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

Thank you for standing by. My name is Bhavesh and I'll be your conference operator today. At this time, I would like to welcome everyone to the Aena 1H 2023 Results Presentation. [Operator Instructions] Thank you, Mr. Ignacio Castejon, Finance Director, you may begin your conference.

Thank you very much, and welcome everyone to the first half year results for year 2023 of Aena. Without further delay, I'll pass the floor to our Chairman and CEO, Maurici Lucena and to Jose Leo, our CFO. Thank you very much.

Thank you, Ignacio. Good afternoon, everybody. Let me please formally welcome you all to our 1H 2023 results presentation. It's a real pleasure being today with all of you. I as usual will start with the key highlights before I give the floor consecutively to Jose Leo. And in the -- and also before the Q&A to Ignacio Castejon. So if you allow me, I will start with traffic. Concerning the first half of 2023, I think that traffic and of course, as a consequence also, all the financial results have been performing very well. In terms of traffic, Aena as a group, as a global group, increased its traffic by 22.8% up to 144.1 million passengers. It implies a recovery again globally of 100.5% compared to 2019. So we can finally and again, confirm that the COVID effect and the COVID wave, it's ended. So this is very good news. Specifically concerning the Spanish network, traffic increased up to 129.4 million passengers. It represents a recovery compared to 2019 of 101.2%. London Luton 90.3% recovery and Brazil. And now I'm referring to the Northeast Brazilian airports, not including yet the new 11 Brazilian airports. So again, in Brazil, the first semester of 2023 represented a recovery of 100.5%. In Spain, we still are facing kind of a symmetry between domestic traffic and international traffic. But the gap is closing. Domestic traffic performed equivalent to 107%, compared to 2019, and international traffic reached a recovery of 98.5%. Therefore, I can confirm that we clearly stick to our 2023 traffic guidance for the Spanish network, which I remind you that it's between 94%, 104% in terms of 2019 traffic. And of course, I think that we have to be realistic and we shall not forget the potential headwinds ahead of us. I'm referring to the evolution of the cost of living. There could be in the future supply-side problems such as strikes, staff issues and aircraft deliveries problems. However, I also want to be very clear stating that it seems that many, many airlines are still very confident that the current trend continues in the last quarter 2023. So I think that the summary would be that we are realistic, but we are still pretty optimistic in terms of the traffic for the rest of the year. I now leap to financials. You can see in the press release this morning that total consolidated revenues for the Aena Group reached EUR 2.3 billion. Aeronautical revenue stood at EUR 1.3 billion, commercial revenue EUR 715.3 million, real estate revenue EUR 47.8 million and international activity EUR 287.5 million. On the cost side, which is very important in a context where the inflation is high, we are pretty satisfied, I can say, because the total OpEx stood at EUR 1.1 billion, plus 8.1% in comparison with the first half of 2022. But actually, I can say that, of course, apart from some inflationary pressures, you should remind that the traffic growth made Aena reopen terminals and subcontract many activities that did not exist in the first half of 2022. That is why I was saying that we are pretty much satisfied with the evolution of the OpEx, again, I repeat in an inflationary context. The EBITDA stood at noteworthy EUR 1.2 billion. And this is very important, the EBITDA margin closed at 50.2%. This EBITDA margin you know is one of the highest in the airport industry. And let me stop just a few seconds in this point -- at this point, because I would say that, both in terms of total revenues and the EBITDA margin, I can expect and strongly expect that we will reach our strategic plan targets, I would say, well ahead in time. I think that we are in a position to beat the targets that we defined in the context of our strategic plan, both in terms of revenues, and I repeat in terms of EBITDA margin, which I guess is very good news for our shareholders. All in all, the net profit in the first half of 2023, reached EUR 607.7 million, confirming the prospects for an attractive dividend in 2024. And the net cash from operating activities stood at EUR 1 billion. I would say in short that the main drivers of our EBITDA and of our net profit were traffic growth, the very positive commercial performance and of course, we were lucky everyone that we faced a lower electricity bill. And we also have where we will have time afterwards to explain what specifically it is, we also had the positive financial results as it is true that it was not a large one. But it really made a marginal difference, both in terms -- not in terms of EBITDA, I'm referring now to the net profit. We'll explain it later on. Now I pass -- I now move to the commercial activity. You can see when you read our results that we experienced very robust growth trend of commercial revenues. I would say that it was based on first the commercial sales of the first half of 2023 exceeded 2022 by 7.6%. Second, all the material commercial businesses aligns surpassed 2019's. And third, variable and fixed rents invoiced in the first half of 2023 beat 2022 figures by over 23%. And from a qualitative perspective, I would say that apart from the evident traffic growth, I think that the progressive recovery of the U.K. passengers under new non-European Union status in duty free was an important qualitative factor. Another one was the reopening of most of our specialty shops that remain closed because of the financial hurricane as a consequence of the COVID crisis. And also I would underline that we have experienced a very welcome increase in per passenger penetration rates in food and beverage. And finally, I would also like to highlight qualitatively, the price increases in car parking and VIP lounges. So I think it's been a very good performance of our commercial activity. And from, again, a qualitative perspective, I would like to remind you all that we keep including and we are proud of it, the minimum annual warranty arrangements as a fundamental element in our contractual framework. In figures, I would underline that since November 2021, we have awarded more than 20 -- more than, excuse me, 280 contracts in food and beverage, specialty shops and financial services with a minimum annual guaranteed rents increase of, for instance, 130% in 2023 in comparison with 2019. On the other hand, yesterday, you know that we held a meeting of the Board of Directors and the Board of Directors made 2 very important decisions. First, we approved the airport charges proposal applicable from the 1st of March 2024, setting the adjusted annual maximum revenue per passenger, the famous [ EMA ] for 2024 at EUR 10.35. And second, concerning the duty free tender and leaving aside the, let's say, media noise that we experienced a few weeks ago, we are very happy to announce that we yesterday awarded the duty free contracts for Madrid and Catalonia and it means that the whole business, I'm now referring to the whole duty free business for Spain, I will just give an example, the minimum annual warranty rents for 2024 are 16% higher than in 2023. So I think it's very good news for Aena, very good news for our shareholders because all in all, it means that the new contracts, again, I'm referring to duty free, firstly, preserve our business model of the minimum annual guaranteed rents and secondly, for instance, I would highlight that it means that Aena will have -- will perceive revenues for a minimum of EUR 6.3 billion in the period from 2024 to 2035. I'm now starting the end of my presentation. I would like to highlight 2 milestones. The first one is in the international and is referred to the international and -- excuse me, the financial -- the international activities. In Brazil, you know that we were awarded last year the concession for 11 airports, including Congonhas. You know that the transfer of the facilities to Aena will happen during the second half of this year. And the second element I would like to highlight is related to financing activities. Aena has recently executed a sustainable syndicated credit facility for EUR 2 billion that has been signed by 14 national and international financial institutions. I'm sure that we will have time to discuss any other issues that you want to -- you want me to comment on. But now I stop here and I just would like to thank you for your attention. Thank you very much.

