Flughafen Wien Aktiengesellschaft (FLW1.F) Earnings Call Transcript & Summary

So hello, everyone, and a warm welcome to the roundtable of the Vienna Airport. So in this case, we're delighted to welcome the Head of Capital Markets, Bernd Maurer. So he will speak right now and give us some insights about Vienna Airport. So having said this, Bernd, I hand over to you.

Good afternoon. Thank you all of you for your interest in our company in Vienna Airport. Yes, let's kick off with a brief overview what we are doing. I guess all of you are familiar with the City of Vienna and have kind of a clue about the business model of an airport operator. So we can jump right into what we are doing and what's going on currently at Vienna Airport. We are one of the European airports who topped or which topped already last year the passenger numbers of the precrisis year 2019. You might know, of course, COVID was a big, big challenge for the industry with passenger numbers down 70%, 80%. And many European airports, but -- by far, not all already recovered from this kind of crisis. For example, German air traffic is around about -- is still around about 15% below the pre-COVID volume. But as I said, many European airports are already above. We, Vienna Airport topped this level in 2024 with slightly above 31.7 million passengers, and this number is expected to increase further in 2025. When we talk about the listed company, Vienna Airport, then we mainly talk about the airport in Vienna, but not only. We are not a globally operated -- operating airline group like our peer group companies, Fraport or Paris Aero, but we also own the airport in Malta and the airport in Kosice in Eastern Slovakia. Kosice is not that much of a driver for the group with below 1 million passengers, but Malta is not to neglect, growing strongly in the last years. Within the last 10 years, passenger numbers more than doubled. And so Malta accounts currently for around about 20% of group passengers and around 20% or even a bit more of group earnings. We are one of the 4 Lufthansa hubs next to Frankfurt, Munich and Zurich. Vienna is the fourth Lufthansa hub with Lufthansa Airline, Austrian Airlines being the home carrier here with about 45% market share. An important characteristic for us, and I will come to this in more detail a few slides later, is our large catchment area. And it's obvious that we capture most of Austria or at least the Eastern part of Austria, but we -- our catchment -- yes, Eastern part of Austria, but our catchment area ranges far into Central and Eastern European countries, respectively, the Czech Republic, Hungary and Slovakia. And simply Vienna Airport is the biggest airport in the region, offering the most destinations and especially frequencies. When I mentioned the business model before, so I think everyone has a clue what the airport operator is doing, although when it's about details, then it's a high level of logistics services, but there are 2 different business models: Being a full-scale provider; or to outsource some services. Here, we, Vienna Airport, is a full-scale service provider, which means mainly that our handling, operations and security services are also done by Vienna Airport and our employees, respectively. I want first to comment about recent developments and then go into the general pillars and drivers of our investment case. Looking at H1 and the passenger development, which is, of course, the basis for the financial development, then you see robust growth of 4.7% in the group in H1; good development also over the summer months; slight growth of Vienna. Here, the COVID -- the big COVID recovery is behind us, as I mentioned that 2019 levels were already surpassed again last year. So we are back into this normal structural growth of European aviation, strong growth driver in H1. Malta with continued double-digit growth rates of almost 12% in first half. Kosice, also very strong, plus 19%. But as I mentioned before, with about a bit more than 300,000 passengers in first half, it's not the driver of group dynamics. Asking why Malta is doing that strongly? As I said before, more than double the passenger numbers within the last 10 years from 4.3 million to 9.0 million last year. It's twofold. It's, of course, the obvious good development of the tourism sector on the island of Malta, but Malta is also doing economically very well. Looking at statistics of European GDP dynamics, then you see on many league tables, Ireland and Malta on top of these rankings. Yes, some details at which record levels we are at the moment. In Vienna, the August this year was the busiest month ever on records. Also, we set a new daily record with more than 120,000 passengers on the 3rd of August. And in Malta, July and August this year were the 2 months, which for the first time, topped 1 million passengers within a single month ever. How did this translate into earnings? Revenues up 7%, EBITDA plus 3.3%. Net profit after minorities almost up by 6%. Drivers, of course, traffic growth in the group and tariff adjustments. Tariffs were up in Vienna Airport with 4.6% this year. So rule of thumb revenue estimation, passengers times revenue increase -- sorry, passengers times tariff increase gives an indication of aviation revenues, which account for about 2/3 of our group revenues. Margin is a bit not under pressure. This would be too much, but margin is a bit lower -- was a bit lower than the last year by around about 1.5 percentage points as personnel increases -- personnel cost increases