Aeroports de Paris SA (ADP) Earnings Call Transcript & Summary

Welcome to the ADP TAV Airports Investor Strategy Conference. My name is Courtney, and I'll be your coordinator for today's event. Please note that this call is being recorded. [Operator Instructions] And I will now hand you over to your host, Edward Arkwright, Deputy CEO of Group ADP and Chairman of the Board of TAV Airports, to begin today's conference. Thank you.

So good morning, everyone. Thank you for being with us this morning. I'm with Serkan Kaptan, the new CEO of TAV; with Franck Mereyde, who is the Chairman of the Executive Committee; and Burcu Geris, who is the Deputy CEO and the CFO of our company. Following the unveiling of the 2025 Pioneers strategy road map last February, as you know, we have hosted some thematic conferences after we tried with Extime presentation after ESG presentation, it is now a TAV strategy that we will present to you. And of course, after this short presentation, we will have time for questions. I will make a short introduction just to say how important TAV is in the -- in this road map and in group ADP strategy. After that, Serkan will give you a view on the strategy of TAV, a strategy of responsible and profitable growth. Franck will go into detail on the strategy and flagship assets. And of course, Burcu will give you some view on risk management and, of course, of the financial strategy of the company. I will make a short conclusion. Just to begin this introduction, as you know, our strategic road map 2025 Pioneers is built on a view that this road map is a first step, long-term transformation, which is going to make our airports a multi-model and energy hubs designed and operated in a sustainable way. So we have the ambition to be a first-in-class in the sustainable aviation. The first step of this transformation is built on the 3 years road map with 3 pillars; one ambition, which is an industrial ambition, to imagine the sustainable airport of tomorrow; one group, which is to build a global, integrated and responsible group with a multi-local approach, I will go into detail about that; and the third pillar is shared dynamics, which concern our collective dynamics and the renewal of our corporate culture, favoring a culture of responsibility, innovation and enable us to attract and develop talent also to reaffirm one that we are working in an ethical and a huge [indiscernible] compliance standard. If I look to the footprint, the international footprint, as you know group ADP has a unique international footprint, which allow us to create value. We have very complementary group with traffic mix between 3 main development platforms, activities in India and Asia, activity around Turkey, activity in Europe and -- in France, sorry, and in North -- in America. So -- and as you know, ADP has small activities in North America, where there is a growth potential. This diversification helps us to mitigate risk in terms of traffic, domestic traffic mainly in India, international one in Turkey, as we will present to you. And as you know, we have a very well-balanced portfolio in terms of growth patterns, in terms of geography, in terms of risk, in terms of exposure. And we are doing with this strategic road map, an example of a multi-local approach. It means that we need the advantages and the force and all the -- of each asset. The TAV strategy is very appropriate to capture growth in some areas of the world. And in -- our Indian colleagues are well positioned and maybe best positioned to do it in other part. And in ADP, we try to do it also. So this road map is shared, of course, with TAV Airports, and you will see the presentation. And there is a clear resonance with GMR Airports road map. How can we steer, as a group, this international development? You see here, we can organize operational -- improvement of operational performance and financial performance with our departments, teams and finance teams -- development teams, sorry, and finance teams. The group operation department steers a continuous improvement of the industrial performance and is therefore driving optimization of the value of all the portfolio, of the global asset portfolio, deploying, for instance, airport industrial policy in order to upgrade the quality of service, to cooperate in airport capacity management, health accreditation, aeronautical safety, maintenance policy, to give more resilience to the operations globally speaking and to create as much -- as many cost synergies as we can. But our business, as you know, is not a business of synergies, of course. It is more a business of synergy of expertise and knowledge. But we can reinforce the process. We can create value by this global approach of the portfolio. You can see the impact in terms of value creation and long-term value creation. Why is this international development so important to the success of the strategic road map and the financial trajectory? Because we are taking the advantage of the faster recovery and a stronger traffic growth going forward. And you can see here that without, and I repeat it, without any additional international development, the contribution of the international assets will rise continuously in the coming years, coming from a 15% share of the group's operating income in 2019 to 40% to 50% of this operating income in 2035, resulting in a better balanced group between Paris and our international portfolio. In this strategy, TAV Airports is key, of course, and it is a key pillar. And because maybe 3 reasons. The first one, it is that TAV is taking full advantage of its leisure-oriented portfolio of assets that are displaying a much faster traffic recovery than the rest of the group. And in 2021, TAV Airports traffic stood at 55% of the 2019 level of traffic, 10 points ahead of group figures. The second reason, it is that in addition to its current portfolio, TAV is ideally positioned -- is an ideally positioned platform to develop activities in Africa, Middle East and Central Asia, as we did with Almaty last year. And the third one, it is that TAV has a wide and very performing portfolio of services company. And this services company is a huge asset in our road map. As we explained, for instance, for the Extime strategy. So at the end, TAV Airports is central for the Group ADP financial trajectory with the contribution to the group, which -- group operating income, sorry, which will go to -- reach 1/3 as early as 2025. This very, very close and controlled relationship is built on a step-by-step history. You know it. But you see how we did this step-by-step full consolidation of TAV in 2017, and we made an important move with the change and the renewal of the management team at the beginning of the 1st of May. You can see the governance of TAV company, which is a very solid governance with, of course, a Board of Directors with 4 independent Board members, 4 committees and a new team -- management team after the move from Sani Sener to Deputy Chair of the Board. And now, as I mentioned at the beginning of this presentation, we have Serkan, Franck and Burcu, a great team in order to able to save the challenges and to face the changes of this company and to make it as it is a real key asset in the group strategy road map. So thanks for this introduction, and I'll let now the floor to Serkan.

