Flughafen Wien Aktiengesellschaft (FLU) Earnings Call Transcript & Summary

Good afternoon. So welcome again, everybody, for the conference call regarding our full year 2024 numbers. With me now CFO, Mr. Ofner, guiding you through the results and also COO, Mr. Jager, giving more insights on recent traffic developments, the traffic outlook and developments in our business results. And I hand over to you, Mr. Ofner.

Yes. Good afternoon, and many thanks for your interest. We today published the full year '24 results. And as you can follow on our slide, Revenue went up to EUR 1.052 billion, plus 13%. EBITDA at EUR 442 million, plus 12.4% and group net profit at EUR 239 million, plus 27% and EUR 46 million thereof comes from Malta International Airport. What underlines the importance of our subsidy in Malta International Airport for our business results. The good results enable us to do both to increase our dividend to EUR 1.65 per share, plus EUR 0.32 compared to last year, but also to expand our investments here on the Vienna Airport. And therefore, our CapEx will go up from EUR 200 million last year to roughly EUR 300 million this year. We can do this CapEx without borrowing. So we will finance it out of our own funds. And we foresee that we will see substantial investments also in the years to come, but on a pace that is not jeopardizing our results. If you look further down, one of the reasons for the positive result in 2024 is that our financial result converted into EUR 15.5 million plus from minus EUR 4 million in 2023. And the reason is that we repaid, as you remember, the EIB loan, end of 2023. So in general, 2024 lays the basis, as you see in the following chart, for further growth. And we see that aviation remains a growth factor, and we will see growth also in the coming years. The chart also shows that we recovered fully from COVID times and are now given our results and EBITDA, even stronger than we have been in 2019. And the only major obstacle we see despite the poor economic situation is regulatory issues arising from green deal regulations on the European level. And I will come back to that issue a little bit later. So given the situation of our expenses, you see that consumables and services used was more or less stable, reflecting the price stabilization of energy, especially we saw in 2024. Personnel expenses went up 10.5%, which is the major part due to our new collective agreement of plus 7%. And on the other hand, of the fact that we have 263 additional employees totaled for 2024, which was caused by the overall growth of 9%. And other expenses, we see extensive maintenance work, runways, technology, Malta Airport and as a one-off, the costs for the noise protection program of EUR 23.9 million. And this program will be realized in the next 8 years and will hopefully bring some comfort to our neighbors. If we look at our cash flow situation, you see that cash flow from operating activities went up 15% to EUR 443 million due to the higher payout ratio of our dividend and additional CapEx. The free cash flow was reduced to EUR 114 million. And you see, on the other hand, CapEx went up from EUR 107 million to EUR 190 million and net liquidity went up to EUR 511 million. And also our equity rose by 7% to EUR 1.667 billion. So overall, we see a very strong balance sheet and a very sound situation in regard of financing. Our balance sheet structure, I think compared 2019 to 2024 shows that our equity went up almost EUR 300 million. And therefore, as I said, we have overcome the COVID problems even stronger than we have started. All that enables us to come to a record dividend, the highest ever we had in our company of EUR 1.65 per share, which equals a dividend yield of 3.2%, what is, I think, very, very fine given the price increase of our share in the current period. So one of the factors we see for the future is that we will expand our operations here on Vienna Airport by constructing the South expansion of Terminal 3, which should bring additional revenue and profit once it's operational. We are in time and in budget. And we hope that we can open the Terminal 3 South extension in 2027. And from all what we know right now, we will be able to do it within budget and within the time frame given. Another expansion project is Office Park 4 expansion, around 17,000 square meters of high-quality office and conference space is planned and start of construction there should be in 2026. There are a lot of other projects. And we are also working alongside the project team for the third runway. And most likely, we will see in 2026, how to move forward in regard of that project. So -- what is the only real obstacle we see that's bad regulation from the European Union. And especially in regard of sustainable aviation fuels, they are too expensive. The quantity is not what is needed. Pricing, CO2 pricing leads to higher ticket prices and European airports and airlines have a substantial disadvantage competing with airlines and airports outside the European Union due to the current regulation. So I think it's very essential to cut all that counterproductive things and come back to a pragmatic form of regulation on an even level playing field with all competitors without abandoning the overall goal to reduce the CO2 footprint, what we also support, but it's the wrong way now the European Union is trying to reach that goal. And especially the expansion of emission certificate trading from 1st January 2027 has a high potential to steer inflation, what would negatively affect the economic position of Europe. So let's hope that we get further successes there. I mean you heard maybe that last week, the European Commission changed the [indiscernible] cassettes and has also stipulated to simplify ESG reporting within the next 6 months. So we have to work on these issues, and I hope we get some success there. What drives me a little bit on the optimistic side is that exactly today, Ursula von der Leyen as the President of the European Commission issued a statement that the regulation for the car industry will be substantially changed and the penalization that would be due to the fact that not enough electric vehicles have been sold will be abandoned, and it's one of the results of the threats from the U.S. So even if we don't agree with things that are proposed from the U.S. in this case, it already had a positive effect. And I hope that what Mrs. von der Leyesaid today is a positive signal also for these other issues that are not regulated in a sense full way. So let's continue with our Airport City, which is as all other parts of our company is performing very well and growing quickly. So the latest acquisition is TUI, Austria with its corporate headquarters moving to our airport city and 2 new space industry companies will start production at the airport city in the coming weeks. So it shows that we can further grow and therefore, we expand our office park and are developing additional land for companies that want to operate at the airport. So let's move to our financial guidance for 2025. I think clouds have a little bit disappeared, not only if we look out the window today. Here in Vienna, it's sunny, and it's like a first spring day. It has also cleared up a little bit for our guidance. So from today's perspective, I would assume that we are on the conservative side. And if things go as it seems, we could even be better than our initial and current guidance is. So revenue will grow to at least EUR 1.08 billion. EBITDA EUR 440 million or above group net profit, EUR 230 million or above CapEx approximately EUR 300 million. So that's from my side, and I hand over to Julian.

