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

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the conference call for Fraport AG. [Operator Instructions] May I now hand you over to your host today, Christoph Nanke, CVP, Head of Finance and IR. Please, sir.

Thank you, Nairobi, and welcome, ladies and gentlemen, also from my side. It's continued to be challenging times, times where we all hope for the end of the war and peace for Ukraine. But today, we are presenting you our full year figures '21 and the outlook for '22. With me at the table, I have Stefan Schulte, our CFO -- CEO; and Matthias Zieschang, our CFO. They will guide you through the presentation and answer your questions afterwards. So I think we can start.

Thanks. Good afternoon, ladies and gentlemen. Before I go into my presentation and make some comments on the recent year. Let me allow to make some introductory with regard to the Ukraine and Russia. To be absolutely clear, you know we condemn the Russian invasion. And at this moment, our thoughts are with Ukrainians who are experiencing unspeakable suffering. And having said this, it's overshadowing our publication today. I think all of us know people from Ukraine or Russia or even have families or friends living there. We also are active or have been active, are active in Russia and have worked with many people together in good relations. So it's really difficult times. We also followed our IR communication regarding our investment in St. Petersburg. And you know that we are in principle at least sticking to our participation there. Why are we doing this? As you know, we issued a loan to our investment at receivables outstanding. I want to retrace this money and don't want to hand it over to the Russian state. The more of the concession contracts excludes any exits. But please be aware that this decision hasn't been easy for us and we cut all business relations. So there's no active business relations this day. And then we have to see what the sanctions mean for us. And however, we have to assess this decision over the time and what options are over the time on the table. It's clear that our motions are not supporting the political leadership in Moscow. We have no proper employees on site. Therefore, there's also no transfer of know-how as mentioned already. And how we have to see what all this means, and what the impact will be. Let's focus now for today on the year 2021. We'll go a little bit more in detail and later on, also on Ukraine, on this war, what does that mean for our business in general. And later on, Matthias will present the financials. If you go on Slide 3, you will find a brief overview of our achievements in the past year. We used 2021 to significantly prepare our group for the future. We made clear progress regarding the restructuring of our processes and staff. We also managed the operational restart of the group. Last year on March 15, we handled only about 25,000 passengers. And today, we expect normally 4x more, so almost about 100,000 passengers, 3x to 4x more, depends on the day. And now that the operational restart was challenging, but we managed to ramp up capacities. We hired back people for operations, and we are also working on further capacity for the summer season, quite optimistic. On the financial side, we have also made strong progress and returned the group profitable again. Here the results were also driven by one-offs, but also these one-offs don't come for free and are part of the management responsibility. We also secured an all-time high amount of available funds, and Matthias will talk about this later. And we took major steps to turn our emissions CO2 [ free ], a topic which is clearly a high importance for us even if you are within a crisis. It will take us long term -- it will take us long to turn the industry, in general, green, but we have to go this way, and we have to be green in the long term to keep the acceptance and, yes, also our license to operate. Let's have first look on the financial performance in the last year. Our group financials are shown on Slide 4. Total group revenues excluding IFRIC 12, recovered by more than EUR 700 million to a level of EUR 2.3 billion. This amount also includes other income from COVID-19 compensation measures and the settlement in security business of, in total, roughly EUR 380 million. Adjusted for these effects, the increase in total revenues was still strong at EUR 385 million to more than EUR 1.9 billion. Key drivers for the increase in total revenues were our international holdings. Adjusted for one-off items, total revenues outside of Frankfurt grew by roughly EUR 210 million or 50%. In particular, Fraport Greece showed a dynamic growth and reported some EUR 120 million higher total revenues on an adjusted basis. With regard to the OpEx, you see on the chart, the effect of our restructuring program. Despite the passenger recovery in Frankfurt and abroad, the underlying OpEx was flat compared to previous year. As a result, our reported EBITDA increased strongly by more than EUR 1 billion to EUR 757 million. So the underlying EBITDA was also clearly up EUR 330 million to roughly EUR 280 million. Here, the share of our International Activities again, grew and reached a level of 68%, a strong result, which again shows the strategic importance of our investments outside of Frankfurt. Bottom line, lower depreciation and an improved financial result, thanks to Antalya led to profit after taxes of more than EUR 90 million. Looking back at the traffic performance in the past year, I'm on Slide 5. The pictures were known to you, so we don't have to go into a lengthy discussions here. However, I think a few points are worth to be mentioned. While handling only 25 million passengers, Frankfurt Airport showed a clearly improving traffic trends in the third and fourth quarter of the year. On a year-round basis, Frankfurt Airport only handled 35%, as mentioned, of 2019 record level, the recoverable rate stood at 55% in the fourth quarter. And then we had to deal with Omicron. With regard to our international portfolio here, we, in general, recorded better development compared to Frankfurt because they are more in the leisure segment. The better performance was, as you are aware, linked to the traffic split. We continue to see a strong recovery on touristic traffic and so-called visiting friends and relatives when compared to business traffic. In Fraport Greece and Fraport Antalya in particular, showed a strong momentum reaching about 90% of 2019 level in October. Also, our airports in Brazil performed too well, where the highest share of domestic traffic is more favorable when compared to an intercontinental hub like Frankfurt. One of the latest trends we are seeing, on Slide 6, you see an update of the first weeks of the current year and near-term prediction. Following a solid traffic momentum at the start of January, Frankfurt Airport suffered end of January and February because of the Omicron variant. Here, it is important to take a look on the passenger development on a weekly base as is done on this slide. While we reported only a recovery of 47% in February, we have seen traffic momentum in Frankfurt now picking up again since end of February. Currently -- I also mentioned it before, we are handling again close to 100,000 passengers per day, and that's around 50% of 2019. Also in our international portfolio, we are seeing increased momentum towards the first 2 weeks of March. This trend as well as the slot request from the airlines provide us confidence for the upcoming summer season. Already for the start of the Easter season in April, we expect passenger numbers to come back to a stronger level of roughly 65%, at least on peak days around Easter holiday. On average, April will be, of course, a little bit lower [ around last ] year. On Slide Chart 7, you see the outlook for the entire summer season. For Frankfurt, we expect that capacities will come back to a level of roughly 80% of the pre-COVID basis. Due to a lower assumed seat load factor, we expect that passenger numbers will recover at a lower -- at a slower rate at about 70% to 75% in summer, but on peak days, probably around 75% to 85%. Please keep here in mind that we are closely monitoring the development in Russia and Ukraine, which may negatively impact our summer forecast even if the direct impact just on Frankfurt business is only 2%, but the indirect effect could be a little bit bigger. Regarding our route network, we expect a strong capacity, recovery of 80% to 90% on European short-haul routes, especially Western Europe should come back to almost 90%, while Eastern Europe should reach about 80%. On long-haul routes, we expect the strongest performance