Fraport Frankfurt Airport Services Worldwide AG
XMUN:FRA
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Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Conference Call of Fraport AG. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions]
May I now hand over to your host today, Christoph Nanke, SVP, Head of Finance and IR.
Thank you, Moritz, and also warm welcome from my side. Welcome from Frankfurt Airport, from Fraport Group's headquarter. I have with me at the table, our CEO, Stefan Schulte; and our CFO, Matthias Zieschang. I think we can present a very confident story today and therefore we should jump directly into the presentation. Thank you.
Yeah, let's make it. Good afternoon, ladies and gentlemen, also from my side, Stefan Schulte. Let me start my presentation today with a review of the past year's performance. As you are aware, we recorded a strong traffic recovery in Frankfurt and even more dynamic recovery with our international airports. Yet, Fraport Greece, in particular, showed a very good traffic development exceeding already the 2019 benchmark year, which was remarkable.
For Frankfurt, we achieved recovery rate of around or about 70% level compared to 2019. Compared to other hubs in Europe, Germany was very much impacted by the Omicron variant at the start of the year, so travels restrictions were longer valid. Having said this, recorded a steady increase in traffic momentum over the course of fiscal year 2022 and ended the year with an average growth rate of roughly 100%.
Also for the current year, we are confident to see a continued traffic recovery in Frankfurt and in our International Activities, more on that I will present later. Financially, we also see it on the chart, we recorded a quick financial recovery in line with the traffic development as well. Key driver were our International Activities, which contributed more than 55% to Group EBITDA, so higher share gain highlights the importance of our International business, has value driver in the group.
Correspondently, our group EBITDA exceeded EUR1 billion and stood at 87% of 2019. Here we also recorded multiple one-off items in our International Activities like the divestment of Xi'an was EUR55 million -- EUR54 million, the second stage settlement in Fraport Greece accounted to EUR24 million, hence the economic rebalance in Brazil was EUR18 million. On an adjusted base, EBITDA therefore would have achieved an EBITDA of about EUR940 million.
Accordingly, the return on our invested capital, which we call RoFRA, for return on Fraport assets, improved significantly from 3.4% in the previous year to about 6% this year. The operating cash flow also increased strongly by around EUR400 million and achieved just under EUR790 million.
As good as these figures are, we are still confronted with a high indebtedness, mainly due to the COVID. Our net indebt -- our net financial indebtedness was up from about EUR4.1 billion in 2019 to roughly EUR7.1 billion end of 2022. As a result, we again have not proposed a dividend payout for the past year and also not forecasting this to propose for the current year for the year.
Moving on to our business update and starting with our summer flight schedule, I'm on Slide number 4. As you see on the chart, our continental and intercontinental seat capacities continue to go back towards the 2019 levels. Most dynamic here we are seeing on intercontinental routes, which are scheduled to back at about 90% of 2019.
The traffic recovery here in particular is and will be strong on U.S. or North America routes, in general, which are more or less already on the 2019 level. The flows ramp up, we continue to see on our routes to fly, especially to China. Adjusted for China, which is just about level on 44% -- 45% recovery rate on intercontinental would have been pretty close to 2019.
Our continental routes scheduled capacities are back to roughly 80% and here domestic routes continue to underperform the broader market at a level of about 70% to 75%. Our Western European flight capacities are already back to roughly 90%. So Eastern Europe continues to be impacted by the close of Russia into war -- into Ukraine by Russia, that's the reason they are at the moment on a level of 65% expected.
From a timing perspective, we already expect first traffic peak coming during the Easter holidays, so on a few weeks from now. Here passenger numbers should come back to around 85% of 2019 levels. This would mean around 180,000 passengers on peak days. To handle the foreseeable traffic increase, we have prepared ourselves markedly which we will show you on the next slide.
On Slide 5, I would like to focus on the security transitioning as Frankfurt Airport. As you know, that was one of the major pain points in the past. Correspondently (ph) requested to take over the security and responsibilities for a long time and jointly with the Federal Ministry and Federal Police, we have decided to transition those responsibility on the 1st of January this year. The transitioning comes along with the responsibility to procure and maintain the security equipment at Frankfurt Airport as well as the awarding of security contracts to security operated -- operators managing the full process.
Regarding the procurement, we have already started to address the security checks with seven modern CT scanners and will continue to rollout our equipment over the next few years. So another 24 CT scanners ordered. And some of them will be in place and operational already before summer. From process point of view, we have now also become more flexible and the deployment of staff and we have much better information’s, much more transparency on which will also be -- also benefit our passengers and airline customers.
Additionally, we have started to test one of Frankfurt smart -- Frankfurt Airport smart way as we call it a service which allows passengers to book a time slot for security checkpoint at home or when they are on the way to the airport, so a slot will entitle passengers exclusive access to the security checkpoints happening toward waiting times and to create an improved airport experience.
Simultaneously, we have reduced our shareholder -- shareholding in our wholly-owned security subsidiary FraSec as a security to 49%, so corresponding P&L effects are shown on the chart. While the security business remains broadly EBITDA neutral for us, the tendering of security services for all terminal parts at Frankfurt Airport will mean some EUR100 million higher revenues and OpEx at the same time.
With the procurement of equipment, we expect cash-outs of roughly low double-digit million amount per annum over the next few years. If we do our first conclusion, it's very positive. The throughput figures are significantly above the previous year. The waiting times are correspondingly very short and customer satisfaction has increased significantly and so did our employee satisfaction and friendliness. So all in all, a very positive development.
Moving on to our ground operations on Slide number 6. The first message here is 2022 was not a good year, from a quality perspective and from a financial perspective. Our task now has to be to make 2023 better year, financially and quality wise. And yes, we are confident that we are on the right way to achieve this. To explain you, what we have done in the meantime is needed to take a short look back at the last year's performance and the main reasons for the quality bottlenecks in 2022.
Firstly, our capacity this year in Frankfurt were quickly taken up by the market, especially during peak hours. We came back to a 100% or even more than 100% of 2019 individual hour. This surge in demand was simply too quick for the interfaces here in Frankfurt regardless whether we discuss check in security, boarding, but also floating and air traffic control. In addition to the increase in demand, the air space above Frankfurt was negatively impacted by the war of Russia and Ukraine, hence the divergence due to the closure of the -- close of the Russian aerospace, so the Eastern Europe air space mostly very much affected.
The tight air space also led to numerous delays, which had an additional negative impact on the operational performance in Frankfurt, which means you need even more people. Moreover, we have won a very detailed analyzers together with airlines and external consultants about the specific reasons for the delays -- delays which has not happened just in Frankfurt, but across the system, but we had a very, very deep focus on Frankfurt here because that's our responsibility.
Besides our own loading and unloading services and that's the reason no question at all, the catering and boarding processes were in particularly the interfaces which cause the highest number of delays besides rotations, air space, weather and so on. So consequently we're working intensively with our partners to restore the quality on the ground, on the different processes and to get the necessary people in place on the one side, but also to get a better and more reliable processes across the different partners in place and that's a very, very intense corporations these days, which is very positive.
What we have done in addition for a better year 2023. Firstly, we reacted quickly and implemented last year so called local rules. So local rule temporarily reduces the number of maximum flights, maximum movements per hour. We took out about 15% of our slots capacity in Frankfurt in order to balance and to stabilize the slot utilization more evenly across operational hours. We will start to ease local rule over the summer and come back to our handled four slots per hour towards the end of the summer flight schedule.