Thank you, Gunther. I will focus on traffic development and the segment results in the next couple of minutes. As you know, 2024 was an absolute record in passenger numbers, cargo, seat load factor now as well in terms of revenue and earnings. Overall, and I think this is very positive that we saw a positive development throughout the company. The Airport segment had the largest share of earnings with 41% of EBIT with EUR 126 million. Handling and Security was positive after a difficult COVID years and EBIT of EUR 8.6 million. Retail & Properties, strong EBIT increase by 15.7% to EUR 94 million. And Malta, as Gunther mentioned, already contributes to 23% to the group EBIT. We expect a slight growth in 2025. Essentially, the situation has not changed a lot since we met in January. So far, the booking situation is good. So the airlines are quite happy with the early bookings and the same with the travel agents. They say the same. So it depends a lot on short-term bookings. And the question is if we can repeat the -- again, the high seat load factor we saw last summer. But overall, I would expect from today's perspective, a slight increase in passenger numbers this year. We are still proud of our high quality levels. We were the third most punctual airport within the airport -- group of airports with more than 25 million passengers. If you would just take the airports with more than 30 million passengers, we would even be the most punctual airport, and this is a way we want to continue. January was okay in terms of passenger traffic, Vienna with plus 3.3%; Malta strong, plus 9%; Kosice plus 22%. So overall, in the group, we were up 4.8%. So as expected, a good start into the new year. And essentially from summer schedule, which starts in April on, the decisive month of the year will begin in terms of our passenger development. What is positive and encouraging was the strong growth to the Far East, 38%; North America, 11%. Germany, again, pretty weak with a decrease of 5%. So the German market is still suffering. Let's continue. I think I've said more or less everything. I think what is positive for the summer schedule, we have 195 destinations in the schedule. We've got Scoot, new nation with Singapore, new destinations from Austria and Ryanair with easyJet is coming again. Saudia reopened, Riyadh, Albania started, again, Tirana route, Condor stations one aircraft in Vienna. So overall, I think the summer schedule looks pretty good. The decisive thing will be load factor. And obviously, the geopolitical situation, Ukraine, Middle East, I think there's some upside potential. Let's see if this materializes in the course of this year. Let's continue with the Airport segment. As I said, very positive, mainly driven by 18% plus in passenger-related fees. We increased airport charges with January 1 by 4.6%. We introduced at the same time an incentive to drive or to give an incentive to grow more in winter, mainly for our larger airlines. But overall, this is obviously some positive development this year. From next year on, we will be again in our old formula. So this will mean that we will have to reduce airport charges in January 2026, roughly as far as we can judge today in the same amount as we increased them this year. If you look at our growth, I think compared to the other Lufthansa hubs, we are quite happy. Zurich and Vienna are ahead. Brussels, Munich and Frankfurt, they still are lagging behind the 2019 figures. And the same in the catchment area, we are the largest airport in the catchment area. Budapest, EUR 17.6 million; Prague, EUR 16.4 million; Bratislava 1.9 million. So overall, I think a strong competitive position. What I think will be positive is the new setting, our new government. I think the sentiment towards aviation in general, will be much more positive than it used to be. We have a new minister from today, Peter Hanke. He was the responsible City Councilor for finance and economy. So he was in-charge of the Vienna airport investment of the city of Vienna as well. So I think he understands a lot the importance of aviation for the economy and for tourism in particular. So overall, I think this should be -- we should expect some support here in the future, significantly more support than in recent years. Yes, I think I said more or less everything regarding summer. Last