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, welcome to Fraport's Q3 analyst call also from my side. The presentation will be started today by our CEO, Stefan Schulte, before our CFO, Matthias Zieschang, is going deeper into the numbers. So let us not hesitate any further, but start.
Yes. Another welcome from myself here from Frankfurt. The last time I presented back in March, the world was still very much in lockdown mode. Fortunately, the vaccine rollout has in the meantime being quite successful in many countries. So it was just yesterday that the U.S. market reopened for nonessential travel after more than 600 days of being shut. We also see some progress on other intercontinental markets like Singapore or Thailand that has meanwhile opened up for nonessential travel again. So we are quite encouraged about the most recent trends. However, we also see that the sky is not just blue. We are also seeing infection rates going up again and some countries going into lockdown again. So the picture remains mixed, and the recovery that we are all waiting for and that we want to happen remains quite for year. Structural headwinds we are also seeing from increasing burdens on the European aviation sector due to the EU Fit for 55 program. In principle, the program is a wide step forward. Climate neutral aviation sector giving an obligation to all market participants to refuel sustainable fuel and to put the burden with the refineries, so creating a sustainable fuel market regulation. We just have to make sure that this will be organized competitive neutral. That means flights via Middle East or Turkey shops have to be treated the same way as flights via European hubs. But here, I'm quite optimistic that we will be successful finally. So let's focus now on the 9 months figures, which brings me to Slide 3 of today's presentation. Total group revenues, excluding for IFRIC 12, recovered by roughly EUR 500 million in the period under review. The figure also includes other income from COVID-19 compensation and a settlement in the security business in the total amount of more than EUR 330 million. Adjusted for this special item, the increase in total revenues was still solid at a level of EUR 160 million. Key drivers for the revenue increase were our international holdings. Adjusted for IFRIC 12 and compensation, total revenues outside of Frankfurt grew by about EUR 118 million. Here, in particular, Fraport Greece showed a dynamic recovery and reported revenue growth of EUR 80 million on an adjusted basis. With regard to OpEx, you see the effects of our restructuring program. Compared to the previous year, we took out an additional EUR 80 million on a like-for-like basis. As a result of the higher revenue and lower OpEx, our reported EBITDA increased sharply by more than EUR 850 million to EUR 624 million. The underlying EBITDA, so without the special effects, was up by EUR 240 million to more than EUR 290 million. Here, rental airport provided growth of more than EUR 120 million, while it was again our international business that provided for the lion's share to the EBITDA recovery. Adjusted for special items, international activities reported an EBITDA of EUR 196 million, and therefore, accounted for more than 2/3 of our underlying EBITDA, remarkable share, which again highlights the strategic value of our investments outside of Frankfurt. Lower depreciation and amortization and improved financial results, thanks to Antalya, led to profit after-tax of almost EUR 100 million. Turning the page to review on the third quarter stand-alone. I'm on Slide 4. The third quarter was marked by an even steeper recovery. Total revenues without IFRIC 12 increased by more than EUR 300 million to EUR 608 million or EUR 650 million on an adjusted basis. As a reminder, the first 9 months were only up by EUR 160 million. Here, Q1 2020 was still running more or less at full mode. So before the crisis mode. The revenue recovery in the third quarter was balanced between Frankfurt and our international activities at about EUR 140 million for each of them. As a result, also the EBITDA share was more balanced at 60% of the underlying results coming from our international activities and 40% from our 3 Frankfurt segments. Having said this, our international activities recovered during the third quarter by more than 3 quarters to the pre-COVID EBITDA, a remarkable recovery. For Frankfurt, it is still a way to go due to the slower traffic recovery and higher share of fixed costs, the EBITDA recovery in Frankfurt was still below 50%. Bottom line, also profit after taxes were positive in Q3 with or without one-offs. That's very positive. Looking back at the traffic performances in the past 9 months, I'm on Slide 5. Compared to the previous year, most of our group airports saw the steep traffic recovery during the first 9 months. The exemptions here were Ljubljana and Frankfurt Airport. Those airports saw more balanced year-round operation. Therefore, the first quarter of 2020, so before coronavirus, was stronger in relative terms and negatively impacted the year-to-date performance. Both airports, however, recovered sharply on the third quarter, exclusive. For the third quarter, in general, we see that the group airport clearly recovered. On average, the airports are back at roughly 50% of the pre-COVID level, while certain airports like Greece and Antalya or St. Petersburg and Brazil recovered even stronger. Those airports are characterized by leisure traffic or have a higher share of domestic traffic. What are the latest trends where we are seeing end of the summer or end of the autumn? On Slide 6, you see a focus on our main airport operations. While Europe remained in lockdown until something like June, the traffic figures for Fraport Greece and Antalya recovered rapidly in just 3 months from 15% to 20% to a level of roughly 80% in September. Frankfurt Airport, which has a higher share of business passengers and serves as an intercontinental app, recovered slower. On the chart, you also see the preliminary figures for October. Here, we are encouraged by the trend at Frankfurt Airport, where we served more than 50% of 2019 level for the first time again. Also, our Latin American airports in Lima and Brazil, which opened up later than the airports in Europe, continued their recovery and recorded about 60% and 70% of the precrisis level. Greece and Antalya remained very strong and almost achieved the levels of 2019. You see here for October, 96% and 92% of precrisis levels, which is a very, very good signal. An operational topic that you may have read in the press is shown on Slide 7. While Frankfurt Airport just recovered around 50%, we had some challenges with punctuality or the way around with delays. On Slide 7, you'll see some