on North American routes. New capacities are expected to almost fully recover compared to 2019. Latin America should recover to a level of 75%, 80%, where the Caribbean will even see higher capacities this summer compared to 2019. Africa and the Middle East should recover to a level of 80% to 85% as well, but most impacted by COVID-19 is still Far East. Here capacities will only recover to a level of 60% in -- of 2019 with China being largely closed, that's at least today's expectations. How do we prepare ourselves for the summer season? On Slide 8, you see the progress of our staff restructuring in Frankfurt. As you are aware, compared to 2019, we reduced our Frankfurt level force by more than 4,000, 4,300 employees exactly. Here a few things are important to note. In ground handling, we have started to hire back people since last summer. In total, we currently employ of the 80% of our 2019 peak summer level in ground handling. More people than in ground handling are currently with us on security company FraSec. Here, we employ more than 85% people of summer -- of 2019 peak summer level. While we continue to hire back people for the operational ramp-up, we simultaneously reduced our staff amounts in administration and semi administration functions. Those reductions are higher paid people, while the rehirings are lower paid people, which also will support our financial recovery going forward. Turning to the page to the progress of our security restructuring in Frankfurt, I'm on Slide 9. On November 19, we entered in a strategic partnership with Sasse Group to transfer a 51% stake of our passenger screening subsidiary, FraSec. And the first step that took over 26% of the shares and will take over another 25% in next year. As you are aware, we will take over the responsibility to manage the passenger screening process in Frankfurt as of next year. The takeover of the management responsibility is very important for us as the process where were far not optimal before COVID. As a result, we needed to reduce our direct involvement in the security handling business. So we found a good partner with Sasse that we don't have to control any longer as a stake. And we can focus on the -- yes, on the management of the processes in total, on investment in new technology, our security technology, on opening up of control lines and having a better performance for the customers and shorter waiting times. That's the most important thing on that side, and that's the reason we are going forward with this way. Talking about security checks and process optimization in Frankfurt, we have meanwhile also decided to relocate the passenger screening lines in Terminal 1 Concourse B. I'm on Slide 10. Here, we'll put the security checks more towards the entrance of the terminal, but this will create an airside connection between Terminal 1 Concourse A Schengen and Concourse B Schengen. This link will bring up our passenger experience in Frankfurt and simplify transfer processes for passengers. Those 2 areas from the heart of the airport operation, as we handle more than 60% of our passengers traffic here. Simultaneously, the relocation will also allow us to create a new major retail marketplace in Frankfurt. Some 5,000 square meters of land site retail area will be turned into more attractive asset area, thanks to the relocation. We will keep you informed about this new and innovative retail marketplace in our upcoming presentations, the relocation of the security lanes will take place in 2 phases. The first phase will be completed in 2025. The second one then in 2027. In total, we discussed the implementation of 14 new technology security lines. So with a much higher throughput that will replace 24 security lines with the current technology, but at the end with better and quicker processes, and that's very important. For the investment volume, we expect roughly EUR 200 million in total, but it will be a part of our other maintenance CapEx and the guidance is also roughly EUR 250 million per annum, this included in this number already. In addition to the new security lanes, we also expect another milestone for the group in 2027. The first full year operation of our wind park project, He Dreiht, or whatever you call it, He Dreiht in the North Sea. I'm on Slide 11. Last December, together with our German partner, EnBW, we signed a commercial power purchase agreement to buy in new renewable energy. The wind park will mark a major step ahead on our road map to become CO2 free. Compared to our 2019 Scope 1 and 2 emissions, the wind park would will turn roughly 50% of our CO2 emissions into 0 emissions. In addition, the wind park project has further accelerated our CO2 transitioning in the past year. Here, we also agreed in principle on the construction of a new major [ photo take ] plan next to our [ take ] of one Western Frankfurt as we did with further plans on buildings. We also agree to further electrify our car fleet and work closely together with the German railway to have an even better [ train system ]. As you are aware, we also intend to go for a dedicated discussion with you on our CO2 targets. Here, we also want to discuss our group-wide target in more detail. For those targets, we also became more ambitious and want to be CO2 free 5 years earlier, so in 2045 rather than in 2050. Moving up -- moving on to an update in Lima. As you are aware, we are in discussions in Peru about our new terminal concept. Because of the pandemic, we decided in favor of a temporary modular dual terminal concept rather than the construction of 1 big single midfield terminal. We decided this way because the dual terminal concept is cheaper to construct, it's more modular, and it favors our airline and passenger customers via our charges. Those savings will help to bring the local aviation industry up again while simultaneously meeting the technical requirements were entered in. Currently, we are in discussions here with the local minister regarding this new terminal concept. And just as an update, we just got today positive answer from [ all the tram ], that's the regulatory body in Peru, and we have to follow and to see the next steps now in Peru, whether it's going through at the end finally. So we expect the feedback on all different levels, hopefully, over the next weeks, and we'll keep you updated. The near future term -- the near-term future, our outlook for this year is shown on Slide 13. Based on the continued low visibility and geopolitical tensions, we expect Frankfurt passengers to recover to a level of 55% to 65% of 2019 value. 55% to 65%, I would say, from today's point of view that we are more on the upper range. But it depends a little bit on what's happening with Russia and whether this conflict is influencing, for example, U.S. Americans traveling to Europe more or less or whether it's influencing over the year German economic, with much higher prices for energy, much higher inflation or even having some worries about the future development. From today's point of view, I would say we are more on the 65% and the 55%. For revenue, this will mean that we expect to reach roughly EUR 3 billion, including IFRIC amount of about EUR 400 million. For the group EBITDA, we expect a range between EUR 760 million to EUR 880 million. And for the EBIT then EUR 320 million to EUR 440 million. For the group results, we also expect a broad range. Here, the result will range between EUR 50 million to EUR 150 million. What is the background for such a big spread on the net result? The answer the question, what are the effects of the Russian war, and how many Russians and Ukrainians, but especially Russians, are flying to tourist destinations on our airport, especially on Antalya and somewhere out of Bulgaria and Greece. On today's point of view, we cannot exclude that we see a very, very small number of Russians flying to Antalya this year, and that's the background for this part, outlook on this net result. This very rough order range, yes, I mentioned already is linked to the traffic uncertainties, especially on the international type, but some, of course, also Frankfurt. And despite this positive group results, expectation will continue not to propose a dividend for this year because of our high level. Nevertheless, our midterm targets are presented on Slide 14. And here, despite the current uncertainties our midterm targets remain unchanged. While we expect our international airports to be traffic-wise recovered next year, we continue to expect Frankfurt to be traffic-wise recovered in 2025 or 2026. Thanks to our cost-saving measures, we also remain confident to be financially recovered already in 2023 or '24. So thanks very much so far. Matthias, more on financials.

