very flexible on how we open this, and we have to see at what time it makes sense, depending also what are the requirements on distancing and so on, at what time we have to reopen Terminal 2. But at what time also it makes sense from the customers' perspective, airline perspective, because the lounges are there and so on for some airlines. So it's not just a decision by a number of passengers, but also the question distancing and then lounges and so on and so on. The share of the administrative employees, there are clearly more than 2,000 employees, 2,200 or 2,400 employees on the administrative side. And I can hand it over to Matthias, but he just gave me information, it's more than 60%, 65% on the administrative side. But we will also see cost savings on the operational side because, also, we take out some of the more expensive content link stuff, which will be later on in 2, 3, 4 years replaced by less expensive younger people. So it's both ways on that side. And that's the reason we mentioned that we will see and we will target [ places ] EUR 350 million to EUR 400 million of cost-cutting and cost savings, a sustainable base, and we will achieve this. [indiscernible]
Yes. There was your question regarding Lima. And I have to say, I love your question. How do you know with regards to Lima because they really did an amazing job. So first of all, I refer to Page 9 of our interim release, where you can see the numbers of our group companies. And when you go on Slide 9, first, you are fully aware that in Q3, Lima showed a passenger performance of minus 95%, you can say, more or less, it's a total lockdown in this period, no traffic or 5% traffic. This is nothing. If you look into the financial numbers on Slide 9 of the interim release, you see that for Lima, we showed a revenue of EUR 37 million. But this is including, of course, the material expenses for IFRIC 12 for the CapEx. So now I give you the numbers adjusted by IFRIC 12 because these are the real revenue streams from the operation and they had, in Q3, they had revenue proceeds of exactly EUR 10 million in 3 months, EUR 10 million. And thereof, you have EUR 3 million from aviation fees, EUR 3 million infrastructure fees and the rest are non-aviation. So EUR 3 million, EUR 3 million, EUR 4 million, in total, EUR 10 million. And on the cost side, and this is really a brilliant job they did, they had a material expense adjusted by IFRIC 12 of just EUR 4.6 million, EUR 4.6 million for a huge international airport, and they had a personnel expenses of EUR 2.2 million and other expenses of EUR 1.4 million. To make the long story short, net number is EUR 1.9 million, and this is the EBITDA generated in Q3. So we have a huge airport, we have no traffic, and nevertheless, we made EUR 1.9 million EBITDA. And this is not wirecard accounting, this is Fraport accounting. So I think a very good job which the colleagues in Lima did there.
Just to make sure I understand correctly. So from the EUR 250 million personnel cost savings, 65% are generated by administrative staff and are sustainable. And once traffic will recover, operating personnel will be hired again, but probably at FRA handling, where costs are 30% lower. And therefore, 30% of the operating staff leaving the group should be sustainable as well. So in total, around 75% to EUR 250 million should be sustainable cost reductions, irrespective of what happens with the traffic. Is this correct?
I think it's a complicated calculation, what you did. First of all, first time is absolutely correct. We have, more or less, 2/3 of the amount of EUR 250 million is administrative and has no leverage up to traffic up or down. So this is 100% sustainable. But even on the operational side, we have some leverage because also, let me say, in ground handling, et cetera, so we have some semi-administrative functions, which we took and take out so that, of course, some employees have to be reemployed. But let me say, we are coming now from 20% traffic. We go up next year perhaps to 45%. So as long as we are in these areas where we are not higher than, so to say, 50 million passengers, we are sustainable of this basis so that we, in our calculation, when the short-term work is ending end of '21, we continue then in '22 with a significantly reduced workforce in all our calculations, with higher traffic on one side and the impact of 4,000 employees on the other side, also in combination with this restructuring tariff agreement, which will be in place at that point of time, we will see minimum EUR 250 million less in '22, in '23 compared to the realized numbers in 2019.
The calculation is a little bit more complicated also because we mentioned in the presentation that we did a big step forward on the restructuring. But there are further restructuring projects in aviation, but also on the ground handling side, which will give us further savings over the next 12 months, and we will communicate this as soon as we are through those restructuring projects. And that's the reason that, at the end, the EUR 250 million savings will be sustainable.
The next question is from the Arthur Truslove of Crédit Suisse.