In addition, we intensively continue to hire staff. We recorded more than 1,000 people last year and also took on a high number of temporary external staff, about 800 people in addition. Our task now has to be to ramp up the qualifications of our new colleagues to buoying up our quality levels. Overtime, we will also have to replace some more expensive external staff of our internal employees to improve our financial results again. To sum up the operations were much more stable this year but it would still be demanding. We achieved a further ramp-up and also to address demographic changes we have now started to restructure our HR management by implementing a new project HRneo.
The cornerstones of HRneo are shown on Slide number 7. That's the long-running project or longer term running project, which is really necessary to demographic challenges on the workforce market here in Germany. So HRneo is tailored to demographic developments as we mentioned, so mainly -- Society in Germany. HRneo's efforts focus on the foreseeable shortness in the labor market, especially of skilled workers. There will be the biggest challenge we face in the future, but not just as an aviation sector it's in principle the topic in Germany or investor in Europe, especially in Germany. So that's the reason we have to get up that way.
Consequently, we are changing our internal processes to improve our access to the lower market, level market and to especially broaden our access. We have extended our outreach to countries in South and Eastern Europe like Spain, Greece or Bulgaria and we are also using the mean of social media, more efficient. Being aware of higher cost to recruit employees we also ramping up our efforts in our employee retention management. So to keep our employees longer within the company to avoid recruitment costs.
What are we doing here. It's too early. We just started the projects are initiated by our new colleagues [indiscernible] but in principle, it's a topic of corporate benefits on the one side, competitive salaries, but not just higher salaries, it's more that we have to focus on leadership of motivation creating of a sense of, yes we can. And yes, we do it with a WE in big letter we are together and does this, a lot of further topics and team spirit and so on. We have to create a Fraport (ph) family, a team Fraport, which is really pushing the topics and making it possible.
Among others it would also mean that we have to think about corporate blend and topics like corporate purpose, that's too early to give you answers today on that side. What I can just reassure you it's also on efficiency but efficiency and attractiveness those way safe to go together in such a market environment.
Moving onto Slide number 8, which provides you an update on our major expansion work here in Frankfurt Terminal 3. As you can see on the chart and also the cover page of the presentation we're progressing on our Terminal project. We are equivalently completing the [indiscernible] and also the highway access is on the home switch. Consequently, we are now moving ahead with attention installations especially the electrical installations and also expect to have first test twice, new people mover system this year.
Having said this, we are confident to be construction wise completed in 2025. So in about two years from now reserving sufficient time for all our processes. So the testing of the terminal infrastructure all the technical facilities for the operational readiness. The fact that we need terminal is we was only recently reflected by new forecast published by the federal government in Germany. And the forecast period until 2050 had terrific performance in Germany is expected to increase by more than two-third compared to 2019 base year.
In absolute terms this means an increase from 59 billion to 99 billion passenger kilometers. So, plus of about 40 billion passenger kilometers compared to 2019, again until 2050. So I think that's a very strong argument also for Terminal 3. Those passengers need to be handled with Terminal 3. Frankfurt is the as far as, I know only major airport in Germany probably Europe which has sufficient capacity to go on the air side, as well as on the land side.
Moving onto our International Activities, I'm on Slide number 9. As you can see on the chart, we have, meanwhile completed the new tower. Hence the new runway in Lima. We handed over the infrastructure to the local authorities. Please note here that the new one will be temporarily lower frequented as long as the new Mid-5 (ph) terminal is not in operation. This has to do with longer taxing times to the existing terminal causing of existing runway.
So terminal itself is well on track and we expect the commissioning and less than two years from now, which is enormous progress. Also the terminal in Antalya is progressing well and we are confident infrastructure in about two years as well. For Fraport Greece, the expansion works are over consequently the investment turned free cash flow positive and we expect Fraport to pay its first dividend this year for.
Fraport Brazil, you will have heard this is where the investment achieved another economic rebalance on the COVID-19 impact for the fiscal year 2022 in the amount, I mentioned already of roughly EUR80 million. All in all we are very satisfied with the progress of our international airports and expect this segment to deliver again a higher EBITDA than in 2019 this year.
Switching gears to our non-financial performance indicators CO2, I'm on Slide 10. Despite the traffic recovery last year we managed to keep our CO2 emissions under control and even reduce numbers in Frankfurt and the board. Here we especially -- that we almost achieved the target set by the EU for the CO2 reduction in fiscal year 2030 compared to the 55% reduction target that we have now managed reduction of about 50%, but you compare to the base year 1990. This reduction was achieved at a higher passenger number as you know probably know in 1990 we only entered EUR29.6 million passengers and we are managing a good way to infrastructure.
In 1990, there was no Terminal 2 at Frankfurt Airport and no one therefore. We continue our path to underpin our ultimate was clear measures. We also passed on masterplan decarbonization for Frankfurt end of last year. The master plan clearly defines measures to become CO2 free latest by the year 2045, sorry. So we are working to get it much earlier, at least earlier and continuous reaction for us.
The first action for us is more general one. With all the electricity needed will include the expansion of our Digital Energy grid which enables us to more efficient load management between purchase and onsite generated electricity. The action also includes more comprehensive energy storage capacities to store surplus wind power generated in between some hours and access to general electricity backup.
Second action for us covers our Scope 1 emissions and Frankfurt, about 75% of these emissions results from our car fleet correspondently we target conversion of our entire fleet into innovative engines. We also equip our ground power units with regenerative engines and reduce energy consumption of our buildings (ph). The third action our Scope 2 emissions. Here we decided among others to produce our green electricity on site, we have photovoltaic plants next to take one way West and construct solar panels on buildings.
We'll also includes the procurement of green electricity via wind park power purchase agreement in this [indiscernible]. The Masterplan also supported has to become more ambitious with our CO2 targets we have now lower our target for the year 2030 in Frankfurt and correspondently on a group-wide base. Please note here that our targets, do not include for compensation measures like offsetting real procurement of CO2 certificates. Our target is to become CO2 free on net zero. That's an important difference.
Coming to the last slide of my presentation. Our outlook statements on Slide 11. As mentioned before, we expect continued traffic momentum in Frankfurt and abroad. For Frankfurt passenger-wise, we are confident to see more than 80% and up to 90% of the level of 2019. In absolute terms, it will be more than 56 million passengers and up to 64 million passengers. Financially this should lead to group EBITDA of about EUR1.4 billion up to EUR1.2 billion. Here we are satisfied to see the results of our restructuring measures. We expect to achieve more or less the same EBITDA as in 2019 at a lower number of passengers
Bottom line, we see the impacts of the higher indebtedness and higher depreciation charges mainly from the new runway in Lima. As a result, the net income guidance does not entirely matched the pre-COVID level at EUR300 million to EUR420 million. We nonetheless expect a clear improvement year-over-year and continued strengthening of our equity base.
For the dividend, as mentioned before, we still don't plan to propose a dividend payout due to the high indebtedness. The net debt to EBITDA key performance indicator, you can see it on the chart is expected to remain more or less stable despite the improvement in EBITDA. Here is the continued expansion programs would again lead to an increase in net debt, as Matthias will also show you in a minute. So, thanks ladies and gentlemen.
