ENAV S.p.A. (ENAV) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ENAV 9 Months 2024 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Daniele Tutino, Head of Investor Relations. Please go ahead.

Good afternoon, everybody, and thank you for joining us today on our 9 months 2024 results conference call. I am Daniele Tutino, Head of Investor Relations. Today, our CEO, Pasqualino Monti, will take you through our progress during the first 9 months of 2024; and then our CFO, Luca Colman, will cover in more detail the financial results, and we will then answer your questions. And with this, I will now hand over to our CEO, Pasqualino Monti.

Thanks, Daniele, and good afternoon, everybody. and thank you for taking the time to join us today. Let's start with the key points about our 9 months results and our recent progress. The first 9 months of 2024 are showing, once again, the rule of ENAV as a top player between the air navigation service providers, providing our service with the usual strong commitment and with safety remaining our top priority. We have delivered a solid performance in these months, and we are approaching the end of this year in line with our expectations. We are very satisfied with this robust set of results waiting to welcome the next regulatory period that will confirm our strategic role in the high traffic management system along with the new opportunities in the nonregulated market that we are ready to catch as demonstrated by the rule of ENAV in the international market. As you may have seen, the traffic is progressing strongly month-after-month with the resin summer season, just behind that confirming the solid traffic path with a double-digit traffic growth in the 9 months of the 2024. Focusing on the last months, traffic performance guaranteed outpacing the results with the strong growth of service units at plus 11.6% in June, plus 9.3% in July, plus 11.9% in August and plus 10.7% in September. In terms of regulation, we are now in a very crucial phase. The current term regulatory period is closing by the end of this year and the new regulatory period, the fourth one will begin in the next couple of months. The discussion with the regulator progressed very well. The Performance Plan 2025, 2029 for air route was submitted to the EU Commission and the final green light is affected in the next month. We'll provide more clarity on the new regulatory period very soon. As already announced, we will present shortly to the financial community, our industrial plan and the new dividend policy. We will keep you updated about the timing, prices timing, but it's expected within the first half of 2025. Once we receive the green light by the regulator on the [ FP4 ]. Coming back to traffic. In the first 9 months of the year, the number of flights managed by ENAV recorded an increase, which was up 9.3% compared to the 9 months of 2022 for air route and up 8.5% year-on-year for terminal traffic. This strong performance confirms once again the rule of Italy as a top touristic destination. This due increase in traffic was also supported by our strong technological expertise, which allowed ENAV to be the only European service provider able to lowering the limit of the free route airspace across the entire Italian space. As you know, we have reduced the altitude from 9,000 to 6,500 meters, almost 2 years in advance of the deadline of December 2025 set at the European level. This is another reason why our space is preferred by our customers as domestic flights will benefit even more in terms of fuel savings and lower CO2 emissions. And these returning benefits for the higher life themselves, optimizing flight times, planning and operating costs. The strong increase in flights led to a strong growth of the service units with and route traffic exceeding EUR 9 million of service units in the 9 months of 2024, up 10.8% versus the 9 months of 2023. And these results in Italy was higher than the average Eurocontrol member states, where the figure at the end of the 9 months of 2024 was up 7% compared to 2023. Also perfect terminal traffic showed a strong growth, and it was up 10.7%, exceeding 800,000 service units. Now let's move to the key figures for the 9 months of 2024 with all figures confirming the positive trend already posted in previous quarters. Traffic performance continues to be the main driver of the strong increase at the top line. Total revenues were $770.5 million, up 4.1% compared to the 9 months of 2023, driven by the double-digit traffic increase and the performance of the core business. EBITDA stood at EUR 222.8 million, with a 28.9% margin, confirming the strong profitability of the service offering. Below the line, EBIT stood at EUR 139.5 million, up 5.9% year-on-year and that the bottom line net result stood at EUR 89.6 million, increasing by 3.8% compared to the EUR 86.3 million of the 9 months of 2023. CapEx are in line with last year, standing at EUR 54.5 million in the first 9 months of 2024. Net debt accounted for EUR 332 million, EUR 10 million up versus full year 2023, reflecting the dividend payment in May. We are still confirming a solid leverage with the ratio net debt on EBITDA at 1.1x. And all these results translate into a very strong cash flow generation of EUR 130.6 million in the first 9 months of 2024, with a strong increase versus the 9 months of 2023 when it was EUR 96.6 million. Before showing you more in depth, all these results, let me now comment on the latest traffic figures and the positive mix to the first 9 months of this year. As I was mentioning before, the traffic growth in the first 9 months of the year has progressed very strongly. And this is not purely related to the summer season, but we are seeing a brilliant performance month-after-month. Starting from air route traffic. Service units were around EUR 9.1 million, up 10.8% year-on-year, driven by a solid increase in all the segments meaning international and overflight traffic, which grew 16.2% and 10.5%. National traffic shows an almost stable trend, with a slightly increase of approximately 1%. In the chart on the left, you can easily recognize the typical seasonality of our business with second and third quarter traffic being the highest contributors. And this year, a route to third quarter traffic volumes were up 10.6% versus 2023, leverage on the very strong volumes managed during the summer season. In terms of mix, in the pie chart, you can see as a national traffic accounts for 16%. International accounts for 40% and overflight traffic, which is the most profitable accounts for 44%. Here, the performance was driven by an increase of Europe, Asia connections and intra-European flights. In terms of [ carriers ]. In the 9 months of 2024, the low-cost segment remained a very significant contributor to the volumes of air traffic in Italian airspace, with a significant performance by Ryanair, Wizz Air and Easyjet. Among the traditional carriers, the increases were recorded among the Middle Eastern companies such as Qatar Airways and Turkish Airlines, while between the main European companies, Lufthansa and the national carrier ITA Airways also posted significant results in terms of volumes produced. This positive traffic trend is progressing with an impressive panel as confirmed by the volume of flight in October, which is up 7.7% compared to October 2023. And now let's see the performance of terminal traffic. Also the terminal traffic had a very positive performance. Service units grew by 10.7% year-on-year, showing a generally positive trend throughout or 3 charging zones. More in detail, Zone 1 is up 24.5% with a so strong increase as its recovery in the post-pandemic period was as lower than the other 2 zones. In comparison with the same period in 2023, there has been a significant recovery in both domestic air traffic and international air traffic, which also benefited from the traffic to non-EU destinations. Very good performance in the first 9 months also for Zone 2, up 8.1% and Zone 3, up 6.8%. In terms of destination, the international component representing the 68% of the total traffic increased by 14.2%, while the residual 32% related to the national traffic grew by 4.3%. The traffic growth was continuous and consistent in the third quarter as well with terminal volume up 9.6% compared to the third quarter of 2023. And with these, I want to hand over to Luca to run through the 9 months key group metrics.

