Fraport Frankfurt Airport Services Worldwide AG
XMUN:FRA
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Welcome also from my side to Fraport's Second Quarter Analyst Presentation for year '23. I'm here in the room with our CFO, Matthias Zieschang, he will guide you through the presentation. And afterwards, there will be, as always, time for your questions. So I think we can start.
Yes. Thank you very much. Good afternoon, ladies and gentlemen, also a warm welcome from my side. Let me start my presentation today with a closer look at our traffic performance at Frankfurt Airport in the first half of the fiscal year 2023. On Slide #3, you see that we had a modest start into the year with a recovery rate of just 75% to 80%. The reasons for the slow start were mainly continued capacity shortages in the Aviation sector, so Ground Handling services, airlines, aircraft, air traffic control, et cetera. The absence of intercontinental markets and therefore, connecting traffic to and from China, Russia or the Ukraine. Thirdly, a continued slow ramp-up of corporate traveling activities, which is just at about 60%.
Despite the slow start, we have recorded a positive traffic momentum from February onwards. While the first quarter recorded a recovery of 77%, Q2 marked an improvement to 82% or 5 percentage points higher. Our preliminary figures for July show a continuation of this trend. Here, July was the first month where we started to make more slots at Frankfurt Airport available again.
As you will remember, we artificially reduced the number of maximum movements at Frankfurt Airport to 90% of the 2019 level due to capacity bottlenecks. From July onwards, we are now starting to gradually reopen these slots again. As a result of the slot increase, the recovery rate improved to 87% in July and showed a total of 6 million passengers. This was the first time that we achieved such a high passenger count in a post-COVID world. Similar to the increase in overall passengers, we are seeing an increase in the numbers of passengers to and from China.
While Q1 still was very low at about 20% of 2019, the second quarter recorded a slight step up to about 40%. Here, June marked another sequential improvement to more than 50%. Our outlook for the China reopening and therefore, remains unchanged. For the third quarter, we expect to be in between 50% to 60% of the 2019 level.
While the fourth quarter is expected to reach about 80% with December going up to a 90%. While we remain far away from providing a traffic guidance for fiscal year 2024 at this point in time, it is, however, obvious, it's a slow start into fiscal year 2023, and the buildup of momentum over the course of the year will lead to a solid year-over-year passenger growth in 2024.
On the next slide, #4, we are moving on to our International portfolio. You see that Fraport Greece continued its very positive trend in the first 6 months of the year. While the recovery rate exceeded Q1 2019 by 8%, the second quarter achieved a further improvement to 10%. July marked another positive development with passenger numbers up by 16% compared to 2019.
Correspondingly, we expect on a full year basis an outperformance compared with 2019 again. Contrary to Greece, Lima Airport showed a flat recovery rate of 85% during the second quarter. Here, the political unrest situation prevented many passengers from traveling to Peru. Looking ahead, we are seeing clear signs of an improvement and expect passenger numbers to gradually come back to 90% over the course of the year. In opposite to Lima, to Brazilian airports showed an improving trend during Q2.
Here, especially Porto Alice benefited from the restoration of domestic and international flights. Fortaleza, on the other side, still misses the hub function of 2019 and Air France KLM was using the airport jointly with goal to serve the broader Northeastern Brazilian market. Tubiana, Ariba and Slovenia also showed some progress all based on a very low level. Here, Adria Airways left the market in September 2019. As a result, the comparable basis will ease from September onwards, and we expect the relative performance in Q3 and Q4 to gradually improve.
For Fraport Twin Star, the passenger trend turned negative in the second quarter, while Q1 benefited from further aircraft being stationed, the second quarter faced headwinds against the high 2019 comparable basis. Here, the Russians and Ukrainians represented a clear double-digit passenger share in 2019 and miss Bulgarian market nowadays.
Simultaneously, the vicinity to Ukraine is not helping to attract tourists to the Bulgarian Black Sea Coast. Contrary to Bulgaria, Antalya Airport remained close to the level of 2019 during the second quarter. Here, also the indicators for the high summer season look promising and should support us to bring the entire group airports closer to 2019 during the third and fourth quarter.
Having said this, we overall expect a positive operational development for the group airports during the third quarter, including the Frankfurt Airport. Our key financial highlights for the past quarter are presented on Slide #5. Ladies and gentlemen, we are proud that meanwhile, 3 out of 4 group segments have exceeded the pre-COVID earnings levels.
While Frankfurt Airport just handled about 82% of the 2019 passenger traffic, the EBITDA in the aviation and retail and real estate segments achieved and even surpassed the 2019 levels. The EBITDA recovery clearly proves the measures we have taken to become a more efficient company during the COVID crisis and will also remain in the future.
For the remainder of the year, we are therefore confident that the Aviation segment will exceed the 2019 EBITDA level and move towards the mark of EUR 300 million. For the Retail & Real Estate segment, we are also optimistic for the year ahead. On a full year basis, however, Q1 marked a strong EBITDA headwind in the area of EUR 20 million also because of a double-digit onetime effect in 2019.
For the segment, we, therefore, also expect to get close to the 2019 EBITDA level, but we don't expect a clear outperformance. Outside of Frankfurt, our International Activities segment continued its very strong development, especially Fraport Greece recorded an outstanding quarter. EBITDA doubled compared to 2019 on just 10% additional passengers. A very strong performance of our most relevant assets outside of Frankfurt.
Correspondingly, we exceeded the 2019 EBITDA level on a group-wide basis for the first time without major one-off effects, so on a clean basis. At EUR 323 million, group EBITDA was 4% up against our pre-COVID benchmark year.
