Aena Sme S.A Unsp/Adr

Good afternoon, everybody, and welcome to this third quarter 22 results presentation. At the call today, we have next to me, sitting next to me, Ignacio Castejón, who is the new finance director of AENA. He joined just three weeks ago. He has a wealth of experience both in the finance side of the business and in the airport industry. I will hand you over to Natio, who will be welcoming you and saying hello. Thank you, Jose. Good afternoon, everyone. It's a real pleasure being today with all of you. I'm really looking forward to start working with you in the near future, and I hope that we are able to interact very soon. Thank you, Jose. Thank you, Ignacio. And without further ado, we'll start going through the main slides of the presentation, starting with the key highlights. I think we are presenting to you today a good set of results. Honestly speaking, it is a good set of results, and I will do my best to make you convinced that this is the case over the rest of the call. To start with, the traffic numbers are going really well. We see a significant growth indeed in the Spanish network, more than 140% year-on-year, and similarly more than 133% across the group. We will later on comment on how this process involves a significant improvement vis-a-vis 2019 and improvement vis-a-vis our expectations a couple of months ago, three months ago, on the guidance that we provided exactly at that time. The total revenue is growing by 65.6%. As we discussed over the last results presentations, this is not in line with the passenger number growth due mainly to the accounting adjustments impacting the commercial revenue that we will discuss as well in a minute. The EBITDA is now reaching a really meaningful figure. 1.3 billion euros in EBITDA is already a very healthy figure, taking into account the background, where we are coming from, and the challenges of the industry. Reaching already more than 44% EBITDA margin, going in the right direction and trajectory. The net result is healthy as well, close to 500 million euros in net profit. Obviously, now entirely out of the tunnel of the losses and the challenges of the COVID experience. Finally, I would like to stress very, very importantly the performance in terms of cash. we have generated more than 1.5, 1.56 million euros in cash. The difference between the cash generated by the operational activities and EBITDA is precisely the impact of the accounting adjustments impacting or affecting the commercial revenues. as they are obviously deducted from the EBITDA, but they have no impact whatsoever in cash terms. And I would like to stress that this is the company back in its good self of generating very healthy cash very, very quickly, and now in full compliance with the governance and the obligations stated in the Moving on to the next slide, the most relevant thing here is that, as I said before, we are already recovering a good chunk, a very significant chunk of the 2019 traffic. For the whole group, we are close to 86% of the total traffic of 2019. In the case of Spain and the Spanish network, this is 86.1%. For Luton, this is slightly less. As we discussed a number of times in the U.K., the traffic recovery is only slightly lower. It's lower, but it's still very good, 71%. And in the case of the Brazilian airports, we have already exceeded the 2019 figures. Particularly in the month of September, the traffic in that group of airports exceeded the September 2019 traffic by 8%. So this is a very good signal. of how attractive and healthy that particular market might be. Taking into account that the October traffic is also going in the right direction to the point that it's showing a level of recovery even above the one experience in the summer months, we are now indicating that we expect to close the year with a level of traffic that will be slightly above the upper end of the range that we provided some months ago. So we will be north of 85%. I don't propose to dwell any longer on this slide, so we can move on to the next slide. As you know, in the month of August we were awarded the concession of 11 airports in Brazil. We are providing here some, let's say, descriptive information. We may provide more insight into this project when we share with you the strategic plan in the coming weeks. Probably you are aware that we are planning to share with the market to arrange a capital market day on the 16th of November. And at that time, in that occasion, we will probably do a little bit more on this. But in the meantime, I would like to share with you the strategic side of this transaction. Of course, when you travel abroad, when you are acquiring airports in other countries, there is always an element of risks, extra element of risks, if you like, that is the knowledge of the market, whether or not you are right strategically, whether or not you feel that you can apply some of the experiences and templates you applied in your own country. Well, we believe that Brazil is ideally shaped for AENA to deliver the sort of value and values that we have delivered in Spain over the last decade. The reasons for that are, first of all, this is a large country. It's a country where the tourism industry hasn't been developed to the extent that we believe it could be developed. It's far from the, let's say, volumes and the level of revenue that the tourism industry is generating in Spain. But we believe that Brazil is ideally placed to do this and even more. On the other hand, for the country, the air transport connections are critical for obvious reasons. I don't need to tell you why. There is still a huge headroom to develop the low-cost carrier business proposition. Of course, there are very healthy and very low-cost carriers on the belt, but still they have room. to grow and to improve that industry. Also, it's a country where, honestly, our experience of operating over there in the Northeast region is extremely positive in terms of the seriousness, how trustworthy the regulations and the institutions are. So with all that in mind, we believe this is a good country to be long-term. This is a good country to try and apply the similar, obviously with some differences, but similar, let's say, experiences that we have already had in Spain. And we believe there is value to be generated there. Now, we are going to manage 20% of the total traffic, air traffic in Brazil, more than 40 million passengers, 17 airports, and the second largest airport in the country. So we believe there is value on that proposition. I just wanted to