And now, Matthias please go ahead with the financials.
Yeah. Thank you, Stefan and also warm welcome from my side. I would like to start my presentation today with a view on our historic financials and have a look at where we stand today. Here we are now on Slide 13, you find the development of our group EBITDA on top of the page and our group result on the bottom, reaching back until 2017. We are happy to see a very positive development after the total breakdown in 2020 generating an EBITDA PAX at 87% of 2019 levels.
Also heavily impacted by the write-off in the context of our shareholding in St. Petersburg, our Group result reached EUR167 million. Looking forward into the current year, you'll see that we are on a very good way to reach our former strength again. 2023 we expect more or less the same EBITDA level as in 2019 and up to more than 90% of the corresponding group result. Of course, this is very much depending on the final traffic development as Stefan already mentioned. In 2024 from today's perspective, we expect to be fully recovered financially.
Now I would like to come to our cash flow performance and indebtedness on Slide 14. The operational cash flow more than doubled compared to 2021 to EUR787 million, strongly driven by the traffic recovery in Frankfurt, as well as abroad. Putting this figure into a context, we are very pleased that the operating cash flow clearly exceeds our maintenance CapEx for the group by around EUR500 million. This already indicates the strong cash flow potential once our expansion CapEx programs are over.
Taking into consideration the CapEx in Lima and Frankfurt Terminal 3 as well as dividends from our at equity consolidated subsidiaries, we generated a negative free cash flow of EUR366 million. Heading the equity contribution for the new Antalya concession of EUR375 million on top brings us to a final negative free cash flow of around EUR740 million. As a consequence, our group net debt rose to less than EUR7.1 billion, which was the lower end of our guidance for the year end 2022.
Our net debt to EBITDA improved clearly to 6.9 times. On my next Slide number 15, you'll find the repeat chart of 2022, namely the H2 cash flow development. The operational cash flow of EUR602 million based on a very good recovery, especially in the peak summer season even outperform 2019 levels by 3%. With this we were not only able to cover the maintenance needs, but also our expansion CapEx in the second half of the year so that we were free cash flow breakeven.
You see that our maintenance CapEx is well under control with Brazil and Greece together just contributing EUR30 million and the remainder of just below EUR70 million for Frankfurt. Like this, excluding for the growth CapEx, we generated a strong surplus of around EUR490 million out of the operational cash flow.
Let me now move on to our segment performances in the past year starting with Aviation on chart number 16. Revenues continue to increase further to EUR828 million, which make up around 80% of pre-COVID levels. Compared to 2021 airport charges were around 75% higher, backed by the tariff increase of 4.3% and the traffic recovery.
Security charges are seemingly down by EUR20 million against the previous year. However, we have to bear in mind that 2021 was positively impacted by a one-off payment by the federal police in the amount of around EUR58 million. Adjusted for this also security charges increased significantly. In addition to that the compensation for COVID-19 losses has been recognized in other income in '21 in the amount of around EUR160 million. Despite all those positive one-offs in 2021 that have not materialized last year we were able to increase our EBITDA to EUR175 million due to strong cost control despite the operational ramp-up.
Compared to 2019, we were able to save more than EUR100 million which is a remarkable result bearing the inflationary environment in mind. Looking ahead based on a strong Q4 2022, with an EBITDA reaching more than 85% Q4 2019 and in EBIT even above pre-COVID levels, we expect a further increase in our operational results this year that should exceed pre-COVID levels. This development will be backed as a 4.9% increase in airport charges that has been well since January 1 which will already bring an additional price effect of more than EUR30 million.
To end this chart, I would like to come back to the security restructuring that Stefan has been talking about before. After the security transitioning we will not only account for the revenues and costs of the causes the traffic has been responsible, but for all security checks in Terminals 1 and 2 at Frankfurt Airport. Therefore, as mentioned before, our revenues and cost will increase by some EUR100 million without any EBITDA effect.
For this reason the margin of the aviation segment will be negatively impacted by the carve-out. Moving on to our Retail & Real Estate segment on Slide number 17. The revenues reached close to 90% of the pre-crisis level, especially due to the outperformance of the real estate revenues also driven by inflation-linked rent adjustments. However also parking revenues developed, above the traffic recovery to around 80% of 2019 levels without significant price changes that have kicked in beginning of this year.
Also, the retail spend per passenger developed much better in the last quarter of the year and we are very satisfied with the outcome of EUR3.33 which even represents a slight increase over the year 2019. This is a very pleasing development, mainly driven by services revenues back on nearly 85% of pre-crisis levels, despite lower passenger numbers. While revenues from shopping developed more or less in line with the traffic recovery, advertisement is still around 50% below 2019 levels.
All in all, the retail revenue more than doubled over 2021 to EUR154 million. On the OpEx side, we incurred higher energy costs of around EUR25 million compared to 2019 and therefore, I have to same cost base as before the pandemic. However, adjusted for energy costs we actually realized an OpEx reduction of around 20%.
Looking at the fourth quarter of 2022 stand-alone, you will see a very positive performance not only because of the strong retail business, but also due to a one-off effect in other income of about EUR18 million, from a property development at the airport site. Giving you an outlook for 2023. We expect a clear positive development due to the recovery of Asian markets, especially the Chinese traffic and therefore a more favorable passenger mix, an increase in advertising revenues and price increases. We however still expect headwinds from high energy prices, which we expect to remain above 2019 levels.
Turning the page now to our Ground Handling segment on Slide number 18. Revenues increased clearly over 2021 to around 78% of pre-COVID levels. Looking at Q4 standalone, we even saw a recovery to 85% of 2019. This outperformance compared to the passenger recovery is driven by weight and movement related charges in the segment. As Stefan pointed out before, last summer we had big issues with the quality of our operations, to somewhat stabilize operations and keep the airport running, we had to invest heavily in the deployment of external staff and pay for extra shifts and overtime.
In addition to that wage increases add FRA further increased our staff cost. Therefore, total OpEx more or less reached the pre-COVID levels. As a result, EBITDA was clearly negative at minus EUR74 million, while especially Q4 2022 was hit by provisions in the amount of around EUR34 million for potential settlement of claims, if adjusted for this one-off item Q4 2022 operational results would have been clearly up compared to 2021.
Now looking into 2023, our clear focus is on improving performance and productivity again. We therefore continue to hire and qualify especially internal staff. We will still need to deploy a big number of external staff. However, we do not intend to increase the number forever. The mid-term, of course, we need to reduce external employees and ramp up productivity again. We are well aware this is still way to go and we will be taking one step after the other. However, we will not lose sight of our targets to turn the Ground Handling segment positive again.
To end our three Frankfurt segments on chart 19, you will find an overview of our Frankfurt OpEx development in the past year compared 2019. You'll see that due to the headcount reduction we were able to save around EUR170 million, 19% of the 2019 staff cost. What is important to note is that the savings have been impacted by wage increases over time in the amount of around EUR30 million, especially from FraSec and FraGround.
Adjusted for the wage effects, total staff cost savings amount to EUR200 million and therefore close to our communicated target. In other OpEx various negative effects together cost an increase by EUR7 million compared to the 2019 cost base. An increase of around EUR70 million euros has been caused by the quality constraints we faced last summer due to the quick traffic recovery, out of that around 50% are primarily linked to the deployment of additional external staff.
