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 of Fraport AG Full Year 2023 and Annual Report. [Operator Instructions] May I now hand the call over to your host for today, Christoph Nanke, SVP, Head of Finance and IR.

Thank you, Doran, and warm welcome also from my side. I think we have some topics to talk about and explain today. So therefore, I'm very happy to have our CEO, Stefan Schulte, and our CFO, Matthias Zieschang, at the table, and I hand the floor to Stefan to start the presentation.

Christoph, thanks very much, and a warm welcome also from my side, good afternoon. Good afternoon, ladies and gentlemen. We have had a business morning, so let's go straight into the presentation. My first slide today provides you an overview on our latest developments. Frankfurt Airport, our main site, recorded just under 60 million passengers last year. This was the midpoint of our full year guidance, which was a traffic recovery of 80% to 90%. In fact, the second half of the year showed an even more dynamic development at about 88% of 2019 or 91% for the fourth quarter on a stand-alone basis. On stronger traffic recovery we saw in our international portfolio, in total, the airports outside of Frankfurt reached 98% of the passenger number handled 2019. Correspondingly, our international portfolio achieved our midterm guidance of a full traffic recovery, which we provided you 2.5 years ago. Benchmarking our results against expectations also shows very good progress regarding our operating results. Our group EBITDA reached more than EUR 1.2 billion, and therefore, recorded an all-time high and outperformed our midterm expectations. In addition to the financial progress, we continued our way to decarbonize the group. During the past year, we amended our so-called master plan decarbonization to include our majority owned airports. The updated master plan describes a way on how to decarbonize the individual airports in order to achieve a CO2 free Scope 1 and 2 by fiscal year 2045. Besides our master plan decarbonization, we also updated our group strategy Fraport 2030 to include new midterm targets. The new strategy comes along with an updated corporate purpose and a new claim connecting the world with tomorrow, but more on this topic later in my presentation. Moving on to our financial highlights of the past year on Slide 4. Despite the fact that Frankfurt just recovered to 84% of the 2019 traffic, revenues increased on a group-wide to just a EUR 3.5 billion. At Frankfurt Airport, in particular, the Real Estate & Parking divisions as well as the Security business contributed to the revenue increase. Internationally, we recorded more than EUR 210 million higher revenues just from our Fraport Greece subsidiary, a strong increase of our very important international operation. But also Fraport Brazil and U.S.A. showed higher revenues. In terms of our group EBITDA, Fraport Greece also helped us to exceed the pre-COVID level. At EUR 271 million, our Greek subsidiary contributed EUR 100 million more EBITDA than 2019. At the Frankfurt side, especially the Aviation segment exceeded the 2019 benchmark year. Bottom line, our group result exceeded the upper end of the guidance for 2023, but remained some EUR 20 million below 2019. Key drivers for the better performance in our group results were higher interest received in our financial asset management and the development in Antalya. At EUR 430 million, this was our third highest result in our group's history. Looking at the traffic performance of last year on Slide #5. As mentioned before, Frankfurt Airport showed the year-over-year recovery to just under 60 million passenger or an increase of 21% against 2022. While full year traffic has recovered to 84% of 2019, the second half of 2023 and Q4, in particular, better traffic development at about 91%. Reason for the improved Q4 development was mainly the gradual market opening of China. In our international portfolio, our Greek Airport showed again the strongest traffic momentum. At 34 million passengers, Fraport Greece was 12%, above the 2019 benchmark year and reached the highest traffic result in its history. Besides Fraport Greece, Antalya exceeded the 2019 year and recorded just under 36 million passengers. The development in Antalya is even more remarkable when considering that about 4 million passengers from Russia are still missing compared to 2019. In addition to Fraport Greece and Antalya, Lima Airport is also showing into the right direction, while Lima on a full year base was still 10% below 2019. November, December, as the first 2 months of this year, recovered to about 100%. Correspondingly, our outlook for this year indicates the full traffic recovery in Peru. Moving on to our business update on Slide #6. The upcoming summer flight scheduled in Frankfurt will start in 2 weeks from now. Year's scheduled seat capacities are expected to reach just under 90% of the 2019 summer season, while the second quarter will still be somewhat below this figure, Q3 is expected to be at about 90%. From a regional perspective, we expect North America, Central America and Southeast Europe to exceed the 2019 benchmark year. And opposite, especially domestic traffic and Eastern Europe, due to the war in Ukraine, are expected to remain clearly below 2019. Regarding China, we expect summer capacities to come back to 70% to 80%. Here, Beijing and Shanghai will be close to 100% for secondary cities like [indiscernible] are still missing. The long-term is expected traffic growth at Frankfurt Airport, we also see good progress in [indiscernible] investments this year. The first milestone we already achieved in February, the new parking house of Terminal 3 partly opened with 2,000 slots. Despite the distance from Terminal 1 and 2, the new offering is very well taken up by the market. At the beginning of March, all parking lots were prebooked. Hence, the new parking house was completely sold out. Visible progress we also -- we will also see with our ESG activities. In Frankfurt, for example, we will complete the construction of our new photovoltaic plant this year. The photovoltaic will provide sufficient energy to one, among others, our entire electric car fleet and our airport hospital in Frankfurt. A very good step ahead with the important topic, CO2. Besides the progress in Frankfurt, we also set a date for the terminal opening at Lima Airport. On December 18, we will make the new terminal available after construction time of just 3 years. This is more than remarkable and a big thank you to the involved parties, including the local authorities. 3 years will also be the construction time of the terminal extension in Antalya. Here, we have meanwhile completed more than 70% of the entire project, while the rest of areas are almost done, too. As in general, we are seeing good progress at our main sites. After 3 years of COVID-19, we can finally say the pandemic is more or less over. Fraport is emerging as a different. It's, in our opinion, a stronger company. We have taken clear steps to change the company and save the Fraport culture. For their dedicated work in the past years, we have to especially thank our employees at all our airports. So a big thank you on that side. And to set ourselves new goals, we updated our new strategy, I'm on Slide 7, Fraport 2030. It's the headline of our new strategy, which also provides new targets for fiscal year 2030. To be clear, we are just talking about 6 years to go. You find these targets on the right-hand side of Slide #7. By 2030, we want to fascinate our customers with our airports, regardless of whether they are passengers, airlines, whether it's cargo or other business partners. Financially, we want to achieve an operating result to an EBITDA of EUR 2 billion, and we want to generate a free cash flow of EUR 1 billion. This will leave us sufficient headroom to reduce leverage, to raise the dividend, but also to pursue new growth projects. In order to achieve these projects, we define 3 main strategic priorities: growth and sustainability; efficiency and innovation; and to be a top employee. And these priorities you find among others, the operational growth at our group airports, the completion of our extensive growth programs, but also ESG-related priorities where they are environmentally or socially linked. Our most important level to tackle these priorities is cooperation. This includes cooperation, especially within the Fraport Group's across countries and divisions, but also outside the group. Being an airport operator, we know there's no takeoff and landing without cooperation. We also know that the most difficult thing to change the development, to change culture, to change the [indiscernible], but it's important. It's really important for the future, and we are really on track there already. We started with first projects on that side, for example, with full digitalization of our HR processes. So we're very excited to see the progress in the future and how we'll further change the company over the next years. Moving on to our near-term outlook, I'm on Slide 8. For Frankfurt Airport, we again provided you a comparably broad guidance range of 61 million to 65 million passengers. While the current forward capacity indicates about 63 million passengers, further progress of the seat load can lead to upper end of our guidance. Simultaneously, further strikes or aircraft availability restrictions that the most difficult thing to predict these days can't be ruled out. This may lead to the lower [indiscernible] So from today's point of view, we are optimistic to be somewhere in the middle range, but we will have to see. Equally on the level of EBITDA, here, the upper end is EUR 1.36 billion, while the lower end is EUR 1.26 billion, and the midpoint is slightly above EUR 1.3 billion. And you know Matthias, he likes always to be on the upper end of the guidance. So that's also a clear message. As a consequence, the group's net result can range between EUR 435 million and EUR 530 million. Assuming continued negative free cash flow, as Matthias will discuss in a minute, our net debt-to-EBITDA key leverage ratio is expected to remain broadly unchanged to the year-end 2023. Being the negative free cash flow of 2024 and the elevated net debt in mind, we currently do not foresee a dividend distribution for fiscal year 2024 at this point in time. Having said this, thank you very much, and I would like now, Matthias, to handle over for the financials.