Art Truslove from Crédit Suisse. So I just go back to the cost base again and specifically for next year. You're obviously expecting to benefit from the Kurzarbeit scheme once again. So if we assume a sort of 35% to 45% of 2019 traffic that you're talking about, how would you expect next year's cost base to compare to what we've seen this year in sort of between Q2 and Q4? Second question, is there any plan to introduce any kind of incentive program to encourage traffic back in Frankfurt? I understand some of your competitors have done that. So I'm just interested to hear whether your thoughts on that have changed. And then thirdly, I just wanted to confirm whether or not there are any potential obstacles to removing the workers that you plan to remove while the Kurzarbeit scheme is ongoing.
Thanks very much. To start with your third question, if I get it correct. No, there are no obstacles as long as we do it on a voluntary base, and those programs we started on a voluntary base. And also to continue the short time worker scheme during next year, that's, in parallel, possible. We will do this. The only topic would be if we are getting into a restructuring program with the unions in such a tariff system, 2022, 2023, then there would be limitations to cancellations to further cancellations, not on a voluntary base, but on a legal base, let's say, this way. But we have to see how the negotiations are getting through and what's the restrictions at the end are and how attractive then the program is. And that depends also how the traffic is developing. So we have to see over the next 4 weeks to 2 months what the final agreement on that side is and then we can decide whether we use it, whether it makes sense, yes or no. And one thing is also clear, there will be a clear or there will be a way of a force majeure clause in, in such an agreement, that if the world is continuing completely different than expected, that you could cancel even such an agreement. Incentive scheme, no, there are no plans. Why not -- whatever we discuss with other airports, with airlines, we don't see that for an incentive of even 5% or whatever you would discuss there, any further flight would be set out in this environment. Anybody would fly in addition and it makes no sense just to shift money from the one pocket to the other pocket. It only would make sense as soon as we get an indication that the market is there, we would have to incentivize the market. But with these travel restrictions and so on, I don't see this, not these days. Cost base, you know that, Matthias is taking over, but you know that it's much too early for detailed guidance for next year. So just a rough estimate.
Yes. But we can keep, in addition to just what Stefan said, we can keep the calculation relatively simple because now we have a good proven track record. When you go back on Slide 20 of our today's presentation where we showed the performance of Frankfurt segments just in Q3, where we had, again, relatively not good, but traffic. So we manage the airport well. And when you look on the right-hand side, in this blue box, you could see the total cost savings, which we realized in Q3, this was an amount of EUR 126 million OpEx, combination of personnel expenses based on short-time work, which we are going to continue in next year till the end of '21 as long as it is possible, and we are on the material expense break and we continue with this. So as a rough estimation, take this EUR 126 million x 4, then we have the annual value, and this is about EUR 500 million. Whether at the end of the day, it's EUR 450 million or EUR 480 million, I don't know, but it's in this region, and this is the best indication for next year. And it's based on the proven track record in Q3, which we showed here in these book numbers.
The next question is from Marcin Wojtal of Bank of America.
Firstly, on Ground Handling segment. I believe a significant part of the cost-cutting, looking at Slide 20, something like half of that provision actually is booked under Ground Handling. So would you be able to provide some sort of guidance for this segment? Would you expect Ground Handling to be clearly profitable once traffic recovers? And could it, with the cost-cutting, could it even exceed the 2019 peak in the medium term in terms of EBITDA?And number two, regarding the structure of your balance sheet. Would you consider perhaps issuing some new debt instruments like perpetual bonds or convertible bonds in order to help a little bit your leverage metrics?
Yes. I'll start, first of all, with your last question. So perpetual bonds are not in instruments because, of course, if you look on the interest rate curve, theoretically, you could issue such instruments. But it's for sure that on such a bond, you must write a higher coupon, which should then have on a perpetual basis. This is -- to make the long story short, it would be too expensive for us. That's the reason we have -- when you look on our duration, we have different tranches when we go to the market. It's shortest duration is always 3, 4 years, but we go up to 12 years, perhaps even up to 15 years. But if you go longer, then even despite the fact that we have very low interest rates, absolutely, of course, there's a positive trade-off between the length of the duration on one side and the interest level, and this would be too expensive. [ Provision ] -- convertible bond, then we are close to equity. This is in the moment not an issue. So we have -- we are fine with our normal debt instruments. We are providing the market with the different tranches with regards to the duration. And there's still appetite in the market. So we don't -- or we don't see any need to bring in more instruments than this, what we did in the past like Eurobonds on one side and promissory notes on the other side, plus some private bilateral credit agreement, which we did. And what else did I not...