The other 50% come from the already mentioned provisions in the Ground Handling segments. On top of that, EUR25 million higher energy costs further weights on the cost side. Taking all those effects together brings you in EUR95 million headwind. Adjusting the increase in other OpEx for those effects would have meant a significant decline of around EUR90 million. Looking ahead into 2023, we will see higher cost from wage increases, rehiring operational staff from the security reorganization and we expect continuing headwind from energy prices.
Now jumping from Frankfurt to our International Activities on Slide 20. As you can see our airport operations abroad have fully recovered financially, not only on the revenue side, but also EBITDA and EBIT wise. And this is especially remarkable as a total passenger volume has only recovered to 87% so far. Other income was positively impacted by nearly EUR100 million in total, which includes the gain from the stake sale in Xi'an as well as compensations for COVID-19 losses in Greece, as well as in Brazil.
As a comparison, 2021 even accounted for some EUR160 million compensations, while staff costs are still down by more than EUR40 million higher variable concession fees as well as unfavorable exchange rates led to an increase in other OpEx by EUR30 million over 2019. Like this the EBITDA reached EUR585 million, or EUR488 million if adjusted for one-offs, which is still nearly 10% above reported 2019 levels. This brings us to an underlying margin of 47%.
So this year we expect an EBITDA decline over 2022 due to the higher one-off effects last year. However, further traffic recovery to around pre-COVID levels overall, in combination with increasing charges, we still expect EBITDA to be above 2019 levels. This again will mark a sharp recovery compared to the underlying value of 2021. So excluding for the COVID-19 compensations.
On my next slide, I give you an update on our cash situation for the group. All in all throughout the year 2022, our cash position remained largely stable with a slight increase by EUR100 million to now EUR4.6 billion. The big push comes from the Lima project finance of $1.25 billion signed in December 2022 and we expect the first disbursement in the upcoming days. This brings our available funds to more than EUR5.3 billion after having paid back the Lima bridge loan.
On Slide 22 you see that we expect some EUR800 million maturities in Frankfurt to adversely impact our liquidity situation this year, out of this we are already well advanced to secure about 50% to be refinanced. The light blue bar, this year illustrates the repayment of the Lima bridge loan. On the top right, you see that our average interest rate of 2.3% has slightly come up from 2.2% mainly due to higher debt from our international assets, but this is still reasonably low looking at the current market conditions.
Looking at our net debt position for the year ahead, our free cash flow development is decisive. I will give you an outlook for 2023 on my next slide. As a starting point we take our EBITDA guidance as an estimate for the operational cash flow, which ranges from EUR1.04 billion to EUR1.2 billion. From that basis we deduct the CapEx in the amount of roughly EUR1.3 billion that stems from around EUR550 million for Terminal 3, EUR250 million maintenance CapEx, primarily for Frankfurt, Lima expansion CapEx of around EUR400 million and a remaining CapEx for the Group airports of less than EUR100 million.
Abstracting some further EUR150 million from fixed concession payments, borrowing costs and IFRS 16 as well as around EUR200 million of cash interest and taxes brings us to a negative free cash flow of around EUR400 million to EUR660 million. The fact that Fraport Greece, we pay out dividends for the first time this year. Unfortunately it has a negative impact on our group net debt due to the cash leakage of 35% of the dividends, which has to go to our shareholders. As a result, we expect our group net debt to grow to a level of around EUR7.6 billion to maximum EUR7.85 billion.
Having said this, ladies and gentlemen, I'd like to conclude my presentation, and we are looking forward now to your questions.
Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] The first question comes from Cristian Nedelcu from UBS. Please go ahead.
Hi. Thank you very much for taking my questions. The first one on the cost savings that you achieved in FY '22 around EUR200 million excluding the Ground Handling provision. Looking forward at 2023 you told us a bit about the moving parts, but could you be a bit more precise on what is the target of cost savings at the end of '23?
Secondly, in terms of CapEx, I think you discussed in the past about the possibility to close down Terminal 2 in 2026 when the Terminal 3 will open. Will the refurbishment of Terminal 2 to be on the agenda for 2026 and beyond? And if it is ballpark, what could the CapEx be associated with that?
The third and last one, if I may, on your outstanding bonds that the yields today on a sort of six, seven year duration are around 4.6%. Could you talk a little bit about how you see the trajectory of your interest cost over the next few years and also maybe to discuss a bit about how much of your excess liquidity, you are ready to allocate to reduce gross debt over the next years? Thank you.
Yeah. Starting with question regarding cost savings. So what you see in our presentation is in so far sustainable debt, the underlying base in the moment about are 4,000 FTE less, and now we have looking forward, the situation that we are going to rehire in Ground handling up to 1,000, so this runs against to 4,000, but on the other side, we still have potentials in the admin sector based on early retirement et cetera, so that we are going to have further reduction in some admin units so that we will end up all along in a range between -- more than 3,000 less than 4,000. So we are continuing with this significantly reduced base of FTEs.
And on the material expense side, it's the same thing which happened in the past. So we have this reduction of nearly EUR100 million and we continue with these elements, but on the other side, of course we have running against us the clear inflation impact as well as higher energy prices and we have to see how they will develop in the future. Regarding refurbishment of Terminal 2, we have to see whether this will start in 2026 or later on, but these amounts are passed of the maintenance budgets which we are, year by year doing so we calculate with about EUR250 million per annum maintenance CapEx and all the things T2 (ph) are included in the next couple of years in these budget.
Regarding the bonds, you can see on the re-payments schedule that we have more or less EUR1 billion ahead of us as repayment of the excess -- existing indebtedness. This means in the moment the total interest cost of our gross debt of EUR11 billion is exactly 2.3%. If now year-by-year, EUR1 billion would be refinanced, we have a current cost of debt of about 4% for long-term money and this means that the average cost of debt assuming that the current interest level would continue -- would go up by about 0.2% per annum. So in other words, [Technical Difficulty], there is a very modest increase of the cost of debt. And I hope that now I have covered all your questions. Anything open (ph)?
Liquidity, yes we have a very strong liquidity. This is an impression of our strengths. And so we are in a very -- very comfortable situation. We can -- we can go into the market and going for fresh money to repay the EUR1 billion per annum or we can at the same time use part of these liquidity, which is in the moment very strong and it's also absolutely clear that all along we are going to reduce it, but in the moment where we have these ongoing negative free cash flow, I think it's good to have this excess cash. But again, we have this option to go for fresh money or are taking parts of the existing liquidity to bring it down and using these existing funds for the repayment of existing debt, also depending from the interest rate development in the next couple of years.
Yeah. Thank you very much.
And the next question comes from Elodie Rall from J.P. Morgan. Please go ahead.
Hi. Good afternoon and thank you for taking my questions. First of all, on CapEx, can you confirm now the overall estimated cost for Terminal 3? I think you had said EUR4 billion in the past and now you expect another EUR2 billion in spending. So just wanted to have an update on the overall cost there.
Second on CapEx as well. We have the phasing that you gave us on Slide 23 for 2023. So it's EUR1.3 billion because -- EUR100 million of IAS 23. What should we expect for '24 and is the EUR100 million IAS recurring?