Okay. Good afternoon, everybody. I will carry on providing some more detail on the key messages that our Chairman and Chief Executive already made by way of introduction. I would start by sharing with you what I believe are the main headlines or views that can come out of this particular slide that you have in front of you. What is clear is that now we have to compare ourselves with 2019. We have been doing that already for a while. Probably to a certain extent, that was an academic exercise. But now it's a very realistic one. Clearly, the reference to us now is 2019, that was the record year from every angle. And I say that because we are back on track at a similar level. To start with, the passenger numbers are now in line with the 2019 numbers. As the Chairman said, we maintain, we keep in place the guidance for the rest of the year, but clearly it wouldn't be surprising to see the year ending there or thereabout the 2019 figures, slightly over. It's true that the summer months are showing slightly less, let's say, aggressive growth rate for reasons that we can discuss, most of them driven by in our view, the offer side of the business, the airlines strategies and the airline yield, let's say, strategies to put that way, plus other bits and pieces driven by some operational issues or issues coming from the, let's say, the provision of new aircraft. The revenues are clearly up on the 2019 figures. We will see later on that there is an element of accounting as a result of the way we are now spreading the minimum guarantee rent revenue over the year, but this is now really, really minimal. It's not a big deal. So the headline here is that we are already exceeding the revenues of 2019, with a similar level of traffic. That means that the yields are improving, particularly the commercial revenue per passenger figures are growing up and in a way that we believe is fairly sustainable. EBITDA is now once again at the 2019 level. And that's very telling because 2019 was the record year with more than EUR 2.7 billion in EBITDA. So the question mark would be, will we be able to deliver a similar level of EBITDA now? Well, I will stop short of confirming that. But what is clear is that both the 2019 EBITDA figure and the 55% margin that we set ourselves as objectives for the strategic plan and that we were expecting to deliver by 2024, let's say the far end of 2024 or beginning of 2025 are very likely to be reached earlier than that. And net result is also already exceeding 2019 figures. It's true and this has been already mentioned by the Chief Executive Officer that we have now a number of one-offs in the financial results line, that those are unlikely to be, let's say, sustainable or they are driven by a number of things that have been disclosed and we can discuss later on. But in total, net of profit -- net of taxes, that's around EUR 50 million, EUR 51 million. If you take that away, still our net result is exactly flat on 2019, which is frankly quite something. As we can see later, but more importantly, the trajectory is in the positive because it's going positively because the second quarter has been a much better quarter than the first quarter, both in absolute terms, which is something you would expect because of the seasonality, but more importantly in relative terms, because we are improving vis-a-vis 2019 more in the second quarter than in the first quarter. So in summary, we are in the right trajectory and at the speed that is clearly faster than we originally planned. Can we move on to the next slide? Okay. In terms of the performance of the different business areas, I think, generally speaking, all of them are performing really well. It's true that the aeronautical element of the business is drag to a point because of the tariff evolution and also there is an element of dilution that we will recover in 2 years' time. But still is performing really well and reaching levels that are not very far from the 2019 figures. The margin is clearly slightly below, 49% in 2019 at this time of the year, 39% now. But as we said before, it would be unrealistic -- as we said a number of times already, it would be unrealistic to expect the margins that were achieved before the COVID to be achieved now. And this is something that I want to stress again and to reiterate. So I call this good performance in terms of the art of the possible of what we believe is realistic and achievable. The commercial business is back on track. We are exactly at the same margins, reaching the same margins there or thereabouts that we enjoyed in the first half of 2019, now 77%, at that time, 78%. So we are back on track. And this is really good news and probably one of the key features of the performance of this business post-COVID. And in terms of the international side of the business, I just want to mention that obviously it's a completely different kind of animal. The dynamics are different, but the margins are affected by the fact that the -- normally we are running concessions. But still this is contributing double the EBITDA levels in absolute terms that used to contribute in 2019 and this is good news because this is part of our strategy. Moving on. One more, please. Okay. Obviously, as we have discussed already the traffic data, I just want to say that if you take a look at the pie chart, in terms of the relative weight of the different traffic segments, we are back to the 2019 composition, there or thereabouts. So we can say that it is true that the international traffic has been lagging behind is catching up already. It will take some time to catch up in full, but it is not very far from the standard composition of traffic. If you look at, for instance, long-haul traffic is now north of 9%. I