further insight. In this recovery phase, airlines focus strongly on peak hour flights. The result is obvious. During attractive slots, we are back at 80% or even 90% of pre-corona traffic. The flip side, however, is that during offpeak hours, we are well below those levels. Moreover, the utilization between the individual days of the week is quite different. While we used to have an imbalance between weekdays and weekends of maximum 20% before COVID, we are discussing these days an imbalance of 30% and even more between regular Tuesday and Saturday today. To make a long story short, with 70% of staff loading and de-loading aircraft, it is difficult to handle 90% of aircraft movements in peak. In this area, we hire people again. And the good thing is we have some delays, that's right, but we don't have any cancellations. And we're improving from day-to-day with the situation even on the ground and inside, loading de-loading baggages. Looking ahead, you will find the outlook on our Frankfurt winter season on Chart 8. The most important message is that the winter in Frankfurt does not show a negative trend compared to the summer season. We see that scheduled movements are at 70% of precrisis level, which is slightly better than the past summer season. The recovery in terms of seats is a bit lower when compared to movements at roughly 2/3. The reason is quite simple. We have more frequencies on the continental side with smaller aircraft. And on intercontinental routes, the 4 engine aircraft types are virtually being taken out for smaller 777, A350s or Boeing Dreamliners. The reason that we see the biggest recovery on continental goods. Here, the movement capacities are already back at 76% and the seats at 70%. On intercontinental routes, the recovery takes longer as expected and is on average at 66%. Within the intercontinental markets, we see the biggest momentum at 80% to the Middle East and now 76% to North America. The first recovery we are seeing on Far East routes at less than 50%, especially China continues to be weak and remains at only 20%, largely closed. An update on the programs to win back the recovery is shown on Chart 9. The most prominent topic here we placed first, a staff restructuring program in Frankfurt. As you can see on the chart, we have meanwhile reduced the labor force by some 4,300 employees compared to year-end 2019. While the figure is flat against end of June, the figure already contains some rehirings because of the before mentioned peak hours throughout the day. Looking ahead, we expect the figure to remain at around 4,000 people despite rehiring. All in all, we are on a good track to deliver on our target set for staff cost savings. On non-staff, Matthias will also provide an update later on. We are also on time and budget to save another minimum $100 million per year. CapEx, we already took out, EUR 400 million in the previous year. In our initial plans, we also prepared you for a higher annual CapEx of about EUR 1.3 billion per annum until 2024. Today, you will see us more between EUR 1.1 billion to EUR 1.2 billion per year. And I will also provide an update on our major CapEx program shortly. CO2 is another major topic, which has made it on our day-to-day agenda. From today's perspective, we are in the final phase to close a power purchase agreement to support a newly planned wind power project. Moreover, we continue with our 3-pillar strategy: award consumption, upgrade technology and produce green energy. With all those measures, we are on a good track to provide you a road map to net zero soon. Currently, we are still waiting for 2 major puzzle pieces to complete our road map, especially the wind power, as I mentioned. We will provide you an expert session in the upcoming year to discuss these topics on detail. Switching gears and moving on to our CapEx programs. On Chart 10, you see the image of the new terminal building in Lima. The expansion itself, we started a year ago with the earthworks for the new runway. The runway itself, we will put into operation in a year from now, so end of 2022. A month ago, we also signed the EPC contract for a new Midfield terminal. Construction of the consortium awarded was Inti Punku, which is made up by Sacyr -- probably it's the right word -- right spelling, I don't know, the right pronunciation. Sacyr a global infrastructure development company, and Cumbra, a main tool in construction company. The construction period set at 3 years, and we expect the terminal to be inaugurated at the start of 2025. For the runway and the terminal, the investment volume will be around USD 1.2 billion. One year later, then improve, we expect Terminal 3 in Frankfurt to open up. On Chart 11, you'll find the latest picture of the terminal. As you can see on the picture, the superstructure of the terminal is almost completed. On the right-hand side, you also find some further information regarding the awarding progress. Out of the total budget of around EUR 4 billion we have meanwhile, awarded contracts in the amount of roughly EUR 2.8 billion or 70% of the order volume. This is in particular important as the current shortage and inflation on raw material is not 100% affecting the construction in Frankfurt. The superstructure works are the most or material intense work until large parts already behind us and all this deal is on the ground. Moreover, when it comes to newly awarded lots, those tenders are also in line with our budget. So we continue to be on track to be ready with terminals in Frankfurt. The near-term future ahead is shown on Chart 12, our updated outlook. Thus concluding the first 9 months, we specified our outlook regarding Frankfurt traffic. We now expect to achieve the upper end of our initial guidance, so around 25 million passengers. As a consequence of the better traffic performance in Frankfurt, but also the year-to-date performance within our international activities raise our revenue outlook on a group-wide level to slightly above EUR 2 billion. Simultaneously, we expect that our group EBITDA will be somewhere in the range of EUR 650 million to slightly above EUR 700 million. Consequently, we also raised the expectations for our group EBIT and group result. So on group result, we expect to be positive. Our midterm expectations are shown on Chart 13. For Frankfurt, we continue to expect to be traffic-wise recovered by around '25 or '26. Due to our cost saving measures, we, however, expect to be financially recovered already by 2023 or 2024. With regard to our international holdings, we expect those to be, on average, traffic-wise recovered by '23. This will also mark the year when we expect to be financially recovered in international activities. Having said this, I would like to thank you, and now Matthias with more financials.