share this with you. Of course, there will be more questions later. Later on, I'm pretty sure. And then finally, I'm going straight to the slides on commercial revenues and OPEX. The commercial revenue performance that we can see on page 10, because you know that one thing is the headline revenue figure. A different thing is the real underlying business. When we look at the fixed variable rents that we are invoicing and collecting day in, every day, we are reaching now a level of 903 million euros. That is 136% more than in 2021, which is not a surprise at all. But when you look at the next slide, slide number 11, and compare These figures with the 2019 figures, that was a year, an exceptional year in terms of traffic, as you know, the best in history. Can we move on to a slide that might let you have a brief? You can see there that the performance of the business has been improving quarter by quarter to the point that in Q3 overall, rents are exceeding the same period rents in 2019 by 8.5%, with only one activity or only one commercial line, the specialty shops, underperforming for obvious reasons because this is the part of the business that was more affected by the COVID in the sense of a number of shops ended up shut down, and they remain shut down until we, let's say, put them again in the market through different vendors. So in total, we are now at close to 900 million euros of fixed and valuable rents built and collected on a regular basis. Again, 887 million euros in 2019. For me, this is good performance. And we can discuss the drivers. We can discuss the reasons. We can discuss whether or not this is structural or it's just a matter of time that this can be impacted by other factors that frankly nobody knows in full. But goodness me, this is good performance. Finally, on other operating expenses, What we can see is that what we have been telling you a number of times is the reality. The operating costs of this business, excluding the electricity costs, is at the levels of 2019. And I believe this is going to be the case for the rest of the year. This can be seen as bad news by some. This can be seen as a reality and the confirmation of something that I have been sharing with you for years already. And I share with you the reasons and I'm happy to answer any questions about what is behind this. It's a combination of structural changes in the business It's a combination of quality standards required by renovators and passengers and airlines and stakeholders. It's a combination, of course, of change in the reality of the Spanish market, the Spanish labor market, so on and so forth. With regard to the electricity cost, this is the result of the evolution of the market conditions. We are not hedging yet. I'm sure you will be making questions on that and I will be very happy to provide some answers. But, you know, the electricity is the maverick element of this year's operating cost base. And let me finish and spend five minutes trying to wrap up a number of things. Obviously, I'm not going to be focusing on any particular slide. I think Reina's situation coming out of the COVID tunnel is really good. To start with, We have improved right in the way we manage through the crisis in terms of our resources. And we are not experiencing, we are not facing any of the havoc situations that other airports are experiencing across Europe. So we are accommodating a significant amount of growth and providing what I believe is a very good, very good, never perfected the operational experience with no issues whatsoever, other than, obviously, strikes in some of the airlines and things like that we have to face. But other than that, We haven't experienced any of the terrible situations. Obviously, we are not happy with that. Some of our colleagues faced over the last two months. Secondly, the traffic is performing really well. It's surprising us positively. Believe me that we were not expecting this kind of performance to become a reality so quickly. Of course, nobody knows what is behind or around the corner as a result of the macro conditions. Nobody really. The airlines themselves are, let's say, watching out and monitoring this by the day. So far, they have no indication of any setback, but they remain vigilant, and we do the same. Thirdly, the revenues, the airport revenues, the airport charges are what they are. They are not set. I mean, it's a surprise. You know our regulation. You know what the level of charges is set by the regulator. You know that we are, until 2026, we have a tap, and this is it. So no surprises. In terms of the commercial revenues, In my view, we are performing really, really well. I believe exceptionally well. Much better than we could do six months ago. Obviously, the headline figures are affected by the DS7 adjustment, but that makes no difference to the cash, and that makes no difference to the reality of the business. In terms of costs, the operating costs evolution is nothing. We are celebrating, of course, but it's not coming as a surprise, other than the energy costs that I'm prepared to take any hit you want to give me. In terms of cash, the business is generating 1.6 billion euros in cash. And as a result of that, debt is evolving very, very well, very healthily. And the impact of the changes in the market conditions is not going to be huge. We can discuss it later. It's not going to be a sort of make-or-break kind of situation in terms of the financial costs because we have already, already now, as we speak, This is not what you can see in the presentation, but we are already now under fixed rates for 80% of our debt. In terms of international experience, Luton and the Northeast Brazilian airports are performing really well. They are contributing already a meaningful amount to our EBITDA. This is going to improve over time. So they are good contributors. They are good businesses. And in the case of Brazil, the recovery of the traffic is amazing. In the case of our international strategy, I share with you our strategic views about Brazil. But, of course, I'm ready to discuss further in detail. And finally, in terms of developing new businesses, the real estate business is already moving on with the award of the first plot of land to P3 with a very good result. So, in my view, of course, this is not the world we were used to in 2019, but I believe, honestly, that China, from any angle, is coming out of the COVID crisis in a very positive and a very attractive manner. This is it. Now we can open the Q&A session. Thank you very much, everyone.