Thank you, Pasqualino. Good afternoon, everybody. Let me now show you the solid performance in the first 9 months of 2024 and how it is reflected into our key financial metrics. All figures are confirming the positive trend already posted in the previous quarters, and we are now track in line with our expectations. First of all, let's see the performance of revenues. In the 9 months of 2024, revenues stood at EUR 770.5 million with an increase of 4.1%, driven by the strong traffic increase and the performance of the core business. As commented by Pasqualino in the first 9 months of 2024 both and route and terminal traffic had a solid performance. And this translated into an increase of both air route and terminal revenues, which grew up, respectively, by 5.6% and 9.9% year-on-year. We have already commented on the good traffic performance and the several traffic drivers impacting our top line. So let me move on the other components of our P&L. First of all, let's see the balance, which, as you know, is a significant element of our regulation mechanism. In the first 9 months of 2023, we accounted by a negative EUR 44.6 million, while you can see now in the 9 months of 2024, the balance at a negative EUR 59.5 million due to the following elements. So the first one is the balance accrued in the period of positive EUR 29.3 million coming from a positive $60.5 million balance are related to inflation, which reflects the inflation increase compared to the forecast figure reported in the Performance Plan. Then we have a positive EUR 8.4 million balance coming from the recovery of higher interest rate accrued in the period compared to one landed in the Performance Plan always. Then we have a negative balance for EUR 14.4 million related to depreciation and grants, a negative EUR 8.8 million balance due to traffic risk mechanism -- having generated in the period at a higher level of service units than the forecast for year. A negative EUR 6.4 million balance for changing Zone 3 related to the cost recovery mechanism. In the 9 months 2024, we have also accounted a balance reversal of EUR 82 million, mainly related to the second branch of the balance accrued in 2020 and 2021, and cashing in throughout this [indiscernible]. And also some other minor balances related to the previous year's balance for a negative EUR 6.8 million. Another important element of our top line are the nonregulated revenues. In the right chart of the slide, you can see not regulated revenues accounting for approximately EUR 26 million in the 9 months of 2024, slightly decrease year-on-year. As you have already pointed out -- as we have already pointed out during the first half 2024 conference call, in 2023, these revenues were boosted by the contribution from the previous performance in Qatar project that is related to the performance of air navigation support service that we have given to the Qatar [ Airways ]. The first 9 months of 2024, the development of non-regulated business is progressing according to our expectations with a significant new contract just like the consultancy for the redesign of the Saudi Airspace, the supply of a new air traffic management system in Kosovo and Cambodia. The modernization installation of systems at the Libyan Airports, the control activities of radio system systems installed at airports in Kenya, Croatia and Romania, the transition project to the Aeronautical Information Management in [indiscernible] and the Dominican Republic. And investment projects for software products are supplied to customers on a global scheme. We are reconfirming the growth with a fourth quarter, which will show strong progress strength of revenue contribution as set in 2024 guidance. And now let's see the cost evolution during the 9 months of 2024. Total operating costs accounted for EUR 547.6 million and went up 5.3%, mainly due to the increase in personnel costs, which was up 4.1%. Such increase is related both to the contractual salary increase as per nation agreement and the actions put in place to manage the high level of traffic. Let's see these cost components more in detail. The increase in fixed components of the remuneration accounts for EUR 8.8 million and it is due to a