Flughafen Wien Aktiengesellschaft (FLU) Earnings Call Transcript & Summary

Okay. So ladies and gentlemen, welcome to our conference call for the 2021 preliminary results of Vienna Airport. Today's presentation will be held as usual by our Board members, Mr. Günther Ofner and Mr. Julian Jäger. [Operator Instructions] The call will be recorded and will be available on our website shortly after the call. The slides of the presentation that will be held now are also available on our website under Presentations. And now without further ado, I would like to hand over to our CFO, Mr. Ofner. Please go ahead, sir.

Yes, good afternoon or good morning. Welcome to our call for the results of 2021 and the outlook for 2022. You followed, I think, our last conference beginning of January. And what we guided there, now you find in the final results of 2021. So despite the fact that we had only 1/3 of the passengers of 2019, we could end the '21 with a positive net result of EUR 6.1 million compared to minus EUR 75.7 million last year. You should be aware that there are not many airports, especially not comparable with Vienna International Airport, who achieved the positive business result for 2021. And I think it was really hard work to come to that point and to meet the guided results despite the fact that our passenger outlook for '21 was not supported by the real development, especially in the first half of '21 due to lockdowns and problems with corona. The reasons why it was possible to get finally in positive territory are that our savings program worked, that we had performed a very high degree of flexibility, supported by the short work program of our government and last but not least, also the support we received for this program and beyond from the taxpayer. So for the full year '21, the subsidies for the short work program amounted to EUR 69 million, which is EUR 10 million less than 2020 and additional contributions amounted to roughly EUR 20 million. Saying that, I have to point at our guidance for 2022 because we expect for 2022, roughly 1/3 higher turnover with EUR 60 million -- EUR 560 million, but EBITDA is then at EUR 172 million, so only EUR 20 million higher than the EBITDA of 2021. And the main reason for that is that we will not receive the public support for the rest of the year '22 as we plan to finalize the short work program end of March because there is a legal limitation of 2 years and 2 weeks. And we have fully used this term for the corona short work program. That means also that in the month April and May, given the fact that roughly 80% of our workforce is on the job, and we will need them for the restart and recovery, but that means that we will see some productivity losses in April and May, at least because we will not have, for sure, not have 80% of '19's traffic in this month. But hopefully, we will see and be somewhere there for the summer because the expectations for the summer are very high and very substantial. Saying that, I think that our guidance for '22 can be maintained despite the fact that the war against Ukraine is accelerating uncertainties, and we don't really know what finally will happen next and what the overall impact of the sanctions on the development of the economy and in specific, for the aviation industry will bring. The direct effect equals to approximately 4% of total passengers. So these are the projected passenger numbers for Russia and Ukraine, and we will have to see further down the road what additional effects could bring. I mean despite all the other negative impact, we have continued our investment in renewables. And I think this was a very, very wise and helpful decision because starting from spring this year, we will be able to produce roughly 1/3 of our electricity consumption on our own, at least, in the summer months. I mean, you know the problematic of such photovoltaics that we don't produce in winter time. And by getting this tool ready, we are also a little bit shielded against the terrible price hike we experienced right now, which is triggering extreme inflation. I mean we just got today the figures for February, for Austria and the inflation rate amount, it grew 5.8%, which is by far the highest since decades. And these figures are not including additional effects coming from the Ukraine war and from very likely additional sanctions against gas and oil and coal from Russia, which so far was one of the main supplier for that. So a bumpy road might be ahead of us, but I think we showed a very high degree of resilience and flexibility and ability to cope with such challenges. And you especially see this by looking at our cash position. So we have been successful to reduce our net debt position even under these circumstances from EUR 200 million to EUR 150 million. In fact, it's EUR 100 million as we guided but the liquidation