deriving from, how should I say, quite generous collective bargaining agreements in the last 2 years ate a bit into profitability, but still decently above 40%. And you see here positive financial result that's rarely seen, I would say, for an infrastructure company as we are a net cash positive infrastructure asset, which invests a net cash position of EUR 400 million to EUR 500 million and then interest income or a positive financial result. What you see here is the interest income of our net cash position with EUR 9.3 million in H1, a considerable contribution to our group profit. This brings me to the guidance for the full year, which is so to say, no surprise that we expect continued small growth this year at the airport in Vienna and in the whole group. This guidance is unchanged since we issued it the first time in mid-January of this year. It was confirmed with Q1 and confirmed with H1 numbers. Talking about the environment, to leave here 2 marks on geopolitics. The conflict in the Middle East is an important factor to watch out. Passengers flying between Israel and Vienna Airport account for about 2.0% of total passengers of Vienna Airport. That's perhaps a bit more than someone would expect. It's 4 carriers which flew the destination: it's Austrian Airlines, [ it's LI ], it's Wizz Air, and it's Ryanair. And Vienna is a go-to transfer hub for Israeli passengers flying to North America. So including transfer passengers flying from Israel via Vienna to North America, this number is even a bit higher than 2%, around about 2.5%. So looking at next year, when hopefully the situation eases, traffic has potential to recover and would bring some additional passenger growth next year. Second factor, but unfortunately, not that much for the short term, rather for the midterm is, of course, the conflict between Ukraine and Russia. Just a number. Before the war, passenger flows from Russia, Belarus and Ukraine to Vienna accounted for 3.5% of total passengers. So if we reach a ceasefire and especially sanctions in the air transportation sector against Russia would be lifted, this would bring a considerable portion of this 3.5% back within a short period of time as Vienna is a very popular destination for Russian and Ukrainian people. Financial guidance is the same. You see the numbers what we round about expect this year, also unchanged since we issued the first time in mid-January this year. This was the update about the recent developments of H1 and the traffic numbers over the summer months July and August. September traffic figures are scheduled to be reported next Tuesday. And I will now switch to a broader top-down perspective, what, in our view, determines the investment case for the share of Vienna Airport. It's comprised of the 6 headlines, so to say. It's growth coming from passengers, meaning growth of the aviation business and growth of the non-aviation business; profitability, having operating a business model with an EBITDA margin of sustainably above 40%. We are net cash positive, what I outlined before. This enables an attractive dividend policy. We operate an airport in a very attractive destination, the City of Vienna. Quality is important to keep our main customers, meaning the airline is happy. And of course, sustainability and important transportation sector is in focus and especially energy efficiency is of high importance at our company, within our company as the measures implemented so far had a clear impact on the P&L and bringing costs down and improving profitability. And I will now outline main points for those 6 headlines of our investment case, starting with the growth of the expected growth of the aviation business in the mid to long term. Two important charts that line out the sustainable long-term and structural growth of the aviation sector. You see on the left-hand side, the aggregate of European airports -- European airport passenger numbers between the year of 2000 and last year; and on the right-hand side, passenger growth and passenger development of Vienna Airport. It doesn't matter if we grew a few tenth of a percentage points more than the European aggregate in the last 20 years, what I want to outline with these 2 pictures is on the one hand that you clearly see the trend growth. If you calculate any trend line, then if the actual development is for whatever reason, a bit below, a bit above, within 2, 3 years, traffic is back to this trend growth, at least the pattern in the last 20 years. The second effect, what is visible from those 2 charts is a very quick recovery after downturns. When passengers are down for whatever reason, be it the terror attacks in 2001, be it the economic crisis following the banking crisis in 2008 then to 2010, be it COVID now which you see on the chart was clearly a different animal, but nevertheless, passenger numbers just a couple of years are back where they have been before and with other less severe crisis, they were even back to the trend growth, which was projected. This structural trend growth of global and European aviation is confirmed by long-term outlooks of Airbus and Boeing. The current global fleet reaches around about 25,000 aircraft. This is expected by both producers to double more or less within the next 20 years that the global fleet reaches around about 50,000 airplanes by 2044. Of course, the biggest growth driver will not be Europe. This will be Asia, especially China and India. But yes, the biggest dynamics we will see within Asia, but many Asian people out of the growing