A more detailed look at our group profit and loss in the second quarter is provided on Slide #6. Revenues, excluding for IFRIC 12 exceeded the 2019 level by EUR 59 million and almost reached EUR 900 million. The increase in revenues can be mainly attributed to the International segment, which showed an underlying revenue growth of about EUR 50 million.
Higher revenues also resulted from the security transitioning in the Aviation segment, which led to some EUR 24 million higher revenues without bottom line effect. Despite the diluting effect from the security transitioning on the overall group margin, the EBITDA margin recovered to 36% in the second quarter.
When adjusted for IFRIC 12, excluding the earnings neutral increase in security revenues, the EBITDA margin recovered to the pre-COVID level of about 37%. At EUR 204 million, also EBIT improved compared to 2019. Finally, note here that the year-over-year comparison against Q2 2022 is negatively impacted by the divestment of Xi'an Airport, which increased the previous year's figures by around EUR 54 million.
Bottom line in the financial results, 3 main effects become visible. Compared to 2019, our financial liabilities on a group-wide basis more than doubled from EUR 5.3 billion to EUR 11.2 billion. Despite a lower average interest rate, our interest expenses grew, therefore, by more than EUR 25 million compared to Q2 2019. On the other side, our cash position also improved strongly and contributed some EUR 10 million higher interest income.
Due to the divestment of Xi’an Airport last year, our result from associated companies reflected the absence of reinvestment compared to 2019. Correspondingly, our group financial result was down from minus EUR 15 million in Q2 2019 to minus EUR 50 million in the period under review. Consequently, our earnings before taxes, so the EBT and group results were down by some EUR 20 million compared to the pre-COVID level.
Moving on to our segment reporting, starting as always with Aviation on Slide #7. During the past quarter, airport charges entirely recovered to the pre-COVID level despite just handling 82% of the 2019 passengers. The recovery rate in airport charges, thus clearly shows the higher price levels, which we have implemented in the meantime.
Looking ahead, we already told you that we will apply for a high single-digit price increase as of January 1 next year. In the meantime, we have formally forwarded our application to the regulator. You can also find a chart in the appendix at Slide #31. In this application, we included a price increase of an average 9.5%, good number as of January 1.
Based on our discussions with the airlines, we have also formally agreed on our application. As a result, we don't expect major pushback during this process anymore and are confident to see a clear double-digit million euro price increase in airport charges next year. In addition to the application filed, we also included a new incentive scheme for 2024.
Here, the threshold level is set at a revenue mark of EUR 964 million. Any excess above EUR 964 million next year will correspondingly be shared equally between the airlines and us.
To be precise here, the level of EUR 964 million is 18% higher compared to the level of airport charges, which we collected in fiscal year 2019. So a very positive development in the Aviation segment. Following news, ladies and gentlemen, I'd like to focus on the current business performance of the second quarter again. Security revenues, as mentioned before, saw an increase of about EUR 24 million compared to Q2 2019 due to the security transitioning.
As a security business basically comes without a margin, it is fair to assume some EUR 24 million higher cost incurred because of the transitioning. Adjusted for the higher security expenses, segment OpEx remained well under control, and we are broadly flat compared to 2019 despite the inflationary trends in the last years. As a result of the favorable underlying performance, segment EBITDA recovered to the 2019 level.
This also indicates a clear improvement in EBITDA per passenger generated. Coming now to our Retail & Real Estate segment on Slide #8. The segment revenues exceeded the pre-crisis level by EUR 2 million or 2%. The strong development was driven by real estate and parking revenues which outperformed the 2019 benchmark.
Regarding our airport retailing, the picture is mixed. While shopping and services revenues were higher than 2019 on a per passenger basis. Advertising revenues continue to underperform the 2019 level. We have also illustrated the relevant numbers on Slide #9. What are the reasons for the low advertising performance?
On the one side, advertising revenues were showing a record high in 2019. Compared to 2019, we still confronted with the changed passenger mix. So less Far East passengers and less corporate travelers. We are also seeing budget cuts in advertising to offset inflationary cost pressure, and we are seeing budgets being reallocated to more of e-commerce advertising, for example.
Moreover, we still had the International Auto Show here in Frankfurt in 2019, a very well-renowned fare, which clearly contributed good revenues for us and the city of Frankfurt. Despite the headwind in advertising, we remain positive on our retail outlook for the year ahead. The further reopening of China and inflation-linked revenue streams should support us in improving the results on a full year basis.
Regarding segment EBITDA, we are seeing inflationary pressure starting to fade. May and June marked the first month where costs for energy supply were reversing compared to last year. In line with the revenue and OpEx development, we recorded a clear EBITDA margin recovery. Consequently, operating results improved over and beyond the level of 2019. Turning now the page to our Ground Handling segment on Slide #10.
Consistent with the other 2 Frankfurt segments also Ground Handling showed a good revenue recovery compared to 2019. At EUR 173 million, revenues reached about 94% of the second quarter 2019 value. With regards to the OpEx side, we continue to see the burn on temporary staff to handle the traffic levels. In addition to the headwind from lease personnel, we recorded the first big onetime payment from the new collective bargaining agreement.
Adjusted for this EUR 10 million, new collective bargaining burden, segment EBITDA would have been broadly breaking. In fact, June 2023, on a stand-alone basis, negative by only EUR 1 million. Having said this, we expect a clear EBITDA improvement in the third quarter where the cost base will be better matched by traffic volumes and revenues.