Thank you, Edward. I will start with the overview of TAV Airports Group. I mean, TAV is the #1 airport terminal operator in Turkey. We operate 5 airports in Turkey and 10 other airports globally, where we are in Kazakhstan, Saudi Arabia, Georgia, North Macedonia, Tunisia, Latvia and also in Croatia. It's -- the first quarter of 2022, we managed to -- we managed to get the 73% of the traffic back. And we have 7 services companies working in a matrix organization with our airports companies. These companies are into duty free businesses, food and beverage, hospitality, technology, security and ground handling businesses, which works in all TAV-managed airports. And beyond that, the services companies has reached to 90 other airports in 29 countries, which helps us to increase our footprint globally. As I said, we are one of the leading airport operators with a diversified portfolio because the 51% of the revenues of the group are coming from the services company. So we have a good model where we split the airport core revenues with commercial revenues 50 by 50. So the TAV Airports growth strategy, I would say that our growth strategy is growth in a profitable and sustainable way. TAV is coming out of this crisis by adding Antalya as a reference airport for its future credentials. We also do TAV Airports platforms for technology, hospitality. We use that for our sustainable growth. When we go to the positioning of TAV for growth opportunities, here in this map, you see our core region, we are extremely exposed in Turkey and the surrounding region. We are quite exposed in North Africa, Middle East, CIS, Caucasus, Eastern Europe. So this is the focus area. We are more focused on emerging markets, which deliver high growth compared to more developed countries. In the future -- in the short future, near future, we are chasing projects in Nigeria and Montenegro. These 2 projects are officially announced. In Montenegro, we have been qualified. That was a government change, and we are expecting the process to continue. In Nigeria, it is the same case. We are expecting the request for proposal to come out any time. So TAV's airports usually has the attractive markets with the strong growth prospects. When we look at the airports of our portfolio, you see that the leisure airports that we are exposed are recovering faster than the regular airports, as the case for Bodrum, Antalya and Izmir. So also, Turkey is one of the fastest-growing markets in the world, also the fastest-growing markets, aviation market in Europe. When we look at the tourist arrivals coming to Turkey, we have seen a steady growth since 2010. So we expect this to continue despite of the crisis, the new crisis of Russia and Ukraine. Our growth strategy brings the resilience to the company. When we look at throughout the last 22 years of operation of TAV, as you witnessed here, we have received or we have passed through a lot of crises. The year of start of Atatürk Airport, we had this 9/11 crisis, then we had the SARS disease, Russia and Georgia and more global financial crisis and many other things. When the Atatürk Airport, which was our flagship airport, ended -- the operations ended, we have seen a sudden drop in our total passenger number. We have reached 150 million passengers end of 2018. We decreased to 84. But still we continued with progress during the last 2 years of COVID. As the other airports, we had a lot of suffer on the passenger side. However, we managed to recover a lot through the services companies and with 2 new additions to our portfolio. One is the extension of Antalya Airport until 2052, end of 2051; and also Almaty Airport, which is also a flagship asset. The company has a solid track record of growth. When we look at the total revenues of the group, it had a steady growth of 9.4% year-on-year, which during the Atatürk period, and after Atatürk, we continued to grow. And we are expecting a huge jump with the end of COVID in our revenue and EBITDA margins. And the year 2021 was our year of consolidation and our economic growth. Although 2020 and '21 was shadowed by COVID, we managed to grow the company inorganically by acquiring Almaty Airport, which is a very important asset. The deal was signed and the takeover happened in 29th of April 2021. We managed to extend our Medinah concession in Saudi Arabia. It was a 25 years concession. And we received a recovery period for COVID, and we did the refinancing of this project. And Antalya Airport, the flagship asset, in terms of international passenger is extended for another 25 years. So we have Antalya Airport, which is our flagship today until to end of 2021. We managed to restructure TAV Tunisia's debt, and through that, we managed to have a net gain of EUR 109 million. And all Turkish airports, the concessions were extended for 2 years. And the rents related to these concessions were deferred by 2 years as well. We had a lot of savings throughout the group. We managed to have savings during the 2 years of COVID period, around EUR 363 million. When we look at our portfolio maturity, the portfolio maturity increased a lot, especially through Antalya and Almaty, and our average duration of maturity of the whole portfolio increased to 30 years. I would like to also talk a bit about some of our major services companies. For instance, Havas is the biggest contributor to the group. Havas EBITDA in 2019 in a normal full year was EUR 49 million. Havas is the largest company in terms of passenger services, ground handling services, cargo and general aviation in Turkey and the region. It is present in 7 countries, has more than 200 airlines, and we are present in 32 airports through this company. We have TAV Technologies. It's, by name, a technology company specialized in aviation business only. We work currently in 40 airports with more than 40 aviation-dedicated products. This company is not only working for TAV, but works globally. It's one of the most global companies of the group, where they prepare software and commercial and operations solutions for airports. Then we have the business development opportunities through our services. As you see over here, the services companies have operations in 90 airports of the world in 29 countries. So it gives us a room to put our feet in many different airports, in many different geographies. The most international one out of the commercial companies is our TAV Technologies company and TAV OS, which is the hospitality lounge management and retail company of the group. Then comes, BTA and Havas, our food and beverage and ground handling company. Then comes our duty-free company, namely ATÜ, where we are partners with Heinemann Group from Germany for duty-free businesses. And more locally, it's the security company. As per the law in Turkey, we need to provide security in our airports and our second ground handling company, which is a joint venture between Turkish Airlines, namely TGS. So this is all for me. I'll leave the floor to Franck.

