Aena S.M.E., S.A. (AENA) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Aena 9 months 2021 results presentation. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Emilio Rotondo, Finance Director. Please go ahead.

Thank you. Good morning to everybody, and welcome to the 9 months results presentation. This occasion, we will presenting Jose Leo, Aena's CFO, and myself. Also, we will try to be brief, so we will just highlight the things that we consider the most important this quarter, and we'll move into the Q&A session right over. Now I hand over the floor to Mr. Leo. Thank you.

Thank you, Emilio. Very good afternoon to everyone, and welcome. Let's start on the usual slide with the key highlights. Rather than going one by one through the different graphs, I'm going to try and summarize what, as Emilio said, these are the most relevant messages or indicators this particular quarter. First of all, you can see that the accumulated figures for the first 9 months of the year are showing an improvement. They are showing an improvement. They are showing a recovery, which clearly is driven by the traffic performance. To the point that we can say that the third quarter of the year has been a very good quarter, given the circumstances are, given the place where we are coming from. First of all, we have a significant EBITDA level in the quarter, close to EUR 500 million. Although it's fair to say that a significant chunk of that is linked to the way we are accounting for the minimum guarantee rent revenues that I will come to that in a minute. Also, we have a positive for the first time in a good while, a positive net result of EUR 223 million. Once again, I'm talking about the quarter, quarter 3 in isolation. Probably more importantly, we have a positive cash flow, operating cash flow of EUR 240 million, which is taking us in the right trajectory to be able to -- sorry, I have someone here making -- sorry. Taking us in the right trajectory to become, I would say, cash flow positive by the end of the year pre CapEx, which is consistent with the comments I made in the previous quarterly results presentations. As I said, this is not surprisingly driven by the passenger number evolution. And although we -- on an accumulated basis, we are now recovering close to 36% of the 2019 figures at this time of the year. When you look at the quarter, in particular, we have reached 60% of the traffic achieved in the quarter 3 of 2019. So it's once again a good and positive trajectory. We are heading for the 40% plus level of recovery for the whole year vis-á-vis the 2019 figures that I'm sure you remember I mentioned at the last -- at the second quarter results presentation. We expect to close the year with something between 40%, 42%, maybe 43% of the total traffic in 2019, which is once again positive, taking into account the COVID-19 background. Of course, that doesn't mean that -- I mean, we can be 100% confident that this is going to be, let's say, moving in the same direction going forward. Every -- in every occasion, I share these kind of discussions with yourselves. I mentioned that we are entirely in the hands of the evolution of the pandemic. Any negative signs of the pandemic going the wrong way, would, for sure, trigger decisions, actions by government that could be damaging to our business. But if nothing happens in that regard, we expect this positive trend to carry on over the coming months. Clearly, the capacity that the airlines are now initially putting in the market for the winter season is a very good signal of their determination to bet on the recovery. Literally, the total capacity they are putting forward in our network is exceeding the total capacity they put forward in 2019 -- in the winter 2019 season, so that's promising. But once again, one thing is to have that capacity declared, different things to operate. That will be fully dependent on the COVID-19 news. Also, an important factor is to see how full those aircraft will fly. Well, without dwelling any more on these global figures, I would like to move on to the next slide to focus on one particular thing and only one, which is the commercial revenues. As you know, we have been accounting on the basis of the IFRS 19 -- sorry, 19, no, 16 for the whole of our minimum guarantee rents, as we are entitled to do so because they are clearly set in our contracts. And this is the case at the end of September 2021 as well. So we are accumulating already EUR 388 million in MAG revenues in 2021 that can be added to the EUR 620 million that we already accumulated in 2020. So we have around EUR 1 billion in MAGs accounted assets in our balance sheet. Well, you know that recently, the Spanish Congress, the Spanish parliament approved a law that will force Aena, a bespoke law addressed to Aena specifically, that will force us to cut the MAGs that we can invoice and charge to the operators for as long as the traffic levels are below the 2019 levels. That will be -- that should be done on an airport-by-airport basis. And that will apply to 3 categories of commercial revenues, duty-free shops, specialty shops and food and beverage outlets. The law will apply retrospectively from the 15th of March 2020. And as I said before, until such time in which the -- by which we recover the 2019 levels on an annual basis. That law has been enforced and -- published and enforced on the 3rd of October 2021. That means that it is only on the 3rd of October 2021 that we will introduce a change in the way we account for the MAGs. So you might be surprised that in September, the figures are not affected, but this is it, this is the way the accounting rules apply. And as I said in a number of occasions, whether or not these rules are intuitive, we cannot afford to have an audit qualification. So we have to apply the rules strictly. So on the 3rd of October, the new law will become applicable, and there are a number of consequences. The most important, of course, are the consequences in terms of cash. We have calculated the total impact of the total amount of MAGs and other revenues that we will be losing, from the 15th of March 2020 onwards until the final date of application of the new law. And we have quantified that at EUR 1.35 billion. It's less than the EUR 1.5 billion we declared some weeks ago. The reason for that is that once we refined the calculation we took into account a number of things. For instance, some of the activities that we initially thought were affected by the law were not affected by the law. There were a number of -- well, one very important point as well. When we ran the first calculation, we took into account all the potential duration of the different contracts. This