Aena Sme S.A Unsp/Adr

Without further ado, I will pass the floor to Mauricio Lucena, Chairman and Chief Executive Officer of AENA. Thank you.

Hello, everybody. This is Mauricio Lucena speaking. I will start with slide four. Before that, thank you. very much for following our presentation. If we move to slide four, this slide as you can see summarizes the evolution of the activity and the most relevant economic and financial trends. I will start within this slide passenger traffic. As you can see, AENA group passenger traffic increased to 117.3 million, which represents almost 82% of the traffic in the same period of 2019. And if we divide this figure into geographies, The Spanish network traffic was equivalent to 82%, exactly 82% of 2019. London Luton Airport was equivalent to almost 66%. And finally, AENA Brazil, the airports of the northeast of Brazil... showed an increase of the traffic that was equivalent to 98% of 2019. You know that last June we updated our 2022 traffic forecast for the Spanish network, which we consider will be something between 75% and 85% of the 2019 traffic. The mentioned review was based both on the one hand, the capacity that the airlines are scheduling and deploying in the summer season, which, as you know, ends at the end of October. And on the other hand, the review was based on the existing current, and I would say, roaring demand. You know that at present the demand of airline tickets is, let's say, very hot and nobody expected at the beginning of the year that at present we would have this level of demand, but this is one of the two reasons why we reviewed and increased our forecast for the current year. On the other hand, total consolidated revenue nearly doubled to more than 1.7 billion euros. Both the regulated and non-regulated businesses benefited from the strong traffic recovery, as is natural. And this traffic recovery in June was 89.2% of the traffic in June 2019. And I have only a preliminary intuition, but I would say that our impression, our current impression is that in July, in proportional terms, in relative terms, we will be in this, more or less in this figure. So in other words, probably the traffic recovery Now, if we consider not only June, July, but also May, probably we'll stabilize in the short term at least around 90%, which is, I repeat, a figure that at the beginning of 2019 we could not expect. Nobody in the sector was expecting. But, of course, it's very good news and promising. I would also like to stress that AENA has demonstrated that not only we still have the most competitive costs in the industry, regardless of some increases in our OPEX, which we will detail in the following slides. But we still, as I said, remain very clearly as the most competitive airport operator in terms of costs. But at the same time, we have incorporated, and I would like to underline this, a very strong resilience. This has been included in the way we subcontract. We have included lessons that we extracted from the very strong and very sad experience of the pandemic. But now we can see that in the Spanish airports, we are not facing individual problems. And the problems with the operations and with the airlines that we are facing are not a responsibility of AENA. So we are, let's say, affected by other airports' problems. But thank you. thanks to this resilience that we have incorporated in our contracts, we are very happy to be able to accommodate this very, very strong increase in the air traffic. On top of that, apart from this recovery of the traffic, which again is around... around 90% compared to 2019, the commercial activity is enjoying even a more positive trend. We have, everybody again has been surprised by the more than proportional recovery of the commercial activity. In the second quarter of 2022, the company recouped the total commercial revenue excluding revenues any accounting adjustment of the same period of 2019. I will come back to this. And this means that the total variable and fixed rents were 4.5% higher compared to 2019, which is really an impressive figure. All in all, our EBITDA for the period stood at noteworthy 631.3 million euros. This figure includes almost 47 million euros from the consolidation of Luton and almost 40 million euros from Brazil. So the consolidated EBITDA margin closed in June at 36.7%. The EBITDA of the first half of 2022 is impacted on the, let's say, not very welcome side of the OPEX. It's impacted by several factors, being, as you know, the most relevant, the increase in the cost of electricity, which compared... with 2021, no, excuse me, compared with 2019 represents an increase of 200%. In other words, three times the cost we incurred in the first half of 2019. This is, of course, an issue. I think it's a universal issue. But the good news, and again I would like to highlight this point you know that AENA's strategy in the mid term continues to be to maintain our commitment on developing renewable energy sources and you can be sure that we will achieve that we will become self-sufficient by 2026 which is not that far because we are now in the mid So, in 2026, we will be self-sufficient from the energy point of view, and you know that we will achieve this through the development of photovoltaic power plants in the Spanish network. Additional factors that have negatively affected the EBITDA of the first half of 2022 are the accounting adjustment of minus 172 million euros. due to the application of the seventh final provision, DF7, and this on the good side, and the partial reversal of the impairments in the group assets for a net amount of 27.4 million euros. In other words, if we exclude these two effects, meaning the DF7 and the reversal, the partial reversal of the impairments, the EBITDA for the period would amount to roughly 776 million euros, which is, I would say, a relevant figure. Consolidated net profit came to 163 point million euros and moving to the last graph of the slide in the bottom right hand corner. The operating cash flow ended with an increase above 1 billion euros... up to 786 million euros... compared to minus 220 million euros in 2021. The consolidated net debt EBITDA ratio closed at 5.2 times... This is, again, a relevant figure because we will, I can assure you that we will continue decreasing this ratio, but at the present time, both AENA SME and London Luton Airport are now, again, in full compliance with the financial ratios committed in our banking facilities, which is, I would say, of course, very good news. To end up my presentation, I would like to single out two very positive trends that I introduced a moment ago that we are seeing in the commercial activity. On the one hand, the underlying sales are now reaching levels above 2019. On the other hand, the new commercial contracts that we have awarded since November 2021, both in the food and beverage and specialty shops branches, are to deliver max in excess of 2019s already next year, in 2023. So this means that the expectations for our business are very good. Another example is that in specialty shops, concretely, we have completed 130 tenders that will render max in 2023 8% higher than they did in 2019. In food and beverage, we have completed 29 tenders that will deliver max again in 2023, higher, in this case, 10% higher than those in 2019. Thank you, and I will intervene again in the Q&A session. Thank you. Thank you.