Yes. Thank you, Stefan, and also a warm welcome from my side. Let me start my presentation as usual with an overview on our cash flow and indebtedness situation. On Slide 16, you see our cash flow development in the past fiscal year. Despite the continued strong impact of the pandemic on our passenger numbers, our group operating cash flow improved significantly to a level of just under EUR 400 million. Here, the positive impact from the governmental compensation, which we received in the third quarter and the cash inflow from the securities settlement more or less offset the cash outflows for our staff restructuring program in Frankfurt. As a result, the EUR 400 million operating cash flow can be seen as an underlying cash flow figure in the past year. When assessing this figure, we are very pleased that the operating cash flow was strong enough to cover all maintenance needs, which we faced on a group-wide basis. Excluding for the expansion CapEx at Lima Airport and Frankfurt Terminal 3, we were, therefore, able to generate a positive free cash flow of about EUR 28 million. This figure was supported by some EUR 27 million, which we received as dividends from our at equity consolidated investments mainly from Antalya. Taking the CapEx in Lima and Frankfurt Terminal 3 into consideration led to a negative free cash flow of about EUR 770 million in the past year. Our group net debt rose correspondingly to a level of more than EUR 6.3 billion, and our gearing ratio reached a level of roughly 170%. Our net debt-to-EBITDA key leverage figure stood at 8.4x, a significant improvement compared to the fiscal year 2020 and a clear improvement compared to our initial forecast at the beginning of the last year. Moving on to my next slide, a closer look at our group cash flow development in the second half on a stand-alone basis. As Stefan already mentioned, the first half of 2021 was still clearly impacted by the pandemic. During the second half of '21, our operating cash flow recovered strongly to a level of EUR 588 million or EUR 428 million when adjusted for the EUR 160 million governmental compensation, which we received in summer. Both figures represented a sharp increase year-over-year, but more important, the operating cash flow was even strong enough to reach the prepandemic level on a reported basis or to reach about 73% on an adjusted basis, so excluding for the governmental compensation. With regard to CapEx, it is also good to see that Fraport Brazil and Fraport Greece are now both running on maintenance. At a cumulated EUR 9 million CapEx volume, Fraport Greece and Brazil contributed strongly to our second half free cash flow. On the slide, we also presented to you the free cash flow without the expansion measures in Frankfurt and Lima. And here, we reached positive level of roughly EUR 440 million or about EUR 280 million when adjusted for the governmental compensation. Please keep here in mind that we still discuss the second half of 2021. The Frankfurt Airport only handled about 50% of the 2019 passenger volumes. Including for the expansion projects in Frankfurt and Lima, our second half free cash flow was mildly negative at EUR 17 million, including for the government compensation. How did the cash flow development impact our available funds? On Chart 18, you see our most up-to-date group cash situation. Past the issue of our EUR 1.15 billion corporate bond in Q1 last year, our group cash situation remained largely stable over the course of 2021. The high level of available funds was positively impacted by continued finance and refinance activities, but also by the clearly improved free cash flow in the second half which I just explained. For this year, we expect some EUR 500 million maturities to adversely impact our liquidity situation. Here, about half of the repayments we already secured, among others, by a new loan this morning, as you can see in the green box on the chart. Also, the contractual framework for new debt remains attractive for us as we only pay a rate of 0.7%. Therefore, our liquidity situation and refinance need this year will again be driven by our free cash flow expectation. The detailed forecast for our free cash flow can be found on my next slide. On this slide, I'd like to start with our CapEx outlook for this year. In Frankfurt, we continue to expect some EUR 800 million as investment volume. Comparable to the previous year, we broke this volume down as roughly EUR 550 million for Terminal 3 and roughly EUR 250 million for maintenance CapEx. For Lima Airport, we expect the CapEx range between EUR 250 million and EUR 350 million. The final amount here will largely depend on the cash outflows for the new terminal project and the currency conversion rate. For the remaining portfolio, we expect the CapEx to remain below EUR 100 million. Therefore, we also expect a positive free cash flow for the airport outside of Frankfurt and Lima. On a group-wide basis, we expect the free cash flow to remain clearly a negative this year. As you can see, on the right-hand side of the chart in the yellow bubble. We estimate a negative free cash flow in the area of roughly EUR 900 million to EUR 1.1 billion. This amount also reflects the initial equity injections into the new Antalya Airport company of more than EUR 300 million. As a result, we expect our group net debt to grow to a level of roughly EUR 7.3 billion to EUR 7.5 billion. Let me now move on to our segment performances in the past year, starting with Aviation. Revenues in the Aviation segment continued to be positively impacted by the security settlement in the first quarter, in the amount of EUR 58 million. Adjusted for this item, revenues stood at EUR 530 million, some 20% above the previous year's level. Compared to 2019, revenues reached more than 50% of the pre-COVID level with 35% passengers. On the EBITDA level, we reflected the additional EUR 160 million governmental compensation, which we already discussed before. As a result, segment