is not the case anymore. Of course, we are not going to extend any contract that would be affected by this law, would be -- otherwise, we would be somehow a little bit silly. So when we take into account that the base case is going to be a nonextension, of course, that will reduce also the impact of the -- well, the amount of cash that we will be losing to this new regulation. So the figure now is EUR 1.35 billion. I will be more than pleased to answer questions later on. I'm sure there will be a number of things about this particular subject. And this is the cash impact. How about the accounting impact? Well, on the 3rd of October, there will be two consequences that resulting from this -- from the application of this new law. Consequence number one is the only positive thing coming out of this new -- of this particular law. And this means that from that moment onwards, we will start accounting for the revenues as they are accrued on the basis of the underlying sales, the variable fees, plus any potential impact of the minimum guarantee rent as amended by the law that honestly, I expect not to be very material, but I might be wrong. But of course, this is just a guess. So the positive thing here is that the revenues and the cash will be in sync and will be -- well, will follow similar trajectories. And this is very helpful for you all and for us as well. What about the backlog, so to speak, what about the amount of receivables that we have been accounting for until the 3rd of October? Well, the receivables in our balance sheet as a result of accounting for MAGs until the 3rd of October, will be written off, will be written off, but not day 1 but on a straight line basis over the years of duration of every single contract. So that means that, that amount of -- that hit will be taken over a number of years. It will be different depending on the contracts. And of course, we are now in the process of calculating that potential impact. So there will be an impact on the last quarter of 2021. Of course, there will be an impact on 2022, there will be an impact on 2023, 2024, so on and so forth. And that will be a straight-line impact calculated through all these years. Of course, the total amount, finally, the final impact will be fully dependent on the actual traffic numbers. But the figures we are sharing with you, of course, are calculated on the basis of our best expectation or our best forecast for the coming years. One final comment on this particular point of accounting. As I said before, we have accumulated EUR 1 billion in MAGs, not all those will be affected by the new law, what we call the final provision #7 of the Law 13/2021. No. The majority of it will be affected for obvious reasons because the largest chunk of our revenues are driven by duty-free shops and food and beverage outlets. But there will be a part of that EUR 1 billion that will be treated as we did before. I cannot tell you how much it's going to be with precise data because we are not running the calculation on a contract-by-contract basis, but probably something between 70% and 80% of this total EUR 1 billion would be potentially impacted by the new accounting. But please, don't hold me accountable for this figure because we are running the calculation right now. And then the next big thing this quarter is DORA II. Well, sorry, I would like to -- I was expecting you to make questions on the new law through the Q&A. But I forgot to mention something just in response to some of the headlines today in the media. We are going to abide by the law. We are not planning to, I don't know, do silly things. We will abide by the law, we will apply the law. As I said before, in accounting terms, that will be reflected in the fourth quarter, not before for obvious reasons. In terms of the relationship with our commercial tenants, of course, we will be returning back money to them. We will be canceling invoices. But it's not that simple and that straightforward because there are a number of cases in which the dispute is being assessed in court. And when making decisions about effectively doing things with the invoices and in every case where we are now dealing with the court, we will be taking care of that. And we may or may not be automatically canceling the invoices. It will depend very much on how our lawyers assess the right way of proceeding. But this is just using the law and being, let's say, consistent with the fact that there are judges involved in the process. But that doesn't mean in any way, shape or form that we are not going to abide by the law, we do. And of course, when all this, if you like, confusion, could be driven by the 2020 MAGs that well -- were invoiced in 2020 -- sorry, the 2020 MAGs that were invoiced at the beginning of 2021. But of course, the MAGs of 2021 should be invoiced in 2022, and we won't do it. We won't invoice MAGs that are not covered by the new law. We will be only invoicing those MAGs that are clearly consistent and in compliance with the new law, and that will happen in January-February 2022. I wanted to clarify this [ as in by the byte ]. Then DORA II, the most important highlights about DORA II are number one, tariffs will be flat, which is not exactly what we asked for, but it is what it is. Secondly, the one very important thing, the maximum, the adjusted annual maximum revenue per passenger, what of any particular year won't be acting as a cap as, let's say, stopper for the next year. That means that if for one particular year as a result of the significant adjustments introduced to the calculation, the MAG is going down by a particular amount. That won't be a cap for the year to come. So this is helpful because, of course, any adjustments should be reflected. This is what it is. But it would be very damaging if that particular annual adjustment is setting a condition that will impact the rest of the years in the DORA. So we are clear on that. That has been discussed and clarified by both the CNMC and the DGAC, and I would be more than happy to answer questions if you wish later on. And secondly, the COVID-19 expenses will be recovered, and they will be recovered over and above the adjusted annual maximum revenue per passenger as calculated on the basis of the standard formula. I believe the rest of the features of this DORA II are important, but probably are not the ones that are more you are more focused on, but of course, we will deal with that at the Q&A session. I think I will stop here, and we can start making questions. Thank you.

Thank you, Jose. Operator, we can move into the Q&A session, please. Thank you.

[Operator Instructions] The first question comes from the line of Luis Prieto from Kepler.