think in 2019 it was similar, it was pretty much north of 9%. The international traffic -- sorry, the European traffic is not very far from 2019. I think in 2019 it was -- let me double-check. To be precise -- but it was 59.7%, now it's 57.6%. And I want to stress this because this means that the international traffic is catching up. This is very good news because for close to 1 year, the main driver for the traffic growth was the domestic traffic. It's true that if you look at the right-hand side of the slide, what is absolutely clear is that the leisure traffic, those airports that offer mainly leisure, well, they are, let's say, used by leisure passengers clearly are exceeding the recovery of the Madrid-Barajas or the Barcelona Airport. But once again, they are close to catch up sooner rather than later. So we can move on. I won't dwell on this, although I will be more than happy to discuss any of this information later on. So let's go on to the next slide, the commercial revenue summary. This slide is telling us -- we consider this slide a very important one because after the messy experience of the accounting issues we now want to be very clear about what is really the performance of the underlying business. This is telling us 2 things. First of all, that the business activity, when you look at those rents that are regularly on a monthly basis invoiced and collected in the 1 month later, they are 19% above the 2019 figures. And this is -- well, this is something that you have been witnessing already for a number of quarters. But this is consolidating now clearly. Then you have the MAGs that for us are very welcome. They are critical to us. It is money, clearly this cash that will be collected the year after. The MAGs are growing 41%, which is also good. That means that this is a combination of 2 things. First of all, the VF7 is somehow ineffective because the traffic recovery is, let's say, offsetting its impact. And secondly, there are new contracts in place that are even more aggressive about in terms of the MAGs they are offering. This second element is still relatively minor. But clearly, it will be growing over the coming months and years to start with because we have now a new duty free contract in place. And then the accounting things. But you can see that the accounting overall is not having a huge impact. So the revenues are luckily enough not very far from the headline revenues, not very far from the reality of the business. But the key message is the commercial business is growing extremely, extremely strongly. Going on to the next slide, this is the slide that is providing the information on the revenues in accounting terms, how they look like in the P&L. So I want to stop on this. Let's move on to the next. Here, you have once again, the fixed and variable element of the rent, those rents that are invoiced on a regular basis. And what you can see here is that the recovery, this 19% that we mentioned before, is now widespread, is reaching all the different corners of the business. The specialty shop line was lagging. As you know, they were laggards because there were a number of shops still closed, but they are catching up. Now in the second quarter, they are already growing 6.4% and let's say, joining the rest of the group. Clearly, advertising is probably the business that is taking longer to get back on track. I think it is easy to understand. No need of huge explanations on that. And the -- say the rest of the activities are growing. And indeed, they are also providing growth in terms of the revenue per passenger. What we have now is EUR 0.74 more per passenger than in 2019. Moving on to the OpEx. The OpEx is going up. It's going up by around -- well, let's move on to the next probably is much better because the total OpEx is going up as a combination of increase in activity, a full opening of all the terminals, all of that, partially offset by the electricity expenditure that is now roughly half the amount we were incurring at this time of the year in 2022. But I think this slide is probably more important for you. This slide is comparing the Spanish network expenditure in 2023, 2022 and 2019, the first half. And I would like to focus on the comparison between 2023 and 2019. Excluding electricity, which is clearly, let's say, a exceptional element of the equation, we are growing around 12% and the increase in OpEx has been very similar in quarter 1 and quarter 2. And I know this can be considered as a half-empty glass or half-full glass. I have to say, it's a half-full glass. I know some of you might be tired of listening to me, but this is what we believe is now the art of the possible. This is the realistic picture of operating our airports. That was said by us before the COVID. We reiterate that now after the COVID, obviously with the influence of the recent inflation readings, even more so growing at double-digit -- low double-digit is not surprising, is, in our view, performing to the plan, is being able to manage the operation efficiently, is being able to extract the best of our management capacities. And frankly, we would struggle to do any better than this and we believe we are good airport managers. But on the other hand, it's clear that the 55% EBITDA margin, which at the end of the day would be the result of this activity and this management capacity is not only to be achieved, is going to be achieved well ahead of the plan. So happy to discuss operating costs later on, but let me be absolutely clear, this is for us a very good result, a promising result. And is frankly delivering what we expected, what we plan. I would say no need to go any further in my view, unless you think otherwise. So I would recommend to open the Q&A session.