Thank you, Serkan. I will highlight the 3 pillars of our strategy. The main one is hospitality. Welcome our passengers in the best way, provide them a very positive and memorable experience. To support this, we need to do it in a sustainable way, it's the second pillar. It means that to take care of all part of sustainability, including carbon footprint and so on. The second wings of this strategy is digital, to do it or to provide a smooth passenger journey, a lot of efficiency to our operation, we are using digital. Hospitality, sustainability and digital. In digital, what we have done together with a team of ADP and TAV, we have worked during the COVID period to define the toolbox, what we need to improve to set digital airport-friendly, involving our IT company, as Serkan mentioned, with more than 100 developers, our operational colleagues and our customer experience colleagues from ADP and TAV. With this toolbox, we have defined KPIs. All our airports with more than 3 million passengers will be airport friendly before 2025, and we have a road map to implement this. And we are working on 2 sides: one side is the customer journey end-to-end with all piece of this journey. As an example, we have already implemented tools like F&B preorder, which allow you to order a pizza in 20 minutes. And during this 20 minutes, you don't use a table at the restaurant, you can do shopping. And when you will reach for restaurant just at the time where you lunch is ready. It means that we save capacity in the restaurant, and we give time for duty free. The second side is operation efficiency. We are improving efficiency in all parts of the business of the airport, not only airport itself, but also ground handling and other because through our service company, we have a full view of this journey. Regarding hospitality itself, the body, the core of our strategy, we are working on hospitality for the airport and for the services all around the airport itself. For the airport, we have already a huge track record, where you can see with ACI score, we are above 4 in the main airport of TAV. We have the ambition and the commitment before '25 to bring 8 airports with ADP with the Oscar of aviation with Skytrax. On the other side, we are also strongly committed on hospitality for full services like meet and assist, lounge, especially with TAV OS company. And we are working together with ADP, especially for Extime. ADP is very strong in duty free, for example, for the hospitality. We are strong in lounge. We are sharing this experience to put under one umbrella, which is Extime, to have, again, a seamless journey. And what we learned from premium services like lounge. During COVID, we were the first to get awards from Skytrax for Best COVID-19 airport, take care of it. What we learned from the lounge, when we can use it in the airport. Regarding sustainability, the third pillar. I will highlight 3 topics: one is environment. It's part of the DNA of TAV. Already more than 10 years ago, Izmir was certified neutral carbon airport. We have 3 neutral carbon airports. Our aim is for all new construction to build, let's say, green building like -- following LEED Gold certification. It's what we are doing for Antalya. It's -- we are following the same kind of standard for Almaty. Improve the infrastructure itself, we have [indiscernible] technology and so on. Improve our process, and we use also TAV Technologies to develop software and tools for optimization, train our people, also our colleagues to do it and produce more renewable energy. We are already using solar panel in Izmir and Bodrum, We will implement at least 4 megawatts in Antalya, and solar panel fit quite well to our network. It means that it will be a part of our strategy to use more green energy in our mix. I will highlight one topic about social. When we talk about gender, out