of the payments for the short-term work since April is delayed. So there are still bureaucratic procedures ongoing. Therefore, the money was not paid to us so far, but it's undoubtedly ours. And therefore, we reached, in fact, the goal we set out but there is some delay in this process. And if you look at the free cash flow, even with 1/3 of passenger numbers, we had EUR 67 million of free cash flow. One of the reasons is also the strict reduction of CapEx from EUR 80 million to EUR 51.6 million. And the strength of the company, you can also estimate, if you look at our equity position and the equity ratio, which even increased by 3.4%. So given these facts, I think we can be calm and optimistic that we will also master additional challenges that might come from the Ukrainian situation and more. If you look at slide -- Page 6, you see that our cost management worked as planned. So personnel expenses, other operating expenses were further reduced compared with 2020. In the position of consumables and services used, you already see the effects of the rising prices for energy in the last quarter. So we would have achieved our goals also there, but we got additional costs -- very substantial additional costs, especially from district heating. The current gas price is around 800% of what it was in 2019. And that's really unbelievable, and that has never been expected for this time to come. If you look at Page 8 and for sure, you are familiar with the development you see that our market cap development was slightly positive in the last period and could at least outperform a backlog as bullish as our peers. So if we sum up the financial guidance for 2022, we see revenues of roughly EUR 560 million for '22 EBITDA of at least EUR 172 million. Consolidated net profit, at least, EUR 20 million, net debt below EUR 50 million, might be 0. And CapEx, approximately EUR 84 million. For -- in anticipation of questions about CapEx, this includes also roughly EUR 20 million from Malta and the photovoltaic investment and also the investment necessary for entry/exit preparation, the European Union decided that the exit/entry system for immigration has to be adopted until October '22. One question from your side, I'm sure, is what does this mean for dividend? So in the -- we will propose that there is no dividend for the business year '21. But definitely, we plan to pay dividend for the business year '22. And given our balance sheet and financial situation, I won't see why we should not be in the position to do so in 1 year from now. So I think that's rather a secure and is a fixed part of our planning. What also could be the case in '22 is that given our cash flow situation, we will start to accelerated prepayment of our EIB loan. I mean that's still a pending issue. But if we see that our cash position is improving as planned, it could be that we will opt for a higher portion of repayment than the regular EUR 25 million each year in June. As I already mentioned, we are on track for operating CO2 neutral in 2023 and all the preparation is underway. And if you look at our airport landing in Vienna in the next month, you will see that the face of our airport substantially changed not only because of the photovoltaic plant, which is very, very huge, and covers finally around 27 hectares parallel to existing runways, but also you will see that a lot of buildings is ongoing at the airport and around the airport because we see a huge number of logistic companies investing and constructing facilities for their needs around the airport because the supply chain was definitely changed through corona. And this process, I think, will even further be accelerated by the Ukraine war. And as we have a sufficient land bank, we can stepwise fulfill and realize all the needs for the companies so we will see a very stormy development in that regard in the coming years. As some of you ask in advance about the Helios Real Estate deal. Yes, it's completed now. The revenue from this deal could not be integrated last year in Q4. So most likely, you will see the effect -- the positive effect in Q1 '22. One small parcel of roughly 3-point-something million is already part of '21 with another contractor but the big sale is part then of Q1 '22. The hotel is also underway. So we hope that in the coming weeks, we will finalize all the necessary contracts, and it should be somewhere around 350 beds and should be finalized within the next 2 years. So summing up, I think it's a very, very challenging time. But on the other hand, I'm rather optimistic that '22 will be the year of an economic turnaround. And despite all the un-security coming from the war in the Ukraine, we hope that we will see a substantial increase in passenger numbers and also in our economic development. So that's from my side, and I hand over to Julian Jäger.