I had a couple of questions. The first one is coming back to the MAGs situation, the accounting. I was curious to see how you will approach the quarterly reporting of those MAGs, given that there's -- I'm not sure what traffic you need to be taking according to the new legislation. If it's a yearly traffic, then quarterly reporting can be difficult. Are you going to take just quarterly traffic and go with that? And the second question is regarding Article 27, and excuse my notes here. I think I get the sense that it got a bit lost with all the noise and I haven't seen anything being mentioned or your position on this one. Can you remind us where that is at the moment?

Yes, of course. Well, with regard to the MAGs, you are absolutely right. You have to assess the MAGs on a monthly and quarterly basis. And definitely, the only actual and final figure will be calculated at the end of the year. But frankly, this is the case in many other things when dealing with any company, you run estimates. So I'm not particularly worried about it. Then the write-off, I call it write-off, although it's not strictly speaking a write-off because it won't be taken to P&L day 1. The write-off of the accumulated receivables would be distributed on a straight-line basis. So that wouldn't be -- in a way, this is a massive progress in terms of clarification with regard to the situation we have been living through. So you are right, there will be some estimates. I don't think this will -- that will be a massive problem at all. And then the element of the -- the element we will take to P&L over years will be calculated on a straight-line basis. So there will be no, let's say, major issues there to identify the impact. With regard to Article 27, I think the ball is still rolling. Of course, in terms of the time already, let's say, behind us since we submitted the request, I think we could be taking a negative view on it in the sense that there has been no feedback. So silence about it, 4 months silence. So that means that you could think, well, this is -- has been thrown to the basket today. But I don't think it is the case. We believe there is still a dialogue. There is still -- there are still discussions ongoing, and we are not giving up. But I'm afraid I cannot share with you any more information. So we -- the ball is rolling, and we will keep pursuing the case. And the outcome obviously is something nobody can predict at this stage.

Remember, Jose, from what you're saying, there's no -- the ball is rolling, it's something good. There's no time frame. There's no right time for something good...

Yes. I'm afraid you're right. Of course, we cannot live forever with this situation. But I think we should be patient. And in this particular case, the most important thing is to not to -- well, not to, let's say, close the door. As long as the door is closed, let's keep working on it.

The next question comes from the line of Cristian Nedelcu from UBS.

Maybe the first one, we are seeing a rising inflationary environment either in wages, either in electricity costs. Can you talk a little bit as you look at 2022 about potential productivity improvement that you could pursue in the Spanish network? And equally so, how do you assess the ability of the travel retailers to actually raise prices next year and effectively pass through some of the inflation that they are seeing? The second question, just looking at Q3 or the current situation. Could you give us a bit of color in terms of the retail spend per passenger before any MAGs, anything like that, just the behavior of the tourist, how much are actually spending these days versus pre-COVID levels? And if you can comment on your expectations are moving far into 2022 headwinds and tailwinds to this retail spend per pax? And the last one, if I may, the regulation effectively talks about a OpEx per ATU ceiling at EUR 2.66 to EUR 2.71, which is higher versus what you achieved in 2018, '19, were at around EUR 2.4 OpEx per ATU. So I guess can you comment a little bit? It looks like there is a bit of space for Aena to perform on the OpEx side. Would that be a fair conclusion? Or are there any other points you want to flag there?

Okay. Starting by the cost inflation pressures, of course, definitely, it's one of these bad news that everybody is facing now, and we are not an exception to that. Particularly, the energy prices, the energy costs are pressing up significantly. The rest of the pressure, let's say, in terms of raw materials, construction, salaries, things like that, we haven't seen it yet in action. We stay vigilant. But so far, we haven't seen it. But I wouldn't rule out the possibility of this problems to start popping up over the coming months. And of course, we will try to manage very, very strictly our cost base. But don't forget that our best tool to deal with that is our procurement process. We are sometimes criticized by the -- our procurement processes here in Spain because we tend to be, well, very prescriptive about what we want. I think we -- our procurement process is somehow we guarantee that every possible saving in the supply chain will be delivered, will be obtained. Because we run competitions in every single procurement process, and trying to manage properly the operation, which is what we do every day, believe me, and this is the reason why we are so efficient. But the pressures are there and could potentially increase and we will need to deal with them. I cannot tell you we have a solution for because first of all, we don't know what the nature of the beast is going to be. We don't know whether this is going to be permanent or temporary, even the central banks don't know, but we have to remain vigilant. And I will link this with your last question. Of course, the EUR 2.71 per ATU is something we believe is challenging, but we are up for the challenge. But the problem here in the first years of the DORA II. Because the first years of the DORA II, the traffic, the passenger numbers are affected by the COVID-19 impact. So the -- we will be -- we will struggle, if you like, to reduce the fixed element of the costs if the number of passengers are subdued. So we need volume to grow at least in line with the DORA or preferably more than that. Because when you have a cost base, you can be very efficient. But with less number of passengers, you will struggle more to reach the EUR 2.71. I don't know if I'm clear enough, but you can later on confirm it or otherwise. Travel retailers' rising prices, well, honestly, I don't know. I would be to too brave to say, I don't know. I think the trends are, as you know well, on one side, the challenges of recovering the traffic. This is the first challenge. And I think their ability to increase prices. I'm just guessing, believe me, this is not my business. The -- it will be dependent on the level of recovery of the traffic. I'm pretty sure that if there is a healthy recovery, they will and they will try and they will potentially succeed to do it. What else? Headwinds and -- sorry, go.