of the 15 airport, 11 are under the full control of TAV. Out of this 11 airports, 6 are under the management of women, like in Tunisia, Georgia, some airport in Turkey. And last comment is governance. We are in the top 10 corporate governance in Turkey for more than 12 years and progress every year, and it covers all kinds of topics of sustainability. I will highlight my speech on 2 assets. One is Antalya. Antalya, it's part of our strategy to target growth asset, it's a growing one. But it has 3 big characteristics: one, maturity. We have mainly a portfolio of concession. Maturity is a key KPI. Extension of Antalya is until December '51. It brings us a huge maturity. Second characteristic of Antalya is the size. Antalya managed around 35 million passengers in 2019, around 29 million international origin and destination passengers, which are the most contributive passengers, who indeed pay more than connecting passengers and is duty-free. And with this credential, we can bid to any kind of airport in the world. We have right credential regarding the size of the airport. And what we will do is, in the first step, EUR 600 million CapEx, additional CapEx in the future to bring step-by-step to 80 million passengers capacity at Antalya. Antalya, to give some numbers, the capacity in bed in the hotels is like a whole Portugal country, but focus around one airport, Antalya. I will continue for the third characteristic. I said maturity, I said size. The third one is resilience. Antalya grew fast. You can see the figures, but also when there is a crisis, when there is an event, it's recovered very quickly. It's a touristic profile, it's an area, people still after any kind of crisis, as soon as they can travel again, [indiscernible] with a high quality of services, a wide range of service in Antalya, you can find from low-cost profile to very upper class 5-star services. It's recovered always very quickly. It means that this asset is very resilient. It's a strong part of our portfolio. And you can see that last summer when border reopened in June, we get the passengers immediately. When U.K. opened in October, the week after, we get also these passengers just in a couple of weeks lag. Second, a big asset in our portfolio is Kazakhstan, again, a growing area. Maturity, again, this one is the first in our portfolio, which is not a concession. We are not limited by the maturity of the concession. It means that it's -- we have -- it's not under concession. We have this unlimited Extime. Second, after maturity is diversification. It's important for us to have a diversified portfolio. Kazakhstan, between China area, Europe, is a key platform, especially for cargo. And half of the revenue more or less of Almaty is coming from cargo or the fuel provided to the aircraft stopping in Almaty between China and Europe. It's a part of resilience. Another part is the country and the distance are so huge. Kazakhstan is more or less 4x a country like France. It means that you need flight, you need aircraft to connect big cities. You cannot build a huge highway or a huge high-speed train network in this part of the world. This is also a key parameter of resilience of this asset. I don't go into the details of the acquisition. You have all the information. I think we are fully available to provide more information. And to show again this resilience, you can see that in passengers, in numbers, we have more or less already fully recovered since the beginning of the year. Total number of passengers is higher than in 2019. There was special big events at the beginning of the year. In less than 3 weeks, the traffic fully recovered because aviation airport in this part of the world is mandatory. This is a strong part of -- the beauty of this asset is this -- its resilience and unique way to communicate in this part of the world. Burcu?