I will skip slides 5, 6, 7, and 8, if that's okay. And I will try to focus on... particularly on the commercial revenue information and the operating costs element of the P&L that clearly are those that might be more complicated to understand. Rest assured that every quarter we are trying our best to provide more information in a very transparent way, hopefully helping you to navigate through the accounting vagaries. To start with, we have this slide number 9, which is the usual one, the one that was It is a sort of legacy from previous years. And this is the headline commercial revenue figure, excluding the real estate revenues. So the headline here is the revenues are flat in the first half of 2022. vis-a-vis first half of 2021, which makes no sense at all, as I'm sure you agree. And this is because there are accounting adjustments affecting this figure. So we move on to the next slide, slide number 10, which I'm sure you are familiar with it since we started to disclose this information in 2021. What we are doing here is to split the total revenue figure between what we can call the underlying proper business activity and the accounting adjustments. You will notice that the total revenues are higher than those in the previous slide. This is because... This is the whole picture. This is taking into account all the non-regulated activities, including the real estate business. So what you can see here is that the underlying, the proper business activity is growing by 159.5% year on year. And this makes more sense. The main driver for that is the fixed and variable rent element. Those revenues that we are generating annually every day that are supported by either the underlying sales they spend per passenger through the shops and the outlets run by others, as well as our own businesses, the businesses we run internally, such as car parks, rent-a-cars, well, sorry, rent-a-cars is not the case, VIP lounges, things like that. So both businesses are contemplated here. And then we have a marked revenue element that for some people reading the papers this morning, this element was surprisingly low. Well, actually, this is the DS7 in action. So, they are surprisingly low for two reasons. First of all, because the DS7 is... haircutting our ability to pass masks onto the tenants and secondly because the more the underlying businesses is doing the less the masks are required so this shouldn't be a surprise really this is just those masks that will be collected will be built and collected in the first weeks of 2023 Because they are properly supported by the DF7 provisions. Then we have the adjustment that you can see is 172 million euros. This adjustment means nothing in terms of what tells nothing about the business performance these days. Probably years ago, this would have been taken to P&L a long while ago. So, all in all, I believe this is providing a very good picture of the commercial performance. But then we move on to the slide number 11, which is giving us even more color. As the chairman said minutes before, What you can see here is that in the second quarter in particular, the fixed and variable rents invoiced and collected, let's say day by day or month by month, overall are 4.5% above the same figures in 2019. which is, in my view, very telling of how good the performance of the commercial activities these days is. There are a number of drivers for that. There is no one single reason for this, Clearly, as the chairman also indicated, we have the UK passengers now being considered, obviously, subject to duty-free sales. You have some of our own businesses making, let's say, performing really well because of particular circumstances, like they rent a car, or the activities, but there is also a propensity to spend these days that clearly is higher than before. We don't know whether this is part of a psychological or sociological behavior, but it is what it is. And just to wrap up, although we haven't included this information in the presentation pack because we didn't want to obviously confuse people with different elements. But if you add to this fixed and variable rent element, if you add the max for this period, in the second quarter of 2022, the total revenues, all included, are at level with the same figures for the 2019 second quarter as well. So in summary, with less number of passengers, we are doing better in terms of commercial revenues. Obviously, I will be more than happy to answer any question about it, but I think this is sufficiently granular information to help you understand the underlying trends. Then we can take a look at the operating expenses. This slide is simplistic. You have all the detail in the management report if you want to take a look at the breakdown of what we call here other line by line. And indeed, I'm happy to answer questions later on. But what you can see here is that in summary, We have the pressure of the electricity, the energy costs, which is clearly, I would say, a whopping impact. But the rest of the cost lines are more or less in line with the 2019 figures. And someone could say, this is bad news. Why on earth? This is similar to the 2019 operating cost bill. And I would say this is good news. This is simply that the business is deploying in full the capacity available, opening terminals and spaces, getting the resources ready, unlike others, and being able to accommodate the growth that we see is coming. And obviously... As the chairman also indicated, there is a level of uncertainty about the last quarter of the year and beyond. But subject to that, we are ready to accommodate what hopefully will be a very healthy growth over the coming months. So we can discuss that later. I'm sure operating costs is one of the key points of focus for everybody here. But let me say, this is good news. And no one can be misled if the 2019 figures are coming back, unless that individual never listened to me. And it was very clear. The margins of 2019 are not going to be back. That doesn't mean our margins will be back. Best in class. It will take some time to come back. But forget about the 62% that you may have in your mind from 2019 because the business is changing. And believe me, it's changing for everybody. That doesn't mean that we are not a very good and very positive and very promising business generating cash flows at levels that I would say are really, really attractive. I wouldn't go any further. Of course, I would be more than happy to answer any questions you might have. Thank you.