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 on the touchstone 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 Nicolò Pessina of Mediobanca. Please go ahead.

Yes, good afternoon all. I've got three questions. The first one, we read about the approval of the new strategic plan, so I'm wondering if you can give us any visibility on the dividend policy. Second question, maybe if you can provide an update on the level of yield dilution and concentration in the nine months and if you can give us any visibility on the full year figure and on the 2024 K factor. And a last question on the new airports in Brazil. If I look at the material made available by ANAC in Brazil, I see a regulated tariff of approximately 16 reais per passenger in 2023. increasing 50% in 2024, which is well below the 43.6 you indicate, for example, for Congonhas in the press release this morning. So I'm wondering if you can explain how tariffs work in the contract, which kind of tariff you expect to implement, And if it's correct, to assume a 50% increase over the next year. Thank you.

Okay. Well, with regard to the dividend policy, please bear with me. We should wait until the 16th of November. I think this is the kind of situation that should be part of the strategic plan presentation rather than me discussing it today. In terms of the key factor on the yield dilution, I can share with you the data so far. And this means in quarter one, we had the concentration by 38.7 million euros. In quarter two, we experienced dilution by €29.3 million. In quarter three, we experienced dilution by €48.1 million. So in total, now we are in a position of €38.6 million. million euros of dilution, yield dilution accumulation. For the rest of the year, we may try to give you some indication later on, but frankly, I would say probably it's going to be there or thereabouts with quarter two, maybe, or something between quarter two and quarter three, but please don't take this as a fait accompli, okay? But what is clear is now the The passenger mix and the growth of the business and the loan factors are taking us in the direction of further dilution. Coming back to the situation we experienced over a number of years before the COVID. With regard to the... the Brazilian revenues, I would rather ask you to be provided with this information at the time of the strategic plan presentation. We will be shedding some light on that. What is clear is that the analysis we have made of that and is a combination of two things. One of them is definitely financials, of course, of course, otherwise we wouldn't be there. But on the other hand, don't forget the strategic perspective. We are going to be there for 30 years, 30-plus years, in one of the largest air traffic markets in the world. and managing 20% of the traffic of that country. So any views based on assessing the coming two, three years would be, in my view, short-sighted.

Okay, thank you.

The next question is from Christian Nedeljko of UBS. Please go ahead.

Hi, thank you very much for taking my questions. The first one, if we look a bit at the cost of living crisis and potential implications for 2023, and I know it's very early on, but could you give us any color on how you see the moving parts in 2023 traffic in Spain? Maybe what's your worst-case scenario? Can you say 90% of 19 traffic, it's a worst-case scenario in a recession in 23? Could it be more or less? Secondly, the retail revenues per passenger, the strong growth versus 19, could you elaborate there how much of that you think is structural? Do you think there are still some temporary benefits in there? And how do you see the next few quarters? Do you think there's room for further improvements versus what you've had in Q3? And the last one, if I may, can you comment a bit about the recent new wage inflation proposal for Spain or for public servants in 23 and over the next three years? When do you expect to see a final decision there? Thank you.

Okay. Starting with huge expectations. Frankly, Christian, you know we don't. or at least we are not providing any views on 2023 for the time being. What I can tell you is that I wouldn't know what the worst case scenario could be. It depends very much on the severity of the evolution of the macroeconomic conditions, the war as well. I think this is definitely an element that everybody in Europe at least should keep in mind. So we don't know. What we know is that so far, there is no indication whatsoever of any worsening of the current trends. And when I say that, it's not only because AENA is monitoring that. It's because we are talking day in, day out to the airlines, and they don't see any indication of that. They are insisting that... Today, the ability to predict the evolution of the bookings is, let's say, almost, it has diminished dramatically. So they are mainly looking at the next month or next two months at maximum. But at the same time, they don't see any indication of issues. You have to take into account as well that they are, there is a large market closed so far, which is the Asia market. I don't mean this is a dramatically important market for Spain. I recognize that. But this market is going to open as well, sooner or later, probably sometime in time next year. And this will have a rock-on impact, a rock-on effect. So, frankly, I cannot tell you what the worst-case scenario would be. What I can tell you is that Everything seems to be heading in the right direction. The consequences of any macro conditions or war conditions worsening, we need to monitor day by day. With regard to commercial revenues, well, the answer is yes. I think the way the commercial revenues are going is I cannot tell you whether this is structural or not in the sense of, of course, there are a number of behaviors, social and personal behaviors taking place in our industry and other leisure industries that seem to be driven by psychological reactions and things like that. But on the other hand, we have... headwinds, sorry, tailwinds coming from potentially the evolution of the dollar and the U.S. travelers coming to Europe more and more. The fact that the U.K. citizens are now out of the, obviously, we can apply them duty-free, let's say, prices, things like that. So I can tell you short-term, and by short-term I mean This year and probably a good part of next year, subject to the conditions I mentioned before, I don't see any reason to see the revenue per passenger going south at all. This is not a prediction. This is just an impression. Because of the other hand, we expect specialty shops, to also join, at some point in time, the trend. They are lagging behind big time for various reasons. So I don't see reasons to believe that this is going to change in the coming, let's say, 12 months or so. Wages. Well, in Spain, the wages are, for the citizens, as you know, are subject to the same rules, are already agreed. So the best – let me think twice. I think this year we have a 3.5% salary increases or wage increases. And then combining these years, 2023 and 2024, because the agreement – has been subject to final signing, but I would say you can take it for granted. Combining 2032, 2033, and 2024, I think the compound growth in salaries would be probably around 9%, between 8% and 9%. I can't check the number for you specifically, but something between those two figures. And this is a given. It's already... It's already done. So this is the kind of salary which increases that you should wait across the board for INA's personnel.

