Fraport AG (FRA.DE) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Haley, your Chorus Call operator. Welcome, and thank you for joining the conference call of Fraport AG. [Operator Instructions] And I would now like to turn the conference over to Christoph Nanke, SVP, Head of Finance and IR. Please go ahead.

Thank you, Haley. Well in time, extraordinary time still. I have with me at the table, our CEO, Dr. Stefan Schulte; and our CFO, Dr. Matthias Zieschang. Just to let you know, we all have been tested negative just ahead of the meeting. So I think we are well prepared, probably something we will get more and more used to these days. And so I think we are ready to take off. Dr. Schulte, please.

Yes. Thanks very much, and good afternoon, ladies and gentlemen. Warm welcome also from my side. So last time we spoke back in November, we were just before the second lockdown period. The situation today, unfortunately, hasn't changed very much. We still are [ waning ] within lockdowns and are confronted with high travel restrictions across our group efforts. So compared to last November, however, the situation has clearly improved in so far that the long-awaited vaccine has finally been approved and is being rolled out. As a consequence, we expect a continued improvement of the situation with the global aviation market from here on or more precisely latest as of summer, and I stay optimistic that from summer onwards, we will see much better numbers than these days. So that's why we want to split the presentation in 2 parts. First, a review on traffic and financial performance in the past year; and second, and more important, what's ahead of us. So what's our outlook section and how do we prepare for the future. If we start on the traffic review, Slide 5. I think we don't have to go too much or too many details here, but we faced record lows around April and May last year, handling only about 5% of our usual traffic in Frankfurt during the first lockdown period. Yes, ladies and gentlemen, that's the reason we just shared this traffic development with you. I'm glad that we can provide you some good news today about the compensation of the operating losses incurred during the Q2 lockdown, so the first lockdown period from mid of March to end of June. Specifically, the German ministers of Transport and Finance agreed to satisfy the claims from the German airports for compensation of the operating losses that's incurred because we needed to keep the airports open to supply the general population and economy with some needed goods. Financially, it would have been more reasonable to close down the airports to preserve cash. But we kept them open, as wished. Our share in this claim is about EUR 160 million for Frankfurt Airport. To be clear, there hasn't been a commitment on the final amount, but there are positive signals, that around this amount will be compensated at the end, somewhere over the next 4 to 8 weeks, I would assume as best guess at the moment. [indiscernible] there is some visibility how the compensation will take place, probably with only few conditions such as no dividends or bonuses for managers to paid for the past year. Regarding the financials, I'm on Slide 6. The traffic results. And so the traffic decrease, of course, affected the financials very much. [indiscernible] major surprise that total revenues suffered due to the strong traffic reductions recorded over the course of the year at close to EUR 1.6 billion. Total revenues recorded a steep drop of more than EUR 1.7 billion or minus 53%. As we are -- as we were not able to influence the traffic performances, our #1 priority was the controllable items in the past year. As a consequence, we focused on all cost items and also enforced revenue streams wherever possible, like in Retail & Real Estate business. Thanks to our cost management, we were able to offset large parts of the revenue shortfall and achieved a positive adjusted group EBITDA, so an underlying EBITDA without the EUR 300 million staff provision in the area of EUR 50 million. Before reviewing our cost-saving measures in more detail, let me focus on the rest of our P&L first. Bottom line, we saw only slightly decreasing depreciation charges of about EUR 460 million as well as a negative development in our financial result. The latter one was more or less exclusively attributable to our minority investments [indiscernible] mainly Antalya which recorded lower results of about EUR 100 million in the past year. Our group result after taxes and minorities, therefore, was down by more than EUR 1 billion to about minus EUR 660 million. As a consequence of our negative financial performance, despite D&A that we won't propose any dividend payments to our AGM this year. A closer look at our saving programs and cost-saving targets is shown on Chart 7. You'll see that we launched the biggest staff and non-staff cost-saving program in our book history. With regard to staff costs, I can confirm today that we achieved our target or probably better. All contracts are signed to reduce our Frankfurt labor force about 4,000 people. This number also excludes natural fluctuation, which will come on top. By year-end 2020, we are already more than 2,000 people leaner when compared to year-end 2019. A further 1,200 employees will leave the company by end of Q1 this year, latest end of Q2 this year due to our voluntary programs. By end of this year, we, therefore, will be a minimum 3,500 employees leaner company. Our 4,000 employee target we expect to achieve over the course of the next year. In addition to staff reduction target, we continue with the short-term -- short-time working scheme for large parts of our Frankfurt staff. Moreover, we signed an annex to the collective bargaining agreement for our parent company staff, which will postpone wage adjustments. As a result of the measures taken, we were able to reduce our Frankfurt staff costs by about EUR 270 million between Q2 and Q4 last year. For the current year, due to the short-time work and lower staff number, we expect staff cost savings to exceed EUR 300 million compared to the past year 2019. Our staff cost target of EUR 250 million staff cost savings we expect to achieve next year. Our second priority is and was to take off non-staff costs. Here, we focus to bring down all non-imminently needed cost positions such as -- as much as possible. Moreover, we closed down infrastructure wherever reasonable. In total, we therefore, saved about EUR 100 million non-staff costs between Q2 and Q4 last year. Hence, we are well on track to achieve our EUR 100 million to EUR 150 million non-staff cost target this year. Our third pillar of countermeasures is to take out CapEx. Slide 8 provides you an overview on our achievements last year. In March 2020, we still guided for a CapEx figure of about EUR 1.5 to EUR 1.6 billion. At the end of the year, we invested (only) about -- but (only) about EUR 1.15 billion or EUR 400 million less when compared to the midpoint of our guidance. The biggest savings here, we were able to achieve in international activities. We, for example, deferred all non-started investment programs, mainly in Lima, all reduced nonessential CapEx. Adding our cost savings on Chart 7 and 8 together leads to cash preservation of just under EUR 800 million in the past year. On top, we also reduced OpEx in international activities by more than EUR 250 million, thanks to saving programs, but also due to lower turnover-related concession fees. So we saved OpEx and CapEx on group level of more than EUR 1 billion in the past year. Taking also the canceled dividend into account so that means a total cash preservation of roughly EUR 1.2 billion in past year. More details we will get later on, on financials and balance sheet from Matthias. Leaving our part -- our review part behind, moving on to my next topic, our outlook or how do we see the future and how do we position ourselves. I'm on Chart 9. Our best assumption and clear conviction is that once free air traffic or the possibility to fly without limitations is being restored, we are going to see an immediate acceleration of our business development. Where do we stand in this progress today? These days governments around globe are preparing plans on how to reopen the markets and ease the current lockdown restrictions. While in Europe, it will firstly be the opening up of retail stores, [ hydro ] facilities and so on, it's clear the freedom of travel will follow close behind. First indications we are getting point to an easing of air travel around in May, as this is the case for the U.K. or for the summer season in general. The question of the precise timing, however, will be linked to data rather than dates. Most important here are the infection rates, but also the number of severe cases form large parts of the decision taking. Thanks to the continued rollout of vaccines and more vaccines being licensed and available, our expectation is to reach a high level of immunity in Germany over the course of this summer. Maybe late summer, that's a little bit open, latest by Autumn. Certain countries like the U.S. or U.K., which are key markets for us in Frankfurt, but also for our Greek, Turkish and Bulgarian investments [indiscernible] and reach herd immunity before Germany and the rest of you. In addition to the global positive immunity, we also expect the introduction of so-called [indiscernible] green digital passport. That will allow for air traveling once people got the vaccine or got tested negatively via PCR or antigen test. So our key expectations, therefore, is that we will regain lost passengers and expect a full recovery of our group airports between 2023 and 2026 subject to the airports' passenger mix. Here, we continue to expect that short-haul traffic will recover before long-haul traffic and that leisure traffic will recover before business traffic. In addition, we expect that main airports or hub airports are better positioned than secondary airports driven by the high focus of airlines on cash and high-yield routes. The hub airports like Frankfurt have clear advantage over the -- over other airports because of this strong catchment area, the strong cargo business. The high number of direct flights offers a strong connecting possibility but also because of the concept of intermodality. What does it mean for us as Fraport Group? I'm on Slide 10. We launched numerous cost savings and restructuring programs in this past year and have continued several steps that we already started in the past. As the world is still progressing on its way to the new normal, we ourselves are also progressing on our way -- on our way to the new Fraport. There are 3 main points: operational excellence, cost control and to be greener. What is behind these topics? And I'm on Chart 11. Fraport always used to be a service providing company. We are rethinking our services and processes offered along the needs and along the customer needs and will follow more the approaches, benchmarking, digitization and sustainability. Here, one of the biggest pain points in the past was the situation along the security checks in Frankfurt. These days, we are close to finalize an agreement to finally