contractual salary increase related to inflation applied from September 2023 and July 2024 as per the National Labor Agreement. And to the increase of the accounts for 58 average units at the group level. The variable remuneration was up EUR 2.1 billion year-on-year, mostly due the overtime allowance for air traffic operators to manage the traffic mix. Then social security contributions, which grew by EUR 4.9 million compared to the 9 months of 2023. The other operating expenses increased by 3.4%, mainly due spare parts and other minor costs. And now let's see the below -- see the below the line items. All these elements have just commented lead to EBITDA that stood at EUR 222.8 million in the 9 months of 2024, a slight increase compared to the 9 months of 2023, when it was EUR 220 million. In brief, at operating level, during the 9 months of 2024, our EBITDA benefited from the strong traffic volume reported in the period, and it was partially offset by the increase in personal costs to manage this high level of traffic and the contractual salary increase, mainly related to the inflation adjustment. Going down G&A decreased year-on-year by 2.8% and stood at EUR 82.4 million, while provisions and write-off decreased by EUR 2.5 million, benefiting from the lower write-off of receivable compared to 9 months of '22 to '23, and the release of the provision accrued at the end of 2023 due to the closing of some litigations. As a result of these moving parts, EBIT stood at EUR 139.5 million, up about EUR 8 million and with a 6% improvement compared to the 9 months of 2023. The net financial expenses accounted for Q4 EUR 7.2 million in the 9 months, decreasing by 7% due to the higher financial income on deposits and to the balance actualization mechanism. That was partially offset by the slightly higher financial expenses on the bank debt. Tax amounted to EUR 42.6 million, up 13.3% year-on-year, due to the higher taxable income and the impact of the taxation. And the net income line stood at EUR 89.6 million, up 3.8% year-on-year, reflecting the standing performance of the period. Moving on the cash flow. Let me now spend some words on our liquidity and financial position, which, as you can see, remains very strong. At the end of September '24, we have EUR 301 million of cash with additional undrawn credit lines for EUR 199 million, out of which EUR 150 million are committed. Along with a loan commitment of residual, EUR 80 million related to the EIB financing signed in October 2023 for an original amount of EUR 160 million. Net financial debt stood at EUR 332 million, increased by about EUR 10 million compared with net debt at the end of 2023, mainly due to the payment of dividends for EUR 124.4 million to May '24 and partially offset by the cash generation of the period. And all these results translate into very strong cash flow generation in the first 9 months of 2024, with a strong increase versus the 9 months of 2023, when it was EUR 96.6 million. In fact, in the 9 months 2024, the free cash flow stood at EUR 130.6 million driven by net cash in from operations of EUR 187.7 million versus EUR 140.9 million in 9 months in 2023, which increased by EUR 46.8 million compared to the 9 months '23, mainly due to the higher cash yield for air route and terminal cost. Then we have a cash out of EUR 57.2 million related to the capital investment. As a result of these changes, net debt and EBITDA ratio stood at 1.1x almost stable compared with the ratio at end of 2023 that I remember is 1.07x. And the remaining still solid and so on. Before moving to your questions, let me now briefly remind you our 2024 guidance as updated after the latest traffic trend, we have seen in this recent month. So now looking at our guidance for the full year. We have delivered a solid performance in the first 9 months of 2024, and we are tracking in line with our expectations. All this means we are comfortable at this stage in reconfirming our full year guidance on our key measure and upgrading the traffic outlook to 10.8% in line with 11.1% year-on-year traffic forecast for Italy that was released by Eurocontrol in September. Thank you for your attention. And now I would -- let's move to your question.