Yes. Thank you, Stefan. Ladies and gentlemen, good afternoon and also a warm welcome from my side. On my first chart today, Chart number 15, I'd like to focus on our group cash flow and indebtedness situation. As you can remember from our H1 results presentation, our group cash flow and indebtedness this year have been adversely impacted by severance payments for Frankfurt staff. Here, we meanwhile cashed out just about EUR 220 million for employees to leave the company. This figure negatively impacted our group operating cash flow in the period under review. On the other side, we received EUR 160 million as compensation from the German state and the local state of Hessen to compensate for the operational costs incurred to maintain Frankfurt Airport open during the first lockdown period in the past year. The cash inflow of EUR 160 million we received during this third quarter this year, as you will also see on my next chart. Concluding the first 9 months led to a negative free cash flow of about EUR 630 million. When compared to the 6 months free cash flow of minus EUR 755 million, this represented a Q3 improvement of EUR 120 million. The negative 9 months free cash flow was more or less exclusively attributable to the expansion programs in Frankfurt as well as in Lima, but also due to the final CapEx invoices we paid for Fraport Greece and Fraport Brazil in the first half of the year. As a result of the negative free cash flow, our group indebtedness stood at EUR 6.2 billion at the end of September. Compared to the figure at the end of June, this was a reduction of EUR 100 million. And we recorded, therefore, an improvement in our gearing ratio by 7 percentage points from EUR 173 million down to EUR 166 million.On the next chart number 16, we provide you with a closer look at our group cash flow statement during the third quarter on a stand-alone basis. Thanks to the EUR 160 million compensation payments, our operating cash flow was positively impacted and reached a level of more than EUR 410 million. When adjusted for the compensation payments, our operating cash flow still reached a solid level of more than EUR 250 million. Here, it is important to highlight that we just discussed the third quarter performance and that the passenger numbers at Frankfurt Airport continued to be down by more than 50% compared to our pre-COVID levels. The underlying operating cash flow of EUR 254 million was more than sufficient to cover all maintenance needs to run the group. On the right-hand side of the chart, you can see the corresponding calculation. Assuming no expansion programs, we recorded a strongly positive free cash flow of about EUR 175 million, and this expresses the cash power of our company. Even when taking our big CapEx programs into consideration, the underlying Q3 free cash flow was only mildly negative at minus EUR 40 million. Assuming an equal amount to be invested in the third quarter of the upcoming year, it is possible that we will already achieve a positive free cash flow in the third quarter of the upcoming year despite the heavy CapEx programs that we are currently running. Due to the compensation payments, which we received this year, our reported free cash flow was positive at EUR 120 million in the third quarter, and our group indebtedness improved correspondingly. How did the Q3 extra money flow into our group liquidity situation and available cash reserves? On Chart 17, you see our most up-to-date group cash situation. Reviewing the chart, you will see that our group cash reserves remained largely unchanged compared to the figure we provided you at the end of the second quarter. As a result, we used the positive Q3 free cash flow to pay back parts of our financial liabilities. Here, our gross debt declined slightly from EUR 9.8 billion at the end of the second quarter to about EUR 9.7 billion at the end of the third quarter. Moreover, in the green box on the chart, we highlighted our most recent promissory note loan, which we placed end of October. The promissory note loan was a big success. When we open the order books, we just intended to raise some EUR 200 million. At the end of the order period, the amount of firm orders stood well above EUR 500 million. As a result, we were able to price the loan tightly and raised EUR 500 million. The proceeds we have meanwhile partly used to pay back a scheduled maturity of EUR 400 million in October, which was priced higher at just under 1.5%. So the promissory note loan placement provides us with some EUR 100 million extra money without paying any higher interest costs than before, a big success of our finance team, I'd like to thank here. Let me now move on to our segment performance, starting with aviation on Chart 18. As with the previous quarters, we provide you for all segments a comparison with 2020 but also with the pre-COVID levels in 2019. The segment revenues in aviation continued to be positively impacted by the security settlement in the first quarter in the amount of some EUR 58 million. Adjusted for this item, revenues stood at EUR 365 million, and therefore, a notch above the previous year's level despite a 2% drop in passenger volumes always compared to the previous year. The EUR 11 million higher underlying revenue was mainly attributable to a EUR 10 million increase in security services. On the level of the segment EBITDA, we recorded in addition EUR 160 million governmental compensation that we already discussed before. Adjusted for the security settlement and the governmental compensation, the underlying EBITDA came to minus EUR 45 million. When compared with the adjusted value of the previous year, this represented a strong improvement of EUR 74 million at a lower absolute number of passengers. The improvement was mainly attributable to a EUR 63 million reduction in underlying OpEx and the before mentioned increase in underlying revenues. In fact, when bearing the low margin of our security business in mind, the underlying OpEx, excluding for security services, was even reduced by more than EUR 70 million. Looking ahead, we also expect the regulator to approve our