restructure the security check business in Frankfurt. More precisely, we have, in general, agreed to come back into the -- so with ministry on -- on federal level to come back into the management position, which used to be the Federal Police in the past. Going forward, we, therefore, will take the decision on the following major points. How many security lanes will be opened at which day, which time? How we'll be in charge for carrying out the security checks? And how is the procurement process of the security equipment carried out? So the Federal Police will continue to supervise our motions, but we expect a clear improvement of the security check situation thanks to the restructuring and thanks to the contract we hopefully can sign over the next weeks. Our best assumption is to come back into the management position by 2023, following a transition period of 2.5 years. Moreover, with our operational excellence approach, we will continue to focus on future concepts such as biometrics or remote business operations to offer our processes leaner, faster and more convenient for our customers. Another big step ahead here was yesterday as our Supervisory Board approved further restructuring of our Ground Handling business in Frankfurt. Within the Ground Handling business, I'm on Slide 12, you are aware that competitive pressure has increased for many years. So most European airports are with -- [indiscernible] organized the Ground Handling business already in a subsidiary. And that's the way we also want to go. And that's really necessary. In order to strengthen our competitiveness in ground handling, especially in the ramp handling, we will bundle the business services in a new subsidiary, and therefore, form a new sustainable structure. The new subsidiary will run the Ground Handling business entirely in the future and will concentrate solely on ground handing. This will enable the subsidiary to act much more flexible and focus on market requirements with better cost positions than the current global handling structure, which is better than the parent company up to now. As a result, we will secure the high quality of ground handling services at Frankfurt Airport and the number of staff in the long term are the start of a new subsidiaries expected from 1st of January next year, but further negotiations with workers' consent. So I have to follow on. The details will be brought out as mentioned. Along with operational excellence and the restructuring of our business, we continue our focus on strict cost control. As already mentioned on previous charts, we have a clear target to be a leaner and more agile company. The focus, therefore, will remain on staff and non-staff cost items, which do not serve our day-to-day business needs. Out of our total 4,000-employee reduction program and the 1/3, 2/3 split in between operating administrative staff, we clearly expect to reduce our labor force by more than 3,000 employees also in the long run, even with traffic -- when traffic recovers. Moreover, we continue with our review of our CapEx program. The target is to return to clear free cash flow positive area and to delever our group. The deleverage is also needed to regain financial flexibility and to take advantage of distressed assets and valuations as they are in the market in these states. A topic that was less in focus last year, but we expect to gain interest going forward is the third pillar on our way to the new Fraport. Chart 14, focus on us becoming greener, or the focus on ESG in broader terms. Already with our full year presentation last year, we showed you a slide about CO2 emissions here in Frankfurt, emphasizing the importance of reducing emissions. The same chart is also shown in the appendix of this presentation, pointing to a further sharp CO2 reduction in the past year. Here, we also need to be fair that most of the CO2 reductions last year were driven by the low traffic volumes and the closure of infrastructure. But nevertheless, we are going ahead with our targets. And as a consequence, we want to reduce our group-wide CO2 emissions to a level of 125,000 tonnes by 2030. As a comparison today, we [ disclose ] 170,000 tonnes for the past year. For Frankfurt Airport in specific, we want to reduce our emissions from 130,000 tonnes today to 80,000 tonnes by the year 2030. By 2050, we finally want to be CO2 free in Frankfurt. Although we achieved those targets, firstly, reducing our own emissions as much as possible, we want to make use of environmental-friendly products with a lower CO2 consumption. Secondly, while generating our own CO2-free green energy, here measures contain the use of further rollout of photovoltaic plants on the airport, but we are also in advanced talks to partner with a wind plant provider. The latter one will serve as a big lever to generate large parts of electricity we need on a sustainable basis. Let's move from here on to the international activities, to our international airports, and I'm on Slide 15. Ladies and gentlemen, we are somewhere honest to be quite open. We are really proud on our team in Greece. What they achieve is really great. But take our time. It took our team less than 4 years to fix all 14 airports and to fulfill all contractually agreed CapEx obligations. From a logistic point of view, the constructions were so far complex as the airports are scattered over 11 islands and the Greek Mainland. In total, we constructed 5 new terminals, refurbished and expanded existing terminals, creating new apron and retail areas plus affiliated land and asset infrastructure. The Greek airports are now ready for future growth and are on their way to become an important financial driver to the group. For this year, we expect the Greek airports to also see a quicker traffic recovery compared to Frankfurt. Greece on the one side has a more seasonal business than Frankfurt. Here, the high season is Q3, and we also expect the market to be partly opened again in Europe. On the other side, Greece has a clear leisure and short-haul focus, which leaves the airports well positioned for quicker recovery. Financially, thanks to the completion of the CapEx program, we also see higher charges at all airports as of this summer. So everything is set for good traffic and financial recovery. Regarding our plans to compensate the force majeure event, we are also well on track to have a position outcome here. Once we have a final result, we will communicate this accordingly. Our Brazilian airports are shown on Chart 16. Comparable to Fraport Greece, also Fraport Brazil is on its way to become an important financial driver of our group. This year, we expect the final element of the Brazilian CapEx program, the runway extension in Porto Alegre to be completed. As a consequence, we expect our proposal to be free cash flow accretive as of next year. Traffic wise, we are also seeing a quick recovery in Brazil. The country itself is simply too big to [ avoid ] for air traveling. Also the high share of domestic traffic points to a quick recovery for the Brazilian airports. We already see this today. Financially, the contractual framework in Brazil has also proven to be very investor friendly. The airports in Porto Alegre and Fortaleza were among the first airports to be compensated for the losses incurred due to the COVID-19 pandemic. Hence, airport charges at Porto Alegre were clearly raised and concession payments across the airports are being canceled until the rebalanced amount of about EUR 30 million is received. An update on our second LATAM investment, Lima Airport is provided on Chart 17. In Lima, we started -- we started to construct the second runway and the new tower last year. Compared to our forecast amount of about USD 500 million, we were able to save some 10% and are expecting an investment volume of about USD 450 million. The investment will be finalized in 2022. So less than 2 years from now. In addition to the airport expansion, we will also need to go for a new terminal in Lima. Here, the tender process has meanwhile started, and we expect to take a decision on the project in second half this year. So simultaneously, we continue with our claims to extend the terminal construction time line and to further defer concession charges. A positive rebalance. We were already able to announce our Turkish investment in Antalya in February. To compensate for the financial losses from the pandemic, the concession was extended by 2 more years until year-end of 2026. The financial terms of the additional 2 years are unchanged to the existing contractual framework and come without conditions. Financially, also positive is the deferral of the 2022 concession charge into the year 2024. So no charges next year, but EUR 200 million in the year 2024. Ladies and gentlemen, let me conclude my part of the presentation with our outlook chart on Page 19. As mentioned already, I stay optimistic that the vaccination process will go ahead in Germany, but also in Europe. And the number of COVID incidences will come down. So less people will die. And therefore, markets will reopen somewhere during the course of early summer or around summer then, and we will see much better traffic numbers. That's the reason that in a good case scenario, we therefore expect a recovery of up to 25 million passengers. If you compare the 25 million passengers with the 18.8 million passengers for the year 2020, it just looks like plus -- only plus 6 million passengers, but you have to take into account that we had 2.5 very good months in the year 2020 before COVID appeared. So at the end, it's more than 10 -- 12 million passengers compared to -- increase compared to the year 2020. And that means we need for this already a strong summer business -- a strong increase in summer business on the European traffic. And that's the reason that depending how the vaccination process is going ahead and at what time markets are opening up, our guidance at the moment is somewhere in between -- below 20 million up to 25 million passengers because we need for this a strong recovery of the European traffic somewhere in the summer. The intercontinental traffic will recover a little bit later. At least from today's point of view, will be first on the main routes. For subsequent years, so from 2022 onwards, we remain much more confident and much more optimistic to see a stronger traffic recovery. This year, it's not the question of recovery. This year it's a question of the timing of the recovery, which is a little bit more difficult and which forces us to be much more flexible than the next years. For Frankfurt, we continue to expect a traffic recovery to this -- to the 2019 levels by around 2025 to 2026. Financially, thanks to a better traffic performance expected for our international activities, we expect a clear improvement already this year. EBITDA share, therefore, amount to about EUR 300 million to EUR 450 million, bringing operating cash flow back into a positive area. Due to the continued high depreciation and amortization and a negative interest result, we expect EBIT and EPS, so earnings per share to remain negative this year. So thank you very much for your attention, and now Matthias will come with more financials.

