Aena Sme S.A Unsp/Adr

Good afternoon, everyone, and welcome to our results presentation for the year 2023. This is Ignacio Castejón speaking. It's a real pleasure being with all of you today again. Our chairman and CEO, Mauricio Lucena, will host the call, together with Carlos Gallego, head of IR, and myself. Now I'll give the floor to Mauricio. Thank you very much, Mauricio. Thank you, Ignacio. Good afternoon, ladies and gentlemen, and thank you for... joining us today. I think that we can confirm that we are very proud and very satisfied with the results that we have presented today. I will start, as usual, commenting the key highlights, and then I will give the floor back to Ignacio Castejón, and then I can again, of course, join you in the Q&A section. I will start with traffic. Inagrid traffic increased year on year by 16% to 314 million passengers, which represented an increase of 2.3% compared to 2019. And if we go To the Spanish network, traffic increased 2.9% compared to 2019 and reached, I would say, a very good level, which was a record. And it was 283.2 million passengers. Domestic traffic increased by 8.2%, while international traffic increased 0.5% compared to 2019. London-Luton airport traffic was not as good as the average of the IANA network. But in the context of the UK traffic, I think it was a normal behavior. It reached 90% of the traffic of 2019. And in contrast, in Brazil, our A and B concession increased 6.3% compared to 2019 levels. I move now to financials. Ordinary revenue stood at a little bit more of 5 billion euros, which is another record. Aeronautical revenue stood at 2.8 billion euros. Commercial revenue, 1.5 billion euros. And real estate revenue, 100%. 5.5 million euros. As you can see at our presentation, total operating expenses stood at almost 3 billion euros, specifically 2.9 billion euros. This variation, as we have tried to clearly explain on the presentation, reflects principally the reversal of the impairment of the airports of the Northeast of Brazil, which amounts to 155.5 million euros. And secondly, the decrease of 121.2 million euros in the electricity bill, which was really good news after the nightmare of 2021. I'm, of course, referring to the electricity bill. All in all, the EBITDA for the period came at 3 billion euros, and the EBITDA margin closed at 58.8%. And if we, as we should do, exclude the reversal of the said employment the EBITDA would have been 55.8%. Again, I'm referring to the AENA group, not Spain. All in all, again, the net profit produced by the company reached 1.6, a little bit more of 1.6 billion euros, net profit in AENA's history. I now move to the commercial activity. The commercial business behaved very, very well. First, the commercial sales exceeded 2019 by 17%. Second, the ratio of sales per passenger was 14% higher than in 2019. And third, the variable and fixed rent invoice surpassed 2019 figures by 21.8%. I would also like to highlight that at the present time, we are ready to award in the coming months the contracts for the rent-a-car activity, and you also know that in 2024, we will put in the market the 13% of the specialty shops business and 9% of the food and beverage business. On the other hand, I would also like to highlight that the duty-free business, and in this case I'm referring to the variable income of the Canarian and Barcelona lots, exceeded the minimum annual guarantee rents in 2023, and this is the first time ever that the mentioned two lots simultaneously invoice the valuable income. Of course, you can anticipate that we are highly proud of this achievement. And finally, I would like to underline a few important milestones. First of all, tariffs. I think that It was a remarkable achievement that the 2023, excuse me, the 2024 tariffs AENA's proposal was finally approved. It was approved by the Spanish government on the part that affects the inflation, especially by the CNMC. This represents, this tariff represents an increase of 4.09%, or in other words, 40 cents per passenger. And I think that ultimately this tariff's approval reflects the robustness of the regulatory framework. In general, I think that it reflects the solidity of the law in general in Spain. Secondly, POAB, our second concession in Brazil. I would like to underline that in the last quarter of the last year, 2023, We took over the full control of the 11 new airports of IANA in Brazil. I'm very, very satisfied with the very smooth process. And I would also add that the Boabé concession, this is the name of this new concession, that consists of six airports, no, excuse me, 11 airports, among which, of course, the most important one is the Congonhas Airport in Sao Paulo. And I would say that the concession is performing smoothly according to our business plan. And I would highlight that First, that in May, the Brazilian regulator ANAC granted the operational certification to the airport of Congonhas. And second, the full concession, POAB, has already submitted CAPEX projects for the mandatory investment to ANAC, which is very good news. Again, I think that... So far, the concession is performing adequately. Thirdly, dividends. Yesterday, as we have publicly announced, the Board of Directors of ALMA proposed for approval at the Annual General Meeting the payment of a gross dividend of 7.66 euros per share. Again, a new record. And fourthly, concerning ESG, China has been included for the first time in the Dow Jones Sustainability Index and remains at the FTSE for good. And finally, The fifth milestone that I would like to underline is about our capital markets day. You know that on the 7th of March we will hold the update of our strategic plan and I hope to again be in contact with you Thank you very much. I give the floor back to Ignacio Castejón, and we will move to a more detailed explanation of the considerations that I have tried to convey to you. Thank you.

Thank you very much, Mauricio.