[Operator Instructions] Today's first question comes from Carlos Caburrasi with Kepler.

3 for me. The first one, I have noticed that you have upgraded your 2024 en-route outlook, but could you also provide some color on the terminal service unit expectations and possibly by charging zone? Second question, I was wondering if you could also provide us with your 2025 traffic expectations? And finally, with regards to the government's privatization strategy, do you have any visibility on the potential timing of the investment on ENAV's stake?

To what concern 2024 output in terminal service unit. Well, the outlook that we have given is in service units. So the 10.8% service units increase is our guidance and what we expect to have by the end of this year. I don't know if I answer to your question, the first quarter, but I guess it was related to the service unit. The second was...

It was -- it was for the terminal service units.

Oh, terminal, sorry. In terminal, it's supposed to be a little bit different at the moment, we haven't given -- okay, now we have at -- an after data that is very close to this value also for terminal. You know that we closed the first 3 quarter at a 10.7% increase for below concerned terminal. We believe this could be a value that can be taken also by the end of the year. The second point is 2025 traffic expectation. You know that Eurocontrol has released a new -- an update, where we see forecast just after closing the -- sorry, having sent the Performance Plan for the route. And for Italy, therefore the forecast an increase of 4.8% in 2025 versus 2024 figures. So that could be something that more or less is what we have taken into consideration. It's a number very close to this one. So what concerned is the third point, we have any color to give about this information because nothing we can say -- is known by the company at the moment.

The next question comes from John Campbell with Bank of America.

A couple if I could. So I'd be interested to know what is your outlook for operating expenses in 2025? So far in the first 9 months of this year, they're 5.3% higher year-on-year. I think you'll be able to get some costs in 2025. So far in the first 9 months of this year, the 5.3% higher year-on-year. Do you think you'll be able to get some cost efficiencies? So that's the first question. I'd also be interested to know if we get more granularity given where we are in the year, on your expectation for nonregulated revenue? I know you've got a double-digit increase, but any sort of quantitative guidance would be helpful. And then the other question I had related to the balance. If I understand correctly, you accrued EUR 50.5 million of inflation balance in the first 9 months, I think it might be helpful for a lot of people. Can you remind us and how you account for this inflation balance. It looks to me like you're carrying over prior years into revenue. And maybe you could tell us how it will start when RP4 begins in 2025.