year was an absolute record for the Vienna tourism. I don't see any reason why this should not be repeat or even surpass this year. So East Asia should come back. Whatever happens on a political level, still, I think North America will be very strong. So I think that should all work very well. We are preparing ourselves for a strong summer. We will get additional employees to a certain extent to not additional, but just replace others who have left over winter. We are ongoing to modernize the terminal infrastructure, want to keep up our high service quality. So overall, things look pretty good for the summer season. To the Handling & Security Services, what was important there that we managed last year to extend the Lufthansa Cargo and the Korean Air Cargo contracts. The ramp handling still has a market share of 89%. Last year, an important driver of the result was cargo handling plus 27%, nearly 300,000 tonnes of cargo here, obviously, as well one driver of growth, Chinese e-commerce. So I think the most important thing is to keep quality high to retain our strong market position and improve results in the future, although this is obviously the toughest feat here, and it's not possible to just increase prices by inflation. So it will still be a battle, but I'm very happy with 2024, and I'm optimistic for '25 to have a positive contribution to overall results here as well. One, just on the sideline, we started to build airport partnerships last year. So we signed partnership agreements with Incheon Airport, with Korean Air, with Shenzhen Airport, with Sao Paulo Airport, not only to do an employee exchange, which we just started now with Incheon to enable some knowledge transfer and promote innovation and best practices, but mainly to develop together the business to do route development together, to do cargo development together. So this is something we will continue doing in 2025. And I think the extension of the Korean Air Cargo contract was already one positive sign or one positive outcome of this cooperation. Coming to Retail & Properties. Here, the revenue distribution is 52% coming from Center Management & Hospitality, plus 13% -- Parking has a 30% share, plus 9%; rentals plus 9% and an 18% share. So mainly from Center Management, F&B and lounges contributed and marketing contributed to the positive results. We opened an increased new duty-free shop in Terminal 1. So all these things worked very well. Rental income was up 9% to EUR 36 million. And what is important is that we started this year the tenant acquisition, which is in full swing, and I expect many contracts to be signed until the end of this year. So we expect proposals from a lot of interested parties until the end of April. We will look for old or new partners, mainly in the F&B field that we want to focus on Austrian cuisine. And we are targeting international premium and luxury brands. It will be a completely new retail environment facades up to 8 meters. So we hope that we will be in a position as well to attract international strong brands. And overall, it's very positive that everything is on track, both in timing and in the costs. And we are looking forward to open the southern expansion of Terminal 3 in the first half of 2027, 70,000 square meters additional space, 10,000 square meters Retail and F&B space, new centralized security checkpoints, additional gate areas, new lounges. So overall, this will be a huge improvement for our passengers. Last but not least, Malta. I told you they are growing again very strong early this year. Last year was an absolute record with EUR 70 million EBIT, 23% contribution to the group's EBIT. I think the most important thing here is to invest now and get this investment done quickly on time within budget. We have to extend the terminal. This is urgently needed. The terminal environment has not significantly changed in the last 13 years. So we need to cater for future growth. We are investing now in additional apron, which is already nearly finished. We will invest in the airport, city of Malta, SkyParks 2, so additional office space, a new hotel. So everything looks pretty well set. And Malta -- I'm sure Malta will contribute even more in the future to our overall results. That's it from our end. So we are looking forward for your questions. Thank you. Thank you very much.