Well, hello, everyone, again. What we believe, we have a set of financial results in front of us that really is a very good one. You will have seen total revenues have increased by more than 21%, EBITDA around 45.4%, and net result, net income, 80.9%, all of those consolidated figures. What are the main drivers in our understanding for these achievements? Basically, traffic performance, commercial trends, A larger contribution from our international business and also the OPEX performance with some one-offs in our OPEX operational structure and also on the financial side. As highlighted by our Chairman and CEO, there has been a significant impact coming from the reversal of the impairment at AMB that has contributed 155.5 million euros to our consolidated accounts. So excluding that impact, our EBITDA would be at a level of 2,867 million euros. Margins would be around 55.8, as explained by Mauricio. There is another one-off that is a subsidy related to COVID expenses. That's 45 million euros that have been received by the company in December. This is also affecting our EBITDA and our margins. Discounting this subsidy, our EBITDA margin could be at 55.4%. In the following minutes, very briefly, I'll try to summarize and focus on these drivers that are behind the performance of the company in 2023.

Traffic.

Mauricio has already mentioned that traffic recovery in Spain has been 2.9% above 2019 levels. What we have seen through the year is that traffic recovery has improved through the year. We started the first quarter at 101.6% versus 2019. and we finished in the last quarter at 108.6%. So the improvement has been happening through the full year 2023. If we look at the segments domestic and international, full recovery compared to 2019, 108.2% and 100.5% for domestic and international respectively, and I'll do it for a sec with respect to these two markets, international and domestic. On international markets, What we have seen is Latin America, North America, and Africa already surpassing 2019 levels. And the Europe market at 99.9%, so at 2019 levels, with countries such as Italy, France, the Netherlands, Portugal, materially exceeding 2019 levels. Our two main markets, the UK and Germany, still sits behind 2019 levels, 95 and 91, respectively. However, we have seen in the last quarter a significant improvement with the two markets already performing in that specific quarter above 2019 levels. With respect to airlines, Dragonair has increased the number of passengers coming to our airports by 21.7% and also AIG group by 7.3%. So with respect to traffic, a very satisfactory performance. The second driver that we have identified commercial trends, commercial performance, Maruisi has already explained to us the main trends behind the improvement in variable rents, revenues, and sales. So I'll spend a few minutes talking about some of the main business lines behind those big numbers. Duty-free, the largest category. I'm going to slide Carlos, 15, sorry, 17.

With respect to duty-free, our largest category is

Our largest category, sales have performed very positively in 2023, with an increase of almost 15% compared to 2019. What is behind this growth? Basically, the average spending by British passengers. Food and beverage, the revenue in this category increased by 33.4% compared to 2022. The main reasons behind that would explain this growth is price increases, more transactions, and also new brands being attracted to the airports by our commercial team. The specialty shops was one of the categories that suffered the most during COVID and also because of the commercial trends out of the airports. We are finally seeing this category contributing to the company with 133 million. That's an increase of 47.7 percent. That's the largest increase this year in all the commercial activities. And what we are seeing is that in airports in which the commercial offer is complete and traffic has recovered, this category is performing very satisfactorily. I would like to say that we have managed to add 5,000 square meters to this category through the year. Car rental activities. Mauricio already pointed out that in this year, the contracts, because they are expiring in October 2024, will be awfully awarded. And I would like to share the trend behind this activity that we have seen in 2023. We have seen prices, number of contracts increasing by nearly 20%, but prices compared to 2022 have gone down. And this is normal. Prices in 2023 compared to 2019 are still 30% higher. So this decline in the value of the contracts is basically a reaction of having more supply by the car rental operators available after the crisis in the supply chains have been mitigated. Let me dwell for a second in VIP services. This is a category that is already contributing $118 million to AENA. This line has materially increased this year by 44%. What we have seen is that the largest contributor of this line, that is VIP Lunges, is performing very well with the customer base because traffic and higher penetration and average contact prices, average charges that we are charging in this activity, materially increasing. The third reason for the performance of this year is a higher, although still at levels below 10% of our international activities. Mauricio pointed out that traffic recovery on Luton is 90%. However, EBITDA is already 20 million higher than in 2019, reaching 108 million pounds. If we look at Brazil, the performance of the airports over there from a traffic standpoint is better than comparable airports, similar, for example, to Recife, and is performing well ahead of 2019 levels at 106%. discounting all the effects of impairment reversals that took place in 2022 and 2023, have grown from R$185 million to R$220 million. And let me finish, just one sec, pointing out the fact that BOAB, being Congonhas the largest airport, in that portfolio is already contributing, with just a few weeks of performance, R$13 million, R$1.3 million, of euros to our P&IL. It's still a small number. It will be much higher next year because of the 12 months, but it's already a good sign that that is part of our activities. The other driver for the performance is OPEX. What we have seen in OPEX, in OPEX we have seen that it's true that at total level, at Costs have decreased. Mauricio has been very clear that there is a very important driver, that is the reversal of the impairment. That is a negative, it's a minus cost, it's a negative cost, so affecting positively. But we have also been managing costs very carefully and trying to mitigate all what's happening in the airport industry and also in the economy in general because of inflation, because of salary increases going up because of the inflation and also minimum salaries increasing in Spain materially in the last few years. Mauricis has already pointed out the positive impact of the reduction of the cost of energy in our accounts, amounting to 120 million euros. That has also been a tailwind in our OPEX performance. Let me finish with the cash generated by the company, a very strong cash generation by the company of 2.2 billion euros, 19% increase year-on-year. and basically net debt position already at 2.0C levels, so very healthy and strong position, even better than in 2019. And with that, basically available cash and available credit lines of more than 5 billion euros that should ensure to everyone that future dividend payments, especially in 2024, and debt repayments that are material in 2024, can be easily managed by the company. Let me finish with a remark. All of you know that we have in a week, hopefully, the Capital Markets Day, where we'll be explaining, we'll be providing some guidance and update to our 2022 to 2026 strategic plan. So I would ask you to hold questions related to guidance for this year and for the strategic plan to that event. so that we can focus the conversation today in the resource of 2023. And that's all from my side. Thank you very much. I don't know, Mauricio, if you want to add anything. Thank you, everyone.