Yes. Thank you, Stefan. Good afternoon, ladies and gentlemen, and a warm welcome also from my side. Let me begin my presentation today with one of the most important financial topics in the past year. On the Slide 21, you see our liquidity charge. While our group cash burn was probably the most frequently asked question, the impact on liquidity and the ability to refinance our sales strength closely behind at second place. On Slide 21, you see that in the past year, we were able to assume significant amounts of fresh money to our group. Despite the negative free cash flow of EUR 1.4 billion and repayments of debt, our available cash reserves increased by more than EUR 1.4 billion to EUR 3.1 billion. We, therefore, took on some EUR 2.9 billion or more than 50% of current market cap. In addition to the significant demand for Fraport debt, we were also pleased to see that our average group interest rate dropped by about 40 basis points to 2% in the past year. Thus, we clearly saw and continue to see very good appetite for Fraport debt in the market. The favorable conditions were also a major reason to continue with our funding activities. In the first 2 months of the current year, we, therefore, signed another EUR 500 million of fresh money to Frankfurt. Up next, we also plan to issue a new bond, presumably over the next few weeks. The target is not just to cover our current negative free cash flow, but to fully finance our future expansion CapEx needs and to increase our financial flexibility. Again, how do these funding activities fit into our repayment profile? Now I'm on Slide 22. You can see that the repayment chart remains well balanced with annual repayments in the area of EUR 400 million to EUR 800 million. From today's perspective, the biggest annual repayment is due in 2027 due to our last year's bond issuance. Already before, we will be through with our Terminal 3 project and also expect traffic levels to have well recovered. Our free cash flow reconciliation and our group indebtedness are shown on Chart #23. Due to the reduced traffic levels, our operating cash flow was negative in the past year. Despite our CapEx saving measures, which Stefan previously mentioned, we faced continued high CapEx due to our expansion activities. As a result, our free cash flow ended the period under review clearly negative at minus EUR 1.4 billion. Hence, our group net debt reached a level of EUR 5.5 billion, as we guided you for with our interim results last year. Due to our negative group result, our group equity declined to EUR 3.8 billion and our gearing ratio correspondingly increased to 150%. Our CapEx and net debt outlook for this year is presented on Chart 24. While other CapEx in Frankfurt is expected to go down towards our sustainable maintenance level of about EUR 200 million to EUR 250 million, the completion of the CapEx programs in Greece as well as in Brazil will also lead to lower CapEx spending this year. In Greece, we are paying the final bills these days and also our Brazilian expansion CapEx will come to an end this year. As a result, we expect Greece to be free cash flow positive this year and Brazil as of next year. On group level, the CapEx reduction in Frankfurt, Greece and Brazil will be nearly equalized by the expansion CapEx in Lima this year. As a reminder, maintenance levels in Lima are only about EUR 10 million per annum. Due to the expansion CapEx, we expect an increase in Lima CapEx to EUR 200 million to EUR 300 million this year. Due to this increase, our group CapEx will remain broadly unchanged, so between EUR 1.1 billion and maximum EUR 1.2 billion. Let me highlight here that this level is clearly below our old pre-COVID guidance. Taking the cash out for the severance payments and our operating cash flow into account will mean that our group net debt will grow grosso modo by another EUR 1 billion this year. Moving on to our segment performances last year, starting with Aviation on Slide #25. Revenue of the segment was clearly impacted by the reduced passenger traffic in Frankfurt. At EUR 441 million, respectively, minus 57% revenues of the segment, however, performed slightly better than the pure passenger development of minus 73% in Frankfurt. The key drivers for the better revenue performance were non-directly passenger-linked services, such as landing and takeoff charges but also security services. Still, revenues declined by more than 50% of EUR 586 million in total. Thanks to our countermeasures, we were able to offset about EUR 130 million of this amount. Here, it is also worth to point out that all of the cost savings occurred in the second to fourth quarter of the past year, because in Q1, everybody expected, again, a new passenger record in 2020, and we have been fully on the gas paddle. At minus EUR 184 million, EBITDA nonetheless was clearly negative. Likewise, our ROFRA, our return on invested capital dropped into the negative area. While our financial outlook for this year is more optimistic, we continue to expect negative EBIT, and therefore, also a negative return on invested capital. As this situation is not acceptable in a regulated business, where fees need to immediately go down upon an outperformance of the allowed return, we also need to address this significant under earnings situation to our airline partners, will go for a reasonable charge increase next year. At this point in time, we are still in the process to prepare our final consultation documents. Therefore, we will need to communicate our pricing expectations to our customers. First, our commercial segment, Retail & Real Estate is shown on Slide #26. Despite the strong passenger decline in Frankfurt, the segment revenues, especially within our Real Estate subdivision performed very resilient. At EUR 295 million, segment revenues were only down by about 42%. Here, the real estate revenues remained almost flat at EUR 163 million. Within the pure retail business, revenues were down by 64%, and therefore, still better than the pure passenger development of minus 73%. As with the previous quarters, retail revenues were supported by more stable advertising revenues, which recorded only a decline of about 50% to EUR 22 million. Excluding for advertising revenues, also our shopping and services revenues performed slightly better than the passenger numbers. At EUR 57 million, the 2 revenue streams recorded a drop of 68% compared to minus 73% passengers at Frankfurt Airport. Shopping and services revenues, again, were positively impacted by the