Thank you, Stefan, and also a warm welcome from my side. Let me start my presentation today with our cash flow and indebtedness situation on Slide #10. Overall, the operating cash flow and capital expenditure developed in line with our expectations. Reflecting the positive traffic and financial result development, the operating cash flow was clearly up compared to the previous year. At EUR 863 million, the operating cash flow reached about 90% of the 2019 level and was clearly sufficient to cover the maintenance CapEx on a group-wide basis of about EUR 360 million. Therefore, without considering the expansion CapEx, we would have generated a solid cash flow surplus of about EUR 400 million. Due to the continued expansion investments in Frankfurt and Lima, our free cash flow was negative at minus EUR 656 million. Correspondingly, our group net debt increased to EUR 7.7 billion at the end of last year. Despite the higher net debt, our net debt-to-EBITDA key leverage ratio improved, thanks to the operational [indiscernible] growth from 6.9x to 6.4x. Moving on to our updated repayment profile at the end of fiscal year 2023. I'm now on Slide #11. Despite the negative free cash flow, our liquidity position remained at the high level of more than EUR 4 billion, respectively. EUR 5 billion, including the unused project finance and committed credit lines. Gross debt on the other side grew to slightly more than EUR 11.7 billion. The increase in gross debt also reflects the project finance at Lima Airport, where we have meanwhile made use of more than EUR 650 million. The unused project finance in Lima still amounts to EUR 470 million. As a result of the ongoing refinance and Lima drawdowns, our average cost of debt increased slightly to 2.9% at the end of 2023. On the other side, our available funds also reflected an increased profitability. While we started 2023 with an average yield of about 0.8%, we are now standing at an average yield of about 2.7% on our liquidity. Looking ahead, we expect the yield to steadily increase to about 3% by end of H1, which will help us to further reduce our cost of carrying. Moving on to our segment development starting with Aviation on Slide #12. While we just handed 84% of our pre-COVID passenger number, the Aviation charges reached the pre-COVID level at about EUR 840 million. Here, the fee increases, which we implemented in the meantime, became visible, so 4.3% in '22 and 4.9% in '23. In addition, the segment EBITDA reflected the restructuring measures, which we carried out during the pandemic. When adjusting for the higher Security revenues, which basically come without a margin, our underlying OpEx. So excluding for Security OpEx was some EUR 30 million below the level of 2019. The decrease in underlying OpEx, let's [indiscernible] to an EBITDA improvement of more than EUR 30 million. At EUR 308 million, EBITDA reached an all-time high and was well in line with our guidance. For fiscal year '24, we expect a further improvement in revenues, EBITDA and margin due to the expected traffic growth and 9.5% price increase, which we enforced on January 1st. Coming to our Retail & Real Estate segment on Slide #13. Segment revenues almost reached the pre-pandemic level of EUR 508 million, despite handling 11 million passengers less. The revenue recovery was once again driven by the real estate and parking divisions, which outperformed the 2019 benchmark year. Regarding our retail activities, the picture remains mixed. While shopping and services revenues were higher than 2019 on a per passenger basis, advertising revenues continue to underperform the 2019 level. We also show the relevant figures on Slide #14. Regarding Advertisement. Despite a negative full year performance, we are encouraged by the most recent trend. Q4 showed a clear improvement on a per passenger basis compared to the previous quarters. With the increasing share of Far East passengers, but also the European Football Championship in Germany this year, we are confident to see further progress in Advertisement and that the division will catch up again. Simultaneously, we expect the improved passenger mix to have a positive impact on our overall Retail revenues per passenger key figure in '24. Regarding the segment EBITDA, we had been still confronted with headwinds from elevated cost items such as energy costs compared to 2019. Consequently, EBITDA was mildly down compared to 2019. For the fifth year '24, we, however, expect an outperformance versus 2019 due to the expected passenger growth and continued favorable conditions in real estate as well as parking. Turning the page to our Ground Handling segment on Slide #15. Following the positive development in the third quarter, the Ground Handling segment turned negative again in the fourth quarter. While costs were slightly higher in Q4 when compared to Q3, the lower traffic volumes led to a revenue decline. Correspondingly, EBITDA was negative at minus EUR 10 million in the fourth quarter and on a full year basis. Looking ahead, we are relatively confident to achieve an EBITDA breakeven this year, so in 2024. The turnaround will be driven by higher charges for the usage of the central infrastructure, higher prices in ground services and the expected traffic recovery. Moving on to our final segment, International Activities and Services on Slide #16. As you can see on the slide, our International segment continued its outperformance against 2019. Revenues, EBITDA and EBIT stood well above the precrisis level. Here, especially Fraport Greece performed strongly compared to 2019. While revenues excluding for IFRIC 12 grew by some EUR 212 million in Greece, EBITDA was up by more than EUR 100 million. Besides Fraport Greece, also Fraport Brazil and Fraport U.S. showed an improving earnings momentum, which Fraport U.S. being positively impacted by the compensation for the early termination of the Pittsburgh lease agreement. At an EBITDA of EUR 560 million, our International Activities segment was once again the biggest single segment on a group-wide basis with an EBITDA share of about 47%. For the year ahead, you will have also seen this in our annual report. We agreed on another state settlement agreement in Greece. The agreement will lead to an extra income of roughly EUR 28 million and will support the segment development in 2024. Based on this, we expect the EBITDA in 2024 to remain on the high level of 2023 or to rise slightly above. Coming now to my final slide for today, our free cash flow and net debt outlook for '24. As a starting point, to reconcile the net debt development in 2024, we take our EBITDA guidance as a proxy for our operating cash flow, which ranges from EUR 1.26 billion to EUR 1.36 billion. From this basis, we deduct the CapEx amount of roughly EUR 1.4 billion to EUR 1.5 billion. Please note here that this year will mark the final year of the elevated CapEx levels in Frankfurt and Lima, and we expect a clear reduction of the CapEx next year. Following the CapEx, we subtract another EUR 200 million for fixed concession payments, borrowing costs in IFRS 16 as well as around EUR 250 million for net debt [indiscernible] and taxes. Adding all the components together, this will mean a negative free cash flow of around EUR 490 million to EUR 690 million this year before we will reach breakeven next year, so in 2025. As a result of the free cash flow outlook, we expect our group net debt to grow to around EUR 8.2 billion to EUR 8.4 billion this year. Having said this, ladies and gentlemen, I'd like to thank you for your attention, and we are now looking forward to your questions.