Operator, we are ready to start with the Q&A.

The floor is now open for your questions. To ask a question this time, please press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Luis Prieto with Kepler. Your line is open.

Good afternoon. Thanks for taking my questions. Two from me. The first one, you have explained the moving parts of the sharp increase in commercial revenue per passenger observed last year. But why the marked jump in Q4 and not before a meaningful jump? Is it a direct function of the jump in traffic? Any idea you could provide us with in terms of average ticket per passenger to give an explanation to this? And the second question would be that there seems to have been a relevant change in traffic behavior over the last few months. I'm obviously, given what you said, not going to ask you to provide any guidance before the CMV, but how stable do you think all of this is at the moment?

Thank you. Hello, Luis. This is Ignacio speaking.

Thank you very much for your question. I understand your question was related to the last quarter of 2023 related to commercial revenues. Is that right? Correct. Okay. Well, you have seen, I think, a combination of effects. Traffic has performed very well in the last quarter of the year. We were discussing speed of recovery was faster those months, although are weak months. We have already seen some of the latest awards to some of our categories. adding to these commercial activities. Third, we have been adding more surface to our activities. So it's a combination. And on top of that, I would also highlight from a pure accounting standpoint, the max signings and all those latest contracts are also contributing in this quarter. With respect to traffic, Of course, we are very happy with the performance of traffic. We have seen November, December performing very strongly. There is public information that we have already shared on the performance of January. What we have seen so far in Feb is not bad. But, Luis, with respect to perceptions and guidance, I would kindly ask you to hold until Thursday next week. It's just eight days.

But if I may rephrase my question just a little bit. In view of what you have seen, there's nothing that leads you to believe that it's not sustainable, is it? It is a sustainable trend. There's nothing abnormal.

What we are seeing is that the traffic performance in December and January has been performing very strongly. So far, so good with respect to impacts of all what is happening out there. on traffic in the following months. That's the kind of discussion that we would like to have with you on Thursday next week.

Perfect. Understood.

Thank you. Our next question comes from the line of Christian Nadelcu with UBS. Your line is open.

Hi. Thank you very much for taking my questions. The first one is on the Spanish network OPEX. to 2024 and the sort of the moving parts there. I think we can see on your slide 20 that your other operating expenses, excluding electricity, Q4 are up 29% year over year, a meaningful step up in that line. So I was curious what is driving that and how we should think about that line going forward, but how we should think about electricity as we're seeing the electricity prices coming down. Secondly, slide 16 is very helpful to see the duty-free rents collected per passenger. One trend that I noticed here is in Q4, your duty-free rents collected per passenger are up 11% versus 2019. In the first nine months, these are up 24%. So there's a material deceleration in deterrence collected per passenger in Q4. Is this related to a slowdown in passenger spending retail? How to do with rising manual guarantees? Or can you give us a bit more color there? So how should we think of this line going forward in 2024? Last one, if I may, more of what question, but we were seeing for the full year MAG revenues, $155 million, straight line depreciation, $60 million. Very difficult for us to model with precision these lines, but give us any help there, any color, at least directionally, do we expect the MAG revenues recognized to grow over the next couple of years, well above $150 million, or will they come down Should it take the $30 million in Q4 and annualize it? Is that the new normal or any color or indication that would help? Thank you.

Thank you, Christian. That was a long list.