Despite the somewhat better outlook, there is no question that we have to further improve the earnings situation significantly in the Ground Handling segment on a sustainable basis. We will keep you updated on the developments here. Moving on to our final segment, International Activities & Services on Slide 11.
As you can see on the chart, our international operations continued the outperformance against 2019. Underlying revenues and EBITDA stood well above the pre-crisis level during the second quarter. Here, especially Fraport Greece performed strongly compared to Q2 2019.
Revenues and EBITDA in Greece grew by some EUR 57 million and EUR 44 million, respectively. In addition to Fraport Greece, also Fraport Brazil and Fraport U.S. showed good earnings momentum compared to 2019. As OpEx remained under control, the underlying EBITDA margin improved to 49%, excluding for IFRIC 12, revenues and costs.
Due to the EBITDA improvement, also the segment share on a group-wide level grew to about 46%. Following the segment update, let me take a closer look at our cash flow and indebtedness situation on Slide #12. Overall, the operating cash flow and capital expenditure developed in line with our expectations.
Reflecting the traffic increases and financial result performances, our operating cash flow clearly increased over the previous year. At EUR 294 million, the operating cash flow achieved about 80% of the 2019 level and would have been more than sufficient to cover the maintenance need for the group due to the continued growth investments in Frankfurt, so Terminal 3 and into Lima Airport, our free cash flow was negative again. At minus EUR 380 million free cash flow developed according to our expectations, and we now expect a better development during our high season Q3 quarter.
At close to EUR 7.5 billion, our net debt to last 12 months EBITDA, leverage stood at 6.8x. This was a slight improvement compared to last year's and end value of 6.9x. On my next slide, you will find our meanwhile well-known chart for the development of our group liquidity. Despite the negative free cash flow during the second quarter, our liquidity situation remained more or less unchanged compared to the first quarter. With more than EUR 5 billion, our available funds remained high, and we feel very comfortable for the years ahead.
Despite our high cash position, we continue to screen the market and look for further attractive funding opportunities. Here, we already started early discussions regarding possible terms and conditions for the upcoming maturities in the year ahead. Moving on to our updated repayment profile at the end of Q2 on Slide 14. When benchmarking our cash position against upcoming maturities, you see that there is no pressure to refinance.
Cash-wise, we are clearly going into fiscal year 2026 based on our conservative business plan. For the remainder of this year, there are only smaller maturities left, which we expect to roll forward. As of next year, we will also select team selectively make use of our cash position and to pay down some of the maturities instead of rolling them forward. Coming now to the last slide of my presentation, our outlook on Slide #15, reflecting the development of the first 6 months, the term business outlook.
We kept the overall guidance ranges unchanged. We nonetheless specified our expectations. Correspondingly, we expect to reach roughly the midpoint of our Frankfurt traffic guidance of 85%. For the earnings development on the full year basis, we are very optimistic, thanks also to Fraport Greece.
Regarding the EBITDA, we expect to be in the upper half of the financial guidance. We also mentioned this before. The upper half can also mean to achieve the very top end of the guidance, and this would mean to recover and even exceed our pre-COVID EBITDA this year. Likewise, we have become slightly more optimistic for our key leverage indicator net debt to EBITDA, where we expect and improvement compared to the level of last year.
Also, the group result before minorities is now expected to be in the upper half of our guidance. Despite the very positive financial development, we won't suggest a dividend payout for the current fiscal year due to the high leverage and negative free cash flow situation. Having said this, I'd like to thank you, ladies and gentlemen, for your attention and look forward to your questions. Thank you very much.
[Operator Instructions] First question comes from Johannes Braun from Stifel Europe.
All right. My questions, I have 2. Firstly, I'd like to better understand seasonality and the outlook in the retail business. So I think last year, sales per passenger was below 2019 after 6 months. But for the full year, it was above 2019, thanks to a strong performance in Q4.
And this year, again, we are below 2019 after 6 months, but we are above last year. So are you expecting again a strong Q4? And if yes, why is the seasonality different to pre-pandemic levels? And then secondly, I know it's a little bit early days, but if you look into 2024 and I look at the moving parts for EBITDA, so you now have the 9.5% fee increase, plus 10% or so traffic growth based on what Lufthansa has said last week that they are growing capacities by 10% or so. So 10% volume, 10% price increase, plus retail obviously benefiting from the return of Chinese passengers. So it doesn't look too bad to me. But of course, the cost side might spoil it all again. So yes, how do you think about EBITDA progression in 2024, please?
Yes. Thank you very much, Mr. Braun. Starting with retail. Yes, as you mentioned, we have -- good information. This is the performance of shopping and services. And on Slide #9, you can see the, so to say, the escalation and the performance. And in the first half year, we ended up with EUR 3.14. But if you drill down and just look on shopping services, you can see that we are better than last year. And now looking forward, we have the -- not phenomenon, the fact that the China market is reopening.
We have up from now about 60% of the capacity in the market and we assume that also these capacities will be utilized. So with other words significant increase of Chinese now using Frankfurt Airport. And end of the year, it's going up to 80% and last month, 90%. So looking forward, the passengers with high purchasing power are coming back, and this is good for the business.
And on the other side, we still expect the continuation of the weak advertising business. But nevertheless, if you look on the full year spend per PAX number last year, this was a value of EUR 3.33. Let me say, based on the current expectation, it should and must be a value more than EUR 3.40 for the full year or even a higher value.
So we are relatively optimistic due to the positive trend in shopping as well as in services based on the general consumer behavior and supported by the overproportionately increase now of Chinese passengers using Frankfurt airport.