The last question on the balance. The line was quite disconnecting. So do you want to drill down on the -- I would say, breakdown on balance because it was not so clear line.

Yes. Sure. So basically, you've accrued EUR 50.5 million of inflation balance in the first 9 months. Could you maybe remind everyone how you treat this? Because it looks like you basically prioritize over prior year's inflation balance into revenue. And basically, how that look in 2025 once you have RP4?

So Luca will answer the first question and our CEO the second one.

Okay. Just to give also the answer to the last question that is about inflation. This will depend exactly from the balance -- sorry, the inflation rate, the actual inflation rate that will be registered by the end of this year. So it should be a value very close to EUR 50 million, EUR 55 million, depending on the final. Now we are -- these balances calculated to the latest forecast given to Italy from IMF, but the actual one would be the one that will be used at the end of the period. So you should consider something close to EUR 55 million, if nothing changed or maybe a little bit less if the inflation as it's happening now is going down, and this will reflect the bonds. For what concern the outlook, so what concern the cost in 2025, you know that we are now in negotiation phase for RP4. And this is something that we haven't disclosed yet. So we will give you disclosure on this information when the process will be over, and everything will be approved. So we will give some color, some maybe more detailed information about our cost planning for the [ FP4 ]. For what concerns the second question, I'll leave the floor to Pasqualino to give you the -- do not regulated market.

Okay. As already said, we are fully confirming the double-digit growth year-on-year on nonregulated market. The last quarter of 2024 will show a strong progress in terms of revenue contribution, which we led to a double-digit growth as originally said in 2024 guidance. Since my appointment as CEO of ENAV, we have run a long way, the market now recognized the ENAV brand as demonstrated by the recent achievements, and the strength of our commercial footprint abroad. The high technological level of our ATFM is part of our story and DNA. This is the result of the strong competencies of all the companies that are part of our group that make ENAV the leading airspace provider -- service provider in Europe and one of the leading in the world. We are now building on our backlog. We are reinforcing the group's position in the global market relating to nonregulated business services and leverage the current offering portfolio by introducing digital and innovative products and services for ANSPS and other aviation stakeholders. In the last months of 2023, and in the first part of 2024, we worked hardly on this. We have been awarded several times with significant contracts around the world in Saudi Arabia, Malaysia, Emirates, Fiji, Kosovo, Taiwan, in Kenya, in Australia, in South Africa, but also in Europe, like Switzerland, Germany, Poland, Albania. In Italy, we are the only provider working with our military air force, providing several services for them. Moreover, we signed many commercial agreements with some of the most important industries in the aviation field such as Leonardo and Thales and others. We have signed an important contract for Sigonella military airport for EUR 12 million. And with reference to what I have just said. I can confirm that we have built, and we will continue building on our backlog with a positive impact, not only in the last quarter of 2024, but also in the future years. This is the story we are writing, and these are the reasons why we are fully confirming the double-digit growth for nonregulated revenues by the end of 2024, with a strong increase in the next quarter.

Can I come back just one follow-up. Could Luca perhaps maybe remind us basically how are you dealing with your inflation balance? Because the EUR 50.5 million in the first 9 months looks to me very much like a carryover of previous year's inflation balance. And can you confirm if that is the case. And can you confirm how your inflation balance will look in 2025 once RP4 starts?

Okay. Yes. The balance by the end of the 1 year is the carryover of the previous year plus the 1 calculated in the year. So 2024 balance -- sorry, inflation balance will be the sum of all this inflation, the RP3, I would say, inflation. For what concern 2025, as the -- all the figures are recepted, the inflation is already in the cost base that is presented to the regulator. So no balance inflation is anymore on calculated actually. At least at the beginning of the period. Then because the cost, as I said, already has in size the real -- the nominal cost is already inside the inflation. Then by the end of the year 2025, if the inflation that is taking in consideration for Italy for 2025 in the regulations or in the tariff is different. The actual one is different from the planned one, we calculate the balance has happened in RP3. So at the starting point, zero inflation 2025, because all the costs have inflation. Then we started the calculation by each -- the end of each year of the RP4. Is that clear?