EBITDA reached a value of EUR 160 million, which is an equivalent to roughly 60% of the pre-COVID level. Adjusted for the security settlement and the governmental compensation, the underlying EBITDA remained negative at minus EUR 58 million. Compared to the adjusted level of 2020, this nonetheless represented a strong increase of EUR 127 million despite handling only some EUR 6 million additional passengers. The underlying EBITDA improvement was mainly due to some EUR 73 million higher Aviation charges and some EUR 42 million lower underlying OpEx. Please kindly note here that we remain conservative regarding our balance sheet in the fourth quarter and therefore, faced some extra cost in the area of EUR 14 million. Adjusted for this extra item, other costs remained broadly stable in the fourth quarter. Looking ahead, this year of 2022, we expect EBITDA to be broadly flat compared to the reported level of fiscal year [ 2021 ]. Please note here that this will represent a sharp increase compared to the underlying level of '21, where we recorded more than EUR 200 million one-off items in aviation. Moving now on to our Retail & Real Estate segment on Chart 21. Looking at the individual revenue streams of the segment, we are pleased that our Real Estate subdivision is back on the precrisis level. In contrast, Retail revenues were still impacted by the lower number of passengers. At EUR 72 million, Retail revenues were also adversely impacted by a EUR 10 million COVID-19 easing measure in connection with our duty-free partnership here in Frankfurt. Adjusted for this special item, Retail revenues were up compared to the previous year. Despite this slight underlying revenue increase, our Retail key performance indicator was slightly down compared to the previous year and stood at EUR 3.70. The key reason for the reduction in our KPI was lower advertising revenue. Here, the first quarter of 2020 was still not impacted by COVID-19 and performed, therefore, clearly better. Parking revenues on the other side were up compared to the previous year and achieved more than 50% of the 2019 value at EUR 251 million. So segment EBITDA recorded more than 60% of the pre-COVID level, mainly thanks to the strong real estate performance. For the current year 2022, we expect a continued increase of all revenue streams in our most favorable -- most profitable Frankfurt segment. Turning the page to our Ground Handling segment on Slide 22. At EUR 386 million, Ground Handling revenue was up by 20% compared to the previous year and reached about 55% of the 2019 value. The key drivers for the revenue performance were the passenger recovery and charges that are not directly linked to passenger volumes like maximum takeoff weight and movement-related charges. Adjusted for an EUR 8 million Q4 accounting effect, the OpEx in Ground Handling was unchanged to the previous year. Please keep here in mind that we handled some 6 million additional passengers. So a flat OpEx development is a very solid result. Still, Ground Handling EBITDA was negative at about EUR 70 million. Here, the second half again showed a clear improvement compared to the first half. The second half performance also encourages us to forecast a breakeven EBITDA for the Ground Handling segment in the current fiscal year 2022. This is a significant increase despite we are far away, of course, from pre-COVID passenger level. On Slide 23, you will find the overview of our Frankfurt OpEx development in the past year. When compared to our OpEx in 2019, we clearly see the restructuring gains. In total, we achieved cost savings of more than EUR 400 million compared to our pre-COVID level. Here, we also included the extra costs, which we faced in the fourth quarter in the amount of up to EUR 30 million. Adjusted for these nonrecurring cost items, we achieved an OpEx reduction of some EUR 430 million or 27%. In the fourth quarter stand-alone, we recorded an OpEx reduction of EUR 64 million on a reported basis or EUR 90 million on an adjusted basis, always compared to Q4 2019. The sequential lower cost saving compared to the third quarter was largely driven by higher costs for electricity, energy and the lower application of short-time work. Due to the takeover of a new security contract in Hamburg this year, we now expect a slight dilution of our OpEx performance. On an underlying basis, so excluding for the new security business, we, however, continue to expect more than EUR 300 million cost savings this year compared to 2019. Moving on to my final slide for today, International Activities on Slide 24. In International Activities, we continue to see that revenues, excluding for IFRIC 12, are clearly impacted by COVID-19. Compared to 2019, segment revenues dropped by roughly 40% or more than EUR 400 million. With regard to the fourth quarter, we, however, see a clear upward trend. At EUR 176 million revenues without IFRIC 12 reached almost 80% of the 2019 level. On the EBITDA level, the fourth quarter result was even higher compared to 2019, thanks to some EUR 46 million COVID-19 compensation. Adjusted for these compensations, EBITDA came to EUR 61 million in the fourth quarter, just EUR 80 million below the pre-COVID level. On a full year basis, the segment EBITDA reached a level of EUR 418 million, supported by some EUR 160 million compensations. Adjusted for these compensations, segment EBITDA stood at EUR 257 million, some EUR 192 million down compared to 2019. Please keep here in mind that revenues were down by more than EUR 400 million, so we are able to offset another EUR 250 million due to OpEx reductions. For this year, we expect EBITDA to roughly reach the reported level of 2021 or with strong tailwind even a little bit more. This, again, will mark a sharp recovery compared to the underlying value of 2021, so excluding for the COVID-19 compensation. Having said this, ladies and gentlemen, I'd like to conclude my presentation, and we are looking forward to your questions now.