Second question, outlook for 2024. So it's a little bit too early but you exactly mentioned all the positive as well as the negative drivers. And again, it's too early to give a precise guidance for traffic in next year, but 10% is a number which is, as of today, it's realistic so perhaps EUR 65 million, EUR 66 million next year.
For Frankfurt, we have this price increase of 9.5%, which is more or less given now. And on the other side and also in retail, we expect a continuation of a positive trend in shopping services and also a recovery in advertisement. On the other side, the high increase on the wage side, this is the negative item. But putting all these ingredients, so to say, of the guidance together, as of today, I would say the EBITDA for the group in 2024 should be EUR 1.38 billion. So this is as of today, the clear metric.
And the next question comes from Ruxandra Haradau-Doser from HSBC.
Yes. Three questions, please. First, could you please give some details on the traffic growth next year? So does this refer to both leisure and corporate traffic? And is it driven only by Asia? Or do you expect traffic growth to other regions as well? And what are the indications on the winter flight schedule at this stage? Second, you highlighted high OpEx in the Ground Handling division. Do you see any opportunity for price adjustments in this division?
And third, I think you renewed the contract with Heinemann during the COVID crisis. So just for clarification, at the terms of the contract now in line with pre-crisis and given the retail performance over the last 10 years, could you please remind us about the rationale to prolong the contract and how long the contract is -- the current contract is running?
Traffic growth. I mentioned it to Mr. Braun, I would say, as of today, EUR 65 million, EUR 66 million next year, not the final guidance, but best guess as of today, and this is driven by recovery of Chinese. It's also driven by the reopening of the Chinese market. So the -- all the slots based of the bilateral agreements between Germany and China on the other side will be recovered in December.
So with other words, in December, we have more or less 100% of the old capacity, and we assume a high utilization rate in next year. So it's a huge and significant increase of Chinese passengers in '24. And this is also determine the structure of the growth and the structure of the passenger mix.
And also regarding business traffic, I mentioned during -- in my presentation, as of today, we have about a 60% recovery rate always compared to 2019. We do not expect a full recovery, but there is still headroom. And also from a today's perspective, it can be that the recovery on the business side, growth from today, 60% to 80% in next year. And also, please have in mind that the whole growth situation this year is determined by the capacity side, not from the demand side.
So just looking on the demand side, traffic in Frankfurt would be much higher. So we have capacity shortages in Ground Handling, and we informed the market in the beginning. That's the reason why we also introduced these artificial slot cap. And we still have reduced slots. But now month by month, we are going up with the slots and end of the year, we are back on the same slot level, which we had in 2019.
So with other words, we have coming from the capacity side, not any longer constraints, not on our side. So Ground Handling is fixed. The slots are open. We can deliver a sufficient quality. So we are able then in 2024 to handle even full traffic from 2019.
But we have also to look on the other side of the capacity side and this is air traffic control. These are airlines, availability of aircraft, spare parts, pilots, et cetera. So we have to see what will be the final picture in 2024. But taking all together, we expect a good and very solid growth in '24. Ground Handling prices. We have in Ground Handling itself. We have 2 subsegments. These are ramp and passenger services on one side. And on the other side, we have the central infrastructure. On the prices regarding the central infrastructure. We will also see relatively high single-digit price increase in next year. So in the next couple of months, we will come with the final price tag for next year.
So this is also a good and solid improvement, which directly leads into much higher revenues in the subsegment central infrastructure. In ramp and passenger services, it's twofold. We have some so-called other airlines where we have flexible and variable contracts with other words, it's more or less a path-through of the inflation rate on the path side.
But with one big customer, we have a contract with a fixed price increase of a little bit more than 2%. This price on an annual basis. This was a good price increase when the contract was signed in the pre-inflation times, but now giving the high inflation rates, of course, there's a mismatch between the wage drift on one side and the price increase on the other side. So it's a mixed picture. But in next year, we will see a significant -- regardless all of these items, we will see a significant revenue increase driven by higher passenger numbers, driven by higher prices in the central infrastructure and also higher prices and ramp and passenger services.
But in average, the price increase in the subsegment passenger services, of course, is much lower than in the central infrastructure. And then your third question was regarding the joint venture with Heinemann Brothers. This is a long-term joint venture, it runs, I think 2031. And the conditions are fixed and given and fine. So it's a very fair and favorable joint venture for both of us.
And we -- regarding all the conditions, we are on the same level like in 2019.
And the next question comes from Andrew Lobbenberg from Barclays.
Can you please just discuss or reassure, I don't know. The CapEx outlook for T3, certainly chatting to that people are curious as to whether the site can be maintained? And then can you also just discuss how the staffing is on the ramp with operations and also in security. So are those operations running smoothly? Are you nicely confident as you ramp up the traffic that there will be no challenges through security or on the ramp.
Yes. First was regarding CapEx. And regarding CapEx, I would like to put the scope on one slide, which we have in the appendix. Give me just a second. It's Slide #30. Here, you could see the CapEx guidance, which we gave in the beginning of the fiscal year 2023. And this is still well adds just so far, one specification that regarding T3, we can confirm which you can see on the slide, the EUR 550 million for the full year, T3.
Also regarding other CapEx, perhaps EUR 250 million could be a little bit more regarding Lima. We will end up at the upper side of the range. So it's going against EUR 450 million. While regarding all other airports, we will be clearly below EUR 100 million. So if you put all together, we will end up as of today at 1 point -- between EUR 1.3 million and maximum EUR 1.35 million as mentioned on this slide.