I hope I will be able to remember all your questions and provide good answers, which is more important, I think. I think your first question was related to page 20 and the breakdown of over-operating expenses for the network in Spain, if I'm right. And I think you were highlighting the increase that you have seen, excluding electricity, and in particular in the last quarter. But I would like to share with you that in the last quarter, what we have had is a provision related to the DF7. Some court rulings have been issued that have not been in our favor, so we have decided to provide for those concepts, and that has been a bit more than 10 million euros, and that's impacting the last quarter in the category of other that you will see in slide 20. And that's something that is negatively adding, of course, to the performance of other operating expenses. I think your question, Christian, you also highlighted, you commented on electricity. As you know, the company signed a long-term supply contract for a few years with our recurring providers, and part of that contract, around 30%, is going to be provided at fixed prices. So we'll be taking advantage, of course, of the better prices And we have been taking advantage in the past weeks, and hopefully it's happening these days as well. But having said all that, taking advantage of this soft market, the company is also very active and is analyzing options to potentially hedge a bit more so that we can mitigate the potential of volatility coming from that item in our cost structure. In the future, we don't know what is going to happen with gas prices, electricity prices, so going above that level is something that we are analyzing and materially considering. I think you also referred to Max. That was your last question, but it is one in between. I will ask you again. With respect to Max, I think you were referring at the performance that is difficult to anticipate. Our plan this week is to share with you the calendar, the schedule of months per category for the whole life of the strategic plan, so 2024, 2025, and 2026. So you will have that visibility. What is happening and why they have increased in some categories and linealizations or straight lining are increasing? What you have seen, for example, in duty-free is that the new contracts kick in in October, well, November the 1st, and those marks are higher than the ones that we had before. So that's why that's contributing a bit more. With respect to straight lining that you will see in slide 13, those 59, that number is increasing because the average life of our commercial contracts is very low because we have awarded very recently a number of contracts, for example, food and beverage for Madrid and also the duty-free that I was mentioning earlier. So the newer our contracts are, the higher that number is going to be. I'm referring to the 59.1%. If our portfolio of contracts gets older, expires, we'll have the opposite effect in the following years. And I think that those are all the questions that you raised, Christian, that I can remember. I would ask for your help if I'm missing something.

That's very helpful, just that one in the middle was about duty-free rents collected. Seems that in Q4 there's a deceleration if I look at your slide 16. DTP rents collected per pack to 19 are up 11%, while in the first nine months they're up 24%. So I'm just asking if you're seeing a slowdown. spending retail spending in the airports or is there any other effect on the marks there or I'm just trying to get a steer on 24 do you actually think that number can grow the rent collected for tax can grow at the end of the day thank you it's a very good point so happy to address it Christian I'm happy to thank you for remembering what is happening there is a normal thing in airports

The new contracts started November 1st, and it's true that most of our duty-free activity has been transferred. There has been a big change with respect to the operator. But as part of our RFP, there were obligations related to new concepts, new layouts, new brands. So some construction works are taking place in the duty-free activities, and that's affecting some of the duty-free surface. and that might be affecting the variable rents that we are collecting in that activity in this specific quarter that you were highlighting, Christian.

Thank you. And these are done. The refurbishment activities are done in Q4, no longer impacting Q1.

Sorry, I couldn't follow you. There was some background noise.

The construction work and refurbishing is done in Q4? Yes.

Yeah, that's likely to finish, hopefully, in the following weeks. Thank you.

Our next question comes from the line of Nicola Pessina with MediaBanca. Your line is open.

Yes, good afternoon, all, and thanks for taking my questions. The first one on the 2025 tariff, do you calculate... Again, a P factor above 1%, and do you plan to ask Spanish authorities, again, the permission to apply a P factor above 1%, as we have seen for the 2024 tariff? Second question, if you can remind us if there is any agreement already in place with the trade unions for salary increases over 2024 and 2025. And a final question on M&A, if you can confirm you are considering the acquisition of Edinburgh Airport. Thank you.

Thank you, Nico. I'm happy to speak with you.

I think with respect to 2025 tariffs, we'll have a full discussion next week, but I'm happy to say that P-INVEST is a function of an evolution change that took place previously. So we were able to have a P-index higher than usual for this year because the P-index was taken into account of what happened in 2022. So given that we are starting at those high levels, it's very likely that in the future what we will see is much smaller increases because the starting point is already there. is already much, much higher. So it's a function of any single index of what has happened in the past. So that's the feedback that I would give you. With respect to smaller increases, the agreement that is still in place is up to 2024, up to this year. So that's the three-year agreement signed by the unions with the Spanish government, and INA is regulated It's passed, as you know, with respect to compensation of that agreement. So that's closed up to 2024. With respect to M&A, Nicolas, your question was about? I think you referred to a specific airport, but I couldn't hear the name.

Edinburgh.

Okay, Edinburgh. Yeah, there has been some press news. Okay. Nicola, what I can say with you is that, you know, it's the largest and top one airport operator globally speaking and in terms of performance. We have a healthy position and when there is an opportunity out there, wherever that is available, we may decide to look at that. However, that can be any airport globally speaking, but also always subject to all our internal criteria of risk-return. With respect to anywhere, there has been leakage by presses. The company is not confirming, rejecting, or saying anything. And what I can say with you is what I have said before, Nico. I think the company has been the number one leader and with an intention to increase the international EBITDA coming from international activities. We will explore opportunities, and we will reject opportunities. Always subject to strict criteria of risk-returning.

Very clear.