[Operator Instructions] The first question comes from the line of Ruxandra Haradau-Doser with HSBC.

First, impressive 2030 targets. The EBITDA guidance this year is up to 200% higher than when Dr. Schulte joined the Executive Board, almost up to 150% higher than when Dr. Zieschang joined Fraport. You guide another improvement of 50% from this year level over the next 6 years. It's really a very impressive performance and congratulations for this. Could you please help us with an interim EBITDA target maybe in 2026 or 2027? Second, I understand that depreciation has increased because of future renovation of Terminal 2. Do you have already details how this terminal will be used going forward? Will it be used by Lufthansa or by the partners of Lufthansa? And the CapEx for T2 is still within the limits of your future maintenance CapEx? And what will be the distribution of the CapEx between regulated and nonregulated activities? Third, what traffic performance in Greece have you considered in your group guidance this year? And what seat capacity growth is the current flight schedule indicating this summer? And the final question for Dr. Schulte, please. We are now a few months ahead of the introduction of the EU requirements with respect to sustainable aviation fuel. How are your EU airports prepared for this? And how is the sector, in general, prepared for [indiscernible]. I understand that only 1% of global airports are currently offering SAF. So why is the number so low? And what needs to happen for airports to engage more in providing SAF and investing in the required infrastructure?

Thanks very much for your questions. When I may start, I'll start with your final question, sustainable sector or sustainable fuels. Yes, we have to [indiscernible] from 2025 onwards. I think it's 2% if I'm correctly informed, and we always have been in favor of those quotes that we applied as an industry in total to go up there. And over the time that we reached an amount and then quotes, which are meaningful and that the industry is getting sustainable. So that's very positive. You know that the obligation is we see big [indiscernible] totals and so [indiscernible] they have to produce this, and it's a complicated technical procedure, how to produce SAF. Within Germany, I'd say it's [indiscernible] production on [indiscernible] base, but we'll see what the different suppliers are at the end doing. We know that a lot of airlines contracting SAF arrangements in different parts of the world. So from that point of view, that's okay. And I'm sure that all airlines will try to fulfill the growth they have to fulfill. So the percentages, which are raising up to 6% in the year 2030. From the infrastructure on the airports, that's not a topic for us because it's not necessary by regulation that SAF has to be provided exactly on the same concept -- by the effort, it's the same consumption of the airline. The airline has to guarantee that they -- for their flights, they are doing worldwide or under the regime of the European Commission that they are doing that they're fulfilling the growth -- the obligations, but it's not important that they do in airport by airport exactly. Here, in Frankfurt, we are prepared. It's not a problem. On other airports that we're taking Island Airport is probably more difficult, but it's not necessary. This will change over the time. It's a question over the time after the year 2030, then you have to be more airport to airport, but that's still a discussion with the European Commission. So at the moment, we don't have any restrictions there and it's not an obligation with the airport. The obligation is [indiscernible] and the airlines, but not with the airports. On traffic performance, I'll just get -- on traffic performance, regarding lease, how is the booking situation, what we see as a prebooking that's very positive. Also, the first 2 months have been quite positive on that side. But to be quite honest, my colleagues here in Greece, they are a little bit more conservative after the strong growth last year. They are more believing in a smaller growth. This year, I'm a little bit more optimistic on that side. So let's see -- it will be in between 3% to 8%, something like this. But it depends on the market, it depends on the availability of hotels, it depends a little bit also on the competition with other tourist destinations like Antalya, for example. Because what we see from the market side is that the demand is very, very high, and the demand is there. It's more the question, what are the passenger flows and what direction are they finally going? And there, I can just say Greece is very optimistic. So our expectations for Greece this year, if you take the numbers, which Matthias just presented, are not so high. They are slightly lower for Greece and hopefully, they will outperform us at the end. Terminal 2, just as a final quality answer because the numbers that Matthias is much more professional on that side than I. With Terminal 3, we get the big advantage that we get tough time free capacity or additional capacity so on terminal infrastructure. So we can move the Terminal 2 airlines and maybe the 1 or the other from Terminal 1 to Terminal 3. But Terminal 1 will stay very much fully loaded. So with Star Alliance and Lufthansa, they have chances after renovation of Terminal 2 of the technical innovation, especially, but also some functional things to provide the Terminal with a good hub product. We've seen traveling in between Schengen and non-Schengen and so on. Lufthansa and Star Alliance will move into the Terminal 2 because there are big advantages on that side, they can use it -- on the Schengen, they can use it on the non-Schengen side, and we had a lot of good discussions with them. So that's absolutely clear. They are happy that they have the chance of the next 5, 10, 15, 20 years to go in Frankfurt and to have terminal infrastructure to go there. Last answer from my side, intervenes on EBITDA target, we don't publish. Of course, we are following on detail the different projects on that side and the different targets we have internally. And if we would run out of that, we would, of course, inform you. But otherwise, from today's point of view, yes, we are quite optimistic and quite confident that we will achieve those targets as we mentioned. It's for sure, much easier on the free cash flow side than on the EBITDA side. But also on the EBITDA side, if you know the potential we have on the international portfolio, but also obviously normal growth in Frankfurt, that won't work. Matthias?

Yes, in addition to this, again, there is no intermediate target for the EBITDA. But looking forward, yes, the target in 2030 is EUR 2 billion. We had EUR 1.2 billion in '23. There was a difference of EUR 800 million in 7 years. So it's relatively simple to make a rough calculation what it could be year-by-year as an increase regarding the EBITDA, and we are not targeting for a curve. So regarding CapEx in Terminal 2, first of all, how will be the phase in 2027 after the opening in '26 of Terminal 3. We are going to close Terminal 2 for a period of 3 years. And this period, we are going in the so-called [indiscernible] of the terminal in these, I think, 16 [indiscernible] are the technology is embedded and included and everything has to be renewed. So that's the reason why we are going to close this infrastructure. Otherwise, there would be a lot of problem to do this under the rolling wheel, so to say. And so there's a clear focus in these 3 years, but the whole concept of refurbishing the terminal is in a period of up to 10 years. So the amount which we are going to invest, and this is about EUR 700 million for the pure maintenance plus X, and this is a 3-digit amount for the functional. Other things, which Stefan mentioned, this will be invested over a period of 10 years, of course, with more load in the year '27 until 2030. This -- everything of this is embedded in our maintenance CapEx program for the next couple of years. So far, the answer to your questions.

We have the next question from the line of Graham Hunt with Jefferies.

I've got two questions, please. First one on pricing. What are your expectations for regulated pricing in 2025? Have you had any preliminary discussions on that with the airlines? CPI, obviously, in a lot lower place today than it was a year ago. Is that a reasonable proxy for the step-down in pricing that we could expect for next year? And then second question on retail. Just trying to understand what a realistic outlook is for 2024 there with spend down year-over-year, despite higher percentage of those international travelers, which tend to spend a bit more. And this trend seems pretty much -- pretty odds with what your peers are seeing in the space. So I just want to get some color on what's really going on here and what your expectations are for 2024.

I can start on fees. It's very early in the year. So we haven't had discussions with the airports. The consultation has not happened up to now. It will start the next phase or the next week. You're absolutely right that CPI these days is not a good indicator and it's not reasonable. It's not, my point, is a good indicator or not a good indicator is not reasonable. If you see what's happened on the tariff increase or staff cost increases, if you see what's happened on the material costs, then it's absolutely clear that we cannot go for an increase of 2% or 3% for the next year. That's absolutely not reasonable. So we need a higher increase and we see also from other airports in [indiscernible] but also in Europe, that's the same situation. Because we have a very big staff amounts in the lower segment of the ranges where you see overproportional high staff cost increases these days with someway have to be financed. That's the main topic on that side where we have to go for a higher increase, but it's too early to give you any indication there or any number on that side. But it's clear that CPI is not possible. Retail?