Understood. Thank you very much.

The next question is from Luis Prieto of Cutler. Please go ahead.

Good afternoon. Thanks for taking my questions. I had a couple of questions. I have seen that there has been a year-on-year acceleration of this research cost in Q3 versus Q1 and Q2. Chef, you were live on this, and there's your hands on your foot. Do you assume that from now on, do you want to lock in the price? Is it more likely that maybe we should not do anything for the time being? And the second question is if you could provide us with what could happen in the context of today's inflationary environment. Okay.

Well, with regard to the energy cost, the increase in this quarter is all driven, well, maybe there is an element of consumption, but frankly, it's all driven by the price of the electricity. In Spain, the price of electricity, well, normally in Spain, the price of electricity, the spot price is something that is called ONIE, O-N-I-E, that you can check online if you wish. And if you look at that, this has been going south, going down, since, I would say, mid of the year, slightly later than that. But that was combined with the approval by the Spanish government from June 2022 till the 31st of March 2023 of a so-called gas price cap. And this gas price cap is supposed, and is indeed benefiting the whole system overall because the price of producing electricity across the country has gone down. because the gas producers have their price cap. But on the other hand, this should be, obviously, money is not falling from the trees, so there is a levy or is an extra cost imposed to finance that across the different users. If you add to the market price the cost of this cap, The cost of the electricity for AENA and for everybody else in the third quarter has been much higher than any quarter before. I think something like 30% from memory. I mean, if you add those components, the total cost has been not very far from 300 euros per megawatt hour over the last quarter. So that's the reason. If you look at the market today, it's interesting because the gas reserves have grown across the continent. The autumn is relatively warm, but it's really warm. And the gas is being accumulated and not consumed. And as a result of that, the price is falling significantly. If you look at the price today, well, just today, probably this is 300 euros per megawatt power. It's probably something in the region of, I don't know, 200. So significantly lower than that. So when you look at this, you can imagine the struggle to make decisions on hedging. Because what you can see today is that the price of electricity fell over the last weeks. Obviously, nothing that you can compare with the pre-crisis prices, but still prices that look more attractive. So why on earth you are going to hedge? When you look at the hedging prices, they are higher. On the other hand, the liquidity of the market is really, really slim. So it's very, very difficult, if not impossible, to hedge more than a very, very small portion unless you are prepared to push the prices up. And then when we look at the futures, the future market is indicating that 2023 is not looking good. either. But in 2023, things improve. Well, who knows, no? This is what the market is signaling today, the futures. So it's difficult. Would you hedge, taking into account that the 2023 prices today are, let me double check, well, on average, 253 euros is what I have here. So probably 50, let's say, for the sake of argument. You just pay megawatt hour to hedge on 2023. Not easy. So it's not that we are stupid. It's simply the market is sending signals that are difficult to buy into. And on the other hand, once again, the hedge capacity is very, very limited, very, very limited, at least in this country. or in this market, to be more precise, because this is the Iberian market. It's both the Spanish and the Portuguese market together. Of course, we are working on an alternative solution. The alternative solution would be a combination of our the deployment of solar panels. It is already part of our plan, well before this took place. And secondly, we may explore some PPAs. We may explore some PPAs with the right conditions and on a temporary basis. Because as I said before, for 2024 onwards, the market is signaling a significant reduction or let's say a significant fall in prices to the tune of one-fourth of the 2023 prices. I hope this helps. It's not easy, really. It's a very convoluted and cumbersome situation that I think we are all experiencing with the prices.

The next question is from Stephanie Dutt of RBC. Please go ahead.