Thank you. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one under touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Christiane Delco with UBS. Please go ahead.

Thank you very much. Hi. Thank you for taking my questions. Firstly, on the OPEX in the Spanish network, how do you think about the second half of the year versus 2019? And if you can separate the electricity cost in here versus all the other OPEX. Secondly, going back to slide 11, which is very helpful, the rents invoice per passenger in Q2 – look higher than 19 levels for several of the categories. Do you think this is sustainable? And do you think this can increase even more over the next quarters as retailers start to increase prices to counter inflation? And the last question, just a technical one. Could you tell us what was the drag on aviation revenues from the dilution from the K factor in Q2 and how you see that playing out for the next quarter.

Thank you. First of all, with regard to the operating costs, let me say again that you have on page 23 of the management report, or it might be a different page because I'm looking at the Spanish version, you have the detail, the breakdown of the operating costs. That other is broken down. So you have all the details there. And for the second half of the year, we are not giving guidance. You know that well. We never did it. But what I can tell you is that you should expect a picture that will be similar to what you can see in the first half of the year. Energy costs clearly increasing significantly vis-a-vis previous years. And the rest, let's say not very far from flattish vis-a-vis 2019. There will be a point in which our operating costs can go beyond that point. Why? Because as I said before, you should never expect INA to be able to deliver, to run, to manage 275 million passenger number at the same costs that we incurred in 2019. That's out of question. That will never happen. Setting completely aside the impact of the energy costs. But for the time being, I think we will be able to run the business at this level. And then the second point you make is about future evolution of the commercial revenues. We are optimistic. We are positive. It's difficult to say because part of this is driven by, in my view, a very particular, a very peculiar trend. individual behavior after the COVID but we are optimistic among other things because in the figures we are presenting today the impact of the inflation scenario so the impact of the price increases in the shops in the restaurants in the beauty free shops is negligible So we expect that to be playing a part in the coming months, a positive part for the commercial revenues. And then with regard to your last question, I believe that it's probably a matter of the K factor. Let me double check. This is a matter of the key factors. So you are used to deal with concentration and now you are dealing with dilution. Sorry, with concentration. You got me. We can get back to you. Give me some minutes and I might be able to answer properly your question.

I think that just concerns about the aviation revenues and I think most probably a big chunk of that explained by the K dilution factor, you will recover those revenues. But yeah, we can continue offline. Thank you very much.

The next question is from Nicola Pessina with Mediobanca. Please go ahead.

Yes, good afternoon. Thanks for taking my questions. The first one is on the traffic forecast for 2022. With, first off, 82% of the 2019 level and currently at 90%, my impression is that IANA forecast implies a clear deterioration in the last quarter of the year. Do you agree with this view, and do you see evidence in the evolution of the capacity plan by the airlines? Second question on the P factor for next year. IANA's initial request was up 2.2% while the CNMC approved 0.7%. So there was no need to apply the 1% cap. Could you explain the different approach in the calculation by the CNMC and which cost items were evaluated differently from IANA's calculation? And third question, we see that the summer capacity in 2022 is now 6% below the 2019 level, while at the beginning of the year it was 4% above. What could be the impact of the capacity constraints in other airports on IANA?

Thank you.

Hello. Thank you for your question. I will answer your first issue. I don't know if I will answer it. I will try to answer it. It is different. Traffic forecasts for everybody in the industry are being very difficult. I mentioned how we struggled. to forecast that this part of the year would be so good which was something very difficult to assess at the end of 2021 and the beginning of the current year but I would not say clearly I would not say that we are convinced that the traffic and the economic situation will inexorably deteriorate in the last quarter If you look, for example, at the economic forecast, the GDP growth, both from the Spanish government and the IMF, of course they are different, but so far the Spanish government and the international organizations forecast significant growth. for the Spanish economy next year. So I would say that you know very well how AENA usually behaves. So we are proud to be considered a prudent company. Taking into account the difficult visibility of the evolution of the economy, the impact of geopolitical issues and so on, we feel comfortable with the forecast we released today. Last June, on the one hand, and we still feel comfortable with the forecast that is included, contemplated in the DORA 2 regulatory framework. This, I think, just means that at present we rather prefer to remain prudent. But on the other hand, I would say that if you, for example, talk with the airlines, the airlines are not pessimistic concerning the last quarter. at present I mean at present at the present time so it's just a combination of factors that all in all let's say they advise us to remain prudent but I would say that with a little touch of optimism this would be my qualitative assessment and I would be very glad that José Leo compliments my explanations Thank you.