Yes. Thank you, Günther. Good afternoon, ladies and gentlemen. Yes, I think 2 weeks ago, I would have been a bit more bullish about the traffic development. You remember that I gave you in the mid of January a forecast for 2022. What you've seen in the meantime is that January figures were significantly above our assumptions for Q1. I can tell you today that the trend has not significantly changed since then. Obviously, now with the horrible war in the Ukraine, things have changed quite significantly, and I think there's, yes, much more uncertainty about the traffic development in the months to come. What still makes us optimistic for the full year and why we are not in any way changing our traffic forecast at this point in time is the fact that the summer schedule looks really, really strong. I will show you in a few slides that in Easter, we are somewhere between 65% and 70% of the capacity of 2019. In summer, we will have roughly 80% of the capacity of the -- the war in Ukraine and the fact that there are no flights anymore between Austria and Ukraine and Austria and Russia, which means that we are losing right now roughly 4% of our passengers. This includes not only the direct flights, but this includes as well the trends for traffic because there are quite a few passengers from Russia or the Ukraine who use Vienna as their point -- as a hub to transfer to other destinations. But the 4% include that, and what we see so far in terms of positive developments in the flight schedules and as well the information we're getting from the airlines. So Austrian Airlines last week did a press release that they see unprecedented bookings so -- which overall, in looking at the full picture, this makes us optimistic that we will reach our target for this year, obviously, with all the uncertainty, which comes with the war in the Ukraine. To cater for these additional passengers, we will open our currently closed terminals with the summer schedules on the 29th of March, Terminal 2 and Pier East and Pier West will be open for business again. We will get some new restaurants in 2022 with a strong focus on Austrian brands. We're happy that the world renowned Chef Wolfgang Puck returns back to its home country Austria and opens his first restaurant at Vienna Airport in Austria. We got -- we will get some new coffee shops. We will get some region ice and food. And overall, we think we will have some very good additions to the brand portfolio in the airport. As well on the 29th of March, City Airport Train will resume its regular operations. And yes, we are doing everything to be ready for a significant increase in passenger numbers. Looking at our 4 segments. Overall, I think the Airport segment, the results were expected. We are still slightly negative territory with EUR 14 million minus in EBIT compared to minus EUR 70 million in 2020, obviously, in the Airport segment. The depreciation does not change because of the crisis. So this is obviously a heavy burden on the segment. Overall, we saw a significant increase in the aircraft-related fees plus 60% and 30% plus in the passenger-related fees. And this is not looking bad, but looking to the future. We increased our airport charges on the 1st of January by 1.75%. I think we told you already that there was a change in the Austrian airport charges law, which will allow us until 2026 to increase our airport charges by inflation. The net revenue in 2021 was EUR 14.84 in this segment compared to EUR 14.51 in 2020. And we expect that this depends then, obviously, a lot on the growth and then how many passengers we are having and which airlines is delivering how many passengers, but we think that we will be somewhere around the figures of 2020 and 2021 in 2022 as well. Going further to the Handling & Security Services, revenue increased by roughly 10%. EBITDA was slightly positive with EUR 2.8 million compared to minus EUR 19.6 million in 2020. EBIT was slightly negative with minus EUR 6.6 million compared to minus EUR 29 million in 2020. Here, the major driver of revenue was the ground handling area with plus 18%. And what was important as well is that personnel expenses fell by 7.9% to EUR 101 million. This is mainly due to a lower average headcount although we -- the income from the short working scheme from the Austrian government was reduced here compared to 2020 because the workload was significantly higher, mainly in the second half of 2021. Moving on to the Retail & Properties segment. Here, we saw a strong development, plus 17% in terms of revenue, EUR 82 million compared to EUR 70 million revenue, EUR 50 million EBITDA compared to EUR 34 million and EUR 30 million EBIT compared to EUR 14 million. We saw here a very strong development in the center management and Hospitality. Although I have to point out that roughly EUR 4 million in this segment -- in this area, center management and Hospitality Was a one-off because an operator handed us back a shop where there was a long-term commitment of the operator. And we got EUR 4 million for this. We already have a new operator. It's