fee application for the aviation charges in the upcoming year. We currently expect to hear back from the regulator by end of this month. Moving on to our Retail & Real Estate segment on Chart 19. Looking at the individual revenue streams of the segment, we are pleased to see that our real estate subdivision is back on the precrisis level. The result is even stronger bearing in mind that Terminal 2 was closed for 5 out of 9 months this year. In contrast, retail revenues were still clearly impacted by the lower number of passengers. At EUR 52 million, retail revenues were even down compared to the first 9 months of the previous year. The explanation here can be found in the shortfall of advertising revenues. Here, the first quarter of the past year was more or less unimpacted by COVID-19, which led to clearly higher advertising revenues in the 9 months period of 2020. Parking revenues on the other side were mildly up compared to the previous year despite the 2% lower passenger count. At EUR 191 million segment EBITDA reached more than 60% of the 2019 value, mainly thanks to the strong real estate performance. The continued OpEx savings also put us into the situation to record an all-time high EBITDA margin of more than 82% in the period under review. The financial performance of our ground handling segment is shown on Chart number 20. As with the other 2 segments, revenues in the Ground Handling segment continued to be more resilient than the pure passenger performance in Frankfurt. At EUR 270 million, segment revenues were up by 8% against the first 9 months of the previous year and down by 50% compared to the same period of 2019. Key drivers for the better revenue performance. Again, we have charges that are not directly linked to passenger numbers. So maximum takeoff weight and movement-related charges. The cost side of the segment also continuing to improve at EUR 330 million. Total OpEx was down by EUR 18 million when compared to 9 months 2020 despite the fact that we recorded higher revenues. Still in absolute numbers, we lost about EUR 50 million with regard to the segment's EBITDA in the first 9 months, a situation, which is clearly not satisfying. The bright spot, however, remains a focus on the third quarter. Here, we clearly see that our efforts to restructure Ground Handling are bearing fruits. At minus 55% passengers compared to 2019, segment almost achieved an EBITDA breakeven at minus EUR 2 million EBITDA. On Chart 21, you see the summary of our Frankfurt results during the past period. When compared to our operational expenses in the past years, we clearly see the restructuring gains. In total, we achieved cost savings of more than EUR 340 million or about 30% when compared to our pre-COVID cost level. So we continue to be well on track to deliver on our cost savings target of EUR 450 million to EUR 500 million this year. Also when compared to the first 9 months of the past year, the cost savings are remarkable at EUR 80 million. The savings are remarkable because we handled almost the same number of passengers, which we reopened Terminal 2, and we reduced the application of short-time work. The latter 2 effects, so the reopening of Terminal 2 and the reduced application of short-time work, led to higher sequential costs in the third quarter. As those 2 effects account for some EUR 30 million higher cost, our underlying cost performance continues to be strong as we offset about EUR 10 million here. Regarding the EBITDA, we managed to achieve a positive EBITDA of more than EUR 100 million across our 3 Frankfurt segments in the third quarter. This also means that on an annual basis, we can cover all Frankfurt interests and maintenance costs and running the airport only at about 50% of the pre-COVID levels, a very good result, which again shows a strong free cash flow potential Frankfurt Airport has. On the next chart, 22, you will find the financial performances of our international activities and services. The very positive message here is that despite the continued strong impact of the pandemic, all investments were EBITDA positive. Jointly, the majority owned international activities and Frankfurt services contributed some EUR 312 million to our group EBITDA. As Stefan already mentioned, the segment therefore accounted for the highest share in group EBITDA and stood on a reported basis at exactly 50%. The performance of the international activities is even more impressive on a quarterly basis. During the third quarter, the majority owned investments in Frankfurt services contributed an EBITDA of EUR 184 million. The segment was therefore accountable for the absolute highest share of the group EBITDA. During the third quarter of '21, the international segment contributed about 2/3 to the group EBITDA, also an all-time high value. Moving now on to my last chart, our international activities segment on Page number 23. For the segment, we continue to see that revenues, excluding for IFRIC 12, are clearly impacted by COVID-19. Compared to 2019, segment revenues dropped by roughly EUR 46 million or more than EUR 360 million. On the other side, we significantly took out underlying OpEx. Compared to 2019, we saved around EUR 183 million. Having said this, the underlying EBITDA was only down by EUR 174 million despite the steep drop in revenues of EUR 360 million. Compared to the previous year's adjusted EBITDA of EUR 82 million, we recorded a steep increase in EBITDA to EUR 196 million on an underlying basis. Yes, ladies and gentlemen, we are very pleased to see the results of our cost savings measures and the higher charges in Greece. While the adjusted EBITDA margin stood at 26% at the previous year, the cost savings and higher charges brought back the EBITDA margin to the 2019 level of 45%. During the third quarter, the margin was even higher than in 2019 at 61% without considering any one-offs. Having said this, ladies and gentlemen, I'd like to conclude my presentation with this positive message, and we are looking forward to your questions.
[Operator Instructions] And the first question is from the line of Elodie Rall from JPMorgan.
