Flughafen Wien Aktiengesellschaft (FLU) Earnings Call Transcript & Summary

Okay. Ladies and gentlemen, we are now ready to start with the Q2 results of Vienna Airport. Welcome to this conference call. Today's presentation will be held as usual by our Board members, Mr. Günther Ofner and Mr. Julian Jager. The presentation will be followed by a Q&A session, where you will be given the opportunity to ask your questions. [Operator Instructions] The call will be recorded and will be available on our website by tomorrow. The slides of the presentation that will be held now are also available on our website under Presentations. And now I would like to hand over to our CFO, Mr. Ofner. Please go ahead, sir.

Okay. So good afternoon from my side. I apologize for being a little bit late, but I had another meeting, which unfortunately took more time than I expected. So what we published today are our half first year 2020 figures. And they clearly show that we are strongly affected by the pandemic and the COVID-19 crisis. And you see that passenger numbers are down by 2/3, revenue decreased by 51% and especially also, EBITDA went down 73% to EUR 48.9 million. I think for the first time since a very, very long period, we had a negative net profit for the quarter 2. And if I should give you brief outlook, I would say, best guess is that traffic volume should stay somewhere around the 25% we see right now. It will very much depend on the further development of infection rates, whether we will see some improvement or even some deterioration. But overall, there is nothing that could really endanger our company. So we have done all necessary steps to secure liquidity even beyond the end of the year. Our EUR 220 million of savings plan is fully implemented and works as we see from the results of the last month. We are part of the short work program and roughly 40% to 50% of our personnel expenses are covered by this program. Additionally, we will receive grants by the government for fixed cost reimbursement. I would estimate at least roughly EUR 20 million, maybe more if the expanded program is also applicable for us. This is a question that is discussed right now. And we are also positively influenced by the possibility that we can draw back our losses. That means that we get a tax refund for the taxes paid '18 and '19, and this is supporting our liquidity. Altogether, it will amount to a maximum of EUR 35 million in 2 portions: 1 portion this year, 1 portion next year. And last but not least, the Austrian government issued a program to specifically incentivize investments. This program starts from 1st of September until end of February next year. And the projects that are started within this period get a 7% or 14% special premium that is tax-free and is paid by the state on top. And for those investments that we have to do in the coming months, we will try that all of them are eligible for this specific support program. So summing up the public support, if we take roughly EUR 10 million to EUR 12 million per month from the short work program, you'll see that we received far more than EUR 100 million. And that is significantly contributing full year's results. As we already explained, the high degree of uncertainty for the rest of the year makes it very difficult to give a firm prognosis. But on an operative level, so on EBITDA level, I think that we could see a red 0 or even a black 0 throughout the year, which, I think, would prove the intensive and high resilience our company shows in this really terrible crisis. If you go further down the line, you might see that our financial results are more or less in line with our predictions. So the credit lines we use are very favorably priced. And still, we have no problem at all to get the necessary credit lines or address them. So from the financing side, we don't see any stress for the time being and also at least 1 year ahead. What I already mentioned are significant cost reductions all over the Board. So consumables, down 31%. Personnel expenses, down 29%. Other operating expenses, down 51%. Depreciation stays more or less the same. You have to have in mind that for the first 10 weeks of the year, we had more or less normal expenditures and expenses. So this shows the effects of 3 months and 2 weeks since mid of March. Our CapEx has been reduced. It was planned EUR 63.5 million. In reality, it's now EUR 39.2 million. And for the full year, we will reduce it by EUR 100 million-plus. This means that the South extension and the renovation of East is postponed. Terminal 2 is more or less finalized and will be in operation next year. And also, our new Office Park is ready. The first rentals are already realized, and they are working to make ready for operation. What is important about Office Park 4 is that we stayed within budget. That is also the case for the renovation of Terminal 2. So despite extra expenses for COVID-19 measures, overall, we could stay within the budget. Clearly, health has highest priority for us. We were the first major airport worldwide starting with COVID tests. And now after 3 months, we have very intensively expanded our service. So just yesterday, we had 900 tests and the number of tests still is growing. And this is a very important contribution that people can travel safely, and it's also a contribution on our P&L. And I think that the service will even expand in the weeks and months ahead because safe traveling needs testing and needs more testing. And also the regulative of the Austrian government was adapted so that the flight bans have been canceled, and they have been now substituted by additional testing provisions. As I already mentioned, we had our stalls opening for Office Park 4, and the tenants are already in their space. And overall, we have a quote of already rented space of roughly 40%. And still, we have seen high interest to come to our new Office Park, despite the crisis and despite all the problems within the economy. The next major event will be our Annual General Assembly on the 4th of September. As you are aware, we will not distribute dividends for 2019, which is also highly supportive for our liquidity. And the other decisions will mainly be some renewals of members of our Supervisory Board. As I already mentioned before, we don't foresee any major problems in regard of financing of our company. The share price still is at around EUR 25, EUR 26, where it was more or less the last 6 weeks. And let's hope that the crisis can be overcome and that we reenter profitable operations as soon as possible. If this will be the case already in '21, I think, is still in doubt and is very much depending on the vaccination and medication issue. But I would foresee the latest in '22, we should be on the path of profitable operation again. So that's from my side, and thank you for your attention, and I hand over to Julian Jager.