Hello, operator. This is Ignacio Castejon from Aena. You can start the Q&A session if you don't mind.

[Operator Instructions] Our first question comes from Cristian Nedelcu from UBS Group.

Maybe the first one on the EBITDA margin of above 55% from 2025 onwards. I guess since your Capital Markets Day, the electricity prices have come down meaningfully. You have the duty free contract signed. Can you elaborate a little bit how much above 55% you think you can go? I remember it used to be above 60% pre-COVID. So would that type of margin be possible in a few years again? The second one on the tariff increase, the 4% that you requested. Could you go a bit in more detail into the moving parts in the EMA, so the adjustments there? I mean from my notes, I had a tailwind from the K factor, then you put on top of it the P factor. I think you also had some COVID recovery costs in there. I was expecting a bit more than 4%, to be honest. So any more color on the moving parts there? And I guess the third one, I mean, there's been a few articles in the press these days around the possibility to see a scenario where Barcelona Airport would be separated, so will be no longer operated by Aena. From a legal point of view, would such a separation be possible? How would Aena be compensated? Is there anything in the current regulatory framework that takes into consideration such a potential scenario? Can you give us more color there?

Hello. Again, this is Maurici Lucena. I will answer the last question for obvious reasons. And I will try to be crystal clear. I think that all that concerning the issue that you raised, all that has been published today. This is empty noise, I think that the Aena model is very well-established by a strong 2014 law. I think that everybody agrees that the company functions very well. And one of its natural and recognized strengths, it's our network model. So I would like to really convey a message of tranquility to all our shareholders, both the public and especially, especially our private state -- our private owners, our private shareholders. This issue is not on the table. It is not on the table. So again, it's empty noise. And I really lament that in this day, today that we have released our 1/8/2023 results, this could have perpetuated the picture of the current moment of the company, which is really, really good.

Okay, Cristian. With regard to the EBITDA margin, we never said we will exceed the 55%. We said that 55% was the realistic best-in-class achievable EBITDA margin in the time frame of the current DORA. Clearly, we think in terms of DORA III, a number of things can change, may change. Some caps might be reshuffled. For instance, there will be no cap on charges. Secondly, the size of the investment program is likely to be more, let's say, more sizable, bigger. So a number of things could impact over time in the next order period the margins. But frankly, it is very difficult to anticipate today whether or not that will end up in us getting back to the 60%-plus margin levels. We will try hard obviously and we will do our best. But in the time horizon of the existing DORA, what we believe is achievable, doing our job properly and being efficient is 55%. No more than 55%, but 55%. What we can see now is that the original plan that was to reach that level, let's say, at the end of 2024 -- to be more precise, probably first half of 2025 is likely to happen earlier than that. That's what we say. But we are not suggesting that we could get over 55%. If we can, we will do it. And probably the tailwind that could help would be the commercial revenue side of the business. But it's early days. So if you like we stick to the commitment of delivering 55%, we now say that this is likely to happen well ahead of the original plan. I hope this helps. And we are considering everything, everything together. Since you mentioned like the new duty free contract, well, different things are already factored in the equation. In terms of the charges, the airport charges increases that we are proposing, I will try to be precise, but probably the best thing is for the IR team to distribute the detail. I will try to provide as much information as possible obviously, there are a good number of numbers, no? First of all, the IMAP, the maximum revenue per passenger, the starting point is EUR 10 for this year. And the most relevant factor adding to that is the P Index proposal that we are making that is 3.5%. 3.5% that has been endorsed by the CNMC. So technically it's very sound, very, very strong. But it's true that, that will open a process in which both the DGAC and potentially the government should be involved. But the CNMC has agreed that our 3.5% proposal is absolutely sound and solid. That will take you to EUR 10.35. So you have a number of factors. The key factor this time around is positive because we have to recover some dilution. And I will stop short of sharing with you every number, but the IR team will provide the details. All that together will take us to an increase before considering any impact of the COVID costs, if we take away the COVID costs from the 2023 charges and we take away the COVID cost from the 2024 charges, the headline increase would be close to 6% to be more precise, 5.97%. But then we have COVID charges. In 2023, the COVID charges were applied and were recovered. This year, we are not proposing -- we are not requesting COVID cost to be recovered. And the reason for that is that we are very close to receive an allowance, a grant from the European Union. And if we do that, obviously we cannot charge the airlines. We cannot get twice the same revenue of the recovery. And we are very close to that. So we -- in discussions with the CNMC and with the airlines, we said we are not going to propose to add COVID charges to the tariffs. Of course, if we fail to get the allowance, the grant, we will get back to request the inclusion of these costs. But we are pretty sure that this is going to be obtained. So there is no reason to -- well, there is no reason we would be wrong to get this twice, no? So with all that in mind, we end up in EUR 10.35 per passenger for 2024. That means a 4.09% increase on 2023, that was EUR 9.95 per passenger.