Okay. Well, with regard to this traffic comment and linking with your question about the summer capacity and the impact of the disruption in other airports across Europe, I think the level of visibility we have about the post-summer season is is obsessionally low. I think this is true for everybody. This means that you can count on only a portion of the traffic to remain and to be sustainable beyond that point. Hopefully, we all will be wrong, but in the meantime, this is the expectation. So, we believe that the Honestly, the last quarter figures won't be reaching the levels of the summer figures. Obviously, I mean in relative terms. In absolute terms, that would be true in any case. So, this is the situation. But even so, we are likely to end up not very far from the positive end of the range that we provided. Part of this... Part of this view about the 2022 numbers obviously is impacted by the disruptions that many European airports are facing in countries which are important to ENA because a significant part of the visitors to Spain are coming from those countries. So we are taking into account an element of attrition that in part is what you can see in the summer season capacity declaration evolution, and that attrition is driven by a number of things, but one of them definitely is the struggle that many European airports are facing. I hope that helps, but obviously if you need any more clarification, happy to do it. With regard to the P factor, It's very simple. There is a provision in the index legislation where you could call for a sort of exceptionality element under certain circumstances. And that's what we did. Particularly with regard to the energy costs, the cleaning costs from memory and something else, we said it would be wrong to apply strictly the indexes or the references, the benchmarks, statistical benchmarks that are supposed to be, well, the standard rule. We believe that it makes all the sense, we argue very strongly that to apply an exceptionality factor for those particular inputs. Through that, we submitted a request to increase the, to calculate the P-index at 2.2%. You can see that we failed. The CNMC applied the standard, and they came to, let's say, in my view, almost ridiculous, 0.72%. Okay.

Many thanks for all the details. Thank you.

The next question is from Elodie Rall with JP Morgan. Please go ahead.

Thanks for taking my question. Just for me, the main surprise from the results was indeed on aviation revenues. So I think you said you were going to come back offline, but actually it would be really helpful, I think, for everyone to understand what caused the lower aviation revenue pair packs, if it's the case factor, if you could explain the impact and what to expect going forward, and if there's anything else, such as discounts that we haven't actually provided. fairly forecasted, it would be helpful because I do think this was the main, I mean, to me, it was the main surprise of the results. And then could you also share the recent traffic trends on the rest of your portfolio, such as Luton and Brazil Airports? You gave us the trends in Spain, but not elsewhere. Thank you.

Well, clearly there is an element of... I have now in front of me some numbers. In quarter one, the 2022... Quarter one 2022 concentration was 38.7 million euros. In quarter two 2022... you have a dilution, we have a dilution of 29.3 million euros, sorry, million euros in both cases. So the second quarter has almost fully reversed the concentration experienced in the first quarter. Why is that? Well, usually it's the result of the type of traffic the load factors, the particular airports at which the recovery is taking place, that combination will deliver a particular yield. But still, we have the right to recover that gap in the year after, as you know, or two years later. as you know. So the ups and downs of the yield driven by the type of traffic, the airports, the relative recovery at different airports, level of recovery at different airports, whether the traffic is more domestic or more international, things like that are supposed to be captured by the K factor. If you remember pre-COVID, Every year we ended up with something like 60, 50 million euros to get recovered two years later. So this is it. Still, frankly, we are in the process of reviewing this in more detail. This is the kind of detail that you need to get under the skin of it. But I think this is the headline. Literally, the accumulated yield concentration... At the end of the quarter, at the end of June, is just 9.4 million euros, which when you compare with the figures we had the year before, well, there is an astronomical difference. I hope that helps. But still, the IR team will carry on working on this and providing more and more information.

Well, thank you. It would be useful to understand how to think about it for H2, for example.

It's not easy, to be honest, Elodie. Even for us, it's not easy. Because if you have a recovery, well, a more aggressive recovery in Alicante and the islands than in Madrid and Barcelona, you will have a different yield. But we will do our best. And we will try and help you, rest assured. But I think we are heading for concentration. Sorry, for dilutions. I got confused myself with these two terms. We are heading for dilution as we move forward, which is getting back to the, let's say, the standard, to the traditional story.

Thanks. And on recent times in other airports?

Well, in the Brazilian airports, the recovery is fantastic. They are back to the 2019 figures and growing. And Luto is also doing really well. They were lagging behind the Spanish network for obvious reasons, but they are catching up very quickly. I think they are now not far from 70% on a monthly basis. of the 2019 figures so it is really very very very promising very very good and the summer will be good for them always a little bit behind the rest of the Spanish network for obvious reasons but catching up very very quickly And if you take a look at the EBITDA of the international business activities, it is a very good figure. They are contributing a significant figure, more than 90 million euros from memory. And this is because they are doing very well.

Okay, thanks.

The next question is from Luis Prieto with Kepler. Please go ahead.

Good afternoon. Luis Prieto here. Thanks for taking my questions. I have a couple of them. The first one is, how should we think about cost inflation in 2023-24? Would you have an estimate of how the gradually tendering of operational service agreements should impact the cost base in coming years in the context of today's inflationary pressures being staggered and delayed in time? And the second question is, is regarding what you said in Q1 that you were, or at least I understood that you were closely looking at the 1% factor P cap. Has any progress been made on this front? What is the likelihood of the regulator opening the door to a change in this cap? Thank you.