Thanks, Günther. Yes. Good afternoon, ladies and gentlemen. Let me continue with the traffic development. I think the traffic numbers in H1 are not really that interesting to you. Overall, we had a reduction of 66% in all 3 airports of our group. But obviously, we had 2.5 months with exceptional growth in 3.5 months with exceptional decrease in passenger numbers. So I think it's more interesting to go through July and August figures. Maybe a few words and the shares of the scheduled airlines. I think what you can see here with Lauda and Wizz Air, they're still growing, and that's why their reduction is significantly less than most other airlines, with minus 45%, respectively, minus 46%. Austrian had a decrease in passenger numbers of minus 70%. Overall, it was a decrease of minus 65%. July, we were down 81.8%. So we had a mere 19% of the traffic of last year. It's interesting to note that transfer passengers hit more than local passengers. We had minus 79% in terms of local passengers, minus 88% in terms of transfer passengers. I would assume that this is a trend other airports see as well. Just take Frankfurt, for instance. I think they recently published their figures from early August and they were down minus 80% still. So I think they experienced something very similar. Obviously, long-haul traffic is next to 0. And I think this is why transfer traffic is hit more than the local passengers. Flight movements are down minus 70%, which obviously leads to a significantly reduced load factor of 52.8%. Last year, we had 81.8%. And I can tell you that more or less, all airlines across the board are hit. There's some negative examples on the, I would say, mid- to long-haul, which are hit probably even harder. But all the European carriers are in the range of 40% to 55% load factors, which is obviously still a disaster for airlines, which usually would have something between 75% and 95% load factors. Cargo was down 32%. We see here the lack of long-haul traffic. We had -- of the air traffic, air cargo, we had usually 50% plus/minus in terms of belly cargo and 50% in terms of cargo-only flights. And here, we obviously see that belly cargo is next to 0. And cargo-only flights increased, but they could not -- by far, not could make up for the loss in belly cargo. The first 2 weeks of August were better than July. We had a decrease in '20 of roughly 75%. So we are on a passenger level of 25% from the figures of last year. Again, local passengers be better than transfer passengers. We were down 72% in terms of local passengers and 83% in terms of transfer passengers. Flight movements were minus 57%. So you see that, here, we don't have the final figures for the first 2 weeks in terms of load factors, but we are still around the 50% in terms of load factors. Talking a bit about the outlook. I mean it's still difficult to say how September, October would be like because more or less every day, the travel restrictions are changing. Just a few days, the Austrian government issued a travel warning for mainland of Spain. Very recently, they issued a travel warning for Croatia. So there's a huge uncertainty, and that's why it could well be that we stay on these levels in the coming weeks. Maybe we go down even a bit further. I think looking in the future, I think IATA forecasted that the recovery to 2019 levels would have last -- would take at least until 2024. I think other airports like Aena and ADP forecasted a recovery to 2019 levels to between '24 and '27. I think this is something which sounds realistic to me. One mustn't forget, we had really exceptional growth in the years 2018 and 2019. So therefore, I think this assumption to reach a level of 2019 somewhere in between 2024 and '27 is very realistic. And obviously, it depends on how long it takes until a vaccination is found, until -- I think even if there would be a vaccination in the coming months, I think it would take quite some time until people would -- people in huge numbers would dare to use it. So I think there will be a delay after a vaccination is found until the traffic volumes go up to the levels we know. And I think on the medium term, definitely long-haul traffic and business traffic will be hit. But at least, to look at it from a positive note, we saw the increase in capacity and the increase in passenger numbers in August. And now, I think it's really the big question mark how the traffic in the end of this year will develop, given the rise in COVID-19 infections all over Europe in recent days. Yes. Günther already mentioned the shift of our major development project. So unfortunately, we had to shift the South extension and the modernization of the East to the future. For how long into the future, we don't know yet, but definitely by 1 year. And then we were about to start these