Yes, regarding -- in addition to this, Retail. So we are relatively positive regarding the year 2024. What are the reasons? First of all, some underlying facts and figures. In 2019, 3% of our passengers have been Chinese passengers. In these 3% passengers, they generated 15% of our retail revenue, so 5x above average. And when you look in the past, in -- past means in 2023, we had between 40 -- just 40% to 50% of the former Chinese passengers because we started with about 20% Chinese in the beginning of the year '23, then between 40% and 50% in the summer, and we ended up at about 70% in Q4 '23. Now looking into the year '24, we assume that we will see 70% to 80% of the former Chinese passengers back. So this number, which is twice as much as this number of Chinese which we welcomed in '23, must just double the income from the Chinese. And again, remember that it is still 5x of the average. So this increase of Chinese is good for, I would say, about EUR 15 million just coming from the Chinese. So this is a big positive impact in '24. Another positive momentum is Advertisement, Media. So when you look on the Q4 numbers, you see already a spend per pax of EUR 0.73, which is nearly on the level of 2029. And now we have a recovery of big companies now paying money for media, for advertisement like auditing companies like Chinese automotive companies. We have the -- this European Soccer Champion in Germany is also good for additional money on the advertisement sector. And this combination of still strong F&B expenses, a good momentum regarding media, plus the Chinese impact on the retail side, plus a new big food store which will be opened in Terminal 1 B, Concourse B, all these elements give us the confidence that the spend per pax in retail in '24, which will be clearly better than in '23. So we have a double effect. We are benefiting from the increased number of passengers, which we expect in '24, plus these mentioned structural drivers, which are running in favor of us.

Can I just come back very quickly on that? I mean, in Q3 and Q4, your spend for pax was down year-over-year, despite those higher percentages of Chinese travelers that you called out. So should I interpret that as the core traveler is actually deteriorating more?

Yes. If you look -- I'm now on Slide #14 in the presentation. I think you're focusing and looking on Q4. So first of all, in Q4, the spend per pax in '23 was at EUR 4.08, which was clearly above 2019. But of course, it was less than the year before, where we had EUR 4.23. But in this year, there was, so far, a special effect because we are -- in '22, we're benefiting from the so-called MAG from this minimum annual guarantee. And these payments for locking in this MAG have been paid at the end of the year. So this was so to say positively spoiled by the MAG, which was working in '22, in '23, when the passenger numbers went up, there was no further MAG payment from the tenants. And that's the reason why we have this overshooting in Q4 2022. So you have to look on the EUR 4.08 in Q4 '23 versus EUR 3.76 in 2019. This is a 10% increase compared to 2019. And this defines and shows the momentum in Q4. And this, you have to now to continue for the full year '24, again, based on the high recovery of Chinese, which is already there because we had already in Q4, about 70% of the former Chinese passenger numbers. And this will, of course, continue, perhaps even can go up to 80%, plus, again, an increase in advertisement. So for example, we have a new contract with a big Chinese bank on the bridges at the [indiscernible] and so there are a lot of elements, which give us the confidence that the retail spend per pax in '24 will be clearly above '23.

The next question comes from the line of Carlos Caburrasi Ortega with Kepler Cheuvreux.

I have three. The first one is on the traffic outlook. I recall that during the 9-month presentation, you implicitly guided for well above 65 million passengers in '24. We're mentioning the net tariff increase of 5% to 6%. And considering that February strikes affected 225,000 passengers, the total impact on an annual basis would be around 2.5 million passengers. Therefore, why is the passenger range so wide to the negative? And what are the moving parts impacting your traffic expectations? Then the second one is on the dividend side. You have reiterated that there will be no dividends in '24, and we will have to wait for '25. And then I would ask you if you could comment on your expectation for that dividend? Would it be in line with the pre-pandemic EUR 2 per share? And the last one is for the long-term view for 2030. Considering that guidance in terms of EBITDA and free cash flow, could you also share with us your view on the allowed return? And when would you expect to earn it?

Let me start thanks very much with the traffic outlook. Yes, I don't know remember exactly whether we indicated above 65 million, but we indicated for sure there, you're absolutely right, higher traffic outlook for this year in September and in the beginning of November, so Q3 numbers last year. What is the reason? What's happened in the meanwhile on the one side? The airlines, especially our main carrier, got aware on the topic with the A320 [indiscernible] how much this affects this operation? How many aircrafts have to go out over the year for 3 months or 6 months or 9 months to get the [indiscernible] topic done? That's the one thing. The other thing is that, to be quite clear, Boeing has much more problems -- challenges than everybody expected, which means that aircraft are not coming or our new aircrafts are coming late. But it's not just on new aircraft, it's also on spare parts. So a lot of topics on that side where the value chain, especially on Boeing, but probably not exclusively on Boeing is really a topic, which led to reductions on the summer flight plan over the recent months. So that's the reason we are now more in the plus 5% or in the range in between 61 million to 65 million passengers. So strike effects you mentioned, we lost up to now 500,000 passengers to date. So hopefully, there are no further strikes, but up to now it was 500,000. The dividends, there haven't been any discussion on at the moment, but it will depend on the question of how the outlook at that time is. So our confidence and we are the growth rates of the business for the next years and how clear the way forward is we are confident on that side, especially on the international side. On Frankfurt, I would expect that the traffic growth is less and internationally, not just because Frankfurt, because of Germany. So I would calculate with the [indiscernible] 2% to 3% maximum, not higher on average, but the discussion hasn't happened up to now. So I can't give you an indication, but whether we start immediately in first year, that gives a dividend of EUR 2. It's at least a question mark, but more I can't say it at the moment, there's no positioning on that.

Regarding your third question, it was a bunch of questions. First of all, allowed return. So in our guidance for 2030, of course, we are focusing on the assumed WACC. At that point of time, it's very difficult, but there is a normal, let me say, level of how this WACC could be, should be at that point of time. On the other side, the second relevant criteria, of course, is a regulated asset base. This is much more easier to define the rep in the coming years because this is based on our scheduled CapEx plan. And in the moment, in 2023, return on allowed on the rep was 3.3% in Aviation. So there's a lot of headroom now for EBITDA as well as EBIT increase in the next couple of years. And let me say, we have all this on our radar screen. And so that we are able also to deliver the EUR 2 billion EBITDA as well as a EUR 1 billion free cash flow in 2030. So we are -- of course, we are now ramping up with the return. We cannot make an excess return. This is also for clear, but now we are ramping up to more or less to the ceiling, and then we are running along this ceiling until 2030.

The next question comes from the line of Cristian Nedelcu with UBS.