Well, I will answer the second question first because it's really easy. We made no progress at all. With regard to the former question, really the I have to be very, very clear. The inflation pressures are likely to have an impact on our costs. So far, we haven't seen it. When I discuss, when I meet investors or indeed analysts these days, and they obviously have show me what is going on in other airports in Europe. Frankly, in Spain, the only actual impact is the energy costs. Nothing else, so far. But it would be disingenuous to say that we are immune to that. We expect that to have an impact over the coming months and years. Assuming that the inflation... A scenario is here to stay that, frankly, nobody knows. To what extent? We don't know. You know we have a number of contracts that are due for renewal, but we don't have a year where we have, substantially all the contracts out for renewal there is a constant flow of new contracts being tender and agreed so it will depend on that if you need more detail about which contracts are due for renewal in which years we are happy to provide it probably offline but remember we always have contracts coming in and going out and we'll see What I can tell you is that still we have contracts, the third party services being tendered out where people are bidding aggressively. They are still bidding aggressively. The labor cost pressures in Spain are nothing near the labor cost pressures in the northern European countries. I believe there will be some pressure coming from that angle, but not of the scale of the, let's say, the pressures that you can see in the UK or in Germany or in the Netherlands. So, sorry for not being more precise, but it would be difficult to quantify this impact, although there will be some.

Thanks a lot, Jose, very helpful. Thank you.

The next question is from Jose Arroyas with Santander Bank. Please go ahead.

Good afternoon, gentlemen. I have three sets of questions, if that's possible. I'll take them one by one. I'd like to ask you about the first tender of the real estate project in Madrid Barajas. We have read several reports in the Spanish press highlighting that AENA is about to designate a partner that may have offered a substantial premium to the evaluation AENA performed of its surface rights. And I wanted to confirm if this is where things are going and if these articles are accurate. And if this is accurate, if you could confirm when we could have an outcome for this tender and what could be the financial implication in terms of cash flow for AENA. And if you could also tell us what future plans AENA has to develop new real estate projects like this one. That's question number one.

Okay, well, without confirming or denying any particular news, the process is ongoing. Officially, the contract will be, well, the decision will be made at the end of September. And you know, AENA tends to be very prescriptive in terms of processes, in terms of ticking all the boxes before announcing something so this is the reason why we are not publicly telling anyone who is going to be the winner because the winner will be the winner once the board of directors of aena has made the decision but i have to say the the The outcome of this tender is really positive. We are very happy with what we have received by way of bids. The numbers that you can hear are not very far from the reality. Which means that, in particular, the logistics business is one that is now capable of rendering better returns than we expected, probably two years ago, three years ago. And this is good. But we will be able to make a public decision or to announce a decision in a couple of months. But Nothing of what you have heard is silly. Nothing is misleading. It's relatively adequate. On the other hand, the way this works for us with the current model is that we select a partner to create an SPD. The partner will take 65% of the shareholding. We will take 35%. we will receive an upfront payment for any extra value. that the partner is considering in its offer, and obviously that value is attached to the right of use of the land for 75 years. So, for instance, you can have different people valuing that differently for different reasons, because they have different business plans, because they have different expectations, because they are... capable of managing this better or because they are requesting from this business a lower rate of return for whatever reason they could end up valuing this higher and they will pay that up front but not today not in one year time only once all the necessary administrative steps are being taken from then on the partner will take responsibility for all the additional capital needs of the business. So this is the model in simple terms, and we will be receiving the dividends on our 35% stake. I hope this helps.

That was very clear. If I may ask about slide 11, that's my second question. I think you have put a positive spin still on car rental business. And I can see the revenue per pack actually declined sequentially in the Q2 to 0.70 euros down from 97 cents in the first quarter. And I wanted to understand if there is nothing untoward here, if the trend is still solid as you highlighted. I wanted to confirm that. there is nothing here that we should know about.

No, really, believe me, this is a very good performance. Of course, you can experience at times reductions in your revenue per packs as the passenger numbers are growing. Particularly when the starting point is a very low level. There is an element of, let's say, pure mathematics or pure statistics. You can have a relatively small universe of people spending... a higher amount per passenger, as you grow your business and you incorporate more people and more passengers, in some businesses you can experience some degree of dilution. This is not unusual, but there is nothing at all here. If you ask particularly, you were asking about car parks in particular? Rent-a-car. Sorry, car rental. Car rental is a very peculiar business these days because there is no real growth in terms of the number of transactions. The rent-a-car operators are struggling to get the cars they need, the units they need. So all the revenue growth there is coming from price increases. Renting a car is becoming more expensive because there is a scarcity of cars available. So you can see some sort of perverse performance there, but there is nothing untoward, believe me, that I'm aware of, definitely.

And Jose, just my last question, sorry if I'm taking too long. It's about electricity costs. Previously, you have stated that INA is not considering hedging. Has this view changed or has it not changed? Thank you.