projects and should consider ourselves happy or lucky that we are hit by this crisis not in the midst of these projects, which would have cost around about EUR 400 million in the coming 3 years. So we will take stock of the situation next year or the year after and decide then if and when we would restart these projects. The good thing is the plans are all finished. So if there should be a more speedy recovery, then probably, we can expect today that we could start any time to start these projects again. Terminal 2 is in the midst of modernization. We -- it should be finalized early Q2 next year. And it contains a centralized security control, new lounges and modernization of the duty-free shop and so on. Yes. A few words for the segments. Essentially, you see that all the segments are hit pretty hard from the crisis. The Airport segment had an external revenue of EUR 83 million, minus 56%. EBITDA of EUR 25 million, minus 72% and an EBIT of minus EUR 14.7 million. We were hit hard there in all revenue segments. And obviously, it will depend a lot on the traffic in the coming months how we fare there then in the full year. What we are trying to do now is to stimulate capacity. And by new incentives, we want -- or we feel that we have to support our airline customers by reducing the landing charge, which is roughly 20% of all charges between April and the end of this year, to 0. This rate is approved from the Ministry of Transport. And for next year, we would dish out EUR 2 for short-haul passengers, EUR 3 for medium-haul passengers and EUR 4 for long-haul passengers to all airlines which offer at least 65% of the planned capacity of 2020 in 2021. So I hope we can pay out a lot of these incentives because this would mean that the capacity level at least 2/3 what it would have been in 2020. Let's see how this works. The initiative was very warmly welcomed by the airlines. Let's see if -- who is in a position to already be at the level of at least 2/3 of capacity, which was planned for 2020. Handling. We had an external revenue of EUR 48 million, minus 39%. Here, we see the cargo handling was not that hard hit from the crisis so far. EBITDA was minus EUR 9 million and EBIT minus EUR 14 million. The personnel expenses fell by EUR 33.4 million -- 33.4%. As you know, we had very significant cost reductions already in 2019 in this segment. This is something we wanted to continue in 2020. Obviously, now, all our workers are short-term as well, and that's how we managed to reduce the personnel expenses. Yes. Overall, a very difficult segment, and we will obviously try to reduce cost levels -- staff cost levels here in the future significantly further. Retail & Properties. Here, we see a fragmented picture, let's say. Parking and center management minus -- both minus 56% in terms of revenues. Rentals, plus 4.4% in terms of revenues. This area is not directly linked to the aviation and the passenger numbers. So therefore, revenues even increased. The big bulk of the revenue in this segment is closely linked to passenger numbers as well. And that's why we felt here the reduction in revenues. Right now, we are seeing in center management that the revenues to the airport are insignificantly below the passenger levels. So what we feel, obviously, is that the high-spenders, the Russians, the Chinese, the Asians, overall, are not existent at the airport. At the same time, the average Wizz Air or Ryanair or a lot of passengers spend significantly more than they used to. So -- and F&B is faring better than retail. So overall, in this area, we have a very insignificant reduction in the revenue we're making per passenger. In terms of advertising, the situation is better. And in terms of hospitality, the situation is better as well. So overall, I would expect that PRR for the full year should be around about where it was last year. Malta was closed for, yes, really 3 months completely. The island was shut down. After the reopening, now, unfortunately, we've seen in the last 2 days a sharp increase of COVID-19 cases again. So in the first half of this year, the external revenue went down by 66% to roughly EUR 15 million. EBITDA was EUR 2.6 million, minus 90% and EBIT, minus EUR 3 million. So obviously, traffic in Malta is closely linked to the tourism industry in Malta. Therefore, we look there at a very difficult year. Thanks to the Maltese government, we got some support in -- for the personnel expenses as well. And overall, the situation there is very different because we are there, I would say, a pure airport operator. We don't have security personnel. We don't have handling personnel. So that's -- in this respect, we are in a different position. Yes. That's it from our end. And now, we are happy to take your questions, and we are looking forward to the discussion.