Room is open for questions now. Hands are already raised. Henry, if you go ahead, raising the hand first.

Yes, sure. Congrats on surpassing the EUR 1 billion threshold. I have a couple of questions. First 2 are for Mr. Ofner. Please elaborate a little bit more on the strong Q4 operating cash flow. I was positively surprised by the cash generation, and it was nearly double that of EBITDA. So maybe there is a working capital swing that we are missing or anything else in the operating cash flow statement. That would be nice to have some more color on this. And also, I noticed that you invested all of -- some of that operating cash flow or the free cash flow in time deposits. I would like to know what current interest rate are you receiving there? So how will it impact the financial result at 2025, 2026? And also maybe a question for both of you regarding the dividend policy. If we assume that you hit your guidance at maybe EUR 230 million net profit before minorities, that would be a little bit below that of 2024. Would you then adjust your dividend payout ratio to keep the dividend as such as stable? Or would you stick to your payout ratio and then adjust the dividend per share maybe this is -- I don't want to know a number, but I want to know the policy of what you're thinking of when you propose the dividend? And then 2 more questions. One is for politics for Mr. [indiscernible]. You just have received a new government. And we're also on the brink of a new government in Germany, we've seen over the last few years that the travel through Germany and from Germany has decreased or is not on the levels that it's been before, maybe because 2 conservative parties are then leading. There might be some legislation changes that you could expect or you hope for anything that you maybe sense coming from the elections in Austria and Germany. I mean Germany has a big voice in Europe, maybe it's also in towards our policy on the EU level might also influence and improve the situation for a travel in Europe as such. And one more question regarding the South expansion. We talk about the south expansion only from a retail property side, but this time may be something we are missing in terms of capacity improvement or revenue contribution from the air side. I'm thinking of maybe less bus transfer, more direct access to the airplane, maybe that comes in with higher revenues or higher aircraft fees or whatsoever. Maybe there is something we're missing, but maybe not much.

Maybe if Gunther doesn't mind, I'll start with the last 2 questions. To start with your last question, there will be more capacity, but more bus capacity. So, which, to be honest, from a financial point of view is no different. So either the airline has to pay for the bus or they have to pay for the [ Beer fingers ]. So that doesn't really make a difference. But in the South extension, there's no space for additional [ Beer fingers ]. That's why when we finish the south extension, we have the intention if everything goes well to extend North from Terminal 3, and we would add 5 to 6 additional [ Beer fingers ]. But there will be future development. We have not done the planning yet. So we don't have cost assumptions yet, but this would be -- should happen in the years '28 and after. So we will have more capacity in terms of [indiscernible]. We will have more capacity for security, and we will have significantly more lounge space, vehicle space. So these are the main features of the South extension. Regarding the new government, I think, for Austria, we do not expect a new change in legislation. So I think we are quite happy with the environment here in Austria. I wouldn't assume that our tax on tickets, which is significantly lower than in Germany would change. So we are relatively happy with the environment. I think what we need is a push in Brussels for a change in legislation because I think Fit for 55 will be executed as if it was decided in the past, I think this would bring a lot of travel and disadvantages for European air travel. I don't want to judge the situation in Germany, but I think in Germany, probably there is a cost issue. So in terms of [indiscernible], I think air litigation control is even more expensive than in Austria. So I think there's a cost perspective to it and I just hope that this will be tapered by the new government in Germany. And together, the Austria and the German government with put pressure on Brussels to adjust the legislation to make the European aviation industry over or more competitive. And I think in particular, the DACH region, I think the ticket prices are very high, which is not for airlines, but we probably would need a bit more competition to drive passenger numbers in this area.

Yes. Regarding your question for our financial reserves. There is a mixture of equity and mostly short-term deposits. Currently, we are at around 3.5% in interest and for sure if the EIB, ECB is further lowering interest rates, this will be slightly go down in the years to come. And overall, I think you have to put in mind that we had a very substantial dividend increase already in 2024 and the payout for CapEx. And given our reserves at the 31st of December of EUR 511 million. So putting that together, that gives you the full picture. But if you are interested in further details, I think we can provide with -- [indiscernible] can provide you outside of [indiscernible]. In regard of the dividend, what we see, I'm very convinced that in any case, we should have at least the same level we see now for 2024, so EUR 1.65. And given that we have more traffic and business is going better, and this will be also substantially influenced by geopolitical developments, it could be more. I mean, if in fact there would be a ceasefire or even the disagreement, Ukraine is what substantially supports our business case and the same speed through for Middle East. So if it would be successful to come to disagreement there and also support traffic here in Vienna. So luckily, I think we are not so directly affected by the overall economic situation, which still is gloomy and what we see is that people are trying to fulfill their holiday dreams despite the overall economic situation, and I don't think that this will be substantially changed in 2025. So we have no indication for that. If the surveys are through that are published by the travel agencies, prebookings are very, very fine. And given all that, finally, it could turn out that our guidance was on the conservative side, and we will come out better than expected.

Henry, that does this answer your questions? Regarding cash flow, I'll come back to you later, but I think the noncash items were listed on Slide #4 on the expenses explained part of it and if there is something else, I can back to you. And so we move on with Carlos.

I have 2. First, I was wondering if you could provide us with the latest update on the third runway process. And secondly, and I know that this is mostly wishful thinking -- but given that there are major investments coming to Vienna, is there a way to remunerate your regulated CapEx?