Hi. Thank you for answering my question. The first one is regarding the Brazilian airport acquisition, and you mentioned we would know more about it in your presentation during the strategic plan, but I was curious to know if we look at the about half a billion acquisition and about a billion of capex in euros, How are you thinking about financing that? What kind of cost of debt are you able to have locally? And you did mention 80% was helpful. I'm not sure I did get your comment right. Is that regarding the Brazilian debt? My second question is regarding the strong operating cash flow of the third quarter. You had a positive impact from working capital. what should we expect for the last quarter, still a positive impact and for the full year. And then finally, regarding other operating expenses, if I'm not mistaken, you historically said that the absolute amount of increase compared to 2019 for every quarter would kind of remain in the same range. I think for the first quarter, we were a bit above 60 million euros higher than other operating costs versus 19. For the second quarter, about 75. And for the third quarter, that number jumped 205. So what should we expect for Q4 in particular inside of the commentary you just made that electricity prices have been coming down and that therefore hopefully the energy headwind for the fourth quarter won't be as high. Thank you so much.

Well, to start with, I may need to ask you to remind me some of the questions. Sorry. Anyway, to start with the Brazilian, what I'm going to share with you now about the Brazilian new acquisition is the numbers. To make the numbers clear, because I think there is some confusion around it, the enterprise value of this acquisition is $3.2 billion. Brazilian reais. 3.2 billion Brazilian reais, if I'm not mistaken, is something like 700 million euros. And how we can come to this figure? First of all, there is an obligation to inject 1.64 billion reais by way of capital in the company. Secondly, we offer 2.45 billion Riyals of, let's say, to pay that for the concession, the upfront payment. So this in total means some 4.1, shy of that figure, million Riyals. Out of only the 2.45 billion reais will go into the company and straight away will be paid to the Brazilian authorities. But the 1.64 billion reais of capital will be used to deal with a number of costs including the redundancies of all the staff in the airports as it happened with any other concession in Brazil before. But then there will be something like 800 million reais left in cash in the business. So that means that the enterprise value of this transaction deducted in that cash is 3.2 billion reais. This is the figure. Nothing else. There are no more payments to be made. Our plan is to, one, how to leverage, how to raise debt to pay for that is a matter that we are working on now as we speak. What is clear for us, the equity element is 1.64 billion reais. Without showing you what is the particular solution we are going to implement to gain the business. But this business, as it happened in the Northeast airports, all the CAPEX, all the capital plans, all the developments will be funded via debt. And in Brazil, that debt is always in full or to a very significant extent provided by the public banks, by the BNDES in particular. And then we may need to add some capital markets, some amount of debt raised in the capital markets over there. But normally, the majority of this funding is coming from the public institutions in Brazil. I hope that helps. Otherwise, please let me know. There was a second question. On the working capital. Okay. Well, don't be too fixated on the working capital, because the reason why the working capital... is better this year than previous year is because, remember, we were accumulating max. And this time, we are accumulating very little by way of max. So I cannot predict to the euro how the working capital is going to be evolving over the coming months. But believe me, this is, in the current circumstances where the max have very little weight, in the business, this is not a big deal. You can see that the 1.5 billion euros of cash generated is exactly the EBITDA plus the DF7 adjustment. So, honestly, in the past, where we have a very significant amount of mags being accumulated to be built and collected at the end of the year, that could play a much more significant part. And definitely in 2021 it was massive. That was massive. It was unbelievably high. You know why? Because we have this 700 million euros accumulated that we are now taking to PNL. But in normal circumstances today, this is not going to be a major, major element of the plan. If anything, it may involve, let's say, some of the cash to be collected three months later, three months earlier, things like that, but nothing critical. And there was another question, right? I don't want to answer.

The last question was on other topics and this trend in terms of absolutely free energy.

Clearly you brought me, so now I'm going to be more prudent. I would say the total cost excluding energy for the whole year is going to be there or thereabouts at the 2019 level. This is my summary. Of course, there are always elements of the cost that you cannot predict in full, because in this business, the traffic, the impact of the volumes is sometimes, let's say, the middle, a bit. But by way of headline, this is it. Excluding energy, energy is something I cannot commit. Energy today seems to be going in the right direction, so I would have thought that my expectation is to have an energy bill in the fourth quarter that will be down the third quarter, but I cannot commit to that because we are entirely subject to the evolution of the market and the gas price cap element as well.

Thank you very much.

The next question is from Elodie Rall of JP Morgan.

Please go ahead. Ms. Rall, your line is open. Please go ahead. Yes, sorry. Can you hear me?

Yeah, we can hear you. All right. Thanks for taking my question. Sorry about that. So my first question is on the debt. And you said that 80% of your debt is fixed-rated. But could you remind us of the portion of debt that is maturing between the next, like between 23 and 20?

So it will be...

We couldn't hear you. For a while, you, let's say, dropped from the line. Okay. Can you hear me better? Yeah, yeah. Now, absolutely fine. So your question was, sorry, the debt.