Yes. The spend per passenger these days and how you see the headwind savings next year?

Okay. The spend per passenger is there is a mix of things. And I would invite you to probably talk to my IR team. There are different trends in different activities or maybe some of my colleagues want to jump now and answer you. There are different trends in different activities. Of course, the most important thing these days is not the spend per passenger, being important is the number of passengers because the trends are affected by many different things. For instance, if you look at the rent-a-car activity, the rent-a-car is interesting because you have a relatively lower level of international travelers hiring a car, but there is a car scarcity. The [ projections ] are going up. And then the revenue is going up for the operators. Then obviously, you look at the duty-free shops, the trend is completely different because as we are missing the international passenger. The spend per pax is not at all good. So these kind of things, there are different dynamics, and I would like to answer with a sort of one-size-fits-all response. And I think the headwinds definitely will be if the traffic doesn't recover. I think for me, the key is traffic, believe me, the traffic will heal the wounds and will heal the relationships and will make people, let's say, forget the part of the past, not all but part of the past. Without traffic or with the COVID-19 issues coming back, well, that will be the most significant headwind you can think of.

Cristian, just to give you a little more maybe detail on the spend per pax on the retail let's say, that is recovering if we compare it with the first month of the year in the 3 activities, duty-free, specialty shops and food and beverage, okay? But of course, we still exist a gap between what is the current spend per pax and the one we had in 2019. Maybe is trying to give her a little more what you said, let's say that duty-free is performing better and maybe the laggard would be the specialty shops in terms of that gap until they match again the numbers they had back in 2019. So there's still room to be recovered as Jose was mentioning, that would depend a lot on the kind of traffic and the traffic recovery itself.

The next question comes from the line of Neil Glynn from Crédit Suisse.

I'll ask two, please. The first, with respect to the commercial business, following on from all of that very helpful detail you provided. Is it possible to give us a feel for the maturity profile of the current contracts in terms of what kind of percentage of contracts might mature in 2022 versus 2023? That would be very helpful. And then the second question with respect to traffic prospects and I guess capacity possibly even more so than traffic. It was very notable that you mentioned that you're seeing capacity plans higher this winter versus pre-pandemic. I guess, it's surprising on one hand. But how is your thinking evolving as we look forward to next summer? Because I presume that kind of statistic must give you increasing confidence that at least your more leisure-focused airport may well see full traffic recovery for peak season next summer.

Well, with regard to the maturities, I think we will maybe -- I don't know, could share with you some more precise data. But I can tell you, the most significant tenant we have in the business, its contract was running until 2023 with the possibility of, I think -- sorry, October 2023, with the possibility of extension to October 2025. Well, the extension will -- won't be on the table anymore. As you can imagine, we are not going to enjoy ourselves the, let's say, suffering cuts in our revenues for 2 more years, if it's not strictly necessary. So this is the most important one by far. So then Emilio later on, maybe could share with you some other relevant cases. With regard to the traffic prospects, of course, we are -- once again, everything is subject to the evolution of the pandemic and, let's say, whether this -- whether or not this is moving forward or just going backwards again. But we would be, at this stage, very positive about the leisure traffic in the summer 2022. Of course, without sharing with you any specific data because I think at this stage, it will be a little bit confusing. You know what we put forward in our DORA II about 2022. That was our expectation and that's it. And we -- our view was that the full recovery of the traffic, the 2019 levels wouldn't be achieved until 2025, end of 2025, beginning of '26. But inside those boundaries, I think, clearly, we are positive or we would like to be very positive about the 2022, the summer 2022 leisure traffic. If things go the right way, I think we would see the majority of the leisure traffic coming back, fingers crossed.

Okay. And this is Emilio. Regarding your first question, well, I think the larger part of your analysis for you to do that work is duty-free shops that has been mentioned by Jose. If we talk about the specialty shops, you might take around 2, 3 years average life. In the case of food and beverage, a little bit longer, maybe 4, 5 or even 6 in some cases.

The next question comes from the line of Siobhan Lynch from Deutsche Bank.

I have two questions, if possible. The first is just on CapEx. So I think there's still, from what we've seen in the presentation, a good chunk of the CapEx to come out in Q4. Firstly, what are those kind of projects that are left? And secondly, is there a risk of any delays to these because of the kinds of materials and labor shortages that we've been seeing in the market in the last few months? And then my second question is just thinking about the longer term for the retail contract. In terms of the revenue per passenger, you take from the retailers, the kind of turnover, I think you call it the canon fees. How could this evolve post COVID when we think about signing new contracts? Would you expect to increase the percentage of turnover that you kind of sign into these contracts in offsetting maybe a lower MAGs amount? Or how would you kind of expect these to evolve in the medium and longer term?