not yet refurbished, but we already have a new operator for this area. Overall, right now, only 3% of the whole areas are without contract. So there was quite some change in the last 2 years. But overall, we are -- we think we made the right changes in the retail and properties area. In the center management area, we extended a lot of contracts. So I think we are in a good position to increase revenue here significantly when passengers are coming back in the future. Parking is obviously very much related to the passenger figures as well, plus 20%. And rental was pretty flat over the whole pandemic period, plus 0.1%. And I think that's the beauty of the rental area and the opportunity that this is not related directly to the passenger traffic. So this was stable income during these difficult times. Malta had an excellent development in 2021. Revenues increased by 47%. EBITDA was EUR 24 million compared to EUR 5.8 million. EBIT was EUR 11 million compared to minus EUR 6 million in 2020. So there was a very strong development in the Airport segment and very strong development in the Retail & Property segment. What was very positive as well is the personnel expenses fell by 24% due to lower head count and some support from government here as well. So overall, I think our colleagues in Malta are doing an excellent job. Yes. Just a few words regarding the outlook for summer. We're expecting now over Easter, 50 airlines and 60 airlines in summer. We expect over Easter, roughly 165 destinations, and this should go up then until the summer peak to 190 destinations in roughly 60 countries. So as I said before, we expect the seat capacity to be around 80% in summer and something between 65% and 70% in -- over Easter. So all the airlines tell us that there's a very strong demand now for European traffic, lots of routes to Europe and mainly the Mediterranean. So overall, we maintain a positive picture of the 2022 traffic. Long-haul, obviously, will be a bit more challenging. I think we are not hit hard by the flight ban over Russia, I mean, due to the fact that the recovery to the East Asia is anyway pretty, pretty slow. Probably this flight ban for European Airlines over Russia now will extend and push the recovery to East Asia even further back. But I think everybody still expects a very strong development over the Atlantic in summer 2022. Yes. Austrian is adding 2 additional aircraft, which they initially planned to keep it long storage. Ryanair is adding 4 -- 5 additional aircraft. We see it's increasing up to 58 destinations, adding 1 new destination with Abu Dhabi. So they are going into the Middle East now from Vienna as well. Condor is new in Vienna, and they told us that they are very, very happy with the bookings. They are mainly working with travel agents. They are mainly focused on the sun and sea destinations, and we are very happy with the development so far. Additionally, we are happy to see some of our airline customers returning back to Vienna like Kuwait Airways, Flynas, Volotea, Air Corsica and others increasing capacity and increasing frequencies like in the red flight, we had like Turkish like Qatar and Sun Express. I already spoke about Ukraine and Russia. Right now, we had 41 frequencies until all these flights had to be stopped. In summer, we would have expected roughly 80 frequencies to these markets, including the transfer traffic, which goes via Vienna. This is roughly 4% of our total passengers and roughly 5% of our aircraft movements. So that's why, overall, having on the 1 hand, the strong summer schedule, the high demand within European destinations and on the other hand, the war in the Ukraine and the flights which cannot happen right now due to that, we remain, our forecast stable and we expect still in the group, 21 million passengers for the group in 2022 and 70 million in Vienna. So this is still our best guess for the full year. Yes, to finish off just a few impressions from our new refurbished terminal. We will have a new centralized security area. Before the duty-free shop, it used to be always just before the gate. So this should improve sales in the duty-free shop, which we are very much looking forward to. It will be a better service for the passengers as well. Dwell time will increase as well because queuing time will be less than it used to be. We will add a 2,400 square meter new lounge, which really, I think, will fulfill highest expectations. And we are adding some 3 -- to be precise, 3 baggage reclaim beds. So we are ready for future growth. As I said before, not only all the terminal areas will be open again on the 29th of March, we are opening -- or the City Airport Train resumes operations as well. And from the 29th of March, one can travel within 60 minutes from the Vienna Airport the city center again. And yes, we are very much looking forward to increase our capacity, improve services for our passengers, and we sincerely hope that we will have a strong summer schedule here in Vienna. That's it from my end, and now we are happy to take your questions and discuss.