application of minimum annual guaranteed rents. Due to the more stable revenue streams, also our retail per passenger key indicator grew sharply to EUR 4.73 or plus 44%. Looking at the Q2 to Q4 period exclusively, retail revenues per passenger even exceeded the level of EUR 6 and therefore almost doubled compared to the same period last year. Thanks to the resilient revenue performance and good cost management, the segment was able to post a clearly positive adjusted EBITDA in the area of about EUR 230 million. Also this year, we expect the segment to contribute positively to the group performance. Now coming to our final Frankfurt segment Ground Handling, which is shown on Slide 27. Comparable to Aviation and Retail & Real Estate, segment revenues in Ground Handling performed slightly better than the pure passenger business in Frankfurt. At EUR 319 million, segment revenues were only down by 55%. Key drivers for the better revenue performance were, again, non-directly passenger-linked charges such as maximum takeoff weights and movements. Still, revenues declined by almost EUR 390 million. From this amount, we were able to offset about EUR 200 million by lower OpEx, mainly between Q2 and Q4. At minus EUR 126 million, adjusted EBITDA in [ Antalya ] was clearly negative. Despite the strong savings measures and higher charges for the usage of the central infrastructure this year, we need to further restructure the business in order to maintain the future of Ground Handling inside the group. [ Here, ] discussions with the Workers' Council have already started, and we will keep you updated on the progress. For the past year, we, therefore, achieved total Frankfurt savings between Q2 and Q4 in the amount of EUR 368 million. The corresponding chart is shown on Slide #28. Annualizing these cost savings will mean a reduced OpEx level in Frankfurt of just under EUR 500 million. Here, large parts are attributable to the application of short-time work and the already realized reduction of employees in 2020 with an annualized amount of more than EUR 300 million. This figure will be replaced as of next year by our sustainable staff cost-saving target of about EUR 250 million when we have 4,000 full-time equivalents less on our payroll. Thanks to the cost-saving measures initiated in the past year, the continued use of short-time work this year and the ongoing reduction of employees, we are also able to lower Frankfurt EBITDA breakeven point to a level of 18 million passengers or 25% of our full year 2019 traffic, this means passenger numbers. On the Slide #29, you see the corresponding chart of Frankfurt EBITDA levels without considering, of course, the staff provisions. In Q1, we still run the business at a regular cost base. As described before, our cost countermeasures largely began as of the second quarter. In August, finally, we were able to post breakeven, again, handling about 1.5 million passengers or equivalent to 50,000 passengers per day. Extrapolating these results to a full year will mean an EBITDA breakeven at roughly 18 million passengers in Frankfurt. As with our Frankfurt operations, we also took comprehensive countermeasures for our international activities. I'm now on Chart #30. Yes, we focused on 3 main pillars, like in Frankfurt, OpEx, CapEx and on top of this, compensation. Thanks to the lean asset management models, we were able to take out OpEx at international activities on a very large scale. OpEx reductions were also supported by lower variable concession payments. Regarding CapEx, Stefan already covered the main points. We will also continue to work on these items in the future. On compensation, similar to Frankfurt, we also filed claims to compensate the losses incurred due to COVID-19. As Stefan already mentioned, we meanwhile received the approvals for our Brazilian and Turkish claims. Also for Lima, we received first approval to defer fixed concession payments. In addition to Brazil, Turkey and Lima, also our Bulgarian and Slovenian investments received compensation payments in the amount of EUR 4 million to EUR 6 million. At Fraport U.S.A., we also received the approval to cancel some of the minimum lease payments in the past year. On the next Slide #31, you can see that thanks to the countermeasures taken, all international holdings, except for Fraport Slovenia, generated a positive EBITDA. Despite the low traffic numbers handed, the international holdings contributed in total some EUR 100 million to group EBITDA. Slide 32 shows you the segment overview of international activities and services. On the one side, you see the clear revenue reduction. While on the other side, you also see the significant reduction in underlying OpEx. At EUR 326 million, OpEx was well below the previous year figure of roughly EUR 580 million. In total, the segment, therefore, achieved an adjusted EBITDA of EUR 128 million and was besides Retail & Real Estate, the major driver was a positive adjusted group EBITDA of EUR 48 million. Bearing our countermeasures in mind also means new EBITDA breakeven levels for our international activities, and I'm now on my last Slide 33. As you were already able to see on Slide 31, Twin Star turns EBITDA positive at about 1 million passengers, while Ljubljana and Slovenia need some 4.5 million passengers, should generate a broadly breakeven EBITDA. Greece, which was EBITDA positive in the past fiscal year needs only about 7.5 million passengers or 25% of the 2019 traffic numbers. Fraport Brazil needs about 5.5 million passengers or 35%. When comparing this guidance with the figures on Slide 31, please bear in mind that Fraport Brazil was positively impacted by the rebalance of COVID-19 losses in the past year, which led to a EUR 30 million higher EBITDA, which we also expect now in this year so this compensation payment. The lowest breakeven point at Lima at about 10%, which is really extraordinary of the traffic we recorded in the fiscal year 2019. On the right-hand side of the chart, you also see our passenger expectation for the current year. You see that we expect all international activities to exceed the needed passenger levels to generate a positive EBITDA number. Hence, we are very confident to achieve the target ranges for our group EBITDA outlook of EUR 300 million to EUR 450 million, depending on the progress of vaccination and the lifting of travel restrictions. Having said this, ladies and gentlemen, I'd like to conclude my presentation, and I'm now looking forward to your question. Thank you very much.