Well, with regard to the CapEx, I know it seems challenging, but we are still confident that we will deliver the EUR 800 million there or thereabouts. I'm not aware of any major pressure from the supply chain or the logistics, let's say, the logistics side of the business that could pose major risks on that. So as I said before, so far in our case, the only thing that we can see crystallizing as a problem, big time is energy cost. The rest, what, so far so good, and later on, maybe Emilio you can comment on the projects. But I think there is a variety of them. It's not that there is 1 particular project or 2 particular projects that are lagging behind is more -- is a general rule the way we operate and the way our works are progressing over the year. And taking into account that, at the moment, we are not dealing with major projects normally when you are spending. I mean, the amount of CapEx we are spending right now, there are no huge projects ongoing. With regard to the commercial revenues, I think it's difficult to say now because we are precisely at the time of reflecting with the help of others, definitely third parties and people in the industry across the world, what is the right way forward in terms of setting the conditions for new tenders. We are not pulling from our interest in keeping a significant MAG structure in place. But who knows, maybe we have to change our mind. Now is the time to start that process, that reflection, testing what's happening around the world, talking to the different players. When one player is leaving someone probably is very I don't know, very keen on coming. And it's exactly the kind of thing we are going to do over the coming months and probably 1 year in order to be ready for the largest contract to be tendered out probably soon after.

[Operator Instructions] The next question comes from the line of Nicolò Pessina from Mediobanca.

First one is on the K factor for next year. Can you give us an idea of the amount of yield concentration you expect in 2021 based on your traffic estimates? Second question on the amount of incentives you expect during the winter season, we have seen an extension of the incentive theme for the air carriers. And last question, if you can remind us the amount of COVID-related sanitary costs to be recovered inventories over the next couple of years.

Okay. With regard to the K factor, for 2023, we are accumulating now clearly yield concentration obviously. And at the end of September, we have close to EUR 54 million in accumulated, let's say, yield concentration effect. The interesting thing here is that the third quarter -- in the third quarter, we experienced yield dilution, not a huge amount, something in the region of EUR 8 million. But this is -- well, it's a change in the trend because hopefully, that will be the case in quarter 4. But I cannot tell you at this minute, what would be the final figure for the year. But our expectation now is to get dilution and then the EUR 54 million to go down rather than up. And with regard to the COVID cost, and then I will leave to Emilio, no I have to -- the COVID costs incurred in 2020 have been EUR 53 million. And in the first 9 months of 2021, EUR 81 million, and then Emilio you can answer on the incentives.

Yes. Thank you, Jose, on the incentives, just -- well, remind you that the Board of Directors approved yesterday the new incentives for the winter season. These incentives are similar to the ones we had on the last summer season and just the change is that the threshold in order to achieve or to have the discount is 75%, okay, of the operations recovered versus 2019, okay? And it would be also applied to the landing charge, okay? Our forecast of what would be those incentives will depend on the traffic on this winter season, hopefully. As you can imagine, the larger the discount we have to apply the better because it would mean we have a higher traffic. But it would be around, let's say, on current forecast around EUR 20 million.

The next question comes from the line of Andrew Lobbenberg from HSBC.

Can I just ask, I just noted of course, the traffic recovering to 2019 levels, does that calculation only take place on a calendar basis? Or is it a rolling 12-month basis? And then in terms of the writing off or writing down of the MAG that are on the book. So we're kind of getting the understanding that the majority of it or the largest part of it should be written off by October '23, I guess. Where will it fit in the P&L? How will you report it?

Okay. Well, it is calendar year, clearly. And I think -- well, intuitively, I don't want to share with you yet the path of the, let's say, impact in P&L of the write-down, as you said. But yes, intuitively, it's true that probably by the end of 2023 the majority of it will be done for obvious reasons. As I said before, the most important contract that we are dealing with has an end in October 2023. So it's clear that, that is going to be the case. And then there will be a tail end, but clearly less material. And I think that...

I was just wondering, where will it be accounted? Will it be...

No. I -- honestly, I haven't got into that level of detail, but I have nothing against that being part of the EBITDA, of course, I don't want to -- I mean, this is above EBITDA, better off. I want our EBITDA and our cash to be as closely as possible. I mean accounting rules prevented us from doing that for a while. Obviously, still will prevent us from doing that for a while. But hopefully, that will go in the right direction. So without taking any commitment, I suppose that will be part of the clearly pre-EBITDA costs.

But sorry, I'm going to be really specific here. I mean I thought this is a buildup of stuff that you booked but you have not had cash in. So when you run it down, it's not cash out is it?

No. But don't forget -- exactly, Andrew. But don't forget one thing. What this write-down would be doing would be to take out of the revenues things that were in the revenues over the last, let's say, 1.5 years or less than 1.5 years, okay? Of course, that would be in line with the cash. But at least we'll make this audity, if you like, disappear. And then every single revenue from October 3, 2021, onwards will be clearly based on fees or MAGs adjusted according to the law, that will -- that means that the cash and the revenues will be working very closely. This is what I mean. But of course, you have to get rid of the past somehow and that will be done on a straight-line basis. So there will be no connection between that adjustment and the cash, but that's inevitable. And this is it. In the meantime, I want to be clear, I didn't mention this before, we are going to apply the law. We are going to abide by the law, but we would challenge the law. In every instance, we feel if appropriate we will challenge the law because we believe it's a decision that is better I believe.