The next question comes from Luca Bacoccoli with Intesa Sanpaolo.

Okay. Great. So 3 questions from my side. The first one is on the 2024 guidance, despite the route service unit's guidance upgrade, the revenue guidance looks broadly unchanged to me. So I was wondering what are the, let's say, elements which are offsetting the volume effect related to the higher service units that now are projecting for this full year vis-a-vis what you were expecting in March? The second question regards the investment in 9 months looks to me that the CapEx are lagging behind the target for the full year, which is EUR 120 million. Is it just because of a phasing effect? Or are there some delays that are you experiencing? And finally, sorry, just coming back again to the nonregulated revenues. You mentioned that you expect a strong increase in the fourth quarter. You are leveraging on your backlog, but what's your visibility on the new contract that you expect to sign in less than 2 months for basically confirming reiterating the guidance?

Okay. On the back of the strong traffic performance of the 9 months of 2024. We have updated 2024 profit guidance at 10.8%, in line with year-to-date traffic at September 2024. And with the last forecast released by Eurocontrol, which is at plus 11.1%. As you may have seen the other elements of the 2024 guidance have been left unchanged and the expected growth is confirmed as follows. Total revenues and EBITDA are expected to grow with a mid-single-digit year-on-year increase. Nonregulated revenues are expected to grow with a double-digit year-on-year increase and CapEx are expected to be at EUR 120 million. The traffic guidance increase is expected not to have a significant impact on revenues and EBITDA growth for the following 3 main reasons. First of all, the traffic increased at 10.8% is above the [ 0.2% ] to show the band, and it means that ENAV benefits only for 30% of the impact of the deviation of planned and actual traffic, while 70% is reverted back to airlines through the balance. At revenue level, second, that the revenue level, the benefits from the increase of traffic are compensated by the reduction of the inflation balance, whose positive impact is lower than expected when we set the guidance in March due to lower trend on inflation. Third, the benefits from the increase of traffic are partially offset by the additional staff costs to manage the higher level of traffic. So all in all, these are the 3 main reasons why the increase of traffic guidance is not reflected into an increase in revenues. Moving on to the nonregulated revenues. We are fully confirming and confirming the double-digit growth year-on-year. The last quarter of 2024 will show a strong progress in terms of revenues, contribution, which will lead to a double-digit growth as originally set in 2024 guidance. Hope to have clarified your question.

And that's the last one, please, on the CapEx?

Yes. So what concern and CapEx seems to be that -- it's a long way to get the EUR 120 million, but we just have to think that the last quarter every year and the last quarter is the one where -- been on the CapEx and the cash balance also increase higher. So we believe that EUR 120 million is still a target that we will reach. Let me say, we have also to consider them on this value, the discount that we may have because this is a target that we give also insight to reach. We also have some discount on the bid that we have that actually are not considered in this, but the amount of CapEx and the projects that, that below this EUR 120 million are totally confirmed. So by end of the year, this means that by the end of the year, there could be some million less, thanks to the discounts that we may have for -- thanks to the bid that we do for -- to get the service that we need and the projects that we need, but this is only difference that we may have at end of the year. So a value very close to EUR 120 million, maybe just couple of million less. Did that clarifies?

[Operator Instructions]. The next question is from Aleksandra Arsova with Equita.

I have 3, if I may. The first one is on the bonus models incentives. So maybe if you can provide us some details on how the summer season went and what is the amount of bonus you expect to get this year? The second one is on the applied tariff for 2025. So although we know that, of course, the new regulation to be approved in the coming months. But from January 1, you will apply the proposed tariffs or maybe you can provide the level of the tariff and maybe what is the amount of balance you expect to use in 2025 tariff? And the last one is on free cash flow. So after the improvement we saw in the 9 months, should we expect to see a further improvement in the full year. So if maybe EUR 150 million -- EUR 160 million, EUR 170 million of free cash flow in the full year is a reasonable figure considering that you will cash in now in the last quarter, part of the summer season traffic?