middle class coming to Europe are coming to Vienna and Malta also, and push European growth to a higher number than what in the European traffic would look like without this boost, without the boost from Asia. Also to put it into perspective that the global flight traffic tripled times 3 since the year 2000. So it confirms the long-term structural growth of aviation traffic, and the aggregate of European aviation passengers is already some 5% above the pre-COVID level now in H1 2025. But to be frank and fair here, 2026 will bring some challenges to Vienna Airport. Talking about the structural growth before, absolutely true for the mid and long term, but will likely not be applicable for the financial year of 2026 as the #2 on Vienna Airport, Ryanair; and the #3 on Vienna Airport, Wizz Air announced to reduce capacities. Wizz Air is going to withdraw from Vienna Airport. They operate currently 5 aircraft, which will shrink to 3 with the winter schedule starting at the end of October, and the remaining 3 aircraft will move somewhere else with the summer schedule and starting as of the end of March. Next year, second negative news, so to say, was the announcement by Ryanair to reduce capacities. They operated 19 aircraft in last year's winter schedule. Ryanair is operating currently 18 aircraft in the summer schedule now. And as of the coming winter schedule, Ryanair will deploy 16 aircraft out of Vienna. So it's a reduction by 3 airplanes when you compare winter schedule to winter schedule and a reduction of 2 airplanes when you compare summer schedule to winter schedule. This will cost us, for sure, passengers. But since Wizz Air and Ryanair announced to reduce the capacities, other airlines already announced to come to Vienna or increase their capacities. Especially worth to mention, our home carrier Austrian Airlines, which will deploy 2 more aircraft as of the summer flight schedule. Then also airBaltic announced to fly Vienna-Tallinn. Scoot, an Asian low-cost carrier, announced to increase the frequencies on its Singapore route. SAS will fly Vienna-Copenhagen with a high number of 12 weekly frequencies; and Air Corsica is linking Vienna to 2 airports on the island of Corsica. So best guess is that what we see on the right-hand side will likely not recover all the passengers and all the capacity that was offered by Wizz Air and Ryanair, but a substantial part. The point I want to make here is that not all the capacity what Wizz Air and Ryanair are removing from Vienna is lost. Note, when one airline is not flying to Vienna destination anymore or cancels the one or the other route, then another airline is stepping in. Everything will likely not be covered by other airlines immediately from one flight schedule to another. But within a couple of flight schedules, you can expect other airlines coming to Vienna or airlines which already operate out of Vienna take over the one or the other frequency and destination from Ryanair and Wizz Air. And what we should not forget, a clear positive out of this is that when 2 low costers in Vienna reduce capacities, then this is a big positive for our home carrier, Austrian Airlines. And the better the state, the competitive position and the financial position of our home carrier, Austrian Airlines, the better it is also for us as the operator of Vienna Airport. I was now talking about one more topic also rather on the headwind side for next year is that we face a small cut of aviation charges next year following a period of a strong rise of tariffs in the last years. In Vienna, we have -- or all over Austria, we have a tariff formula in place, which is a function of traffic growth and inflation. As the disruptions during the COVID pandemic made this tariff formula inappropriate, Austrian airports were allowed to hike or this formula was suspended during the COVID period and Austrian airports were allowed to hike tariffs by the rate of inflation. In the last years, Austria was kind of a high inflation country and unfortunately, still is, but this led to a tariff increase of some 20% to 25% in the last years. As we surpassed again our pre-crisis passenger numbers, we fall back now to the tariff formula. And applying this formula for 2026 will lead to a reduction of passenger tariffs by 4.6% and by landing tariffs by 2.1%. So on average, tariffs will be down by 3.5% next year. I talk now about the growth outlook of the aviation business. I mentioned before talking about the pillars of the investment case, the growth comes from 2 sources: Aviation, on the one hand; and non-aviation on the other hand. And non-aviation growth is -- or was stronger than aviation growth in the last years, and this is a trend expected to continue like this. As we have, so to say, 2 growth projects in the non-aviation business. One is the Terminal 3 Southern expansion. Terminal 3 is the main terminal of Vienna Airport routing most part of our passenger traffic. This will be expanded by 70,000 square meters and open in 2027. And this will lead to an increase of the space being rented out to shopping and catering tenants by 50% to then 30,000 square meters. So you will see a visible revenue increase from shopping and gastro as of 2027, which will trickle to a higher degree down to profitability lines, especially, of course, EBITDA. Second source of growth is the so-called AirportCity. AirportCity is everything here on the airport side, which is not directly linked to the aviation business. Think of all the logistics companies here, all the businesses