The next question comes from the line of Elodie Rall from JPMorgan.

So my first one is on traffic. We've seen some lower traffic figures indeed in June. And I think you commented that it is due to airline prioritizing yield over capacity. So my question is, do you see this as a risk for the rest of the year? And how are the trends in July so far? If you could comment on that in terms of bookings and capacity for the winter season as well. My second question is on MAGs and the outcome from the tenders that you've just secured. And I wanted to have your opinion about the 2 specific contracts of Barcelona and Madrid-Barcelona in particular and how satisfied you were by the outcome of these contracts? And lately -- lastly, sorry, on the accounting of MAGs specifically. I know you said it's not that relevant to [ NEMO ], but in Q1, we had EUR 79 million, in Q2 EUR 20 million. So just was wondering what to expect for Q3 and Q4, if you could comment?

Hello. Again, this is Maurici Lucena. I will answer the question concerning the duty free tender, if I understood correctly. I think that honestly we are happy with the results of the overall tender. The way Aena contracts or subcontracts or assigns contracts to our clients is not the easiest one in the world. It means that sometimes we experience a public noise that with another system of procurement we would not experience. And this is related to our 51% state-owned ownership. And -- but I mean, for us, this is something that we have completely incorporated in the way we function. I think that in the end, the system works well. But in the meantime, sometimes, as it was the case with Madrid and Catalonia, when in the first -- at first we could not -- we could not close the deal that was finally closed with Dufry, again, we experienced a public noise that it is only noise because in the end what matters, I think, is the combination of the quality of the new or the renewed duty free shops that will -- I think that will be very high and especially the financial results. So the financial results, no matter how we analyze them, are very good. And let's remind that the starting point, I mean, the past contract was very demanding, was very challenging as -- and you just have to compare in relative terms how much money Aena is able to earn from the duty free activity when you compare our duty free shops with other competitors. And with this very demanding challenging starting point, I think that the figures are very, very good. And of course, you always want more, but we are realistic and we defined in our first tender what were our minimum. And these minimums have been overcome. So we are happy and Madrid and Barcelona, it is true that they have finally just -- or we have just finally reached marginal increase in terms of our original tender, but we also knew from the beginning that Madrid and Barcelona were the most demanding contracts among the Spanish, among the rest. So we are happy. I think it's been a good business for Aena. And probably, I must confess that the final result has even been a little higher than I could expect at the beginning. So I'm happy in a double sense.