[Operator Instructions] The first question is from the line of Elodie Rall from JPMorgan.

I'll just have 2 actually, I'm sure more will comment there. But just on your guidance for CapEx going forward, so you gave us '22. Could you give us an update on CapEx expectations for after '23 in particular for Terminal 3? And when do we expect the opening again? Actually, I have 3 questions. Second, when you open Terminal 3, like we've seen at the moment, pressure on airlines from, I mean, sensitivity on airlines from rising tariffs. So do you -- how do you actually expect to see Terminal 3 when you have already a little bit of difficulty of passing through tariffs increase with regard to some of your airlines clients? And my last question is on dividend. When should we expect a return to dividend?

So first question, CapEx guidance for '23 as well as '24. So it's more or less the same level. So EUR 1.1 billion, maximum EUR 1.2 billion. Why? Because now we are in the middle of the CapEx for T3 and also regarding Lima. So this is dominating the CapEx, while the maintenance CapEx for all other assets is extremely low. So you can say it's a continuation of the -- in the presentation mentioned also CapEx structure for '22, which is representatives for '23 as well as for '24. And then it's going down because the end of '22, the runway is ready at Lima, so it's a little bit reduction. And also in 2024, T3 goes to its end. Opening is summer -- it's planned summer schedule '26. So we have the terminal itself, this is already 12 months before already, but then we are testing, et cetera, and we are going to open in summer '26. And your question regarding dividends, our guidance is, we have to come back to our, let me say, the key ratio net debt to EBITDA of about 5. So you know from '21, we reached 8.4, and now we are ramping down close to 5. And when we are reaching, or we are adjacent to 5, then I think there is room for dividend payments again.

Sorry. So can you just give us an idea of when you think you'll reach that 5x? And also on sensitivity to airlines with regard to tariff increase, how should we think about that going forward?

We always have pressure from airlines on fees, that's normal. There's nothing specific. Nevertheless, we have been able to get fee increases through last year, and it's looking out to quite promising this year. So starting then from 2023 onwards. And the whole strategy will depend a little bit how we go ahead for the next years and what the demand on Terminal 3 is how we also decide to use the other terminal operations, and how the market at that time is. So I don't see a special challenge over there. That's a normal challenge we always have. On dividends, it was already mentioned by Matthias, what for us, the trigger point is to come closer to net debt to EBITDA of 5, whether we wait up to that point or whether we can start with some dividend payments even earlier, maybe on a lower level. We have to see. That's not discussed up to now with the Supervisory Board. And it depends very much on the total market outlook. So if we -- if the pandemic is really behind us, if we are reaching to -- very promising to reach the pre-COVID passenger numbers and so the future outlook is promising, then probably would start earlier with the dividend payment. Whenever exactly, I can't tell you, but it will take, for sure, some further years, it will not be tomorrow, not 2023. Thereafter, there is no restriction as these days.

Our next question is from the line of Marcin Wojtal from BofA.

So the first one, just to come back on Terminal 3 in Frankfurt. Can you just confirm what is the total expected CapEx for this project? I believe the last communication was around EUR 4 billion, but can you please confirm it? And can you just confirm if there are any construction contracts that are not yet awarded or it's all fully awarded and subcontracted? Question number two, if I may, on cost savings. I mean previously, you talked about the target of EUR 450 million or even EUR 500 million of cost savings. Do you still reiterate those numbers considering we are seeing inflationary pressures in the industry? So those are the 2 questions.

We take first up your question. Thanks very much for the questions. On Terminal 3, yes, the main project on Terminal 3 expansion has a total CapEx of EUR 4 billion, that's unchanged. And all contracts now, but most of the contracts are awarded. I think around 80%, something like this. but all main contracts are awarded, but there are some smaller contracts, could be. But we are not affected by high inflation or something like this or by sharp increase of steel price because all of those things have been done already. There are some smaller contracts, of course, outstanding, if you take all the monitors and so on. To be quite honest, I'm not aware of them, but I would assume they are not awarded, but that's commodity. Yes, if there are some price increases on that side that would affect us. But it's not really changed the picture on Terminal 3.

Cost savings cost savings. First of all, I think we made it very transparent on the slide in the presentation showing officially EUR 406 million. I also explained verbally that we did something on the balance sheet, which then was reflected in OpEx. So let me say adjusted, we made EUR 430 million, EUR 440 million OpEx reduction. We already said that our target was about 4,000 full-time equivalents. This is then or will be equivalent to EUR 240 million personnel cost reduction. This we will show also in the next year. And on the material expense side, of course, the realized EUR 150 million will be lower next year because we are ramping up with the volumes. We are ramping up with the prices on the energy sector. But at the end of the day, I would say it can be EUR 100 million savings always compared to 2019, and this is linked to my expectation, our guidance that we see a cost reduction in 2022 of clearly more than EUR 300 million always compared to 2019. Of course, all along, inflation will run against us. But this we already said in the beginning of the crisis, so we are continuing working on the labor side, in the admin and semi admin sector, we are doing whatever we can. And we are convinced that we can still achieve further things on the cost side.

May just add one comment, just to be clear on that side. The program Matthias mentioned, [ we launched 50 ], that's a program on structural cost savings. We are nevertheless part of this world. So I would also expect that we would see also, due to the Russian conflict now but not just because of this, higher inflation over the next years and probably on a level which we never have assumed. It's, of course, our job then that we do the structural cost savings as we did it and to continue on that side. And in addition, yes, we have to place ourselves in the market. So if the on the low -- on the easy level employees, if the salaries are coming more up on that side, for example, ground handling, probably your reality over the next years, then we have to work on the revenue side to pass it over, but we cannot exclude ourselves from those market developments. It's a little bit more difficult on the energy side. That's also one of the reasons why we have to be more CO2 [ freezer ] earlier so to go into more green alternatives. And the deal we did there is really not linked to inflation, and that's a real positive thing on that side. So it's -- we get more independent from electricity costs on traditional electricity and so on. We are not getting, of course, independent from material cost increases and so on. But this then has to be reflected on the revenue side per price increases. There's no other way. So thanks very much.

The next question is from the line of Andrew Lobbenberg from HSBC.

Can I ask what's going on with the security strike that's due to be happening tomorrow? How much disruption do you expect from it? And how does that fit with the transition of the security operation? And then I saw on the slide, you're saying that you think that the lost Ryanair flows are successfully backfilled by Eurowings Discover. But I mean, what are the prospects for building out low cost or point-to-point services into Frankfurt as we look ahead to Q3 from where we sit today?