Nico, the chairman would like to add some more. Hello, this is Mauricio Lucena again. I completely share what Ignacio Castejón has just said. I would just add a general reflection. Our top priority at present is is to consolidate what we have achieved abroad. In this case, I'm referring to Brazil. I think that we have to, as a company, we have to digest correctly the 20% of Brazilian air traffic, which is a considerable amount. But this is compatible with what we consider our responsibility, which is, as Ignacio Castejón said, to analyze any opportunity as, by the way, all our competitors do all the time. I mean, we are not different compared to our competitors, to our peers. But I would like to clearly state that Brazil is our priority in the sense that we want to consolidate what we are already doing. And in general, our international approach at present is what we could call opportunistic. Opportunistic in the sense that we don't have, let's say, specific targets. We are open to analyze any opportunity, but we are not impatient, in other words. We will be very happy if in a few years, in the future, we communicate to the market that we have not purchased anything else. But at the same time, we would be happy if we consider that we can find a good international opportunity, you know, concerning always the quality of the asset, the price, the regulatory risk, and so on. Okay, so I hope that my intervention has helped to clarify or to, in other words, to add some information to what very correctly Ignacio said before. Thank you.

Absolutely, yes, very helpful.

Our next question comes from the line of Graham Hunt with Jefferies. Your line is open.

Thanks very much. I'll keep it to the two questions. Just coming back to the, I think, just over 10 million provision you mentioned, I think you said it was related to the DS7 disputes. Can I just get a sense of, is that the entire scope of the risk there, or is there... Should we anticipate potential for further provisions going into 2024? Just trying to understand the scope of risk there. And then if I could ask on duty-free, I wonder if you could just give us your thoughts on sort of the tailwind that you've been seeing from the British traveler since Brexit and their access to duty-free. You know, what... Can you just dig into some of the details of what is going on there, maybe some of the specific verticals within GT3 which are benefiting or the specific travel routes which you're seeing the biggest tailwind? Just trying to drill into what has obviously been a very positive trend for you over the past couple of years.

Thanks. Thank you, Ryan. This is Ignacio speaking.

I think your first question, this permission is related to some court rulings with respect to business activities that the company is defending and is still defending that shouldn't be affected by DF7. However, we have got some court rulings that are applying the DF7 to some of those business lines that our understanding is that they are excluded, that the DF7 shouldn't be applicable. So after getting those initial court rulings, the company has decided to provide for that. With respect to the future, it's difficult to say because there are a number of court proceedings taking place with respect to some of these activities. We are doing our best in order to reach some agreements when it makes sense with our tenants. But the solution will depend on future court rulings following that criteria or changing the criteria because we are seeing different criteria being applied depending on the specific judge, depending on the specific court. In general, the company feels that it's the right decision to provide for this 11.7, if I remember well, related to that specific category. and we'll take a similar approach in the following months if we perceive that that trend remains as we have seen so far. With respect to duty-free, you were asking about the British passengers. I think that there are too many trends behind what's happening. I think the change in the regulation in the UK is helping us a lot and is, of course, negatively affecting the British airports. Why? Because they have reduced the offer that they can provide on a tax-free basis to their passengers, and it's very limited to tobacco and alcohol. So we are benefiting or taking advantage of that limitation. That is a change in regulation that was approved a few years ago in the UK. And simultaneously, given that we have all the British passengers becoming non-European unions, and not having that kind of limitation in our airport, those passengers being our largest customer base after the Spanish, after the domestic, is helping a lot. If you ask me about the specific details, what I can say with you is that on average, sales per pack at this moment in time of our UK passengers are around 63 euros higher than than the total average of that activity. So the delta between a non-Brit and a British passenger is material for this activity. They are taking advantage, of course, of the duty-free experience. In Spain, if you add to that all the renovation of our duty-free activities taking place in That's helping a lot, our P&L. That is playing in our 23.5% increase in that activity. Juan, I hope I have answered your question.

Yes, thanks very much. My pleasure.

Our next question comes from the line of Andrew Lobenburg with Barclays. Your line is open.

Oh, hi there. I've got two questions, really. The first one is looking at the change in the operating cash flow compared to the EBITDA, because the EBITDA was up a billion and the operating cash flow was up 400. So can you talk us through the very big difference in change of operating cash flow against EBITDA and help us understand how we should think about EBITDA translating into cash into the future. And then the second question, I'm aware you might try and put it off until next week, but let me ask. You were very careful with your answers around M&A and your thinking around external expansion. I'm very keen to explain that you're going to be patient, not in a hurry. and yet the business is generating cash flows. So how are you going to think about incorporating shareholder returns in the context of an external inorganic growth, which is going to be lumpy and hard to predict?

Thank you, Andrew. This is Ignacio speaking.

On operating cash flow... I think what is happening, if we compare, for example, operating cash flow to profit before tax, I can discuss with you, Andrew, a few changes that we have seen this year. I think the first one in EBITDA, we have already discussed the reversal of the impairment. That's $155 million. That is a non-cash item. We have also had some financial items that are non-cash items, such as, for example, closing a derivative position. There is a significant impact coming to cash flow going out related to taxes. The tax bill last year from a payment standpoint was 177. In 2023, we have had 447 million euros of cash going out. So that's around almost 300. With respect to changes in working capital, you will have seen a small negative impact. That's because at the end of 2022, we had a number of short-term suppliers that invoiced us very late in December, and those invoices were not paid until 2023. So we had a positive impact in 2022. And that's why we have a small negative one this year. And that's really what is happening, Andrew. Those are the main drivers. Some non-caste items related to finance. The impairment, that is a non-caste item. Some write-off of financial assets related to DF7. negative movement, but a small, on the working capital and the material increase in tax payments. And that would be all. And the MAG is not a big part of it? The MAG, you said. Yeah, of course, the MAG, sorry, that's a good point. Of course, the MAG is affecting because it's a non-cash item. You are totally right. But I just want to be very careful. When we are talking about MAG, Andrew, and the non-cash item nature of MAC, what we are referring is to the straight line in another adjustment, because that's the adjustment that is a long-term one that relates to the newer contracts. So that's generating more EBITDA than cash. When we look at MAC revenue to be invoiced, that is the 154.9 million euros, Andrews, That normally marks that are invoiced and collected very early in the year following when that revenue has been accrued. So that's also affecting a bit. But the significant, I wouldn't use the word significant, but the important effect from an accounting standpoint of the straight lining, this year is 59. That is also non-cast, as you correctly highlighted, Andrew.