Thank you. Thank you, Franck. Now I guess it's time to put all this strategy -- growth strategy, the sustainable and smart growth strategy of TAV, explained by my colleagues Edward, Franck and Serkan to put into numbers. For the first time in the history of TAV, because we're going through such a huge inorganic growth in such a short time and we added 2 big assets like Antalya and Almaty, good investments to our portfolio, we wanted to give a longer-term guidance. Historically, we gave only 1-year guidance. But this time, we wanted to give a guidance until 2025. Because for a temporary period of time, we will be in an investment period and we will have -- also, our net debt-to-EBITDA ratios will be impacted by that. So we have seen -- as explained by my colleagues, we have seen recovery, a fast recovery. For 2022, before Russian-Ukraine crisis, we guided our investors for 71 million to 76 million passengers. We keep this guidance still. For '23, we are hoping to achieve 2019 numbers, which was the record numbers of TAV. So 2023 will be the full recovery year. And for 2025, we are guiding for between 102 million to 107 million passengers. For the EBITDA margin, historically, we had quite high double-digit numbers. We had 2018, 2019 numbers with around 35%, 40%. And in 2022, we hope to have between 30 -- around 32% EBITDA margin. For '23 and '24, we hope to return to these margins of 2019. And for 2025, we are guiding for between 42% and 45% margin, which is a very healthy and robust margin. For net debt to EBITDA, as I mentioned, we have now in front of us a couple of years of investment period for Almaty and for Antalya. So during this period, we will have a bit higher ratios than normal, but this will be a temporary phenomenon, just for 2 years. And after that, we will have the normalization of our EBITDA with full recovery plus the end of the investment period. So for 2022, the ratio will be between 6 and 7. But when we reach 2025, this will be normalizing back to its levels between 2.5 and 3x. We get this question a lot about inflation because it's a hot topic, inflation around the world. Our functional currency is euros and are -- so most of our revenues are euro-based. And only 13% of our revenues are not inflation linked. So the rest 87%, we can link to inflation. We can manage the prices and we can link to inflation. Only 13% is passenger fee and fixed throughout the period of the concessions. Having said that, I have to also mention that the concession fees related to these passenger fees are also fixed, so they don't increase by inflation. So they set off each other. As I mentioned, most of our revenues are hard currency. So 64% of our revenues are hard currency, meaning euro and dollars. And the rest is local currency, including TL and other currencies. On the other hand, only 22% of our OpEx is hard currency. This gives us an advantage. So normally, we are Turkish lira short, which means that as we have seen in the past, we have had Turkish lira devaluation, and this had impacted our EBITDA on a positive way. And also this is true for the other local currencies where we operate. If we look at another popular topic about the breakdown of our passengers because, obviously, Russia and Ukraine crisis is questioned. If you look at the total TAV Airports passengers, 25% is coming from Russia and 5% is from Ukraine. So we are still monitoring the impact of Russian-Ukraine crisis. We are expecting still a strong tourism season. The demand from all the other source markets are very strong, including U.K. and Europe. So we expect some part of this decrease from Russia and Ukraine passengers to be made up by the other markets. Regarding OpEx, my colleagues already mentioned about the savings. I just want to highlight once more the huge number of savings during 2020 and 2021. This was EUR 363 million, so EUR 0.5 million per day, you can consider. So this is a huge achievement and it had huge sacrifice from every employee and management and also a renegotiation of contracts and restructuring. And I'm happy to say that some part of this OpEx, and not every part because of, obviously, some part is related to the traffic. But some part, around 10% to 15%, is a sustainable saving to go into the future even if -- even though the traffic will pick up. Regarding our investment process, so how will the -- how we achieve this smart and sustainable growth. We have certain criteria regarding passenger growth. So we focus on high passenger growth potential, and we also have a core geography. So we don't go for the whole world. But as Edward mentioned, we go for certain parts of the world around TAV's core region. And we make sure that there is an international recognized legal infrastructure and our contracts are safe and sound and bulletproof. We give a lot of importance to these 3 criteria. Regarding the process, we have a very clear and transparent process. We start with passenger projection. We project service revenues, OpEx. We make a very detailed cash flow projection. We just look at the financing, how we will do the financing through debt and equity. We calculate the project WACC. And then there's committee evaluation, we take it very seriously. We have our Risk Committee, and we explain the project in detail in every type of risk and how we mitigate those risks. And then we have the Board evaluation, and the Board gives a certain mandate, so an authorization by the Board for a minimum IRR target. And then we have a very disciplined bit strategy where we bid up to that IRR target. And while we are doing this, while we are focusing on our growth strategy and investment strategy with the processes, we give a lot of importance to risk and compliance. We have all the processes in the company, all the committees, all the trainings. As Franck mentioned, we have ranked even top 3 in governance for the last 10 years in Turkey. So this is very important. And we pride ourselves in putting a lot of importance to risk compliance and ethics and risk management. Thank you, and I give the floor to Edward for conclusion.