No, not for the time being. I think we have a middle term, let's say a solution that the chief exec mentioned before. This is our horizon to get rid of these kind of things. But in the meantime, we will stay vigilant But frankly, these days, it makes no sense to hedge. It would be, in my personal view, the wrong thing, the wrong decision.

Thank you.

The next question is from Stephanie Death with Bank of Capital. Please go ahead.

Good morning. Thank you for answering my question. The first one, please, is commercial. Have you done any survey to understand the propensity of passengers to spend at your airport? I believe in the past you've mentioned longer time at the airport as a day wind or shorter average trips, which means they spend more. And any interesting things to highlight or maybe on the passenger mix as well? My second question is a follow-up on other OPEX. Could you clarify if for the second half we should expect an absolute or relative percentage point amount, a similar increase than in the first half, and is it versus 2019 or 2021 that we should be looking at the trend? And a follow-up on the OPEX inflation for the later years. What would be your best guess of wage increase for 2023-24? And do you think that the high unemployment rates in Spain means that the inflation on wage is not going to be as substantial? And then finally, my third question is on working capital. In the first half, there was a 300 million better performance than last year. What do you expect for the second half? Thank you.

Okay, you started with propensity to spend. Frankly, we haven't undertaken any particular... or survey recently that I can share with you, there is a well-known, let's say, well-understood behavior in different passengers from different countries that I believe is still the same. Normally you have people coming from long-haul destinations, particularly Asia, destinations or origins to spending more or in Europe there are countries that have more propensity to spend but that remains the same probably the only factor that is changing now is apart from the COVID impact in the mindset of the people, that is a different story altogether, but probably the only change is the fact that the Britons are now out of the European Union, so they can be treated as non-European Union citizens in terms of duty-free sales. But the rest, frankly, I have very little to add. I don't have anything. In the past, we always kept an eye, and we will do it going forward, in trying to attract as many passengers from Asian countries as possible. Because they are... They are, well, people who spend more than others. And you know our Achilles' heel in the past was the relatively low level of, let's say, traffic with these countries. But this is the generalistic point and nothing new to it. Then you mentioned the other OPECs. I would say the other OPECs is likely to be, well... performing similarly to first half, but always comparing with 2019. I think 2019 is a more meaningful year to compare with than 2021. No, don't ask me to give you a particular figure. I'm not going to do that, but I can tell you, don't be surprised if you have similar performance that for some people might be bad news for me is good news other than energy costs that we are there or thereabouts the 2019 cost bill on the other hand this is not hugely material but today we spend on things that we didn't spend in 2019 as much such as innovation Obviously, the sustainability agenda, the agendas that are, they are not huge amount of money, but they are relevant to us. They are strategic. And you have to spend some tens of millions of euros. if you want to deploy that agenda and move forward. And this is something that is a must these days. So many things are changing and one of them is the quality standards, the regulatory requirements and also the strategic agenda of the airports. Then inflation, wages in Spain. Well, I suppose you mean wages in Spain rather than wages in AENA. But I believe that the level of wage increases in Spain are going to be more modest than... Some of the figures, double-digit figures, I can see in the northern European countries in some cases, because our labor market, unfortunately, on the other hand, is not as robust as it is in the northern European countries, and there is a... long-lasting experience, long-standing experience of that. So, there will be increases, but I struggle to see increases that go beyond, I don't know, 3-4%. I might be entirely wrong. I think there are people more prepared to answer this. Working capital. Last year was an unusual year because the working capital was affected by the accumulation of minimum guarantee rents. Let me double check here. Working capital, half one, 2021, that was a period pre-DF7. So we were accumulating receivables. Do you remember receivables at the end of the day, ended up being a basket case. But as we accumulated receivables that were not collected, we had a very negative working capital impact. The figures you can see this year are more in line with what I would say is the usual run rate.

Thank you.

The next question is from Dario Maglione with BMP Paribas Exane. Please go ahead.

Hi, hello. Three questions for me. The first one on business traffic. If you have any figures, you can give us some indication of how business traffic is recovering. Second question on the tariff for 2023. which you propose surpassed 0.6%. Just wonder why they are so low, given that you will also need to recover COVID-related OPEX in the tariff. And the third question is on OPEX. Do you, I mean, what is your assumption for when COVID-related OPEX will reduce to zero? Thanks.

Well, with regard to business traffic, I'm afraid I cannot give you that information frankly in a reliable way. What we know is that the business traffic is lagging a little bit behind the rest of the traffic. But we will need to get to obtain information that I don't have handy here. So bear with me and we will do our best to provide you with that information. But this is not handy. Tarif 2023. Well, the Tarif 2023 is just a pure mathematical... Let's say calculation. First of all, all the factors, all the different factors that should be included are included, let's say, rightly. And the most relevant one is the K factor. is taking away 30 cents per passenger. And this is it. There is nothing you can do about it. On the other hand, you have the COVID costs. The COVID costs that are considered here are those between the 1st of October, 2021 and the 31st of March, 2022. which is the period that the regulator had time to capture. Anything before was already considered in the 2022 charges, and anything after that period of time, obviously it was impossible to be considered for timing reasons. And then you have the P-index. The P-index, clearly we wanted more, and we argued for more. So, the only element you can challenge here is whether or not the P-index is right or wrong. The rest is pure mathematics. So, it cannot come as a surprise, honestly speaking. The P-index is the only thing that you can take a view on it. Obviously, we have a very strong view on it. Then, OPEX... Sorry, can you say again what you...