Thanks very much for your questions. Well, may I start with the securities point today. It's not tomorrow, it's today here in Frankfurt. You have to differentiate because it's on the paragraph 8, mainly, but some portion of paragraph 5, but it's mainly paragraph 8. It's not linked with us. It's a Federal issue. And that means it's employees are allowed to go and strike in Germany. If the union is asking for this, if you are in a tariff conflict and so on. And it's not at all linked to the transition. This could also happen in the future. We are, and I'm absolutely not a fan of such a strike, and I don't respect it and I have no acceptance for this to go on. We call it, advance strikes or warning strike for a full day, blocking completely all original flights. So normal passenger is not an originating passenger, departing passenger is not able to get an aircraft today, more or less not able. For transfer passengers, yes, it's working. And for arriving passengers, of course, they are also handled, because ground handling and so on is working. So if you take a normal day like today, it was around -- it's a weaker day. It's not a peak day with around 80,000 passengers, 50% [ renter ] passengers, remaining up 40,000, then the arrival passengers are the other 20,000 to 40,000. So the direct effect is just 20,000 passengers. That's not a big effect, and maybe some of them will also fly them tomorrow, a day later or whatever. Nevertheless, it's really angry because negotiations between the partners, so the union and the employee of representatives, it's nothing directly links Fraport. They are quite near together. It's not a big distance. They will meet [ a thing ] tomorrow, the next time, if I'm correctly informed. So it's more a public sign, in my opinion. Why they are doing this public signal and that's really angry. But nothing to do with the transition. It will not be changed next year or the year after. It's a principle of what we have in Germany, like in other countries, of course. Regarding why now best times, why not market share of around 3% of the volume. And what we mentioned with this comment is that the demand this year is so high and the airlines are putting such a lot of capacity into the market that this probably at the moment is compensated. That compensated by TUI fly, by Condor, by Eurowings and so on. So if you see that even Lufthansa is flying with a 747 Jumbo to Majorca, and you know the demand seems to be for the summer and hopefully, it will stay this way. So on that side, it's compensated. In the longer run -- the longer run, the business model of low costs will still exist. That's no question. They have their segment. And we have to see how we deal with this, but one thing is also clear. With all the initiatives for CO2 neutrality or CO2 free of emissions, flying -- to fly will be much more expensive. And the advantage of low cost would stay, but it will be relatively more narrow on that side because if you know what the [ Fit for ] 55 will cost on a short-term flight of 1 leg, EUR 50 more. So on a round trip, EUR 100, and on a long -- on long-haul flight, around EUR 100, EUR 150. And that's excluding the actual high fuel prices. So if you take the high fuel prices, it would be even double the amount, but the one is near term, the other one is long term. So it's important to be in that segment. That's clear. But at the end, it's important to have the best connectivity and to have a broad number of airlines where we are going back to the roughly in summer, I think, around 100 airlines something like this, 95 airlines like -- something like this, and that's a good offer we have there.

Our next question is from the line of Ruxandra Haradau-Doser from Kepler Cheuvreux.

Several questions, please. First to follow up, just for clarification, given your agreement with labor unions, could you please provide guidance on the personnel costs in transport in 2022? Second, to better understand the cost saving dynamics, how many people have been rehired in summer 2022? Third, with Q3 results, you guided a full year EBITDA of EUR 650 million to slightly above EUR 700 million. But you reported EUR 757 million, although the one-offs had a negative impact on your performance in Q4, and there was some impact from Omicron in December. So why did you end up with such a significant better performance in Q4 than you anticipated in November? And finally, an ESG-related question. The Executive Board was expanded from 4 to 5 members in [ 2020 ]. And given the announcement yesterday, it looks as if this will be permanent and not just to deal with the retirement this yet. Could you please explain a bit why the additional capacities are needed now in light of 20% to 30% less employees in Frankfurt and traffic expected to recover to 2019 level only in 2025, '26. And the Executive Board is very much focused on Frankfurt and only the CEO and CFO and monitoring, among others, external activities, which now generate a significant share of operating results. So shall we expect some restructuring in the responsibilities of the Executive Board going forward?

Good questions. Let's start with the first one. Labor union agreements. There's no negotiation at the moment going forward. So for this year, I think all the agreements are in place, and you should calculate roughly a number around 2.5% to 3%, something like this. It depends a little bit on detail, but that's the amount for this year 2022. Cost savings is -- Matthias, okay.

Cost savings, I would recommend to look on Slide #8, where we showed the exact numbers regarding our staff restructuring. Regarding the 3 elements, Ground Handling, FraSec as well as other Frankfurt positions.

I think that wasn't the question. The question was, if I'm correctly informed, maybe was the...

How many people were rehired? And we hired 400 people in the Ground Handling, on gross number.

Gross number, on a gross number.

And net, it was 100. You can see it on the chart from 7,160 to 7,260 now.

But up to now per end of March, I would say we are on a net number of -- around 250 to 300 on a net, but by end of March this year, and the gross number will be around 500, 600, something like this. So you have to be a little bit careful with gross and net numbers because there are still people leaving and then fluctuation. On the Executive Board, that's very simple. The Supervisory Board was on the impression and that's probably correct. So the company was like Fraport, with bold roughly 18,000 to 20,000 employees, should have a very experienced board member on staff issues, handling those issues, but also be experienced in change management processes and so on. And there was a lag on the actual board members on the experience because Michael Miller, the former arbitrator relief -- and I know Matthias Zieschang, he has a broad expectation, but not on staff, sorry, staff handling issues and so on and so on as an HR Director, no and for me. That was the reason that we went into rehiring on that level. I think with Ms. Kranenberg, we have an excellent capacity on that side because she has been involved in a lot of restructurings and then change processes and at the end, really also on board level. That's no discussion, and there is no discussion or that's not a...

A prediction.

That's no prediction for how we go ahead in 3, 4 years from now, I see your point. But at the end, it's a Supervisory Board decision, but it could be that in the long run, will go back to 4 executives, we have to see.

Now your question regarding Q4. So it's relatively simple to answer. So we -- before Q4, we expected or we had the fear that the -- was it the fourth or third corona wave would come and would have a stronger impact than at the end of the day was reality. That's the reason why we have been, let me say, too conservative regarding Q4. And now we are happy that Omicron hasn't had such a strong impact, which we expected before.