I'll have 3. First of all, on the revised guidance. So you have increased it, obviously, given the good results. But I'm just wondering why is your revised guidance still very conservative as it looks like because even the top end of your guidance implies Q4 EBITDA of EUR 80 million to EUR 90 million on your bottom line. Your bottom end basically implies no EBITDA at all almost in Q4. So why you're being so conservative when you only have 1 quarter to go? Are you expecting something bad in Q4, maybe some costs going back up with traffic? If you could give us a bit of details on why being so conservative. That's my first question. Second question would be on tariff update, please, for next year. What you're thinking for the years after next year? And my third question is on CapEx. I'd like to understand what will be the normalized amount of maintenance CapEx post the opening of Terminal 3 and the completion of Lima as well. And if you could have a little bit of phasing in terms of CapEx, an update on phasing for CapEx over the next 4, 5 years. That would be helpful.
Let me start a little bit in general on the revised guidance. From today's point of view, we are quite positive regarding the fourth quarter traffic-wise, but that's more Frankfurt because international participations will not contribute to the same amount on the fourth quarter because wherever it's leisure, whether it's tools, the season is more or less done. But your point is correct. It depends a little bit, and that's the reason for the wider range. We are still working on some projects, and it depends a little bit whether we have to book some provisions, yes or no, that's the topic on [ proper ] U.S.A., where we are. In some flights regarding our progress, it depends. Regarding the one concession, whether we will comply with all deadlines say, yes or no, or whether we have to book some provision. And second, here on Frankfurt business, with the restructuring on the security business, there, we are still in discussions also with the Worker's Council and -- not just with the Worker's Council and let's see how this work. That's the reason for the broader range on this guidance, and we hope to be more on the upper end, but it depends on those topics I've mentioned. I'm not discussing another [ terminal ] lockdown. I don't see any lockdown. But what could happen, of course, is now we are quite optimistic regarding the traffic. We see that the business track is coming again, back to growth and business passengers are flying again. That's positive. Intercon is reopening. But we see also, on a daily basis, more intense discussion on compliance -- not on compliance, sorry on COVID and so on and so on. So at what time this could change mental situation of passengers continuing to fly or to be more prudent on that side, I don't know at the moment. But the main issue is -- are that the end special topic, yes or no. Regarding traffic year update. For next year, it's difficult at the moment. I will give a best guess at the moment, somewhere in the range of 60% to 70%. But it's too early to be quite honest. It just the momentum from today's point of view, and we will give you a more clear insight there with full year's presentations in March or even earlier, in January and February, let's see. But it depends very much on the COVID development and not whether we expect another terminal lockdown. I wouldn't expect a lockdown in Germany as long as you are 2G -- on a 2G base. So if you are vaccinated, then I would expect that there will be no further restrictions for those who will be -- who are fully vaccinated. But nobody knows what's going on internationally whether other countries are restricting air traffic another time, yes or no. And what -- nobody knows is how people react at the end if they see on a daily basis in news opening up in the morning at 7:00 with the new COVID numbers and so on and so on. That's a little bit the topic behind, but we are quite optimistic for next year, probably starting already Eastern and then another time with a clear summer peak and further goes then in autumn. CapEx phasing to you [indiscernible].
Yes. Our CapEx after finalizing the expansion programs, we see and expect a sustainable maintenance CapEx level in Frankfurt of a little bit more than EUR 200 million. Outside Frankfurt in our international portfolio, less than EUR 100 million for all airports. So if you put this together, the long-term sustainable CapEx level is up to EUR 300 million per annum, all included.
The next question is from the line of Cristian Nedelcu from UBS.
Also 3, if I may. Firstly, on transatlantic capacity, I think overall, at a market level, December is somewhere around 70% of the 2019 capacity. Could you tell us your expectations as we move into 2022 on transatlantic? How do you see the passenger traffic evolving as a percentage of 2019? Any color there would help. Secondly, could you give us, please, an update regarding the tender in Antalya for the extension of the concession there? Any more detail you can offer us in terms of the range for the upfront payment or any CapEx involved there? And I guess your strategy, if you intend to participate there, that, that would also help. And the last one, just on thinking at your OpEx in 2022, what do you budget internally in terms of cost inflation next year? So either it's wage inflation or one of your peers is talking about electricity costs going up quite a bit. So any more inputs you could offer us into 2022 OpEx wage inflation and cost inflation?