Thank you, Burcu. So before moving to the Q&A, I'd like to close this presentation by underlining all what TAV Airport is bringing to Group ADP strategic road map. As you can see and as you heard, TAV is a key asset for us. And it is a key contributor to deliver our strategy. In hospitality, TAV achieved excellence in quality of service in several airports. In digital, with the strong innovation capabilities of TAV Technologies, and we need this company, TAV Technologies, to achieve digitalization and smartization. In sustainability, TAV's airports commitment for carbon neutrality and net zero emissions, commitments for several airports fits with our decarbonation trajectory. In human resource, cross-mobility of employees between TAV Airports and other platforms of the group will improve the group culture, especially in international development and business development. So also TAV is a key asset to drive value creation. Just remember what has been done during the last 2 years, reduction and control of OpEx, restructuring of the worse performing assets, negotiations -- successful negotiations with the government about the consequences of the crisis, acquisition of Almaty, renewal by advance of Antalya. So it has been a great job during these 2 dramatic years. And if you look at the next years, as I mentioned, TAV Airports is a growing airport and services company, geographical footprint enhance our international opportunities for the group. We have the laser-oriented portfolio of TAV Airports, which allow us for a much faster recovery of traffic. We have a portfolio in a growing and emerging market. We have a very good exposure to this growing and emerging market. And of course, the return of TAV Airports to financial performance, both in margins and deleveraging, as Burcu mentioned, will help us to achieve our financial targets. So we are very, very happy to have this global and close relationship with our Turkish partners, and it is a strong asset of the group airports -- Group ADP strategy. Thank you for your attention during this presentation. And now the floor is yours for Q&A.