Okay. With regard to traffic, what we have witnessed is -- and frankly, it is difficult and very difficult to get to the bottom of every single driver or element that is influencing the situation. What we see is that the demand is very robust. The demand is there. And we see no reason to be concerned about this in the foreseeable future. But what we also see is that from the offer side, there are on one side, some issues and on the other side, some strategies. Issues are linked to some very aggressive airlines, airlines that were very keen on adding capacity aggressively for the summer are struggling to get the aircraft they need. Some other airlines are finding that if they add more capacity because of the potential industrial conflicts at the origin airports, they may end up canceling flights and they believe that this won't be good for them. So they prefer to be slightly more conservative at least for the time being. But also, clearly, the airlines are playing the card of the yield enhancement, which I understand. They went through a very difficult time, and they are right to get -- to try hard to get back to their profitability. So the combination of all these factors are -- and believe me, it's not easy. This is not something that you can quantify element-by-element. But we believe that the combination of these different factors are leading to, let's say, flying a number of aircraft that is not as -- is not reaching the levels that they originally wanted and expected, but the load factors are going up. I mean we are reaching load factors that are the historic highs here in Spain now. The consequence of that is that the growth that we experienced in the first 6 months or 5 months of the year vis-a-vis 2019 is likely to be slightly less, let's say, clear in the summer. By no means we are suggesting that this is going backwards, not at all, because the demand is there. But it wouldn't be surprising to see modest growth on the 2019 summer or even flattish numbers. It wouldn't be surprising. This is not bad news. This is simply a fact of life. This could happen any year in the past, pre-COVID, and in the future because airlines also have the right to do the job the way they want. So we are not at all concerned by that. We believe that the guidance we are providing is still valid and we believe that if you, let's say, make a mathematical average of the 94 and 104, you could end up around 99%, 100% or 101%, you won't be wrong to expect that to be the final outcome of the year. But finally, let me say, we don't know more than you, in a way. Obviously we have information, we have inputs that are very valid and very valuable, but we don't know what the airlines might be doing in 3 or 4 months from now. For the time being, we believe they are protecting the yield. And for the time being, we believe that expecting the year to end up being flattish or slightly over 2019, it is a very reasonable expectation. But we might be wrong and maybe we see more growth coming or -- but rest assured that we don't see any reason to be concerned about the demand side of the business. So we don't see the general macro conditions or any economic issues really eroding the healthy demand that we have been witnessing over the last months. I hope this helps. With regard to the other comment you make, which is accounting of the MAGs. Well, I didn't say that we should be -- or we should forget about the accounting. No, I didn't say that. What I said is that when looking at the quarter -- sorry, the half year results, the commercial revenue -- the element of the commercial revenue, which is driven by accounting, is not really contributing hugely. So the reason why the 2019 commercial revenues -- sorry, the 2023 commercial revenues are better than the 2019 commercial revenues are a very legitimate underlying improvement in performance. And the accounting element is having, but it's starting marginally. So I wouldn't put too much focus on that now. The accounting going forward is going to continue being sort of confusing element. Let me try to describe for you what is going to be the most relevant element of that. That still is not impacting the numbers. The most relevant element of that is going to be that we will be spreading the MAGs evenly over the years of a particular contract. So if you take a look at the duty free contracts, the new contracts for duty free, they are going to commit growing MAGs year-on-year for 12 years. So between now and 2036. And we will have to -- and unless we are invariable to the extent that we keep operating under MAGs, we will have to account for those MAGs evenly every year, every day, every second will have the same MAGs revenue despite the fact that some of them will be collected in 2028, in 2030, in 2032. And this is the reason why the accounting could be generating some confusion, but we cannot get rid of that. What we will do is to be very transparent about the real element of the commitment of -- in terms of the -- when the MAGs are due. And also we will be disclosing the underlying trends of the business excluding the MAGs. But the MAGs accounting will have a very significant impact going forward. I didn't say the contrary. What I said is that in this particular comparison between the first half of 2023 and the first half of 2019, this is not really adding. You cannot say the revenues are up because they're of the accounting. No. That's not the case. They are massively -- this improvement is almost entirely driven by the business, by the underlying business performance.

Our next question comes from Luis Prieto from Kepler.

I had a couple of questions, if I may. The first one is, in the context of the endorsed 3.5% P factor for '24 that you were commenting on. If it finally materializes, how should we think about future years? Does the situation leave the door open to the elimination of the 1% P factor cap at any point in time? And the second idea or the second question is if you can provide any sort of guidance of where variable rents would be in the agreed duty free contracts to sort of assess the likelihood of them being above MAGs at any point in time?

Well -- Hi, Luis. With regard to the P Index, the good news is that we have confirmed that so to speak 1% universal cap was not really such a thing. It is just something that won't apply to the extent that you're -- let's say, the -- let me say, the indexes that are set to be making up the calculation, which are well-established in the regulation, they said they are not delivering something different. So if you are trying to, let's say, run exceptional requests on the P Index -- sorry to be -- probably it's a bit confusing because the other number of legal elements here, but just to try to get to the bottom. If you are trying to argue that there are exceptional circumstances and such and such, you would face the challenge of the 1% cap. If the indexes that are meant to be looked at when pulling together the calculation are delivering something which is different from 1%, we have concluded that you can apply for that particular outcome. And the CNMC agreed. So the indexes that are meant to be making up the calculation ended up delivering 3.5%. So we went to the CNMC and said there is nothing in the law preventing us from requesting or asking for 3.5% and the CNMC said, yes, you're right. So this is good news. So I hope that will apply forever. That doesn't mean that every year, you are going to exceed -- this is not about inflation. This is not about saying, well, we are closer to something that is similar to applying the CPI. No, we are not close to that. What we are close -- what we have been able to clarify is that to the extent that the component parts of the P Index are delivering something, you can ask for that something. And this is a step ahead obviously. So good news. And then Ignacio will be answering the other question.

Thank you, Jose. Your question on the variable rents, I can -- let me start with you a couple of things to try to help you and provide you some further information. When the company was putting together all the tender, the decision was made with respect to trying to set a very high level for MAGs. The outcome was very successful, as has just been explained by Maurici. And we managed to increase the MAGs by 16%, if we compare levels of 2023 versus 2024. At the same time, what I would like to state very clearly is that the company also made a decision about not disclosing the variable rents. We think it's a very sensitive piece of information given our relationship, our contractual relationships with the duty free providers. What I would like to state is just one more thing that, of course, the variable rents that were tender were higher than the one that we have in our documents. So the outcome was also successful from our side.