And third on that same slide, you project for '23 EUR200 million of interest and tax for '23, but we were already at EUR175 million more or less in '22 if you take the net interest and the cash, the cash flow statements for tax. So how can it be only EUR200 million mix, I mean, in '23? And lastly, just if I can squeeze in on Ground Handling, would you expect EBITDA to turn positive in '23? Thanks.
Probably I start with some questions and you have a little bit more time. On the CapEx on Terminal 3, yes, we confirm the EUR4 billion, but in rough terms, whether it's at the end, EUR4.1 billion, EUR4.2 billion, so in such a big project we're wanting for a total of more than 10 years. And you know the material increases and so on, which is a different -- difficult with [indiscernible] and with China and so on. So, yes, could be a little bit more, but on that level, it will be at end. To be quite honest, I'm not discussing on touch a bigger project of EUR100 million or EUR200 million that's always possible on that side, but we are in line with the numbers we gave you.
On Ground Handling, 2023 will not be like even there is no chance because we will see on the one side, this year, the wages increase, you know that the negotiations are running there. We are not part of them because it's on the federal level, but we are belonging to this at the end. And we are passing a lot over to customers, but it depends on the duration of the different contracts to ask. So some contracts we increased already, other contracts will follow this year, but there will also be some longer-term contracts where we cannot directly pass it over.
So there is, of course, the time that in between. And as mentioned by Matthias or also by me, still we have a difficult situation on account and it was all the additional qualifications, hiring of people and so on. So I would expect that we are getting to more normal situations in the year 2024 and passing overall the additional cost in inflation area will be 2024, 2025 or earlier wouldn't expect to be breakeven on that side. So taking CapEx 2024, I think that's the open question on interest.
Yeah. First of all, starting with CapEx. So in '24, it's more or less the same as in '23, so EUR200 million, EUR250 million maintenance CapEx for the Group. Then on the other side, between EUR500 million and EUR600 million for T-3 and more or less the same amount like in 2023 for Lima. So we are talking about EUR1.2 billion, EUR1.3 billion, EUR3.5 billion CapEx in '24. So it's like -- it's like a CapEx settle in '23 as well as in '24.
Regarding your question for the interest, it's relatively simple. So we have a gross debt of EUR11 billion, exactly EUR10.9 billion times 2.3%. So our interest expenses cashed out exactly or relatively exactly EUR250 million. On the other side, we are receiving interest income for the existing liquidity, of course, depending on the current interest rates, which in the moment are running in favor of us. So as of today, we calculate for this year EUR60 million.
So again EUR250 million interest expenses minus EUR60 million interest income is a net financial interest result of EUR190 million and then we are paying some taxes, which is not similar to the taxes we show in the P&L because these are IFRS taxes in reality. We paid taxes in Germany based on the tax loss carry forward. And therefore, in the moment, it's more or less, so to say, zero some taxes for the assets outside Germany. So that the minus EUR190 million cash out -- net cash out for interest rates plus EUR10 million, EUR20 million taxes are, in total, generating this amount, which you could see on Slide number 23.
Okay. Thanks.
Thanks.
And the next question comes from Stephanie D'Ath from RBC. Please go ahead.
Good afternoon, and thanks for answering my questions. The first one is on traffic in February, which was impacted by operational issue. Could you maybe quantify? Because, if we look at the recovery rates against 2019, we were at 79% in January and 75% in February. So is that 44% deterioration into operational issues or is that on part of it?
My second question regarding their security responsibilities you are taking over. Could it be that in the mid-term as opposed to the neutral on EBITDA, it becomes positive? And my third question is on Ground Handling, when would you expect EBITDA to turn positive again? Thank you.
Let me start. I think the impact on the February numbers have been around 3.6% of the traffic, so on 60,000 passengers or 70,000 passengers, I'm not sure exactly. But so without the strike, the traffic recovery would have been 78.6%, I've just mentioned exactly that's the number. So it's more or less in line with the general number, roughly 80% more or less.
Regarding security, they are very clear about how we have to calculate the security revenues compared with the cost by the federal government because at the end it's a service we do for the federal government, but we are now -- we have [Technical Difficulty] responsibility, but how to calculate those revenues and fees, there are detailed calculation guys which you have to follow.
So there could be a small EBITDA positive, but that would be really small. It's really not change the numbers that we nevertheless took over the responsibilities really to get away towards the pain point we had in the past with long fueling times, with highly inefficient security process, unfriendliness intent, leading up to the points that even business, especially business customers, business [indiscernible] just mentioned never flying via Frankfurt.
And that was the point that we took it over because that's -- it a process where you have to get control and which you have to manage because it's the end and you are also probably a frequent flying person, you want to have a really seamless service and, for instance, service on that side.
Ground Handling, I mentioned already, it will take a little bit longer due to the environment we have in the market, so I wouldn't see breakeven earliest 2025. But I would also expect a much better performance from year-to-year whether that's really break-even 2025 that depends. I don't have at the moment the knowledge how long those different contracts are wanting.
But now that we are increasing the Ground Handling charges already on a lot of contracts, but not on all contracts, that's the problems there on that side. And it depends on what time we get the additional wages and the wage increases will be there 2023 -- 2024, how we can pass them over on that side. From the point of efficiency and so on, there shouldn't be any shortages any longer in 2024, that's why -- so probably 2025 should be a target.
Thank you.
And the next question comes from Ruxandra Haradau-Doser from Kepler Cheuvreux. Please go ahead.
Yes. Hello. Congratulations on the performance and thank you very much for this detailed presentation. I apologize if I ask a question that has already been answered. If it's the case, please ignore it. I was kicked out several times from the call. First your guide for this year on EBITDA up to pre-crisis level, but you expect traffic below pre-crisis level. Could you please give us an indication where do you see the EBITDA range once traffic fully recovers to pre-crisis level?
Second, at what level do you calculate regulated cost of capital currently? And you mentioned that RoFRA was at 6% in 2022 and below the level of 2019. Could you please help to understand what the RoFRA would have been in 2022 if you were to calculate the REP (ph) as it will be calculated 20 assets under construction will be commissioned? Then once you temporary close Terminal 2, what happens with the REP of Terminal 2? Will it remain in the Group REP since the closure is only temporary? And finally, what dividend do you expect from Fraport Greece? Thank you.
May I answer your question Ms. Haradau-Doser. So EBITDA -- so we have given you a very broad range of EBITDA 1.04 to 1.2. So this is depending, of course, on the traffic recovery when we're -- would end up at the high end of traffic expectations and it's going to 1.2 if we are ending up at the lower traffic numbers. So there is some place to go through the year to the downside. But you know us, we have conservative to our clear ambition and target is to end up in the upper half of these terrific guidance.
Regarding your question what will happen if and when we are fully back on 2019 passenger numbers? The answer is relatively clear. We will end up with an EBITDA above the old number. Why? Because we have on one side sustainable cost saving effects and on the other side, of course, in the meantime, we have escalated some prices. And this combination, cost discipline plus price increase will lead to an higher EBITDA given the same passenger numbers like in 2019.
Regarding the RoFRA, so we -- always in the past, we already are including the assets under construction. So each and every euro we invest in Terminal 3 is the day after part of the REP. So when you look into the REP of 2022, all the investments already done in favor of T-3 are part of the REP and the same is valid for Terminal 2. So all the historic investments of T-2 in the REP will stay in the REP because the closure is temporarily and it's a backup terminal. And when the capacity of T-2 is needed again, we will -- not overnight, but in the short time, we will take back this into operation.