[Operator Instructions]

Can you hear me? This is Vladimira Urbankova speaking, Erste Bank. I take this opportunity as I'm calling from my phone and somehow blind as I do not see participants and the things around. Nevertheless, I would have 2 questions, if you allow me of regarding 2022 outlook. One would be regarding your cost. You already mentioned that in fourth quarter, you were negatively affected by the higher energy costs. So how do you judge what will be the impact of high energy cost on your 2022 cost of consumables? And then next question would be regarding your personnel costs. As you are planning to open Terminal 2 and recently expand your activities, do you plan to add more personnel? And in personnel contracts, do you have any inflationary clause so that means that there's high inflation in 2022? Do you plan to increase also salaries and wages? So this would be my 2 questions at the beginning.

Fine. Starting with energy costs, I mean, we made, I think, a cautious calculation for full year '22. So if we assume that there will not be an extraordinary hike due to Ukraine, I think we should well stay within the guidance. On the electricity side, we have already bought roughly 50% of our demand 4 years ago. So the price for that portion is fixed. And for district heating, there is no possibility to hedge the costs or to be fielded against the additional costs. There is the only way to manage overall costs by reducing consumption, and we will radically cut down any kind of usage to an extent that we finally reach our goals, our estimations. In regard of personnel costs, we will not see wage inflation in '22. We already entered into a collective agreement with our employees starting from 1st of January '23. And it's an increase by 5.6%, which reflects inflation from May 19 until end of '21. And following that, the next negotiations will be somewhere around May 23. And yes, we will hire to a certain extent operational people. but we still have endings of contracts until the end of next year, which already are contracted. So we should not see a substantial rebound overall because some of these effects are compensating one another but a slight increase is likely. It will very much depend how the passenger numbers are. If they are beyond our current guidance and expectations, then we will need additional manpower, but then we have also the revenues out of that. So I would not see for the near future, a substantial cost risk there. In general, I think all companies who are very much service-oriented will have difficulties in the future to get the right people at reasonable cost. And therefore, I think automation and digitalization are very important tools. And we are struggling on different fronts to push that ahead. As you might know, we are a joint venture partner of Plug and Play, which is working on the airport with European headquarters for travel, hospitality and smart cities. And this partnership enables us to be really on the cutting edge of developments worldwide in regard of digitalization and of automatization and support of service functions. And so let's hope that this is a factor, which will help to overcome the problems on the workforce side.

Okay. Any other questions, please? I see some of the usual suspects in the call, so I would like to extend this offer to you to ask questions.

Andrew, we are waiting.

So he has un-muted himself. Let's go, if he has a question. Andrew, do you want to say something?

We cannot hear you.

We cannot hear you. I mean, alternatively, you can also write the message into the chat function if you cannot speak. Anyone...

Can you hear me now?

Now we can you. Sorry, yes, we can hear you.

I mean, I know it's very early days, but I mean, how -- what are you hearing from your airline partners about the latest trend of bookings? What are you seeing on the most recent passenger numbers? Are people scared of getting on a plane or are people flying because they're booked already?

I mean, the latest I heard is that bookings within Europe are still on a very, very high level. So it does not seem that people are shying away from booking the holidays in summer and so on. What the airlines tell me is that they see a slowdown in bookings from the U.S. So I think so far, yes, I mean, obviously, they are all worried about oil price, about the problems with not being in a position to fly over Russia anymore. The reduction in flights to Russia and Ukraine, but it does not seem that people change their booking behavior towards Easter or towards summer.

That makes sense. And can you offer some color on how the fight between Ryan and Wizz is playing out? Because obviously, earlier, we've discussed this and you were rather constructive from your perspective saying that they were both fighting for market share, and that was going to support your passenger numbers. But I don't know, the story were fed is that Wizz is somewhat in retreat that Ryanair is triumphing. So perhaps you're not going to have this competition for so long and -- which actually is pretty supportive for your passenger numbers, right?

I mean the reality is that Ryanair is still growing quite significantly and Wizz is not. So the Wizz is, they are opening some new destinations. They are, I think, pretty creative in looking for new markets. But I think, obviously, the market share of Ryanair will grow this year, and then we will see about the market share of Wizz Air. So what I -- and I think this was a trend throughout the pandemic that the Ryanair is much more aggressive than others to put capacity in despite the difficult environment in the pandemic. So Ryanair is, I think, are more aggressive to gain market share. And my impression was that Wizz is more concentrated on results than on market share.

Okay. And then just the last one, I guess, really curious to understand what happened to retail trends because I think everyone following the industry has been surprised by how spent ahead -- what's high despite the unattractive passenger mix as we started to fly again in the pandemic. But as passenger volumes are building, do you get any sense or signals that the passenger behavior is reverting towards more normal situations or are still people just so bloody excited to be going on holiday that they've forgotten how to keep their wallet closed and they're just spending crazy?