As you may have seen, the traffic is processing strongly month after month with the recent summer season, just behind us continuing the solid traffic path with double-digit traffic growth in the 9 months of 2024. We are currently facing outstanding level of traffic. And during the summer season, there were some delays due to some pressure on capacity. This increase in the level of traffic has led to some delays on the European network and consequently on the Italian Airspace. Anyway, ENAV remains the top player in terms of quality in Europe continue to be the leader between the top Eurocontrol members. There are currently some discussions with the regulator on how to consider this huge impact of traffic on the punctuality target as it was set taking in consideration a much lower level of traffic. So the final calculation of the bonus on quality is impacted by the evolution of this discussion. But now it is too early to figure out it. We will probably be able to give you some more color on it in the following months.

What concerns instead the tariff apply in 2025, you know that there's still a process ongoing with a larger committee that is supposed to be, I guess, next week. The figure would be defined. I can tell you that the tariff plan at the moment is around EUR 74 for the next year for the route, but it's something that would be -- I mean different decided in a couple of weeks. But this is the color of the tariff for the next year for en-route.

So 1% free cash...

Sorry?

Sorry. And the balance included in this proposal of EUR 74?

We haven't disclosed it yet. You know that the volume is quite important we still have to decide better. We need to wait the end of the large committee to give more disclosure on this point. But the value is for sure part of the inflation calculated in 2023 year that we go in 2025 tariffs. That's the one -- the 2 most important balance. And the second one is the traffic that is around EUR 150 million traffic coming from 2020, '21 -- '21, sorry, traffic downturn. These are 2 main balance system and there are the several other balances that in some way with a positive or negative impact, but we need to wait the end of the meeting to give more disclosure on this. But this is the 2 most important points. What concern free cash flow, also for this, we expect to have a higher cash flow by the end of this year compared to the last year, but it is something that is has to be confirmed by these last 3 months of cash in.

The next question comes from Marco Limite with Barclays.

I've got 2. The first one is on your current guidance of mid-single-digit EBITDA growth. So you have delivered -- you have EUR 220 million, I think, of EBITDA this year, which is flattish in Q3. So all the growth is coming basically from Q4. Yes, just what's the explanation for that? And then the second question, which is a bit more technical. If i look -- just wondering what the balance related to depreciation means in practical terms? Just I'm not familiar with that.

Sorry, I didn't get the last question. What about the balance depreciation...

Sorry, I go directly to this one. All the depreciation -- let me include depreciation.

[indiscernible].

Our depreciation sorry, I go directly to this one. You know that all the depreciation -- let me say, in a simple word, all the depreciation that is calculated in the tariffs that is planned in tariff, it works more or less in a cost recovery system. So if -- by the end of the period, the depreciation or the CapEx -- actually, the depreciation is lower than the one planned in tariff, we have to give back the difference. Same thing with the grant. So all the grant the contribution that was given to the company has to be given back. So if you add these 2 items, you have the balance that we are giving back this 14, I guess, if I remember million coming from the -- yes, EUR 14.4 million negative balance of depreciation and grant because we are giving back, as I explained it before. The first point was related to -- yes, the fourth quarter. As you may have seen the traffic is progressing strongly, as we have said before, month after month, and this is definitely a good thing, and we expect also to have the last period quarter that is very strong. We just had today this morning the result of October, a result of traffic and is 9.8% increase for what concern and route versus October in 2023. So still very, very strong. So as we have already delivered solid performance in these months, we keep -- we believe that this performance can be taken also in the last part of the year. For this reason, for the traffic reason and also for the balance calculation, we believe that in terms of revenue and EBITDA, we're expecting a solid performance in fourth quarter which, as I said, will also benefit from the several components included in the year and the balance that you know that is calculated only by the end, some balances are calculated only at the end of the year. Yes, that's it. So traffic that will remain high and the month calculation should allowed us to get to the target -- to the outlook that we have given.

The next question is from Nicolo Pessina with Mediobanca.