Thanks very much. I can start with your first questions on transatlantic traffic. As mentioned, we see on the intercontinental market the biggest momentum at 80% for the winter season in the Middle East and 76% in North America. And of course, we don't have a crystal ball, but we would hope that we see even higher growth rates than over the year next year, if there's no further COVID impact or something like this so that the U.S. traffic, which is very important for us will show further growth than over the year. So in principle, from today's point of view, but that's not a guidance. From today's point of view, we hope to start next year in the first month on a level of 55%, 60% of traffic, especially on continental traffic, but also some intercontinental traffic. And then we, of course, hope to see a first peak during Eastern and in May with all the holidays and so on, the longer weekends to hope the peak of more than 70%, 80%, whatever in summer. But we have to see. It's a little bit too early at the moment. So if I gave you a range of 60% to 70%, it could even be depending on summer, depending on COVID, a little bit better. But it's not a crystal ball. It's too early at the moment to see how everything is developing on that side. But we are quite optimistic on 2G base that most of our passengers are at the end fully vaccinated and they will continue to fly if the situation keeps under control. That's an important thing around the world. So nobody knows at the moment what time China will open up. There are [indiscernible] in the market at Far East, especially China could be -- could continue to be closed up to end of next year. I can't comment on that. I have not, and we don't have the crystal ball. Regarding Antalya, I can just tell you, we have a close look at that one. That's clear because we are in there already for 20 years. It's an attractive market, that's no question. But there is also -- there are some limits. And we will have a close look to this one. So how could we continue? How could we bid for Antalya? With limited resources on that, how do we structure that one? Maybe taking a partner or whatever. It's too early at the moment. And we also have first to check all the documents and the chance and the risk profile, whether it's effective for us, yes or no. But we will let you know. At the moment, due date is beginning of December, and there are still 2 or 3 weeks to go on that side. I forgot to answer the first question or the second question from your predecessor. So the margin aviation charges. If I got the question correct, was the question what's going on for next year? So we consulted and it's done already with -- this was plus 4.3%, which are already -- yes, which are [ soon ], and so we can increase that number. But there is no further decision for the year 2023. That's too early. We will build up our mind in the first quarter of 2022.Matthias, OpEx?
Yes. Regarding inflation impact on our cost side, so normally, when we are looking forward in our long-term plan, we have, you can say, an average -- an inflation increase of 2% to 3% on the wage side as well as on the price side for products. Now everybody notices that the prices are going up, but we do not expect the wage price spiral in the future. So of course, it's just a temporary increase of prices and -- but this will not create a huge negative impact to our business because we have a lot of long-term contracts. And so we have, you can say, a contractual protection against inflation over the next couple of years. So perhaps, in average, there could be a higher price level of about 1% compared to just what we have and had in our long-term planning. But we do not expect, let me say, prices on the construction side or on resources side due to these long-term lasting contracts, which we have here for the company.
The next question is from the line of Ruxandra Haradau-Doser from Kepler Cheuvreux.
Three questions, please. First, a clarification question on next year. Lufthansa indicated 80% of precrisis capacities next summer. Given your plans for next year, could such a recovery imply challenges for your Ground Handling division next summer? Second, could you please give us a breakdown how the cost savings that you are currently implementing will be distributed to the different divisions of the group? And third, do you see any potential to restructure the financing of the Brazilian airport? You have very good financing conditions in Germany, but the interest payment for the small debt position in Brazil looks very high.
Yes. Thanks a lot. We're normally in a phase to where it's very difficult to predict exactly the traffic development and -- for the next 12 or next 24 months. And what we have seen already this year, if you remember, we have been, in Germany, in a lockdown up to June or more or less seen as a lockdown up to June. And then suddenly [ June ], but especially July or August, we saw the increased number from warm water destinations as we call them. And at that time, beginning of the summer, we believed that still the autumn vacations would be so strong as they now came through. Nobody knew at what time the states are opening up. So we have to plan a little bit on scenarios. And one scenario is really that we will be able to handle 80% of the traffic in summer, that's one of the scenarios. I'm not saying we are planning for this, but something like this could occur, that's absolutely right. And that's the reason we're trying to set up the business on the ground handling side, the loading, de-loading and so on, more flexible than we do nowadays. So to be more flexible on the shift basis to have further incentives out to hire people, and there could be that, at the end, we have a little bit too much people on or a little bit too less, but we have to have enough flexible instruments that we can handle even 80% next summer. Absolutely right, and we have to be prepared for that. On cost savings, Matthias?
Cost savings or the drill down of the allocation of percentages. If you assume 100% of our cost targets for next year, which we already defined, so about EUR 250 million on the personnel cost side and EUR 100 million to EUR 150 million on the material expense side, you can allocate this in -- 40% to aviation, 40% to Ground Handling and 20% for retail as well as internal services.
So we had a question on the Brazilian smaller financing where the existing smaller financing, I don't have [indiscernible] on that one.
The interest cost awarded?
Yes.
Let me say, the financing in Brazil is done on Brazilian real. So the Brazilian currency, project financing, nonrecourse, and I think we pay weighted average about 8% to 9% in Brazilian real denomination.
And you don't see any potential to restructure the financing in Brazil at this stage?
No, no, no. We're fine with this refinancing.
Because it's who we are, that's the important thing, yes.
Yes. And we have, on the revenue side, let me say, our -- the charges in Brazil are, so to say, inflation protected because when the year is over, we are looking on the inflation rate, and you can say that more or less the fee increase is related to the inflation rate. And let me say also on the interest side, so we have a natural hedge. Revenue in real, protected by this price escalator, and the refinancing for the CapEx is also in real. So we don't have any currency risk in Brazil. So the remaining risk adjust the translation of the profit from Brazilian real into euro.
[Operator Instructions] The next question is from the line of Andrew Lobbenberg from HSBC.