So then second staff situation in, first of all, Ground Handling -- again, some remarks regarding the situation. Our capacity as well as quality problems in Ground Handling. In the last year, I have to say since the Easter holidays, we have a significant improvement now, and it runs relatively smooth operation. And this has not to do with a number of FTEs or full-time equivalent.
So our main problem was the qualification of the people in this segment because most -- a lot of them are new and have to be educated and skilled and this took and takes time, but we are now on a good way. And now looking forward, we still continue improving the qualifications of the people to driving licenses, licenses to operate machines and some cars, et cetera, special cars.
And this is working very well. And as an express of this, you see the quality indicators, which month by month are going up and really less complaints. And looking forward now for the rest of the year, we expect a relatively low 3-digit further increase in ground handling. But most of the recruitment is done. And this is what still is ahead of us is working on the qualification side. In security itself, if you look now on all the KPIs in security, waiting times, et cetera, it's very good. We are now in the middle of the peak season, no complaints.
It's running really very well here at Frankfurt Airport. And we and also the other service providers, I-SEC as well as Securitas, they are working on further recruitments already preparing the year 2024. And as of today, we are absolutely optimistic to have a sufficient number of employees in ground handling as well as in the security business to be able to manage a full recovery -- if possible in 2024.
And the next question comes from Graham Hunt from Jefferies.
Maybe just two questions from me. First on the Retail division and the Chinese travelers that you're seeing so far, can you give any color on the level of spend that you're seeing from them relative to where that was pre-COVID. I think you used to give some information around how that compared to other nationality travelers, I just wondered where you're seeing that today versus maybe where you're expecting it to be?
And then second question is just on some of your international stakes. How are you thinking about those in terms of your de-leveraging? Are there any of them that you would consider potentially reducing down? I assume you would want to maintain a majority, but are there any that you would look at as a potential paths to accelerate de-leveraging and maybe get back to returning dividends a little bit faster just on that international side?
First question, China. So they are coming back, and we couldn't identify a change in their general behavior. So before COVID it was 5x to 6x of the average, the spending behavior of the Chinese, and it seems to be that this is the same in the -- after COVID time. So we can't see any change, clear preference for luxury goods. So nothing has changed in their behavior.
Regarding the de-leverage, we have a clear focus on the de-leverage topic. And I think with our, so to say, modified guidance saying that from 6.9x net debt-to-EBITDA last year. Now there is headroom down to 6.5x, even 6.4x. So this is a good scenario just coming from the increase of EBITDA and CapEx in line with our expectation on the other side. And now looking forward in 2024, this will be another good year, but also having in mind that we continue with a high CapEx because in Lima as well as here in Frankfurt for the Terminal 3. With this full steam, we are finalizing the expansion program.
So that's up from '25, then there is a decrease on the CapEx side. In Lima, because in the first half of '25,this project will be stopped or ended -- and we are absolutely in time and in budget. And the same remains the main is will it for Frankfurt. We are absolutely sure that in 2026, we are going to open the terminal. So everything is on the line. And then the CapEx level is going down significantly, and this is generating a huge amount of free cash flow. And then we are using free cash flow to bring down also the absolute indebtedness, which we think is too high in the long run and also to have headroom for other things, and one other thing is paying dividends.
So clear indication now that in '24, we are not going to pay dividends for '23 and what will happen in '25, we have to see depending from all the financial KPIs and the further development. But clear focus is on de-leveraging while reducing net debt-to-EBITDA as well as the absolute indebtedness.
And the next question comes from Cristian Nedelcu from UBS.
Maybe the first one on the tariff increase in Frankfurt, I guess your tariffs are now 20% -- around 20% higher than in '19, which is great news. But in the same time, what does it mean for the opening of the new terminal. And when we know your main airline there is focusing on yields rather than on growing capacity. And we know that the low-cost carriers are complaining about the tariffs a couple of years ago. So I guess, in this context, does it become increasingly difficult to get incremental traffic as terminal 3 opens? That's maybe the first one.
The second one, just looking at the front foot OpEx in 2024. Could you give us a bit more color on the headwinds and tailwinds that we have there versus 2023, the main moving parts? And the last one, if I may. If I look at the outstanding yield on some of your -- sorry, if I look at the yields on some of your outstanding bonds, the 6-year bonds are now trading at around 5.3% yield to maturity. Now could you elaborate a little bit how much of your excess cash you believe you can use over the next 15 months or so, you have this the EUR 1.7 billion maturing, I think, over the next 15, 16 months.
So how much of that you can actually use your excess cash to terminate that?
A bunch of questions. Starting with the tariff increase. As you mentioned, I think the performance in the last 2 years, 4.3%, 4.9% and now 9.5% for '24 is a good result. And without any hassle with the airlines and also regarding the 9.5%, this is agreed with Lufthansa. And I have to say that we have an extremely good relationship with Lufthansa its best relationship since I remember. So very friendly, very cooperative. And despite the 9.5%, and why because, if you look on the numbers of Lufthansa, they also have excellent numbers. And everybody knows that most of these numbers are produced here at Frankfurt airport.
It's a good situation. You can bring through high ticket prices. So Lufthansa is happy and when they are happy, we are also happy and with the 9.5% we are especially happier. And what you mentioned you have always -- when you look on the revenue side, it's a combination of volumes, times prices. And just looking on volume increase, this is not what makes people happy because if you have too strong passenger growth, this is followed often by additional CapEx by additional OpEx. So it's better to have a normal growth increase in line with the market, and we are growing in line with the market, and we have nice fee increases and everything is fine with the airlines.