Yeah, the COVID-related topics will reduce to zero.

Well, the sooner the better, but I don't know. We expect this to be the case over the coming months, slowly but firmly. But honestly, at this point in time, I cannot tell you when, but we would be delighted to get rid of them because we don't believe there is a good reason to keep them in place these days. Okay, thanks.

The next question is from Marcin Wojtel with Bank of America. Please go ahead.

Yes, good afternoon. Thank you for taking my question. I will have two. So the first one is just a follow-up on electricity. You mentioned that you are building this photovoltaic plant and you will be fully self-sufficient in 2026, but presumably it's a lot of project in various airports. So could we expect any impact any savings actually before 2020, 26 from those. And question number two, more high level. Are you planning to provide perhaps at some point a medium term business plan to the market if you have the regulation right now and traffic is recovering? So do you have any plans to share some financial forecast? And I think the most interesting would be your dividend payout? Is it realistic to expect an 80% dividend payout, which was the case before the pandemic? Thank you.

Thank you. I will take the second question. Well, honestly, I'm not very happy that we have felt, let's say, the the obligation to postpone several times our intention to present a new strategic plan. I'm not happy because I simply don't like to postpone issues that I consider very important, but we have postponed the presentation of this strategic plan and also the elaboration of the plan because honestly it's been in the last two years almost impossible not to get the impression of being obsolete very fast because the forecast, the traffic, and the uncertainty has presided almost every serious analysis. So, why I'm saying all these things? Well, because now I'm pretty sure that possibly... At the end of the summer, I don't know exactly the date, but for sure before the end of the year, we will present a strategic plan. Of course, the strategic plan will incorporate the main issues of the DORAC. at least in terms of CAPEX and other of our obligations. And we will also take into account the traffic forecast of the DORA, but we will try to incorporate, if it's adequate, the novelties that we have at the end of the stage in which we are ending the elaboration of the strategic plan But many of the things that will be contemplated in this plan, you already know them. Probably there will be a few novelties. And the most important thing is that we will be very happy to convey the long-term messages that we consider strategic for the future of the company. And one of them, and I'm not forgetting your question, one of them is the payout. I cannot anticipate our final decision because this, of course, has to be discussed with many people. many relevant stakeholders and in the end it will be the board of directors who will take the decision but I'm pretty sure that our payout policy in the future will be in the same range. of the one you know. I feel very comfortable with the 80% payout, more so when we have been lowering the debt EBITDA ratios, which for several months really worried me and worried even more the CFO. But now that we are clearly seeing that we will be able to reduce this ratio to even a figure that some investors could find even too low. But, you know, our policy, it's clear we don't want surprises. And we... Coming back to the payout policy, I'm pretty sure that we will approve something similar to our past and recent policy, which I hope that it's good news for our investors and owners.

Well, the other question about the potential savings from the solar plants, yes, as some of these facilities are in operation, we will get some savings, definitely. But having said that, There is one of them which is particularly relevant, which is the Madrid Barajas plant, that has been already awarded in terms of the building and maintaining and operating it to a third-party provider. So there is already intense work on it. But still it will take a good while. It's the kind of thing that normally takes around three years to get completed. So the savings, the major savings are going to come from... from facilities like this one in particular. So, but yeah, the more we deploy, the more, well, the less expensive the energy will be for us and for others, for our commercial partners as well.

Thank you very much.

The last question from the conference call is from Andrew Lobinserg with HSBC. Please go ahead.

Oh, hi there. Can I just ask for an update on what you're thinking about the re-letting of the duty-free contract, when that process might start, and what concepts you might be addressing? And then, you know, in that context, just curious to see what you think the combination of duty-free and autogrill means for your balance of power or the competitiveness of that process. Thanks.

Okay, thank you, Andrew. The relating is going to start externally through the tender process probably at the end of this year. In the meantime, we are working internally in getting this ready. So the process will kick off. At the end of this year, as you know, the contract should be awarded well ahead of the 1st of October 2023, which from memory is when the current contract expires. With regard to the do-free-auto-grill deal, I think this is good news for China. I would say it could be good news for other airports as well in Europe. Because I have to say, Dufri is a very big, very, it's a leading group. They are definitely a group with strong muscles. And to have someone like them competing in the food and beverage arena, or the combination of both competing in the food and beverage arena is good news, I suppose. Honestly speaking, Autogrill was, in our case, was out of our network already for a while. And if they, by combining both businesses, they feel stronger and they want to address, well, they want to target INS spaces, we welcome that.

Okay, cool. Thanks. The next question is from Manish Sajh with City Group. Please go ahead.