[Operator Instructions] The next question comes from the line of Akhil Bhattar from Citi.

I have two. So the first one is on the MAG. So rather than rolling the impairment over the life of the contract, did you consider to take the write-off all in one go? I mean, because it gives a lot more clear number. So this is the first question. And the second one is, I mean, we appreciate that there's a lot of calculation going on for the EUR 1 billion revenue that's already accounted for in the receivables. But by when can we expect a more clearer number on the EUR 1 billion write-off that needs to be done?

Okay. I presume that for anyone being an accountant as I am, your suggestion will be fine. But unfortunately, the international accounting standards won't allow us to do that. So we have to -- under IFRS 16, we have no alternative other than to account that over the life of the contracts, of every single contract, on a straight-line basis. So there is no alternative. There is not -- there is no option. And then sorry, but I forgot your second question.

Hold on, Akhil, maybe when you ask your second question, put your mute after you finish, we are getting there some echo.

Yes. So my second question was really on the clarity on the EUR 1 billion receivables that you already accounted for. So by when can we expect more visibility on the potential impact of that EUR 1 billion?

Well, what I told you, I think is -- there is a return here, very annoying. Is everybody on mute? Okay. Well, fine fantastic. Well, anyway, the -- as I said before, out of the EUR 1 billion, the majority of it will be subject to the new loan, to the final provision number 7 of the new law. And this is going to be around 70% to 80% of the total. I cannot -- of course, by the end of the year, you will have the figure in precise terms, but we are still running the calculations. But I think this information is more than, I think, enough to have a good guess.

The next question comes from the line of José Arroyas from Santander.

I have 2, actually. One is on DORA 2. I have a question on tariffs and the impact of the type of traffic you might have from now on. You mentioned before that one good element of DORA 2 is that the gap on the IMAAJ has been removed, and I agree with that. But I have one question. What happens if the revenue per PAX effectively -- what happens if the revenue per PAX that Aena effectively realizes is below the IMAP. Presumably, that could happen if traffic is dominated by short-haul traffic, which is lower yielding traffic. Can Aena reclaim the delta between the IMAAJ and the IMAP? And my second question is on Aena's dividends from now on, especially in light of the IFRS 16 goal that will force Aena to book negative revenues for several years, which I presume would also bend net income. And would -- will Aena change its dividend policy, will it reformulate it somehow to account for these one-off impact? Or should we assume lower dividends for several years.

Okay. Clearly, the IMAP for every year will be calculated and then compared with the IMAP of the previous year. If the IMAP of the previous year is higher before this clarification, you could think -- sorry, the other way around. You calculate the IMAP for 1 year. And then if the IMAP for this year is higher than the IMAP for the previous year, until the clarification was made, you could say -- you could think, well, I cannot effectively implement my IMAP. Then now this is not the case, then you have the reference of the IMAP. And as long as the IMAP is above, you can perfectly go, perfectly well ahead with that calculation. And then you say, what if in 1 particular year, you have dilution, correct? Well, if you have dilution, you have the K factor to recover it in 2 years' time. So any revenue per passenger, which is above or below what you have been entitled to for a particular year will be recovered or returned back in 2 years' time. I don't know if I'm answering your question, but I understood that was what you were asking for. And then what you're asking is whether or not this particular accounting entries will be adjusted at the time of deciding the -- what is the net profit for the purpose of -- well, I don't know. It's too early. I mean, we need -- this will be a decision to be made by the Board of Directors once they set the new dividend policy. Frankly, at this stage, I cannot even think of it.

Elodie Rall is asking the next question from JPMorgan.

Just 2 remaining questions, please, on my side. The provision of EUR 30 million, can you explain where you've taken it, did it hit the EBITDA level? Or is it below the EBITDA? My first question. And the second question is just on tariff on '22, when will we know actually the actual tariff factor or K factor and the credit compensation and all that? And what's your best guess in terms of those for '22?

Okay. First of all, the EUR 30 million of the application of the impairment to the financial assets, the IFRS 9, that is sitting above EBITDA. So this has an impact on EBITDA, okay? The 2022 process, well, the approval of the 2022 tariffs is, I think, is going to start very quickly. And I think I hope by the end of the year, they will be approved by the end of 2021. Of course, you know the big elephant in this room will be the K factor impact, which is very significant. We are talking about EUR 150 million of yield concentration that should be given back to the airlines. But also, there are other elements there to take into account, which probably will have a positive impact. Anyway, what is clear is that with the K factor in mind, the trend -- the natural trend will be for the tariffs to go down vis-a-vis 2021. This is pre-COVID costs because the COVID costs will be recovered on top of that, okay? And this is pre the incorporation of the P index, the inflation index. But before those 2 elements, obviously, you should expect a reduction in charges vis-a-vis the 2021, but I wouldn't like to go any further.

The next question comes from the line of Charles Maynadier from Kempen.

Apologies Jose, to come back on the 2022 tariffs. So I just wanted to understand if the reasoning works. So assuming that we know that K factor impact using the DGAC traffic forecast. And assuming that you can recover fully the 2020 COVID-19 cost. Is it fair to assume then a tariff decline of high single digits for 2022? And then as a follow-up, if we look at the path of tariffs for the next DORA, so we should see a drop year-on-year in 2022 and most likely an increase in '23 and again, an increase in '24. Would that make sense?