Okay.

Okay. I think you raised another question on M&A.

Yeah, the variability of M&A and how that impacts what you think about shareholder return. Okay.

Well, let me say very clearly, the company has only invested and will only explore opportunities in which equity RRR makes sense. It's attractive from a risk-reward standpoint. So that's the value creation filter that we always apply to any single transaction or opportunity that has been analyzed and that could be analyzed. So we are very careful and very serious so that any equity RR makes sense in the long term for the company and, of course, for the company's shareholders. Dividend payout. is that 80% of the individual net income this year has increased materially for our shareholders, and we are hopeful that that increase of those levels will remain there so our shareholders can benefit from that generation. The chairman would like to add some further color to my answer. Thank you. This is Mauricio Lucena again. Once more... I would like to convey that, of course, I share the reflection of Ignacio Castejón. And again, I would only like to complement it. And I would kindly ask analysts and investors who in the past and at present have trusted AENA, how it is managed. They have trusted our board of directors, our management. And I would kindly ask that we analyze carefully, honestly, the track record of arena internationally. If you analyze Luton, if you analyze Colombia, which is ending, Cali, Cartagena de Indias, if you analyze Mexico, Gap, we would unanimously conclude that these have been very good investments, very good investments. I hope, and of course this does not mean that any potential international operation is adequate for ARENA, of course. But when I try to look carefully at Brazil and our investments and acquisitions there, and I project them in the future, in the next... 30, 35 years. I'm sure because I'm seeing how our management team and our employees, they are working. I'm now being a privileged witness of how our financials in Brazil are evolving. Of course, you know that at the beginning of a concession, you have to assume capex, you have to assume debt. But in the long term, I'm sure so far that Brazil will also be a very good investment, a very good bet for AENA. And when I refer to AENA, I'm referring to its shareholders, which are, you know, our most precious treasure. So I'm just trying to say that... Please trust our board, our management team, because honestly, we will only bet for new operations if we are quite, quite, quite sure that the figures will be the adequate ones. We are very aware that investing in us money is shareholders' money, and we will

I do this in mind all the time. Thank you.

Thank you. Our next question comes from the line of Johannes Brunn with Stifle Europe. Your line is open.

I have two as well.

The first one would be on the 4.1% increase of fees this year. My question would be how the airlines reacted on that. I'm just asking because Ryanair was in the press saying that they will not open five new bases in Spain if the fee increase goes up. I'm just trying to get a feeling of the risk for traffic roads. And then secondly, I think at Luton Airport, the EBITDA in Q4 was down quite a bit year over year. And I think that was due to a 30 million impairment. So just curious what happened there, please. Thanks. Thank you.

I will take the first question. the airport charges, the airport tariffs. Well, yes, this is something that surprises me every year. I mean, I cannot understand why we always finish in a hot debate between AENA and on the other side, the airlines, The airlines are our precious clients, our customers, our partners. We really appreciate them. We feel very fortunate to live together with some of the most important airlines in the world. Ryanair, the airlines within the IAG group, etc. They have very good managers. So the only thing that I try to reivindicate is that Aena's shareholders, they deserve exactly the same consideration as the shareholders of anyone else specifically the airlines so when the airlines frequently question the increase the potential increase of our airport charges I can just say one we have shareholders which again are at least They have at least the same quality as the shareholders of the airlines. Second, it is in the interest of the airlines that the long-term quality of the Spanish airports and AENA's airports is preserved. And this can only be achieved through a robust regulatory framework which must be followed each year line by line. And this was what explained the 4.09% increase of 2020 for tariffs. And third, which is a secret, that we are probably the most efficient airport company in the world. This is the only secret. And I would like that... that this is recognized. Because on the other hand, in relative terms, the increases of profits, of the 2023 profits, have been much higher. Again, in relative terms, the increase of profits have been much higher in the case of airlines. And I don't see there any debate here. And finally, taking into account, I mean, I'm conveying it to you, but I know that you know this very well. Probably I'm speaking more broadly. Taking into account that from 2015 to 2023, nominally, airport charges in Spain decreased by more than 11%. And in real terms, it means taking into account inflation, from 2015 to 2023, airport charges in real terms have decreased significantly. more than 30% in real terms. So I would wonder if this is sustainable in the long term if you take into account the necessary future investments in Spanish airports, in the quality, in safety and security and so on. Well, this is something that we... together with the airlines, must reflect on. And if we, for a moment, forget the short-term interest, probably we will conclude that it makes complete sense that the remuneration of Iona shareholders through the regulatory framework, which is you without subtleties, you... can recover the OPEX and your CAPEX is reasonably remunerated. It's a scheme that I would say makes sense and it is the shared responsibility of all the air transport sector actors to preserve this model for the benefit of the quality of airport, air traffic, tourism, and ultimately the functioning of the Spanish economy.