[Operator Instructions] So the first question that we have is from Jens Løgstrup.

Jens Løgstrup calling here from PP Capital in Copenhagen. I'm very happy to see that it's not worser than this. But what I can understand, you have had a lot of help from the state. How long time will this go on? In Denmark, we are seeing that the health packages are stopping up here in August. What is the situation in your country? How long time can we expect that you will get this great support from the government?

Yes. We see now a prolongation for 6 months starting from the 1st... [Technical Difficulty]

I get no -- I cannot hear anything.

Sorry.

Sorry. We are on mute still. Yes. So the short work program was just now prolonged from 1st of October for another 6 months until end of March of next year. And there is a unanimous consensus in Austria between the social partners and the government that even beyond this program until end of March '21 for specifically affected parts of the economy like tourism and like traffic and like the airports, there will be a prolongation. There might be some changes in the framework, but the conditions overall, I think, would not very much deteriorate. So from that side, we can be relatively sure that at least for the full year of '21, we can address state support for short-term work. The program that supports investment starts from 1st of September. And all projects that started until the end of February of next year are eligible for this premium, and they have to be finalized not later than end of February '23. So we have 2 years' time then to work on these investments. As I already explained, the subsidy for fixed costs is now prolonged for another 6 months. What really is under discussion is to what degree we will be eligible for the second part of this project -- program. From today's perspective, the worst case would be that for the second term, the additional 6 months of the program, it could be limited for a company, for example, to EUR 5 million or EUR 10 million or something like that, but that is still under discussion. And within the government, you have the people who are supportive to business. They don't want this floor or ceiling. The green party within the government is in favor of it. So finally, it will lead to some compromise. And on the tax side, we can deduct all our losses and collect the taxes we have paid for '18 and '19, up to a maximum amount of EUR 35 million, around EUR 35 million in 2 parts, this autumn and next spring. So overall, I think these are really very, very helpful, supportive measures, and they will not be stopped immediately.

We have another question from Bernd Maurer from RCB.

I have 1 question to Malta. Malta is in a special situation. Is there -- so can you elaborate perhaps a bit on what would be any, let's say, plan B with Air Malta? In the current situation, how much is -- would you expect on Ryanair to focus on Malta instead? Any talks with the government? Is there any, let's say, Maltese aviation strategy upcoming? Or it just remains to be seen still on the outcome of the crisis in the next 12 months?

I mean I think the most important thing is that Malta is heavily reliant on aviation industry and to support their tourism industry. So I think this is the most important reassurance, and I just recently met the Prime Minister and top government officials in Malta. So I think there is no significant change in the strategy of government in terms of aviation. What the government already did in the last few years is to support Ryanair founding Malta Air in Malta. I mean Ryanair has roughly close to 40% market share in Malta, followed by Air Malta. Still, Malta is a government entity. Right now, there are heavy discussions between the government and the pilots' union. There were some layoffs of pilots, so I think this is encouraging, I would say. There is -- for the first time, I follow this, this government seems to be willing to take measures in terms of cost reduction and staff reduction. I think it's the time to do it as well because in the end, the strength of the union is obviously much weaker in such a time of crisis. So I think still, the strategy of government would be not only to rely on Ryanair but to essentially to help Malta to do the reliable services to the main hubs and main capital cities all over Europe and, on the other hand, to have Ryanair with a strong base in Malta and a strong connection in Malta with their subsidiary, Malta Air, and to bring in the bulk of the tourists to Malta. So I think there's no change unless we are forced to change this strategy, mainly by the European Union. But personally, I think as long as Alitalia is flying or -- not flying but happy around, I would not see why the European Union would penalize a small island economy like Malta for supporting and helping their national airline in the times of COVID.

[Operator Instructions]

This is Stephanie from RBC. Can you hear me?

Yes.

I have 2 questions, please. The first one is, you said earlier in your [Audio Gap] you mentioned something about it being a 0. I couldn't really catch the whole sentence. With even [indiscernible] in the first half, would you expect to be able to achieve a similar number from the past?