[Operator Instructions] And the first question comes from the line of Ruxandra Haradau-Doser of Kepler Cheuvreux.

Can you hear me now?

Yes.

Okay. 3 questions, please. First, my initial understanding was that key employees leaving the group breakdown in 50% administrative staff and 50% Ground Handling staff. Has this changed? I'm asking because you mentioned on Slide 13 that 3,000 from the 4,000 FTEs leaving will be sustainable. And I would expect the employees in the Ground Handling division to be hired back at the lower cost subsidiary once traffic recovers. Second, considering the planned cost savings, what tariff increase would be required in order to earn the cost of capital in the regulated business once traffic recovers to pre-crisis level? And finally, some airports like Stuttgart are currently working on implementing social distancing technology in the terminals. What is your view on social distancing and crowd management requirements post-COVID? And related to this, do you expect airports to be able to operate above nominal terminal capacity post-COVID as it was the case in Frankfurt pre-COVID?

First of all, thanks very much for those questions. First, let's get through the crisis, and let's see that we get 2021 and then 2022 done. And thereafter maybe 2023, you could come to a point where social distancing technology post-COVID could be really a topic. Before then, I don't see this really as necessary. So there's still a discussion ongoing, what will be the processes to organize, what are the requirements for airports, we need to have some protection, no protection and so on or not. We have to cover our faces and all those topics or do we have to have a social distancing technology in place. From today's point of view, I would say, no. There's no requirement for social distancing technology in place. But what exactly the new standard will be in the future, we have to see, and it's -- you cannot discuss this just on airports, then you would have to have a much broader discussion, take concerts, take other cultural events, take the underground system and so on, take the fast-speed train section, so the railway. So this discussion will be in front of us, but I don't believe that we will come to a social distancing technology as a requirement. Regarding your first question, ground handling and administration, so the question on the 4,000 employees, I don't know exactly whether we have a mismatch, but I thought we were -- there will be more on 1/3 ground handling and 2/3 administrative and logistics and so on and so on. So that's the reason that from our point of view, minimum 3,000 employees reduction will be sustainable because also on ground handling, we will see some efficiencies. So they are working on several topics there and productivity increases. Regarding the second point, increase of aviation, which part or which one...

Yes. When do we meet the allowed return on the cost base? And Mrs. Haradau-Doser, we are now driving on site. So we are just under earning in the moment. We have a negative return on assets, and we have unknown variable. This is a -- the recovery of the number of passengers. And one thing is for clear, we need a combination of higher passenger numbers on one side. We also will go for a reasonable increase of the tariffs in the next couple of years, and we have to see when we are going to fully cover the return on assets. But in the moment, this is not our problem. Now we have to ramp up as soon as possible. We have to come back into the black numbers and whether we achieve full coverage of our WACC in 2025 or 2026, I think this is not, let me say, the key topic in the moment for us. But again, we control just the item fee increase. On the other side, we have to find a well-balanced combination between passenger recovery on one side and the fee level on the other side.

Maybe one more question, please. Over recent years, low-cost carriers have increased capacities at primary airports, like Frankfurt, Munich, Vienna and so on. How do you expect this trend to develop in the fourth to medium term? And what share of low-cost traffic do you target at Frankfurt airport over the next 5 years?

Thanks a lot. We don't have those target numbers in place these days because, first, it's really our topic to recover and to bring up the numbers, so -- to recover the process and to recover the traffic and to be prepared for that one. And our focus for this year, to be quite honest, is really to control cost, to control CapEx, to have a wide flexibility in place because nobody knows exactly at what time this recovery on traffic will happen, the vaccination process and so on. And then we can do a lot of that, we can do something wrong. And there, we have to be really careful. And so for us, at the moment, academic discussion whether the low-cost shares are 2 percent points higher or lower. Let's see who is surviving all of that crisis, which airline, and that's more important for us these days.

The next question is from Elodie Rall of JPMorgan.

Can I ask first on the dividend? So you're not paying a dividend in 2021, unsurprisingly, but when do you expect to return to a progressive dividend policy? Is it from 2022 in your view? Second. We've seen some delays, unfortunately, on vaccine with the suspension of the AstraZeneca in Europe here and there. How would that expect to estimate for the recovery this year? And lastly, on tariffs. How could we think, I mean, just if you could give us an update on tariffs, when should we expect to see some increase in tariffs, some compensation for maybe COVID here, given what we're seeing elsewhere is some increases in other airports at the moment?

Thanks very much. Starting with the third question, yes, you should expect that we will have the discussion already this year on the agenda. And over the forthcome of this year, we will keep you informed there what's going on and which way we are going ahead. But as Matthias mentioned, at the end, it's for us, much more important, and we have to balance these 2 points that we get more traffic in because you can increase the fees by 10% or whatever, it's not helping at all, if you don't have the traffic at the end. So we have to find the right approach on both sides. Traffic recovery, traffic growth on the one side; and on the other side, to have increase on the other side and to find the right mix. So there's a lot -- way out to go ahead there. Regarding vaccine estimates for 2021. I think our outlook and the range is broad enough for that to cover this one, even with AstraZeneca now. Let's -- yes, we know that. So a lot of things are very difficult, if you see the daily news and so on. But if you take it a little bit broader, it's really big progress and the big success for all of us that science is so positive and they've developed such a lot of vaccine already. And at the end, in 2, 3 months from now, nobody will discuss any longer why the process was in spring this year in Europe a little bit slow. Everything can take now 1 month longer, maybe. But at the end, it's not a question that everybody got his vaccine. It's probably more the point at what time the number of dead people are coming down because the number of incidents can even go up. It's really not an issue, if we have no problems with hospitals, and if we don't have problems with too high number of dead people. And that's, I think, in my opinion, the topic, and that can change relatively quickly, and that's the reason I'm more optimistic for summer. People want to fly. Whenever you discuss with people, they want to go abroad for like a vacation. And so I think we'll see a good summer season in Europe. Not intercontinental, that's too early. That's probably next year then. Regarding dividend, there's no discussion on this. It's normal -- it's a clear point that we -- with losses in 2021, we will not propose the dividend payment for the year 2021 in 2022. There hasn't been any discussion on 2022. The general policy you know is in place that we want to pay out 40% to 60% of our net earnings. But what does that mean regarding the level of indebtedness, net and gross? And that's all too early. It depends how we get out of the crisis.

The next question is from the line of Cristian Nedelcu of UBS.

3, if I may. First of all, on the international business on the EBITDA 2023, 2024, could you give us some color, how should that look like versus 2019 levels? And in particular, do you see structural cost savings there, benefits from increased retail space in Brazil or Greece or any deferral of rents as part of the compensation agreements, if you can elaborate a bit on that? The second one, I think in your annual report, you're targeting net debt-to-EBITDA of 5x on a midterm. Now on my calculation, I'm getting somewhere around 6x in 2023. Please correct me if I'm wrong. But could you give us a bit of color how you define midterm? So what is the time line of getting that 5x net debt to EBITDA? And the last one, it's very useful to see the CapEx guidance for 2021. Thank you for that. Could you give us a bit of color on '22 and '23 for Lima and for Frankfurt, what are the expectations of CapEx expenditure there?