And on the international business, responsibilities of the supervisory or on the Executive Board, yes, you gave a clear description. That's right. It's my oversaw. I'm directly responsible for this and have very good support by Matthias because he's very much in detail or into the numbers. And we have both international department. And to make an answer very simple, if I look at the performance of these international [ participate patients ] over the recent 10 years, probably was corrected, we organized this way.

The next question is from the line of José Arroyas from Banco Santander.

I have 3 questions, please. First one is on Antalya. Slide 19 speaks of an equity injection of just EUR 300 million whereas elsewhere and before you have guided for EUR 500 million equity injection. Does this mean Antalya will pay EUR 200 million of dividends to Fraport in 2022. So that's question number 1. Question number 2 is I've noticed that in the press release this morning, you mentioned Fraport will hired 1,000 operational employees in 2022. I wanted to clarify if that pertains to Frankfurt only? Or if that pertains to other entities as well. And if it's helpful, I wanted to understand how that relates to the EUR 250 million of [ superficial ] cost savings if this requires more action on your side to get there or if that number is under control? And lastly, I wanted to ask you about the Hamburg Security contract. I wanted to understand if that contract is EBITDA accretive, and how long this contract lasts?

Yes, thanks very much for those questions. I start with the 1,000 employees. The 1,000 employees is a gross number. It's not a net number. A gross number, started already from October last year up to probably October this year or summer this year. So it's mainly ground changing, and we already exchanged the numbers where we are up to end of March of this year. So there will come another 500 or 600 on a gross level, which will mean that the gross number of 1,000 will at the end be probably a net number of 500, 600. And that's working -- just on ground handling now. And that's working because if you are going in some of our 100% on peak days of movements, was probably on peak 80% of passengers, 75%, 80%, something like this. And you have seen on the slide that we are just on 75% of staff levels before prices and you cannot handle with 75%, 100% of movements. That's the reason we have to go into rehirings, but we do it just on a cheap base there. So no one on [ top of a G ] level, it's just easy qualifications on fore ground level. And it's not affecting the cost savings program because [ we launch 50 ], there are further people to leave over the year and also over next year due to early retirement programs and so on. Contracts we've signed already but also some fluctuation where we are not doing a new replacement. So both is working together. So very much and that's a little bit now the difficulty we have. On the direct jobs on the ground, we have to come back maybe not to a level of 100% because of some productivity, but close to that one. But with cheaper contracts as in the past because we took some more expensive people out. We are focusing very much on the other side. It's the administrative side, so the overheads in a broader sense. And there, we are very keen to stay on that level what we achieved to have sustainable cost savings on that side. Then on Hamburg, I can mention Hamburg, that's normally 3 or 5 years contract, something like this 3 years, at least 4 years, probably 4 years. And of course, it's EBITDA and also net profit contributing, of course, otherwise we wouldn't do this.

And then you asked the question regarding the equity injection in Antalya as well as the dividends, which we are going to receive. So coming back, what is going on. We won the -- we awarded the concession, and we have to make an upfront payment of -- together with our partner, TAV of EUR 1.8 billion, and most of this amount will be refinanced by a project financing. So the rest will be paid as equity divided by 2 because it's a joint venture. And as of today, we have to see what will be the final outcome of the project financing. So I would say it's more than EUR 300 million equity, which we have to inject on one side. On the other side, we are -- we will receive dividends, but the dividends are now depending from the, let me say, the Russian impact now on Antalya, what will happen on the passenger side. So it's a little bit an equation which we have to solve at the end of the year. So it's 300 plus x for the equity minus some dividends which we are going to receive.

Our next question is from the line of Johannes Braun from Stifel Europe.

I have 2. The first one would be on fees. You mentioned that it's looking good for another fee increase next year. Is that based on your discussions that you have with Lufthansa and the airlines? And also shouldn't that fee increase then be larger than the 4% that we had this year just because of all the cost inflation that we are currently seeing? And the second question, just can you update us on the St. Petersburg situation, especially on the shareholder loan, I think that you are still outstanding? And how confident are you to retrieve that shareholder loan?

Thanks very much for those questions. I also answer your understanding that we are not giving any details with whom we are speaking at what time because it's much too early. I wanted to give you a signal that I'm quite confident taking the actual circumstances, market conditions and so on that we will see a further fee increase, and so we clearly have to go for that one. And I will not comment at this point in time on which level we are going. But I wouldn't have said it if I would just calculate 0.5%. So that's also clear. Second on St. Petersburg. Yes, there is a shareholder loan, which is given. We are in Malta and to north -- Northern Capital, that's the name St. Petersburg over there. It's a long-term loan, which will be repaid and honored via the performance of St. Petersburg airport. Are we optimistic? I'm always optimistic, but I'm also realistic. It's too early to answer this one. But in principle, yes, I assume that we will get our money back. Otherwise, you would have seen a depreciation or whatever. So we are in principal optimistic, and we have to fight for this. Anything else, it's too early to say these days. We have to see what the situation is in 2 months or 3 months. But it's very clear, it's our job to get the money and to safeguard the money and our values. And so we will work for that, that's absolutely clear.

[Operator Instructions] The next question is from the line of Nicolas Mora from Morgan Stanley.

Just a quick one for me on costs. Just thinking back at what you did and delivered in Q4 in the Aviation business. Looking at the guidance, I really struggled to get to basically EBITDA in line with another EUR 160 million for '22. How should we think about the cost -- the cost in Q4 were at around EUR 200 million. You stated that there were EUR 14 million of exceptionals. I mean should we take the leftover around EUR 185 million and kind of normalize it throughout the year? Is that what you're trying to say and that would take into account a bit of wage inflation, lower number of average staff. Is that how we should frame basically the 2022 EBITDA for Aviation?