Fraport Greece dividend [Multiple Speakers]
Yes, Fraport Greece -- yes, we -- the dividend which will be paid in this year in total is exactly EUR250 million. So today, you'll find the dividend -- the dividend which will be paid in the balance sheet of Fraport Greece, excess liquidity. And from this EUR250 million based on our shareholding of 65%, we are going to receive EUR160 million and EUR90 million will be paid to our co-shareholders. This is Copelouzos on one side and the French fund on the other side.
So there is a leakage of EUR90 million going to the co-shareholders and EUR160 million from Fraport Greece to Fraport AG. And that's the reason why you find in the -- in the cash flow projection in the last slide on the presentation, when you look on the total free cash flow a minus of EUR100 million, this is exactly the dividend leakage because today the whole liquidity is fully consolidated from Fraport Greece in the Fraport group numbers. And by paying dividends with co-shareholders, we have the leakage in the amount of these money which will flow to the co-shareholders.
Thank you. Maybe coming back, what is the level of the regulated cost of capital currently? And if I remember correctly, you include the assets under construction at 100% of the CapEx in the RoFRA. Could you please help us to understand what the RoFRA would be, if you were to calculate the REP as it will be calculated once these assets under construction will be commissioned?
Yes. First of all the WACC in 2022 is 7.3% pretax. And the second part of your question, give me just a second. We have -- so the REP in aviation -- is just in aviation is for -- Fraport, not the REP, Fraport assets EUR4.1 billion. So -- and your question is without -- what was your question?
So what would be -- maybe if you don't have the figure now, you can send it to us later?
We don't have it here, but we will give it to you later on because [Multiple Speakers]
Thank you very much. Thanks.
And the next question comes from Johannes Braun from Stifel. Please go ahead.
Thanks for taking my questions. I have two quick ones. First one, what would be the terms and the interest rates for the additional financing in Lima, the additional EUR750 million? And then secondly on the cost side, what will be the cost savings from replacing the expensive temporary staff with normal staff in Ground Handling? And also what will be the OpEx saving some closing down Terminal 2 please?
We -- in last year, we spent exactly EUR35 million for the external staff. So we are not going to zero, that's also for clear in the future, but this is a maximum now. And I would say that minimum 50% of this amount is a potential cost saving looking forward. In a situation where we just run our own stuff, then it would be theoretically EUR35 million for Lima. We have the number exactly. What was the margin so -- give us just -- okay, so I just found that it will be fixed as a margin risk margin and when the payment will take place and in fixed, so it's three months LIBOR plus X for the risk margin.
It's a typical project finance margin for South America -- for U.S. dollar for such a project in the U.S. project dollar price (ph).
We also have to give you that number. So very much as soon as is fixed, what we can give is a calculation or what is the next [indiscernible] Mr. Nanke will call you.
Okay. And the OpEx savings from closing down Terminal 2?
This was about EUR50 million.
But be careful, then you have additional OpEx of Terminal 3, so you can just take the net. So just to put down, EUR50 million is, of course, not the white.
Any indication on the net impact I guess, Terminal is much more [Multiple Speakers]
Yeah. It will be more efficient but as we speak up. So I can't give you today a net figure. But yeah, we can calculate it, but I don't have that figure because Terminal 3 is much bigger than Terminal 2, it's more efficient Terminal 3 of course as the brand new one. So as mentioned maintenance CapEx also will be at the beginning lower, but then the question is at what time do we really start with kind of waiting Terminal 2 and so on. And how is this going into the different year schedules. So that's a little bit too early that's the reason we're not prepared for that question today.
Thank you.
Next question comes from Sathish Sivakumar from Citi. Please go ahead.
Thanks again for taking my question. So I got two questions. Firstly in terms of the cost like compared to '22 going into '23, can you just give color like what are the elements of inflation that is not fully felt of passed through into your cost element, where could you see the more like increased risk of inflation impact?
And then the second one is around the real estate performance into '23. And do you see like 2022 trends continue, because you did at a good year on real estate and what are the drivers are and how does, we should think about into '23? And the third one is actually related to retail contracts. So first part of that is actually, what is your exposure to inflation pass-through on the retail contracts?
And the second one just relates to that retailers, if you look at Q4, you had a really good performance on retail revenue per pax around 13% year-on-year increase. Can you share any color on what are the drivers are and just that today, one of your peers has mentioned, they expect average spend per passenger to decline as we go into '23. So can you just give some color why you actually think that will be slightly different for you? Thank you.
I can start with the first question. But that's really differentiated answer because you have to go through the different segments as it's not a one answer. If you take the regulated business and If you look at inflation, so additional material costs and so on, of course this inflation is going on different sizes but it goes in then higher material costs, higher CapEx and so on, on CapEx projects, as well as higher wages loans for the people. So for the stuff and that goes into the next amount of aviation charges and decreases of aviation charges where we will ask for sure for an increase of aviation charges. No question we have to compensate this but there's always a time dig in between.
If you take Ground Handling. I mentioned already before, that you have direct contracts, customer contracts, some contracts with an inflation clause in there other contracts which are linked to salary increases. So wage increases, but there are certain contracts which have a fixed increase independent from the inflation. And then you have to have direct contact, direct negotiations, which we do even if there is no contract. And sometimes you're more successful, sometimes less there has contracts which are even longer running where you don't have such a clause as mentioned, we have to go into direct negotiations, that's the reason.
If you see on the lowest level of employees hiring increases on wages is time or this is period that's affecting us on Ground handling because we have a higher number of staff, which is more on the lower base and there you will see over-proportional salary increases over the next 24 months whatever the reserve will be at the end. So there are some compensation mentioned is most, but not everything is simultaneously, like on retail where If inflation goes directly into higher prices, we also have a higher shift on that one. So if you get 30%, 35% as a commission, then of course it surprises going up by 10%. We have our 30%-35% or 25% whatever topic it is.
On real estate, as Matthias mentioned what is our most times inflation related contracts. So it goes directly. So here with the next round of adjustments of normally next January 1, but that's where direct effects. On real estate performance in Q4. Matthias do have more detailed answers on that one?
Just some general remarks regarding inflation exposure. If you look on the OpEx side at Frankfurt side, combining all three segments and without looking on cost of capital, the OpEx, you can divide into 70% personnel costs and 30% material expenses. So this is a general allocation of the cost elements. And if you look on the remaining 30% material expenses there, you have one -third for energy and now you can make your own calculation what you expect as inflation rates or wage increases, you can calculate the cost impact on the Frankfurt P&L. What Stefan mentioned, we -- our key ambition is to bring it through on the revenue side, by inflation-linked prices in retail as well as real estate and all other operations.
And the next question comes from -- I am sorry. Please go ahead.
No, no. In terms of the units spend per pax performance in Q4, why is there had been so strong? And do you expect that to actually continuing into '23?
Different mix of topics. First of all so little bit more positive passenger -- passenger mix -- passengers on that side, but also destination wise more Korean passengers and so on. So that comes back. That's positive, but also inflation was higher prices. As mentioned, this has been the two most important topics on that side. And sometimes, yes, sometimes also -- where you see that suddenly every passenger wants for all (ph) or something like this, was the campaign on that one, which I can give you an argument, why this is a topic but that sold out and you see also those positive effects on airports, if you are in that segment.