You said 2022 pre or post COVID-19 cost recovery?

No, taking everything into account for the K factor and the COVID-19 cost.

In that case, it wouldn't be high single. You said high single digits?

Yes.

No, no. Definitely, I don't expect that to be the case. Considering the COVID-19 costs as well. And it's quite likely. I think the CNMC themselves said some days ago in a public event that they are likely to consider all the 2020 and 2021 COVID costs until September in the calculation of the 2022 charges, they said that. So it's not me, so...

No. Okay. So then it would offset most of -- a big part of the drop indeed. And then it's quite likely that we will see an increase in 2023 tariffs.

Yes. Yes, definitely. But you should expect that.

Clear. And then another last follow-up on the dividend. Is it fair to assume that we will get a medium-term visibility on the payout on the new policy? Just if you could confirm that.

Yes. I think the sooner the better, frankly, it's not that we have any interesting delay in that decision. But I think probably the Board of Directors will need -- I'm just guessing, but of course, I am part of the process. So I think the Board of Directors probably would like to see 2021 closed. And then the trends in winter 2022, that's my view. And then, of course, I think for everybody, it would be good to have clarity about our strategy, our dividend policy as soon as possible, for sure. We are also very keen on that. But I think now it would be premature, very premature.

The next question comes from the line of Nicolas Mora from Morgan Stanley.

Just 2 quick ones. First one on -- I mean you highlighted the importance of cash. So with the outflows on net working capital linked to retail up into September, should we expect another large outflow in Q4? Are we kind of from here, things are going to normalize somewhat, the outflow should neutralize. And from that, can you give us a bit of a feel of where you think net debt could end up at the end of '21? And same questions for '22. When things normalized, should you finally get paid for the 2021 retail revenues and then get and benefit from a big inflow of net working capital which would cease down then quite dramatically next year? That's the first question. And second one is just on cost. We've seen costs, so creeping back actually quite as expected, more and more, I mean, closing the gap versus 2019. With the expected good traffic in winter, would you expect cost to actually match 2019 level in Q4 and actually in 2022, considering a bit of inflation from energy rise and Spanish minimum wage, could you actually put 2022 cost go beyond the 2019 level?

Okay. I think, Nicolas, really the -- let me tell you that at this particular time, the working capital movement is a bit of a red herring because you have to go to the bottom line. Why? Because clearly, the working capital is moving dramatically as a result of the MAGs being recorded. But I have never been telling you that those revenues are going to generate cash anytime soon. And now with the new legislation in place, well, we don't count on that cash to run the business. Of course, we will work hard. We will challenge the law. We will do our best to get back to the offer we made or something along these lines. But we are not naive enough to expect that cash to come in anytime soon. So this is going to change a little bit as a result of the change in accounting. But once again, I would recommend you to focus on the bottom line operating cash flow because the working capital is driven by the MAGs, of course, is dramatically changing for obvious reasons, we are accounting for revenues that we are not collecting. So I hope that helps. And in that sense, the business is clearly -- the cash generation is ramping up, and it's good news. We -- yes, go...

But Jose, I mean you've been barely paid in '21. So you've been paid a little bit in Q1. You've been accruing hard cash retail revenues that should be paid most likely in Feb and March next year, and then would start to normalize a little bit, EBITDA and cash flow, some of that cash should come your way not Q4, but clearly next year in quite a meaningful way.

But you have to distinguish 2 different things. One is the fees, the revenues that are driven by the underlying sales. They are coming in, and they will carry on coming in, and they will be growing as long as traffic is growing. Everything is down to traffic. Traffic will drive the whole thing. And then you have the MAGs. And the MAGs with this decision made by the Spanish Congress or the Spanish Parliament, the MAX will be contributing well, not very materially. So for a while, you will have to focus on traffic for a while, meaning until the 2019 traffic gets back, and this can take years. So for those contracts, I don't mean new contracts. Any new contract we sign won't be subject to the new legislation. But for the existing contracts, forget about the MAGs. The MAGs will contribute, but it wouldn't be a massive amount of cash. And the MAGs that we accounted for in 2020 and 2021 so far, are those that I'm telling you will be taken to P&L. And the 2021 MAGs under the old rule won't be invoicing in January 2022. So I mean, I think it's much more simple than it's just looking at the cash you generate, looking at the revenues generated in the commercial business, on the basis of the traffic, and the underlying sales, plus probably still some MAGs, no doubt, but those MAGs that are allowed by the new law, that's it. And that wouldn't be massive. That wouldn't be the sort of hundreds of millions of -- hundreds of millions of MAGs that we used to deal with in the past okay? In terms of costs, I think that I don't expect the quarter 4 to get costs back at 2019 levels. Actually, if you look at the figures today, you have to take into account that the total costs these days are inclusive of the COVID-19 costs that are to be recovered. So if you compare the costs incurred in quarter 3 now excluding the COVID-19 cost with the cost incurred in quarter 3 2019. Obviously, it's not a massive saving, but are meaningfully below and that will be meaningfully below in the next quarter. Beyond that point, the inflation pressures I mentioned before, so far, we haven't seen anything massively important, but we don't know that these trends could enhance over the coming months and years.