which rent office at the airport side, the fitness center, the kindergarten. Around about 20,000 people work at the whole airport side, but the company, Vienna Airport employs on site here just around about 5,000. So almost 20,000 people, 18,000 when you calculate it correctly, are employed at companies active here on the airport side, which is mostly our premises where we gain rents or income from granting building rights. A lot is going on. There is a boom in business location projects. Just over the summer months, TUI Austria relocated its Austrian headquarter to Vienna Airport. A new logistics park with 80,000 square meters started operations in June. Over the last 1.5 to 2 years, a space hub for companies being active in the space industry as was established and built up at Vienna Airport. A new hotel is commencing operations in December. We have 4 office parks. And the newest one, the Office Park 4, will started to be enlarged with construction work already next year. And there is a bigger development project, so-called Development Zone West with a potential of 47 hectares of logistics and industrial area to be developed. Project -- development project could already begin next year or in 2027. This brings me to one characteristic of Vienna Airport that we own all the properties, all the land, all the buildings necessary for the aviation and the non-aviation business. We are not a license taker. We do not have to renew a license and spend a couple of hundred millions or billions likely. No -- all is -- all assets are our property; no royalties to pay; no license fees to pay; and also no costs for a potential or eventual renewal of any license. And of course, this gives us the opportunity to develop the land bank, what I outlined before with the so-called AirportCity with its different projects. Another characteristic, what I already mentioned or stated is our net cash position, what you rarely can find within the universe of infrastructure stocks. EUR 500 million at the end of last year; we paid out EUR 130 million on dividend payments. Adjusted for this, net cash position would have increased slightly in H1. So it was EUR 400 million in H1. This gives us a very comfortable leeway for investments -- growth investments, and pay out -- we pay out at least 60% of our net profit. This led to a dividend of EUR 1.65 per share last year, yielding -- calculated on the average share price of 2025, 3.2%, which is also around about the dividend yield when you take last year's dividend and calculate with the current share price. Talking about the City of Vienna. At the end, you can operate the most efficient airport, if it would be in a location where no one flies to, as we had one example in Spain in the early 2000s, then it would not be too profitable asset. But Vienna, you can clearly see is an attractive destination being a tourism hotspot, a leading global congress city, the headquarter of many international organizations. We headquarter the United Nations in Vienna, we headquarter OPEC, we headquarter the International Atomic Energy Agency and so on and so forth. You see a couple of logos on the slide. And Vienna is also an attractive headquarter city for global -- or groups operating their headquarter for Central and Eastern European activities out of Vienna. This is important when focusing on incoming traffic. When looking at outgoing traffic, I mentioned them, are quite far-reaching catchment area, on the one hand, the City of Vienna and its surroundings capture one of the most affluent regions of all over Europe. On the other hand, CE region is growing fastly with one of the highest -- or if not the highest growth of income per capita in Europe. And this you see in statistics of how many flights a person takes a year. This is rising strongly in the countries of Czech Republic, Hungary and Slovakia. And this is to the benefit of us here at Vienna as Vienna Airport offers, by far, the most frequencies in this region. I would -- yes, no, I do not keep it as quality is important as it secures -- if we are a punctual airport, then Austrian Airlines is a punctual carrier. And the more punctual Austrian Airlines is, the more happy Lufthansa is with Austrian Airlines and secures the capacity of Austrian Airlines and allows our home carrier to grow. And as I said, Austrian has almost 50% market share. So any additional capacity Lufthansa gives to Austrian Airlines is, of course, to the benefit of Vienna Airport. And you see here Austrian Airlines is, by far, the most punctual airline within the Lufthansa Group. Finishing with 2 comments on sustainability. We are operating our activities here, Scope 1 and Scope 2 already CO2 neutral according to the ACAS classification. And our CO2 -- sorry, our Scope 2 emissions are already 0. We operate now the second biggest photovoltaic plant in Austria. When we started operations, it was the biggest. The other 50% of electricity requirements are CO2-free, thanks to hydropower certificates. There were many, many energy efficiency measures implemented in the last years, which especially had a direct positive impact to P&L, bringing the cost down with making all the buildings more energy efficient. We use district heat, e-mobility, of course, and mainly it's about the topic of using new technologies, which reduce the energy input of all the buildings, be it office buildings, be it terminal buildings, be it energy necessary for the airport operations. With this, I would conclude, and I'm happy [ to leave some ] time for some Q&A.