Our next question comes from the line of Sathish Babu Sivakumar from Citigroup.

I've got 2 questions here. So first on the commercial revenue. Can you, like, explain like the price/mix is the volume mix the 6% growth that you're seeing, how much of it is actually a function of just inflation because as you see recovery in long-haul traffic coming through, you should have seen just the volume of transaction should have been the growth having more than the inflation level? And second is, how does your spend compass, say, any color on long-haul traffic versus short-haul passenger spend? And second one is around the corporate travel. Like, what is your exposure to corporate traffic? I believe, yes, it's mainly the leisure mix here, but just any color on that would be actually really helpful. The reason is actually airlines are pulling back some of their winter schedules as we speak, especially from the low-cost carriers. So just wanted to understand, like are you actually starting to see that? I'm not talking about the summer actually, beyond the summer, the winter schedule is being scaled back, so which means that as you go into the winter, probably the upside would be more of a corporate traffic coming back rather than the leisure?

Okay. I will answer some of them, and Ignacio will take some others. When you ask about the Q and the P of the commercial revenue, frankly, this is a difficult answer to be given over a webcast. So I will suggest that we will try and get to you some -- it's difficult because frankly, there are a number of factors. This is not about saying what is the quantity element and what is the inflation element, it's much more complex than that. So excuse me if I don't give you a simple answer saying X percent of the increase is driven by inflation, Y percent of the increase is driven by the higher -- or the propensity to consume more. What is absolutely clear is that some of the drivers, which are having a much more significant impact without quantifying them, are driven by, I don't know, behaviors. For instance, the Brexit impact on the propensity of the U.K. visitors to spend because they can benefit from the VAT refund, or the lack of VAT billing. We also have a very clear example of, let's call it, propensity to spend more in all the VIP services. It is unbelievable to what extent people are now queuing to get into a VIP lounge, I don't mean the airline lounges, but ours, our land use and ready to pay. So in my view, a significant amount of the improvement is driven by changes that first COVID, or for whatever reasons, or post-Brexit are making people to be more keen on spending or using our services. Inflation, of course, is playing a part, but it's difficult to quantify in a very simple way. With regard to corporate traffic, Ignacio will be answering. I just want to demote so to speak, the importance of corporate traffic for Aena. I don't mean by that it is not an element of it. But at the end of the day, this is not about mainly business travelers. It's about, let's say, leisure traffic, international and domestic. The business traffic is very welcome and as long as this is back in full, we will benefit from that. But this is not a make or break kind of situation as you may see in other airports, if you think of, I don't know, JFK or even Heathrow or you can say, well, the corporate traffic here is critical. If you take a look at Aena's network, we have 46 airports in Spain. And probably a couple of them could be relatively affected by corporate traffic. Before handing you over to Ignacio with regard to airlines pulling capacity, definitely, they are pulling capacity with regard to the original plans. The way this went was initially, some of them, in particular, some of them, and you can think -- if you can basically guess who were very, very aggressive, reaching record commitments. And then now they are pulling, pulling obviously not dramatically, still in the app, but pulling some of the capacity, for the reasons that I discussed before, we believe, okay? But there's nothing dramatic. At the end of the day, the end gain of that is what I said before. We will be there or thereabout the 2019 traffic or slightly over. That is our view of the 2023 picture. So this is summing up all the different trends that you can see over the summer, in the winter, but definitely the airlines are now slightly less -- particularly the low-cost carriers, slightly less keen on growing dramatically, although they are still adding capacity, are more focused on earnings and the load factors are record now. In our network, now I think from memory, we are reaching levels of 95% load factors on average. So this is quite something.

Could I just follow-up actually on the commercial revenue spend. Like what is the difference you see between say, long-haul passenger versus a short-haul passenger?

Sorry, you're right. You made that question as well. Normally, overall, the long-haul -- some long-haul, some nationalities are more [ propense ] to spend -- at least to spend large amounts of money. And nobody knows that the Asian traffic is particularly important for that, the Russian traffic was important for that before the war obviously. And it is absolutely fair to say that the Chinese traffic in Spain hasn't come back yet. But once again, unfortunately, maybe -- well, unfortunately, the weight of the Chinese traffic in our network is relatively small. Hopefully, in a number of years, we will get significantly more Chinese visitors or Indian visitors or people coming from that part of the world. But for the time being, they are not really moving the dial dramatically. But when they come back, the commercial revenue per passenger will benefit from this coming back, of course, absolutely. Nationalities are the main driver, sometimes more than the reasons for the travel of the revenue per passenger. It is what it is.