Thank you.

Thanks. I mean, I agree or I tend to agree with your thoughts. I mean, more concretely, did Ryanair come back to you in terms of those five new bases that they plan to open this year? Or no?

You are asking if after the approval of the new airport tariffs for 2024, if Ryanair has come back to us? Could you please clarify that? Exactly. No. This public message that I have now elaborated, it is exactly the same. that I conveyed to Ryanair and all the airlines. So I think that, in the end, they understand our point. So, no, I don't have any novelty.

Thank you. Thank you. Johannes, I think you had another question with respect to Luton Performa. So can you please clarify what you were really seeking so that I can address your point properly? I think Johannes has been cut by the operator.

So let's move to the next question. I think it is Dario, if I'm not mistaken.

Our next question comes from the line of Dario Maguillon with BNP Paribas. Your line is open.

Hi, good afternoon. Three questions. One on the situation with the Catalonian airports, you know, about local parties trying to push to split Aina. Just wanted an update there on whether it's really legally possible. Question number two, I see that the airlines are planning to increase seat capacity for the next nine months by 10% year-on-year. This looks very bullish. So in this context, what impact are you seeing from the Pratt & Whitney engine issues or the delays in deliveries of airplanes? And the third question is more a technical question. There is a cap on the year-on-year increase in tariffs. Can you remind us what this cap will be in 2025?

Thanks. Thank you, Darío. I will take the first question.

My answer has not changed an inch since last time we spoke. Concerning the possible transfer of the ownership or management of the airports in Catalonia, Really, believe me, I said it a few months ago, this is empty noise. I think that everybody agrees that AENA's model functions very, very well, and its functioning benefits all the regions, including Catalonia. So, you know, on the other hand, there's a very strong... 2014 law that defines how the INA works in terms of its regulated activity. And finally, we have a hybrid composition of ownership. 51% belongs to the Spanish government, 49% belongs to private investors. We are a listed company, so this is another clear sign that the model will be preserved.

Thank you. Thank you. Thank you, Mauricio.

I'll address, I think there were two more questions. Let me start with the third. respect to 2025 tariff. I don't want to be rude, we are going to cover guidance feature next week, but I think 2025 tariff will be following regulation as applicable. So we will start from the EMAC, the index will be applied, and there will be the technical adjustments related to dilution quality, etc., so that we can calculate the EMAC applicable for the year. You are aware of the restrictions applicable in our regulation that we have to comply with the EMAP index by, or taking into account the P-index as a restriction, as a cap, and also the EMAP applicable the previous year. Taking into account those caps, that will be the tariff that hopefully will become applicable in 2025. I think you raised some questions on the, the other question you raised was related to seed capacity and potential disruptions on aircraft fleet. I think we are working with the slots communicated to us, and we are working with the information communicated to us by the airlines. So we understand that the airlines, when they share all that information from a planning standpoint with us, they are taking into account all the potential disruption that they may have related to those events.

Okay. Thank you, Miasho. So that 10% in-year increase, it actually may be possible.

Dario, why don't we have that kind of discussion on Thursday next week? Sure. When you have more info from us, I am sure that we can talk with all that information in front of us and have a more meaningful conversation.

Is that okay? Okay. Absolutely. Thank you very much. Thank you.

Next question comes from the line of Martin Hotel with Bank of America. Your phone is open.

Yes, good afternoon. Thank you for taking my questions. I will try to be brief. I have just a technical question on slide number 12, where you disclosed that there was a dilution effect in regulated revenue of $94 million in 2023, which I think is actually quite relevant. For 2024, could you do something proactive?

high dilution numbers. Could you just share some color on that particular topic?

Thank you.

Thank you, Martin. That's a good question. to be brief and sharp, is that in 2026, the different interim caps that were applicable during the interim regime of our regulation wouldn't be applicable. So that would be a situation in which we are just postponing that cash collection by a couple of years and, of course, duly capitalized. Of course, we work... and try to have a better... We work on how to apply the EMAC every year to all the different cost centers and business activities of the company. We have some restrictions that are applicable in order to have those cost centers operating at a break-even in the medium to long term. So, of course, the company does their best. We do our best to mitigate that dilution. Having said that, many times what happens is that traffic... performs in a manner that is a bit different from other plants, and dilution becomes a higher number than we were expecting. In the last quarter, what we have seen is a trend that has been different to the previous trend through the year, in which dilution was increasing, and we have had concentration, and the reason for the concentration has been the normal pattern that we see many years, in which the last quarter of the year airports that are more expensive, such as Madrid and Barcelona, from a tariff standpoint, attract more passengers, relatively speaking. The other factor, the other driver explaining the concentration in that quarter has been that the recovery pace of those big airports at the end of this year has been higher than the recovery of the rest of the network, so that has also contributed. Unless you have any

I think we can move to the next question with Elodie. Thank you.