Can I ask a little bit about the latest view on your competition with your rival in Bavaria. I think Ruxandra was trying to get to look at Lufthansa's guidance of 80% capacity for the summer and see what it means for you. But through the pandemic, certainly, there was a concentration of their capacity with you because of your great cargo attractiveness. Is there a risk that as they bring capacity back that your share actually dilutes and we get disproportionate growth in Munich? Or do you think you can keep your current share of Lufthansa? And then can I ask a little bit more about the delays that you referenced? Are they all on the ground handling side? Or are there any problems in the terminal? Obviously, I'm always interested in the security and hoping that we can get a clear path for it to improve. But I mean, are security processes in a state to improve yet or you haven't got your arms around it yet? Yes, that will do.
Thank you very much, Andrew. What we have seen over the pandemic is that airlines, Lufthansa, but in general, all airlines, especially on the intercontinental side, concentrated that traffic very much on the main hubs at Frankfurt. We see recovery paths now. This will, of course, not stay on that absolute level on this relative level. That's clear because there's also other catchments. And what we would expect is that over the time, the more the recovery is going ahead, we will come somewhere back to the old relations, if you want, market shares and so on. Whether we can keep at the end a percent point more market share, could be, that's too early. But on the other side, we also don't see any shift from Frankfurt to Munich. But if you have seen, for example, this year or last year, Munich suffered very much. They have been on a very, very low level of traffic, especially on the intercontinental side. And what we know is that with the recovery path now, the one or the other route we will reopen also from Munich, if that makes sense, or from Zurich, even if I would like to have all the traffic, that's not realistic. So it's not a shift in a way that put an airport from Frankfurt to Munich, but it's with all the reactivating on airport that in the second phase, third phase of the pandemic, more and more aircraft will also be reactivated on the Munich side. On the delays, no, that's not just a ground handling. There's a lot of reason. But if I go through the processes in general, security was quite good this year. There are small waiting times. So the Federal Ministry [ ordered ] a lot of people and that worked quite well. It's more that with all the documentation checks on transfer passengers, but also on originated passengers, it takes more time. Very simple, people -- passengers are not any longer so much used to fly. So it takes also more time on the security side, even if it would result long waiting times, but it takes more time and it's the same on the border. So [Foreign Language].Immigration agenda and so on. It takes lots and more time with all the document checks on that side, especially on non-AU traffic. Then at the end, you have some passengers who are not making it up to the aircraft. So we have wait for the baggage. So the baggage has to be de-loaded and so on. So the loading teams have to be long on an aircraft and also with the boarding and de-boarding processes, which are even not so smooth as before crisis. So it's not the one point. It's -- there are several points in the process where everything has to come together and then we are still in a recovery phase, so it will take some further months on that side. But the security processes at the moment, not the pain point, not at all. I think that was the second question and your final question.
The next question is from the line of Nicolas Mora from Morgan Stanley.
Just a couple of questions on the guidance. First one, looking at the net debt into year-end '21, should we expect anything odd or actually unexpected in Q4? I mean you've raised the guidance on EBITDA, but it seems there's a bit of a loss contribution flowing down to net debt. So just trying to understand a little bit the bridge into the full year '21 net debt. Second, quickly on Antalya, do you actually expect to get -- pay the dividend in '21 considering the strong performance of the assets? Or should we wait for next year? And do you have any idea of the scope of how much you could get out of the asset considering it's cash positive?And last one on Greece. I mean the performance of the asset has been quite amazing. The traffic is recovering fast. All airlines are putting a lot of capacity into 2022. Beyond that, what's going to really drive the results in the asset value? I mean what do you need to make this a genuine key contributor and continue to push up the value of the assets? Is it just developing shorter season traffic, duty-free? I mean how can we drive, basically, more of this growth just beyond a catch up on traffic?
Matthias, do you want to start with the guidance, net debt to EBITDA and so on?
Yes. Before -- let me say before we change or improve our guidance, we said that we expect an indebtedness end of the year of about EUR 6.5 billion. Now we improved our guidance, and this is directly translating also into an improved guidance for the indebtedness. So as of today, starting from EUR 6.2 billion net debt on September 30, I expect for the year-end EUR 6.4 billion. So a clear improvement of about EUR 100 million on the debt side.
Included in those numbers is already an expectation where we are working on to get it done on dividend on Antalya. This year, still, with EUR 20 million, EUR 25 million, our share, which we hope to get through this yet. And your third question, Greece, the midterm outlook. First, Greece is very attractive. As a destination, I'm absolutely sure. So it will continue to beat traffic, that's clear. As on all airports, it's traffic. It's tariff increase. And it's, of course, also duty-free in retail and all those things. And yes, there's an addition, positive things that we have to pay for some years, less concession fees. So this is also positive due to the compensation we now got. And we have to keep costs under control as we did up to now, and we are quite successful on that side. And we have to -- what you said to catch out the terminals as much as possible, so delay CapEx. This [ idea ] and so it is a general [ ledger ] on making concessions successful, and we'll try to do this.
In addition to this, what Stefan said, we have a very comfortable concession agreement in a way that there's an automatic escalation of the charges of 0.9% of the Greece inflation rate. So we have positive price numbers. And even if they would go up in the future, what we do not hope in principle, but this on the other side, we have a perfect inflation natural hedge by this concession agreement.