The first one on CapEx. I think your CapEx in '23 came out a bit higher than initially expected and also your FY '24 guidance has seen a EUR 100 million higher CapEx. Could you elaborate a little bit what is behind this? And how should we think about it? Is this CapEx pull forward? And if that is the case, should an FY '25 show you, I don't know, EUR 200 million, EUR 300 million cash positive rather than a breakeven free cash flow? So I guess any comments you can make here also on CapEx '25 and '26 would help? Secondly, on the Frankfurt OpEx, please correct me if I'm wrong, but on my calculations, if I exclude the Security OpEx, I calculate that in Frankfurt, your OpEx was EUR 40 million above 2019 levels in 2023. And I believe go back sort of around H1 results, you were talking potentially about a target of EUR 0 million to EUR 30 million lower OpEx. So I guess the question is what surprised to the upside on the OpEx side? And more importantly, looking at 2024, how should OpEx in Frankfurt develop year-over-year? I guess the last one on international EBITDA, it's very helpful to present as the one-offs that helped the results. I guess if we strip out all these one-offs in Greece, U.S. and Brazil, can you talk a little bit what is driving the EBITDA growth in 2024 year-over-year? How much is coming from Greece versus Lima versus others?

Yes, I'll start with the CapEx question. So first of all, your doubts about the CapEx level of '23, we interpret this as a good signal. Why? Because we are running exactly on the time schedule, which we have planned. So it's a good expression that we are going for success, time-wise and regarding the budget. So starting with Lima, you have heard in the morning that there was a clear signal that on the 18th of December, we are going to inaugurate the new [ midfield ] terminal. This is earlier than it was scheduled before. So we are before the time. And as an expression of this already, again in 2024, we will spend the full budget for Lima because otherwise, we cannot open Lima in December this year. So with other words, there will be another higher CapEx amount for Lima in '24, and the same applies for Terminal 3. So we spent about EUR 600 million in '23. You will see more or less the same amount in '24. Why? Because we are absolutely on time to be ready with the construction in the middle of '25, more or less, and to open this terminal in '26. So you will see another CapEx higher in '24, up to EUR 1.5 billion, but therefore, the first significant reduction of CapEx in the year '25. And that's the reason why we gave the guidance for another about EUR 600 million to EUR 700 million indebtedness increase in this year because on one side, you will see a higher EBITDA. On the other side, you will see perhaps even a little bit higher CapEx in this year. This is more or less a wash. So that the net indebtedness increase will be the same like in '23. But again, a clear confirmation that we are going to achieve free cash flow breakeven in '25 and a clear positive free cash flow generation in '26. Why breakeven in '25 and not a surplus? Because we still spend a lot of money for Terminal 3 and also some remaining expenses for Lima on a much lower level but there is still CapEx. And that's the reason why there is breakeven and not a positive generation in '25, but then positive in '26. OpEx will be driven in '24 by wage increases based on the actual tariff agreements. So as a rough calculation, the wage effect for the 3 segments in Frankfurt is a little bit above 9%. This is very high. But on the other side, therefore, we have this 9.5% tariff increase. So it's an equivalent of the wage inflation, which we see in '24. And this is explaining the OpEx increase. So in absolute numbers, you can expect a personnel cost increase of about EUR 100 million in '24 for the 3 segments compared to 2023. Regarding EBITDA, contribution of the international segment, as you mentioned, we have some positive special effects in '23. This was COVID compensation in Greece, about EUR 30 million. This will happen again in '24. So this is more or less the same, let me say, compensation effect, but not any longer in Brazil. So there, we have a gap of EUR 20 million in Brazil in this year as well as a EUR 10 million, which we received for the Pittsburgh deal in '23. So with other words, we expect based on positive growth expectations in this year full positive compensation of these extraordinary effects in '23 as well as an upsize, and that's the reason why our guidance is the same level as '23 or even a little bit more, depending that at the final passenger growth outside Frankfurt. And of course, main drivers, Greece. In Greece, we are, again, we will receive the same COVID compensation or nearly the same, EUR 28 million in '24 compared to a little bit more than EUR 30 million in '23 plus, again, a good single-digit passenger growth. In Lima, there is a relatively strong recovery, which we expect in '24. In Bulgaria, we have a good fee increase plus also some passenger growth. The same applies for Slovenia. So that all in all, we are very happy with the growth expectation in our portfolio for '24. But again, not a big increase, why? Because we have these explained 3 special effects in '23.

That's very helpful. If I can follow up on the OpEx. I think you said EUR 100 million more on the staff cost in Frankfurt. Is it fair to assume that the electricity prices are coming down? So you have a tailwind there. And I think you used to talk about excess temporary workers in Frankfurt. So should there be another benefit reduction in OpEx there? And I'm just trying to get a picture for the overall staff cost and other operating expenses in 2024. Any color you could offer, please?

Yes. This is -- but we have 2 effects. As you mentioned, we are going to reduce the number of external workers in ground handling. On the other side, we are still ramping up in ground handling on workers on our payroll. So this is more a compensating effect, whether it's a little bit net positive or net negative, we can't say. But the final effect is a wage increase of about EUR 100 million, which we are going to expect, primarily in ground handling in '24. And as you mentioned, energy cost flat or even a little bit lower. So we do not expect any further increase. Again, there could be some tailwinds from reduced energy prices. But today, to predict what are the final prices end of this year is a little bit too early. But we are in a positive mood, so to say.

The next question is from the line of Harishankar Ramamoorthy.

Just a couple from me. So if I understood that right, the main reason behind the lower summer capacity is, as you said, supply-related issues from Boeing, et cetera. But if I take a step back and look at Lufthansa adding capacity elsewhere, they do seem to be adding capacity in some of the other airports. Just wondering what's leading them to cut capacity at Frankfurt but add it elsewhere like in Munich or Zurich, for example? The second is on the 2030 guidance or the target of EBITDA at EUR 2 billion. Would it be possible to give us building blocks behind this EUR 2 billion of target? I mean how much should we think comes from -- incrementally from Frankfurt itself? How much incrementally from retail within that? What is the passenger assumption you're making by 2030? And if I heard you right, you said you're looking at some further opportunities on the International segment. So wondering if the EUR 2 billion target encompasses any further additions to International ops? And if there would be any investments towards that?

Let me start with your first question on Lufthansa, why they're different in Frankfurt from Munich or Zurich. Lufthansa has taken, a lot of years ago already, a principal decision that they try to handle the multi-hub cost, strategy cost that way to reduce it somewhere, to keep it under control somewhere. That Munich is a pure in to the Airbus industry fleet and Airbus is now delivering the A350s, maybe with some delay, but in principle, they are delivering. They had some problems there, but new aircraft on the A350 are coming in, and that's the same for Zurich. We are also on Airbus, by the way, but we are mainly on Boeing 747, 787, 777. And you know that especially the 777 has big problems and the 787 is also somewhat delayed. That's the reason behind. So our positive thing is that through 747, so called Jumbo, is still in operation, it's even going in complete overhauls and will be taking much longer. The 740, they're still in operations, and they will continue to operate. But it's, of course, not optimal. And whether Lufthansa will take at some time, a principal decision depending on the delays, let's also take A350 to Frankfurt. I don't know, you have to ask this to Frankfurt. It depends very much on their strategy. But that's the reason behind. On the guidance or the target of EUR 2 billion, we don't give more details at the moment. We have to work out more details behind that point going through all the strategic priorities. But we have a view that this will be roughly 50-50 on the International business and on the Frankfurt business, whether it's at the end 50-50 or 45 to 55, something like this in this range, it will be. And then you can calculate the growth rate because it's on the actual business, including, of course, the prolongation of the new concession in Antalya. But it's not calculated to big acquisitions or something like this. That's not in -- we're not going for big acquisitions these days, big tickets that, due to our policy, we mentioned this, that we first have to bring down net debt. To be very clear, free cash flow positive. That does not mean that we are not working for small issues like consultancy contracts or something like this or a smaller new contract in the states on the center management or something like this. But the EUR 2 billion is on the existing business with the existing concessions.