Following up on the question on the bonus. I would like to ask if you can give us an idea of the level of quality indicator in the first 10 months, how many minutes of delay per flight. I understand that there are some issues regarding delays specifically given the strong traffic growth in summer. So I was wondering where we are with the quality indicator. Second question on the evolution of the workforce over the next couple of years, maybe given this strong traffic increase and that the [indiscernible] outlook provided by Eurocontrol, how many new hirings are you planning for 2025, '26. And how many people will retire from the role of air traffic controller.? And last question on the M&A strategy. I'm wondering if you have to look at any airport in the past few months, as you mentioned during the Capital Markets Day at the beginning of the year.

Nicolo, I'm sorry, but we're in a position just to understand the first question. The second and the third [indiscernible] was not so clear. So the first one that's okay is on the, I would say, level of the bond of models. The second one and the third one. Could you please recap for us?

Sorry, there's a problem with the line. So can you speak loudly, if it's possible?

The second one is about new hirings and air traffic controllers retiring in '25, '26. If you can give us any visibility about the increase of the workforce that you plan over the next couple of years? And if you are looking at any airport for potential acquisitions?

The second one, sorry, is on the hirings and retirement. That's okay. And the third one is the strategy. I'm so sorry about that.

Any -- are you looking at any airport for potential acquisition?

[indiscernible] the first one. Okay. Now we are not in the position to quantify the amount of the delays as we are currently in talks with the regulator to address the specific nature of some delays.

So what concern the second one, the second question, hiring, now as you know, Nicolo, we are overseeing the negotiation fees with the regulator. So it's something that we will disclose right after the closing the regulation, but the flavor I can give you the color can I give you to you to the figures, and say, we are depleting the people that are going out as the traffic is increasing. And we don't have the issue in terms of covering the knowledge and experience of the controllers, all the controllers that are going to retire, we are under a very important training phase in this moment and new people are coming in. They are in the figure that we are negotiating with the regulator. So we don't see, at the moment, any particular pressure on this. We can give you -- we will definitely give to the market and to you on some more information with the business plan that we will present right after the negotiation will be flow and we will have the Investor Day. For what concern the third question, the third question on airports. We are not interested in managing airports.

[Operator Instructions] The next question is a follow-up from John Campbell with Bank of America.

Yes. Two more questions. Could you remind us which traffic forecasts ENAV have used in their RP4 submission to the regulator please, number one, which version of Eurocontrol, basically? And then the second question comes from an investor who was asking basically what is happening to Terminal Zone 3 in RP4? Is that going to a similar system to Terminal Zone 1 and 2. And can -- and if that is the case, maybe can you tell us what impact that will have, if any?

So what concern the second question, let me see, this will happen I guess, as a company, and I will be happy to manage it as the -- [indiscernible] going to perform like Zone 1 and 2. So for us, everything goes on performance allowed the company to perform and to have a benefit also if we perform well. So other than and the cost recovery system, the company looks well, looks positive this potential change. I guess you should wait some more weeks to have a final view on this point. For what concern, you said the first question about the traffic. Let me see our traffic -- the forecast we have used in the performance plan was traffic that was planned in -- not really in line, but considering the previous forecast of Eurocontrol, there was published in February 2024. The new forecast was published by Eurocontrol after it was in October. So when the plan -- the Performance Plan was already sent. Let me say that in general terms, more or less, the forecast we have planned in the moment is closed, not exactly the same, but closed to the [indiscernible] scenario of the new forecast delivered by Eurocontrol. Not exactly the same as a little bit different in every year, but more or less, you should consider something between the scenario, yes, and the high scenario, a very close to the base -- new base scenario.

[Operator Instructions] Gentlemen, there are no more questions registered at this time. Do you perhaps have any closing comments?

So I guess that there are no more questions. So thanks a lot to every one of us for joining us today. The investor relations department obviously remain available for a further follow-up. Thank you very much. Good evening.

Ladies and gentlemen, thank you for joining. The conference is now over. You may now disconnect your telephones.