My question is on the debt and the securities that are coming to you or due in the next three years, between 23 and 25. And what would you expect in terms of the financing conditions for those maturities? If you could remind us, you know, how much is maturing and what you would expect and the additional impact on financial costs going forward. That's my first question. And my second question, just quickly on COVID compensation, I think you still registered some compensation in Q3. So if you could just clarify how much and what we should expect for Q4. Thanks.

Okay, the maturity of cadmium is something you can find on slide number 22 of the presentation. What you can see there is that there is a significant peak in 2024. 2023 is a very modest year in terms of dead maturities. 2024 is close to 2 billion. But this is driven by the fact that we took some debt over the COVID period. with a view to pay it back, to be perfectly honest, if and when. So we are not at all concerned by that. We may even, if the conditions are right, even repay it earlier, or we can refinance part of that and to, let's say, spread it over a number of years. So the refinancing of part of that debt is something that I'm sure we will be doing shortly. And of course, that refinancing will come with a cost. And that will depend on the market conditions. For instance, to get to the 80% fixed or hedged rate that we have today, meaning today because if you look at the slide number 22 at the end of September, that figure was 71%. To get to this point, obviously we needed to pay more because we transformed some of our floating debt into fixed debt. On average, we end up paying 3% over that chunk of debt that is something around 1.2 billion euros of debt. So it's coming to the cost, of course, inevitably. I mean, we are in a different world. We are not anymore in the world of, let's say, zero-cost debt. We have to accommodate to that reality. In the case of AENA, as an individual company, of course, this will have an impact, but it's a really, really moderate, very moderate impact in the terms of millions, nothing major. Different things, when you contemplate acquisitions, when you are financing large capital projects in other subsidiaries, Of course, that will come with a cost that will be, let's say, commensurate with the reality of the market. But you need to look at that on a case-by-case basis. But when you think of AIMA, which is what you can see on slide number 22, the impact of any refinancing will be moderate. But it's true. We are not anymore in the world of the 0% interest rate. And we will see the average interest rate to go up. But still, as our loan-to-debt is in such a good set of conditions, the average cost of debt will be still probably, I would say, best in class.

The next question is from Satish Sivakumar of Citi. Please go ahead.

Thank you. Actually, I have one question on Brazil. If I look at the market share of the top three airlines in Brazil, it's around 90%. And in your opening remarks, you did mention about your plans around stimulating traffic there. Given the consolidated nature of the market, and how do you actually like to try to stimulate more traffic growth and Brazil. And then just related to that, can you actually comment on the utilization of the apples that you actually want concession for? Just to get a sense like what are we doing there to actually grow for the volumes, i.e., traffic? Thank you.

So I didn't understand your second question. With regard to the first question, question. Well, there are three airlines there, but there is still room to... That market hasn't been liberalized to the extent that other markets have, and we believe that over a long period of time there is still room for the Brazilian low-cost market to develop further. Of course, the way you... I have to be very clear that Particularly in Congonhas, the story is not one of growth or dramatic growth. Of course, we expect that airport to grow, but it's not one of dramatic growth because it's an airport that has a number of constraints and limited growth capacity. So it's more a matter of utilizing properly the airport and improving some of the parameters. The rest of the airports, obviously, they don't have the weight of Congonhas. Really, Congonhas is disproportionately important to us. But the rest of the airports have room to grow. There is a huge amount of congestion in the key Brazilian airports. In the Sao Paulo area, definitely this is the case. You can read in the press there that there is a need to find... ways to funnel all that into other airports. And some of the airports in the portfolio are not very, very nearby, but not very far from being able to operate and serve to this region. So without getting into the detail, I'm not a technical individual, but what I can tell you is this is not a It's not driven by growth. The equity story here is not going to be driven by growth at Combonias. It is an element of that. There is an element of that, but this is not the critical point. There is room for growth in the other airports, indeed. The second question, if you can say that again, please.

Yes, sure. It's actually around the utilization, i.e., like, say, what is the terminal utilization today? and what is the utilization of the portfolio, just to understand that how much scope is there in terms of capacity point of view to go further.

You are asking about these particular 11 airports that we have? Yes, yes. Obviously, they are ruined because they haven't recovered. Congonhas hasn't reached the level of traffic recovery that, for instance, we have in the northeast region. I think from memory they are around 75%. So there is a big room coming from the COVID impact. But colonias was already full. And colonias will be full. So colonias will be growing more than weekly over a number of years. But this is not about adding massive numbers of extract capacity. This is not the case. It's full of internet, which is in the middle of the city.

Got it. Thank you.

The next question is from Uranus Brown of Stiefel. Please go ahead.