That's very helpful. And if I may have a follow-up. On the free cash flow target on around EUR 1 billion by 2030. Just wondering if that marks or coincides with the end of the bulk of the CapEx for the T2 refurb? So would it be any different picture if we had to look at 2029 instead?

No, no. This is very simple. When you have a target of EUR 2 billion EBITDA and EUR 1 billion free cash flow, the difference is determined by CapEx and interest expenses. And so as we mentioned, the CapEx will be on a sustainable basis, much lower than as of today because the expansion programs are running out. And then we still focus on maintenance CapEx and the rest is interest expenses and so on. And this is explaining the number in '23. And there is no distortion, so to say, in '29 or in '31. So it's more a linear function than coming from '29 over '30 to '31.

The next question comes from the line of Patrick Creuset with Goldman Sachs.

Just first one, coming back on your pricing comments, on comments on return on RAB headroom. Basically, the question is, at what pace can you keep increasing prices? And at what pace can you converge to your allowed return, considering that, I think, in the last 18 years, you've not met your large return once? And of course, you still have a lot of headroom. And I think there's more of a willingness to push pricing. But just have a bit more of a feel over how many years you hope to reach your allowed return now? Second question was just to clarify on the CapEx. I think previously, I think you budgeted more for EUR 1.3 billion, maybe a little more of group CapEx in '24, and it seems there's some pull forward based on your earlier comments. But just to clarify, the CapEx upgrade basically for 2024 is really just a pull forward, and we get sort of an equivalent reduction in CapEx therefore, in 2025, '26?

So starting with the second question. This is clear. So up to EUR 1.5 billion in this year now is an expression that we are already in December, ready with the terminal in Lima. And again, Terminal 3 is running with full steam to the inauguration. So it's a positive impression, a positive signal for the progress on these 2 sites. And therefore, a significant decrease in the following years. And regarding your first question. First of all, it's not true. If you go into the past, before the expansion in Frankfurt, we always have been very close to the allowed return. So in the year, I don't know, 2005, 2006, 2007, so we have been close to the allowed return on assets. Then, of course, we started the expansion with Frankfurt with the fourth runway, with the A+ peer, et cetera, all these stuff. And then we always had this headroom because the RAB on one side went up and also traffic didn't, let me say, develop as expected. And then we had COVID and all this stuff, which you know -- that's the reason why we are now underperforming. But now we are ramping up. And you can see the positive escalation on the EBITDA side. And now looking forward, also, it depends a little bit from the inflation side because we always say inflation/wage increase determines also the OpEx. And when the OpEx is higher, the EBIT would be lower and this, we are compensating by higher fees. So there is some link between the wage escalation on one side and the fee is escalation on the other side. As a compensating mechanism, which we have in our business model and if you tell me what will be the wage increase in 3, 4, 5 years, we can tell you what could be about the fee increase in the next couple of years.

I mean just to clarify, though, there's still a large gap rate and between the actual and allowed return. So you would, on paper, have a strong case to continue with very high price increases somewhere in the same region that you've put through for 2024. I mean is that basically the strategy to make sure you hit the allowed return as soon as possible?

First of all, it's good to have the headroom because otherwise, we couldn't increase EBITDA as well as EBIT. So we are happy to have this headroom because this gives you the guarantee that our EBITDA and EBIT numbers will go up. Otherwise, we have to pay back fees if we would achieve an excess return, this is not the case. So we have the headroom, we are happy to have the headroom and we are going to close the gap between the actual return on assets in comparison to the allowed return. And so last year, 3.3%, which was very low. In '24, the return on allowed assets, which will be higher. And now we are ramping up. And I think this is good and this is good and this is combined with a mid- or long-term target of EUR 2 billion EBITDA. And of course, embedded in this at a certain point of time, we exactly achieve our allowed return on assets. Otherwise, we cannot move up to EUR 2 billion EBITDA target.

The next question comes from the line of Elodie Rall with JPMorgan.

I just have some follow-ups at this stage. First of all, on CapEx. I mean you're talking about '24 being the last year elevated CapEx. I know there's been questions around CapEx outlook for '24, but is it fair to assume CapEx of around EUR 1 billion in '25? Is that what gets you to about breakeven? Second, a follow-up on dividend. I was under the impression that it was more likely to see a dividend in 2026. But in one of the previous questions, I wasn't sure if you said there was a possibility it could happen as soon as '25? So if you could clarify that? And lastly, on traffic at Frankfurt, you still expect to be quite below '19 level in '24, obviously. What about '25? Do you see traffic returning to '19 level as soon as '25 now?

Perhaps I'll take the first question regarding CapEx. So if we assume the guidance for '24 is EUR 1.4 billion to EUR 1.5 billion, assume because we are running like hell, which is good. So let's assume we would achieve EUR 1.5 billion. Then in '25, Lima is significantly reduced. T3 is still on track because we still continue to construct in '25, and there is always a delay between the construction progress and the payment of the builds. So with other words, a good -- you mentioned the EUR 1 billion, I would recommend, as of today, EUR 1.1 billion in '25. And if you take this in your internal consideration, calculating the free cash flow, you can come to the conclusion that the free cash flow should be -- must be about around 0.

So if we take the other 2 questions, thanks very much. So you mentioned that we probably gave an impression that we could speed up with dividend payments. We didn't want to give any impression on that one. So it was very, very neutral. The question we got earlier was what we pay immediately whenever we pay the EUR 2, yes or no. And on that side, I mentioned it depends [indiscernible] one and at what time we start with dividend payments, depends on the strategy which has to be discussed with the Supervisory Board at that time. And I mentioned -- I make a question mark whether we go with the first dividend payment on a level of EUR 2. So you should just take my personal view on that. I would assume that whenever we start with the first payment, it's probably not directed to you because so that even if we start with net debt reducing, there's still a high debt situation. But it depends on whether the figures, the outlook are and so on and so on. If you now ask me, I think we meant to very clear today that the decision that we are not paying dividends in this year for the year 2023, and we gave really the indication that we are not expecting to pay dividends in the year 2025 for the year 2024. Further indications, we haven't given at the moment, but we have given you the indication that we expect to be free cash flow positive in the year 2025, and you had already a lot of questions on this. This is a breakeven as it is a big positive development, but you know that given that the net debt will be quite high at that time, even if the ratio is becoming better because the results are better. So I can't say today, yes, I can't say no, I don't want to go to any discussions on probability because, first, it has to be discussed then with the supervisory Board. On the traffic recovery, this depends very, very much on the questions, how -- are aircraft available? Then are the right pilots, are they trained? whether the [indiscernible] topic is solved versus -- the [indiscernible] is on the way. Yes, I understand that Boeing seems to have bigger problems with the '27. This could be further delayed. And if you take all this together, I hope that we would come in 2025 close to the recovery level of 100%, but it's more a question mark on this these days. So to give a guidance now for 2025 is too early, but if we would be in between 95%, or above 95% of the year 2019, I think that's best what we could estimate at the moment, depends very much on the aircraft availability because yes, it's very much also linked to the main customer here in Frankfurt and the market in general seems to stay positive from today's point of view.

The next question comes from the line of Dario Maglione with BNP Paribas Exane.