Ground Handling, clear target to bring that business back to profit, that's no question. Just this -- [indiscernible] provisions are not helping on that side, but it's an important part to do this. But we're also working, in addition, on restructuring that business to continue to grow the business more on the side of daughter companies and the mother companies so to come to sustainable wages over there or sustainable structures and processes in the future. We are working on restructuring the processes. That's still in discussion with the unions, so let's say, better with the worker councils here in the company itself, but we are making progress on that side. So they are further parts on the restructuring side we are taking these days. It's not just only this cost-cutting on the staff side, but it's also restructuring of the business on the one side, in ground handling, but on the other side, also on the safety and security side, where further communications will come over the next quarter or half year.
The next question is from José Arroyas of Santander.
Three questions from me, please. And first of all, I wanted to clarify if I'm right understanding that personnel redundancy provisions have been raised from EUR 100 million before to EUR 218 million now. And if that's the case, why that has been and what has increased these costs? And second question is another clarification. If I read correctly in the release, Pier G, which is part of Terminal 3, will now be open in 2025. I have understood the opening was previously 2022. Can you clarify this? And if you can also explain what caused the delay, if it's demand considerations or if it's constraints on the construction side of things, which is a factor you raised in the Q2. And lastly, longer term, I wanted to hear from you what's your opinion on the latest announcement from Munich airport and Lufthansa about their plans to restore Munich airport's 2019 flight capacity by 2024. And how can -- how that can, if any, limit the recovery potential at Frankfurt airport. Thank you very much.
Regarding Munich airport, you probably mean this A350 which are now -- portions of that, 8 clients, are going to Frankfurt and, what, transferred to Frankfurt here in winter. And also more the intercontinental traffic is concentrated in Frankfurt. I think that's the decision during the crisis now where it makes sense to fly intercontinental, if you fly at all, from Frankfurt because we have seen much bigger, better profit margin on the cargo business. And A350s, of course, an aircraft, so it can take a lot of cargo. So to fly this aircraft [ issue plans into ] intercontinental times these days for all airlines, not just for Lufthansa, it makes sense to fly those aircrafts from Frankfurt with a very good cargo business. And cargo, we are more or less on previous year level already the recent weeks or sometimes even above. So cargo is quite strong on that side. I will not say it's a long-term decision and a long-term trend. But what we see is that on what we expected that traffic over the time of the next years will be concentrated on the hubs because it's giving a much better cyclical factors for the airlines and a better cash position and profit position for the airlines compared to decentralized traffic. So it should continue for some time. And longer time, we also believe that with the Green Deal of the EU, with all those targets, CO2 reduction targets of the German government and on the traffic side, so we are best located here with the intermodality and with the translation of the high-speed train and giving us a very good catchment also on that side to fill those bigger aircraft on that side. Regarding Pier G, the construction is going ahead, and Pier G construction will be finalized somewhere end of 2021. So there's no delay on that, and it's more or less finished already. So it's more the demand side. We are flexible on that side. We could open up with Pier G, of course, earlier than 2025. But from today's point of view, we don't believe that we have to open it up. We don't have to open it up earlier. So we believe from today's point of view makes more sense then to open it together with Terminal 3. It's a better product for the customers. Its demand side is possible and -- but we are flexible on that side, so no delay on construction regarding provision?
With regarding to provisions, I think the whole rationale behind this enhanced number of volume of provisions you see on Slide 9. So before, we always said EUR 120 million, perhaps up to EUR 200 million, this was our guidance. But this guidance was based on a certain number of employees, which we had as a target for this program. So if now, as of today, we have, beginning from the 1st of January this year till 30th of September, we have already reduced our workforce just here at the site of Frankfurt by 1,300 employees. This is a good step forward. Then we opened the program, and we saw this demand, this appetite for this program. And now we could collect, in total, 2,400 people which were willing to sign these programs divided into severance payments for leaving the company in Q1 and Q2. Or for partial retirement and this was, you can say, was a momentum which we used and now we paid, so to say, in total, EUR 280 million for 2,400 employees. This is an average, about EUR 100,000 per full time equivalent, which is German industrial standard. And you have to see that in these EUR 280 million, we still have some reserve in the provision for additional guys in the future, which also then on a bilateral basis, could put into -- not in this program, but could on top of these numbers. So as of today, which you can see on Slide 9, we have locked in 3,700 employees. We have still a double-digit amount reserved in the provisions for additional ones so that the full target of 4,000 is more or less achieved. There will be no additional payments later on. So we said we did it in one element, in one jump. And now you see all in Q3, we have made this differentiated treatment because we made EBITDA before and after. And later on, in Q4, in Q1 next year and so on, you see in the item, personnel expenses, the advantages, the reductions of this program, and we have put all the burden now in one provision. That's the rationale.