And this is also our strategy looking forward to make the long story short. We don't have any reason to focus now on low cost. We are happy with our customer base. And when a new airline would like to come, it's also they are welcomed and -- but they have to accept the prices as it is. And to create additional traffic with incentives. We do not think that this is the right way. We feel happy with the current situation, the airlines feel happy and we are looking forward, we will see additional growth and if you now assume, for example, based on our today's expectations, 6.5 million, 6.6 million passengers next year and another increase in '25, '26.
We will end up exactly at about EUR 70 million when in '26, we are going to open T3. So this is a fine situation where the capacity in the existing infrastructure of Fraport is then totally exhausted. And further growth will be realized via the additional capacity of Terminal 3. So everything is a smooth transformation into a new infrastructure and there is no necessity to speed up the growth. So with other words, we will not come with incentives or anything else. We continue with our current policy, a focus on a modest and normal passenger growth on one side, in combination with price increases, which follows the inflation rate. And we feel happy. And when you look on our financial results, I think this is a proof that the strategy is good.
Regarding OpEx, we had the trends driven by the inflation rate on one side, the relatively expensive tariff agreement with [ TVöD ] agreement, which cost us a lot of money. And also in our appendix, you can see the precise impact of this is on Slide 34 where you can see the one-off payments in '23, which altogether give a negative impact of EUR 30 million. In combination with the, so to say, carryover from last year tariff increments plus volume effect.
So it's combination of nearly EUR 100 million more personnel expenses driven by more FTEs on one side and higher prices, 50% one-offs on the other side. And this will also continue in '24. You can see exact then the impact in '24. So the base payment of EUR 200 per employee, plus 5.5% on top of it, a minimum of EUR 340 million. And we make a calculation what is the outcome of this package, and this costs us EUR 70 million in 2024. So we will see a higher -- another high step up on the personnel cost side.
But on the other side, you see the 9.5% fee increase. You see solid million increase on the passenger side in Frankfurt. On the aviation side, you see in retail increase in ground handling, I explained in detail what we expect also central infrastructure on one side, ramp in passenger services on the other side. So it's a high revenue increase, partly compensated by higher wages, but the net impact is clearly positive, and that's the reason why from a today's perspective, the EBITDA in 2024 will be 1.3 million as today's calculation.
Cash -- third question, cash position. Also, I make reference to Slide #13, where you can see the total liquidity available funds of EUR 5 billion, thereof EUR 3.7 billion is in our balance sheet. The rest are free credit lines. So directly available are the EUR 3.7 billion. We feel very comfortable. But knowing that looking forward in the long run, of course, this is too high.
But today, it's an expression of our strength. And as long as we have negative free cash flow, we continue with relatively high liquidity -- but the -- let me say, the negative free cash flow situation now the end is at the horizon in '25. We are going to achieve breakeven of free cash flow. This is good. And this means on the other side that we are now step-by-step also using some parts of this liquidity for repayment of debt. So there will be now a gradual reduction of the liquidity but not as significant in the next 2 years.
And the next question comes from Dario Maglione from BNP Paribas.
Three questions for me. The first one on traffic guidance for Frankfurt Airport. The middle of the range for the full year implies traffic at around 90% of 2019 levels for the next 5 months. And when I see the airlines have planned only 89% of capacity, for those months. And they usually cut some plant capacity as time approaches. So I just wonder what makes you confident to hit that traffic guidance? And the second question on OpEx, Frankfurt Airport, maybe if you could tell us how -- just for Frankfurt Airport, how that Q2 compares to 2019 level on a like-for-like comparison, how has this developed over the past few quarters? .
And the last question is regarding Greece, which is doing very well. I just wonder when will the concession payment kick in? And what traffic and EBITDA we should expect this year and next year, roughly speaking?
First question. As we said, we -- the guidance is 80% to 90% for the full year. Now we made specification saying that we are in the middle, middle is 85% and 85% is equals about EUR 60 million -- EUR 59.5 million, EUR 60 million. So in this range, we will end up. This means on the other side, that now in the second half, of course, the increase must be higher, as you mentioned. Now we will see up to 90% of the 2019 numbers. So that mathematically in average, we can expect 85% for the full year. So a much higher passenger number in a percentage expressed in the second part. And your implicit question is a high utilization of the capacity offered by the airlines.
And regarding OpEx, we always make a comparison to 2019, and we have to remember to start end of '21, where we showed an OpEx reduction regarding the 3 Frankfurt segments of more than EUR 400 million. And then we have already in last year headwind by absence of short-time work, higher energy cost, wage increases, et cetera, additional payments for the summer operations and ground handling so that we ended up end of 2022 with a lower OpEx level of about EUR 170 million as far as I remember. So coming from more than EUR 400 million end of '22, ending in EUR 170 million -- EUR 400 million in '21, EUR 170 million in '22. So this is a starting base.
And now you see the expensive wage agreement, which we have expressed on slide of what is number 33. So it costs us always adjusted by the carve-out of security cost us another EUR 100 million higher personnel cost. And thereof EUR 30 million just as a one-off. This inflation compensation payment, we still have or had in the first half year higher energy costs. We have still temporarily more employees from the market to support our own staff in ground handling also inflation-based higher cost base for maintenance things. So that -- at the end of the year, we will end up flat or up to minus -- been flat and minus EUR 30 million compared to 2019.