[Operator Instructions] And our first question comes in from the line of Cristian Nedelcu from UBS.

Maybe just 2 on my side. How should I think about your revenues, about TAV revenues in sort of '23, '25? Should they grow versus '19 in line with your passenger growth forecast or guidance? Or are there any differences there? And secondly, could you tell us a bit more in terms of the CapEx -- annual CapEx that you will incur over the next few years and maybe separate between what is CapEx related to your existing portfolio and potentially how we should think about -- you mentioned a few concessions you're looking at now, and I guess there will be more over the next few years. But a bit of color on that would help.

Okay. Thank you, Cristian. I would like to answer these 2 questions, very good questions. In fact, you have kind of answered in your question. Yes, the revenues will -- our projection is that the revenues will also grow in line with traffic until 2025. So we gave a long-term guidance between more than 100 million passengers. And in line with this growth in passengers and also in -- related to that are services. The revenues will grow. One important thing we can mention is since Antalya and Almaty investments will be completed, there is an additional impact on capacity increase and the commercial revenue increase. So this any capacity constraint-related revenue restriction or the commercial revenue caps, this will be eliminated so there will be even further growth in revenues. For CapEx, the major CapEx, as we have mentioned, is Almaty and Antalya for the next 2 years. Antalya is not consolidated, by the way, since we are a JV in Antalya. So neither CapEx nor revenues and EBITDA nor the debt is consolidated for Antalya. Only Almaty numbers are in CapEx, plus the routine CapEx. But the routine CapEx, I can easily say historically and for the future, for all the airports and services, it's been less than EUR 50 million per year. So for us, for the next 2 years, the biggest CapEx is Almaty. And we had mentioned already that this is around $200 million, $250 million investment spread over 3 years.

Regarding CapEx for -- just one comment about new potential projects like Montenegro. It will be EUR 100 million CapEx if we are awarded. Always, for projects, we have financing like 30% equity, 70% debt. And for -- however, in service company, a company like IT is not CapEx-intensive. One who is using CapEx is mainly Havas to renew equipment. But they are doing by themselves with a strong financial basis. And for other, it's, I think, quite limited.

[Operator Instructions] We do have another question coming through from the line of Nicolas Mora calling from Morgan Stanley.

Yes. So just a couple of questions. First one, a bit short term, but I understand you're keeping the guidance for '22 on traffic. But it may be a little bit doubtful. It's 35% of -- 30% of traffic is from Russia and the Ukraine. Despite good pent-up demand from Germany and the U.K., the rest of Europe, we've seen already softness into April. Capacity -- airlines capacity is also softening into summer. I mean I'm not quite sure I understand how you can keep the guidance for 2022. So a bit of color there would be helpful. And second, on the margin, short, medium, long term, I'm really struggling to get to your 42%, 45% EBITDA margin. We're seeing costs creeping up quite fast in airports since mid-'21. We've got also Almaty, which is margin-dilutive for now, higher revenue growth, but it's mostly refueling, so it's low-margin business. I struggle a little bit to see how you can basically hit new highs on margins in -- basically with the new asset base you have now, especially with Almaty and despite cost savings sticking around.

Okay. So let me start by the traffic part. For the traffic, the Turkish asset exposure for the Russian-Ukrainian traffic is around 30%, as you rightfully said. But we have a demand, a lot from Europe now, the German traffic is increasing, it's at its highest level ever. The U.K. traffic started to -- especially to Antalya, we had it for Bodrum and Izmir on the Turkish assets. And the Nordic traffic usually coming to Alanya region, another of our airport, started to -- Antalya, Izmir and Bodrum as well. In terms of the Russian traffic, it's still yet a bit early. I mean we have a lot of slots and commitments from the airlines. It's yet starting. If you may remember, last year, though the traffic started end of July, we had a huge demand from Russia. So we are expecting a lot of traffic to come from Russia even if this crisis continues by June, July. That's our expectation. That's the commitment of the airlines, not only Turkish Airlines and Pegasus, the low-cost carrier of Turkey, but also Aeroflot and some 2 newly established carrier with 9 aircraft are based in Antalya and will be traveling in between. We are expecting to recover a minimum of 35% of the Russian traffic. It may go up to 50% depending on the demand of June, July.