Thank you so much, Bernd, for presenting Vienna Airport to us. So now I really feel like flying off on vacation listening to you. So ladies and gentlemen, we are now happy to take your questions. [Operator Instructions] And with a view of the queue, by now we have no virtual hands, but there is a question in the Q&A section. So the question is, in the first half of 2025, Vienna Airport reported a meaningful rebound in passenger numbers and solid financial metrics despite challenging global conditions.

Yes. Well, nice summary of our development. Yes, as a picture, what I want to leave is that the COVID rebound is behind us, and we are back to this structural growth phase of European air traffic in Q1 -- in H1. It was -- I see that another question comes in or further question, but I finish saying that we are back to the structural trend growth where H1 was quite representative, I would say, with increase of 2.7% in Vienna. Which segments are recovering fastest and where do you see greatest upside? When we would split our business in aviation and non-aviation, then over the next years, non-aviation would recover faster or would show higher growth rates than aviation. Main trigger is the opening of the Terminal 3 South expansion where simply when you increase space for shopping and gastro outlets by 50%, this will trigger a substantial increase of rental income from shopping and gastro. And this should give a big boost to the non-aviation business. This is the reason why non-aviation will be faster growing than aviation. When we only look at the aviation business, then I would see -- and if you mean talking about different regions, then I would see Asian traffic to recover or to show the strongest growth rates. In H1, Asian traffic grew by 30% as, one, it's still a bit of a legacy of COVID as long-haul destinations were later -- were coming back later than traffic within Europe. But we saw new airlines coming to Vienna. We saw existing airlines from Asia increasing frequencies to open new destinations. So Asia shall bring the highest growth. So the region in the next year showing the biggest growth rates. Competitive -- question continues. How does our competitive position look with other Eastern and Southeastern European airports, connectivities -- with respect to connectivity services and incentives? Good question, and thanks for answering this. Yes, this announced to shift their capacities from Vienna to Budapest or to -- and to Bratislava. Nevertheless, I would say that competition between the 2 airports is -- there is practically no competition. Talking about competition, I would say, Munich and Zurich and later Rome are our competitors, meaning other hubs within the Lufthansa network where Lufthansa, when thinking of adding a Chicago destination out of their hubs, then it's about quality, then it's about fees. Where to put the plane to operate a flight? Munich-Chicago, Vienna-Chicago, Zurich-Chicago or Rome-Chicago? The low-costers are going now to Bratislava. For sure, Bratislava is cheaper than Vienna. For sure, Budapest is cheaper than Vienna. All the second-tier destinations of low-cost carriers are cheaper than Vienna. But our competition is Frankfurt, Zurich, Munich. And here, we are cheaper than our competitors in the Lufthansa network. I guess that's the main answer to your question. If some low costers increase capacities to Budapest or Bratislava, yes, nice. But when you want to come to Vienna, then you fly to Vienna. When you go to Bratislava or Budapest, then you fly to Bratislava or Budapest. But for transfer traffic, the competition within Lufthansa is the most important thing.