Yes, thanks for taking my question. I have two. First question would be on your good performance in the commercial business. In the press release, you mentioned that you have also increased prices in car rental and VIP places. I was wondering if you can quantify the price increase there. And then secondly, coming back to the cost inflation, at which traffic level will you reach the 2019 EBTA performance considering the cost inflation? Obviously, I guess we need to adjust for the MAC write-down for that. But still, what would be the traffic level that you need for 100% EBTA recovery given the structurally higher costs?

Well, I'm afraid I'm not going to answer your last question. I would rather stay silent on that. But definitely they would be higher on the 2019 traffic level. On the other hand, commercial revenues, you mentioned car rental of VIP. Happy to share with you the price increases, but I don't know if we have them handy now. So the IR team will be providing you with this. I understand that was it? Yes. Okay. Sorry, I forgot to answer a question before on the COVID costs. So let me... Okay, the COVID costs on quarter one was 12.4 million euros. In quarter two, 51 million euros. In quarter three, 59 million euros. So in total, we have accumulated In our charges, €122 million in COVID costs charged to the airlines. I don't know if we have an estimate of the quarter four, but anyway, we could provide that offline later on if you wish. I'm sorry for not answering before.

The next question is from Dario Maglione of ENT, Paribas Exams.

Please go ahead.

Hi. I have three questions. One cost, so I'm starting to agree for Aina SME, cost of JMS in 2019, apart from the decreased cost. Has inflation kicked in yet in the outsourced? And if not, when will that happen? The second question on commercial value within commercial value from Q3, how much would energy pass through to tenants? And same figure for Q3 2019. And the last question is on the P factor. which was around 0.7 for next year Paris. My understanding is that was calculated based on the change in cost between 2021 and the previous year. So in theory, next year you could get a much bigger P factor. However, the CNBC is saying that the energy cost inflation It's an issue that belongs to EMA. It has been hedged, and so it's not exceptional. So, what's our respect for the PE factor next year? Thanks.

Okay. Your first question is difficult to say. I think there is an element of inflation already in some of the cost increases, but honestly, not is not the key driver. So I have to say that the level of inflation that we are witnessing these days in the Western countries, such as 7%, 8%, 9%, some of that, hasn't been impacting us yet on the... on our third-party services. But on the other hand, at the moment, we have 90% of the 2023 third-party services already contracted. So I believe this is a protection to the extent that their disinflation rates are not going beyond 2023. I suppose there will be a time when the impact will be potentially diluted and people will be back to being aggressively. But it will depend very much on the on the nature of these inflationary pressures, if they become strictly at that level, that would be a massive problem. But hopefully the monetary policy decision makers will be fighting hard to avoid that to happen. So if this is a transitory or temporary situation, to start with, 90% of our cost bill, third-party cost bill, is already engaged and contracted and they should honor the contracts the way they are. So on balance, I believe that we are not going to be hit that hard. But if I'm honest, I cannot tell you we have already experienced the sort of impact that these 8% and 9% inflation rates could bring about. In regard to key factor, because I forgot the second question. Okay, Australian energy costs. The Australian energy costs on average for 2022 on average should be around 20%. So, obviously, you can take that as a reference for the whole year, for every quarter. In terms of the P factor, well, you're right. We are supposed to be passing through the energy costs, and I think that In my view, the CMMC, this is my personal view after talking to them, they have a more flexible opinion about the possibility of taking a look at the P-factor over the coming years because they have realized that this index is not working at all. I have to refuse entirely that we should have hedged this. We have done over a number of years, for years, we have been buying energy in the spot market. And as a result of that, we achieved two goals. First of all, we delivered a very, very effective, efficient, and cheap energy bill to the airport users in general. And nobody complained about it. And secondly, we also make sure that the regulator, when assessing the costs to be factored in the broader discussions, they were looking at the real actual costs and nothing that would have been legitimate, obviously, to hedge. But when you hedge, normally this is more costly. So nobody complained about it. Everybody was happy with that. And then all of a sudden there is a major, major change in the market. We are taking a hit. I think this is not reasonable. But this is the kind of discussion that will take a while to entertain with regulators and I would say with government as well because we need to take a look at how these things should be hopefully modified going forward. We're going to do our best.

Thank you very much. Thank you.

The next question is from Akal Kumar of HSBC. Please go ahead.

Hi. Thank you for asking me.

I was dropped off in between.

So what kind of growth is structural? What kind of growth is not structural? How do you see the retail revenue going ahead given that Asian traffic is still not recovered fully and they are the high spenders? But then there is some, as it's mentioned in the release, that BRITs are spending more. So how do you see this overall retail spending going ahead? And then how would that impact your relating of duty-free context? You must have started the process and how that could impact you. The second question is around your strategy. Of course, you believe that you're going to close in November, but then what What are the key themes I will focus on? Of course, you might not disclose the details, but is it possible for you to share the key themes? What key themes are you going to focus on? You know, is it more traffic? Is it more evidence? So what is it that we could actually think of? And finally, on the cost structure, cost inflation, how should we look at your costs going ahead especially with the inflation and I'm sorry if you already have some questions.