Yes. In regard of third runway, as I said, I mean, our teams are currently working and hopefully, we will shed more light on how to move forward in the next year, so in 2026. On the legal side, there is still pending the decision of the highest administrative court in regard of construction period and -- so far, we have fortunately no indication when they will come to a decision. So this could take substantial time throughout at least this year. And last, but not least, any investment must be economically viable. So these are decisive criteria we are working on. And in regard of tariffs, in general, all burdens that are put on us in a legislative manner can be included into the tariffs. So for example, entry/exit, the system installations are included in the revenues. The South expansion is a decision we took on our own and is commercially viable and will not be included in the tariff system. So it depends what is the reason for specific costs. And if they are legally binding, then we can include them into the tariff system.

Vladimira, please go ahead.

Just 2 very brief questions. First one would be related to your personnel costs. If you could indicate what are your assumptions for this year, there is usually some increase linked to collective bargaining process from May. So what should we expect? You also said that your head count is going higher. So overall, what could be growth in personnel costs in 2025? And next question will be related to this noise protection program. Was it kind of a one-off? Or do you expect that there will be maybe more kind of related costs coming in the future?

Yes. The basis for the collective bargaining process is inflation from 1st of April '24, to 31st of March '25. So currently, we are around 2.6% something. Unfortunately, January and February now are a little bit higher. So February was 3.3%, January 3.2%, so we will end up somewhere between 2.5% and 2.7%. And normally, this is the basis for negotiations. So we could end up somewhere in the region of 3%. And in regard of workforce, I mean, technically, an increase is already implemented because people who started, for example, in October, or in November are only very slightly affecting numbers in 2024, but are full accounted for in '25. So we will see some increase in 2025 in workforce, but it will finally depend on the development of passenger figures and the cargo and traffic growth because without growth, it would be very conservative and will not allow substantial increases. Once we grow, we will need additional headcounts. So this is very much depending on the overall development. But what I think can be said for sure is that the overall growth rate, '25 will be below the growth rate of '24.

And then the question related to this noise program. Is it pure one-off? Or should we expect maybe going forward?

It's a one-off. And maybe not 100% of it will be served. So that's maybe a little bit of an upside if the investment finally is lower than the sum we stipulated. From today's perspective, it cannot be higher, because that's the maximum we stipulated. And in case that not all people that are eligible opt for it and invest on their side, the overall expenses could be slightly lower than the provision is made. Yes. But this will be correctly then in the course of the years.

Any further questions? Philip now your hand this up again, please.

Congrats to the good results. I have 2 questions on Malta briefly. First one would be -- if you could just remind us how the year 2025 will shape up at Malta because you're guiding for a passenger growth, if I'm correct, of around 300,000 passengers, so roughly 3% year-over-year. And sales should definitely benefit from that. But could you shed a bit more light maybe on what you expect from the fee adjustment side if there is any? So this will be the question on regarding Malta?

In Malta, there is no increase in the charges. So the charges have remained stable for, I think the last 15 years. But we have not been reduced as well. And if they would have had our formula, it would have had to decrease because of the strong growth. So we don't expect the upper charges to change in any way there. And overall, our best guess in January for 2025 overall was a very slight growth for the group. Let's see if Malta manages again to grow stronger this summer. But after the strong growth last year, I think we will see growth in Malta in summer, but more modest been in recent years and probably more modest than what we've seen now in January.

Maybe an additional one regarding capacity at Malta. So is the airport currently during the summer travel season bumping at capacity? And does that limit the growth? And is this also the reason why you don't forecast more aggressive passenger growth? Or is it just that you see demand slowing down already from the booking situations and the airline?

I think Malta had huge growth in recent years. So I think we cannot complain about the growth. I don't think that capacity is really an issue. I mean it's more comfort, which is suffering right now quite significantly, to be honest. And we definitely have to increase capacity in terms of space for passenger space for passport control and space for security. So this is going to happen in the next few years. But we have 2 runways in Malta. We just extended now aircraft stands in Malta. So I see if we have capacity issues, the issue would be quality for the passenger, but not necessarily a loss of traffic.

No hands are raised, are there any further questions, any further -- any follow-ups? If not, then I thank you all for the interest in Vienna Airport. Thanks for the discussion for the many questions. You see on the slide, Q1 will be reported in the mid of May, 15th of May. In the meantime, annual report will be out at the end of April with all the notes and that's it, I will close the call. Thank you very much.

Bye-bye. Thank you, everyone.