Maybe, Nicolas, just to complete the answer, as you know, we do not anticipate that the consequences of the conflict will challenge our traffic assumption at the group level. That was your question, but I take the opportunity to make this precision. Maybe on margin, Burcu?

Sure. On the margins, I see your point on Almaty and also on the cost. On the cost, I don't actually agree. If you look at TAV financials, you've seen that there hasn't been -- yes, the OpEx has increased with Almaty addition. But if you look at compared to 2019, the costs are still -- the savings I mentioned are real. So this EUR 363 million saving is real. And as I mentioned, since the functional currency is in euros, and OpEx, most of it is in local currency, as a result of inflation plus FX devaluation, we have seen that the costs have even in euro terms decreased. I'm talking about -- I'm not talking about energy or utility, but I'm talking about more staff costs and other Turkish lira or local currency cost. So we have our business plan, and usually, we are on the conservative side. I can say that we have worked diligently on these margins. And with our projections, these seem achievable. As I mentioned in my previous question, the commercial revenue increased and these additional revenues also add up to this margin buildup. And we have seen these margins before. We have seen the 42, 45. We are confident that we can reach these levels again.

Okay. And if I may just a follow-up on potential new developments. So there's Montenegro, which has been around for quite a while. There's Nigeria, same thing. Is -- are you seeing a -- especially after the success in winning Almaty, bit more opportunities especially in Central Asia, just as a -- basically as a [indiscernible] from Almaty? And also in Africa, is there medium-term opportunities elsewhere than Nigeria, which seems a little bit far-fetched?

Thank you for the question. Yes, there are opportunities in Central Asia. Once we identified as Montenegro and Nigeria are the officially announced and tender-in-progress projects. However, we plan to have Central Asia as a second base for TAV Airports because Almaty Airport is the largest with a lot of development opportunity in Central Asia. However, the surrounding countries around Kazakhstan are also of our interest. Since there is no official tender yet, we cannot disclose any airport project. However, we have huge interest in Central Asia other than Almaty Airport. For Africa, you have asked for Africa, Nigeria is out. But we are interested a lot with Sub-Saharan Africa, with Black Africa. Again, this Nigeria project has been around for the last 4 years. You may have heard earlier about Ghana and some other airports. But this seems like it started and we are expecting the RFP to come out soon. However, we also have interest in sizable African airports as well to come.

I can add one comment. We have started to do some business in Uzbekistan in IT, in technology, to provide software for airport in Uzbekistan, which allow us to be in touch with local ecosystem, airlines, authorities, operators and so on. And Kazakhstan is the biggest regarding GDP in Central Asia. Uzbekistan is the biggest regarding population. And the synergy between airport and service company is also to be able to enter in some markets with no CapEx or very limited and to start to work in aviation, like we are doing now in Uzbekistan through TAV Technologies. And when there is opportunity, which will come, we will have a better view of the local ecosystem.

[Operator Instructions] We currently have no further questions coming through, so I will hand you back to your speakers for any written questions. Thank you.

So if there is no other question, maybe I just can thank you for having logged to this thematic conference. The next financial communication event of the group will be the H1 release on July 28. And in the meantime, feel free, of course, to contact [ Cecil Elliott ] at Group ADP level, Ali at TAV level, for only financial communication question or any question. And don't forget that, especially in spring and summer, you are welcome in all our airports. Enjoy the rest of your day, and thanks a lot.

Thank you.

Thank you.

Thank you very much.