Perhaps in addition to this, food and beverage fronts was excellent. So there was a huge increase in F&B. So the spend per pax in shopping was comparable to 2019 despite unfavorable passenger mix without the Chinese. But on the other side in services, we outperformed and inside services, especially F&B was brilliant in Q4.
Thank you.
The next question comes from Hari Kumar from HSBC. Please go ahead.
Yeah. Hi. Thanks for taking my questions. So first of all, going back to the retail spend per passenger, so as you mentioned, I mean the Q4 was very strong. I mean, of course, Q1, Q2, Q3 would have been impacted by many events, but do you think going into 2023, we should expect further retail spend closer to Q4 rather than the full-year average? That is my first question. Secondly on the traffic side, do you think you can actually accelerate your traffic by giving some more incentives? Would you think about that?
Third question is about, how confident or how comfortable are you with your balance sheet? Of course your liquidity is strong but then in 2024 again, you mentioned EUR1.4 billion of CapEx and a similar amount of debt maturing in 2024. So it looks like probably a cash outflow of almost like EUR2.8 billion, which seems to be much higher than EBITDA. So your FCF could be still negative. And I'm not sure if how net debt to EBITDA would move and then you are already very high at net debt to EBITDA. So, how comfortable are you in terms of your balance sheet?
And finally, my last question is about your international assets. So if you give us a bit of a brief breakup passenger, what kind of flexibility would you have to increase your airport charges that your different international assets, mainly including Greeks, and Lima and Antalya where you have very strong trading, what kind of increase in revenue and EBITDA you should expect at your international assets in 2023? Thank you.
We start with the spend per pax. Your question is Q4. Good guidance of malls the average. Yes, Q4 was very strong. But Q4 is always the most strong quarter. So I would more take the average than the Q4 because that's probably a little bit misleading even if we hope that also this year Q4 is very strong and we have a good year but average is there better guidance on that side.
Accelerating traffic was, the bookings situation is very good, that's not a question. If necessary we also have incentives or you know that we had incentives after on the recovery side, after corona and that made a lot of sense at the moment. It seems to be that it's not so much the topic of incentives, it's more the topic of resources. So to have a stronger goals, it's only possible if everybody has the necessary resources in places and it's not the topic of incentives for this year. The moment at least our perspective and the discussions we have with airlines.
On the international assets, I think we gave some time ago already indication, most times we are working on concession contract which are very clear and have really key awards in how the aviation charges can be increased or whether they are stable. So if you take Antalya, the -- there is an increase from the next concession period onwards 2026 as far as I know, but in between the concession period, the fee levels, the fee per passenger is fixed. It's not increasing by inflation or we have seen always a very good increase of passenger goals, so that's compensated.
Greece as a clear -- was that you can pass all the inflation, was really in Lima in principle also can pass it over. But we have a productivity figure against it. So that's really comfortable situation. Yes, we have to work on the productivity, that's the one thing, but that's okay, but you can [indiscernible] why to pass it over. These are the four major assets on that side. Balance sheet?
Yes. I will take over this question. So first of all, I think there is a clear transparency, what will happen in this year. Looking on our last chart in the presentation, so we expect stable net debt to EBITDA number 6.9% and this is driven by two elements. On one side, the increase on the EBITDA side, up to EUR1.2 billion. On the other side, the indebtedness, which is driven by CapEx, and so that we will end up in '23 more or less same 6.9% and perhaps with a little tailwind, perhaps a little bit lower.
So then the interesting question is what will happen in '24? In '24, of course. EBITDA will be significantly higher than '23. On the other side, the CapEx is more or less the same like in '23. So we are still in the negative free cash flow zone, but the increase will be dampened by the higher EBITDA. So from today's perspective, we will overcome the EUR8 billion threshold, so to say, as the absolute indebtedness.
But the net debt to EBITDA will be clearly lower than 6.9% and then in '25 this year, the Lima expansion program is finished. So there is a first drop on the CapEx side. We are back on a positive free cash flow neutral or even positive and then we have stopped the absolute increase of the indebtedness at a number, which is 8 times.
But then you have. But then you have debt repayment also falling in '24 of EUR1.4 billion. So, don't you think that will have an impact of course?
As I mentioned, we are extremely comfortable situation because we have this huge liquidity and we can always at that point of time decide whether we're going again into the market, depending also from the interest rate situation or we are bringing down our excess liquidity and all along, it's clear we are not going to run the company in this size with such a huge liquidity. This is due to the fact that we are coming from COVID and we survived on our own. In the long run of course, we are going down to perhaps EUR1.5 billion maximum excess liquidity and not any longer EUR3.6 billion plus available credit lines.
Okay. Perfect. Thank you. Thank you so much.
The next question comes from Dario Maglione from BNP Paribas Exane. Please go ahead.
One -- four quick questions from me. What was the energy build in 2022? Second question, what wage inflation for Frankfurt employees -- that 2023? Third question, replacing the temporary staffing Ground Handling with your own staff, could that save? Last question on, what was the concession payment for the Greek airports 2022 with respect to 2023?
The energy build in 2022 was EUR110 million, that's compared to 2019 was EUR85 million. So, EUR25 million in addition, which inflation, you mean, what's the wage increase will be this year? That's too early because the negotiations are warning. We are belonging to the federal system on that side. So it's a federal contract or public contract for federal -- for federal and national services where airports are belonging to due to the past.
They are asking for plus 10% on the unions but was a minimum of plus EUR500 to employee which would mean on average more plus 15%. In our opinion that's predictable, but we have to see how we get out and I wouldn't call. Please, I don't say I'm not commenting, here we are this channel was what I believe what the solution will be at the end because next negotiation around will it be March 27 up to April 1.
Temporary works, I think it was mentioned already that additional process around EUR35 million, but that's not going completely as Matthias mentioned also that the additional costs are around 50%. Because if you want to replace them with normal employees and they are 50% cheaper that's the message behind.
Concession charges, EUR20 million in the year 2022 because that's the variable charge, fixed charge was waived because of COVID. At the end, the warehouse that pay the compensation amounts. As we mentioned already, 2023 is very, should also on -- I would assume that fixed is also compensated by this compensation mission is most. So it should be around EUR20 million, maybe because of traffic, EUR25 million something like this. But not a big change in.
Okay. Thanks so much. Next question.
[Operator Instructions] The next question comes from Graham Hunt from Jefferies. Please go ahead.
Thanks for that. The questions just three from me. Firstly on retail sales per pax, could you just -- are you able to give any indication if the spend per passenger from the Asian origins in Q4 and how that compares to pre-COVID levels, specifically for those passengers?
Secondly on dividends. I know that you said you're not looking to resume payments in '23 and I think your overall guidance is to look to propose resuming when leverage returns to 5 times EBITDA. Could you remind us when you're expecting that threshold to be reached? And whether there are any other thresholds that you're considering with regards to resuming dividend payments and given your strong balance sheet position, or liquidity position, Is there any flexibility around that in your perspective?