Regarding the international business, the guidance that we want to achieve pre-crisis levels, that we believe that on the international business, we are able to do this somewhere in between 2023, 2024. That's the gross number -- gross estimate -- well, not a gross, it's a rough estimate. That way -- so we wanted to give you the idea and the message that from our side, how we see the markets. We will recover on the leisure traffic airports, but also on the South American airports in a much faster way, in a quicker way than on such complicate or complex hub structure, like Frankfurt. We're not prepared today to give more details how the concession [indiscernible] business with retailers in Brazil will develop. Other than this, we can do if we are in a more stable development. That's not topic for today. But the message in principle is we expect a faster recovery on the leisure traffic in general and on the continental traffic. And in the second stage, more the intercontinental traffic. And in the second or third stage, also more the business side. So the recovery on the business side will take longer than on the leisure side. And our main subsidiaries, the international airports are more or less more on the leisure airport -- on the leisure traffic. That's the reason what we should participate on that much more and earlier than on the business side. South America is a little bit different from that. We mentioned it. Brazil, it's much too big. You have to fly. And you see it also during the pandemic now, say, around 55% or something like this of the traffic or 50% of the traffic, even the incident numbers are really high. But you have to fly there somewhere. There's no other chance, and that's the reason, let's say, we'll have a little bit different traffic structure and recovery structure than other airports. And what's very positive and which is probably not reflected in the numbers up to now is the very good progress on the vaccine strategy in North America, especially USA, which could mean that Europe and Germany to North America, that this traffic streams open up earlier. But there's no political discussion on this. We are working on this, that's right. We set corridors, as we call it, testing and so on. But it's completely unclear whether we have returns to be successful on the part, yes or no. Matthias? Can you...

Yes, I take over. First of all, question number three, CapEx expectation or development in the next couple of years. You got from us the guidance for '21, about EUR 1.1 billion CapEx on the group level. And when you think back on our chart in the presentation, it's about EUR 800 million, which we are going to invest at Frankfurt airport and the rest outside, primarily for Lima. And now looking forward, forward means looking to 2022, '23, '24, you can continue with the same level of CapEx on the group, so EUR 1.1 billion until 2024. And also the allocation between Fraport on one side and the rest of the group on the other side is more or less the same. So EUR 800 million for Frankfurt, also for the next 3 years, so '22, '23, '24 and EUR 300 million outside. And from the EUR 300 million, it's in average about EUR 250 million for Lima, and then we have a sharp decline up from '25. Why? Because in '25 itself, we are through with our CapEx Lima. So we have then inaugurated the second runway as well as a new terminal. And also looking at Frankfurt with T3, we are more or less than in '25 ready and have realized the construction. So that up from '25 onward, we have substantially lower CapEx level for the group. If you can directly translate into your second question, the ratio, net debt to EBITDA, which is, of course, linked on one side on the escalation of the indebtedness on the other side of the recovery of the EBITDA numbers. And based on the CapEx projection, which I gave to you and the assumed EBITDA ramp up, which, of course, is directly linked to the passenger recovery, as of today, assuming that at Frankfurt, we will be back on a 70 million level -- passenger level in '25, '26, also having in mind that then our cost level is substantially lower than in 2019 due to our sustainable cost measures, we should go down to 5x in '25, '26. But everything is linked to the passenger recovery.

The next question is from Andrew Lobbenberg of HSBC.

Can I stay you on that matter of deleveraging? Is there any need or is there any benefit to deleveraging quicker? And slightly related to it, is that in your presentation, you spoke about being keen to deleverage to be able to take advantage of opportunities in the market for undervalued assets. I mean, is there any reason that you would want to take other action other than just deleveraging free cash flow to get your leverage down to be able to play? Would you want to sell some assets to be able to buy other assets? Or do you want to raise capital to buy other assets? And then just a simple one on the compensation that you're hoping to get from the German government. Would that go through the P&L? Would that contribute to the EBITDA? And I guess it's excluded from your guidance, but yes, just how would it be accounted?

Andrew, thanks very much. Yes, the compensation would go through the EBITDA. It would be -- it's not included in our guidance. So it would be an extraordinary item. We would flag it out separately, so it's not included. Regarding leveraging, and what you are discussing at the end is, do we need equity, yes or no?

No. Do you want to sell assets as such?

Both ways, yes. We have to monitor the market, and we have to see and to have a close look on the development of the market. So how the market sees the leverage and debt. So we cannot exclude from today's point of view, whether we go for additional authorized capital somewhere over the next years or conditioned capital for the next years, which would be a quite normal thing all companies have. We haven't had that in the past, but we should have the flexibility at least somewhere in the future that we have those instruments authorized by the annual meetings. Further plans. There are no further plans on that. I would not confirm it, but I also would not exclude it for the long term. I can't just tell it. It depends how the markets are developing, and then we have all the options. We have also the options, yes, you mentioned this one where we would say, if necessary, to look whether we could get proceeds in by selling assets. But we would never sell an asset just because of liquidity, if there's a good asset on the table and the fire sale makes no sense. So that depends very much on the how the market is, in general, developing and all the traffic recoveries going ahead and how then the markets are seeing our indebtedness structure and so on. That's the answer. No, yes, no, no. And I can't ever see -- sorry for that. We are driving on site.

The next question is from Jenny Ping of Citi.

A couple of questions from me, please. Just going back to your 71 million passengers by 2026. You have previously talked about potentially sort of seeing 10 million or so business-related passengers to be at least sort of disappearing to a large extent. Has that -- has anything changed which changes your view on that? It doesn't seem based on what you're saying today, that's your base case anymore. Just wondering what has changed there. And then just going back to the EUR 160 million of compensation, you mentioned there's a few conditions, including no dividends. I just wondered how long that no dividend clause is in there for? And also no bonuses, how long they're applicable for? Is it just 2021 or more extended period of time? And then just lastly, to clarify on the cost savings. You talk about the EUR 500 million of annualized cost on Page 28. But am I right in saying that's got some costs associated with closure in there, which, obviously, if traffic comes back, will bounce back. So what we're really looking at is the EUR 300 million of employee-related costs and the EUR 100 million to EUR 150 million of nonemployee costs, so let's call it, EUR 450 million annualized cost savings on an ongoing permanent basis?

Yes. Thanks for your questions. Let me start with the first one on the 71 million passengers 2026. It's a best estimate from today's point of view, that we should have recovered on that level by the year 2026. As I mentioned already on leisure traffic, we believe that we will see a full recovery and much earlier on that side. And you know that on Frankfurt airport, we have 2/3 of our traffic is leisure traffic, 1/3 is business traffic. So on the 2/3, we should be even earlier be recovered, and then we will see further growth from that on. On business, yes, there will be some traffic missing. But on the other side, we are more and more getting optimistic on that side. We see the international -- the global activities of companies are continuing. There's no nationalism on that. We see that more -- midsized companies are more and more active on the international markets, even more service companies are active on that market. And it could be that we see there new segments flying around the world, so -- compared to those in the past and that they are compensating the one or the other business flights, which you will not see in the future, for example, internal meetings or something like this, and which they could compensate on that side. So we are a little bit more optimistic on that side than we have been 1 year ago because you get more and more from industrial leaders and from service. You get more and more the point that as the [indiscernible] virtual formats are, at the end, they really need also for internal meetings to personal contact, and they have to fly to the markets, and they have to meet politicians and other important people. And for this, it will come back, and I'm quite optimistic on that. Regarding the conditions on the EUR 160 million. As it's drafted these days, and we haven't seen the final draft, but as it's drafted these days, it would be just to condition, no dividend and no [indiscernible] or no variable payment for the year 2020. Nothing helps in up to now. But let's see what's the final draft is saying at the end.