Okay. And last one, if I may. I'll give it a try. You talked a little bit about the outlook on traffic on '22 remaining quite vague. I mean can we switch to EBITDA? And I'm not going to get a number from you, but we've seen consensus numbers. Some numbers in consensus hitting up to EUR 1.2 billion for next year. Where are you comfortable as of today considering what you know on winter schedule and quite a, let's say, a fair amount of tailwinds on traffic into summer?
I think at the end, sorry, to be quite open, and you know this already. There has to be still a surprise for the next call. And it's a little bit too early to give you all the guidance on that side. So yes, we have some expectations, and we'll try to get it done as best as possible. But first, we have to get a better look on the traffic side, whether we can be so optimistic as mentioned, even up to 80% in summer because that's the most important driver on that side. And I'm quite optimistic on the EBITDA side, and I know that I have a very good CFO on my side. So it will work even if we have to be a little bit more conservative. What I mentioned on the scenarios regarding hiring of people, but just [indiscernible] in general on the company, just on Ground Handling because at the end, we have to be able to match even a sharper recovery of the traffic to keep market share and so on and so on. Next call on that one.
The next question is from the line of Dario Maglione from Exane BNP Paribas.
Just one question for me. Regarding the Fit for 55 proposals that you mentioned, how much traffic do you think is a risk to be captured by the Middle East hubs if all the proposals are approved?
I'm more positive thinking, to be quite honest. I'm absolutely sure all of the discussions we had already with the European Commission, that they fully understand our argument, and that we will find, at the end, a way which gives us a clear path forward [indiscernible] neutrality with the sustainable fuel obligation, that's absolutely right. But that will be competitive neutral because they see this point and they don't want to harm the big airlines in Europe, the big hubs in Europe. They know how important they are for the connectivity of Europe with the world. And I'm sure we'll find a way. And if we have it and if we can discuss this, and if we know the details, then we can discuss what is remaining growth paths. From today's point of view, I'm still positive.
We have a follow-up question from Elodie Rall from JPMorgan.
We can't hear you. What was the question? She's not any longer there.
You can't hear me?
Now we get you.
Okay. I just want to come back -- yes. On the cost savings section question...
Now we get you.
Can you hear me?
Yes, thanks. Cost savings.
So EUR 500 million savings this year. How much is really sustainable assuming traffic at Frankfurt comes back to 100%? Say traffic at Frankfurt comes back to 100% next year, should we assume that basically, EBITDA at Frankfurt will just be EUR 400 million higher than it was in 2019?
Good question. You know our targets, what we give you as guidance for next year, the EUR 250 million personnel expenses, plus EUR 100 million, EUR 150 million. So on the personnel expense side, you have to see that when you look on the allocation of more than 4,000 FTEs, which we reduced, so 50% is at the level of the AG, so the high paid admin and semi admin guys. And we are going to continue with this lower number than before. On the other side, we have another 2,000 FTE reduction in services and in subsidiaries here at the Frankfurt side. There will be some compensating effect when we rehire some guys in the ground handling. But here, you have to see that the average payment, for example, in the Frank ground in our subsidiary, we pay an average EUR 40,000 per employee per annum. While on the admin side, we have a lot of guys, which had EUR 100,000 per year. So just looking on the FTE numbers is not, let me say, the key indicator. You have to look on the real expenses, which we brought down. That's the reason why also looking for the next couple of years, we expect this EUR 250 million lower personnel expense level here for the Frankfurt side. And on the material expense side, there will be some ramp-up. Perhaps at the end of the day, it's not EUR 150 million, it's about EUR 100 million, but this has indicated the range of sustainable lower cost basis in the future for the Frankfurt side.
If you then add a better-performing international business, but some inefficiencies on the recovering side because we are not on a -- we still will have some peak spot of next year. We are not in a full utilization, then probably you are right, with something like around 350 or whatever because there are plus and minus and so on around that level. That's probably the right number. But it's too early today. To be quite honest, we will go through this process in the next weeks. And we will pick the targets with our different units. And you get some first ideas in which rough numbers it could be.
The next question is from the line of Johannes Braun from Stifel Europe.
Actually, just have 2 left, which you have both touched on the topic of the increase and also regulation. So firstly, do you maintain the ambition to increase fees by 4% to 6% per year over and beyond the 4.3% for next year? That's the first question. And then within the regulation, be it the WACC formula or be it the definition of the regulated asset base, is there any aspect or any angle that you can think of that Lufthansa could potentially attack in order to prevent those fee increases to happen? Or is it all 100% waterproof in your eyes?
First, I would say from our point of view, it's 100% waterproof, but you never know. If you are going in front of court or whatever, the court will second. But from our side, it's 100% waterproof. Second point, I think we haven't given an indication that we will be in the range of 4% to 6% per year over several years, but what we can give you as an intention, yes, there will be fee increases over further years, absolutely clear. But we haven't defined up to now on which size we will do it, what's necessary and what's market compatible, those ways. So as an indication, yes, there will be further fee increases, but we haven't decided on the level.
There are no further questions at this time. So I hand back to Professor -- Dr. Zieschang for closing comments.
So I'm taking over Christoph Nanke. So thank you, everybody, for participating. If you have any further questions, give us a call in IR, yes, I'm happy to look forward for the end of the year and hoping for good traffic and good time anyway. So thanks again.