Four questions from me. The first one on the 2030 target. Can I just confirm that basically you don't expect big M&A internationally, not before 2030. Second question on CapEx guidance for 2024. You're guiding for EUR 350 million of CapEx in Frankfurt, excluding the Terminal 3. I think this was a bit higher than what we had before. Is this a maintenance CapEx that we should expect to continue in the next years? Third question is on -- just on the OpEx. Sorry, we had some question on the OpEx for the 3 segments in Frankfurt. But just to sum it up, how much of a year-on-year increase shall we model for the 3 segments of Frankfurt in 2024? And the fourth question is on the fixed concession payments. The guidance for 2024, especially, I think EUR 150 million, including [ IA&S ] '23 is higher than 2023. So I just wonder why fixed concession payments are going up? And should we expect them to increase faster in 2025?

Let me start with the target on the M&A project because I'm responsible for the international segment, myself. And I can just tell you, and because I'm responsible and I have to go on my contract another 3 years, that for the next 3 years, I can exclude big topics, big targets on that side. Thereafter, we have to see. If you ask me, can I guarantee you not exactly before the year 2030? No, I don't know because it depends very much a lot on the market, how are the figures at that time, all the equity situation and the debt situation, the profit situation and so on. What's clear strategy was we want to grow the International business organic, but also long term may be inorganic, but that depends very much whether they are attractive assets on the market, yes or no. From today's point of view, for the next 3, 4 years, I would say no. We don't see this. That's not our target. We will even not go for that, at least not for the next 3 years. I'm responsible for that, thereafter, we have to see what's going on and whether it's at the end of the year 2029, and there would be a very effective airport like Munich on the market. Yes of course, I would go there, but I'm not responsible any longer then.

Perfect. Then CapEx guidance. I would like to go back to Slide 17 in our presentation where we described the cash flow as well as the CapEx guidance and you can see each and everything also regarding the future. So again, in '24, we spent about EUR 600 million for the Terminal 3. And you can see up to EUR 350 million for the rest -- for maintenance. So in 1 year, it can be EUR 300 million, and another year it can be EUR 400 million. So this is a range -- maintenance CapEx range for Frankfurt also on a sustainable basis. The EUR 600 million will disappear at that point of time when T3 is open. Lima, again, we have this about EUR 450 million. And we think, we will achieve this amount in '24. Why? Because we are going to open at the 18th of December this year, with otherwise, an EPC contract. So with fixed installments, fixed regarding the amount as well as the timing, the point of time. So this is a relatively clear amount. Also, again, this will be significantly lower than in '25. And yes, then looking forward, again, EUR 300 million to EUR 400 million maintenance CapEx plus some investments outside Frankfurt, which are minor. And here, we have a proven track record when you look on Slide 10, where we showed what we spent for Brazil, EUR 20 million, what we spent for Greece, just EUR 14 million. This is showing our CapEx discipline after finalizing the expansion of our refurbishment programs, which we did in the past and the same will happen in Lima as well as in Frankfurt. OpEx again, OpEx development or OpEx escalation will be determined in '24 from the new tariff agreements, which are good for a little bit more than 9% increase, a little bit more on the volume side, and this describes a cost increase of EUR 100 million, maximum EUR 110 million for the 3 segments at Frankfurt and of course, a majority is determined or allocated to ground handling because this is a personnel-intensive segment, which we have here in Frankfurt. And on the material expense side, again, driven by inflation price increase on the energy side, this has stopped now. So we are confident that this is flat or even going down. That's the situation.

[Operator Instructions] The next question comes from the line of Manish Beria with Societe Generale.

So yes, I will take the question one by one. The first question is just a very simple one. On the guidance. So what I understood is that -- of course, you are giving a range. But in terms of traffic, probably you will be at the midpoint. So let's say, if you achieve the midpoint of traffic, so where you land at the EBITDA, so that would be at the higher end or not? I mean, this is a very simple one. Then I will ask the next once you answer that.

Yes, it's very simple. We have a relatively broad range, and this is exactly linked to the traffic expectation to 61 on one side, in the worst case, and 65 in a positive case. And as you mentioned, if you are in the middle, EBITDA will also be, more or less, in the middle.

So basically, middle traffic meets middle EBITDA. So it's like one-to-one mapping in such case, right? I mean okay, one-to-one mapping in that case, yes?

Everything from today's point of view, we are always working for more. So second question.

Yes. So the second question, I wanted to understand what is your like sustainable, let's say, once you do all the CapEx and everything becomes very normal? What is it like? How much net debt EBITDA you want in your balance sheet? Because I just got your calculation 2030, it looks fine, the EUR 2 billion EBITDA without acquisition, free cash below EUR 900 million, EUR 1 billion, whatever, it's fine. But I'm just trying to see, like, because if you have too much debt, because in my model, I get a net debt EBITDA or something like than 3x, 3.2x, 3.3x net debt EBITDA. So just trying to see this EUR 1 billion is totally free cash or we have to further deleverage our balance sheet from here? Like something goes for making it more sustainable balance sheet? So just trying to see what is your long-term net debt-to-EBITDA target in that sense?

First of all, it's good to have headroom. So we have this free cash flow and then we can talk about how to allocate the money. And in principle, there are 3 sources, and Stefan have already have mentioned this. On one side, we are coming back with good dividends. That's for clear. Second, there's a focus on bringing down the absolute [indiscernible] business. This is also for clear to end up with a net debt to EBITDA number, which is below 5x. And then we have the third item, which we could manage or where we could go for. And this is if and when there are attractive assets in the market, we also, again, have headroom for further growth, which today is not in our plan, but then we have the firepower to go for it. And these are the 3 elements: dividends/reduction of indebtedness/headroom for M&A projects.

But, but, but 3x is fine, right? 3x, if you have long-term basis, it's fine, net debt to EBITDA, correct?

Yes, sure. But it can also be 4x. So it should be below 5x, and then we have to see what's on the market.

Normally, you would go from today's perspective on a gearing in between a broad range, 80% to 120%. But that depends on equity. That depends very, very much how the markets are and what are the opportunities, as Matthias mentioned. So it makes no sense. There is not the 1 goal, and you cannot manage the company by just 1 figure. That's one of the figures, one of the -- on the ratios, you have to have a look on, depending on the results. And I know you would like to make a model now and exactly precise that figure, but sorry, business is not working that way. [Ex 120 ] would be a good range from today's point of view, in today's market. It could be competitive in 5 years.

And the last one is that -- sorry to come back again on this one. So if I do my math, I mean, it seems your -- the return on the regulated emission business will improve to something like 5.5% with the tariff that you have made, not 9, 9.5%, still below like what you mentioned in your annual report, 7.5%, 7.6% WACC. So the question is, okay, there is some inflation, with inflation moving ground handling, less inhibition, but still there is some inflation. So in that sense, will you try already in 2027 7%, 7.5% WACC or it will be gradual, let's say?

Gradually, gradually.

Will be gradually. And we don't give a confirmation what's the final level in the year 2030 exactly is because we have to go also through commerce airline, you should not always put everything on the table.

The next question is from the line of Jose Arroyas with Santander.

Two quick clarifications I'm afraid, again, on CapEx. And on Terminal 3 in Frankfurt, do you still maintain the assumption that the project will cost EUR 4 billion, considering that by the end of 2024, the cumulative spend will be EUR 3.6 billion? And also regarding Terminal 3 and Lima, what are your current assumptions for the leftover payments? The receivable payments that we will see in 2025 and 2026?