I mean, so far, there are no significant changes. So what we still see is that people spend more than they used to. But obviously, as you said, we are missing out on the Russians. We are missing out on the Ukrainians. We're missing out on the Chinese. So obviously, the passenger mix is not changing in our favor. It's actually probably getting a bit worse than it was. And so what we see is we see a very solid and strong development in terms of duty free. So in the duty free, the -- even the low-cost carrier passenger spend more than they used to. We see a very solid development in the F&B sector. Obviously, banking is a disaster. So all those passengers who used to exchange money are still missing, and specialty retail is in a very, very difficult situation as well because this was mainly driven by passengers from Russia, Eastern Europe and Chinese. So I think this is an area where it's still pretty difficult.

And the duty free and the behavior of the low-cost carriers, I guess what I'm -- I mean, I kind of don't think it's sustainable, but I was wondering whether you did or -- it seems like sort of strange behavior as people are getting back into flying rather than being sustainable, like I'm not meaning to be rude at all.

No. Look, we have -- we don't see right now that there's a significant change. But still, I think we are still in a phase where people go on their first flight after 2 years probably or for the last 12 years. So they are more in a mood to spend a bit. I don't think that on the long run or that in 1 or 2 years, when the whole situation is normal, again, that we will see this level of spending of low-cost carrier passengers still. But on the other hand, I hope that in 1 or 2 years about our passenger mix will look different as well.

These are crazy days. So I'm always really admiring of your calmness and the adversity that we keep getting thrown at our industry. So good luck, guys.

Thank you. Bye-bye.

So are there any other questions?

Bernd?

Yes, from my side, call me 1 of the usual suspects. Look, regarding floor space, I want to ask you. Are you now, with the beginning of the summer schedule, opening Terminal 2 after renovation, what is the current shopping and rental space in the terminal you have under operations? Also, please in -- sharing the pre-COVID number as a comparison?

I mean in Terminal 2, there are still changes going on. So we have a refurbished duty-free shop there in summer. Obviously, sales should go up quite significantly due to the fact that security is before the duty-free shop, but there are still then some areas closed because of changes in operators. We will settle still the 1 other refurbishment going on. And in Pier East, where the passenger numbers will be somewhat lower than they used to be. There will be only F&Bs and the duty-free shop being operated. So the space is less than it used to be, but the major shops will be refurbished. There will be some new brands. And therefore, yes, we are very much looking forward for the opening of Terminal 2.

When we had around about 20,000 square meters pre-COVID, how much less, is it...

Insignificantly.

Insignificant.

I mean after opening up, it's probably, I don't know, 5% less. Mr. Schmidt will tell you after he checks but from the top of my head, I think it's not more than 5% less.

Got it. And was after opening -- you meant after opening of Terminal 2 or the additional refurbishments to come in later?

No, after the opening of Terminal 2 because then all the gate areas are again in operation, and then I think we have a like-with-like comparison.

Okay. Any other questions? Wait, wait, wait 1 second. We have Charles here, who has -- I think has a question, Charles?

This is Charles here. I just have 1 small question on the regulatory aspects. Considering the new regulation and on tariffs, could you share your internal assumption on the traffic growth over the next 4, 5 years? That will be quite helpful.

I mean this is something we have not disclosed yet. So we -- what I can tell you is that I don't think that we will reach the 2019 figures before 2025, probably 2026. But I think you can appreciate that the uncertainty about long-term or midterm development is now even higher with the completely changing political landscape within Europe. So what I can tell you is that we expect at least until 2025 that we will increase our charges by inflation. And if we don't, because we have so much growth and reached the 2019 levels earlier, I think we would be more than happy to be in that situation.

Okay. So if there are not any questions left, then I would like to conclude today's session. So gentlemen, thanks again for your presentation and answering the questions. Thank you to the audience for your attention and also for asking the questions. And I would like to tell you that the next call we're going to have will be on the 19th of May when it will be about the first quarter results for 2022. Until then, yes, thanks a lot. So stay safe, stay healthy and until next time. Bye-bye.

Bye. Thank you.