Thank you for taking my question. I'll have three if I may. On capacity, airlines are planning to scale back this winter. So what do you think on the traffic evolution for the winter? Is it already based in your current traffic forecast of 75% to 85% of 2019 levels? And my second question is on commercial revenues. If you look a bit at what the travel retailers are doing these days, as you have 10% inflation in Spain, and as you've already alluded earlier, you've not seen price increases in like duty-free, food and beverage, and specialty shops. So when do you think that increase in line with inflation? And is it price elastic? that segment and the last question is if you could provide us with any update on the constitutionality questions at judicial level and the administrative appeal against the article 27 compensation denial any progress there thanks

Okay, with regard to the Q4 passenger numbers or expectations, they are factored in the 75% to 85% range. I would say that they are the reason for this range. Together with the potential impact of the operational challenges in the summer, as well as the fact that we expected some degree of attrition, some degree of reduction, in the capacity available for the summer. This is always the case, and in the current circumstances, it's not a surprise to see that level of attrition growing statistically, well, vis-a-vis the standard statistical So, altogether, let us to provide this 75% to 85% range. If the winter is good, is reasonable, is, well, I wouldn't say not necessarily in line with the summer, but not very far from that, we will end up in the top end of the range. If the winter is something that some people like, mentioned could be like a balloon, let's say, or a bubble bursting or something like that, we would end up probably at the low end of the range. So it is a factor in that regard. Price increases in the shops. We believe, not only we believe, we have checked that the price increases of the shops are probably starting to to be shown now. It's when we recognize there are some price increases in line with the high street. So, so far... the commercial revenue performance hasn't been driven by that. But we expect these price increases to be evident over the summer. These days we already start to see price increases in the shops. Whether there is a level of... Elasticity that could offset that? I don't know. I don't know. Honestly, my answer is I suppose there is always elasticity when people are buying just for the sake of it, when they are traveling. You can say yes or no to any particular buying decision. But on the other hand, what we see these days is there is a willingness in people to really spend at the shops, spend at the restaurants. And we believe that this is going to last over the summer. Beyond that point, I think you can link that also to the general economic conditions and the macro conditions. If the conditions worsen, I think that elasticity can play a more significant part. But I would link all of that to the more general macro conditions, not at the airports, but generally speaking across the economy. With regard to the judicial processes, yes, we appeal that. The process is ongoing. These things take time. So the only thing we can do now is to wait and to provide any further information, the different court instances we require from us, and to carry on working on it. And time will tell.

Thank you.

The next question is from Nicolas Mora with Morgan Stanley. Please go ahead.

Yes, good afternoon. Just two quick flow. The first one on the tariffs for next year. So you've given the different components, so K-factor, COVID, but you're also quite massively overrunning on COVID recovery cost in 22 was like 50 million. So that should come out next year as well in your tariff as an adjustment. That would be the first question. Second one, just coming back quickly on the cost for third-party service providers. I mean, back in the day, so 2018, 19, early 20, you flagged very well how certain large contracts were being tendered and being repriced upwards. Now you're telling us in 2022, 2024, basically this is going to be more run-of-the-mill. I'm a little bit lost. Could you provide us at least a big-picture view of what would be tendered in terms of the most important contracts, cleaning, security, maintenance, internal transports? Just for us to gouge and assess when the step-up in costs might occur over 23-24. That would be great. Thank you.

Well, the answer to your second question is yes. We will make sure that we put together something that we can distribute to everyone. Yes, definitely. No trouble at all. With regard to the charges... Let me be clear. So I can read for you the main component parts. So you can get to the 10.01 euros per passenger. The IMAP is 9.89 euros, as you know. Then the P-index is 0.72%. That takes you to 10 euros. There are a number of adjustments. Of which, you know, the usual ones, quality, standards, investments. The most relevant one is the K-factor. The K-factor means there will be a negative adjustment of 30 cents per pack. So, altogether, we take you to 9.75 euros per pack. Pre-COVID costs. And COVID costs is exactly the figure you mentioned, 50 some million euros, 56, I believe. And that is 0.27 euros per pack. So, altogether, this means 10.01 euros per pack, considering the number of packs that you know well are in the Dora 2 for 2023, which is 232.5 million passengers.

Yeah, no, that's very helpful. Jose, just because you're getting 80 cents for COVID recovery in 2022, and because your PACS numbers are much higher than initially expected, you are also quite massively over-earning in 2022. No, but don't...

No, no, no, no, no. I think the K factor is not affected by the COVID costs. Don't forget the COVID costs is sort of overlaying. And the reason why we have 0.80 euros last year and 0.27 this year is because the costs incurred was higher. And secondly, and probably more importantly, there were three quarters factor in that point 80 euros now we are dealing with two quarters only just for timing reasons nothing else okay i think yeah i think we can we can take enough time okay thank you very much for the detail thank you i think this is over we have finished so thank you very much and Hopefully, over the coming days, we will be in touch clarifying any extra points you might have. See you soon. Have a very good summer break. Bye-bye.