Then we had the question about the sustainable cost savings. I have to go back what we realized last year. So on an annual basis, EUR 500 million. We are striving to realize the same number in this year, but it's clear in the very long run, and we cannot continue with EUR 500 million because at the moment, we are also benefiting from the instrument of short time work. But it's a clear ambition to continue with the lower cost base in the company. So we already flecked out EUR 250 million personnel cost all along, plus EUR 100 million, EUR 150 million on the material expense side. So you can expect up to EUR 400 million cost savings all along. Yes, that's the answer.

[Operator Instructions] And the next question comes from the line of Johannes Braun of Stifel.

First one would be a rather technical one on the compensation that you received in Brazil. I mean on EBITDA level, the compensation more or less compensates your losses, but I can see that on the net profit level in Brazil, the result is still steeply down. So I was wondering if there's anything in the financial result or how that compensation actually worked here. Second question, what do you expect regarding the potential compensation increase in Lima? Will those be as generous as the one in Brazil? Then third question. The summer project in Lima, I think last time you indicated that this will be postponed. Now you're talking only about downsizing, no longer postponement. So why is this? And how much will it be downside? I think in the past, you said the terminal would cost $1 billion. And then based on what you told us in terms of CapEx over the next years, when do you expect free cash flow to turn positive now? I think in the past, you said 2023, 2024, but I guess that would be now rather 2025, 2026 or so, depending on the Lima terminal, I guess.

Okay. Those 4. And so different questions, here, and thanks very much for them. Brazil, we can have a look in more detail, but I think it's because we finished the first part of investments on CapEx and then went into depreciation, and that's the reason that probably the depreciation and the interest costs are now up directly on the balance sheet because it's not linked with the compensation. That's not the reason. But we can give you also here -- Fuchs may give you more details later on, if my answer would be incorrect now. But I think that's the way. Regarding potential compensations, reason Lima. The easiest thing is Lima because there is not a big compensation. And Lima is very difficult these days. Yes, there is some conversation on the payment structure and how we have to pay payments and variable payments by -- we can delay the payments over -- I think it was 10 quarters, something that fits, we can shift them through. But it's not a direct compensation, positive wise -- it's positive -- would not be positive or is not positive on the P&L, it's just on the cash flow side. It's difficult to get there more because they have no government or they have a government but just in between government, there will be elections and that has been very, very difficult political situation. It's not very stable these days on those things. On Greece, there, we get -- we are still in good discussions. There are different approaches to make the compensation possible. It would be really compensation in a 3 million digits area, to compensate the losses on the EBITDA and then side, partly on stage 8, partly on the high cost recovery on -- or not cost recovery, but on cost compensation with different instruments. That's under discussion with the government. The first thing seems to be the state aid, which has to be approved by the European Commission, and that process has started. The other things are under discussion and would have to be drafted and then agreed by the parliament. So that will take, in my opinion, at least another 6 months. On Lima, on the terminal project, yes, due to the situation with the government, they are not willing at all, besides 1 or 2 or 3 months, but they are not willing at all to give us a bigger postponement. We haven't been successful on that side. So we just react now in creating the new terminal more modular. It was the first step much smaller than originally planned in a way that we also use the old terminal and new terminal, which is not so easy because we cannot use then the full capacity of the old terminal because with inauguration of the new tunnel, we get new requirements on the full terminal locations so on both terminals, which reduces the capacity of the old terminal. That's not a distressing topic, but it's a topic how many gates we have to have and how many people are allowed on the gate and so on. So that's the reason we cannot go with the first model of the new terminal. We cannot go so small as we would have liked, but we are still discussing an amount of minus EUR 300 million, minus EUR 400 million, something like this for the first step of investments in Lima. That's the actual situation. On free cash flow, Matthias?

Yes, free cash flow, as you mentioned, Mr. Braun, so we -- it depends what is the recovery of passenger numbers in the second half of '23? So if this is more on the positive side, we can achieve free cash flow positive numbers end of '23. If recovery is not so good, it will be finally in 2024. So it's -- in this region, we will achieve on a group level, the free cash flow breakeven point, at the end depending from the faster or not so fast recovery of the passenger numbers.

Okay. And that would also include the Lima terminal, the CapEx for Lima terminal?

Sure.

Of course, in Lima, because in Lima itself, as I mentioned, we are now going in average for EUR 250 million. So for this year, we guided a range between EUR 200 million to EUR 300 million. And also for the next 4 years, so '22, '23, '24, in average, another EUR 250 million CapEx amount in Lima. So it's in total, about EUR 1 billion. And therefore, as long as we are realizing this CapEx program in Lima itself, we will not achieve a positive free cash flow number. But at this point of time, when then latest -- the new midfield terminal is ready, then we are automatically overnight achieving huge positive free cash flow numbers. But in the meantime, all other assets in our portfolio are still generating relatively high free cash flow numbers.

The next question is from Arthur Truslove of Crédit Suisse.

Could you hear me, okay?

Yes.

Yes.

So a couple from me, if I may. So the first one, I just wondered what your latest view on the sort of requirements for people to actually travel in terms of sort of what vaccination status they're likely to need to have in particular for intra-Europe travel in the summer of 2021. And my second question was just in terms of costs for this year. You obviously mentioned that in Frankfurt, you took out around EUR 500 million on an annualized basis in 2020. Clearly, this year, you've got a combination of some part-time work and some permanent cost savings coming in. So you're expecting the sort of total cost saves in the course of '21 to be higher than the total cost saves in 2020 or about the same? And can you give us any color on what your expected number was?

So first on your first question. Thanks very much for that. It's not decided, to be quite honest, especially on the intra-Europe travel, what the conditions there are, what the restrictions are or what the requirements are. It's a big debate amongst the leaders of the different European countries. There are some out. We would like to see a head pass or vaccination pass or something like this. Others are out saying, no, not at all. Test regime or something like. It's open. And probably, it's also the reason that the reasons maybe on the different speed of vaccination in different countries here in Europe, that for politicians too difficult to have a clear position on that these days. I'm quite optimistic, I'm quite sure that in May, the picture will see complete -- will look completely different. So how are that estimated? It will be a mix of, yes, people to have vaccination already. It's fine. Otherwise, there will be a test on antigen, faster test or something like this. So it will not always be a PCR test. And depending where the numbers are, maybe even without a test, but it's open at the moment.

And your question regarding the cost target in '21, it's the same like last year. So we are striving for EUR 500 million less compared to the 2019 numbers.

So just to follow up on that one. So what you're saying there is that you're expecting that sort of short time work for the last -- across the full year despite the fact that traffic is likely to improve through the year?