[Operator Instructions] And the next question is from Johannes Braun of MainFirst.
Actually, I just have 3 short clarification and questions left. Firstly, can you confirm that your CapEx guidance for this year is still valid, the EUR 1.05 billion to EUR 1.15 billion. Didn't find this in your presentation slides. And then secondly, you mentioned testing. Just wondering what the current status is in Frankfurt. Do you think there will be full testing available soon? And if yes, how quickly and how much testing is available at the moment? And then lastly, I think last time you told us that Greece, that increase there might be covenant breach this year. Has this been resolved by now?
So thanks very much. Greece has no governance breach. [indiscernible]
Covenant, covenant, covenant.
Covenant, yes, But it's -- [ I was saying ]...
Let me say there's a technical breach and therefore, we are in discussions with the banks, but we can say this will be yield. Yes, it's an official topic or formal topic, but you will see it's underway. We are working on it. And there's a clear, let me say, attitude of the banks to heal this issue. It's a formal issue, yes.
Testing, we have enough testing capacity on the airport, on PCR tests, different sources we have. So we don't see any shortage on that side with the different companies providing those tests. The question more important is, of course, the question forward. What is the solution next year? Reopening up intercontinental traffic on those quick tests, can we use this on a bilateral base from A to B, as the question was already asked. There, the discussions are going ahead. But I think we are very much on the point one then. We know what to do as soon as we have an opinion there or guidance there. And that's one of the topics discussed on Friday on the so-called luftverkehrs, so the aviation summit, yes.
And to your question with regards to the CapEx guidance. Clear answer, the CapEx guidance for 2020 is still valid.
The next question is from Dario Maglione of Exane BNP Paribas.
Three questions for me. Net debt-to-EBITDA will remain for many years well about the 5x limit set by the Board of Fraport. How do you expect to bring down net debt-to-EBITDA ratio within this limit in the next years? Second question on free cash flow, which was minus EUR 111 million during Q3, the month. What should we expect in terms of cash burn during the winter? And then the last question. You made clear in the past that you're seeing in Terminal 3 in Frankfurt is necessary because long term expect traffic growth and that's stopping the construction work for the -- quite expensive. Is that a scenario where Fraport would need to raise equity to fund this capital expansion?
Thanks very much for your questions. First, the net debt to equity, that will stay for several years above 5. That's no question because, first, we have to do both things in parallel on the one side to bring costs down. And we showed you several measurements as we did already. And we will continue to do this and also to bring operating -- operative cash flow up. So with less CapEx and also to have a better free cash flow. But nevertheless, it would stay for several years above the 5 because also we need to try for recovery. And that's also linked to Terminal 3. Yes, CapEx of Terminal 3 will be somewhere delayed. And probably next time, we can give you a clearer guidance on that side because we are working this through these days, but there is no plan from today's point of view to increase equity. Whatever the long term is, we have to see them. But from today's point of view, there's no plan on that. On winter free cash flow?
What do you mean with...
What is the free cash flow for the winter period? What do you mean? For the fourth quarter and first quarter next year, probably?
Yes, Q4 and Q1 next year. So until spring.
Yes, it's relatively simple. We -- you see that the cash burn in Q3 was about EUR 100 million per month, and this will continue in Q4. That's for sure. Because traffic numbers are down, and CapEx is continuing. And then, let me say, up from Q1, Q2, you will see the second step of our recovery because, first of all, traffic numbers then will go up on one side. Cost measures are still in place and will continue. And then our CapEx breaks will show the impact, especially coming, first of all, from the international side because CapEx increase in Brazil is absolutely over then. So we do not have any longer for programs then than just 2 programs. And also our, let me say, measures here in Frankfurt on one side, to reduce significantly the maintenance CapEx, we'll see, first, a success or first effect in Q1 and Q2. And the same, what Stefan Schulte said, that we are working on the T3 issue to delay it and to bring down the annual burden from this program will also show effect in Q1 and Q2. But of course, still negative, that's for sure.