And then thirdly, quickly on the summer and potential disruption around labor. Are you able to give any sort of color on the contingencies that you have in place to potentially avoid the disruption that we saw last year, if talks break down or if we just see an increased level of disruption again over this summer? Thanks.
Start with options on summer '23 compared to summer '22. Yes, it was a very difficult operation in '22, was very much twist but there wasn't -- it hasn't breakdown of all down. We could manage it together with the airlines, who have lot of measurements to stabilize. It's part of the hand punctuality. The target for this year 2023 is very clear. I must and we want it was a higher punctuality but much more stabilized and there are a lot of processes in place, hiring of people, qualifications of people and so on and so on, but also change in exchanges of pulses, much better cooperation.
So I'm optimistic regarding summer '23. There will be much better than summer '22 even if it's not achieving the top performance in -- out of years, we would like to see like 2016, 2017 something like this, but we are getting back to that level. On dividends. yeah, I think we gave you the indication that we have to get the year to '22 the year the five times EBITDA. That's the main topic and we will not propose a dividend payment for the year 2023.
There was indication we gave you. So somewhere around 2024-2025 there we should come back with dividend payments. That's the best estimate I can give you today and hope that we are then also getting to positive signal to the market. But let's give -- let's see how the traffic is recovering over the next 12 months. And what's your outlook incentives for the year 2024 and then we will probably be more precise on that one.
On retail sales per pax, do you have any information.
Yes. Some additional information regarding spend per pax. So you know, for the full year, we had these EUR3.33 euro spend per pax. This is little bit above 2019 levels. The difference is, 2019 was with about 5% Chinese or Asian customers. Now we made a little bit better spend per pax without more or less the Chinese. So the structure changed, nevertheless we were able to outperform 2019. And if we drill down into the sub-segments of the spend per pax in these EUR3.33, we have EUR2.10 for shopping and this was exactly the same like in 2019. But again the structure now was so far worse because we have no Chinese. So, the other one spend, more so to say.
Then on the advertising side, there was a huge reduction compared to 2019. So upside for the future. While on the other side, we clearly outperformed in the sub-segment services and services is dominated by F&B and we had -- here we had an extremely strong performance in Q4 and now looking forward, we assume that for the full year 2023 the spend per pax will be higher than the EUR3.33 as of today and of course depending from when and in which time mentioned the Chinese will come back to our Frankfurt market, this shows the upside potentials because of spending behavior of Chinese is 5 -- 4 times higher than the average. So this is showing -- and again in 2019, we had 5% of Chinese 4% to 5%. So this is defining the potential, but again the whole thing depends from when are they popping up here at Frankfurt Airport.
Got it. Thank you.
The next question comes from Jose Arroyas from Santander. Please go ahead.
Two quick clarifications, please. Could you first of all give us your best estimate of the cost savings at Frankfurt by year-end 2023 compared to 2019? And secondly on Terminal 3 CapEx, I think you mentioned that the EUR4 billion indication still stands but that there could be some deviations of maybe around EUR100 million, but I was running a calculation here at my end. I think between 2017 and 2022 amount spend is EUR2.3 billion and today you are telling us that there is a slightly more than EUR2 billion that needs to be contracted. Does it not make the new budget closer to EUR4.4 billion or to EUR4.5 billion than to EUR4 billion? It's just a quantification. Thank you.
I can start with cost savings. So from our presentation, you know that regarding, personnel expenses, we showed in '22, EUR169 million. So EUR200 million coming from the 4,000 people, running against the wage increase, in the meantime and now looking forward, we are going to lose something from the 4,000 due to the ramp up in Ground Handling. A little bit compensated by further reductions in admin.
Having in mind that of course the salaries and admin are much higher. So this can at the end of the day, more or less a wash but what we will see in this year is again, the wage increase, which today we cannot calculate because as discussed, there are the ongoing negotiations regarding the new wages. But it can be another EUR30 million increase. But this is just depending of the outcome of the negotiations. So it's EUR200 million minus EUR30 million in '22 minus x in 2023.
On the material expense side, so the net effect was zero. But, we showed the underlying was EUR90 million and now we are ahead in the material expense side, of course, some special items like the provisions which we do not assume will come back again in this year. So there is an implicit saving of EUR35 million for the provision, and then we have to see what we can do on the external staff side but in '23, this is very limited.
To make the long story short, it can be and we have of course inflation regarding -- further inflation on the energy side and other materials things. But I would say as of today, that's the saving of the provisions which will not come again a second time, can compensate all the inflationary things which might come from monetary expansion policy.
Regarding Terminal 3, to be quite transparent, quite often the internal number of project Terminal 3 has at the moment a budget of EUR4.3 billion, but it's including a risk buffer of EUR150 million and now the question is very simple. Of course, behind is with budget -- which buffer is of course, there are several probabilities and on best case if we don't need it at the end we are on a EUR4.1 billion or EUR4.15 billion, if we would need to more, than if your calculation on EUR4.4 billion.
So it's not always an optimistic guy. But I would say that's the reason I mentioned EUR100 million, EUR200 million, could it be more at the end that we are working on that also this legal staff and so on that we don't use the full risk buffer. But we would see at end 2025, 2026 and then some claims will also take longer and then we have to see how we get out of it.
And we have another question from Christian Cohrs from Warburg Research. Please go ahead.
Yes. Thank you. Three questions from my side. First of all your work has increased due to higher cost of equity. Can you maybe share some color what's effect on that? And secondly, with higher cost of equity and you were talking a lot about cost inflation. So is it fair to assume that airport charges prospectively next year will be higher than the increase you are benefiting from this year? And lastly, with regards to your indebtedness, do you have any non-core assets or did you have anything in your portfolio which you could or would you be willing to sell in order to reduce and improve the financial leverage? Thank you.
Cost of equity mean the WACC calculation here we had in the past, an increase because the interest rates for the indebtedness went up. Second, the beta factor also increased due to a higher volatility. And now I think the higher interest rate levels are given also in the next couple of years. So we don't see a reduction, perhaps, also again some risk of further increase. But we have to see. But again due to the fact that our indebtedness is long term. So our exposure as I mentioned, is about 0.2% per annum on the indebtedness side. So regarding beta factor, nobody knows, but again, it can be that there will be a slight increase of the WACC in this year, but depending from the variables. And…
Regarding non-core assets. It's a question of definition what's core, what's non-core? Of course you can say, if necessary, a lot of topics like parking, and whatever. But then you also losing the earnings out of that and the revenues without out of that business, that's the reason we haven't gone for this afternoon. There is no plan on that.
Okay. That's clear. And what's the higher WACC. Is there any chance or is there any likelihood now with higher WACC in place that the -- that you will go for a bigger airport fee increase to the regulator for next year.
This has nothing to do with WACC because we have huge headroom, because our return on assets is significantly below the WACC, regardless how the WACC will perform, so the headroom is [Multiple Speakers]
But you are right, we cannot go to put a figure on the table. We are not going for 2%. That will be clear, so it will be a bigger amount, but I don't want to discuss at amount, because we are still in preparation and some discussions there.
Okay. Thank you very much.
There are no further questions at this time. And I hand back to Christoph Nanke for closing comments.
No. Thank you everybody for attending. Thank you for this good and productive discussion conversation. Yeah, if you have further questions, please give us a call in IRR and happy to see you soon on one of our roadshows and conferences. Thank you, bye.
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