Okay. And just to remind us, the electricity bill you mentioned is around EUR 80 million per annum, no, on 2019 prices.

Effectively, it is -- this quarter, we have seen the electricity prices rising. The impact on this quarter in September versus September 2020 is plus EUR 30 million that as long as the price stays at the levels we are seeing now, we will have that impact on our OpEx in 4Q and onwards if that's the case. So maybe for your forecast, you should maybe separate that electricity prices versus the rest of the OpEx that will follow the trend that has been mentioned by Jose.

[Operator Instructions] The next question comes from the line of Marcin Wojtal from Bank of America.

Just one question is on your OpEx allowances. I think you suggested that you're quite comfortable with your ability to outperform a little bit what is in the DORA or at least match it. But when I compare what is finally in the DORA for OpEx allowances with your initial submission to the regulator, you actually included higher OpEx allowances. So can you just elaborate a little bit how are you thinking about operating costs and whether you can outperform a little bit or not?

Well, I can summarize this in one word, challenge, particularly in the first 2 years. Beyond that point, it's not that we are saying that we can outperform. If we could outperform, well, we haven't submitted these figures. But I think there is room for us to work hard and to improve the figures, maybe. But the first 2 years are going to be challenging because of the level of traffic. When you have a significant element of fixed costs as airports normally have, the lower the traffic, the more difficult is for you to operate efficiently, so to speak, or more -- rather than efficiently to move your cost down accordingly. So this is -- so it's challenging, challenging.

The next question comes from the line of Dario Maglione from Exane BNP Paribas.

I have a few questions. One on traffic expectation for Q4 and Q1. Can you give us a bit more detail in terms of your expectations and or assumptions that underline those to the expectation? Question number 2 on MAG? Thanks for sharing the information, very clear. Just to give us a sense for Q3, the Aena charged, I think, EUR 133 million. How much of MAG -- how much MAG would have been charged is the new law applied in Q3? Then a question on cost. For the 9 months, Aena booked in the P&L EUR 81 million of other net losses stating that these expenses are related to the pandemic. So shall we assume that when the pandemic is over this cost will go to 0? And the final question, again, on cost. There are a few moving parts, like less concession fees, some IFRS 16, 12 costs. But in terms of OpEx in Spain for the Spanish airports in Q3 how do they compare to 2019?

I didn't quite get your last question, but we will come back to that. With regard to traffic, well, the traffic for the fourth quarter, I think, will be at the level that will deliver what we are sharing with you, which is something for the total year, for the total 2021 year, will be something in the region of, let's say, 40% to 42%, 43% of the total traffic. So this is it. Emilio can maybe give us a little bit more detail, but this is it. For the first quarter of 2022, well, I would stop short of telling you, I think that in the absence of any setback on the COVID front, I think there will be progress, there will be improvement. So the capacity that the airlines are putting in the market for the winter season will be matched with an increase in load factors, although they want to operate the capacity they are putting in the market now, believe me, more than 100% of the 2019 levels. I don't think that that's going to be realistic. But the combination of a very ample capacity available plus potentially an improvement in load factors will make the first quarter of 2022. Well, being part of that improvement trend. But everything is subject to the news that we could have from the COVID-19 pandemic side. Then you mentioned the MAGs impact in the -- before September under the new law. Well, this is a very long shot. We are still calculating the future. So frankly, we haven't done that calculation, honestly. Then, okay -- the EUR 81 million, the COVID costs, hopefully, will disappear as soon as the COVID -- we are COVID free. But I cannot guarantee you that, that will depend on the final decision of the health authorities. But remember, we are being paid euro for euro, for those costs. So it's not ideal because -- and probably what is more important is the constraints that these kind of things pose on the operation. But at the end of the day, we recovered these costs. So this is not something, let's say, terribly. But I don't know. I suppose the health authorities will make a decision if and when they believe they are not needed anymore. And the final question, I didn't get it.

Sorry, I'll just simplify it. The OpEx in Spain in Q3, how does it compare to 2019?

You can see, I mean, the numbers are very easy to -- let me -- I have the numbers over here. It's over. Well, OpEx, I have other -- I mean, what we call third-party suppliers because the staff costs and the rest of the costs linked to the traffic control are very flat. They are flat. So they don't go up or down. They simply are flat. So we call -- what we call the other operating or general expenses, I think with regard to 2019 is something like 14%, 15% down in the quarter, in quarter 3. This is what I -- yes, this is the note I have now in front of me.

And this is for Spain, it doesn't have the...

Yes. Yes. Yes. If we look at the -- no, this is the consolidated, but the Spain should be too far from this. And take into account that the 2021 figures have Brazilian concession costs and things like that. I mean we can provide it. But this is the -- the headline is 15% down.

Dear participants, thank you very much for all your questions today. I would like now to hand the conference back to the speaker for closing remarks.

Okay. Thank you very much, everybody, to join this conference call of the September results, and we will talk again with full year results in February. Take care. Goodbye.