Thank you. Don't worry. Sorry, don't worry. I understand. Well, first of all, the revenue, the commercial revenue per passenger grows that at this time is significantly over the 2019 level, as I said before, have some structural components and may have some other sort of components. And it's difficult for me to specify and to be very precise, but suffice to say that I believe that this healthy performance on a revenue per passenger basis, on a per passenger basis, I believe will remain, will remain at least for the coming year or so. So I think there are drivers there that will act as tailwinds. I don't mean by that that this is not going to be the case. beyond that point. What I'm saying is that I'm confident that this very healthy commercial revenue capacity in a few years will remain in place for a while. And I said before, and well, subject to macro conditions. Don't forget that we are living through an uncertain time in terms of weather. the consumer's reaction, the people's reaction, the, I don't know, the fact that the savings may go, not necessarily going to have an impact across the economy in general, and indeed on the transport industry. But subject to that, I think there are no reasons to believe that this is here to stay, at least, To the point that I have visibility, though, in the coming months or so. With regard to the things that we are going to discuss, obviously, please bear with me. I would be fired if I anticipate what we are going to do. Now, it's a joke, but definitely anything that you may expect. Anything that is relevant about the future of the business will be contemplated at the strategic plan presentation. And with regard to the cost inflation impact over the coming, let's say, year or years, as I said before, I don't believe we have been hit by the inflation other than in terms of the electricity. But on the other hand... 90% of our contracts are already in place, and they will be in place over the coming year, at least. So next year, 90% of the costs will be already contemplated in contracts that are already up and running. So I know this is a sort of insurance policy. Whether or not the inflation... The very high inflation rates remain beyond that point, and that could be an issue 2024. I don't know. But as I said before, again, the monetary policy, the central banks are there to supposedly to impede that to happen.

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

Yes, good afternoon, gentlemen. Just three from me. Thank you. The first one is on the international strategy. I was wondering if ANA is happy with the footprint they have achieved now that Congonhas is in their portfolio, or if we should instead expect the company to remain active in new privatizations in the near and medium term. Second, it's on electricity and energy in general. A few days ago, the chairman was on record for saying that AENA may bring forward its decarbonization target by a full decade. What did he really mean by this statement, and could this be something that AENA be considering accelerating its solar PV strategy? You mentioned before something about the PPA contracts. Could you be more specific about this? And lastly, I noticed on page 11 of the earnings report that there have been several appeals against the status for 2023 by several airlines. What could this mean?

Thank you. Thank you. With the international activity, the answer is yes, we remain active. to the extent that we can find good opportunities, we will remain active in that camp, in that field. In terms of the, what the chairman said is that we were aggressive or, if you like, ambitious about bringing forward the carbon neutrality agenda and things like that, but he was not to the rest of my knowledge, specifically about the solar panel development plan. This is something that is very specific. We have a plan for that. The carbon neutrality agenda obviously goes beyond beyond that point is a result of a combination of many other things. It's not only about your energy being provided or sourced by green sources. It's more than that. This is one piece, and that piece is still part of our plan, and we are working on it as we speak. Bringing that forward is extremely difficult because there are There are administrative and bureaucratic steps to be taken that in Spain are not precisely going in the right direction, to be perfectly honest. You need to get access to capacity to develop your plans. That capacity is part of a process that is put in the market as part of a process that is run by Red Electrica. Then you have to comply with a number of terms and conditions. You have to apply for a number of licenses, things like that. And this part of the process in Spain is not particularly agile. But other than that, we are very ambitious and working hard to get to where we want to get to. When I mention the PPA in particular, it's because between now and the time when we deploy our solar plants in full, obviously we were planning to do nothing. Nothing. with the electricity price. Now the conditions are such that you have to take a look at that. If you can find a way of breaching that period of time and to weather the price volatility, you should do it. As I said before, it's difficult to hedge for the coming 12 months because it is economically difficult. irrationally, I would say. But between that time and the time when we could deploy in full the panels, we may think of implementing something if the market conditions are right and the prices are meaningful and sensible. And this is what we are exploring. This is what I wanted, what I meant, nothing else. We are not changing the strategy. Then we will add to this Yes, indeed. A number of airlines appealed on the competition, the CNMC decision for both 2022 and 2023 tariffs. Obviously, they have the right to do that, and we need to wait and see. Obviously, we have every confidence that this is not going to fly. The CNMC was pretty clear rejecting the 2023 two appeals, and they are working now on the 2023 appeals. The 2023 appeals are still a work in progress, as you may expect, because the CNMC hasn't yet made a final decision on them.

Okay.

No more questions, I can see, so thank you very much, everyone, for for being part of the call today and all the rest. I'm sure we will see you at the November 16 event. Thank you very much.