Of course, we know from the central government in Berlin, it's guaranteed that till end of December, we can make use of the short time work instrument. And so we are using this as long as possible. On top of this, we have reduced number of employees. So it's a combination of both. We are also continuing with the high-pressure on the material expense side. So that's, let me say, based on this annualized calculation for 2019, where we have a proven track record for 3 year quarters. we assume more or less the same amount. This means about EUR 300 million on the personnel cost side or even a little bit more and the rest on the material expense line.

[Operator Instructions] And the next question is from the line of Dario Maglione of Exane BNP Paribas.

First question on border. What is your most likely scenario in your view for border controls in -- outside of Europe? So let's say, a German person is vaccinate this summer wants to travel South America and maybe there are still high infection rate, low vaccination. Can he go there and then return to Germany without the quarantine, do you think, even if he's vaccinated? Second question on ground handling. The Board, you mentioned approved restructuring program. Can you give a little bit more detail in terms of whether there will be some people leaving and whether the existing, the current employees will move there with the same wage or a new wage? And final question on OpEx. You mentioned, over the long term, your target to retain most of the OpEx savings that you will be achieving. But will that mean also lower tariffs in the future because, of course, you have lower OpEx?

Thanks very much. Your first question, if I got it correct on intercontinental traffic, what we expect there? It will be much more difficult to give you any clear expectation on that. We see these days already that those countries are somewhere -- some countries are even open, you can fly, you can fly from Frankfurt to Brazil. So that's possible. It's more difficult to fly to North America. And if you fly as a business customer, you even don't have to go in Germany as far as I know on current time, as long as you haven't been away for more than 3 days, something like this. But I'm not really aware on detail on those. We know some regimes like China and so on, and that's very difficult to go there, but you can go there, but it's very difficult. I would expect that some first routes will be opened in the -- probably more fourth quarter, maybe end of the third quarter, first intercontinental routes, and that will be on a base that you have vaccination or PCR test, but not on quarantine. But that would be my best estimate at the moment. And then it depends on the different countries. If the number of incidents is very high, then this will not be enough. Then of course, you also have to go on quarantine. And -- but that we have to see. It will be an opening up country by country, so it will take time. That's best estimate I have for you on today's point of view. It's difficult to discuss with politicians, to be quite honest, because they are very much focused on their nation, on Germany, in our case. And so they don't have an open mind for those topics. On ground handling, the question was how we restructure that one, what are the transfer processes. In principle, the thing is that we bundle -- that we will bundle the business in the daughter company and the structure of daughter companies, including the management of that business, the support functions, the logistics, the disposition sanctions and so on and that the people are going from the mother company, staying with their contracts in the mother company with a mother company contract, but that they have transferred into the daughter company. So on those people who are already now with Fraport, they we -- we don't -- we are not calculating any savings. That's not our topic. The topic is to come to more flexible structures, to have environments in that daughter company to build up the business over there with [indiscernible] achievement and with processes and structures and so on, which are really market benchmark.

Regarding OpEx, I understood your question that you asked, whether we are going for lower tariffs? I think you mean tariffs on the passenger side. And the answer is, of course, no. Because in the moment, the return on assets is negative. So we have to ramp up. We are far away from a full coverage of our cost of capital. And let me say as long as we are far away from these return levels, we don't think about fee decreases. We are working on reasonable fee increases.

The next question is from the line of Charles Maynadier of Kempen.

I just have one follow-up on the international activities. Given the traffic will still be down quite a bit this year and also next year, how much more compensation you expect to claim on your different assets in the medium term?

That's very difficult. I can't give you a clear answer on that. On Greece, we try to get most of this as a direct approach under the contract and not a state aid because then we want to have the chance also to claim something for next year, but the discussion is still open, and that's the reason I'm a little bit careful on that one to elaborate much more on that. Because if you go on state aid, then it's one time. If you find another way, and that's a discussion, then you could even go for a second time. On Brazil, in -- principally, the same. Nevertheless, there is no guarantee that we can go a second time, but we will go for a second time. We will try it at least to get it, and these are the 2 big topics. In Antalya, that's already covered, even a difficult year 2021, difficult year maybe 2022, whatever, there is no further approach and no further chance. And that is at the end because the other smaller payments we mentioned are more on a higher -- in brackets, voluntary base. Very, very difficult from the contractual point of view.

Again, on Lima?

On Lima, there's no really compensation. The contractual basis in a way that we can try to get anything in front of court, but the position is not so strong. So we will keep it on. We'll follow that one, but I'm not saying from today's point of view that we go in front of the court because we have -- we have to have a closer look on the contract, and we have further topics there. The contract is not so clear on that, that you can get a compensation on that one.

The next question is from the line of Christian Cohrs of Warburg Research.

Just 2 left for me. First, coming back to ground handling. So if I understood you correctly, the transfer of people, this will not be linked with additional restructuring costs. Is this correct?

That's correct.

And maybe then looking -- yes, looking ahead into the 4 to 5 years once traffic is coming back. In the past, even when Frankfurt airport was fully utilized, the division failed to earn adequate return on capital. Do you think with the new structure, you will be capable then in 2025, 2026 once traffic is back at normal levels, do you think that the ground handling division will then be value-accretive according to your valuation scheme?

Yes, in principle, yes. I don't give you a guarantee on the exact number, 2025, 2026, but that's exactly the point why we are doing this and what the target is for the management to go this way. And it's a little bit more complicated because the savings we are getting on the one side on more flexibility in the company or -- so regarding working hours and then shift systems and so on. And this has to be negotiated first on a new table system for new employee people. But third also because [indiscernible] has to put pressure on all our internal service departments here, IT and other things, to come to cost structure and services -- service levels in the future, which are market-driven. So I will also expect and I hope also that we get some pressure on other divisions in our mother company, if I say -- may say it this way. We are challenged, to be quite honest. And so savings have to go into the daughter company, of course, or partly the savings.

Yes. Okay. No, understood. And then just the second question related to your retail business or to the prospect of your retail business. Many retailers are running out of cash and go bust. Have you faced any bad debt as your retail space still fully rented out? And/or do you face, yes, empty space? Or do you face a deterioration in terms and conditions and lower demand from the retailer side? Also with regards to advertising, for instance, I mean, you make quite a decent portion of money also with advertisement.

We have to see. We have a lot of change in tenants in our terminals, and these are strong companies, and they can also bridge different times. And so we -- some tenants left, that's for sure. But on the other side, we have a short list of interest parties to replace them so that we do not expect any troubles on this side.

So 5% of the areas are empty at the moment, but that's a normal rate, that's nothing specific. At the moment, it's difficult to find somebody new, we have a short list, but that takes more time than normal. That's clear. But there's no bad debt.

There are no more question at this time. I hand back to Christoph Nanke for closing comments.

Okay. Thank you, everybody, for participating today. I think we answered a lot of questions, but if you still have, give us a call in IR later today or tomorrow. Anyways, we have crossed fingers for the development of this year for everybody of us, also with regard to help. Have a good afternoon, and yes, I hope to hear from you soon. Thank you.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.