So with other words, this what we achieved by have a sustainable reduction of the number of personnel is still there as a positive impact. But in the last 3 years, we have this inflation -- accumulated inflation and this compensated all the volume effects, which we realized in the beginning of the COVID period.
Regarding Greece, the variable concession payment will kick in, in 2024. And that's the reason why absolutely seen the EBITDA in '24 increase will be lower than in '23. So we had in, I think, last year at EUR 270 million. You also can see on Chart 32, we had -- in last year, we had a total EBITDA of EUR 272 million, thereof EUR 77 million COVID compensation. So in this year, we still have a COVID compensation, which you can also see on the chart of EUR 35 million. So a significant reduction, nevertheless, a better underlying increase of EBITDA by higher volumes and 8% price increase. So perhaps as of today, we will end up EUR 250 million EBITDA in total in Greece.
And then in '24, there is no any longer COVID compensation, but still higher passenger numbers and a further unknown price increase. So that as of end -- the kick in, yes, this means the absence of COVID is to pay variable fees so that we will end up with an EBITDA, which is below EUR 250 million. This is a calculation as of today. Yes. I think I have answered all your questions.
And the next question comes from Sathish Sivakumar from Citi.
I've got two questions here. So firstly, on the retail spend per pax, obviously, for the quarter, you did about EUR 30.2 with a shopping around EUR 2.62. How does it actually extend that during the quarter? Or was it like April, May and June? Any color on what are the June exit rate would be helpful. And secondly, on the Fraport cruise. If I look at, say, a couple of weeks ago, Aena did mention that they are seeing last minute cancellation from airlines as well as last vacancies did capacity growth for the current quarter actually. So what are you seeing on Fraport cruise? Are you seeing like airline's pulling capacity at the last minute? Or is it just more specific to, say, some of your peers?
Yes. In Greece, starting with Greece. So we are absolutely optimistic. So in the press, you could see -- you could read something about [ fires ] in roads as well as in [indiscernible] but it's a press if you talk to the people spending -- having the holidays, they're absolutely happy. And if you look just on the numbers, you can't see any negative impact by these phenomenon. So with other words, the industry is booming, everybody is happy. And you see the actual numbers, which has proved that the trend is unbroken. And Greece is very attractive, why because there have been a lot of investments in luxury units, luxury hotels, boutique hotels, very individual things. So people like and love Greece, and looking forward we don't hear any negative things which could occur in '24. So the success story of Greece, we think the momentum is given, we can't see a breach of this good development.
So of course, the volume increase, which we are going to see this year cannot exactly continued in next year, also due to the availability of capacity -- airline capacity, hotel capacity, et cetera. But it's still very positive, and we expect also in '24 continuation of this success story.
In retail, we had -- when I look on the numbers in the months itself, we had in April we had EUR 2.90, we had in May exactly EUR 3, and we had in June EUR 3.10. So on average, -- the -- what you can see on Slide #9, is EUR 3.02. And the good thing is EUR 2.90, EUR 3.00, EUR 3.10. So it's coincidence. It's a clear linear increase. And this might be that the driver for this are the Chinese because it's really parallel to the performance of the Chinese. And that's also the reason why we are so confident then that the good trend will continue now in the second half.
And the next question comes from Manish Beria from Societe Generale.
My first question is on the retail segment, here, you said your EBITDA will just be near the FY '19 levels. But you also commented, I mean, the spending per pax would be something around EUR 3.3, EUR 3.4. So when we put this into our model, I mean, I don't -- I get an EBITDA that is much higher versus '19 levels. So can you explain like what could be the margins? I mean, will not be the margin can be the same, like 2019 level of 78% in the retail segment. This is the first question.
The second one is on the ground handling division. You said you want to take the margins to the sustainable level. So of course, your margin in the second half will be -- the EBITDA in the second half will be positive. So can you say when we'll reach the sustainable level of margins in which year? And what will be the progression?
Yes. In first question, EBITDA outlook, retail and real estate. So it can -- we had -- in 2019, I think, we had EUR 398, as far as I remember, million EBITDA. So it's...
Correct.
Thank you. So far, it can be that we end up with EUR 400 million. So as I said, we will end up at about EUR 400 million. So your question is why it should be better. So it's my understanding of your question. But please have in mind that we have 2 things or 3 things. We have the weakness in advertisement, it's a small item, but nevertheless. Second, we have the inflation regarding material expenses. But the main driver also was a one-off effect in 2019 in Q1 when we made a real estate project with an extraordinary gain of EUR 22 million.
If you -- looking on an adjusted basis, I'm absolutely confident that 2023, and this segment will be better than 2019. But again, despite the special effect in 2019 with a little tailwind, yes, it can be that the absolute EBITDA will overcome EUR 400 million. This is possible.
And ground handling. Ground handling is in so far -- it's difficult you know because we -- not on the revenue side. I think on the revenue side, it's relatively okay. The ramp-up, we have to accept, so to say, this very expensive tariff agreement and the ingredients, so to say, I explained in the chart in the appendix. So this costs us a lot of money. But now looking forward into the second half we have in so far the phenomenon that the cost base more or less compared to the first half is flat.
But on the other side, we see passenger-driven higher revenues. And we see also now or we expect a little bit better productivity. So the lack of qualification in the past has or our attempt to compensate this to bring in additional staff, especially from service providers, which was very expensive and productivity is relatively low because these are new guys and not qualified. And so looking forward, the productivity must become better. And that's the reason, and we do not expect any special or negative special effects in the second half of the year. And that's the reason that it can be that we run ground handling in the second half more or less breakeven.