Just a quick comment on your question after Jose explanation on the business travel or corporate travel. I think one of the main reasons for the recovery of Aena -- faster recovery than our peers has been that structurally we have around 75% of our passengers are basically BFR or laser. This is based on basically Q&A statistics, internal statistics of the company based on samples. What I would like to say is that business travelers in Aena were not much higher or have always been below 20%. At this moment in time, the recovery, the level would be around mid-teens. So we are still a bit below that kind of passengers if we compare '19 with 2022. Those are the latest -- that's the latest data that we have. So it's coming back and will come back as soon as Madrid, Barajas and Barcelona are also back because if you look at the recovery of those airports, they are still a bit behind and that's where we are seeing the lower recovery in terms of business passengers. I believe that the second part of your question was relating business traveler and low-cost and legacy carriers. At this moment in time, we are seeing that there is an equal split with respect to carrying that kind of passengers between that type of airlines. Of course, all this info is based on samples -- large samples carried by the company, but this information that we have at this moment in time [ Manish ].

Our next question comes from the line of Manish Beria from Societe Generale.

So yes, I have 2 questions. The first is on your commercial spending per pax guidance in 2026. I mean you had this guidance of EUR 5.38. So I see -- I mean commercial plus real estate in 2019 per pax did EUR 4.8 and the duty free that you have already awarded, I mean if you do that -- I mean, it adds plus food and beverages that you have done, are probably at like EUR 0.6. So you're already reaching there just with the duty free and some food and beverage contract. So I'm just wondering the comment that you have made, the behavior changing, Brexit is helping. So why not, I mean, your guidance will be significantly exceeded, so what is the realistic target that you can look at, at this point in time? This is my first question. The second is also you mentioned that in the DORA III, the CapEx spending will be very important for the investment thesis of Aena. So just with the political ramification, I mean -- because Barcelona is one where we need more CapEx, so with the political events happening, do you think we'll get go ahead or green signal for the Barcelona CapEx to happen there?

This is Maurici Lucena. I will answer your second question. Well, you know we as a company, I think that we were and we are very transparent. We simultaneously -- actually, it was 4 years ago, but then we went through this COVID crisis. So if you leave aside the crisis and all of the perturbations it introduced in the technical proposals for Aena, let's say that we, after the worst effects of the COVID crisis, we simultaneously proposed the expansion, the enlargement of Madrid and Barcelona, both, you know that they are the most important airports for Aena, the largest ones, the most profitable and so on. So we -- I think we were very careful when we simultaneously proposed the enlargement of both facilities. And the reality is that the enlargement of Madrid was unanimously accepted and Barcelona was not because the Catalan government -- it is true that it had, and it has an environmental complexity. That is why we needed as a sine qua non condition the approval of the Catalan government because of the environmental issue. And the Catalan government finally did not accept the expansion. They opposed the expansion of the Barcelona Airport. And we are very cautiously optimistic in the sense that I think and we think that the expansion of the Barcelona Airport is so important. It's -- I would say it's a capital issue. It's a fundamental issue concerning the future competitiveness of the Catalan and the Spanish economy, but also for the mobility of the Catalan citizens. So I think that these very strong factors, these very strong arguments, could in the future make the Catalan government accept and support the project. It's not the case at present. But as a final comment, let me say that in the coming weeks, maybe after the August vacation, there will be an institutional, let's say, table and institutional discussion between the Catalan government and the Spanish government, which comes from a budgetary agreement between the Socialist Party and ERC, which is the party that now or whose -- in other words, the President, the Catalan President, the President of the [indiscernible] Catalonia belongs to this party ERC. It's -- there's, again, an agreement between these 2 parties, whereby they commit to discuss technically, again, the potential enlargement of the Barcelona Airport. I think that they then, of course, will support the project. The Spanish government, I can confirm that will support the project. So it's all in the hands of the Catalan government, who, let's be confident that can change its mind.

Okay. With regard to the commercial revenue per passenger target, you are right. Looking at the current performance plus the pipeline of improvements that could come up of the recent contract awards, the 2026 target seems a little bit humble. I fully agree. I think that what we don't want to do is to update you or anyone on the business plan piecemeal. So we are planning to -- after the summer, to -- at some point in time to have a session and to update our views on the plan because as I mentioned before there are some other relevant financial objectives that are likely to be reached earlier than expected. So definitely, we have to do that. But in the meantime, we don't want to, let's say, share information piecemeal. But I agree with you, the target seems to be now probably to [indiscernible].

Our next question comes from the line of Marcin Wojtal from Bank of America.

First one, I wanted to follow-up on operating expenses. So you mentioned in your presentation that OpEx is up 12%, I think versus 2019 in H1, but going forward, should we expect this cost inflation to accelerate because there are perhaps still some contracts with external suppliers that need to be reset to reflect the, let's say, the new reality or overtly should perhaps cost inflation come down? Because when we look at inflation, the CPI number in Spain right now, it's something like plus 2% year-on-year and it was at some point plus 11%. So inflation in Spain has come down significantly. If you could perhaps indicate what would be your expectations for the next 12 months and perhaps not in terms of specific numbers, but in terms of direction of travel?