Yes. First of all, please do not look just on Q4. Why? Because as you mentioned, we have some extraordinary items to -- let me say, to make our balance sheet even stronger. Second, we have always in Q4, for example, Christmas bonus payments to the employees. So Q4 is always higher than all the other 3 quarters. To get an impression what is a sustainable level for the next year, look more or less on the average in the first 3 quarters. This is a predictor, not Q4 because Q4 is always spoiled by extraordinary items in both directions. In this year, it was just negative impacted by items. And again, I said clearly during my presentation, in this year, we had officially EUR 406 million reductions, and it will be less because we have inflation. We have some rehirings of people. But on the other side, let me say, the expensive guys left the company so that we clearly will show also next year, next year means 2022, more than EUR 300 million savings always compared to 2019.

I would recommend such a detailed question that you have a close look together with Florian Fuchs and then have a call together to go through the numbers in detail because probably that's not the right level now.

Sure. And just on the -- I mean, that's on CapEx. First one on Lima, you've talked about some negotiations ongoing to flexibilize a little bit the CapEx. I mean, what are we talking about? Is there a big savings to be expected from that out of the terminal budget? That's the first one. And then on T3, you said you've got EUR 2 billion to go on CapEx from 2022 onwards. You stated that only 20% of the project EUR 4 billion was up for tender. I mean we've seen a bit of overshooting in '21 on the spending. Isn't there -- I mean I'm just trying to understand whether or not there's not more risk in the tail end of that CapEx from, let's say, '25, '26, '27?

Probably the difference, and Matthias can comment more on detail on that one, is between, I mentioned the 80% of awarded contracts, but that's not saying that's already performed, especially not said that is already paid. That's of course, there's a big difference on that one. On Lima at the end, if you take the full number of passengers, it's not a difference whether you constructed in models, modular, Modular 2, Modular 3 or whether you constructed in -- as a one big single terminal. The bond is more on the cash flow side over the time, at what time you will construct Modular 2 and Modular 3, so it would save money at the moment, but not in the long run. And it's absolutely clear that we have to, in all cases, to fulfill the [ regulatory ] requirements and so on. The difference would not be and will not be on the CapEx for 2022 because in 2022 and even '23, it's mainly Modular 1, which will be constructed in all instances, whatever we agree. It's more than the years 2024 and '25.

Yes. And again, regarding Terminal 3, we have spent about already 50% of the CapEx. And what Stefan Schulte said is, we have awarded the contract of up to 80%. So -- and now we are going to construct the rest, but we've spent about 50%. But we have hedged, so to say, prices of 80% of the whole CapEx volume and the annual spending for Terminal 3 is exactly what we did in last year and what we are going to do in this year, it's between EUR 500 million and EUR 600 million. And it cannot bring more than EUR 600 million because then everybody is working. And on the site, you cannot -- on the site of such area, you cannot spend more than EUR 600 million. This is going forward until -- not until the opening until 1 year before the opening.

Right. And last one, if I may, just on Antalya, actually on Antalya and Bulgaria. I mean isn't your base case just basically no dividends from these assets, at least in '22?

In '22, of course, as a variance of the amount of dividends which we are going to receive, this now is exactly linked to the Russian impact or no impact from the Russians what we will see in summer. So that's also the reason why we have such a broad range regarding net income because Antalya plays, let me say, in the financial result at equity handled. And let me say, the EUR 50 million net income would be the outcome if we wouldn't welcome no Russians at Antalya Airport. And on the other side, if the Russians will come as before the crisis planned, we are at the [ alpha ] range and let me say, reality will play in-between these 2 numbers. And again, let me say, on the low side, we anticipated, so to say, more or less relatively worst-case scenario regarding the Russians coming or not coming to our airports.

Our final question is from the line of Christian Cohrs from Warburg Research.

Maybe to start with -- for the sake of clarity, does your guidance include any COVID-19 compensation measures? You have seen quite some last year. Or are there any other one-offs? And are -- also can you confirm that there are no one-off effects on the horizon because last year, it was a bit it was a bit confusing sometimes. Second question related to Q3 or to be more precise, the Pier G of the low-cost part of the third terminal. And as I'm informed, the terminal -- this terminal part is more or less ready. So do you face any operating costs for having this terminal available already? And lastly, more of a long-term question, you touched this point already. There has been lately Toulouse Declaration by 35 European countries pushing the aviation industry towards Net Zero CO2 by 2050. So I would actually like to know what is your expectation how this is going to shape or reshape the industry? And what are the impact on Fraport? Will this be also linked to an entirely different airport sector? And does -- is this linked also to maybe new CapEx programs necessary to prepare for that?

I will start with the final question. Thanks a lot for those questions. We are aware of, of course, obviously, Toulouse Resolution, signed also a lot of airports and a lot of airlines. And I mentioned already that we as an airport and not just as an airport, but also as an airport group, group-wide, CO2 neutral or CO2 free, even by the year 2045. And we are really working on that and we're making good progress on that. If we take the industry in general, so including airlines, it's much more difficult regarding synthetic fuel. It's first very important that we get the Fit for 55 initiatives as a law, if you want, as a regulatory because the every and any airline is obliged to fuel synthetic fuel, and there are still discussions going on. Then secondly, the production capacities have to get up. And thirdly, you need to send to go in energy, and you need a lot of green energy for that. So to get all this done up to the year 2050, let's say, optimistic, okay? That's my comment on that one, but it's important that we get the first steps and that will get ahead. And then we can discuss in 5 years from now whether it's realistic to be minus 50%, minus 70%, minus 100% on the aviation side, but that's airlines, it's not airports. On airports, we will get it done. On Pier G, we have some operation costs, but these are small operating costs. Yes, it's ready or more or less ready and the operational cost a single-digit number, somewhere in the mid of single-digit million number. On compensation, and guidance.

Yes, your first question regarding the guidance. So our guidance is EUR 760 million to EUR 880 million. When looking on the low side, no compensation payments are included. It's a combination of risks and chances. When we go to the high side of the guidance, then there could be a lower compensation at Greece. But at all other airports, we do not expect any additional compensation in the year 2022.

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

So thank you all for participating for the interesting questions. If there are any further questions, please contact us in IR, we are happy to answer. And yes, I wish you all a good rest of the day, and we stay in touch. 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.