Yes. To start with your second question. I mean, as I explained, we cannot give a full guidance for full year's results because there is a lot of uncertainty. And just to give you an example, we cannot foresee whether we will have objects and investments that have to reevaluate it or things like that. So I can just give you some guidance for EBITDA, so for our operative result. And from today's perspective, I think we could reach a black 0 or a slightly red 0 on EBITDA level per end of the year. I mean that's a very rough guess. But putting together all parts of our operations and also the subsidy we get from the state, it could be somewhere there, maybe EUR 10 million more or less. This is always a higher degree of uncertainty. But I think if everything is going well, as we expect it now, we could see somewhere a black 0 on EBITDA level, which I think is rather good news for the resilience of our company even in such terrible times as we are in now.

And sorry, just to follow up on that. Is that because you assume less government help than Q2? And therefore, if I look at Q2 this year, minus EUR 10 million. Even if passenger numbers pick up in Q3 and Q4, without the government help, you would still expect potentially a negative EBITDA for Q3 and Q4?

Yes. So we are not expecting a negative EBITDA, as I said before. So we try to put together the different elements. And if we are right in our assumptions for the traffic for the rest of the year and the other revenues we get and also the state aid, it should be possible to be on the positive side operatively.

I think if I may add, I think there's still a huge uncertainty in terms of the traffic levels for the remainder of the year. And I'm very curious to see now the traffic in the second half of August and September, after these new travel warnings issued by not only the Austrian government, but in our case, mainly the Austrian government. So that's why I think Günther said before that we expect around 0 EBITDA level. It might be a bit in the plus, it might be a bit in the negative, but it depends a lot on the traffic levels in the coming months. So...

Of course. What I meant is if you expect above 0 and it is [indiscernible] in the first half, that would assume we do about minus EUR 15 million in the second half. I just wanted to understand the reason you were more optimistic on the second half than on Q2 [indiscernible].

No. I think the reason why we have minus EUR 10 million in Q2 is because it was really the worst. So there will be...

[Foreign Language] I mean I think there's still a huge uncertainty. And that's to be cautious and careful, we think we will be around 0. But maybe with traffic of August or traffic of September, we can give you then a guidance if there's more visibility for the remainder of the year.

[indiscernible] you said that -- the presentation that was said, yes, we -- for traffic to be at 25% from last year. But I didn't understand whether you were referring to the remainder of the year, through December, or if you were referring as your base [indiscernible] 25% from last year for full year 2020.

For the remainder of the year. I mean, right now, we're on 25%. And obviously, at this point in time, we are running different models. So obviously, I would not rule out that traffic recovered in the remainder of the year. If there will be a vaccination and so on, then we might go up to levels of 30%, 35%, 40%. But I think from today's perspective, it's more realistic that we stay around 20% to 25%. And we're still running these models. And I think in the next few weeks -- for me, the decisive point would be then the September traffic because what we saw now is the surge in the sun and sea destinations. And I think what is for me the big question mark, what's going to happen when school starts again? Will there be any form of city destination tourism? Will there be a recovery of business traffic? If not, we might see the levels go down again. So therefore, I think to assume from today that we stick to these levels plus/minus is realistic, but it could be versus as well. And I think the decisive month for me will be the month of September, which will indicate us then after the summer season, how traffic levels will be then.

[Operator Instructions] Yes, we have Vladimira Urbankova from Erste Group.

Just maybe a little bit to elaborate on that revenue issue because I think on cost side, looks like that we have some clear guidance for the remainder of the year. But revenue remains a bit black box for me. So what do you expect as kind of non-traffic figures related revenues for the remainder of the year and then the traffic related part to be, realistically?

I mean, in general, I would say, if it could be more or less similar to what it was in the last 4 months, so the non-aviation side will have a little bit less reduction in revenue compared to 2019 as the aviation side because we have some stabilizing factors like rental income, maybe a little bit above-average parking and things like that. And we have also parking revenues from our tenants. So they are fixed. They have rented their space for the whole year. So in percentages, if you'll take 25% for traffic-related revenues, we can maybe take 40%, something like 35% to 40% for the non-aviation revenues.

Okay. Any final questions? Okay. So we have reached 4:00 p.m. Thank you very much for calling in. Thank you very much for your interest in our company. And if you have any additional questions, please get in contact with me. Thank you very much. Bye-bye.

Thank you. Bye-bye.