Next question comes from the line of Elodie Welle with JP Morgan. Your line is open.

Hi, thanks. I just had one left on capacity expansion on both Barcelona and Madrid. We know Barcelona is currently at above 90%, I think, in terms of utilization. Given the news, and you said it was all noise, but we know the CapEx plan has been put on hold. I think it was $1.7 billion. Is there any update on that, or is this on hold until there is more? clarification with the future of Barcelona. And on Madrid, we know about the 2.4 billion, but is there any update or could you give us some more details on how this will play out?

Thank you. Hello, this is Mauricio Lucena again.

We are concerning the potential expansion of Barcelona Airport. I think that we are where we were a few months ago. I think that the will of AENA and the Spanish government is crystal clear. And so far, I don't see... any novelty concerning the only relevant actor which is I mean only relevant actor for the decision which is the Catalan government. The Catalan government is the institution that in the future should publicly explain what decision, what proposal it has for the Barcelona airport. And, of course, this proposal should be technically specified in terms of airport language, not abstract concepts in terms of what our aeronautical engineers deal with. and I don't see any move in this sense. I think that the Catalan government, it is where it was not only a few months ago, but I would say two and a half years ago. So, in the end, this is a question for the Catalan government, because taking into account the and environmental issues, we cannot change anything in the Barcelona airport without the support of the Catalan government.

So this is what I think is relevant so far.

Our next question comes from the line of Rosandra Doser, which HSBC. Your line is open.

Yes, hello. Thank you for taking my questions. First, maybe a follow-up. Elodie asked also about the CAPEX at Madrid airport. I understand from press that the largest part of this CAPEX refers to Terminal 4. What is the feedback you received from Iberia on increased CAPEX and to which extent does this CAPEX depend on the merger between AeroEuropa and Iberia and the shift of AeroEuropa to Terminal 4? Second, I understand from press that at many airports you have introduced new incentives this year. Could you please help understand the magnitude of these incentives, maybe relate them to the tariff increase? And do you see a risk that some airlines will shift capacities from airports with no incentives to airports with new incentives in order to optimize the net impact of the tariff increase? And third, I understand that the Spanish government plans to progressively reduce a 40-hour working week without a reduction in wages over the next two years. If this was to happen, could you please talk about implications for IENA? Thank you very much.

Thank you. My pleasure. That was a long list.

Let me try to help you with my answers. With respect to Madrid plans, I'm not planning to defer to next week, but our plan is setting our views and plans on the Madrid expansion more carefully and with detail on Thursday of next week. But it's a play that we are hopeful that will take place next as the support of many stakeholders, and it's not only affecting T4, and I think as you were pointing out, Rosandra, but also might be affecting T1, T2, and T3, getting a single terminal in the future. So that's a point that we are hopeful that will get crystallized during Dota 3 and Dota 4. I think on CAPEX, we are seeing CAPEX related, CAPEX increasing. That's the short answer in the next DORA period. You also raised a question with respect to working hours. We expect a material impact at Aina with respect to working hours given the current situation of the company. So that shouldn't be a thing that might materially affect the operating cost of the company and staff cost. You raised the point on incentives. The financial assessment will not have a material effect. And I would say... If any, we'll be positive. Why? Because we are only contributing partially to the tariff, to the passenger tariff. As you know, that's not the whole tariff that the company, that Aina gets. We get a whole part of our charges are explained by movements, by uses of our facilities, et cetera. So we are still getting that, too. And the other reason, the second reason is all the commercial revenues that we'll be attracting with those incremental volumes that we are hopeful that we will be attracting with these incentives. I think you raised the point on how that could affect the network, et cetera. We have some protections, so there has to be a real net increase in the network because of all those incentives that could be claimed by airlines. So there shouldn't be either a leakage or a dilution affecting the company because of that impact. And I think that was it. Thank you very much.

Thank you very much. Maybe just a follow-up. What's the current average number of hours per week that your employees work?

I think that let me check with HR, but I think we're at 37.5 officially with shifts. Yeah.

Okay, thank you very much.

I will leave that to you.

Perfect. Thank you very much. Thanks.

Our last question comes from the line of Jose Arroyas with Santander. Your line is open.

Yes, one question, please. It's on OPEX. You previously mentioned the one-off related to BF7 in the other operating line, other operating costs, sorry. I was wondering if there had been any other one-off effects in some of the other cost items like DRM or security services that have increased in Q4 significantly versus the nine-month run rate that we might not see if we did it before. That's all. Thank you.

Thank you, Jose Manuel. There have been, as you can see in the information provided, there have been cost increases coming from basically minimum salary increases, new contracts being awarded, the new security contract training, more people being added to the organization. So I would say that in general, Jose Manuel... What you are seeing is a general trend, more than one-offs, apart from the one that we highlighted related to DF7 and some write-offs related also to DF7.

I think that was the last question, operator. So I think we can finish the conversation.

There are no further questions at this time. I will turn it over to the speakers for closing remarks.

Excellent.