Okay. So we should expect something less than EUR 100 million per month? [indiscernible]
Yes, EUR 100 million minus X is the best guidance. And we are working on the X that X is increasing during the day by the CapEx breaks on one side and the EBITDA recovery on the other side.
But that's on mid of next year. So for the next month, you have to expect EUR 100 million plus it's somewhere because the traffic is so much down.
The next question is from Charles Maynadier of Kempen.
It's Charles Maynadier from Kempen. I have 2 questions. The first one, the more longer-term one. So you mentioned consolidation in the airline industry. Could you share more color on this? How do you see the industry evolving in the coming years? And in a post COVID-19 world, how will that impact Frankfurt? And how do you expect your client gas traffic mix to evolve? The second one is more on the medium term. So how should we look at the relation between the restructuring program in Frankfurt and the tariff evolution in the coming years? So more specifically, do you think the restructuring could, in any way, penalize you or make it harder for you to obtain higher tariffs?
Thank you very much. The restructuring program itself is not penalizing us at all. The question is very simple over the next years to get a better view what is the recovery on the traffic, how fast, how quick and how long it takes. And the success on the cost recovery, we know quite well now, and we have a clear view on that one. So that's more on the traffic side, on the market side the question. Consolidation of airline industry. I haven't meant -- I haven't talked about that today, in my opinion. What I meant is we expect for the next years, even up to the year 2023, '24, a smaller airline market. I gave some reasons for that. But I'm not so sure whether we see a bigger consolidation on airlines because I would more expect that the surviving bigger airlines who are there these days, they will be supported by the government if necessary, and they will survive as well as the leading low-cost carriers, let's say, this way. And you know that we have roughly 100 airlines here on the airport, and most of them are really paid linked airports or the leaders in their home market and so on. So I would expect that most of them or all of them will survive, most of them at least. So I'm quite sure that also, Lufthansa, as our major customer, will survive for sure and will have a good future. And they're also working on that topic as well as some other airlines. So they don't see a negative effect from that side. It's more on the market, market [indiscernible].
[Operator Instructions] And the next question is from Jenny Ping of Citi.
Just a quick clarification on the cash flow. So if I look at your EUR 280 million of provisions, when are you expecting that money to actually flow out as part of the compensation for employee determinations? And then just on that also, along the same lines on cash. The money that you are expected to get in terms of compensation from your international concession contracts, such as those in Greece, is that coming in as a cash payment? Or does it get offset in terms of future payments that you will make? Just to understand the cash flow there. And then very lastly, on tax. Presumably, you would have built up quite a bit of tax losses this year. Is that usable to offset cash tax going forward?
Okay. First of all, provisions. So due to the fact that most of the people who are going to leave, will do this end of Q1 and end of Q2, the payments will be realized end of Q1 and Q2. So let me say most of the EUR 280 million will flow out in March, respectively, in June. Increase, so far when we -- let me say, first of all, it must be fixed, the compensation. This will be an amount. And you know that increase, we have to pay in the future, not just in the future, but also in the past, concession payments in a form that we, per annum, have to pay always EUR 22.9 million per annum as fixed concession fee, and then 28.5 % from the EBITDA. And whatever we will get as a compensation will be compensated with the obligation on the concession side. So they will not cash out the money to us, but we have to pay less as concession fees in the future. This is a mechanism. And what was the third question was?
Tax losses.
Tax. Yes, of course. Tax, it's a carryforward. Of course, when we are back, let me say, profitable, then in the next couple of years, we don't pay any taxes. As long as these tax credit is, of course, let me say, every profit then is booked against the tax credit. And then we have -- we don't pay anything in the next 2, 3 years.
And there are no more questions at this time. I hand back to Christoph Nanke for closing comments.
Thank you, everybody, for participating. As always, if you have remaining questions, give us a call in the IR team. Yes, let's hope that everybody keeps safe and healthy and happy to talk to you soon. Thank you.
Bye.
Thank you.
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.