So next question. Do you want to read or shall I?

I don't see it, so please you.

Okay. So it's a quite long question. So recently, Ryanair dropped 3 Vienna routes and demanded lower airport fees and regulation setting cost pressures. Wizz Air also plans to cease base operations in Vienna by March 2026, complaining about airport costs. How do you respond to these pressures? Will you adjust your tariff structure, rebate terms or negotiate bilateral agreements?

No and no. We cannot negotiate bilateral agreements as the tariffs stipulated in the aviation law are the same tariffs for each and every airline. As an airport operator, you are more flexible with incentives, which are kind of discounts, which we offer for new destinations for the increase of frequencies and for the increase of passenger numbers, for new long-haul destinations, you see it here. But we do not plan any significant changes to the incentive scheme nor can we do it for tariffs as such. Anyhow, the tariff formula leads to a tariff decline next year, which increases the competitiveness of Vienna as a destination. And yes, let's see how many -- how much capacity is really lost next year. The low costers are threatening -- or put it that way, the low costers cannot move out from every country and every airport they are threatening to fully move out. So let's see what capacity is really lost. But we react with the cost reduction and efficiency program here, which is already started to be implemented to cash in the financial effects from the lower capacities and work to attract new airlines to come to Vienna when -- if carrier A is not operating in a certain destination, then carrier B is stepping in and of course, are happy for any uptick, especially of our home carrier Austrian Airlines. And you see here on the right-hand side of the chart a couple of airlines already announced to increase operations out of Vienna or even come newly to Vienna. Because [indiscernible] [ 5% ], which is now up for competition between other low-cost carriers or broadly speaking, new airlines in Vienna. And many, many now look if certain destinations make sense from a business perspective for the airline.

Thank you so much, Bernd, for answering. So the investor said, thank you as well. So -- and he's done with his questions. And it seems we did not receive any further questions. And in view of the time, I guess we're quite on point. So thank you, everyone, for your shown interest in the Vienna Airport. And also a big thank you to you, Bernd, for, yes, representing Vienna Airport to us. So from my side, thank you for being your host today. And final remarks, Bernd, belongs to you.

Yes. Thank you for the interest in the company. Thank you to Airtime for the platform and the Austria ON AIR product. Happy and glad to participate. And to all investors, this was a more comprehensive slide selection of our roadshow presentation. Looking at the Investor Relations section of the homepage of Vienna Airport, you'll find a more detailed roadshow slide deck called Investor Presentation. When I -- when you got some appetite or when it rose some questions, please contact me and/or look into the more comprehensive roadshow slide deck to get further information. Happy to meet you on any other roadshow occasion, otherwise, via Airtime.

Thank you so much. Bye-bye.