I think tendency negative but we are coming close to zero in the second half. And now looking forward into, which is much more interesting looking forward. So for the full year, '23, a clear double-digit negative EBITDA contribution from ground handling EUR 30 million, EUR 40 million minus is clear, will be the outcome or even minus EUR 50 million, I do not expect, but it's not impossible.
So looking forward now to '24. As I mentioned, we will go into the central infrastructure with a relatively high single-digit price increase. And central infrastructure covers 50% of the revenue. So here, we can compensate the wage increase on the ramp and passenger services side, the price increase is lower. So there's a mismatch between the wage increase and the price increase. But therefore, we have higher volumes, so 5 million, 6 million more passengers, which also helps to generate more revenue. And then we try to bring down the number of staff, which we ordered from service providers.
And we -- in '24, it's also the year where we will start a strong focus on productivity again. Now the focus is on qualifications, qualifications, qualifications, quality. And '24 is a much stronger focus on productivity. So that there is a chance to come to breakeven but it's a chance. It's not today's clear guidance.
And what is the sustainable margins in the ground handling over time, let's say?
Margins, even in good times, I would say, 3%, 5%, 3% to 5%. This is, let me say, a normal margin in this business in normal times.
Okay. And the last one, if I may. So you said, I mean the focus will be to reduce the leverage by increasing the EBITDA, of course, EBITDA is going to increase that will bring down the net debt-to-EBITDA, but also the absolute gross debt. So I guess, I mean, there will be, in your mind, a certain level of leverage, net debt-to-EBITDA, when you start paying -- you're reaching there, you start paying dividends, let's say, because you want to bring down that number. So what is that number? I mean the sustainable net debt-to-EBITDA, when we can model in our model the dividend, extra cash that whatever comes in goes for dividend or let's say, growth investment. So what is that sustainable net debt-to-EBITDA or reasonable net debt-to-EBITDA?
Latest when we reach 5x net debt-to-EBITDA latest KPI. So next year, no dividend. Let me say, we have 2 clear years. So in next year, we don't any dividend for '23. That's what clear. So I would say, in '26, we are going to pay for '25, and it is also clear. And so the question is, are we going to pay in '25 for '24. So this is a question mark, and this depends how successfully now we are bringing forward all the numbers, the net debt-to-EBITDA, et cetera. So next year, no dividend. In '26 for '25, yes. And in the year in between, it's a crystal ball.
[Operator Instructions]
And the next question comes from José Arroyas from Santander.
Just one question on this on Slide 30, where you say that you expect the net debt to end the year 2023, EUR 100 million lower than before. And I noticed that this seems to come from your belief that you will not need to pay a dividend to a minority. Can you tell us what minority that is? And why this dividend has been suspended?
It was difficult to understand you because the transmission was not so good. So my understanding is your question is regarding Greece. Yes, is it correct, the dividend and the impact of the Greece dividend is indebted? Is this correct?
Yes, it's correct. That's the question, yes.
Yes, we had -- I have to make reference to the chart number 30 -- just a minute, please look on Slide #30. And here, we had the change on the right-hand side, we had before minus EUR 100 million, and now it's 0. Why the change? So when we -- the intention is to pay now year-by-year, very high dividends from Greece to the shareholders, and we have 3 shareholders. So we are the main shareholder, the second shareholder is a Copelouzos Group from Greece and the third shareholder was a small portion is a French investor. And when you have -- just as an example, when you have EUR 100 million cash in Greece in the company itself.
The EUR 100 million cash, of course, is reducing the net debt because if you have EUR 1 billion debt, and you have EUR 100 million cash, your net debt increase would be, just an example, EUR 900 million. And this is in the consolidation because Greece is fully consolidated. And if and when you are now going to pay out EUR 100 million of the cash as a dividend, we are going to receive EUR 70 million. This is our share. So then EUR 100 million is leaving Greece and just EUR 70 million is arriving at Fraport AG. Because the other EUR 30 million are going to the other 2 shareholders.
So there is -- if you pay directly dividends, there's always a leakage of 30% of the paid dividends before everything is fully consolidated. And then you have EUR 100 million less cash in Greece. This is increasing the indebtedness ceteris paribus by EUR 100 million. And EUR 70 million is compensated because the cash position at Fraport AG is going up and leakage of 30% to the other shareholders. And before, we the intention is to pay what was it, EUR 350 million, dividends, and we paid the EUR 350 million.
But due to financial engineering, we decided to pay the EUR 300 million -- EUR 250 million, the EUR 250 million, not in the form of the official dividend, just to repay the shareholder loan. And so it's the same money, which is transferred to the shareholders, to us and to the other 2 guys. But -- when we are -- when Greece is reducing the shareholder loans, you don't have the leakage because in the consolidation, you are -- when you paid EUR 250 million dividends, the cash is going down by EUR 250 million, but the indebtedness of Fraport Greece is also growing by EUR 250 million.
So by changing the way of paying the money to the shareholders compared to the former plan, paying direct dividends. So we have -- first of all, we have a tax advantage and second, the leakage and the consolidation treatment is not any longer given.
And that's the reason why we -- now, we have this positive effect in the guidance which we changed because we changed the way of repaying the money to the shareholders. A little bit complicated, but I hope I could explain it.
So there are no further questions at this time, and I hand back to Christoph Nanke for closing comments.
So thank you all for your good questions and comments. So if you have further questions, please give us a call. Yes, I wish you a good afternoon, and we will speak again in November for the third quarter. Thank you.