Yes. Regarding Terminal 3, assuming we spend another EUR 600 million, this year, which is very likely. So we have an accumulated CapEx of about EUR 3.5 billion. So looking forward, now it depends what is the final amount. And we always said, the target was EUR 4 billion. We said there is some -- there could be some cost overrun up to Eur 4.2 billion. We have to see at the end of the day, what is the final bill. So with other words, when we are end of '24, we have another headroom, so to say, for cash out between EUR 500 million to EUR 700 million allocated over the next couple of years. Regarding the terminal in Lima, assuming EUR 400 million in this year or EUR 450 million. So we have accumulated CapEx end of '24 of about EUR 1 billion. And then there are some remaining costs in '25, plus further CapEx for the second phase. So let's assume there's another headroom up from end of '24 of about EUR 300 million next couple of years, so in '25, '26 following.

The next question comes from the line of Sathish Sivakumar with Citi.

Yes. I got two questions here. First is on 2024 targets. If I look at the aeronautical segment right now, you did around EUR 300 million this year. And if I add on the tariff hike, probably that gets me to another EUR 80 million, somewhere around that mark plus the volume growth. So is it reasonable to say that your 2024 for aeronautical would be around EUR 400 million? But in your annual report, you do say that it's unlikely to get to that EUR 400 million. So could you just explain me that the rest of the delta is just the cost, is what's taking it off? And then the second one is around, again, 2030 targets. So if you have a EUR 2 billion of EBITDA, I'm assuming a 75% cash conversion just based on historical average for the sector as such. So that would give me about EUR 1.5 billion of cash flow from operations. So the rest should be like CapEx, maintenance CapEx? Is it a fair assumption to say that EUR 500 million is what likely to be in maintenance CapEx as we go into 2030? And then just related to, again, 2030 target as such, is there any split between, say, from where we are today, '24 to 2030 between aeronautical and commercial, how much is actually the upside is going to come from aeronautic versus commercial? Yes. Those are my 3 questions, actually.

Perfect. Yes, starting with aviation, your calculation is correct. So we have 9.5x, about EUR 700 million -- EUR 800 million, sorry. So we are talking about roughly EUR 80 million price increase plus the volume effect depending now whether we end up with 62 million or 63 million [indiscernible] or 64 million, nobody knows. So this is a variable in this game but it's relatively sure that we have minimum EUR 100 million revenue increase in aviation, so which is like-for-like going directly into the EBITDA level. But on the other side, we have -- it's also relatively personnel-intensive, as I mentioned. We have about EUR 100 million just wage increase or let me say, personnel cost increase at the Frankfurt side, some is allocated to aviation. And that's the reason why if you take the EUR 300 million in last year, you cannot end up with EUR 400 million in '24, it's EUR 400 million minus x for the OpEx increase, and that's the reason why we will end up in the second half of EUR 300 million as the EBITDA guidance for aviation. In CapEx, EUR 400 million as a guidance for maintenance CapEx, of course, it can be EUR 100 million less or more. But this is a good and rough number plus interest expenses, which we have in this year based on still a relatively high absolute indebtedness, of course, and plus tax payments. So in the moment, we are in very comfortable situation due to the loss carryforward that we are more or less paying very minimal taxes, but this is changing when the tax load -- the loss carryforward is exhausted, then we have to pay again taxes, real taxes, so to say, not IFRS taxes, and this is also a little bit absorbing then parts of the EBITDA. So with other words, we have CapEx, we have interest expenses, and we have taxes and the rest is the free cash flow.

Split of aviation and commercial, we are not giving. So we gave you already the indication that Frankfurt, compared with international business, it will be roughly 50-50 or in the range of 45 to 55, something like this.

The next question comes from the line of Nicolas Mora with Morgan Stanley.

Quick one. On -- just looking at the guidance for '24, I'm struggling with your International activities guidance. You're pointing to a similar level of EBITDA as in '24 versus '23. So EUR 560 million. That includes another COVID contribution in Greece, so let's call it, let's say, EUR 530 underlying. Your underlying base in '23, stripping out the one-offs was EUR 500 million. So EUR 500 million to EUR 530 million. But in there, you've got the headwinds from Greece in terms of the step-up in concession fee. You also have a step-down in Fraport USA because you're switching from contracts, not recognizing leasing costs. So I'm not quite sure where the growth is going to come from year-on-year in International? A bit of growth in traffic in Greece, a bit tariffs in Bulgaria, but that doesn't give you the EUR 50 million, EUR 60 million EBITDA you need to hit your guidance. So if you don't mind shedding a little bit of light on how you get to your math, that would be very helpful.

It's relatively simple. So first of all, we had in '23, we had 3 positive extraordinary effects. This was a COVID compensation in Greece, more than EUR 30 million, it was COVID compensation in Brazil, about EUR 20 million, and it was a Pittsburgh deal of EUR 10 million. What will happen in '24? No further Pittsburgh deal, no further corporate compensation in Brazil, but another COVID compensation in '24 of EUR 28 million. So this EUR 28 million, I'm not talking about the EUR 5 million difference, it's more or less the same like in the previous year. So with other words, we have a net delta from '23 to '24 of EUR 30 million, again, EUR 20 million coming from Brazil as well as EUR 10 million from the Pittsburgh deal. So this, we have to compensate to be on the same level again. How we are going to compensate this? This is traffic growth everywhere. Strong traffic growth expected in Lima, for example, but everywhere, good, solid traffic increases plus everywhere, fee increases. So with these elements, volume times price increases, we are compensating the EUR 30 million are all positive from '23 plus hope that it will be a little bit more. And that's the reason why we gave the guidance, same level as in '23 or even slightly above.

Right. But if I may, the -- we agree on the EUR 30 million, but your starting point is even lower than that, your concession fee in Greece is stepping up on paper?

No.

Okay. So it's not. And then Fraport U.S. is a contribution going down markedly?

Just for clarification, in Greece, everything was spoiled by the COVID compensation. But the mechanism are as follows. We, in Greece, we have to pay 28% from the EBITDA as a variable concession fee, plus EUR 23 million fixed concession payment every year. So this is the mechanism running as long as a concession is there. This was in so far, spoiled, while the COVID compensation has not been paid in cash. It was always a reduction of these concession payments. This made the whole situation a little bit intransparent. But again, the underlying concession payments have always been the same. And we have -- the only difference is that, I think in last year, it was EUR 30 million, how many was the COVID compensation? EUR 30 million or EUR 34 million. And now we are going to receive EUR 28 million. So we have a minus of EUR 6 million as a net debt to EBITDA between '24 versus '23. Yes. And, again, we'll be compensated by volume increase everywhere plus fee increase everywhere.

We have a follow-up question from Graham Hunt with Jefferies.

Just a quick one actually on 2025 free cash flow. So I think you said, you expect CapEx to step down to EUR 1.1 billion in 2025. So from the EUR 1.4 billion to EUR 1.5 billion, down to EUR 1.1 million. So that gives you EUR 350 million additional on your EUR 600 million negative free cash flow. The remainder on your 2025 bridge, is that all coming from EBITDA? Or is there some other variation in that free cash flow bridge that we should be thinking about to get to neutral in 2025?

No. No. It's again, it's EBITDA. Of course, we have some positive contribution and equity from Antalya, but this is more or less in a normal range. So again, it's EBITDA minus interest risk minus CapEx, then the outcome is 0, about 0.

Thank you. There are no further questions at this time. I now hand the call back over to Christoph Nanke with closing comments. Over to you.

Thank you all for your good questions, interesting discussion. If you have further questions, please call us in IRR. And I wish you a good rest of the day. Thank you.

Thank you very much.

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.